Page 1

VOLUME 124, NUMBER 15 / September 9, 2013

A CINN Group, Inc. Publication

Serving: New York, New Jersey, Connecticut, Pennsylvania and Washington D.C. Since 1889

Contents [COVER STO RY ] 18

New York Retirees AT RISK; DFS Audit Hits State Pension Technology

September 9, 2013 | volume 124 number 15 43



Looking Back: July, 1988


In the News: MSO Partners with Nexxus Solutions Group; Introduces Pet Services BOP


Foreword: Robust Bust Steve Acunto, Publisher


Insight: Gone, But Not Forgotten! Peter H. Bickford


Exposures and Coverages: Failure to Defend Insured Stops Insurer from Pleading Exclusion; Must Vandalism Be Directed at the Insured to Trigger Coverage? Is Delivery of Policy to the Wholesale Broker Delivery to the Insured? Jerome Trupin, CPCU


Albany Notebook: Signed into Law... Betty Flood and Katlin Nash


Face to Face: It’s None of Your Business… Social Business, That Is! Michael Loguercio


In the Associations: ISO Introduces Suite of Mobil Business Interruption Options


Michael Fliegelman, CLU, CHFC, AEP, RFC: Why You Should Become a MassMutual Broker With Us.


The D.B.L. Center, Ltd.: What the D.B.L. Center, Ltd. Wants You to Know - Your One Stop Shop Insurance Wholesale Center

Correction: We credited the wrong writer to the EXPOSURES AND COVERAGES column in our August 19th issue. The writer of this column is Jerome Trupin, CPCU, not N. Stephen Ruchman, CPA. We appologize for the error.


NYIA Applauds New Laws That Protect New York Motorists 38

On the Level: Are Your Clients Ravings Fans? Jamie Deapo


Courtside: Attorney’s Rhetorical Question in Appellate Brief Does Not Amuse the Court Lawrence N. Rogak


Guest Opinion: D&O Cover for Associations Presents Challenges Sherry Branson


22 Like us on Facebook… The Insurance Advocate Magazine INSURANCE ADVOCATE / September 9, 2013 3


Steve Acunto


Robust Bust


re you as tired as I am of hearing the word “robust”? Everything is robust. You have a wine, it’s robust, you have fans at a baseball game who are robust, you have a new suit hanging on the rack at Brooks Brothers and the sales clerk tells you the color is robust. And on and on. Now the insurance economy has been described as being robust, inasmuch as prices are going to be rising. I’m not sure if we should use that word; as a matter of fact, I think modesty would be the best approach. “Robust” in this case may wind up with an emphasis on the second syllable rather than the first. Let’s see how this price increase can be shepherded through an economy that has had successive years of robust misery leading up to this point... In this issue we focus on a number of different ideas and trends, welcoming Peter Bickford back from vacation with his customary insights. Our lead story relates to the DFS’s Audit of the State pension system’s technology and potential damage to those dependent upon it. We believe that the insuring community, as well as the pension and banking community, should push for an answer and some clarity, if they are unsatisfied with what they are reading thus far.... The Insurance Federation of New York, Inc. will honor Evan G. Greenberg, Chairman and Chief Executive Officer, ACE Limited, on Friday, November 15, 2013 at Cipriani’s Wall Street– it’s a “don’t miss” party – with Senator Ben Nelson, Chief Executive Officer, National Association of Insurance Commissioners, as the featured speaker, and an appearance anticipated by Superintendent Benjamin Lawsky, New York State Department of Financial Services. As an extra added plus, the Federation has announced that Maurice “Hank” Greenberg, Evan’s father, and, himself, a Free Enterprise Awardee, will present the honor to Evan.










EDITOR & PUBLISHER Steve Acunto 914-966-3180, x110 CONTRIBUTORS Peter H. Bickford Jamie Deapo Michael Loguercio Lawrence N. Rogak N. Stephen Ruchman Jerome Trupin, CPCU PRODUCTION & DESIGN ADVERTISING COORDINATOR Creative Director Gina Marie Balog 914-966-3180, x113 SUBSCRIPTIONS P.O. Box 9001, Mt. Vernon, NY 10552 914-966-3180, x126 PUBLISHED BY CINN Group, Inc. P.O. Box 9001, Mt. Vernon, NY 10552 (914) 966-3180 | Fax: (914) 966-3264

Vincent Dunn (1934-2013) Vincent A. Dunn, a lifelong resident of New Rochelle, died on August 22nd, 2013. He was 79. Vincent was a Past President of the IIAA of Westchester County and won several of its top awards. He was a Board member of the Womens’ Insurance Professionals of New York State Vincent was born on March 19, 1934 in New Rochelle. His family was most dear to him, as beloved husband of Eleanor (Korotky), loving father of Nancy (Michael) Dunn-Gallin and Cynthia (Rich) DeStefano, cherished grandfather to Andrew, Ashley, Reilly, Giavanna and Gabriella and devoted brother to Jack, Skip and Alice. He proudly served in the US Navy and was past president of New Rochelle Chamber of Commerce. He devoted countless hours to various organizations throughout New Rochelle. He was the owner of the Sullivan Agency for many years. [IA] 4 September 9, 2013 / INSURANCE ADVOCATE | President and CEO Steve Acunto


INSURANCE ADVOCATE® (ISSN 0020-4587) is published bi-monthly, 21 times a year, and once a month in July, August and December by CINN Worldwide, Inc., 131 Alta Avenue, Yonkers, NY 10705. Periodical postage paid at Yonkers, NY and additional mailing offices. POSTMASTER Send address changes to Insurance Advocate®, PO Box 9001, Mt. Vernon, NY 10552. Allow four weeks for completion of changes. SUBSCRIPTION RATES $59.00 US, Canada $65.00, International $110.00. TO ORDER Call 914-966-3180, fax 914-966-3264, write Insurance Advocate® PO Box 9001, Mt. Vernon, NY 10552 or visit INSURANCE ADVOCATE® is a registered trademark of CINN Worldwide, Inc. and is copyrighted 2013. All rights reserved. No part of this magazine may be reproduced in any form without consent. Trademark registered U.S. Patent and Trademark Office.

For high-quality article reprints (minimum of 100), including e-prints, contact Gina Balog at or call 914-966-3180, x113

e r e h W o T t if Sh e r A s r e k o r More B ... t s u r T ir e h T Placing v

The Park Super Heroes Team Can Help You Navigate Through The Congestion of The New York State Commercial Transportation Industry. From Competitive Rates to Comparable Commissions. Large Enough to Service You... Small Enough To Care.

Park Insurance Company • Auto Liability • Physical Damage • General Liability • Split Limits On 100/300 And Single Limits Up To $1M • On-hook Coverage & Premium Finance Options For more Information or an Immediate Price Quote Call

1- 8 8 8 - P A R K P R I C E w w w. p a r k i n s u r a n c e c o . c o m


By Peter H. Bickford

Gone, But Not Forgotten!


ou may have heard the huge sigh of relief coming from Downtown Manhattan in early August, particularly from the William Street offices of the New York Liquidation Bureau. On August 8th the decades long failed reha-

tions and the life industry to address ELNY’s insolvency began in 2006. Those efforts ultimately led to a plan approved by the court in April 2012 and implemented this August after court rejection of all appeals.

To ensure that the participants in those discussions are not misdirected by past litigation rhetoric, and to enable them to correctly understand the defects in the insolvency process exposed by ELNY, the air needs to be cleared regarding a few myths that pervaded the proceedings. Peter H. Bickford

bilitation of Executive Life Insurance Company of New York (ELNY) finally ended and it was officially liquidated. Not only was it liquidated, its remnants, including its restructured contracts, were shipped out of town (to, of all things, a District of Columbia captive). Gone! Goodbye! Good riddance! Before too much congratulatory backslapping, however, a sober post mortem is in order. First, it is important to remember that ELNY was placed in rehabilitation in 1991 to “protect it” and not because it was insolvent. After 20+ years under management of the Liquidation Bureau, ELNY ended up insolvent to the tune of almost $2 billion. It is also important to understand that ELNY has been seriously insolvent for many years. According to testimony of the rehabilitator’s own witnesses during the March 2012 hearing on the rehabilitator’s plan to liquidate ELNY, serious efforts by the rehabilitator, the life guaranty associa-

To briefly recap, the plan utilized the remaining ELNY assets and guaranty fund commitments to provide for continued full payment on roughly 84% of ELNY contracts. The remaining 16% — about 1500 contracts – have benefits reduced by as much as 50% or more to cover the roughly $900 million remaining shortfall. Almost all of these reduced benefits were to structured settlement annuities used as funding mechanisms for settlements with people with severe bodily injuries. The rehabilitator justified the plan as being the fairest plan possible under the circumstances and in view of the statutory limitations on each state’s guaranty fund coverage. The objectors – a group of annuitants whose benefits were cut substantially under the plan – argued unsuccessfully that the plan was discriminatory and that they should be afforded the opportunity to explore fairer alternatives. The courts disagreed. With court support for the plan and rejection of all arguments against it,

together with sweeping immunity granted to anyone associated with the rehabilitation effort, shouldn’t the book on the ELNY saga be closed once and for all? Quite the contrary! Now is the time to put legal posturing aside and to make objective, constructive assessments of the ELNY circumstances, including its troubled history, and to pursue a serious discussion of appropriate and necessary changes to the liquidation process and the guaranty fund structure, not just in New York, but nationwide. To ensure that the participants in those discussions are not misdirected by past litigation rhetoric, and to enable them to correctly understand the defects in the insolvency process exposed by ELNY, the air needs to be cleared regarding a few myths that pervaded the proceedings. First is the myth that the final court approved plan is not discriminatory. It is! The reduction in benefits under the restructured ELNY contracts falls almost exclusively on one class of beneficiaries – structured settlement annuitants. The rehabilitator and the guaranty associations argued throughout the proceedings that the plan was not discriminatory because the ELNY assets were applied uniformly to all contracts. The reduction in benefits to structured settlement annuitants resulted from the statutory limitations on guaranty fund coverage, not because of any discriminatory application. That legal posture was successful with the courts, but with the reductions applying almost exclusively to one category of annuitant, the plan is de facto discriminatory. If the current process allows for such obvious discrimination (which it does) then the structure needs to be radically reconsidered. There is no justification for a system that

Marketing Reimbursement Program: Up to $500 Available. 6 September 9, 2013 / INSURANCE ADVOCATE

continued on page 8

Real Dividends! $145 Million Paid

“The Friedlander Group and Donna Nygard are incredible to work with!!! They respond to the many issues in placing new business and provide answers quickly. Glad that we are working with Donna and the Friedlander Group.” Paul S. Pellerito, Area Vice President Arthur J. Gallagher & Co. Tampa, Florida

Up to 25% Advance Discount and 9.2% N.Y.S. Assessment Retailers




Oil Dealers

Social & Health Services

Retail Group of NY, Workers’ Comp. Safety Group #544*

Wholesale of NY, Workers’ Comp. Safety Group #551*

United Restaurants of NY, Workers’ Comp. Safety Group #556*

Hotel/Motel Group of NY, Workers’ Comp. Safety Group #578*

Oil Dealer Group of NY, Workers’ Comp. Safety Group #582*

Social and Health Services Group of NY, Workers’ Comp. Safety Group #585*





























36% average dividend since inception in 1992

33% average dividend since inception in 1993

38% average dividend since inception in 1993

20% average dividend since inception in 2006

7.5% average dividend since inception in 2010



Group formed on 8/1/2011

Fees paid to 560 Brokers Learn more at:

Retail 2003 Bakeries 7998 Hardware Store 8001 Florist Store 8006 Food/Fruit/Deli/Grocery 8008 Clothing/Shoe/Dry Goods 8013 Jewelry Store 8016 Quick Printing 8017 Retail (Not Classified) 8031 Meat/Fish/Poultry Store 8033 Supermarkets 8039 Department Store 8043 Retail (including Food) 8044 Furniture Store 8046 Auto Accessories 8072 Book/Music Store 8105 Leather Store 8382 Self serve gas w/conv. store Residential Care Facilities 8864 Developmental Organizations 8865 Residential Care Facility Hotel/Motel 9052 Hotels NOC 9058 Restaurants in Hotels

Wholesale 4310 Greeting Card Dealer 7390 Beer/Ale Dealer 7999 Hardware Store 8018 Wholesale Store/NOC 8021 Meat, Fish Dealer-Wholesale 8032 Dry Goods, Clothing, Shoe 8047 Drug Store 8048 Fruit & Vegetables 8111 Plumbers Supplies Dealer-Wholesale Restaurant 9061 Clubs 9071 Full Service Restaurants 9072 Fast Food Restaurants– Including Drivers 9074 Bars & Taverns Social and Health Services 8854 Home Health Care – Prof. Employees 9051 Home Health Care – Non Prof. Employees 8857 Counseling – Social Work – Traveling Oil and Gas Dealer 5193 Oil Burner Installation 8350 Fuel Oil & Gas Dealer 8353 Gas Dealers, LPG & Drivers

*Underwritten by the State Insurance Fund Ask about low DBL rates exclusive to safety group members, underwritten by First Rehabilitation Life Insurance Company of America

The Workers’ Compensation Leader in NY Call Cosmo Preiato at 800-394-7004 ext. 203 Fax: 914-694-6004 e-mail: 2500 Westchester Avenue, Suite 400A Purchase, New York 10577 How to Save Big on Workers’ Compensation: With Insights From Leading Industry Experts by Adam Friedlander, now on Amazon

[ INSIGHT ] continued from page 6

permits such blatant discrimination. But the discrimination against structured settlement annuitants is not the only discrimination occurring under the ELNY rehabilitation. A less discussed but equally significant form of discrimination was the discrimination – or preference – caused by the long delay from the time ELNY was known to be seriously insolvent up until the implementation of the restructuring plan. This delay in addressing the insolvency created a preference in favor of short-term annuities or annuities that simply matured while ELNY was insolvent over long term or deferred payment annuities. Every state’s insolvency or bankruptcy statutes include provisions for voiding preferential transactions occurring prior to actual filing for bankruptcy or liquidation, and allow receivers or trustees in bankruptcy to recover preferential payments (see, for instance, NY Insurance Law Section 7425). Since at least 2006, and probably longer, the rehabilitator and his agents allowed payments in full (including contractual enhancements such as cost of living adjustments) to continue to annuitants even though ELNY was known by them to be significantly insolvent, thus creating a preference in favor of some annuitants over others. If ELNY had continued in private hands, its management would likely have been held financially responsible for allowing such preferential treatment. In the ELNY proceeding, however, the rehabilitator and his agents received blanket immunity from responsibility instead. Another major myth is that participating guaranty associations will have paid out their full caps to annuitants with reduced benefits. The fact is that no participating guaranty association was or will be required to pay out its full statutory cap to any ELNY annuitant! This is because the court approved plan allowed for the statutory subrogation claims of guaranty associations to be offset against their payment caps. In the typical insurance liquidation, the guaranty association pays out up to its statutory cap to claimants, and then has a claim for such amounts against the insolvent estate recoverable pro rata with other claimants if and when the estate makes a distribution in the future. Under 8 September 9, 2013 / INSURANCE ADVOCATE

the ELNY plan, however, the guaranty fund participations were on a net basis so that cap amounts were simultaneously reduced by subrogation claims. As a result, the guaranty funds were reimbursed their share of ELNY assets before having to pay a dime to any annuitant. Another preference? The unusual ELNY circumstances highlight the real world limitations of guaranty fund coverage – particularly for annuities — limitations that do not usually appear in the conversation about the protections provided by guaranty funds. They should! Finally, now that victory is in hand, the restructuring plan implemented, and immunity firmly in place, the liquidator and his minions need to drop the posturing on the financial history of ELNY, particularly concerning its financial status at the time it was taken into rehabilitation, and when it became irreversibly insolvent. ELNY was a successful insurer when taken into rehab to protect it from a possible “run on the bank” because of the failure of its parent company, Executive Life of California. ELNY was NOT insolvent, nor was it deemed to be in a deteriorating financial position. The financial deterioration of ELNY occurred while under the aegis of the NY liquidation bureau. When that deterioration became irreversible is unknown because of the lack of reporting and openness by the rehabilitator and his agents over the years. One thing is certain, though: by 2006 at the latest (and probably much earlier), ELNY was hopelessly insolvent. Any attempts to blame the insolvency or even the depth of the insolvency on subsequent events or conditions, such as the 2008 financial crisis, are misleading and unhelpful. Continuing to hold onto these positions muddies the waters for a serious examination of the insolvency process. Now that the restructuring plan is implemented, the estate assets transferred to a new assuming entity, objectors suppressed, appeals exhausted and immunity secured, it is time to translate the lessons of the ELNY rehabilitation into meaningful changes in the insurance insolvency process. For changes to be meaningful, however, it its essential for regulators, legislators, guaranty associations, consumers and the industry to understand what really happened with ELNY and not just accept past legal posturing. [IA]


MMIP “Second Layer” Not Required By Katlin Nash


lbany, N.Y.—The statutory clarification that the Medical Malpractice Insurance Pool (“MMIP”) is not required to offer a second layer of excess medical malpractice insurance coverage is extended from July 1, 2013 to July 1, 2018. The bill was signed into law as Chapter 80 by Gov. Andrew M. Cuomo on June 30, 2013. The sponsors of the bill were Senator James Seward (R, C, I-Cayuga) (S5704) and Assemblyman Steven Cymbrowitz (D, WF-Kings) (A7388). “In 1999, legislation was passed to dissolve the Medical Malpractice Insurance Association (‘MMIA’), the market of last resort for medical malpractice insurance. Upon MMIA’s dissolution, the MMIP was established as a source of medical malpractice insurance for health care providers who were unable to procure such insurance in the voluntary market. Upon initial distribution, i.e., the July 1, 2000 through June 30, 2001 policy year, MMIA insureds were to-receive policies with provisions and at rates which were at least as favorable to the insureds as what they would have received upon renewal has MMIA not been dissolved, including a second layer of excess coverage,” said Senator Seward. “Currently, no authorized medical malpractice insurer offers a second excess layer of coverage to its insured physicians, dentists or podiatrists. It is both unfair and illogical to require MMIP to bear the financial burden associated with providing a second layer of excess malpractice insurance to such health care providers where industry practice does not make such insurance available. Without this extension MMIP will be required to provide a second layer of excess medical malpractice insurance in the involuntary market despite the fact that no MMIP member insurer will provide in the voluntary market such coverage to its own policy holders. This law will continue to correct this inequity by clarifying that MMIP is not required to offer a second layer of excess medical malpractice insurance,” said Assemblyman Cymbrowitz.[IA]

A bridge to recovery

Statutory or Enriched Disability Benefits insurance helps people suffering a non-occupational illness or injury bridge the gap caused by lost wages. Since Statutory coverage is mandated for most businesses in New York, a number of markets are available. However, brand does make a difference – especially in quality of service and ease of use. New to “DBL,” we believe GUARD competes favorably with other carriers on price and other key categories. Our basic policy can be enhanced by electing one or more of the following options: ! ! !

In-Hospital Rider Enriched Benefits Rider (2X or 3X available) Accidental Death and Dismemberment (AD&D) insurance

We believe the Disability arena is a natural complement to our traditional specialty. Workers’ Comp coverage provides wage replacement benefits for work-related illness and injury, while our new product can do the same for non-work situations. From us, you know your clients will get good value for their premium . . . while you get a chance to expand your income stream! GUARD producers and prospects are invited to contact us to learn more. ®

a Berkshire Hathaway company Notice required by New York Law: This policy provides disability income insurance only and does not provide basic hospital, basic medical, or major medical insurance as defined by the New York Department of Financial Services. Coverage underwritten by AmGUARD Insurance Company − Form No. DB 99 00 00 07 11.


By Jerome Trupin, CPCU

Failure to Defend Insured Stops Insurer from Pleading Exclusion Must Vandalism Be Directed at the Insured to Trigger Coverage? Is Delivery of Policy to the Wholesale Broker Delivery to the Insured?


his month we’re going to look at three cases that may change the way you view insurance coverage. Two of them involve the New York Court of Appeals, which seems to be coming down on the insured’s side more frequently than in the past. And at the end we’ll quickly look at an item that intrigued me because it involved the Cleveland Indians and insurance-broker E&O.

Failure to Defend Insured Stops Insurer from Pleading Exclusion It is universally recognized that the insurer’s obligation to defend is broader that its duty to indemnify. The insured need only show that the claim is potentially covered by the policy to trigger defense coverage. As a result, insurance companies often defend under a reservation of rights. That gives them to right to argue that the claim is not covered by the policy, if the defense is unsuccessful. A case supporting the insurer’s right to deny liability when it defended under a reservation of rights is Williams v. New York Cent. Mut. Fire Ins. Co.1 New York Central disclaimed coverage but provided a defense. Following depositions in the coverage litigation that ensued, the insurer sought to amend its answer to add affirmative defenses not raised in the disclaimer. The Appellate Division, Fourth Department, held that the insurer was not estopped from asserting the additional grounds because the insurer had provided a defense and expressly reserved its right to assert further grounds for non-coverage when it disclaimed.

Even just defense coverage can be valuable to the insured and expensive for the insurer. Not only can the insured avoid some legal expense, but the insurer will often settle the claim to stop the continuing litigation costs. In some cases, however, the insurer feels that it is so clear that the policy does not provide coverage that it refuses to defend the insured. That may change. In what insurance defense attorneys are calling a stunning departure from existing law, but attorneys who represent insureds say is a boost for policyholders and a natural outgrowth of prior decisions, the New York Court of Appeals (New York’s highest court) has ruled that when an insurer is found to have wrongfully failed to defend a law suit against its insured, it may not thereafter argue that policy exclusions limit its obligation to indemnify its policyholder. The case, K2 Investment Group, LLC, et. al. v American Guarantee & Liability Insurance Company, 2 involved an errors and omissions claim against an attorney. The insurer denied liability saying that the claim involved business pursuits other than the attorney’s legal work and refused to defend the insured. The attorney then defaulted in the claim against him and settled with K2 by assigning his rights against American to K2 in exchange for a release from all claims. K2 sued American for coverage based on its assignment from the attorney. The court ruled that American was wrong. It

1 2013 N.Y. Slip Op. 05156 (App.Div. 4th Dep’t July 5, 2013). 2 213 N.Y. LEXIS 1461, June 11, 2013.

10 September 9, 2013 / INSURANCE ADVOCATE

continued on page 12

Jerome Trupin

Jerome “Jerry” Trupin, CPCU, is a partner in Trupin Insurance Services located in Briarcliff Manor, NY. He provides property/casualty insurance consulting advice to commercial, nonprofit and governmental entities. He is, in effect, an outsourced risk manager. Jerry has been an expert witness in numerous cases involving insurance policy coverage disputes and has taught many CPCU and IIA courses. Jerry has spoken across the country on insurance topics and is the co-author of over ten insurance texts used in CPCU and IIA programs including Commercial Property Risk Management and Insurance and Commercial Liability Management and Insurance. He regularly contributes articles to CPCU Interest Group Newsletters, the Insurance Advocate, and other publications. He can be reached at Thanks to Jerry Trupin for this article and to the CPCU Society’s Risk Management Interest Group newsletter for letting us reprint it.

Brea aking News ws forr Producers. . . . .     -Time Online Rater Is Better Than Christmas in July! Quotes in Seconds! No Acords to Fill Out!   our trrus usted frie r nds at United Software to bring area brokers the most state of the art rating system available today. Get real time quotes instantly in your offfice. No Acords, s, no faxes, no long waits. You enterr the inffo by answering some easy questions about your risk, and Presto, your quote is right there. If the risk is not eligible foor a real time quote, then the inffo

      built an Acord behind the scenes and sent it to our underwriters so we can look at otherr markets for

John Mason, Pres Chenango Brokers, LLC

Products on our Rating Portaal: rtisan Contractors ommercial Auto* omeowners orkers Comp* OP** mbrella** estaurants** *At time of publication these modules nearing completion **Separate rating engines available at

Recently Written Accounts: Towingg Co.Auto

Contr t actors Auuto t

Fish Store


Work Comp-Contr t actor


Drywall Contr t actor

General Conttractor

Dealer Plates

Hair Salon


BOP mini market

WCtemp agency

GL  logger

BOP restaurantt

Pers Auto t  Liab only

Pers Auto t   

Homeowners near shore

Ren nttal properties

Pers/Comm Umbrellas

"!  !    !!!!"! 1-800 800-403-3738 3738

A company you can trust…

[ EXPOSURES AND COVERAGES ] continued from page 10

…a product you can rely on.

KK Wholesale Your me is our me.

We specialize in COMMERCIAL RISK across ALL 50 STATES. We have several ADMITTED CARRIERS to help your clients find the coverage they need at a great rate! • NO ENROLLMENT FEES • NO ANNUAL FEES • NO MONTHLY FEES • Fast, Excellent Service • In-house Quong & Binding • 30 A+ Rated Insurance Carriers

Give us a call today.


wrote “when a liability insurer has breached its duty to defend its insured, the insurer may not later rely on policy exclusions to escape its duty to indemnify the insured for a judgment against him.” The K2 case was decided June 12, 2013; just two months later, it was cited in another decision, Samantha Lawrence v. Continental Casualty Company.3 In that case the court held that the insurer was obligated to pay a $132,000 default judgment against a nail salon for a customer waxing injury even though the insurer had obtained a signed statement from the technician involved admitting that she was not properly licensed. Based on that statement and a policy provision excluding coverage for bodily injury arising out of services rendered in willful violation of any Federal, State, Municipal or other law or regulation, the insured denied coverage and did not defend the insured. The insurer did not pay the judgment, and a coverage suit was filed. The Court ruled in favor of the insured, holding that the insurer’s disclaimer was invalid because the allegations of professional negligence in the waxing injury complaint did not fall wholly within the exclusion. Moreover, the Court held that because the disclaimer was invalid, the insurer could not use the exclusion to deny coverage. Randy Maniloff, an attorney with White and Williams LLP and author of the insurance law newsletter Coverage Opinions, is quoted as saying that “Even if the insurer believes that its risk of being wrong is very low, it may now choose to defend because of the significant consequences of a duty being found to have been owed. Insurers will decide to pay defense costs as a small premium for insurance against losing the ability to disclaim coverage for what could be significantly higher amounts.”4 Is this the law in other states? John Ellison of Reed Smith writes that “the decicontinued on page 14

3 2013 WL 4458755 (E.D.N.Y. August 16, 2013) 4 Bibeka Shrestha “NY Strikes Fear Into Insurers Waffling On Defense Coverage” Portfolio Media. Inc. www.law360. com June 12, 2013

[ EXPOSURES AND COVERAGES ] continued from page 12

sion actually embraces an estoppel rule for breach of the duty to defend that other courts across the country, such as Illinois, have recognized for years.”5 UPDATE: After this article was written, the New York Court of Appeals granted a motion to reargue the case. In its brief requesting a rehearing, American Guarantee contended that the court had given insufficient consideration to a prior decision, Servidone Construction v. Security Ins., 64 NY2d 419 (1985). In that case it held that an insurer that wrongfully refused to defend could still contest coverage based on a policy exclusion. Rehearing is expected early next year.6 More next month.

Is Delivery of Policy to the Wholesale Broker Delivery to the Insured? Excess/Surplus lines are frequently placed through an intermediary excess line broker. Usually there’s a retail producer acting on behalf of the insured who submits the application to the wholesale broker. New York’s new law dealing with late notice in reporting a claim generated an interesting court case on who represents whom in such a situation. It also sheds light on New York’s new law on late notice. In October 2008, B&A Demolition & Removal purchased a combined general and pollution liability policy from Markel Insurance Company. B&A’s broker, Halland Companies, placed the coverage through Gremesco, a wholesale broker, on B&A’s behalf. In 2009, while B&A was working on a building in Roosevelt, N. Y., Parabit Realty, the owner of an adjacent building, claimed that B&A and others were responsible for damage to its building. B&A was served with a summons on April 13, 2009 in this matter. As happens with appalling frequency, there was a delay in sending the summons to Markel; Markel didn’t receive it until November 17, 2009. On December 2, 2009, Markel denied coverage to B&A due to the late notice.

One question that the court didn’t reach, even though the US 2nd Circuit Court of Appeals certified it to them, concerned whether vandalism coverage applies when excavation at an adjoining building damages the insured’s building.

B&A argued that it was entitled to coverage because Markel was not prejudiced by the later notice. Under the revision to NY Insurance Law that took effect on January 17, 2009, an insurer must show that it was prejudiced by the delay in order to deny coverage to the insured. Markel responded that the new law applied only to policies “issued or delivered on or after January 17, 2009 and that the policy had not been delivered to the insured until after that date. On December 1, 2008, Markel transmitted a copy of the Policy to Gremesco via e-mail. Gremesco claims that it was forwarded to the retail broker, Halland, the same day. Halland denied receiving the email and stated that it did not receive the policy, despite numerous requests to Gremesco, until February 18, 2009. The issue for the court was whether delivery of the policy to Gremesco on December 1, 2008 constituted delivery to the insured. If so, the new law would not apply. If delivery to the insured did not occur until the policy was received by Halland, the retail broker, on February 18, 2009, then the new law would apply. While Markel regularly did business with Gremesco, Gremesco did not have an agency agreement with Markel. The court ruled that the wholesale broker was the insured’s representative and that delivery to that broker was delivery to the insured. Therefore, the policy was delivered prior

to January 17, 2009 and the new law did not apply. B&A lost its coverage.7 Learning Points: (1) The new law didn’t save B&A, but it may rescue future insureds. Nevertheless, the better course: remember the three-fold claims handling formula: Report, Report, and Report. Prompt reporting will avoid arguments over prejudice. (2) Use care in selecting wholesale brokers. If the wholesale broker is the insured’s representative, then material misstatements by the wholesaler equal misstatements by the insured and may give an insurer grounds to deny coverage.

Must Vandalism Be Directed at the Insured to Trigger Coverage? The New York Court of Appeals (New York’s highest court) had a busy year with insurance cases in the year just ended. In addition to the duty to defend case discussed above, the court decided insurance questions ranging from the meaning of “residency” in a homeowner’s policy to a broker’s liability for errors and omissions when the insured failed to read the policy. (The Westchester-Fairfield CPCU chapter is running a seminar on these decisions and others in November in Stamford, CT.) One question that the court didn’t reach, even though the US 2nd Circuit Court of Appeals certified it to them, concerned whether vandalism coverage applies when excavation at an adjoining building damages the insured’s building. Although the US Circuit Court of Appeals didn’t decide the case, some of their comments concerning the extent of vandalism coverage are most interesting. Georgitsi Realty, LLC owned a building in Brooklyn that sustained significant damage due to construction and excavation work at adjacent property owned by Armory Plaza, Inc. Georgitsi had obtained a temporary restraining order to stop the work and the Building Department had issued numerous stop work orders, but the excavators nonetheless continued work. continued on page 16

5 John N. Ellison and Whitney D. Clymer “New York Court of Appeals embraces a more policyholder – friendly stance on insurer’s duty to defend” Lexology June 17, 2013 6 Joel Stashenko “State Court of Appeals Sets Unusual Reargument” New York Law Journal 9/4/13 7 B&A Demolition And Removal, Inc. V. Markel Insurance Company (11-cv-0572 US District Court, E.D. NY April 18, 2013)

14 September 9, 2013 / INSURANCE ADVOCATE

Why You Should Become a MassMutual Broker With Us. I. We know Brokerage II. We know Brokers III. We know how to Provide Quality Service IV. Competitive Products Life Insurance: UL, Whole Life, Limited pay WHole LIfe, Surivorship & Term. Ask us about our new Long Term Care Access Rider. Disability Income Insurance: Non Can Guaranteed Renewable Individual DI. Business Overhead. Buy, Sell & Retire Guard. Long Term Care: From a company that is the business for the long term. Reimbursement Policy - Share Care Options, Participating Policy, Eligible for dividends V. Career Agency Support No Minimum requirments A team dedicated to service you

For more information, contact

Michael Fliegelman CLU, ChFC, AEP, RFC

MassMutual Brokerage Director 6800 Jericho Turnpike Suite 202 West Syosset, NY 11791 web: http://www.massmutualbroker email: mfliegelman@massmutualbro Phone: (516) 682-3336

Center for Wealth Preservation 6800 Jericho Turnpike, Suite 200 West Syosset, New York 11791

For Illustration Contact Deborah Marcovecchio at 516-682-3339 or Donna Portnoy at 516-682-3336

MassMutual Financial Group is a markeing name for Massachusetts Mutual Life Insurance Company (MassMutual) and is affiliated companies and sales representatives

[ EXPOSURES AND COVERAGES ] continued from page 14

The excavators ultimately admitted to many violations of the stop work orders and paid $36,500 in fines to the city. Georgitsi claimed that the damage was due to vandalism. It was insured under Broad Form coverage, which is named peril, not “all-risk” coverage. One of the named perils was vandalism. Although Special Form is more commonly written, it’s generally agreed that special form coverage is at least as inclusive as broad or basic forms. Therefore the same argument could be made by an insured with special form coverage, even though special form is not a named peril form. While the cause of loss may not sound like vandalism to you, the court did not reject coverage on that basis. It said “malicious mischief has been defined as the willful injury or destruction of property from ill will toward its owner or from mere wantonness,” but New York courts take a more liberal position. In New York, malicious mischief covers the “intentional doing of a wrongful act without legal justification” with no requirement that there be malice or ill will involved.8 The Appellate Court cited numerous cases showing that malice and ill will were not required. What stopped the judges from deciding the case at that point was

the question of whether the conduct must be directed at insured’s property. The US court said that it could find no New York decision on that and therefore certified the question to the New York Court of Appeals. Notice how broad the court says vandalism and malicious mischief coverage is in New York. The insurance textbook definition of vandalism says: “…both intent (“willful”) and motive (“malicious”) must be established for a loss to be considered vandalism.”9 This may not be accurate in New York and many other states.

Indians on the Warpath—Insurance Broker Watch Out. This case caught my eye because it involves baseball, which I like, insurance broker E&O, which is of professional interest, inflatable slides, which I don’t like, and an email from a broker that’s an embarrassment. The accident even took place at a stadium to which an insurance company purchased naming rights. The Cleveland Indians contracted with National Pastime Sports, LLC to run a “Kids Fun Day” event at a game at Progressive Field. The contract required National Pastime to provide a CGL policy naming the Cleveland Indians as an additional insured. National Pastimes directed its insurance broker, CSI Insurance Group,

to obtain the required coverage. CSI placed the insurance with New Hampshire Insurance Co. During the “Fun Day” event, a spectator was fatally injured when a large inflatable slide collapsed on him. Unfortunately, the New Hampshire policy excluded claims arising out of “amusement devices.” The application the Indians completed included a question about “bounce houses or inflatables,” which was checked yes. National Pastimes asked the broker what happened. Here’s the broker’s email response: “Oh, ok. Sorry, I guess I missed it. I’m so used to quoting up your events I think I hardly look at anything but the dates and the details of the event.” The next email from the broker quoted in the decision contained five grammatical mistakes in three sentences. I don’t know if the grammar influenced the court (they did mark them “sic,” which stands for “this is how it was written”). In any event, the court found in favor of the Indians.10 A California attorney has opined that the ruling would be similar in most other states.11 However, the Yankees or the Mets might not fare as well. New York courts often hold that the penalty for failing to obtain the required insurance is just the cost of the insurance. [IA]

7 Georgitsi Realty, LLC v. Penn-Star Insurance Company U.S. Court of Appeals, 2nd Circuit. 11-4444-cv (12-21-12) 9 Jerome Trupin and Arthur Flitner, Commercial Property Risk Management and Insurance, 8th Edition, American Institute for CPCU, Malvern, PA, 2008 10 Cleveland Indians Baseball Co. v. N.H. Ins. Co., et al. US Court Of Appeals 6th circuit No. 12-1589 (8-23-13) 11 Barry Zalma “Cleveland Indians Win In Michigan” Zalma on Insurance August 27, 2013

FOR ADVERTISING OR SUBSCRIPTION INFORMATION Call 914-966-3180 • New York and New Jersey’s Leading Insurance Magazine Since 1889. Like us on Facebook…

16 September 9, 2013 / INSURANCE ADVOCATE

business thought:



What The

D.B.L. Center, Ltd.

Wants you to know -

Your One Stop Shop Insurance Wholesale Center

Since the beginning of April, The D.B.L. Center, Ltd. has been proactive in marketing to the brokerage community via The Insurance Advocate, informing brokers about the latest niche products we offer and how we can guarantee to place more money in your pocket. Now that the summer is winding down causing us to propel into full gear again, I wanted to take this time to recap our offerings and how we can catapult your business and help you rebound from the tumultuous year we have had post Hurricane Sandy and amidst Healthcare Reform. 1. Have you replaced your Zurich business? As you have been made aware, Zurich North America exited The Statutory Disability Marketplace in New York & New Jersey. Our General Agency has been successful with the replacement of over 7,000 policies on the behalf of the brokerage community. If you require any assistance with remaining annually billed policies that will be termed January 1st of 2014 please contact our office immediately so we can expedite this transition for you as soon as possible to ensure your clients have coverage required by law. 2. Did you know there is DBL in New Jersey? Now is the time to contact our office so we can obtain the information necessary to replace your clients State Mandated Short Term Disability away from the State and with a private insurance company for the beginning of the New Year. The state charges an assessment tax that many are unaware of and you can be making commission on this coverage that you may already be broker on for other lines so please contact a member of our team today! 3. Are you cross selling?

Training, Educating and Assisting the brokerage community write Statutory and Group Ancillary benefits since 1976.

Your Personal Concierge Let us market your clients benefits with our preferred partner carriers and provide enhanced benefit options with the savings.

Long Term Disability Group Life/AD&D Short Term Disability Dental Voluntary Plans

Give us a call so we may arrange your RFP, recommend alternative enhancements and procure the most competitive proposals which you may present to your client.


Many brokers utilize our services for the following product lines besides the State required DBL & TDB (Group Life & AD&D, Long Term Disability Insurance, Dental/Vision and Long Term Care). Not only can we cut costs on current plan designs, we can also extend the rate guarantees on your clients in force benefits or take the money we save them on the Statutory side and implement company paid or sponsored benefits as an additional incentive. Don’t leave money on the table! 4. Yes we write down to 1 life Many brokers are pleasantly surprised when we tell them we offer comprehensive Dental insurance options for individuals and families through a reputable network in all 50 States. Contact us today so we can run you a quote or give you a personalized link so that your clients may enroll directly without you lifting a finger. Let’s work smarter not harder. It has not been a full year since several insurance company’s exited the marketplace, a natural disaster hit our area, over and above the commission cuts that have occurred on the major medical end. Now is the time to become proactively aggressive in making money again and we want to be a part of that process while protecting your business. Give The D.B.L. Center, Ltd. a call today so we can show you how we’re growing. We want you as our client.


New York Retirees

AT RISK DFS Audit Hits State Pension Technology

18 September 9, 2013 / INSURANCE ADVOCATE


The Department of Financial Services (DFS) released the first in a series of audits on the New York State Common Retirement Fund (CRF). The audit uncovered serious information technology problems at the Office of the State Comptroller (OSC) that are putting retirees and taxpayers at significant risk. To help address these problems, DFS – the state’s pension regulator – will issue new regulations requiring the CRF and other New York pension funds to strengthen their information technology policies and procedures.

DFS’s audit revealed that the mainframe computer that OSC uses to process pension transactions is more than a quarter century old and runs on computer code from the 1950s in which few programmers are still trained. Additionally, key software that OSC uses for pension fund business is no longer supported by its manufacturer and is not updated with security patches to protect against new security threats. Furthermore, OSC conducted inadequate and infrequent internal audits of its own information technology systems and failed to take prompt, corrective action that could have helped avoid these problems. CRF executives also acknowledged during DFS’s examination that the pension fund’s technology programs are “approaching a point of failure.” A system failure would be devastating for New Yorkers that rely on OSC to handle their private information and to administer and distribute their retirement savings. Benjamin M. Lawsky, Superintendent of Financial Services, New York State, said: “In a world of high-tech hackers and high-frequency trading, a nearly $160 billion pension fund is being managed with computer code from the 1950s and hardware from the 1980s. The regulations we are proposing to address the problems our audit uncovered will help better protect the millions of retirees and taxpayers who are today at risk.” Under New York law, the Department of Financial Services is charged with supervising New York State’s actuarially funded public retirement systems. In carrying out that responsibility, DFS is required to conduct audits and issue regulations regarding the management of New York’s public pension funds. DFS’s extensive audit into the CRF’s information technology systems uncovered the following serious problems: • Antiquated Technology. OSC supports the core business processes of the retirement system, including benefits processing, calculating and payment, employer billing and reporting, and enrollment and termination of memberships through its Member, Employer, Benefits, Executive, and Legal (“MEBEL”) application. The system processes more than one mil-

“In a world of hightech hackers and high-frequency trading, a nearly $160 billion pension fund is being managed with computer code from the 1950s and hardware from the 1980s. The regulations we are proposing to address the problems our audit uncovered will help better protect the millions of retirees and taxpayers who are today at risk.” - Benjamin M. Lawsky Superintendent, Department of Financial Services, New York State

To read the AGʼs officeʼs point by point response, please go to: tire/word_and_pdf_docu ments/publications/re ports/nyslrs_response_to_dfs _it_examination.pdf

continued on page 20

INSURANCE ADVOCATE / September 9, 2013 19

[ COVER ] continued from page 19

lion transactions per month for member salary and service credit calculations alone. MEBEL was created for the OSC more than a quarter century ago in 1987 with support from Anderson Consulting. That system is written in the programming language COBOL (Common BusinessOriented Language) and uses CICS (Customer Information Control System), which is a transaction server that supports online transaction processing.  COBOL was created in 1959 and is one of the oldest programming languages. CICS was released in 1968.  Both are very outdated. The CRF faces a serious problem as the availability of programmers proficient in both COBOL and CICS is small and will continue to deteriorate over time as new computer specialists are not being trained in these old systems and the COBOL/CICS specialists at the CRF approach retirement. • Out-of-Date Software. The operating system for MEBEL has not been supported by its manufacturer since September 30, 2012 and will be out of date until a replacement scheduled for later this year. Its database management system was out of support from July 2011 until it was upgraded in January 2013, several months after the DFS examination began. Using software that is not supported creates serious security and business risks and contravenes best practices and industry standards. Software vendors do not create security patches or fixes for recently identified problems for software that is past their formal support end dates.  This lack of security protection leaves the retirement system’s data vulnerable to bugs and to security breaches, including attacks by hackers.                        • Inadequate Disaster Recovery Plans. The CRF’s disaster recovery plans are not prudent because the designated data recovery and business continuity sites are both too close to the CRF’s headquarters at 110 State Street in Albany.  For example, the CRF plans to use either 90 State Street (in Albany, NY) or Riverview Center 20 September 9, 2013 / INSURANCE ADVOCATE

(150 Broadway, Menands, NY) as a business continuity site where employees could work if the 110 State Street headquarters was not available in a disaster. The 90 State Street building is less than 200 feet away from 110 State Street and Riverview Center is approximately three miles away. Both are too close to the headquarters to serve as an effective business continuity site. In the event of a disaster that impeded the use of the CRF headquarters, it is likely that surrounding buildings would also be unavailable for use – potentially jeopardizing pension payments for retirees  • Red Flags Missed. In testimony taken during DFS’s audit, executives of the CRF acknowledged that its technology programs are “approaching a point of failure.” Moreover, IT professionals at the CRF stated that, although the need to replace the antiquated hardware and software has been known for some time, the replacement process has been halted by “higher-ups in the Comptroller’s office.” • Inadequate, Infrequent Internal Audits. DFS’s investigation uncovered that OSC’s internal IT audits of the CRF do not happen frequently enough. There is no defined cycle within which all elements of the IT audit universe are reviewed and/or audited and the IT portion of the annual audit plan is sparse, especially given that the audit plan is for the entire agency rather than specific to the CRF.  There are only three IT internal auditors for the entire agency and IT-specific audits occur only 2–3 times a year agency-wide (so most are not related to the CRF).  Indeed, although DFS requested IT audits from the previous year, the CRF had to go back several years to find 2–3 IT audits because of the infrequency with which IT audits are performed for the CRF. Additionally, the IT auditors currently employed at the OSC are not highly qualified. In fact, two of the IT auditors have no professional certifications and had no audit experience before joining the OSC.  To help address the serious informa-

To help address the serious information technology problems at the CRF that DFS uncovered in its audit, DFS will propose new regulations requiring New York public pension systems to have IT governance, risk management, and internal controls in place in order to ensure IT systems are operated and maintained securely and efficiently.

tion technology problems at the CRF that DFS uncovered in its audit, DFS will propose new regulations requiring New York public pension systems to have IT governance, risk management, and internal controls in place in order to ensure IT systems are operated and maintained securely and efficiently. In particular, the regulation will require the adoption of policies to protect sensitive information; the appointment of an Information Security Officer; the establishment of an internal IT audit unit; and annual IT assessments, penetration testing, and disaster recovery testing. [IA]








No matter what is on your to do list, NYIA can help. NYIA has represented the New Yor o k property and casualty industry for more than130 years. The association is dedicated to making New Yor o k a better place to do business for insurance companies. Whether it’s figh fi ting mounting taxes and assessments, facilitating regulatory matters, reporting on guaranty fund implications, analyzing the impact of proposed legislation and new laws or helping navigate rate and for o m filings, NYIA is working fo or property and casualty insurers. To learn more about how NYIA can help your company visit or call 518.432.4227.



By Betty Flood and Katlin Nash

Signed Into Law… Albany, N.Y.—New legislation has been signed into law. Legislation restricting the supervision of state licensed real estate appraiser assistants has been signed into law by Governor Andrew M. Cuomo of the laws of 2013. The law became effective on July 1, 2013. “The new standards had to be adopted by state appraisal programs by July 1, 2013, at which point the Federal Appraisal Subcommittee (ASC) will begin compliance review. States that fail to revise their licensing statutes and regulations to meet the new standards will be subject to sanctions and endanger the validity of the licenses and certifications they issue. If New York were to lose federal recognition of the state appraisal programs, federally regulated financial institutions would be prohibited from accepting appraisals from New York real estate appraisers. This would affect most mortgage and refinance transactions,” said Senator John DeFrancisco (R, C, ICayuga) sponsor of the bill. “This legislation is necessary to ensure that New York meets the Federal requirements,” said Assemblywoman Patricia Fahy (D-Albany). Legislation to provide a process by which a domestic mutual accident and health insurance company may reorganize to become a stock accident and health insurance company in New York State unlike life and property mutual insurers, no current process exists has been signed into law as Chapter 286. “The law will add a new section to the Insurance law, which will authorize the reorganization of a domestic mutual accident and health insurer and provide a process by which such reorganization to a stock accident and health insurance may be carried out. The process allows a domestic mutual accident and health insurer to apply to the Superintendent of the Department of Financial Services for permission to reorganize as a domestic stock accident and health insurer,” said Senator Joseph Griffo (R, C, I-Oneida) cosponsor of the legislation. “Upon application, the Superintendent 22 September 9, 2013 / INSURANCE ADVOCATE

“The law will add a new section to the Insurance law, which will authorize the reorganization of a domestic mutual accident and health insurer and provide a process by which such reorganization to a stock accident and health insurance may be carried out.…” will examine the mutual insurer to ensure that its proposed reorganization is in the best interests of the company’s policyholders and is in compliance with all applicable laws,” said Senator Griffo. “In addition, the Superintendent will order an appraisal and report of the company’s fair market value by qualified disinterested persons. If the results of the examination report and appraisal report are satisfactory, the superintendent may grant permission for submission of a plan for reorganization which must then be adopted by the company and submitted to the Superintendent,” explained Senator Griffo. “The mutual insurer must give notice of the reorganization resolution to all persons becoming policyholders or holders of agreements subject to New York Insurance Law. The Superintendent will hold a public hearing, adequate notice of which shall be provided by the mutual insurer to each policyholder along with a copy of the plan of reorganization,” said Senator Griffo. “After the hearing, the Superintendent will approve the plan, refuse to approve it, or request modifications before granting approval. If the plan is approved, it must be submitted to a vote of the policyholders, with two thirds vote in the affirmative of the votes cast required to adopt the plan.” “Article 73 of the Insurance Law already provides a process for the reorganization of most types of insurance companies, including domestic mutual life insurers and domestic mutual property/casualty

insurers. This law mirrors the latter section in the Insurance Law, which provides a similar process for the conversion of domestic mutual property/casualty insurers into domestic stock property/casualty insurers,” explained Assemblyman Anthony Brindisi (D-Herkimer). “The Insurance Law does not include a process for the reorganization of domestic mutual accident and health insurers, most likely because there are very few such companies. In fact, there is currently only one domestic mutual accident and health insurer in New York State, a company that has been headquartered in Utica, New York for nearly 130 years. The company has written health insurance coverage and based in Utica since its inception. Recently, the company has experienced increased recession-related losses, combined with expense overruns that are becoming increasingly problematic. It simply has too much fixed expense for its size and does not have the capital to invest to grow its business. The company’s AM Best rating has slipped to ‘B’ and is expected to slip further in the coming months. This will impact the company’s sustainability,” said Assemblyman Brindisi. “This mutual accident and health insurer needs to engage in a partnership in order to access capital to stabilize its financial position. The reorganization process detailed in this new section of the Insurance Law will facilitate the company’s partnership with another insurer-a partnership that is likely essential to allow the company in, and grow its business in Utica, New York,” said Assemblyman Brindisi. Legislation allowed health care professionals to perform services at the Ironman triathlon held on July 28, 2013 in Lake Placid, New York who are healthcare professionals licensed to practice in other jurisdictions in New York was signed into law by Governor Andrew M. Cuomo as Chapter 141 on July 12, 2013. “The legislation allowed any person who is licensed to practice as a physician, physician’s assistant, massage therapist, physical therapist, chiropractor, dentist,

[ NOTE B OOK ] optometrist, nurse, nurse practitioner or podiatrist in another state or territory, and who had been appointed by World Triathlon Corporation to provide professional services to competitors at the Ironman event,” said Senator Elizabeth Little (R, C, I-Clinton), co-sponsor of the legislation. “The triathlon in Lake Placid is a one day 2A-mile swim and a 112-mile bike ride which concludes with a 26.2-mile marathon. As this event is physically taxing on the athlete, the health and safety of the participants in the days before the event and especially during and after the event are crucial. This legislation allowed licensed health care professionals from other states who volunteered and were sanctioned by World Triathlon Corporation to perform services for the athletes,” said co-sponsor Assemblyman Daniel Stec (R, C, I-Washington). Legislation in relation to extending authorization for certain exemptions from filing requirements extends the sunset date and removes certain filing requirements for the “large commercial insured” exemption with regard to the free trade zone has been signed into law. The sponsors of the bill were Senator James Seward (R, C, I-Cayuga) and Assemblyman Phil Steck (D-Albany). “The bill amends the Insurance Law to extend until June 30, 2015, the exemption from rate and form filing requirements for certain property/casualty policies written in the free trade zone and to repeal the requirement that insurers file a certificate of insurance with the Department of Financial Services within one business day of writing such a policy,” explained Senator Seward. Legislation enhancing regulatory efficiency and efficacy to permit the sharing of confidential and privileged materials with members of a supervisory college, as described in new Insurance Law 302 would add a new Insurance Law pertaining to supervisory colleges has been signed into law as Chapter 238. The legislation was sponsored by Senator James Seward (R, C, I-Cayuga) and Assemblyman Kevin Cahill (D, WFDutchess).


Quaker Special Risk


Exclusive Construction Managers Program CMAA Endorsed (Construction Management Association of America)

Combined PL/GL Form to Cover Professional & BI/PD - Duty to Defend Form; - Bilateral Tail Options; - Incident Sensitive Trigger; - Coverage for Acts While Involved in a Joint Venture; - Disciplinary Proceeding Supplementary Payments ($500 day/up to $10,000); - Subpoena Expense Supplementary Payments ($500 day/up to $10,000); - Project Specific Coverage Available.

Dedicated claims team for Construction Managers Program


QSR has a profound understand of this niche industry segment and has partnered with CMAA to provide Quaker Special Risk a differentiating solution for Contact Frank Walsh at: Construction 800-447-4180 • email: Managers. P.O. Box 1350 • Eatontown, NJ 07724 Fax 732-223-9072 •

continued on page 24

INSURANCE ADVOCATE / September 9, 2013 23

[ NOTE BOOK ] continued from page 23

“The bill amends the Insurance Law to require every person who becomes a controlled insurer to amend its registration within thirty days any material change to the information provided in the registration, and will require the registration to be in such form and to contain such matters as the Superintendent of Financial Services prescribes. It also would delete the current

language in the Insurance Law, which currently requires a registrant to furnish the Superintendent with certain information regarding its holding company, and add a new subsection requiring a holding company to adopt a formal enterprise risk management function and to file an enterprise risk report with the Superintendent by April 30th of each year,” said Senator Seward. “The existing law requires a domestic

Apartment Building coverage in n a fiv five-minute ve-minute phone call call..

Call. Quote. Bind. 1 Ș}Ê/* "½ÃÊVœÕÀÌiœÕÃÊ>˜`Ê«Àœ“«ÌÊV>Ê 1Ș}Ê/* "½ÃÊVœÕÀÌiœÕÃÊ>˜`Ê«Àœ“«ÌÊV>Ê VVi˜ÌiÀ]Ê«>À̓i˜ÌÊ Õˆ`ˆ˜}ÊVœÛiÀ>}iÊV>˜ÊLiʵ՜Ìi`]ÊLœÕ˜`Ê>˜`Ê i˜ÌiÀ]Ê«>À̓i˜ÌÊ Õˆ`ˆ˜}ÊVœÛiÀ>}iÊV>˜ÊLiʵ՜Ìi`]ÊLœÕ˜`Ê>˜`Ê ` `iˆÛiÀi`Ê̜ÊޜÕÀÊi‡“>ˆÊˆ˜LœÝʵՈVŽÞÊ>˜`Ê>VVÕÀ>ÌiÞÊ`ÕÀˆ˜}ʜ˜iÊ iˆÛiÀi`Ê̜ÊޜÕÀÊi‡“>ˆÊˆ˜LœÝʵՈVŽÞÊ>˜`Ê>VVÕÀ>ÌiÞÊ`ÕÀˆ˜}ʜ˜iÊ vvˆÛi‡“ˆ˜ÕÌiÊ«…œ˜iÊV>° ˆÛi‡“ˆ˜ÕÌiÊ«…œ˜iÊV>°

Ê œÛiÀ>}iÊÛ>ˆ>Li\

Ê œÛiÀ>}iÊÛ>ˆ>Li\ UÊÊ*Àˆ“>ÀÞʈ“ˆÌÃÊÕ«Ê̜ÊfÎÊ"VVÉ}} UÊÊ*Àˆ“>ÀÞʈ“ˆÌÃÊÕ«Ê̜ÊfÎÊ"VVÉ}} UÊÊfx]äääÊi`ˆV>Ê*>ޓi˜ÌÃÊ œÛiÀ>}i UÊÊfx]äääÊi`ˆV>Ê*>ޓi˜ÌÃÊ œÛiÀ>}i UÊÊ``ˆÌˆœ˜>Ê˜ÌiÀiÃÌà UÊÊ``ˆÌˆœ˜>Ê˜ÌiÀiÃÌà UÊʈÀi`Ê>˜`Ê UÊʈÀi`Ê>˜`Ê œ˜‡œÜ˜i`ÊÕ̜Ê>Û>ˆ>Li œ˜‡œÜ˜i`ÊÕ̜Ê>Û>ˆ>Li ÊÊ ÝViÃÃʜÀÊ1“LÀi>ʈ“ˆÌÃÊÕ«Ê̜Êfxʓˆˆœ˜ UUÊÊ ÝViÃÃʜÀÊ1“LÀi>ʈ“ˆÌÃÊÕ«Ê̜Êfxʓˆˆœ˜ coverages and mar kets may may vary vary * Available Available coverages markets dependent upon rrisk isk characteristics. characteristics. dependent

*Àœ«iÀÌÞÊ œÛiÀ>}iÊÛ>ˆ>Li\ *Àœ«iÀÌÞÊ œÛiÀ>}iÊÛ>ˆ>Li\ ÊÊ Õˆ`ˆ˜}Ê UUÊÊ Õˆ`ˆ˜}Ê ÊÊ œ˜Ìi˜ÌÃÊ UUÊÊ œ˜Ìi˜ÌÃÊ ÊÊ ÕȘiÃÃʘVœ“i UUÊÊ ÕȘiÃÃʘVœ“i UÊÊ >ÈV]Ê Àœ>`ʜÀÊ-«iVˆ>ÊœÀ“Ê UÊÊ >ÈV]Ê Àœ>`ʜÀÊ-«iVˆ>ÊœÀ“Ê UÊÊ,i«>Vi“i˜ÌÊ œÃÌʜÀÊ 6 UÊÊ,i«>Vi“i˜ÌÊ œÃÌʜÀÊ 6 Êʘ>˜`Ê>Àˆ˜i UUÊʘ>˜`Ê>Àˆ˜i ÊÊ µÕˆ«“i˜ÌÊ Ài>Ž`œÜ˜ UUÊÊ µÕˆ«“i˜ÌÊ Ài>Ž`œÜ˜ ÊÊ œ“«ÕÌiÀÊ µÕˆ«“i˜ÌÊÊÊ UUÊÊ œ“«ÕÌiÀÊ µÕˆ«“i˜ÌÊÊÊ ÊÊ"ÕÌÈ`iÊ-ˆ}˜Ã UUÊÊ"ÕÌÈ`iÊ-ˆ}˜Ã

The T TAPCO APCO Ser Service vice Pledge UUÊÊ º º»‡À>Ìi`ʘœ˜‡>`“ˆÌÌi`ÊV>ÀÀˆiÀ »‡À>Ìi`ʘœ˜‡>`“ˆÌÌi`ÊV>ÀÀˆiÀ

œ“«ï̈ÛiÊ«ÀˆVˆ˜} UUÊÊ

œ“«ï̈ÛiÊ«ÀˆVˆ˜} >ÃÌÊ«œˆVÞÊÌÕÀ˜>ÀœÕ˜` UUÊÊ  >ÃÌÊ«œˆVÞÊÌÕÀ˜>ÀœÕ˜` UUÊÊ ˜‡…œÕÃiÊvˆ˜>˜Vˆ˜}Ê>Û>ˆ>Li ˜‡…œÕÃiÊvˆ˜>˜Vˆ˜}Ê>Û>ˆ>Li

UÊ f£äÊVÀi`ˆÌÊ̜ÊޜÕÀÊ«iÀܘ>ˆâi`Ê UÊ f £äÊVÀi`ˆÌÊ̜ÊޜÕÀÊ«iÀܘ>ˆâi`Ê Ê / /* "Ê <Ê ÕVŽÃÊ6ˆÃ>Ê`iLˆÌÊV>À`Ê * "Ê <Ê ÕVŽÃÊ6ˆÃ>Ê`iLˆÌÊV>À`Ê Ê ÜˆÌ…Êi>V…Ê«œˆVÞ ÜˆÌ…Êi>V…Ê«œˆVÞ UÊ 6ˆÃ>]Ê>ÃÌiÀ >À`Ê>˜`Ê  UÊ 6 ˆÃ>]Ê>ÃÌiÀ >À`Ê>˜`Ê  Ê « «>ޓi˜ÌÃÊ>VVi«Ìi` >ޓi˜ÌÃÊ>VVi«Ìi`

+ՈVŽÊV>ˆ“Ãʅ>˜`ˆ˜} UUÊÊ + ՈVŽÊV>ˆ“Ãʅ>˜`ˆ˜}

1,000 ,000 Strong Str ng

o than 1,000 1 More classes of P&C business authority.. wri written unde binding authority under


controlled insurer to notify the Superintendent of its intention to enter into sales, purchases, exchanges, loans or extensions of credit or investments with any person in its holding company system involving more than one half of one percent, but less than five percent of the insurer’s admitted assets at last year-end. That section also requires a domestic controlled insurer to notify the Superintendent at least thirty days before entering into any reinsurance treaties or agreements with any person in its holding company system,” said Senator Seward. “This bill will amend the Insurance Law to conform to the National Association of Insurance Commissioner’s (‘NAIC’) Model Insurance Holding Company System Regulatory Act. Enactment of the amendments would provide uniformity with other states and will improve efficiency by reducing the number of certain holding company filings,” said Senator Seward. “Specifically, the bill will amend the current requirement that all domestic insurers file with the Superintendent, for his review, all reinsurance treaties or agreements with any member of their holding, company systems. With regard to domestic property/casualty insurers, the bill only requires them to file reinsurance treaties or agreements that meet a certain threshold, unless otherwise requested by the Superintendent,” explained Seward. “The bill makes a distinction between different kinds of insurers, because property/casualty insurers typically enter into large numbers of reinsurance treaties and agreements, but many of them are for relatively small and ascertainable exposures: The dollar threshold would ensure that the Superintendent will review the material transactions that have potential for negatively impacting domestic property/casualty insurers.” “However, reinsurance treaties and agreements entered into life insurers generally are complex, often involving offshore affiliates, captives, and securitizations, and it would not be known in advance whether a reinsurance treaty or agreement involving a life insurer would meet a certain threshold because of the nature of lie insurance. With regard to continued on page 26

24 September 9, 2013 / INSURANCE ADVOCATE



Friedman Public Adjusters, is a fully staffed adjustment firm with ten licensed public adjusters, as well as engineers, inventory specialists, accountants, emergency service personnel and other professionals committed to expediting your claim process. Friedman Public Adjusters has a combined total of over 150 years experience representing policy holders.

insurance claim. Friedman Public Adjusters offers early intervention initiatives following any disaster including: arranging temporary housing, securing the property from further damage, and arranging for cash advances. Our rapid and thorough preparation of your claim will help you to receive an equitable and proper settlement in your best interest.

When you hire Friedman Public Adjusters, our knowledgeable, experienced and energized staff will advise and assist you with every phase of preparation, presentation and documentation of your

We take the burden off your shoulders so that you can focus on rebuilding your home or business. Regardless of the size of the loss, we maintain the highest level of expertise, attention to detail and ethical standards.

16 S. Central Avenue • Valley Stream, NY 11580


[ NOTE BOOK ] continued from page 24

accident and health insurers, the volume of reinsurance treaties and agreements is not as great as those entered into by property/casualty insurers. In addition, holding company arrangements involving many accident and health insurers affect entities dully regulated by the DFS and Department of Health, so it is necessary for the Superintendent to review reinsurance treaties and agreements to ensure compliance not only with the Insurance Law, but the Public Health as well,” continued Seward. “Adoption of the amendments also may be necessary for the Department to maintain its NAIC accreditation. Accredited state insurance departments must undergo a comprehensive review every five years by an independent review team to ensure they continue to meet baseline standards,” explained Seward. “The accreditation standards require that state departments have adequate statutory and administrative authority to regulate an insurer’s corporate and financial affairs, and that they have the necessary resources to carry out that authority.” “In addition, the bill will require a holding company or parent insurer to establish a formal risk management function and to file an annual report that would identify material risks that could pose enterprise risk to New York authorized insurers,” said Senator Seward. “The bill will also authorizes the Superintendent to participate in a ‘supervisory college,’ which is defined by the NAIC as ‘a forum for cooperation and communication between the involved supervisors established for the fundamental purpose of facilitating the effectiveness of supervision of entities which belong to an insurance group; facilitating both supervision of the group as a whole on a groupwide basis and improving the legal entity supervision of the entities within the insurance group,” explained Senator Seward. “Further, the bill will permit the Superintendent to impose daily penalties when an insurer fails to provide a meritorious explanation as to why it could not obtain information that the Superintendent needs when the information was not in the insurer’s possession. In addition, the bill provides that, where it 26 September 9, 2013 / INSURANCE ADVOCATE

“The bill will amend the Insurance Law to facilitate the insurance of annuities by charitable annuity societies by providing that charitable annuity societies with reserves on outstanding annuity agreements of less than $1million need not obtain a permit to issue such annuities.…”

appears to the Superintendent that any person has committed a violation may serve as an independent basis for disapproving dividends or distributions or as grounds for rehabilitation or liquidation,” said Senator Seward. “The bill will amend the Insurance Law to facilitate the insurance of annuities by charitable annuity societies by providing that charitable annuity societies with reserves on outstanding annuity agreements of less than $1million need not obtain a permit to issue such annuities. This amendment to the Insurance Law will save many charitable gift annuity societies from the burdens and expenses associated with having to obtain a permit to issue charitable gift annuities, while retaining the authority of the Superintendent to examine such societies as needed to protect the interests of consumers,” said Assemblyman Cahill. “In addition, the Department no longer requires foreign insurers to file hard copies of the annual statements, since they are available to the Department of electronically on the NAIC’s website,” explained Assemblyman Cahill. “However, the Department must collect hard copies of the jurat pages (i.e. the annual statement signature page), which Department staff logs in and files. When insurers do not file the jurat pages, the staff must contact insurers and try to get them to file the pages. Staff also must send these documents to the State Archives after three years. This bill will amend the Insurance Law to permit the Superintendent to

accept an electronic filing of a foreign insurers annual statement that does not contain the signature or verification of the officers provided that the foreign insurer had filed, in its state of domicile, an annual statement verified by the oath of at least two of its principal officers. In such a situation, the officers of the foreign insurer shall be deemed to have given their oath in that state. This amendment would result in increased efficiency and efficacy, which should result in savings for the Department.” “The current $2,500 cap on the value of assets disposable without court approval, adopted thirty-three years ago, prevents the Superintendent, as receiver, from efficiently disposing of low-value assets and increases administrative expenses. The Insurer Receivership Model Act sets a higher threshold (the lesser of $1 million or ten percent of the general assets of the estate), which has been adopted in state such as Texas,” explained Assemblyman Cahill. “Other states have adopted various other thresholds on the value of the sale of assets by receivers that do not require court approval. For example, Illinois, California, and Kentucky have maximums of $25,000, $20,000, and $10,000, respectively. A $25,000 threshold for court approval properly balances the desire to streamline the sales process and reduce the related selling costs with the need for active judicial oversight for asset sales of a significant size.” “Furthermore, the administrative costs of drafting and processing the requisite court orders on all eligible security fund claims are significant. The proposed amendment would increase the speed of and lower the administrative cost associated with payments out of the security funds, but without impacting the courts in supervising estates. The amendment would set a reasonable dollar threshold at which judicial allowance of individual claims is required, and below which it is not. This amendment has the potential to greatly reduce the administrative costs associated with the payment of security fund claims. In each of the past three years 70-80% of all paid Property/Casualty Security Fund claims payments were for $25,000 or less (70% in 2010, 75% in 2011, and 82% from 2012 to date),” said Assemblyman Cahill.

[ NOTE B O O K ] There are no fiscal implications to the State from this bill. Legislation to amend the driving while intoxicated and ignition interlock devices has been signed into law as Chapter 196 of the laws of 2013. “The bill provides that a person operating a vehicle with a conditional license while intoxicated or impaired would be subject to a charge of first degree aggravated unlicensed operation (AUO) of a motor vehicle, which is a class E felony,” explained Senator Charles Fuschillo (R, C, I-Nassau) co-sponsor of the bill. “The bill clarifies that youthful offenders are subject to ignition interlock requirements, and provides that the minimum period of interlock installation would be increased to twelve months, but reduced to six months upon submission of proof that the defendant installed and maintained an interlock device for at least six months,” said Senator Fuschillo. “It also provides that the interlock period would commence from the earlier of the date sentencing, or the date that an interlock device was installed in advance of sentencing.” “The bill also clarifies that a finding by a court of good cause for the lack of installation of an interlock device may include a finding that the person is not the owner of a motor vehicle if the person asserts, under oath, that he or she is not a vehicle owner and will not operate a vehicle during the period of interlock restriction except as may be otherwise authorized by law,” said Senator Fuschillo. “This bill is a necessity to properly implement New York’s stated public policy on impaired driving,” said Assemblyman Harvey Weisenberg (D, WF-Nassau). Legislation signed into law as Chapter 203 of the laws of 2013 allows the previously authorized and extended freelancers demonstration program to run to its expiration date of December 31, 2014. “This bill allows for the continuation of the freelancers demonstration program and permit 25,000 currently insured independent workers to maintain their health benefits through December 2014. This bill was modeled on previously enacted legislation for student health plans sponsored by New York State independent universi-

“FIC is currently licensed as an Article 42 insurance company and as such is regulated by the Department of Financial Services.…”

ties and would safeguard members’ health coverage by allowing them to move their coverage from Freelancers Insurance Company (FIC), an article 42 licensed insurance company, to a newly created selfinsured health fund called Freelancers Health Plan, which would continue to offer eligible Freelancers Union members affordable health benefit plans,” said Senator Kemp Hannon (R, C, I-Nassau). “Freelancers Health Plan will be regulated by the Department of Financial Services and will be required to follow most of the same rules and regulations as a nonprofit health insurer, including complying with stringent consumer protection provisions, minimum reserve requirements and financial reporting,” said co-sponsor Assembly Speaker Sheldon Silver (D, WFNew York). “At least one plan that complies with the ACA metal tier requirements and, upon approval from CMS, its offerings will be considered Minimum Essential Coverage. In addition, the legislation will subject Freelancers Union to the penalties should they violate the provisions of the law. The legislation would maintain the existing demonstration program’s current sunset date of December 31, 2014.” “In 2009, New York State authorized a demonstration program through 2013 providing health insurance coverage to independent workers, a constituency which historically has had limited access to affordable, comprehensive health benefits. Freelancers Insurance Company (FIC) was created to serve independent workers who, unlike the majority of workers, are unable to access health benefits from a traditional employer,” said Senator Hannon. “In 2012, two years after the ACA was enacted, the legislature extended the sunset date to December 31, 2014 to allow FIC members one full year to acclimate to the new landscape created by the ACA. Today, more than 25,000 Freelancers Union mem-

bers and their dependents receive affordable health insurance from FIC, a health insurance company wholly owned by Freelancers Union. FIC premiums are on average 40% less than plans available in the individual and group markets in New York City and last year FIC had a 0% premium increase across all plans, well below the 9.6% average increase for small group plans in New York State. Additionally, as of November 2012, FIC members can access free primary care and preventative services through a state of the art medical home located in Downtown Brooklyn,” said Senator Hannon. “FIC is currently licensed as an Article 42 insurance company and as such is regulated by the Department of Financial Services. Effective January 1, 2014, the ACA, as specified in recently promulgated CMS rules, will require health insurance to all individuals or groups in the state, to offer coverage that fits within narrow actuarial value ranges and to participate in various risk sharing pools,” said Assembly Speaker Silver. “The ACA failed to incorporate any exceptions to these requirements for existing insurance demonstration programs such as FIC that were designed to make affordable coverage available to independent workers with middle incomes. The obligations imposed under ACA will impose severe hardship on FTC members, jeopardizing their ability to continue to obtain affordable coverage. Most importantly, FIC’s actuaries estimate that application of ACA would force FIC to raise premiums an average of $178 per member per month.” “FTC members are a unique class of New Yorkers who historically have faced difficulty obtaining affordable health coverage. The majority of FIC members are middle class (annual incomes of -$50,000 to $100,000 for a family of four) and all members have no positioned favorably to purchase insurance through the exchanges since, as middle income earners, most of them will not be eligible for tax subsidies under the ACA and they have no employer relationship to fall back on,” said Assembly Speaker Silver. “As such, FIC provides a needed service to middle class working New Yorkers that cannot be easily replicated. The new law will allow members of FIC to continue to receive their existing benefits for one year after implementation of the ACA reforms, as originally contemplated by the Legislature.” [IA] INSURANCE ADVOCATE / September 9, 2013 27


By Michael Loguercio

It’s None of Your Business…Social Business, That is!


ou hear it every day, social networking: Facebook (which by the way has now climbed over its IPO price and is increasing every day!) Twitter, Tumbler, LinkedIn, Instagram…where does it end? Guess what? It doesn’t…it just keeps growing!

sion of the Bible) This parable accurately identifies the dynamic our industry grapples with as it tries to adapt, stay relevant, and make sense of the many challenges it faces in today’s rapidly evolving business environment. More often than not, agencies try to

While using social media, mobile devices, and other technology, consumers are employing these new tools to become better informed when making buying decisions, and to express their opinions to their followers about the products, businesses, and events of interest to them. Michael Loguercio

Two new key trends that we are now seeing are “social culture” and the “connected society” which now take social interaction to the next level where the interaction is with much larger groups of people. While using social media, mobile devices, and other technology, consumers are employing these new tools to become better informed when making buying decisions, and to express their opinions to their followers about the products, businesses, and events of interest to them. Thanks to my friends and fellow committee folks at ACT/AUGIE, I am able to share with you this information written by Rick Morgan, who describes the emergence of the “social business” and how this new business model is better suited for agencies and other businesses in this new social, connected environment. In describing the social business, Rick draws upon the changes he is seeing agencies successfully make in order to be better positioned in today’s social culture. 

Becoming a Social Business: A Model for Success “Neither do men put new wine into old bottles: else the bottles break, and the wine runneth out, and the bottles perish: but they put new wine into new bottles, and both are preserved.” (Matthew 9:17, King James ver28 September 9, 2013 / INSURANCE ADVOCATE

make social and mobile technologies work within the constructs of outdated business models, organizational structures and traditional processes. The result is an effort that fails. For example, social media is treated simply as a marketing tactic; a Facebook Page is launched and an administrative employee is put in charge. Disruption in day-to-day office procedures results with little if any real benefit. Clearly, there is a difference between organizations that simply engage in social activity and execute social media tactics, and those that actually become social businesses. What is a Social Business? A Google search will turn up hundreds of definitions. Understanding what a social business model is and how it differs from a traditional business model is not all that simple. The concept of social business is new and still evolving. Yet, the definition below is a good start. I have followed Amber Naslund on several social channels for the past four years and consider her to be a pioneer and thought leader in this space: “Social Business is the creation of an organization that is optimized to benefit its entire ecosystem (customers, employees, owners, partners) by embedding collaboration, information sharing, and active engagement

into its operations and culture. The result is a more responsive, adaptable, effective, and ultimately more successful company. Social business can encompass using external social media, but it’s not a requirement. Technically, an organization can be a social business without engaging publicly in social media at all.” (Amber Naslund, President, Sideraworks) The concept of social business is more than theory. A growing number of agencies realize the need to adapt and understand that their business must be transformed or reinvented. They realize the need for a comprehensive social strategy that is clearly aligned with business goals. (Too often this is not the case. An Altimeter survey of nearly 700 social media professionals and executives found that only 34% of businesses  felt that their social strategy was connected to business outcomes.) Further, these agencies have senior management involvement, organizational alignment and operational processes in place that enable execution of their social strategy. They also understand the need to integrate social methodologies into their organizations in order to enable their businesses to adapt to the fast and ever changing business environment. These agencies know that use of new technology, as well as social and mobile initiatives, will only be successful if there is an organizational and cultural transformation that changes the way employees work, interact with one another and communicate with customers and prospects – in essence, a reinvention of the agency. The concept of reinvention is not new to our industry. When we first started installing agency management systems, we found that there was a big difference between just using “automation” vs. becoming an “automated agency.” Only when agencies reinvented operational processes and procedures (remember Transactional Filing?) did their investment in technology start paying off. Only when management became involved did agency management systems transition from being primarily accounting systems to continued on page 30

Partnering with PRI… Insuring the Medical Community for over 30 years. Dedicated to playing an important role in shaping the future of malpractice insurance.

PRI serves our professional colleagues for their protection against medical professional liability damages, as created by our founders of, by and for medical doctors. PRI protects top doctors and the leading healthcare facilities in New York, using our unique, award winning risk management and loss prevention techniques. PRI successfully defends doctors and facilities with the strongest defense team anywhere and the most aggressive approach to defeating unjust claims, effectively insulating our insured against fraudulent, capricious claims.

1800 Northern Boulevard • Roslyn, N.Y. 11576 Tel: 800.632.6040 • Fax: 516.365.7522

[ FAC E TO FAC E ] continued from page 28

tools that supported agency service, sales, and marketing activity. As difficult as process change is – changing an agency culture and the “people” part is even harder. It all starts with leadership. Leadership Charlene Li, founder of Altimeter Group, and Keynote speaker at the 2013 ACORD Insurance Systems Forum said this about social business adoption: “The biggest determinants, by far, of whether you will be successful at social business are leadership and culture.” As mentioned above, all the technology in the world is useless if operational processes and organizational behaviors aren’t changed. Change starts from the top and an agency’s senior management and leaders are the ones responsible for facilitating this change. That is, success depends on change management initiatives being driven by agency leadership and practiced at every level from senior management down to customer service and support personnel. Thus, executives must not only talk about changing the organization; they must also become involved and demonstrate the behaviors that drive change. This is often referred to as “transformational leadership” where the leader provides employees with an inspiring mission and vision for the organization and encourages them to challenge the status quo and to alter the landscape in which the business competes.




What does a Social Business look like? It is difficult to understand exactly what a social business is and how it is different from a traditional business by a definition alone. Perhaps looking at some examples of the operational and organizational changes a growing number of agencies are making will make it easier to understand what becoming a social business means. Trust Employees Empower and trust your employees to participate on social sites on the agency’s continued on page 34

30 September 9, 2013 / INSURANCE ADVOCATE


Defensive Driving Class Opportunies! We are looking for Delivery Agents, Instructors, and Facilies in ALL Areas of New York to Parcipate! The Benefits of choosing Empire Safety Council: · LOW START UP COST All required materials compare favorably in price. · EASY TO TEACH FORMAT Instructor’s manual is logically organized and cross referenced to the student workbook and the NYS Vehicle & Traffic Laws. · PIRP IS GROWING Every year, on average 150,000 of New York’s drivers choose Empire for their Point / Insurance Reducon needs. · BACKED BY SCIENTIFIC RESEARCH Empire’s Accident Prevenon Workshops, in fact, save lives by reducing both the number of vehicle accidents and repeat traffic offenses for the highest overall effecve rate in driver safety educaon. · MAINTAIN THE HIGHEST INTEGRITY Empire maintains the highest integrity among all sponsors by referring all students to Empire’s officially approved Delivery agencies


· PARTNERSHIP IN EDUCATION PROGRAM As a Human Resource for business to raise funds for schools, libraries, fire departments, churches, and non-profits. · TURN KEY OPERATION Empire supplies you with markeng tools no extra cost to you. If you want to gain partners in educaon, we have unique agency proposals.

By law, NYS drivers who complete Empire’s 6-hour accident prevenon workshop save 10% on all their vehicle liability, personal injury protecon, and collision insurance premiums for three years. Addionally, students can reduce up to four traffic violator points on their driving record every 18 months. Upon compleon of the course, students will receive an official course compleon cerficate. ESC helps organize classes, appoint delivery agents, train instructors, fill out applicaon to obtain approval (usually within two weeks), refer students, and further assist you with adversing support programs.



COMMERCIAL LINES SPECIALTY PRODUCTS Outstanding Products, Easy Quoting, Great Service New Ventures Eligible Financial Strength Rating



A++ Superior

CONCESSIONAIRES & VENDORS Street vendors, flea market operations, kiosks, seasonal lots & tents acceptable

BEAUTY * BARBER * NAIL SALONS Incidental tanning beds & massage services acceptable

VACANT LAND & BUILDINGS Partially vacant acceptable, vacant acceptable

FAST FOOD Up to 30% alcohol sales acceptable, up to $5M in annual sales

FITNESS CENTERS Health Clubs, Gyms, Yoga & Pilates Studios; incidental massage or child sitting services acceptable

JANITORIAL Up to 50% floor waxing acceptable; up to 25% of annual sales from landscaping, carpet cleaning & window cleaning acceptable

CHILD CARE: COMMERCIAL & RESIDENTIAL Drop in centers acceptable; abuse & molestation limits available

LAUNDROMATS 24 hr operations with or without attendants and drive in operations acceptable

COMMERCIAL UMBRELLA & EXCESS GENERAL LIABILITY Primary AM Best B++ or better acceptable; limits up to $5M

Quick & Easy Phone Quoting: 888-845-6076 Access General Agency Doug Flindt, Commercial Underwriter 516-622-4674

Committed to the Success of our Agents!

PERSONAL LINES SPECIALTY PRODUCTS Outstanding Products, Easy Quoting, Great Service Financial Strength Rating



A++ Superior

PERSONAL UMBRELLA Broad risk appetite Primary umbrella limits & excess umbrella limits up to $10,000,000 Direct bill option No self insured retention

HOME BASED BUSINESS More competitive rates & broader coverage than available under a homeownerâ&#x20AC;&#x2122;s policy Over 150 eligible classes of business Liability coverage up to $1,000,000

VACANT PROPERTY Renovation, for sale, and boarded-up are eligible Vacant tenant & condo spaces Business personal property in a vacant building Inspection costs paid by USLI

COMPREHENSIVE PERSONAL LIABILITY Coverage offered for owner occupied or tenant occupied 1, 2, 3, & 4 family dwellings Coverage offered for condo unit owners, mobile home owners, tenants of multiple unit buildings, & secondary/seasonal residences

Quick & Easy Phone Quoting: 888-845-6076 Access General Agency Amy Levy, Marketing Manager 516-622-4620

Committed to the Success of our Agents!

[ FAC E TO FAC E ] becomes a key success factor in driving organizational change. Encourage your employees to build personal brands on social sites. Thus, opting out of social networking activity is not an option. Successful social businesses depend upon a team effort. They create processes that support organizational consistency. For example, when a new employee joins the agency and wants to start blogging or Tweeting on behalf of the agency, a process

continued from page 30

behalf and trust that they will do the right thing. Consider starting a blog and use it to educate your customers and prospects and demonstrate your subject matter expertise. But also use it to build and strengthen your brand personality. Agency staff will be the foundation for building a fully collaborative social business. A shift in employee behavior

SIMPLIFYING IT Our award-winning Aspire Information System is real-time... web-based... a complete end-to-end scalable solution custom configured to address all of your business requirements for policy, claims and reinsurance transactional administration.



Software as a Service Rating Engine Forms Generation Engine Automated Batch Processing Bulk Payment Processing Accounting (premium and loss) F i nancial Analyt ics Data Migration Services 3rd Party Service Integrations Portable Data Analytics Agent/Broker Profiles



Company Producer C onsumer



BUREAUS I SO AAIS & all other Stat Plans


Technologies A L i m i te d L i a b i l i t y C o m p a ny

...building technology solutions to grow your business... 34 September 9, 2013 / INSURANCE ADVOCATE

Policy Claims Reinsurance


Admitted Surplus Lines Risk Retention Groups Captives Self Insureds

500 Craig Road Second Floor Manalapan, NJ 07726 Tel: (732) 863-5523 Web:

should be in place that governs employee training and certification in the social media policy that the agency has in place. (See ACT’s guide to creating a social media policy.) Flexible and responsive work The definition of work changes – the incoming workforce will demand a more open and flexible work environment. Options as to how, when, and where work happens are expanded. For example, new models in the form of small virtual offices, expanded geographic locations, flexible work hours, 24/7 availability, outsourcing, niche or expertise-driven agents are transforming how we define work. For example, becoming a social business means producers – in addition to using social tools to create personal brands – spend less time behind desks and more time in the field making “real life” contact, meeting in places like Starbucks. Collaborative work environment Develop a collaborative (vs. hierarchical) organizational structure. The new social and connected cultures have set new expectations when it comes to speed of communication and response. Traditional hierarchically structured agencies will not be able to adapt to this new standard of consumer expectation. Further, information must be available and shared – not horded, restricted or reside in silos. In fact, many agencies are inviting customers to participate in agency decisions. For example, they have customers sit on the agency’s board of directors or participate in advisory councils. Become transparent in your communication. Customers and employees expect to communicate more seamlessly and develop personal relationships. Agencies have found that this is one of the best ways to build trust. Community Involvement Become personally involved in your real-life community, including active involvement and support of charitable initiatives. The profiles of successful agencies reflect social values that are embedded in the core of the organization. This is also a key value for customers – they want to do continued on page 36








All Types of Surety & Fidelity Bonds



STANDARD RATES | Treasury Listed Sureties | Immediate Binding Facilities

Call Our Highly Experienced Team For All Your Bonding And Surety Needs!

U.S. SURETY SERVICES AGENCY, INC. 108 Greenwich Street, New York, NY 10006 Phone: 212-968-9100 • Fax: 212-248-0380 WATS: 800-924-0398 INSURANCE ADVOCATE / September 9, 2013 35

[ FAC E TO FAC E ] continued from page 34

business with a company that is socially responsible. Technology Deploy technology that facilitates collaboration. Technology will not change an organization’s culture. However, having a strong understanding of your agency’s cultural objectives will have an impact on your technical requirements, choice of technology and how to implement and configure it. Clearly, there will be need for agency management system technology to support the new social business model. Responsive Marketing Most personal lines and small commercial customers are interacting with agents and insurers across the full range of channels: in-person, by mobile device, by phone, and even through services like Skype or Google Hangouts. It is necessary to understand your customer and adjust your marketing and communications accordingly. For example, shift marketing dollars from traditional marketing channels to digital ones. (i.e., Yellow Page ads to digital/on-line marketing). Keep track of the communications preferences of your clients and be prepared for communications of differ types from a wide variety of devices. Reinvention of Agency Processes In addition to organizational and cultural changes, many traditional processes are also in need of reinvention. We need to think through how many of our everyday processes might and should change, enabled by the new technologies available to us. Everything from managing passwords, e-signatures, certificates of insurance, ID cards, online self-service, mobile options, policy delivery, billing and payment options, and even coverage offerings must change to meet current customer service expectations. Summary It is important to remember that consumer expectations are set by the culture, not the industry. The culture is shaped by new technologies and innovative applications of those technologies by other industries and social institutions. We have 36 September 9, 2013 / INSURANCE ADVOCATE

Agencies that are able to make the transition and become social businesses will be well positioned to meet the challenges of the new business landscape and the demands of the new social culture and connected society.

become a “social culture” and a “connected society,” where consumers are increasingly connected and empowered through changing technology to interact with and shape the world around them. Local agents are not on the verge of extinction, but we do need to change and adapt. We are past the theoretical stage – there are a growing number of agencies that have started to make the shift/transformation. Agencies that are able to make the transition and become social businesses will be well positioned to meet the challenges of the new business landscape and the demands of the new social culture and connected society. Tying this to the opening parable, they are putting new wine in new bottles. Additional Resources For additional examples as to how agencies are reinventing themselves for the future, please see: • ACT’s “Agency Perspectives on the Future” Video • ACT’s “Agency Strategies for Growth” Video • 5 Ways Agency Principals Can Seize the Future by Peter van Aartrijk • Agency Strategies to Manage Change Successfully by Jeff Yates Around town The New York Young Insurance Professionals and PIANY had their annual YIPN Open at the beautiful Seawane Country Club in beautiful downtown Hewlett Harbor, NY. Thanks to the 150 insurance folks that participated, I am proud to say that we raised over $1000 for St. Jude’s Children’s Hospital, and as Adam

Rostkowski of ProActive Brokerage always says, “Everyone had a great time!” Well that’s all for now, and until next time when we will be talking about some other events in our area, “Ciao for now!” Michael Loguercio is the Regional Sales Manager for EZLynx; and has been active in the insurance industry since 1978 as an insurance technology professional and a licensed insurance broker. He is an active Past President of the Young Insurance Professionals of New York State, current ACT/AUGIE, Professional Insurance Agents of New York State, Independent Insurance Agents and Brokers of New York State, and Council of Insurance Brokers of Greater New York committee member. NY-YIP/PIA has honored Michael with a “Distinguished Service” award in 2001; “Insurance Professional of The Year” award in 2009; “Lifetime Achievement” award in 2012; and a “Special Service” award in 2013. In his community, Michael is President of the Longwood Central School District Board of Education on Long Island, NY; is a Director on the board of REFIT NY (Reform Educational Financing Inequities) and is a member of The Middle Island, NY, Rotary Club and Central Brookhaven Lion’s Club. In 2013 he was awarded the SCOPE “Community Service” award for his dedication to the public. Michael is a regular Contributor to the Insurance Advocate since 2008, and may be contacted at 631-345-9359 or may also follow him on Twitter @MLoguercioJr; and on Facebook @ Michael Anthony Loguercio Jr.

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


ISO Introduces Suite of Mobile Business Interruption Options


ERSEY CITY, N.J.—ISO has filed new coverage options to address the business interruption exposures of vehicles and mobile equipment. ISO is a member of the Verisk Insurance Solutions group at Verisk Analytics (Nasdaq:VRSK). Traditional business interruption coverage typically responds when loss or damage occurs at a specific location. Commercial policyholders have long been able to protect their revenue stream from adverse events that occur at their brick-and-mortar locations, as well as events that occur at the premises of suppliers and other dependent locations. ISO's new coverage options will enable business interruption coverage to respond to the exposures presented by vehicles and mobile equipment while away from the policyholder's location. The evolution of the commercial enterprise has led many companies to rely on vehicles and mobile equipment to support their business operations, according to Kevin Thompson, president of ISO Insurance Programs and Analytic Services. "Vehicles and mobile equipment can generate a significant percentage of a business's revenue, and when such property is damaged or destroyed, there's a potential

for business interruption," said Thompson. "This exposure can be especially significant when the equipment is customized and cannot be repaired or replaced quickly in the event of a loss. There's a need in the marketplace to address this exposure, whether the insured is a small business owner running a mobile pet-grooming business or food truck or a larger business that depends on multimillion-dollar well-drilling or geophysical exploration equipment." To provide its customers with maximum underwriting flexibility, ISO is introducing the new coverage option as a series of similar endorsements under its commercial property, commercial auto, commercial inland marine, and businessowners programs. This approach gives each insurer the ability to choose the appropriate line to place the coverage based on underwriting philosophy, risk appetite, and the nature of the exposure being insured, as well as the preferences of the insured seeking the coverage. The endorsement for each line of business is designed so that business interruption coverage for each risk would be provided under only one line of business. "For instance, if the insured already has business interruption coverage at the prem-

NYIA Applauds New Laws That Protect New York Motorists


LBANY, N.Y—The New York Insurance Association (NYIA) applauds the legislature and Governor Andrew Cuomo for putting greater fraud protections in place in New York. Governor Cuomo recently signed two bills that increase safety for the state’s drivers and passengers. It is now illegal in New York to make, distribute, sell or install counterfeit or non-functional airbags. In addition, it is now a crime to forge a vehicle identification number (VIN). “The passage of these measures will help combat fraud,” Ellen Melchionni, president of NYIA said. “Criminal oppor-

The trend of using a counterfeit or non-functioning airbag has fatal consequences. tunists are always looking for new ways to cheat society for monetary gain. I heartily thank the legislature and Governor Cuomo for taking a stand against these fraudulent, often dangerous, acts.” The trend of using a counterfeit or non-functioning airbag has fatal consequences. “Airbags are meant to save lives,”

…ISO is introducing the new coverage option as a series of similar endorsements under its commercial property, commercial auto, commercial inland marine, and businessowners programs. ises, whether under a businessowners or commercial property policy, an insurer has the option to extend that coverage to vehicle and mobile equipment exposures as well," explained Thompson. "On the other hand, the commercial auto or commercial inland marine option enables writing mobile business interruption coverage within the same policy that insures the vehicles and mobile equipment for physical damage, as well as in situations where the insured does not have premises-based operations at all." The new options, along with associated advisory rating material, have a planned February 2014 effective date for commercial property, commercial auto, and businessowners. In addition, mobile business interruption coverage will be filed later this year under ISO's Capital Assets (Output Policy) and Agricultural Capital Assets (AgriCAP®)programs and will be available through ISO's Inland Marine Handbook.[IA]

Melchionni said. “The installation of an airbag that is fake or has already been deployed can prove deadly. These tragic circumstances are easily avoidable if a vehicle is equipped with a proper airbag.” Forging VINs is a common method used to mask the true identity and owner of a stolen car. “Making it a crime to forge a VIN will provide law enforcement with greater tools in tackling theft and fraud.” Melchionni said. “This legislation will help prevent honest, law-abiding New Yorkers from being the victims of theft.” The counterfeit airbag bill is S5037B/A6378B sponsored by Sen. Zeldin and Assemblyman Dinowitz. The VIN forgery bill is S2098A/A3180A sponsored by Sen. Golden and Assemblyman Abbate. Both of these measures will take effect Nov. 1, 2013.[IA] INSURANCE ADVOCATE / September 9, 2013 37


By Jamie Deapo

Are Your Clients Raving Fans?


y last 2 blog posts at IIABNY have been about establishing the value of buying protection from an independent agent. Having consumers appreciate that value takes the decision on where to buy coverage out of the realm of just price.

via email and then get that email address entered into your agency management system? It’s important that you look at every facet of the service you provide and do whatever it takes to make the overall experience exceptional. In my most recent blog post I provided

Personal insurance, and very soon small to medium sized business insurance, is experiencing a paradigm shift. Online direct response carriers are gaining market share. Technology is making it possible for traditional insurance providers to consider cutting out independent agents from the insurance buying process. Jamie Deapo

Technology has allowed price sellers who deal directly with consumers over the internet to offer a decent customer experience. Depending on a consumer’s previous experience they may even believe it’s good to very good service. That’s why in addition to offering professional advice and support independent agents have to offer exceptional service. As Ken Blanchard says in his book with the same name you need to turn your clients into raving fans. How much time, energy and money do you put into making your client’s experience so exceptional that they become raving fans? How do they feel about their experience as your client? If their perception is that their experience is just OK you need to be concerned. Remember as I said earlier with today’s technology the internet price sellers can provide them with a similar experience and in many cases for less money. Do your clients and prospects visit your website and/or Facebook page? If so how many are visiting, what do they look at and how long do they stay? If you don’t have a website or Facebook page how and where do your clients go to gather insurance information? Do you ask every client if they would like information sent to them 38 September 9, 2013 / INSURANCE ADVOCATE

a list of the items that people told me they valued in deciding who would handle their insurance protection. Here is a list of those items: • Convenience in doing business • Appreciate their business – positive, friendly interaction when they call • Regular communication in language they understand • No hassles – don’t need or want problems • Candid advice with their best interests at heart • Keeping them aware of issues that could affect them and offering solutions • Don’t take my business and then forget about me • I need you most when and if I have a claim – please be there How would your clients rate your agency’s performance in these areas? Do you routinely survey clients on how satisfied they are with the service you provide? When clients leave you do you reach out to find out what caused them to make that decision? In this article I have posed quite a few questions and there are many more that could be asked. If you aren’t looking at

every facet of how you do business and working to make that experience as exceptional as possible you may regret it down the road. Personal insurance, and very soon small to medium sized business insurance, is experiencing a paradigm shift. Online direct response carriers are gaining market share. Technology is making it possible for traditional insurance providers to consider cutting out independent agents from the insurance buying process. Their consumer advertising is totally centered on convincing consumers that they can give them everything they need at the lowest price possible. To retain the business you have and take back market share independent agents must convince consumers of the value of doing business with them. You would think the professional advice they provide and their work on behalf of the client when there is a claim would be enough however it’s not. Too many consumers haven’t experienced, or know someone that has experienced, a significant loss where these valuable services would come into play. So in addition to reinforcing your professional advice and claims support an agency must make that consumer feel special by providing exceptional service. The more consumers feel liked and valued and the higher the level of satisfaction they receive in being your client the less likely they will be lured away by internet price marketers. So look at every facet of your customer service and do everything you can to make it the best experience a client could want. The future growth and stability of your agency depends on it. [IA]

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

THC EXPRESS Contain Con C on ntain n ttain in Healthcare H Costs, Boost Productivity Produc Producti P Pr Pro roduc ductiv du & Reduce Absenteeism

* * One price includes the entire household

With THC Express, employees can Address minor medical problems without missing work Seek treatment quickly & proactively so they get better faster Maximize their healthcare dollars by avoiding unnecessary trips to the doctorâ&#x20AC;&#x2122;s office or ER Save on Dental, Pharmacy, Vision & More!

Help your Clients Keep their Employees & Bottom Line Healthy

For $9.95*/month, THC Express delivers Free 24/7 access to on-demand healthcare through Ameridocâ&#x20AC;&#x2122;s Telemedicine network Deep discounts on Dental, Pharmacy & Vision Exceptional customer service Employee satisfaction An excellent retention & recruitment tool *$9.95/mo if 100% employer paid/full participation, otherwise $14.95/mo

To Learn More Call THC Group Sales or visit THC Group Sales (888) 770-7450 THC Express is not health insurance. 3/13


By Lawrence N. Rogak

Attorney’s Rhetorical Question in Appellate Brief Does Not Amuse the Court Promed Durable Equip., Inc. v GEICO Ins.


ppeal from an order of the Civil Court of the City of New York, Kings County (Lisa S. Ottley, J.), entered October 25, 2011. The order, insofar as appealed from, denied defendant’s cross motion for summary judgment dismissing the complaint and found, in effect, that plaintiff had established, for all purposes in the action, the submission of the bills and the fact and amount of the loss sustained. ORDERED that the order, insofar as appealed from, is modified by providing that the branch of defendant’s cross motion seeking summary judgment dismissing so much of the complaint as sought to recover upon a claim for supplies furnished on December 16, 2008 is granted; as so modified, the order, insofar as appealed from, is affirmed, with $25 costs to appellant; and it is further, ORDERED that on the court’s own motion, Jonathan R. Vitarelli, Esq., Ilona Finkelshteyn, Esq., and counsel for defendant are directed to show cause why an order should or should not be made and entered imposing such sanctions and costs, if any, against Jonathan R. Vitarelli, Esq., and Ilona Finkelshteyn, Esq., pursuant to Rules of the Chief Administrator (22 NYCRR) § 130-1.1 (c) as this court may deem appropriate, by each filing an affidavit or affirmation on that issue in the office of the Clerk of this court and serving a copy on the others on or before October 4, 2013; and it is further, ORDERED that the Clerk of this court, or his designee, is directed to serve a copy of this decision and order to show cause by regular mail upon Jonathan R. Vitarelli, Esq., Ilona Finkelshteyn, Esq., and counsel for defendant. In this action by a provider to recover assigned first-party no-fault benefits, defendant appeals from so much of an 40 September 9, 2013 / INSURANCE ADVOCATE

In this action by a provider to recover assigned first-party nofault benefits, defendant appeals from so much of an order of the Civil Court as denied defendant’s cross motion for summary judgment dismissing the complaint and stated that the only issue for trial was the medical necessity of the supplies at issue.

order of the Civil Court as denied defendant’s cross motion for summary judgment dismissing the complaint and stated that the only issue for trial was the medical necessity of the supplies at issue (see CPLR 3212 [g]). Contrary to defendant’s argument on appeal, plaintiff established the submission of the bills and the fact and amount of the loss sustained. We therefore do not disturb the Civil Court’s implicit finding that those facts had been established for all purposes in the action. To the extent that defendant argues that the order improperly found that plaintiff had established, for all purposes in the action, that defendant had issued a claim denial that was conclusory, vague, or without merit as a matter of law, this is an incorrect reading of the order,

which directs that a trial be held on the issue of medical necessity. In support of the branch of its cross motion seeking summary judgment dismissing so much of the complaint as sought to recover upon a claim for supplies furnished on October 23, 2008, defendant submitted a sworn peer review report which set forth a factual basis and medical rationale for the doctor’s determinations that there was a lack of medical necessity for these supplies. In opposition to defendant’s cross motion, plaintiff submitted an affirmation by a doctor which was sufficient to raise a triable issue of fact as to whether these supplies were medically necessary (see Zuckerman v City of New York, 49 NY2d 557 [1980]). Consequently, this branch of defendant’s cross motion was properly denied. In support of the branch of its cross motion seeking summary judgment dismissing so much of the complaint as sought to recover upon a claim for supplies furnished to plaintiff ’s assignor on December 16, 2008, defendant submitted a peer review report which set forth a factual basis and medical rationale for the doctor’s determination that there was a lack of medical necessity for these supplies, on the ground, among others, that these supplies were superfluous, given that the assignor had already been involved in a treatment plan which included physical therapy and rehabilitation, which treatment plan, the peer reviewer stated, was sufficient to restore the assignor to the assignor’s pre-accident comfort level. In opposition, plaintiff submitted an affirmation by a doctor which failed to meaningfully refer to, let alone rebut, this determination (see Pan Chiropractic, P.C. v Mercury Ins. Co., 24 Misc 3d 136[A], 2009 NY Slip Op 51495[U] [App Term, 2d, 11th continued on page 42

Senator John Sherman Author, Sherman Antitrust Act

“If we will not endure a king as power we should not endure a the production, transportation, of any of the necessaries

The Sherman Antitrust Act remains a landmark federal statute on competition It was enacted for the protection of competition in the marketplace “No private corporation shall be created e corporate rights granted to one are open to all.” Sen. John Sherman 21 Cong. Rec. 2456 (1890)

a political king over and sale of life.”

“If we would not submit to an emperor we should not submit to an autocrat of trade, with the power to prevent competition...”

Sen. John Sherman 21 Cong. Rec. 2456 (1890)

urgood Marshall U.S. V. Topco Assoc., 405 U.S. 596 (1972)

e freedom guaranteed each and every business, no matter how small, is the freedom to compete – to assert with vigor, imagination, devotion, and ingenuity whatever economic muscle it can muster.”

e Supreme Court of the United States agrees with the provisions of the Sherman Antitrust Act “The public interest is best protected from the evils of monopoly… by the maintenance of competition.” Justice Harlan Stone U.S. v. Trenton Potteries Co., 273 U.S. 392 (1927)

Know Competition, No Monopoly


2/6/2013 2:25:10 PM

Leveling the Playing Field for Regional and Specialty Insurers since 1985

No Competition, Know Monopoly Demotech, Inc. is working hard to assist every finnancially stable insurer offer its products through each producer it has appointed. Call 800-354-7207 or visit

Competition_vs_Monopoly_vInsurance_Advocate.indd 1

[ COURTSIDE ] continued from page 40

& 13th Jud Dists 2009]). Since plaintiff has not challenged the Civil Court’s finding, in effect, that defendant is otherwise entitled to judgment, the branch of defendant’s cross motion seeking summary judgment dismissing so much of the complaint as sought to recover on a claim for supplies furnished on December 16, 2008 should have been granted (see Park Slope Med. v Praetorian Ins. Co., 39 Misc 3d 141[A], 2013 NY Slip Op 50761[U] [App Term, 2d, 11th & 13th Jud Dists 2013]; A. Khodadadi Radiology, P.C. v NY Cent. Mut. Fire Ins. Co., 16 Misc 3d 131[A], 2007 NY Slip Op 51342[U] [App Term, 2d & 11th Jud Dists 2007]). Where a respondent submits an appellate brief, it shall include, pursuant to CPLR 5528, respondent’s appellate argument (see Rules of App Term, 2d, 11th & 13th Jud Dists [22 NYCRR] § 731.2 [a]). Sanctions and costs may be imposed against an attorney or party to the litigation, or both, for engaging in frivolous conduct (Rules of the Chief Administrator [22  NYCRR] § 1301.1). We note generally that rule 3.3 (f) (2) of the Rules of Professional Conduct (22

42 September 9, 2013 / INSURANCE ADVOCATE

NYCRR 1200.0) provides that “[i]n appearing as a lawyer before a tribunal, a lawyer shall not . . . engage in undignified or discourteous conduct” (see also Galasso, Langione & Botter, LLP v Galasso, 89 AD3d 897, 899 [2011]). We further note that rule 5.1 of the Rules of Professional Conduct (22 NYCRR 1200.0) governs the responsibilities of law firms, partners, managers and supervisory lawyers. In the instant case, the brief submitted on respondent’s behalf contained, among other things, pages denominated “Table of Authorities” and “Summary of the Argument” that merely state that these pages were “left blank intentionally.” The “Question Presented” stated only “WHAT’S A BOY TO DO?” The remainder of the respondent’s brief did not address the facts of this case or interpose any specific argument as to why the order from which defendant appealed should be affirmed. Based upon the above, and other statements in the respondent’s brief, we order Jonathan R. Vitarelli, Esq., Ilona Finkelshteyn, Esq., and counsel for defendant, to show cause why an order should or should not be made and entered impos-

ing sanctions and costs, if any, against Jonathan R. Vitarelli, Esq., and Ilona Finkelshteyn, Esq. Accordingly, the order, insofar as appealed from, is modified by providing that the branch of defendant’s cross motion seeking summary judgment dismissing so much of the complaint as sought to recover upon the claim for supplies furnished on December 16, 2008 is granted and, upon the court’s own motion, Jonathan R. Vitarelli, Esq., Ilona Finkelshteyn, Esq., and counsel for defendant, are directed to show cause why an order should or should not be made and entered imposing such sanctions and costs, if any, against Jonathan R. Vitarelli, Esq., and Ilona Finkelshteyn, Esq., pursuant to Rules of the Chief Administrator (22 NYCRR) § 130-1.1 (c) as this court may deem appropriate, by each filing an affidavit or affirmation on that issue in the office of the Clerk of this court and serving a copy on the others on or before October 4, 2013. [IA] 2013 NY Slip Op 23283 Decided on August 16, 2013 Appellate Term, Second Department



By Sherry Branson, Kevin Davis Insurance

D & O Cover for Associations Presents Challenges


n the Community Association world, Directors and Officers Liability Insurance is a must. Community Associations, such as Condominium Associations, Homeowners Associations, and Co-ops, present a unique set of challenges to insurance brokers. Education is a key component to understanding these challenges and it is the insurance broker’s job to educate and explain the types of risks the associations face and how an Association can best protect itself from loss. The best way to communicate the need for coverage is to give real life examples of a wide variety of claims Community Associations have encountered and the amount each claim costs. The lack of funds at many Associations is raising the number of breach of contract claims and has put the Associations in a position where they cannot afford to provide the same services they offered in the past. Directors and Officers Liability claims across the board have increased in the past several years. Common claims which Community Associations are facing are Breach of Fiduciary Duty, Breach of Contract, Violation of Covenants, Conditions, and Restrictions, and Discrimination. As you can see, it is a wide range of claim situations and having coverage that will protect and prepare an association for multiple scenarios is very important. Here are some examples of Directors and Officers Liability Insurance claims you can share with Community Association Property Managers and Board Members as you help them understand the importance of Directors and Officers Liability.

Breach of Contract: Plaintiff seeking $150,000 for fulfillment of contract Defense Costs: $15k An Association hires a company to maintain the grounds for a three year term. After the first year of the contract, the board is not happy with the foliage selection and fires the grounds company. Grounds company files suit against the Association for fulfillment of contract.

Violation of Covenants, Conditions & Restrictions: The Association By-Laws have several restrictions regarding the color schemes of homes. An owner is building a home and wants to paint it brown. The Association approves. The owner subsequently decides to paint the house pink and they don’t notify the Association. The Association notifies the owner that the color was not approved and the owners sue for arbitrary, discriminatory treatment since they believe that other homes in the neighborhood are not on the approved color list, also. Discrimination: $100,000 Settlement-$140,000 in Defense Costs A complaint was filed by a prospective buyer against a Condo Association with the Department of Housing and Urban Development (“HUD”) alleging that the prospective buyers’ application to purchase a unit within the Association was denied for discriminatory reasons. Specifically, the buyer alleged the Association President discriminated against him by denying his application based on his age, national origin, and familial status. The HUD commission issued a finding of probable cause. During that time, the Board allowed the prospective buyer to purchase the exact unit they had initially sought. Despite this, the buyer filed a lawsuit against the Association alleging discrimination and included damages representing the difference of the unit purchase price during the time of the disputed application approval process, attorney fees, compensatory and punitive damages. Another extremely important point to bring to the attention of Board Members and Property Managers at Community Associations is for them to be aware of what is excluded in their current Directors and Officers Liability policy. Many policies currently available exclude breach of contract, discrimination, employment issues and architectural issues, so the old saying BUYER BEWARE! is very important when considering a Directors and Officers Liability policy and what is NOT covered in the policy. [IA]

DOWNTOWN NYC BROKER Looking for Experienced Commercial Account Executive. Fax Resume to (212) 406-4225 PRIVATE OFFICE FOR RENT DOWNTOWN NYC - FURNISHED AVAILABLE IMMEDIATELY Perfect for Business Professional! CALL JOHN AT (212) 406-4004

AGENTS • PRODUCERS • BROKERS “LET OUR OFFICE BE YOUR OFFICE” SERVICE and/or PURCHASE 35 Major National & Regional Carriers Competitive Commercial & Personal Lines Private Offices & Conference Rooms Licensed in all States - Est. 1974 Plainview, N.Y.

Ask For Richard or Evan Bower. 516-576-0400 Ext. 0 E-Mail:

Classified Opportunities Classified advertisements must be received by MONDAY NOON prior to publication date for inclusion in that week’s issue. Rate is $38 per inch, per insertion, payable in advance of publication date. In addition, there is a $5 charge for advertisers requesting to assign box numbers forwarded via first class mail.

(Response forwarding expires 30 days after publication.)


INSURANCE ADVOCATE / September 9, 2013 43

[ LOOKING BACKâ&#x20AC;Ś Insurance Advocate, 25 years ago]

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

REAL-TIME RATER = REAL-TIME REVENUE Get multiple real-time General Liability and Homeowners insurance quotes in less than three minutes. No forms. No fuss. Just results.

Sign up online today at 44 September 9, 2013 / INSURANCE ADVOCATE

1-800-403-3738 607-240-7833

PO Box 460 Hancock, NY 13783

Commercial auto real-time quotes coming soon! Workers comp and personal auto quotes can also be submitted for fast turnaround.

[ LOOKING BACKâ&#x20AC;Ś Insurance Advocate, 25 years ago]

REAL RESULTS. REAL TIME. Get multiple real-time General Liability and Homeowners insurance quotes in less than three minutes. No forms. No fuss. Just results.

Sign up online today at

1-800-403-3738 607-240-7833

PO Box 460 Hancock, NY 13783

Commercial auto real-time quotes coming soon!

INSURANCE ADVOCATE / September 9, 2013 45


Call DANNY GAGO  Sales Associate | 732.898.9666 |

Our team possesses… Real Fluency • Insurance Experience • Care … and We Work on EST. Our team helps you… Reduce Rent Costs • Cut HR Expenses • Avoid Employee Insurance Payments • Decrease Payroll Taxes A profitable new angle on data entry, compliance, filtering, billing, claims, faxes and more!


outsourcing aides


46 September 9, 2013 / INSURANCE ADVOCATE

MSO® Partners with Nexxus Solutions Group Glen Rock, N.J.—MSO®, Inc. (The Mutual Service Office, Inc.) has announced that they have partnered with Nexxus Solutions Group. Based in Orlando, FL., Nexxus Solutions Group, LLC is a managed repair network servicing the Insurance Industry and their customers. Nexxus Solutions Group’s national network encompasses mitigation companies, contractors and service providers, who mitigate, repair or restore the damage caused by a residential or commercial loss with a two-year workmanship warranty. Their network members go through an in-depth credentialing process ensuring they are licensed, carry the appropriate insurance and pass criminal background checks. Nexxus Solutions Group manages the claim from start to finish, offering reduced loss costs and cycle times to the Insurer and a higher satisfaction level and peace of mind to the Insured.  According to Nexxus Solutions Group CEO Rick Hayne, “We are excited about our partnership with MSO offering seamless repair solutions to this very important and growing market.  Our dedication and commitment to favorably impacting loss and expenses, reducing cycle times and providing outstanding service fits well with MSO and their member companies.” MSO CEO Jan Scites adds “Nexxus provides a valuable service to the insurance industry with their managed repair network. We are delighted to have them join as a vendor partner. ” MSO is the oldest continuously operating property/casualty rating service bureau, providing product development and rating services to the insurance industry since 1944. MSO has long been an industry leader, offering programs that are comprehensive and easy to use. MSO’s plain language programs save companies money by clearly excluding coverage for claims that were never intended to be paid.  Consistency of policy wording between the programs also makes claims handling easier. [IA]

MSO® Introduces Pet Services Bop Glen Rock, N.J.—MSO®, Inc. (The Mutual Service Office, Inc.) is expanding the specialty Businessowners (BOP) programs they offer to include an endorsement for Pet Services. The pet services option is in addition to programs already available for such exposures as Bed and Breakfasts, Restaurants, Self Storage, Landlords, Condominium Owners, Dry Cleaners, Funeral Directors and Home Businesses. Pet grooming and other pet services operations are becoming increasingly popular, with the establishment of businesses that provide pet day care and pet boarding services. Pet services operations range from individuals who walk dogs to multistate franchises providing multiple services. Mobile pet grooming is also increasing in popularity. The Coverage For Pet Services endorsement tailors coverage for pet services including grooming, day care and other such services. The endorsement is designed to be used with either the standard BOP or the Home Business BOP. Coverage enhancements include coverage for client’s lock replacement to replace or rekey locks, and police department fees charged to respond to accidental activation of an alarm at clients’ premises. Other coverages include loss of client’s property due to dishonest acts of employees of the pet service, loss of employees’ tools, and household pets that are lost while in the care, control or custody of the pet service.  Other covered expenses include emergency veterinary care, burial and cremation and emergency relocation. There is an option to provide Loss of Income/Loss to Pet Grooming Equipment coverage, covering income lost due to damage to a vehicle containing permanently installed pet grooming equipment, or to the permanently installed equipment itself.  Liability coverage is extended to the legal liability arising out of the pet grooming or pet services operation. MSO’s plain language programs save companies money by clearly excluding coverage for claims that were never intended to be paid.  Consistency of policy language between the programs also makes claims handling easier. [IA]

first rehab life 速

E x p e c t big thing s in workers’ c omp ens ation. E x p ec t to s ave a third of your c lient s 3 0% or more. E x p ec t bro ad ac c e pt anc e and few c l ass limit ations nationw id e. E x p e c t c omp etiti ve c ommissions. F or infor m ation c all ( 8 7 7 ) 2 3 4 - 4 4 5 0 or v isit au w.c om /us.

©2013 © 2 0 13 A Applied p plie d U Underwriters, n d e r w r i te r s , Inc. Inc. A B Berkshire e r k s h i re H Hathaway a t h aw a y ccompany. o m p a ny. R Rated a te d A A+ + ((Superior) Superior) b by yA A.M. .M. B Best. est.

September 9, 2013  
September 9, 2013  

New York Retirees AT RISK DFS Audit Hits State Pension Technology