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Officially the Assistant Vice President of Research, Tim is our self-proclaimed "Insurance Geek."  As one of our most recognizable names and utilized resources, he helps members every day with technical questions.

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June 29
Order in the Court (Part 3): Scaffold Law Homeowner Exclusion


New York's (in)famous scaffold law exempts owners of one- and two-family dwellings. Homeowners don't have to worry about absolute liability, right?

Well, it depends. A New York appellate court refused to apply it to one homeowner last week.

A worker died during the construction of a one-family home in New York City. The homeowner also happened to be an officer of the general contractor who was building the home. He was an experienced construction worker. The deceased worker was an employee of an electrical contractor acting as a subcontractor on the project. The homeowner provided the workers with a 14-foot ladder that he built himself out of "two-inch by four-inch pieces of wood connected by nails and screws." As the subcontractor's employee was coming down the ladder with a heavy drill in hand, the ladder jerked and he fell.

The man's survivors sued the homeowner under New York State Labor Law Sections 240(1) and 241(6), which are collectively known as "the scaffold law." Both sections apply to all owners and contractors and their agents, "except owners of one and two-family dwellings who contract for but do not direct or control the work ..." The homeowner seized on this provision to claim he was exempt.

Neither the trial court nor the appellate court were buying it:

(T)he appellant's control of the work site exceeded that of the ordinary homeowner, since he was involved in the construction, assembled and placed the ladder where it was, and instructed the workers to use it for access to the second floor ... The appellant also performed some of the work at the site himself, coordinated the subcontractors, and was 8 to 10 feet away from the plaintiff's decedent at the time of the accident, performing work on the entrance door. Because of his involvement in and control of the work site, the appellant was not entitled to the homeowners' exception under Labor Law §§ 240(1) and 241(6) ...

Because, under New York court precedents, a ladder that suddenly moves is considered to have not provided proper protection to the worker, the court found that the homeowner had violated the scaffold law. Judgment for the plaintiffs.

This is sad case, but the decision is in line with earlier decisions. The courts have consistently found that a homeowner who may possibly have been directing or controlling the work does not get the exemption. I'm sure this will not be the last such case.

June 24
Read the Policy You’re Selling


“Insurance professionals should seek continually to maintain and improve their professional knowledge, skills, and competence.” (The Canons, Rules, and Guidelines of the CPCU Code of Professional Conduct, Canon 2)
“Insurance professionals should be diligent in the performance of their occupational duties and should continually strive to improve the functioning of the insurance mechanism.” (Canon 4)
“Last Sunday morning there was a 24-inch water main break on the road where my insured is located. The water main was only 20 yards from the insured. We have them written under a Businessowners policy that has the broadest coverages available. Yesterday, the adjuster indicated, ‘the claim might be not covered because of surface water.’ However, when we Google what is surface water, it‘s quite vague. Therefore, it has been difficult to explain to our client that the water main damage most likely will not be covered by the comprehensive policy we tailored for them. I hope you might have other similar claims that you recall, or perhaps there is some case law(s) or bulletins which you might be able to research.” (Email, sent with no citations or attachments of policy forms, from the president of an agency outside New York in the eastern U.S.)
“I write a property policy using ISO form CP 00 10 06 07. The building definition includes buildings under construction for materials, equipment, supplies, etc. The policy also has the special causes of loss form CP 10 30 06 07. Question: If there is a loss to building materials due to theft, would there or would there not be coverage?” (Email from another anonymous producer in a Midwestern state)
“Is the trigger for property damage in a Commercial General Liability policy the date the product was manufactured or the date the product was put to use? What is the interpretation of ‘occurrence’?” (Email from a CPCU in another Midwestern state)
What do these three questions have in common? The producers could have found the answers quite easily by reading the contracts that they were selling.
In the first question, the agency president claimed that the insured had “the broadest coverages available,” yet the news about a surface water exclusion apparently came as a surprise. The water damage exclusion in property insurance policies dates back decades. The individual did not know the product the agency had sold.
The second questioner knew what the coverage forms were. However, rather than reading the forms to determine whether coverage would apply to a theft of building materials, the questioner asked someone else (not me) to do it.
The third questioner, who is actually bound by the ethics canons cited above, and who has taken the intensive CPCU courses and passed the exams, apparently did not review the CGL policy, did not know that coverage under that form has always been triggered on the date the injury or damage occurs, and in fact did not check the form’s definition of the word “occurrence.”
All of these individuals hold licenses issued by their respective state insurance regulators. They have been granted legal authority to give other people advice about insurance decisions. They are permitted to accept commission payments for the sale of contracts potentially involving tens or hundreds of thousands or even millions of dollars. No doubt some of them prominently use the Trusted Choice® logo in their advertising. And yet, they do not know what is in the contracts they are selling. Worse, they don’t display any inclination to find out on their own.
I wish I could tell you that these questions are unique, but they are not. It is very common for producers to ask me or my peers around the country, “Does a [fill in the blank] policy cover [a particular loss]?” That question immediately implies that all policies of that type are the same, that there’s no difference between ISO, GEICO, Progressive or Travelers auto policies. That a Chubb umbrella is the same as one issued by The Hartford. That a GL policy issued by Scottsdale says the same thing that one issued by CNA says. That is demonstrably incorrect. As evidence, I will cite my own previous blog posts:
  • An ISO homeowners policy covers dwellings that house up to four families. At least one insurer’s policy does not cover three- and four-family dwellings.
  • A theft claim was not covered because two words, found in ISO homeowners policies, were not in the one a Texas man bought.
  • The afore-mentioned ISO Causes of Loss – Special Form contains a five-word phrase that would make the difference between coverage and no coverage for the owner of heavy equipment if the floor collapses. His policy will not provide the coverage.
  • A commercial auto insurer’s policy actually makes the application part of the legal agreement between it and the insured. In one part of that application, the insured acknowledges a duty to notify the insurer of new drivers. What happens if the person who normally handles that is on vacation or out sick when a new driver gets hired?
Here are the facts:
  • Insurance policy forms and endorsements for the same line of coverage but issued by different insurers have significant differences.
  • Insurance producers offer these different policy forms and endorsements for sale to their clients.
  • Leaving aside what the courts say about a producer’s legal duty to insurance buyers, those buyers rely on producers to know what those forms and endorsements say.
  • Producers who do not know what the forms and endorsements say cannot give sound advice to their clients.
When people receive bad advice, they are more likely to make bad decisions. They may make bad decisions even with good advice; bad advice just makes a bad outcome more likely. When they make bad decisions and eventually suffer uninsured losses, people suffer. Not just the insured – innocent third-party claimants.
In one case involving a New York State agency, the insured had a special events policy covering a rodeo. Actually, the insured received a certificate of coverage, not a complete policy. After the event ended, some bulls got loose. An average professional bull riders bull weighs between 1,600 and 1,700 pounds. It’s not hard to imagine that a bull after a rodeo is at best anxious and at worst frightened. These bulls injured several people before they were subdued. People who came out for an evening’s entertainment ended the night in hospitals.
When they sued, the insured looked to his special events policy for coverage. This policy was obtained from an employee of a managing general agency, brokered to an employee of the retail agency, which was managed by a veteran agency principal. And before the loss occurred, none of them noticed that the policy excluded coverage for bodily injury or property damage caused by animals.
A special events policy covering a rodeo did not cover injuries caused by animals, and nobody noticed. Please ponder that for a moment. Animals are kind of the stars of the show at rodeos.
So, no coverage under the events policy, so the insured sues the agency. Trial court dismisses the lawsuit, insured appeals, and this time he wins. The agency couldn’t even cite the insured’s duty to read the policy as a defense, as there was no policy for the insured to read. He had only a certificate. The appellate court has sent the case back to the lower courts for a trial. I doubt the agency’s E&O carrier will let things get that far. The agency in question has not been an IIABNY member for well over a decade, so I don't know who that carrier is.
Did I mention that the injuries occurred in the summer of 2012, and the appellate court’s decision just came down four months ago? In the meantime, have the people injured by the bulls received anything? Only if the insured emptied his pockets. The guy is a logger by trade and puts on rodeos as a sideline. Something tells me he’s not independently wealthy.
People enjoying a night out, injured by agitated animals who weigh almost as much as a car, and they probably have received no compensation for their injuries four years after the fact because three insurance professionals didn’t know what they were selling.
I believe that product knowledge is an ethical issue. The stakes are too high, the consequences too severe, the potential financial loss is too great for we as insurance professionals to shrug, say the policies are all the same, and focus on whether we can get the premium down fifty bucks. Ignorantly selling someone the wrong product can and does harm people.
It is one thing if a client ignores your suggestion and buys lower limits or skips the coverage altogether. People can’t be forced to buy high uninsured motorists limits or flood coverage. It’s another thing altogether when the clients are never given the chance to make that decision because they’ve been told that they have “the comprehensive policy we tailored for them,” to quote the email above about the water main break.
We are insurance professionals. We do what we do to make a living, yes, but we also do it to give people peace of mind so they can go on about their lives and businesses. We can’t do that unless we know what we are talking about. That means keeping copies of the insurance policy forms and reading them. Sometimes the words are indeed vague and subject to interpretation (personally, I find interpreting policy language to be the fun part – here’s a good example about some kayaks.) That’s when the conversation should start about what it all means. However, the starting point has to be opening a paper or electronic copy of a policy form, finding the relevant provision, and reading what it says. No one can commit all these forms to memory, but the key is to know where they are and where to look for the answers when questions come up.
Sure, I can do that for you, Bill Wilson can do it, Chris Boggs can do it, and so can a lot of other people around this country who are smarter than I am. But I’m not the one who has to face the client, or answer a summons, or suffer a damaged reputation. I’m a guy blogging at a desk in Syracuse, and no one faces bankruptcy if I never get around to reading today’s email from Insurance Journal. But someone could face bankruptcy if an insurance producer sitting at a desk in Syracuse or San Francisco or San Antonio sells a policy to someone without knowing if it’s the right policy for that client.
We are insurance professionals. We are Trusted Choice®, for crying out loud. Maybe we’re not all CPCU’s, but that doesn’t mean we shouldn’t meet the requirements of the CPCU canons at the beginning of this article. We have ethical obligations to the people we serve. We owe it to them. We owe it to our peers in this industry that has treated us so well. We owe it to ourselves.
Read the policy.
Postscript: Tim Wahl, an agent from St. Louis and one of my colleagues on the IIABA’s Technical Affairs Committee, has started a sideline t-shirt business with his daughter. Tim is such a devoted student of policy language that he actually buys and collects antique insurance policy forms on eBay. He brought a bunch of them with him to the Mid-America Insurance Conference last fall; they date back to the mid-19th century. Anyway, Tim and his daughter are selling a line of t-shirts that say “RTFP” on the front (“RTFP” stands for “read the policy”; I’ll leave it to you figure out what the adjective marked by the letter “F” is). The back says, “Saving the world one insurance policy at a time!” The market for these one-of-a-kind shirts has reportedly been brisk, with some agency principals buying them for all their employees. You can’t get these at Walmart or Target, so if you would like to spread the RTFP message, visit to view photos and download an order form. I’m the proud owner of one of the originals.


May 16
Landlord's Appliances - Building or Contents?


Image courtesy of Used under a Creative Commons Attribution 2.0 license.

Question from an IIABNY member: If a landlord of an apartment building is providing appliances to the apartment units, must the landlord have a separate personal property limit under their commercial real estate policy or this can be included under the building/property coverage? Same question goes for a condominium where the sponsor provided the appliances. Self-understood, we are talking about an All Risk policy form in New York.

Answer: It depends on the provisions in your client’s policy, but this is what the ISO Building and Personal Property Coverage Form says:

“1. Covered Property

Covered Property, as used in this Coverage Part, means the type of property described in this section, A.1., and limited in A.2., Property Not Covered, if a Limit Of Insurance is shown in the Declarations for that type of property.

a. Building, meaning the building or structure described in the Declarations, including: …

(4) Personal property owned by you that is used to maintain or service the building or structure or its premises, including: …

(d) Appliances used for refrigerating, ventilating, cooking, dishwashing or laundering; …”

Therefore, the appliances can be covered as part of the building under the B&PP Coverage Form. The value of these appliances must be added to the building’s value in order to avoid underinsurance.

The ISO Condominium Association Coverage Form contains a pretty significant difference:

“1. Covered Property

Covered Property, as used in this Coverage Part, means the type of property described in this section, A.1., and limited in A.2., Property Not Covered, if a Limit Of Insurance is shown in the Declarations for that type of property.

a. Building, meaning the building or structure described in the Declarations, including: …

(4) Personal property owned by you that is used to maintain or service the building or structure or its premises, including: …

(d) Appliances used for refrigerating, ventilating, cooking, dishwashing or laundering that are not contained within individual units; …”

The building owner’s appliances are building property only if they are not contained in individual units. If the building owner is supplying appliances in the units, they must be insured as personal property, requiring a separate limit.

Your client’s policies may not be identical to the ISO forms, so it’s a good idea to check the provisions in them.

April 28
Does an Insurer Need the Client's Consent Before Inspecting Property?

Photo by Nicolas Raymond. Used under a Creative Commons Attribution 3.0 Unported License.

Question from an IIABNY member: I have a client that is upset that his insurance company completed an inspection of his property without his consent. He feels that this may be considered trespassing. I spoke with the carrier and they state:  "In insurance, there is implied consent to inspect property based on our contractual, insurable interest in the home." Just wondering if you have any research on implied consent to complete a property inspection. I did some internet research and didn’t see anything official but did see several times that the insurance company should have permission to complete an inspection.

Answer: Some policies give the carrier the right to inspect. For example, AAIS form HO 0003 01 06 states in the policy conditions:

6. Inspections -- ‘We’ have the right, but are not obligated, to inspect ‘your’ property and operations. This inspection may be made by ‘us’ or may be made on ‘our’ behalf. An inspection or its resulting advice or report does not warrant that ‘your’ property or operations are safe, healthful, or in compliance with laws, rules, or regulations. Inspections or reports are for ‘our’ benefit only.”

The ISO Homeowners 3 policy form does not contain a similar condition, though it does require the named insured, after a loss, to show the damaged property as often as the insurer reasonably requires. Some proprietary company forms may contain a condition similar to the AAIS condition.

I did a quick search for court cases about inspection of homes by insurers and did not find anything. It seems more than a bit discourteous of the insurer to drop in and inspect the home without contacting the insured first, but I don’t know that an inspection rises to the level of trespassing. gives this legal definition of trespass:

“n. entering another person's property without permission of the owner or his/her agent and without lawful authority (like that given to a health inspector) and causing any damage, no matter how slight. Any interference with the owner's (or a legal tenant's) use of the property is a sufficient showing of damage and is a civil wrong (tort) sufficient to form the basis for a lawsuit against the trespasser by the owner or a tenant using the property. Trespass includes erecting a fence on another's property or a roof which overhangs a neighbor's property, swinging the boom of a crane with loads of building materials over another's property, or dumping debris on another's real estate. In addition to damages, a court may grant an injunction prohibiting any further continuing, repeated or permanent trespass. Trespass for an illegal purpose is a crime.”

I’m no lawyer, but it seems to me that, if the insurer’s inspector didn’t damage anything, then this doesn’t meet the legal definition of trespass. Regardless, the customer is upset, and that’s not the best way to earn customer loyalty.

April 01
IIABNY, Google Announce Pending Merger




(April 1, 2016) - Internet giant Google and the Independent Insurance Agents & Brokers of New York (IIABNY) today announced that they intend to merge, positioning the technology company to re-enter the insurance market that it abruptly left earlier this year. Spokespeople for both Google and IIABNY declined to reveal the terms of the deal, citing confidentiality concerns while stakeholders evaluate it. However, it is believed that Google put up at least $10 million in cash for New York’s oldest insurance producer trade association.

Google’s purchase of IIABNY will give the company access to the data and markets of the association’s 1,750 member agencies in the Empire State. The move will allow Google, which announced weeks ago that it was shuttering its Google Compare insurance shopping service, to compete on a wide scale in the property-casualty insurance market.

IIABNY President and CEO Dick Poppa said, “We are very excited to join forces with Google. Their reputation for innovation and excellence, not to mention their ability to track the activities of everyone who goes online, makes them a natural partner for IIABNY and its member independent insurance agencies. We look forward to a very successful relationship.”

IIABNY Chair of the Board Todd Rockefeller noted, “This new venture with Google will give IIABNY and its members access to a wide range of sophisticated technology tools. Independent insurance agencies in New York will now have improved search engine optimization, along with the ability to know what their clients are doing before the clients themselves know.” He added that the IIABNY logo would likely change on a daily basis following the merger.

Neither Poppa nor Rockefeller would comment on rumors that they had been granted Google stock options.

Should Google stockholders and IIABNY members approve the merger, Google would enter into the trade association business for the first time. Industry observers have speculated that Google and IIABNY may launch the largest captive insurer in the U.S. Poppa declined to comment, calling all such speculation “premature.”

“However,” he added, “I must say that, when I retire later this year, I’m really going to miss saying to our members, ‘Happy April Fool’s Day’.”

March 31
How To Be a Good Customer

​This slideshare deck and Calvin speak for themselves. If you work with customers, you will appreciate this.




March 04
Is the New Owner Stuck With the Old Owner's Lousy WC Experience Mod?


Question from an IIABNY member: One of my accounts is a new owner of a business since November 2014. The name changed but they kept part of the old company name under a "doing business as" name. The experience modification factor for the old owner was 1.13, but there was a claim and when the new owner took over his mod was now 1.31. Would the new owner have to keep this mod for his business if he took over? Wouldn’t he start with 1.00 mod? He kept a few of the employees, put a safety practice in place and hired a safety consultant.


Answer: Under the New York Experience Rating Plan Manual rules, “The experience for any entity undergoing a change in ownership will be retained or transferred to the experience ratings of the acquiring, surviving or new entity unless specifically excluded by this Plan.” The rules go on to say,

“The experience will be excluded only if the Rating Board confirms all of the following:

  • The change must be a material change such that:
    • The entire ownership interest after the change had no ownership interest before the change, or
    • The collective ownership of all those having interest in an entity results in either less than:
      • 1/3 ownership before the change, or
      • 1/2 ownership after the change; and
  • The material change in ownership is accompanied by a change in operations sufficient to result in reclassification of the governing classification; and
  • The material change in ownership is accompanied by a change in the process and hazard of the operations. Change in process and hazard is determined by the Rating Board.”

So, not only does the ownership have to change, but so do the operations, process and hazards. If the new owner is performing the same operations as the old one, then he’s stuck with the old owner’s experience mod.

March 02
Rocky Mountain High: Court Confers Cannabis Coverage For Colorado Company

4864154481_ba85a7d2c3_z.jpgHow could I not write a post about this one? Growing, possession, sale, etc. of marijuana, as you may have heard, is illegal under federal law. Conversely, an increasing number of states have made it legal, at least for certain uses. New York is in the midst of implementing a temporary law that made use of medical marijuana legal.

Two states and the District of Columbia have legalized marijuana for its, um, traditional use. In Colorado, you can buy it in stores, not on street corners. This is the sort of use that Congress had in mind when it prohibited marijuana back in the 1930’s. Consequently, the U.S. has a classic federal-vs.-state conflict when it comes to the regulation of this substance.

This comes back to insurance. (Repeat after me: All things come back to insurance.) Property insurance policies do not cover “contraband.” “Contraband” refers to goods prohibited by law. Marijuana certainly seems to fit that definition, at least if one is referring to federal law. Suppose, though, that the insurance and the property are in a state that has taken a more tolerant legal attitude? Does the insurance cover it then?

A federal district court in Colorado decided this question two weeks ago, and it said, “Yes.”

The plaintiff was a medical marijuana retailer in Colorado Springs. It has a growing facility adjacent to its store. It bought a commercial package policy from a surplus lines carrier, effective June 29, 2012. At around the same time, a wildfire started near Colorado Springs. It did not damage the store’s buildings. However, the retailer claimed that smoke and ash overwhelmed its ventilation system. The resulting lack of ventilation damaged the plants.

The store filed an insurance claim in November, seeking $200,000 for growing plants and $40,000 for plants that had been harvested and were being prepared for sale. Eight months later, the insurer denied coverage, arguing that the occurrence began before the policy took effect; that the store’s claim about the date of loss was a “material misrepresentation” that voided coverage; that the insured did nothing to mitigate the loss; and the insured waited too long to give notice of the loss.

The store subsequently sued the insurer for breach of contract, bad faith and unreasonable delay with regard to this and an unrelated theft damage claim. The insurer responded that:

  • The policy provision covering “stock” does not apply to growing plants
  • Any coverage is limited by a “growing crops exclusion”
  • The loss actually commenced before the policy took effect
  • Coverage for growing or finished marijuana is subject to an exclusion for contraband
  • Coverage for marijuana is a violation of public policy and void.

The court found that:

  • The policy’s definition of “stock” could cover growing plants
  • However, the growing crops exclusion removed all coverage for growing plants
  • A trial is required to determine when the loss actually commenced
  • The policy’s exclusion of coverage for contraband was ambiguous because of the difference between federal law and the federal government’s stated attitude toward enforcement in states that have legalized marijuana. Further, the “evidence strongly suggests that the parties mutually intended to include coverage for harvested plants constituting (the retailer’s) inventory.” The court noted that the insurance application asked several questions about the amount and value of the inventory. Also, the insurer knew prior to binding that the insured was in the medical marijuana business, and it chose to issue the policy anyway.
  • Prior court rulings that insuring marijuana is against public policy did not apply to this case.

Based on these conclusions, the court ordered that the dispute over the claim for the finished plants should go to trial.

With New York’s medical marijuana industry in its initial stages, I think it’s a matter of time before we start to see these kinds of claims here. While a federal court decision in Colorado is not necessarily binding in New York, this decision will likely inform judges’ thought processes when similar disputes reach their courtrooms. This case gives us a preview of what we can expect as New York’s medical marijuana experiment goes forward.

February 19
Carry Cyber Insurance or Be Sorry


Got Cyber-.jpg


If you are in business today, cyber insurance is no longer optional. It’s not optional for insurance clients, and it’s not optional for insurance agencies. As if the point needed further emphasis, a New York appellate court drove it home yesterday.
The operator of several Five Guys restaurants in the Albany area got hacked. Criminals accessed customers’ credit card information and went shopping. The credit card holders naturally protested the unauthorized charges to their card issuers. The issuers got stuck absorbing the costs of these fraudulent charges. At least one of the issuers, Trustco Bank, sued the restaurant operator for failing to take reasonable care of the data. According to a report in the Albany Times-Union, the bank sought more than $104,000 in damages.
The operator made a claim under the liability coverage section of its business owner’s insurance policy. The carrier denied coverage and refused to provide a defense. The reason was simple. Commercial general liability coverage applies to the insured’s liability for “bodily injury” and “property damage”. The policy defined “property damage” as injury to or loss of use of “tangible property.” It also stated that, “[f]or the purposes of this insurance, electronic data is not tangible property.” The policy also excluded coverage for damages arising out of the loss of electronic data.
The insurer concluded 1) there was no property damage, as the policy defined that term; and 2) the coverage did not apply to loss of data. Accordingly, there was no insurance for this loss.
I find it pretty incredible that the trial court didn’t uphold the claim denial, but it ordered the carrier to provide a defense. The carrier appealed, and yesterday the appellate court ruled that the policy’s “unambiguous language” meant that the bank’s lawsuit was not a claim for property damage and that the loss was excluded. Honestly, insurance policies do not get much more straightforward than that.
It cannot be said often enough. Every organization has an exposure to cyber loss, whether it’s a loss of customer data, loss of proprietary internal information, vandalism to a web site, infiltration of a virus, unauthorized transfers of funds, or any number of losses. Insurance agents, to do their jobs properly, must discuss this with their clients. The client might still refuse to buy the coverage. I heard as much last fall when I covered this topic in a continuing education course I presented. Most of the producers in the classroom reported that their clients believe it won’t happen to them. That’s probably what the operator of these restaurants thought.
And insurance agencies are not immune. There’s an awful lot of confidential client information on their servers. Social Security numbers; salary data; home values; names and ages of children; driving records; loss information – the list goes on and on. If agency principals think cyber criminals are not trying to break into their networks to get their hands on it, they are engaging in a dangerous form of denial. It can happen. It will happen to someone reading this blog post. It’s a sad fact, but it’s true.
Buy the coverage for your agencies. Offer it to your clients. Explain to them why their businesses are in jeopardy without it. Confirm in writing their decisions not to purchase. Unfortunately, some may decide not to buy the coverage today, and then try to sue the agent after an uninsured loss occurs. That’s why it’s important to have a paper trail, either electronic or physical. My hope is that most will see the wisdom in buying the coverage and that the paper trail will not be needed.
It’s the 21st century. Our lives and our property reside on computer networks, and any network can be hacked. Cyber insurance is just not an optional purchase anymore.


February 15
Justice Antonin Scalia and Insurance

Justice Antonin G. Scalia

Associate Justice Antonin G. Scalia, 1936 - 2016

U.S. Supreme Court Associate Justice Antonin G. Scalia passed away unexpectedly last Saturday. My condolences go out to his family and loved ones. Love him or hate him (and it appears plenty of people did both,) Justice Scalia had an immense influence on this country’s legal system. He was devoted to the idea that judges should interpret the U.S. Constitution the way its authors intended. His sometimes colorful opinions disdained the idea of the Constitution as a document that should adapt to the times.

As we remember this larger-than-life jurist, it’s interesting to survey his opinions on cases that affected the insurance industry. From his appointment in 1986 until last week, the court considered 1,830 cases that included the word “insurance” (according to Google Scholar.) Trust me; I didn’t look at all of them. What follows are a handful of cases on which he wrote majority or dissenting opinions. This survey does not include insurance-related cases in which he concurred or dissented but did not write opinions.

  • Writing for a unanimous court in 2003, Justice Scalia held in Kentucky Association of Health Plans, Inc. v. Miller that the federal Employee Retirement Income Security Act (ERISA) does not pre-empt certain state laws. However, the exception applies only to laws that 1) are specifically directed toward entities engaged in insurance; and 2) substantially affect the risk pooling arrangement between the insurer and the insured.
  • In a major 1993 decision, Hartford Fire Ins. Co. v. California, he sided with the majority. They held that the McCarran-Ferguson Act’s exemption from anti-trust laws did not protect domestic insurers who acted together with foreign reinsurers. However, he disagreed with the majority’s conclusion that the insurers’ actions amounted to a boycott, as McCarran-Ferguson uses that term. He also dissented from the decision to apply U.S. anti-trust law to those reinsurers.
  • In 2002, he wrote for the majority in Great-West Life & Annuity Ins. Co. v. Knudson that ERISA does not authorize court-ordered reimbursement to an insurance plan for its payments when the claimant wins damages from a third party.
  • In 2003, he dissented from a decision that threw out a $145 million punitive damages award against State Farm. He argued that the Constitution does not protect against excessive or unreasonable awards of such damages.
  • In 2000, he wrote for a unanimous court on a bankruptcy case. The bankrupt business owed its insurer $50,000 in delinquent Workers’ Compensation premium. The business’s bank was the secured creditor in the case, so the insurer went after the bank for the premiums. Justice Scalia ruled that the federal bankruptcy law does not permit a third-party creditor to recover that way.
  • In 1998, he wrote again for a unanimous court, siding with the Internal Revenue Service in a dispute with Atlantic Mutual over the meaning of the term “reserve strengthening.”

Justice Scalia used some of his sharpest words in opinions related to the Affordable Care Act. I think it’s reasonable to conclude that he was not a fan:

“The dissent treats the Constitution as though it is an enumeration of those problems that the Federal Government can address — among which, it finds, is ‘the Nation's course in the economic and social welfare realm,’ ..., and more specifically ‘the problem of the uninsured,’ ... The Constitution is not that. It enumerates not federally soluble problems, but federally available powers. The Federal Government can address whatever problems it wants but can bring to their solution only those powers that the Constitution confers, among which is the power to regulate commerce. None of our cases say anything else. Article I contains no whatever-it-takes-to-solve-a-national-problem power.” (National Federation of Independent Business v. Sebelius, 2012, pertaining to the Act’s so-called individual mandate)

“Words no longer have meaning if an Exchange that is not established by a State is ‘established by the State.’ … Under all the usual rules of interpretation, in short, the Government should lose this case. But normal rules of interpretation seem always to yield to the overriding principle of the present Court: The Affordable Care Act must be saved…The Court's next bit of interpretive jiggery-pokery involves other parts of the Act that purportedly presuppose the availability of tax credits on both federal and state Exchanges… The Court claims that the Act must equate federal and state establishment of Exchanges when it defines a qualified individual as someone who (among other things) lives in the ‘State that established the Exchange,’ ... Otherwise, the Court says, there would be no qualified individuals on federal Exchanges, contradicting (for example) the provision requiring every Exchange to take the ‘`interests of qualified individuals'’ into account when selecting health plans. ... Pure applesauce… For its next defense of the indefensible, the Court turns to the Affordable Care Act's design and purposes…The Court's decision reflects the philosophy that judges should endure whatever interpretive distortions it takes in order to correct a supposed flaw in the statutory machinery…This Court, however, concludes that (a) limitation would prevent the rest of the Act from working as well as hoped. So it rewrites the law to make tax credits available everywhere. We should start calling this law SCOTUScare…And the (NFIB and King cases) will publish forever the discouraging truth that the Supreme Court of the United States favors some laws over others, and is prepared to do whatever it takes to uphold and assist its favorites.” (King v. Burwell, 2015, which held that health insurance premium tax credits are available to taxpayers who live in states that did not establish their own health benefit exchanges)

I disagreed with many of Justice Scalia’s legal opinions on a wide variety of issues. Regardless, his was one of the great legal minds of our time. He left an indelible mark on American law and society. I’ll leave it to others to argue over whether that mark was for good or ill. Rather, I’ll salute his intellect and his devotion to public service. May he rest in peace.

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