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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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July 10
The Myths About NY's Certificates of Insurance Law

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Image by Brenda Clarke. Used under a Creative Commons Attribution 2.0 license.

In just 18 days, New York’s certificates of insurance law will take effect. The New York State Department of Financial Services has posted an initial list of certificate forms it has approved. We are getting closer to a huge relief for New York insurance producers.

Judging from the emails and questions I’ve been getting, though, there seems to be a fair amount of misunderstanding out there about what this law says and does. So, let’s take a few minutes to dispel some myths.

Myth #1: The law puts new restrictions on what insurance producers can do with certificates.

The truth: Until now, producers have been guided by a pair of circulars issued by the DFS back in the 1990’s. Here’s the major point:

Licensed producers are advised that they may not add terms or clauses to a certificate of insurance which alter, expand or otherwise modify the terms of the actual policy unless authorized by the insurer which has filed an appropriate endorsement with the Superintendent of Insurance and obtained prior approval, if required.

Now, here is what the new New York Insurance Law Section 502 says:

A certificate of insurance shall not amend, extend, or alter the coverage provided by the insurance policy to which the certificate of insurance makes reference. A certificate of insurance shall further not confer to any person any rights beyond those expressly provided by the policy of insurance referenced therein.

There’s not a whole lot of difference there. The second sentence is pretty close to what the ACORD 25 Certificate of Liability Insurance says in its header. The fact is that this law does not place any restrictions on producers that weren’t there before.

Myth #2: Certificates that are not approved by the DFS are illegal.

The truth: Nuh-uh. Saying that a particular act or document is illegal implies that someone can be punished for using it. There is nothing – NO-THING – in the law that makes it a crime to ask for or issue a certificate form that the DFS has not approved.

Rather, an entity that wants its own unapproved form has no leverage over the insured. Section 502 also says this:

In this state:

(a) With respect to a certificate of insurance evidencing that a policy provides personal injury liability insurance or property damage liability insurance, as defined in paragraphs thirteen and fourteen of subsection (a) of section one thousand one hundred thirteen of this chapter, no person or governmental entity shall willfully require, as a condition of awarding a contract for work, or if a contract has already been awarded as a condition for work to commence or continue under the contract, or if the contract has been performed or partially performed as a condition for payment to be made under the contract, the issuance of a certificate of insurance unless the certificate is:

(1) a form promulgated by the insurer issuing the policy referenced in the certificate of insurance; or
(2) a standard certificate of insurance form issued by an industry standard setting organization and approved for use by the superintendent or any other form approved for use by the superintendent.

All of the prohibitions stated in this provision apply to those who require certificates of insurance, not to the producers who issue them. Also, the language does not prohibit asking for a non-approved form. It says that the requestor cannot retaliate against the insured for failing to produce it. This law gives you (the producer) the ability to tell a certificate requestor to bug off, and you don’t have to worry about the requestor retaliating against your client. That’s the really valuable change it makes. If someone requests a non-approved certificate, and you say no, and that person kicks your insured off the job site, then he is subject to a fine.

Myth #3: The agent can be fined for issuing a non-approved certificate form.

The truth: Nuh-uh again. As the language quoted above shows, nothing prohibits an agent from issuing a non-approved form. From a practical standpoint, I can’t imagine why a producer would want to issue such a certificate (the whole point of the law was to get that off producers’ backs), but it’s just incorrect for producers to think they’ll get fined if they issue a cert that’s not on the list. ACORD always urges issuers to use the most current editions of their forms because they make changes to reflect the laws in all 50 states, and they don’t support outdated forms. Therefore, both the DFS and ACORD would tell you that your best bet is to use the editions on the list.

Essentially, producers have the legal ability to issue any certificate form if 1) it doesn’t change the insurance coverage in any way; and 2) the insurer has authorized its use. This doesn’t mean they have to issue it (most of the time, they won’t want to.) It means that they can legally do it.

Myth #4: Certificate holders can no longer request wording on a certificate that is not on the policy.

The truth: They can ask, but they can’t require. Here’s Section 502 again:

(b) No person or governmental entity shall wilfully require the inclusion of terms, conditions or language of any kind, including warranties or guarantees, that the insurance policy provides coverage or otherwise sets forth terms and conditions in a certificate of insurance, if the insurance policy referenced by such certificate of insurance does not expressly include such terms, conditions, or language. This subsection shall not prohibit any person or governmental entity from including minimum insurance requirements, coverage limits, terms, or other conditions in the solicitation of bids as part of a competitive process, and it shall not prohibit any person or governmental entity from requesting, or an insurer or insurance producer from responding to such a request with, clarification regarding the terms of the policy, or endorsement thereto.

They’re free to ask for it, but once they’re told it’s not possible, they can’t kick the insured off the job site solely because of the certificate. If the insured signed a contract in which he promised to carry certain coverage and he doesn’t have it, he could be in breach of contract, but that’s an issue separate from the certificate. Any project owner can still say, “You have to name me as an additional insured.” They cannot keep someone off a job site simply because a certificate does not say, “The People of the State of New York and all of their European, Asian, African and interplanetary ancestors are additional insureds.”

The law does not place new restrictions on producers. Rather, it gives them a new ability to say no to unreasonable requests. There is now recourse against those who won’t take no for an answer. And that is what makes this law valuable to producers.

July 06
Called On The Carpet: Recent Disciplinary Actions Against NY Producers

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Photo by Grotuk. Used under a Creative Commons Attribution 2.0 license.

The New York State Department of Financial Services released its latest periodic disciplinary actions report last week. Compared to some editions, this one was relatively short. A few insurers were taken to the woodshed for violating the laws pertaining to cancellation notices (balance sheets at 21st Century, AXA and MetLife are a tad lighter now than they were in April.)

The good news for agents and brokers was 1) not that many hearings and stipulations; and 2) a lot of the punishments were doled out to out-of-state producers. With regard to agent and broker hearings, there were two license revokations:

  • A nonresident agent from Texas stole an insured's credit card; was terminated for cause by an insurer; and ignored DFS inquiries on the matter. New York was the fifth state to revoke his license.
  • A nonresident agent from Philadelphia sort of forgot to mention on her license application that she was the subject of a criminal prosecution. Three other states revoked her license, and she also sort of forgot to tell the DFS about two of them. She, too, ignored DFS inquiries.

Lesson: Don't ignore correspondence from the DFS if you want to keep your license.

A review of the agent and broker stipulations shows that, if you're really dying to fork over some of your treasure to the DFS, not telling them about actions taken against you is a fine way to do it. Producers in the Binghamton area and Brooklyn and a Long Island independent adjuster each donated $1,500 to the cause for this reason. A number of out-of-state producers paid amounts ranging from $500 to $6,000 for the same offense. A few others lost their New York licenses, in part because New Jersey had also revoked their licenses. At least one person lost a license for not responding to DFS inquiries.

That whole not answering the mail thing? SO not a good idea.

One other thing: I often get questions about licensing and whether someone has to get a license for a new entity and so forth. This report is exhibit A as to why the answer is "yes." To wit:

  • $10,000 fine for acting as an insurance producer without a license
  • $3,000 fine for using an unapproved name in conducting business as an insurance producer; also for commingling premium funds with operating and personal funds
  • $1,500 fine for acting as a producer with an expired license
  • $2,000 fine for transacting business under an unlicensed agency name
  • License revoked for transacting business under an unlicensed agency name and failing to respond to DFS letters

Lastly, a nonresident excess line broker from Washington state lowered our collective taxes by $7,200 for not taking care of excess line dec page and premium tax filings.

I always find it interesting to see where the department is focusing its regulatory efforts. Nothing this issue about misleading certificates of insurance, though that has popped up before. Also, in the five years since the department issued Regulation 194, which requires producers to disclose to their clients certain information about how they are compensated, I have yet to see a single instance of a producer being disciplined for violating it.

Still, if you want to impress on your colleagues the behaviors to avoid, look no further than this publication. If history is any guide, we may see one more edition before the year is out.

June 22
New York's 'Scaffold Law" and a Temporary Worker Exclusion

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Question from an IIABNY member: I am looking to you to help clarify a question I have regarding a “temporary worker” exclusion currently attached to one of my clients policies, attached is a copy for your reference.
 
My insured’s policy is written without a “labor law” or “employee injury” exclusion which she paid a lot more for and is very important because she is a “sub-contractor” for many large companies and signs many project contracts.   At the time the policy was written the attached “temporary employee” exclusion did not seem to present too much of an issue because the insured did not anticipate any time that she would need to hire a temporary employee, that is until now.    So a few days ago my insured sent me the attached labor firm contract asking me for a certificate of insurance so I immediately went to the carrier for information pertaining to this “temporary employee” exclusion currently on the policy and below is the email thread for your reading pleasure.
 
In your opinion if the insured does proceed with this labor firm and takes on 2 people to help her out now that she is busier than she thought  will she have a gap in coverage if a labor law or third party over action suit would come up or would the labor firm be held responsible since technically they are not her employees?   Attached is the labor firm contract for your reference.

Answer: This endorsement excludes Labor Law claims and other injury claims involving temporary workers.

NY Labor Law Sections 240(1) and 241(6) apply to owners, contractors and their agents (i.e., those who have the authority to hire subcontractors and to direct and control the work.) These entities must provide certain devices to workers engaged in certain specific activities, and the devices must provide “proper protection” to the workers. If a worker’s injury is caused at least in part because a device did not provide proper protection, the entities are legally liable; the worker does not have to prove they were negligent.

While the law does not permit these entities to delegate the legal responsibility for compliance, the entities may transfer the financial responsibility for violations. Typically, they do this by requiring downstream parties to name them as additional insureds under the downstream parties’ CGL polices and/or requiring them to sign hold harmless agreements. This is how an injury to one of the named insured’s employees gets covered by the CGL – the additional insured seeks coverage, and the employers’ liability exclusion does not apply because the injured person is not an employee of the additional insured.

The endorsement on your client’s policy says:

“This insurance does not apply to ‘bodily injury’ or ‘personal and advertising injury’ to any:

1. ‘Temporary worker’;…

For the purposes of this endorsement only, ‘temporary worker’ means:

A person who is furnished to any insured to substitute for a permanent ‘employee’ on leave or to meet seasonal or short-term workload conditions; however, ‘temporary worker’ does not include a person who is furnished to any insured by a labor union to substitute for a permanent ‘employee’ on leave or to meet seasonal or short-term workload conditions.”
A temporary worker is one furnished to any insured (named insured or otherwise), and the exclusion applies to any temporary worker. It’s interesting to contrast this with the employers’ liability exclusion in the ISO CGL policy:
This insurance does not apply to: …

"Bodily injury" to:

(1) An "employee" of the insured arising out of and in the course of:

(a) Employment by the insured; or

(b) Performing duties related to the conduct of the insured's business …

This exclusion does not apply to liability assumed by the insured under an "insured contract".
This exclusion does not apply in most scaffold law cases because 1) the injured employee is not an employee of the insured (the owner or GC), and 2) the exclusion does not apply to liability assumed under an insured contract (the hold harmless agreement).

The endorsement on this policy concerns me because it applies to injury to any temporary worker, not just a temporary worker of “the insured.” Suppose a temp gets hurt on the job and sues the GC. The GC is an additional insured under the employer’s CGL policy. The GC submits the claim to the insurer. The insurer cites the endorsement – “insurance does not apply to bodily injury to any temporary worker” (unless furnished by a union.) Any means any. Also, note that the endorsement does not include an exception for liability assumed under an insured contract. Essentially, if a temp worker gets hurt and sues any of the insureds, there is no coverage.

I agree with the underwriter’s statement that this is not a Labor Law exclusion – it applies to injuries arising out of ordinary negligence, too. It’s not limited to Labor Law. However, in my opinion it would certainly exclude coverage for any scaffold law claims involving a temp. 
June 16
Slideshow - The New ISO Homeowners Insurance Change: Preventing Financial Disaster

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May 13
New Video: Changes To New York's Auto Photo Inspection Rules

​Warning: If you're located outside of New York State, feel free to skip this post. If you write personal auto insurance in New York, you're going to want to watch.

New York Insurance Law requires insurance companies to inspect many types of vehicles that they intend to insure for physical damage. Last winter, the New York State Department of Financial Services announced final adoption of a series of changes to New York Insurance Regulation 79, which sets for the rules insurers have to follow. A few of these changes will make life easier for insurance agents and their clients.

Clicking on the image below will take you to a 12-minute video in which I review the changes that most directly affect agents and their clients. The video and a link to the complete text of Regulation 79 are permanently housed on the Auto Insurance page in the Member Answer Center of the IIABNY Web site.

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May 08
A Manhole-Sized Bad Court Decision

New York State Court of Appeals

 

Last year, I developed and taught a continuing education course titled Absolute Liability: New York’s Scaffold Law and the Courts. The course looked at the history and interpretation of New York Labor Law Sections 240(1) and 240(6). Collectively, these sections are known as the “scaffold law.”

For those who are not familiar, the sections require project owners, contractors and their agents to provide certain devices to workers engaged in certain activities. The devices must provide “proper protection” to the workers. Courts have held that these entities cannot delegate the legal responsibility for this duty to anyone else. An injured worker automatically wins a lawsuit against them if he can prove that a violation of either of these sections at least partially caused his injury. Since it first enacted these provisions in 1885, the New York State Legislature has prohibited defendants from raising assumption of risk (you knew what you were getting into) and comparative negligence (I was at fault but you were more at fault) as defenses in court. In 1945, the New York State Court of Appeals (the state’s highest court) ruled that defendants may not raise the worker’s contributory negligence as a defense.

Basically, if the defendant cannot prove that the only cause of a worker’s injury was his own conduct, the only remaining question is how many zeros will be printed on the award check.

Part of my course looked at cases where the injured worker lost. One case I cited was Barreto v. Metropolitan Transit Authority. The plaintiff was an asbestos removal worker who exited a manhole on a Manhattan street at 4:00 a.m on a January morning. His foreman had instructed him, in these situations, not to start dismantling the enclosure that kept the public away until the cover was put over the manhole. He had followed these instructions several times before. This time, he started dismantling before the cover was replaced. In so doing, he stepped into the uncovered manhole and fell 10 feet. He sued multiple parties under the scaffold law to recover damages for his injuries. He lost at the trial court level, appealed to the appellate division, lost again, and appealed to the Court of Appeals.

The appellate division’s opinion was direct. “Here, plaintiff was provided with the perfect safety device, namely, the manhole cover, which was nearby and readily available…Having just emerged from it, plaintiff should have known that the manhole was still open, and covering it at that time would have avoided the accident…Plaintiff's claim that the statute required defendants to furnish a guardrail around the manhole, or safety netting or a harness, is not applicable here where the manhole cover was the adequate device for protecting the workers. There is no reason that other devices were necessary after the workers exited the manhole or that the manhole cover was inadequate.”

In class, I read these sentences aloud for comic effect, to show that judges sometimes get sarcastic. Yesterday, the plaintiff got the last laugh. A divided Court of Appeals ruled in his favor.

Associate Judge Eugene F. Pigott, Jr. wrote for the majority. He noted that the project’s site safety consultant testified that there should have been a guard rail system around three sides of the open manhole during the enclosure’s dismantling. This, in the judge’s opinion, was proof that the defendants did not provide the plaintiff with an adequate safety device. He also said that the plaintiff could not have been the sole proximate cause of his injury. The manhole cover was so heavy that it took two men to lift it into place. The judge reasoned that one person cannot be responsible for his own injury if he needed help to prevent it. For these reasons, Judge Pigott, Chief Judge Jonathan Lippman, and Associate Judges Jenny Rivera and Eugene M. Fahey ruled in favor of the injured worker.

Associate Judge Leslie E. Stein, joined by Associate Judge Sheila Abdus-Salaam, disagreed in part. In her opinion, the court should not have ruled in favor of either side. Rather, because some facts were in dispute, she wrote that a jury should decide whether Mr. Barreto received proper protection. The open questions, as she saw them, were:

  • Did the absence of the site safety consultant at the scene, and his failure to ensure that the work crew immediately replaced the manhole cover, contribute to the accident?
  • Was the site safety consultant’s testimony about the need for a guard rail system credible?
  • Was the manhole cover an adequate safety device?
  • Were there lights shining on the site? There was conflicting testimony about this. Remember, this work was done overnight in January, so there was no sunlight.

In her view, these were questions for a jury to consider and answer.

Associate Judge Susan Phillips Read was having none of it. Her dissenting opinion cited the plaintiff’s own testimony as evidence that he knew that he was supposed to wait until the hole was covered before he began dismantling the enclosure. He offered no explanation for his safety lapse, further incriminating him in her eyes.

She also doubted the credibility of the safety consultant’s testimony. His opinion that a guard rail system should have been in place did not cite any federal or state safety regulations. Also, she wrote that requiring a guard rail system made no sense. Per the foreman’s instructions, the manhole cover was supposed to be in place before dismantling of the enclosure began. She also rejected the argument about the weight of the manhole cover. “(T)his is not a case where a supervisor instructed an employee to use safety equipment that was unavailable or somehow unusable for its intended purpose. Plaintiff was never told to replace the manhole cover by himself, and whether it took two or more of the (asbestos removal) workers in the five-person crew to replace the manhole cover is irrelevant.”

“(P)laintiff's foreman instructed him not to begin dismantling the enclosure until the manhole cover had been replaced,” Judge Read continued, “and plaintiff disregarded this basic safety direction, which was the sole proximate cause of his accident: obviously, he would not have fallen into the underground chamber through the manhole opening if he had waited for the manhole to be covered, as he conceded he knew he was supposed to do, and had done on previous occasions. … It is certainly poor public policy to treat employers that direct their workers how to accomplish a task safely and make adequate safety equipment available just the same as employers that make little or no effort in this regard.”

Lastly, she addressed the dispute over whether the lights were on. “(T)his disputed fact is beside the point. Dim or nonexistent lighting would, of course, lend greater credence to plaintiff's testimony that he did not notice whether any of his co-workers had replaced the manhole cover or that it was missing, even though the crew was a small one working together in close quarters. It does not, however, explain why plaintiff proceeded to disassemble the enclosure without receiving the ‘okay’ from his supervisor, which he testified that he had waited for in the past.”

The upshot is that the court voted 4 to 3 to award summary judgment to Mr. Barreto (“summary judgment” is a judgment based on the judge's conclusion that the litigation involves only a question of law, with no associated questions of fact.)

As one who spent a lot of time last year learning about and speaking about the scaffold law, here are my thoughts on the matter.

Number one, I suspect some readers will immediately react with grumbling about so-called “liberal judges.” I want to nip that in the bud. Judge Pigott is a Vietnam veteran, former Erie County Attorney, and a jurist with 18 years’ experience. His appointments to all three levels of the New York State court system were courtesy of Republican Gov. George Pataki. Chief Judge Lippman was nominated for various court positions by Gov. Pataki and Democratic Gov. David Paterson. Judge Fahey, who received nominations from Governors Pataki and Andrew Cuomo, was house counsel for Kemper Insurance Co. for eight years in the 1980’s and 90’s. Not exactly a radical bunch.

Number two, I am not an attorney. I’m merely someone with a deep interest in court decisions and the impacts they have on people’s lives. I have a CPCU designation of which I am very proud, but let no one mistake that for the expertise of a practicing lawyer.

Number three, I hate this ruling. I’m sorry Mr. Barreto got hurt. The court opinions didn’t describe his injuries, but cases involving sprained ankles don’t go to the Court of Appeals. His injuries must have been severe. Regardless, the fault for his accident lies with his crew members and him. The manhole cover was right there. Manhole covers keep millions of pedestrians from falling into holes every day. That’s a pretty good track record of accident prevention. Further, he knew the cover was supposed to go on before dismantling work began. He wasn’t new to the job; he had seen the cover go on first many times before. It was standard procedure. This time, someone forgot and he paid the price for it. No one should celebrate that outcome. However, it doesn’t necessarily follow that third parties should be held responsible.

While researching the Absolute Liability course, I read about many injured workers who did what they were supposed to and still got hurt. Isidore Koenig was ordered to climb a ladder he thought was unsafe. Richard Hoffman wore a harness and used the scissor lift his employer gave him and still fell 35 feet to a lobby floor. Paul Wicks attached his ladder to a pole in the middle of an island at a gas station so he wouldn’t fall over; he fell anyway when the pole collapsed. Sharif Mohamed suffered horrible injuries when a backhoe bucket crushed him in an excavated trench after a co-worker bumped the backhoe’s controls. Sean Dowdell lost a leg because no one secured a piece of plywood that he stepped on while guiding a crane operator from 20 feet above ground.

The legislature enacted the scaffold law to protect people like this. In my opinion, using it to compensate someone who was obviously careless is bad public policy. It rewards carelessness, punishes those who could not prevent the carelessness, sticks taxpayers with the bill (three of the four defendants in the Barreto case were public entities,) causes liability insurance rates for contractors to rise, and further hurts the state’s business climate. Mr. Barreto will get some compensation to help him cope with the consequences of his accident. I certainly wish him well, but I disagree with the conclusion that the law compels the City of New York, the Metropolitan Transportation Authority, and the New York City Transit Authority to pay him that compensation. In my mind, it’s not justice.

This decision will go down as an unfortunate precedent in the unfolding history of the scaffold law. Plaintiffs’ attorneys will cite it in their arguments in future cases, and judges will have to consider it. I only hope that, when they do so, they will also consider the points Judge Read raised in her dissent.

I also hope that contractors will be extra vigilant when they spot their workers who don’t follow instructions. This attention may prevent more serious injuries, more crippled workers, and more large legal settlements. That would be the best outcome of all.

May 06
Insurance as Commodity - The View From VU

The Blues Brothers

You may recall in my blog post yesterday that I mentioned that Big "I" Virtual University's Bill Wilson is on a mission from God to show that insurance is not a commodity. Here he is, in his own words as quoted last month by Insurance Journal:

Bill Wilson, director of the Virtual University of the Independent Insurance Agents & Brokers of America (IIABA), a well-known insurance industry expert and teacher for more than 30 years, says Google Compare is nothing more than another auto insurance comparison website that misleads consumers.

“What Google is doing has been done for at least 10 and maybe closer to 20 years now,” says Wilson. “There are all kinds of comparative rating websites. … from the usual Progressive Direct, GEICO, Esurance, Nerd Wallet, Quote Wizard, Bank Rate, carinsurancecomparison.com, and on and on.”

According to Wilson, Google isn’t any different from other comparative rating sites, except that it’s Google. The difference is in the Google name, expertise and financial prowess that come with it. “You have that Google name and their expertise and, needless to say, the potentially billions of dollars that they have available to pump into this.”

Because what they are offering now isn’t anything new, most independent agents aren’t overly concerned about Google’s entry into auto insurance, in Wilson’s view. Consumers are the most at-risk, he says.

“Most of the marketing for these kinds of websites is based allegedly on low-cost and convenience,” Wilson said. Many online comparison sites claim to offer an insurance quote in minutes. “How can you really help a consumer identify their exposures to loss and match it with the right customized product for those exposures” in minutes? he asks.

The big loser when it comes to online comparison tools like Google Compare is not going to be independent agents or even insurers; the real loser is consumers, he says. “Consumers are being duped into believing that all of these policies and the service providers are exactly the same. The only difference is price.”

Stay tuned. There will be more.

May 05
Think All Policies Are the Same? (Part 1)

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Photo by Simon Cunningham. Used under a Creative Commons Attribution 2.0 license.

I often get questions similar to one I received from an IIABNY member last week. "Does a Homeowners policy cover you,” the member asked, “if you host a party or rent a hall for a wedding reception?"
The person asked if a Homeowners policy covers a party. This implies that all Homeowners policies are the same. A Homeowners policy covers a certain exposure. They must all cover it, right?
Nuh-uh.
Bill Wilson of Big "I" Virtual University is currently waging a war. He’s fighting the unfortunate and inaccurate notion that insurance is a commodity. This is an effort that I whole-heartedly support. Insurance policies are not all the same. If we insurance professionals don’t understand this, the public won’t either.
This is the first in what I hope will be a series of posts on this topic. Today's exhibit comes to us courtesy of an anonymous insurer. Its name is secret to protect its guilt. Our specimen is the insurer's commercial auto insurance policy.
First, though, I’ll give a quick refresher on the ISO Business Auto Policy, CA 00 01 10 13. The ISO form has five loss conditions:
  • Appraisal for Physical Damage Coverage
  • Duties in the Event of Accident, Claim, Suit, or Loss
  • Legal Action Against Insurer
  • Loss Payment Options - Physical Damage
  • Transfer of Rights of Recovery
It also has eight general conditions:
  • Bankruptcy
  • Concealment, Misrepresentation, or Fraud
  • Liberalization
  • No Benefit to Bailee - Physical Damage Coverages
  • Other Insurance
  • Premium Audit
  • Policy Period and Coverage Territory
  • Two or More Coverage Forms Issued by Insurer
Now let's examine our anonymous insurer's form. It has all of these conditions, though the names differ somewhat. However, it also contains this additional condition:
This policy, its applications, all endorsements, and the Declarations include all the agreements between you and us relating to this insurance. It is the responsibility of the insured to notify us of any changes to drivers and vehicles. No change or waiver may be effected in this policy except by endorsement issued by us. If a premium adjustment is necessary, we will make the adjustment as of the effective date of the change. All endorsements to this policy are subject to these General Provisions unless otherwise modified in the endorsement.
According to this provision, the application is part of the legal agreement between insurer and insured.
The third paragraph of the Applicant's Statement on the application (there are eight paragraphs) states in part, "I understand I have a continuing duty to notify the Company of any changes in: ... (3) the operators of any of the vehicles listed on the policy ..." The insured has a "duty" to notify the insurer of new drivers, and the statement creating this duty is part of the agreements between the insurer and insured.
Call me crazy, but it sounds to me like the insurer could deny coverage if a driver they don't know about gets into an accident.
So, under the ISO policy, if I hire someone this week and don't think to tell my insurance agent, and the new employee totals the new F150, I have coverage. Under the anonymous insurer's policy, I don't.
There are real differences in the marketplace, folks. If you're selling commercial auto insurance, you have to know about them. Otherwise, you cannot properly inform your clients. Don't ask if a policy covers something; ask if this policy covers it.
Insurance isn't a commodity. Don't treat it as if it is.
More to come, I'm sure.
April 23
NY Insurance Agents: Deep-Rooted, Growing, Challenged

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Every couple of years, the Independent Insurance Agents & Brokers of America (a/k/a, “The Big I”) conducts an “agency universe study.” The study gets into very specific detail about the state of independent insurance agencies across the country. It’s a way of taking the temperature of the distribution channel. It also indicates trends. For example, for many years the number of independent agencies shrank due to retirements, consolidations, mergers, and so forth. However, the number appears to have stabilized, according to the last few studies.

IIABNY decided it wanted to dig deep into the 2014 AUS to find out specifically what’s going on here in New York. The association hired a research consulting firm to pull out the New York data and compare it to the data from outside the state. The results were interesting – encouraging in some ways, challenging in others.

Most New York agencies saw their revenue climb from 2012 to 2013 – 67 percent. This compares to 70 percent of non-New York agencies. Like the rest of the country, New York has been slowly crawling out of the hole dug by the Great Recession. Upstate New York often seems to be in a permanent state of slow growth. Regardless, the majority of agencies are growing their businesses.

New York agencies have been around for a long time. The study looked at dates when agencies were formed. One-third of New York agencies started between 1940 and 1970. One-fifth of them were formed before 1940. That means 21 percent of New York insurance agencies are older than McDonald’s, Intel, Visa, rock music, the Peanuts comic strip, 14 Major League Baseball teams, and the last three U.S. presidents. When you consider that something like half of all businesses fail in their first five years, you have to tip your hat to that kind of staying power.

New York agencies do a big chunk of their business with New York based insurance carriers. Compared with their peers elsewhere, smaller proportions of New York agencies represent the large national carriers like The Hartford, Travelers, Progressive and Zurich. They make up the difference with New York names like NYCM, Merchants, Dryden Mutual and Utica National.

On the downside, not only are the agencies older, but so are the people running them. Almost 70 percent of agency principals are above the age of 50. That’s fine until those folks decide to hang up their spikes. Perpetuation will be an ongoing issue for New York agencies as they struggle to get people in their 20’s and 30’s into the insurance field.

On a related note, more of them report concerns about maintaining experienced producers and staff than do agencies outside the state. 40 percent find maintaining experienced producers extremely challenging (versus 21 percent in the rest of the country,) and 32 percent find maintaining experienced non-producer staff extremely challenging (15 percent elsewhere.) Industry demographics, which point to an older workforce, don’t indicate that these worries will alleviate anytime soon. Part of the reason for that may be …

They’re also not exactly training their marketing power on the younger set. Only 16 percent of New York agencies are focusing on individuals aged 39 to 49, and a slight 12 percent are going after those aged 21 to 38. Nationally, 29 percent of agencies are targeting 39 to 49 year-olds and 23 percent are targeting people in their 20’s and 30’s. Given that those are the age groups where tomorrow’s money will be, it would seem prudent for agencies to adjust their focus.

So, the report is a mixed bag, but there is no doubt that a lot of agencies have found and are finding New York a profitable place to be. I’ll be curious to see what the report two years from now will show. Will revenue keep growing, or will it plateau? What will agencies do about recruiting younger workers and selling to the electronically connected generation? The answers will say much about the insurance industry and the economy as a whole in the Empire State.

What are your thoughts on the study? Leave your two cents in the comments.

April 21
Does a Leased Vehicle = An Owned Vehicle?

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Question from an IIABNY member: I have an auto policy that shows Symbol 7  ("Specifically Described Autos") for Personal Injury Protection Coverage and Symbol 5 ("Owned Autos Subject to No-Fault") for Additional PIP Coverage. The insured has vehicles that are leased. Does the word "owned," as used in Symbol 5, include leased vehicles? 

Answer: In my opinion, symbol 5 in the ISO Business Auto Policy (CA 00 01 10 13) does not apply to leased autos. I say this for the following reasons:

  • The policy describes symbol 5 as, “Only those ‘autos’ you own that are required to have no-fault benefits in the state where they are licensed or principally garaged. This includes those ‘autos’ you acquire ownership of after the policy begins provided they are required to have no-fault benefits in the state where they are licensed or principally garaged.”
  • The policy describes symbol 8 as, “Only those ‘autos’ you lease, hire, rent or borrow…”
  • The New York Mandatory Personal Injury Protection Endorsement (CA 22 32 11 13) defines “insured motor vehicle” as “a motor vehicle owned by the named insured and to which the bodily injury liability insurance of this policy applies and for which a specific premium is charged.”
  • The Additional Personal Injury Protection (New York) endorsement (CA 22 33 11 13) states, “The Company agrees with the named insured, subject to all of the provisions, exclusions and conditions of the New York Mandatory Personal Injury Protection Endorsement, not expressly modified in this endorsement as follows …”

Symbols 5 and 8 appear to be mutually exclusive – one includes only owned vehicles, the other includes only leased vehicles. The mandatory PIP endorsement includes only owned vehicles in the definition of “insured motor vehicle.” The APIP endorsement includes all the terms of the mandatory endorsement unless the APIP endorsement specifically changes them.

That is not to say, though, that the APIP endorsement does not cover anyone while they’re in a leased vehicle. The endorsement states:

"The Company will pay additional first party benefits to reimburse for extended economic loss on account of personal injuries sustained by an eligible injured person and caused by an accident arising out of the use or operation of a motor vehicle or a motorcycle during the policy period.

Subject to the exclusions set forth below, an eligible injured person is:

(a) The named insured and any relative who sustains personal injury arising out of the use or operation of any motor vehicle …
(c) Any other person who sustains personal injury arising out of the use or operation of the insured motor vehicle while occupying the insured motor vehicle; or
(d) Any other person who sustains personal injury arising out of the use or operation of any other motor vehicle (other than a public or livery conveyance) while occupying such other motor vehicle, if such other motor vehicle is being operated by the named insured or any relative."

The endorsement contains eight exclusions. Four of them pertain to vehicles owned by the injured person and that do not carry no-fault coverage; one pertains to occupying a motorcycle; one pertains to intentional self-inflicted injuries; one pertains to operating a vehicle while intoxicated; and the other pertains to racing, illegal acts, and working in the auto service business. None of these necessarily apply to the named insured or relative while in a leased vehicle, or to another person while occupying a leased vehicle operated by the named insured or relative. The endorsement should provide coverage to the injured individuals. It also gives the insurer subrogation rights, so the insurer could conceivably seek recovery from the leasing company or its insurer. 
 

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