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July 2017 -- The E&O Report

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E&O Report Header 
 July 2017
Volume 29, Number 7

         A Follow-Up to Questions Asked During the Annual E&O Telecast Seminar

On June 7, IIABNY’s annual errors and omissions telecast seminar was presented live from Hudson Valley Community College in Troy. The seminar was transmitted to 10 remote locations across New York state. For the first time, New York insurance agents and brokers were also offered the option of viewing the telecast seminar as a webinar in their office. More than 700 were in attendance at the remote locations and online. As usual, we devote this issue of The E&O Report to answering some of the questions we received during the telecast that were unanswered due to time constraints.

​​​On a Related Note
Please also feel free to let us know about any issues or topics that you may want us to address in future issues of The E&O Report. Many of the topics we write about in The E&O Report originate from issues agents and brokers bring to our attention through telephone calls and emails. If you have any ideas in this regard, please reach out to Jim Keidel​ and let him know what you have in mind. From our experience, an issue that one New York insurance agent or broker is facing may actually be much larger and affect many other producers across the state.

A question submitted by an attendee asked about insurance coverage for customers that work as drivers for a Transportation Network Company or TNC, such as Uber or Lyft.

Question: Can you please describe how the insurance coverage works for an Uber or Lyft driver once they log into the TNC’s App?

There are three insurance-related phases when driving for a TNC, and coverage will differ depending on the phase. In Phase 1, the driver has the app turned on and is waiting for someone to call them. During Phase I, the driver’s insurance is provided by the TNC in the amount of $75,000 per person and $125,000 per accident. The minute the app is turned on (when the driver enters Phase 1), most if not all personal auto policies will no longer provide personal auto coverage.

       Phase 1/Logged on to Network:

       During Phase 1, the minimum limits of insurance required are as follows:

  • BI: $75,000/$125,000
  • PD: $25,000
  • UM: $25,000/$50,000
  • PIP: $50,000

Coverage may be satisfied by insurance maintained by the TNC driver or insurance provided through a group policy maintained by the TNC or a combination of both.

Phase 2 begins when the driver has been contacted by a customer and the driver is on the way to pick up the customer. Phase 3 starts with the customer in the car and traveling to his/her destination. Phases 2 and 3 have essentially the same coverage requirements.

During phases 2 and 3, the minimum limits of insurance required are as follows:

  • BI/PD CSL: $1.25 million
  • UM: $25,000/$50,000
  • SUM: $1.25 million
  • PIP: $50,000

There are no requirements for physical damage coverage, but TNCs must tell drivers they might need physical damage coverage if the vehicle is subject to a lease or loan.

If the insurance maintained by a TNC driver lapses or does not provide the required coverage, the group policy maintained by the TNC must provide the coverage with the first dollar of a claim and have the duty to defend. The TNC driver's own personal automobile insurer does not have to first deny a claim before the TNC group policy responds. TNC group policies must be obtained from authorized insurers unless it's unavailable, then it can be placed with an excess line broker.

TNC drivers must carry proof of insurance at all times during TNC driving. The state Department of Motor Vehicles will prescribe the form, which may be the same as the current insurance ID card. TNC drivers would still need an ID card from their personal auto insurer. When a driver is required to produce an ID card, he/she should produce both their personal auto insurance ID card and one provided by the TNC’s insurer.

Telemarketing

Another question submitted by an attendee asked about the use of telemarketing firms by insurance agencies and brokerages.

Question: Are telemarketing firms allowed to initiate contact with prospective insurance customers by making telephone calls to potential customers on behalf of an insurance agency?

In an Office of General Counsel opinion dated April 22, 2004, the state Department of Financial Services commented on acceptable practices for telemarketers to follow on behalf of an insurance agency or brokerage. In the opinion, the DFS was asked the following question: “may non-licensees, including telemarketing firms, initiate contact with prospective insureds (by making outbound telephone calls to such prospective insureds) to determine their interest in speaking to licensed insurance agents and brokers about insurance products if there is no discussion of specific insurance policy terms and conditions, and the non-licensees’ compensation is not based on the purchase of insurance?”

In response, the DFS stated that non-licensees, including telemarketing firms, may initiate contact with prospective insureds (by making outbound telephone calls to such prospective insureds) to determine their interest in speaking with a licensed insurance agent or broker about insurance products only if there is no discussion of specific policy terms and conditions and the compensation paid to the non-licensee is not based upon the condition insurance is purchased.

Notifications

Another question submitted by an attendee asked about DFS notifications to agents or brokerages regarding cyber regulations or any new law or regulation before they take effect.

Question: During the seminar, I learned for the first time about the new New York Cyber Regulation 500. If I hadn’t come to the seminar and learned about the regulation, would the DFS have notified our insurance agency about this regulation?

The DFS did not send out any type of notification to New York agencies and brokerages regarding the new Cyber Regulation 500. It is not the practice of the department to provide notification to insurance agencies and brokerages of changes to state laws, regulations or new laws that might take effect. Because the DFS does not provide any such notification, it is a good practice for every agency or brokerage to have one person, or depending on its size, a group of employees regularly review the DFS website for information that could affect the agency. Such information should be shared with others at the agency.

It is also helpful to regularly check the IIABNY website, which highlights important information such as changes in the laws and new regulations of particular interest to New York insurance agents and brokers. Additionally, an added benefit of IIABNY membership is the association routinely sends its members notices concerning changes to state laws and regulations they should be familiar. With Cyber Regulation 500, IIABNY has shared informative messages to its members for more than a year.

Conclusion

The various questions posed during this year’s E&O loss control telecast seminar prove attendees are thinking about the issues we discussed. In our experience, an agency or brokerage truly committed to following good loss control techniques can substantially reduce the likelihood it will become involved in an E&O claim or lawsuit. And, in the process, they can provide increased customer service while boosting sales.

As we mentioned in the past, statistics show New York insurance agencies and brokerages that attend IIABNY’s annual E&O loss control seminars are 39 percent less likely to face a claim or lawsuit than those who don’t. One of the most effective ways to promote loss control is through education. Therefore, it is our hope that, in addition to attending these seminars, agencies and brokerages will encourage E&O education and awareness for all employees.

Submitted by:
James C. Keidel, Esq.
Keidel, Weldon & Cunningham, LLP

Keidel, Weldon & Cunningham, LLP concentrates its practice in the defense of insurance agents and broker's errors and omissions claims and litigation, errors and omissions loss control counsel and education, insurance coverage analysis and litigation and insurance regulatory matters. Please direct any comments or questions to James C. Keidel, Esq. by mail to the main office of Keidel, Weldon & Cunningham, LLP, at 925 Westchester Avenue, Suite 400, White Plains, NY 10604, telephone at (914) 948-7000 or e-mail at jkeidel@kwcllp.com. The law firm also maintains offices in Syracuse, New York; New York City, New York; Wilton, Connecticut; Fair Lawn, New Jersey; Warwick, Rhode Island, Philadelphia, Pennsylvania, Williston, Vermont and Naples, Florida.
 
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