INSURANCE NEWS                                                                                          January, 2008

Selected opinions of the Office of the General Council

NY Insurance Department - January 23, 2008

The Office of General Counsel issued the following opinion on January 7, 2008 representing the position of the New York State Insurance Department.

Re: Advertisements of Insurance Agents or Brokers

Questions Presented:

1. May an insurance agent or broker make reference to specific insurers in an advertisement, without also indicating the location of the insurers’ principal offices?

2. May an insurance agent or broker use only the logos of the respective insurers in an advertisement (provided that the agent or broker receives permission to do so), without indicating the full name and principal office location of the insurers?

Conclusions:

1. No. N.Y. Ins. Law § 2122(b) (McKinney 2006) specifically requires that all advertisements that refer to an insurer also include the city, town or village of the insurer’s principal office.

2. No. Use of only the insurers’ logos in advertisements runs afoul of the requirement set forth in Insurance Law § 2122(b) to state the full name of the insurers, as well as the city, town or village of the insurers’ principal offices. The use of logos also may violate the Department’s regulations if the logos are misleading as to the true identity of the insurer.

Facts:

Advertisements of Insurance Agents or Brokers

NEW YORK INSURANCE DEPARTMENT IMPLEMENTING THREE-POINT PLAN ON BOND INSURANCE

New York State Insurance Superintendent Eric Dinallo issued the following statement today about the bond insurance companies and current market conditions in response to many inquiries:

“The New York State Insurance Department is continuing to actively monitor the major bond insurance companies and to work with those companies and others to help stabilize the market, continue protecting policyholders, assist in the continued availability of bond insurance and seek private sector solutions.

“A key role of the regulator is to be a facilitator to help speed transactions. We are in constant dialogue with the bond insurers and regularly gather information from them. In particular, we are closely monitoring and discussing with the companies and their financial advisors their efforts to explore alternatives. We are also conferring daily with federal regulators, the National Association of Insurance Commissioners and other state insurance regulators.

“The Department has implemented a three-part plan:

NY Insurance Department - January 23, 2008

House Okays Change In Flood Insurance Rates

The House approved legislation today that would require some homeowners whose houses are valued at more than $600,000 to pay actuarially based rates for flood insurance.

Passed by voice vote, the measure (HR 3959) is aimed specifically at homes that predate the government’s flood insurance rate map, or FIRM, and are purchased after the bill is signed into law for more than $600,000.

Because they predate the federal flood maps, which took effect in 1974, such properties have enjoyed lower rates for their flood coverage, which critics have said amounts to a subsidy.

The legislation was sponsored by House Financial Services Committee Chairman Barney Frank, D-Mass., and committee member Scott Garrett, R-N.J., on October 24 and was approved by the committee a week later.

In speaking on the House floor prior to the vote on the bill, Rep. Frank noted that it brought together people with strong views on government spending, like fiscal conservative Rep. Garrett, and those who are concerned about the environment. The bill, he said, “advances the concerns of both those parties.”

For his part, Rep. Garrett also pointed to the legislation as a compromise between those willing to allow the subsidies to continue and the even more fiscally conservative who had sought to immediately impose actuarially sound rates on pre-FIRM homes.

National Underwriter - January 23, 2008

N.Y. Panel Urges London-Style Financial Services Regulation

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A commission helping redraft the regulatory framework for New York's finance industry is considering placing greater emphasis on "principles'' than on strictly defined rules, Gov. Eliot Spitzer said.

Regulations based on broad guidelines — such as "observe proper standards of market conduct,'' and "maintain adequate financial resources'' — could inject some flexibility into the arcane and Byzantine rules governing the industry now, Spitzer said.

While the governor said the move to revamp the state's regulatory system began long before last year's mortgage crisis reached a boiling point, he said the turmoil in financial markets underscores the need to modernize the system.

"There is also a premium to restoring the credibility to a regulatory framework that I think a lot of people look at and say, 'You have failed,''' he said.

Spitzer established the commission by executive order in May to issue recommendations to the state for regulatory change, aiming for regu lations that can keep markets running smoothly and protect investors and consumers.

Composed of more than 40 members including bank executives, lawyers, regulators and consumer advocates, the Commission to Modernize the Regulation of Financial Services held its first meeting last Friday at New York University.

A principle-based regulatory framework would more closely resemble that used in London. Spitzer said such a system would serve as a foundation for interpreting existing laws, and urge regulators to concentrate on outcomes instead of the process.

Insurance Journal - January 23, 2008

LTC Insurance Sales Expected to Show Slow but Steady Growth in the Coming Years

Industry observers are optimistic that long-term insurance (LTCi) products will finally see increasing sales in 2008 and beyond. Although the growth is expected to be slow and moderate in general, some leading LTCi providers are predicted to generate double-digit sales growth.

Sales of LTCi products have been lackluster because most consumers find them expensive and unnecessary. Negative media reports have also made LTCi products even less appealing.

But signs that consumers are finally warming to LTCi products were noted last year. Unum’s LTC insurance business acquired 800 groups and 60,000 employees through the third quarter – a record year for the company.

Through the third quarter of 2007 Genworth Financial Inc. reported LTC sales rose by 11%, MetLife's Long Term Care Group achieved a 30% increase and Northwestern Mutual Life Insurance Company recorded higher sales (up 25%) over the third quarter of 2006.

Overall, industry sales increased 2% for the same period. For the whole of 2007 the LTCi industry sales are estimated to hit 3% to 4%.

While the LTCi industry is expected to enjoy only single-digit sales growth in 2008, industry analysts are taking that as a good indication of things to come. Sales of linked-benefit products are also forecasted to show better numbers beginning in 2009 and into 2010 thanks to the newly enacted pension reform legislation.


InsuranceNewsNet - January 23, 2008

Raising the Bar—The Liquor Liability Exclusion in the CGL

Considering our collective fascination with saloons, taverns, and pubs, it is little wonder that those organizations regularly selling or serving liquor need special liability insurance.

How ingrained in our culture is the idyllic bar? Top billing in the first World Series scorecard in 1903 (then known as the World's Championship Games) was secured by Michael 'Nuf 'Ced McGreevey, to promote his famous "Third Base" saloon, so named because "it was the last stop on the way home."1 First broadcast by NBC in 1982, the highly popular television situation comedy, "Cheers," featured a local bar "where everyone knows your name." And more recently, the compelling characters so vividly depicted in J.R Moehringer's best selling memoir The Tender Bar: A Memoir were revealed largely as patrons of Publicans restaurant and bar of Manhasset, Long Island.2

Those organizations that are not engaged in selling or serving of alcohol often think of risk in terms of its employees consuming alcohol (or using other substances) before or during working hours. While this risk should not be minimized, all organizations must also have an appreciation for other risks that involve alcohol—such as the occasional serving or furnishing of alcohol to others or renting to tenants who sell or serve alcohol. All of this should lead to several questions, including what is the extent of coverage provided in the commercial general liability (CGL) policy for claims related to selling, serving, or furnishing of alcoholic beverages?

The Liquor Liability Exclusion
The third exclusion of the standard Insurance Services Office, Inc. (ISO) CGL policy applies to "liquor liability." Unchanged since the mid-1980s, the liquor liability exclusion wording contains three main parts, none of which apply at all unless you [a named insured on the policy] are in the business of manufacturing, distributing, selling, serving, or furnishing alcoholic beverages. What does "in the business" mean? More on that later.

Host Liquor
It is plain by the "in the business" exception that the liquor exclusion is not meant to apply to all persons or organizations. The result is the so-called host liquor liability coverage found in the CGL. Host liquor liability coverage, which used to be a separate express coverage grant provided as part of the Broad Form CGL Endorsement added to the 1973 ISO comprehensive general liability policy, is intended to provide coverage for a person or organization for certain functions or events that are incidental to the named insured's business.

A company picnic or an open house for customer appreciation at which beer, wine, or other alcohol is served or furnished are examples of the types of events for which host liquor protection is provided. Should an employee at the picnic or a customer at the open house overindulge and consequentially injure others (non-employees) due to their intoxication, the unendorsed CGL will protect the insured from claims made by persons injured by the overserved employee or customer.

IRMI - January 2008

New York Auto Insurance Plan - January 2008

NEW YORK INSURANCE DEPARTMENT IMPLEMENTING THREE-POINT PLAN ON BOND INSURANCE

New York State Insurance Superintendent Eric Dinallo issued the following statement today about the bond insurance companies and current market conditions in response to many inquiries:

“The New York State Insurance Department is continuing to actively monitor the major bond insurance companies and to work with those companies and others to help stabilize the market, continue protecting policyholders, assist in the continued availability of bond insurance and seek private sector solutions.

“A key role of the regulator is to be a facilitator to help speed transactions. We are in constant dialogue with the bond insurers and regularly gather information from them. In particular, we are closely monitoring and discussing with the companies and their financial advisors their efforts to explore alternatives. We are also conferring daily with federal regulators, the National Association of Insurance Commissioners and other state insurance regulators.

“The Department has implemented a three-part plan:

1. Attract more capital and increase capacity to protect policyholders and ensure continued availability of bond insurance, especially for municipal issuers. Specifically, the Department successfully invited Berkshire Hathaway to open a new bond insurance company in New York and quickly approved the capital-raising plan for MBIA. The Department is currently in discussions with other parties about possible future capital investments.

2. Facilitate solutions to current market challenges. The Department is engaged with insurers, banks, financial advisors, credit rating agencies, other regulators and government officials, and other stakeholders in examining and developing measures to help stabilize the market.

3. Develop stronger regulation for bond insurance. Since it is clearly time to develop new rules for the road, the Department is drafting new regulations that would redefine the future activities of bond insurers. The Department welcomes any input on this project.

“As a regulator, our primary responsibility is to protect policyholders and safeguard the solvency of insurance companies so they can pay any claims. Additionally, we work to ensure that consumers, businesses and governments have access to the insurance products they need from a healthy, competitive market. Our activities in the bond insurance market are aimed at achieving those goals. As we demonstrated with the invitation to Berkshire Hathaway, the Department has a proactive approach to dealing with market problems, and we will continue to implement measures we believe are appropriate in response to the current issues facing the bond insurance market.”

NY Insurance Department Press Release - January 22, 2008

Top Swindlers of 2007

A glass-eating gypsy, a teacher who faked cancer, and an insurance agent who killed the homeless are among the top insurance swindlers of 2007. These convicted thieves were inducted into the Insurance Fraud Hall of Shame by the Coalition Against Insurance Fraud.

An $80-billion-a-year crime, insurance fraud has grown more violent and invasive in recent years. Reflecting that trend, this year ís Hall of Shame compiles the year is most brazen insurance scams.

Coalition Against Insurance Fraud - January 22, 2008

N.J. back in driver's seat with insurance - Deregulation in 2003 was the key.

New Jersey has fixed its auto insurance problem.

Five years after the state deregulated the industry, the results are in, and by almost every measure the reform has been a resounding success.

Premiums are down. Competition is up. The number of insured is up. Complaints to the state are down by more than half.

"I'm happy," said John Porreca, 22, a Cherry Hill resident who switched companies and saw his insurance bill drop $1,000.

For decades, auto insurance was the Mideast of New Jersey politics - an intractable mess. Fraud was too pervasive, the experts agreed. There were too many motorists banging into each other on too-crowded roads. The doctors or the lawyers or the insurers, take your pick, were too powerful.

All of those verities have been swept aside since the Legislature finally got it right in 2003, in the third major shot at reforming auto insurance since 1990.

Philadelphia  Inquirer - January 20, 2008

 

Marketing to Business Owners is a Cross-Selling Opportunity

There’s nothing small about the small business market. Numbering around 25 million, small business owners in the US represent a major market niche with incredible potential. Aside from their volume, there is another big advantage that comes with serving the financial needs of small businesses.

A small business presents several opportunities for producers and financial advisors. One opportunity deals with the personal financial needs of the businesses owner such as insurance coverage, management of assets acquired through the business, estate and gift tax reduction and other wealth transfer strategies.

Another opportunity lies in providing for the company’s separate needs such as business succession planning, buy-sell agreements and worksite benefits.

Experts who specialize in this market recommend working to acquire either the individual (business owner) account or the business account first rather than attempting to capture both needs at once. By winning over the business owner, acquiring the business side is almost a given and vice versa.

Take the time to build rapport and a level of trust before moving on to the other component. When working in small towns, producers who conduct face-to-face meetings will have a great advantage over others whose location does not permit personal meetings.

Producers who are coming to this market for the first time should be prepared for the different needs of the small business owner and the business.

Many small business owners are time-conscious clients who prefer to focus on operating their company and like to leave the details to the producer. This can be an advantage since it can free up time for producers. Small business owners are generally logical thinkers and have the ability to see the value of insurance and investment products more quickly than other consumers. Most experts describe them as “trouble-free” clients.
But the needs of the business as a client is much more demanding and requires special expertise that producers who have been handling individual or group clients may not have. These include setting up 401(k) and/or other traditional and consumer driven retirement plans, golden handcuffs and other selective incentives, retirement plans and rollovers, and insurance and healthcare group coverage for up to 500 employees (based on the size definition of the U.S. Small Business Administration).

InsuraneNewsNet - January 18, 2008
 

N.Y. seeks to modernize financial services regulations

A new commission to modernize New York state’s regulation of financial services said Friday it will consider having a single state regulator for all financial services, as well as for developing “principles-guided” regulation.

Four state governmental agencies currently regulate financial services—the offices of the superintendents of insurance and banking, the attorney general and the secretary of state—according to a spokesman for Insurance Superintendent Eric Dinallo.

The Commission to Modernize the Regulation of Financial Services also clarified its approach to eliminating out-of-date regulations, which borrows from the United Kingdom’s “principles-based” regulatory structure, the group said in a statement.

New York will consider a “principles-guided” approach, which it considers “a unique alternative,” that focuses on outcomes and relies on principles for guidance in interpreting existing regulations and statutes and as key objectives for future regulations.

The commission’s agenda also will include standardizing regulation of similar products sold by different types of companies; instituting a risk-based approach to regulation; and eliminating old rules that are unnecessarily burdensome.

The group includes the heads of major financial services organizations, consumer advocates, the business community, legislators and regulators. (ed - What's missing? - How about members of the insurance community)

The commission’s goal is to “make recommendations for new laws and regulations that promote competition and business growth while effectively protecting consumers and honest businesses from unfair or unethical practices,” the statement said. It seeks to help New York “retain and enhance its status as the world’s financial capital.”

Business Insurance - January 18, 2008
 

Tort Trends Likely to Remain Stable in 2008, Finds I.I.I. Survey

Tort trends will likely remain stable in the year ahead, according to a survey conducted by the Insurance Information Institute (I.I.I.) at its 12th annual Property/Casualty Insurance Joint Industry Forum.

Sixty-six percent of the executives polled believed tort trends in 2008 would be little changed from 2007. However, 28 percent believed tort trends would deteriorate. Just 6 percent of those polled indicated that tort trends would improve. Nonetheless, respondents were very confident about wind versus water litigation. Eighty-percent of respondents indicated that wind versus water litigation was largely resolved in favor of the insurance industry.

Regarding whether Congress will adopt a National Catastrophe Insurance Plan in 2008, 90 percent of respondents did not think it was going to occur. In addition, 70 percent of insurance leaders thought the push for an Optional Federal Charter would not gain momentum on Capitol Hill in the year ahead.

Looking at the industry's financial performance, a majority of industry leaders believed the market would continue to soften in most property/casualty lines. Broken down by line of insurance, only 24 percent of respondents believed profitability would improve in personal auto and homeowners insurance, 22 percent expected improvement in workers compensation. Overall, just 20 percent of respondents expected an improvement in commercial lines profitability in 2008.

Insurance Journal - January 16, 2008

Internet privacy concerns rising, study suggests

Findings come amid a record number of data breaches in 2007

Privacy concerns stemming from online shopping rose in 2007, a new study finds, as the loss or theft of credit card information and other personal data soared to unprecedented levels.

Sixty-one percent of adult Americans said they were very or extremely concerned about the privacy of personal information when buying online, an increase from 47 percent in 2006. Before last year, that figure had largely been dropping since 2001.

People who do not shop online tend to be more worried, as are newer Internet users, regardless of whether they buy things on the Internet, according to the survey from the University of Southern California's Center for the Digital Future.

The study, to be released Thursday, comes as privacy and security groups report that an increasing number of personal records are being compromised because of data breaches at online retailers, banks, government agencies and corporations.

A sixfold increase from 2006
The Identity Theft Resource Center, for instance, listed more than 125 million records reported compromised in the United States last year. That's a sixfold increase from the nearly 20 million records reported in 2006.

Data breaches often result from lost or stolen computer equipment such as laptops, though the single largest breach was a case of online hacking. Early last year, TJX disclosed that a data theft had exposed tens of millions of credit and debit cards to potential fraud.

The card numbers were typically collected during brick-and-mortar retail transactions at T.J. Maxx, Marshalls and other TJX chains. The breach is believed to have started when hackers intercepted wireless transfers of customer information at two Marshalls stores in Miami — an entry point that led the hackers to eventually break into TJX's central databases.

Nonetheless, concerns about credit card security have largely stabilized, with 57 percent very or extremely concerned last year. It was 53 percent in 2006, a difference within the survey's margin of sampling error of 3 percentage points in either direction.

As of 2007, two-thirds of adult Internet users shop online, compared with just half a year earlier. Most spend $100 or less a month, and two-thirds of online shoppers have reduced buying at brick-and-mortar stores.

MSNBC - January 16, 2008

 

INSURED'S VOLUNTARY PAYMENT TO CUSTOMER FOR LOSS OF AUTOMOBILE DEFEATS INSURANCE CLAIM FOR REIMBURSEMENT

R. Ferraro Collision, Inc. v. Universal Underwriters Ins. Co. 2008 NY Slip Op 00248 Decided on January 15, 2008 Appellate Division, Second Department

The plaintiff, an automobile body repair shop, commenced this DJ action against its insurance company, for a judgment declaring that the insurer was obligated to indemnify it under the terms of its insurance policy in the sum of $134,917, the value of a Mercedes- Benz automobile belonging to one of its customers that was stolen from its garage. In its complaint, the plaintiff alleged that the customer owed it funds in excess of this amount, and "in payment for the loss of the" vehicle, the customer "kept" funds totaling this amount. The plaintiff alleged that the insurer was obligated to indemnify it for the amount "kept" by the customer.

The insurer moved for summary judgment, contending that the plaintiff was not entitled to any indemnification because it failed to comply with the provision concerning its "duties after loss," as set forth in the insurance policy. In particular, the insurer alleged that the plaintiff made a payment to the customer without the defendant's consent. Supreme Court, Kings County, denied the motion. The Appellate Division reversed.

"The insurance policy provides that the defendant 'will not defend or pay any LOSS for YOU or any other INSURED who fails to comply with their duties after loss.' One of the 'duties after loss' imposed upon the plaintiff is to 'assume no obligation, make no offer of payment, and incur no expenses without OUR consent, except at the INSURED'S own cost.'"

Rogak Report - January 16, 2008

New York Says Insurance Fraud Arrests Are Up

Investigations by New York's insurance frauds bureau led to over 700 arrests last year, a 17 percent increase from 2006, according to an annual report released today by the state insurance department.

The bureau, established in 1981, received about 22,079 reports of suspected fraud last year – more than 60 a day – most of which were from agents. About 1,100 new investigations were opened in 2007.

Among the major cases:

• Twenty-six suspects were arrested as a result of a sting operation targeting car thieves on Long Island and in the New York Metropolitan Area, and 11 more are being sought. In addition, 92 vehicles with a Blue Book value of more than $1 million were recovered.
• The arrest and pending prosecution of a man who posed as a broker for Lloyd's of London and sold more than $8 million in bogus insurance for bars and restaurants.
• A medical clinic operator and 30 other suspects in New York City and in the Buffalo-Niagara region were arrested for staging numerous accidents in Western New York. The drivers and several passengers in each car falsely claimed they were injured and sought medical treatment at clinics that were involved in the scheme. In some cases, the suspects who claimed injury were hundreds of miles away at the time of the alleged accidents.

Insurance Journal - January 16, 2008

New York Workers Compensation Terrorism Risk Insurance Program Reauthorization Act of 2007 - Endorsements Effective January 1, 2008

In R.C. Bulletin 2154, you were informed of the signing by President Bush of the Terrorism Risk Insurance Program Reauthorization Act of 2007 (TRIPRA) which extends the federal backstop for terrorism exposure until December 31, 2014.

The Rating Board has filed, and the Insurance Department has approved, effective January 1, 2008, the Terrorism Risk Insurance Reauthorization Act Endorsement (WC 00 01 13A) which replaces the current Terrorism Risk Insurance Extension Act Endorsement (WC 00 01 13).

Revisions to this endorsement include:
•changing the reference of TRIEA to TRIPRA
•updating the definition of “act of terrorism” to include domestic terrorism
•updating of insurer deductible provisions
•defining “Program Year”
•disclosure of the $100,000,000,000 cap as required by Section 4 of TRIPRA
•updating of existing disclosures
 

NYCIRB

FEMA Issues a Warning about Portable Generators

The Department of Homeland Security’s Federal Emergency Management Agency (FEMA) has joined the U.S. Consumer Product Safety Commission in issuing a warning to consumers about portable generators. A generator’s exhaust contains poisonous carbon monoxide, which can kill in minutes. Last year, at least 65 people died from generator-related carbon monoxide poisoning. Many of the deaths occurred after winter storms knocked out power. The following link includes important generator safety tips, as well as links to additional information about generators and carbon monoxide.

http://www.usfa.dhs.gov/media/press/2007releases/121907.shtm

DINALLO NAMES KENNY INSURANCE DEPARTMENT SPECIAL COUNSEL

Superintendent of Insurance Eric R. Dinallo today announced that John J. Kenny has been named Special Counsel to the Superintendent, with duties to include performing special projects for the Superintendent. Kenny joins the Department from the New York Liquidation Bureau, where he was Deputy Chief of Staff.

“John Kenny is an outstanding addition to the Insurance Department and I’m pleased to welcome him,” Superintendent Dinallo said. “He did a superb job as part of the turnaround leadership team at the Liquidation Bureau and I expect both the Department and I to benefit from his input and advice.”

Kenny served as Deputy Chief of Staff at the Liquidation Bureau, a non-governmental agency with more than 400 employees that liquidates and rehabilitates insolvent insurance companies on behalf of the Superintendent, since May 2007. There, he was responsible for a wide variety of the Bureau’s operations, including addressing various operational, management, financial and legal issues.

From March 2006 until the election in November 2006, Kenny was with Spitzer 2006, the Campaign for Governor. There he conducted and supervised a variety of finance and compliance activities. After the election, he was named Senior Appointments Advisor to the Spitzer Transition Team and in the office of the Appointments Secretary in the subsequent administration. Through January 2007, he conducted and managed various facets of recruitment, interviewing and selection of candidates for commissioner and other agency head positions for Gov.-elect and Governor Spitzer.

NY Insurance Department - January 15, 2008

Insurers Stop Paying for Care Linked to Errors
Health Plans Say New Rules Improve Safety and Cut Costs; Hospitals Can't Dun Patients

Health insurers are taking a new tack in a bid to improve patient safety and reduce health-care costs: refusing to pay -- or let their patients be billed -- for hospital errors.

Aetna Inc., WellPoint Inc. and other big insurers are moving to ban payments for care resulting from serious errors, including operating on the wrong limb or giving a patient incompatible blood.

The companies are following the lead of the federal Medicare program, which announced last summer that starting this October, it will no longer pay the extra cost of treating bed sores, falls and six other preventable injuries and infections that occur while a patient is in a hospital. The following year, it will add to the list hospital-acquired blood infections, blood clots in legs and lungs, and pneumonia contracted from a ventilator.

Private insurers are looking first at banning reimbursements for only the gravest mistakes. But health-insurance executives say it is only a matter of time before the industry also stops paying for some of the more common and less clear-cut problems that Medicare is tackling, such as hospital-acquired catheter infections or blood poisoning. "I'd rather have the cudgel in place first than push the list too far," says Aetna President Mark Bertolini.

Some hospitals and others are concerned that the new strategy could drive up medical costs in other ways as hospitals absorb or pass on the expense of introducing the safety and screening procedures needed to help avoid mistakes.

Ultimately, insurers say, the efforts will trigger safety improvements and savings for patients.

Aetna, the country's third-largest insurer by number of members, is beginning to stipulate in hospital contracts up for renewal that it will no longer pay nor let patients be billed for 28 different "never events." Compiled by the National Quality Forum, a coalition of physicians, employers and policy makers, these mistakes include leaving an instrument in a patient after surgery, the death of a mother in a low-risk pregnancy, allowing a patient to develop bedsores or using contaminated devices. Such errors are so egregious "there can't be any argument that they should ever happen," says Troy Brennan, Aetna's chief medical officer.

WellPoint, the largest insurer, is testing the same approach in Virginia with four errors from the forum's never-events list, including leaving a sponge or other object in a patient after a procedure and performing the wrong procedure. It plans to extend the policy soon to its plans in New England, New York and Georgia. UnitedHealth Group Inc. and Cigna Corp. say they're exploring policies similar to Medicare's. The Blue Cross Blue Shield Association says that its 39 member health plans are looking at approaches similar to Aetna's or working with hospitals on reducing errors.

$$ Wall Street Journal - January 15, 2008

Selected Opinions of the Office of General Council

Insurance Department - January 14, 2008

P-C Insurers Ramp Up Internet Use Survey Says

A survey of property-casualty insurers, most of them in the workers’ compensation sector, has found the number of firms offering Internet-based transactions is accelerating rapidly, a technology firm reported.

Fiserv in Brookfield, Wis. also found a number of holdouts who have no plans to offer transactions via the Internet.

The company said while 41 percent of its online survey respondents said they already offer quotes via the Web, another 24 percent said they plan to do so within a year.

In addition to asking about quotes, the survey of information technology executives, asked when companies would be using the Internet for policy issuance, endorsements, renewals, reinstatements, cancellations, billing and audits.

Fiserv found that 29.4 percent said they had no plans at all to offer quotes over the Internet and 41.2 percent said they had no plans to use the Internet for either reinstatements or audits.

All of the other firms said they either used the Internet for reinstatement and audits or planned to within three years.

Some 47.1 percent said they had no plans to offer online cancellations.

The numbers showed that policy issuance via the Web will double to 47 percent of responding companies within the year and online endorsements will jump from 12 percent to 47 percent in that same time span. But 35 .4 percent had no plans to use it for policy issuance and 29.4 percent had no plans to use it for endorsements.

For renewals, 23.6 percent had no plans to employ the Internet and for billing 29.5 percent had no plans.

According to the firm, demand for policy-related service level improvements is a key driver for this increased level of web activity.

National Underwriter - January 14, 2008

Will foreclosures spark an arson boom?

As homeowners get more desperate, the insurance industry is bracing for an increase in arson.

Faced with foreclosure on her Russellville, Indiana home, Christina Snyder allegedly concocted the kind of plan that now has insurance executives on edge.

According to the county prosecutor, the 31-year-old Snyder allegedly offered to pay a neighbor $5,000 to help her burn down her house and make it look like a botched rape attempt - all in order to claim $80,000 in insurance money. Snyder wanted the neighbor to bind her hands in duct tape, write "whore" on her shirt, and then help her escape once the blaze was set, the prosecutor says. The neighbor demurred, instead reporting Snyder to police.

With the national foreclosure rate zooming and the real estate market in a two-year funk, the insurance industry fears more homeowners will see arson as a way out of their financial woes. A recent report by the industry-funded Coalition Against Insurance Fraud notes that with "untold thousands of homeowners struggling with ballooning subprime mortgage payments, fraud fighters are watching closely for a spike in arsons by desperate homeowners who can no longer afford their home payments."

History indicates such a spike is coming. "When the economy is down, we see an increase in fraud," says Dennis Schulkins, a claim consultant in State Farm's Special Investigative Unit.

It may already be happening. Allstate (ALL, Fortune 500) spokesman Mike Siemienas says his company has seen an increase nationally in arsons among homes in foreclosure. In California, the state¹s insurance division reports that the number of questionable residential fires in 2007 increased 76 percent over 2006.

Fortune - January 10, 2008

Builders Risk Premiums Keep Falling As Soft Market Expands Into Cat Zones

Pressure for top-line growth, new player influx creates buyers’ market

The softening in the builders risk market over the last few years not only showed no sign of a turnaround in 2007 but has expanded into catastrophe-prone areas as well—particularly along the Gulf and East Coasts, despite hurricane concerns—as pressure builds for top-line growth and new capacity is being poured in, leading players in this niche warn.

The softening market came back “with more of a vengeance in 2007,” according to Rick Girden, managing director of the property construction practice at Mercator Risk Services, which is a national wholesale insurance broker.

He explained that “based on how insurers did in 2006, they all had very, very lofty budgets for 2007, and very few markets even came close to meeting their budgets, so there’s pressure for the top-line growth.” This pressure, Mr. Girden said, is coming from stockholders, senior management and those putting up investment capital.

In addition, pressure is coming from outside as well as within, as Mr. Girden noted that, for the first time in awhile, companies that have usually stayed away from construction risks have hired new people to write this business.

He added that, not only have new companies come into the market, but existing companies have expanded their current writings.

National Underwriter - January 14, 2007
 

2 New Rochelle taxi companies close amid insurance-fraud accusations

Two New Rochelle taxi companies have closed amid accusations that their owners falsified certificates of insurance.

The closings, which have left 20 percent fewer cabs on city streets, also have precipitated an evaluation of what to do with a 10-year-old addition at the historic Metro-North train station to be vacated by one of the defunct companies.

Four Westchester residents have been arrested on multiple felony charges in the case, authorities said.

A yearlong investigation by city police and the New York State Insurance Fund found that workers' compensation insurance certificates filed by the owners of De Luxe Radio Taxi and America Taxi Co. had been falsified, New Rochelle Police Officer Lilliana Sanchez said. The certificates were filed with several applications for city medallions in 2006 and 2007.

Sanchez, head of the Police Department's Hack Licensing and Medallion Unit since 2006, said she noticed that some certificates "looked funny" and began the yearlong investigation soon after taking over her job.

Taxi medallions for 23 cabs - 19 owned by DeLuxe and four by America - were suspended, removing them from the road, following the Nov. 28 arrests of the companies' owners, Sanchez said. There are almost 100 cars, including five independents, still serving the city, she said.

Arrested were Joseph Tarricone, 45, of 106 Crestview Place, Ardsley, and John T. Villanova, Jr., 50, of Second Avenue, Pelham, who are the co-owners of De Luxe. Witman Oliva, 43, of 41 Washington St., Port Chester, and Laura Arquinio, 38, of 135 Edgepark Road, White Plains, co-owners of America Taxi, also were arrested. All four were charged with several counts each of first-degree falsifying business records and offering a false instrument for filing and second-degree forgery and criminal possession of a forged instrument, all felonies.

The New York State Insurance Fund was falsely inserted as a provider on some certificates, Sanchez said. On others, insurance was bought for a different type of business at a lower premium and then the certificate was "pasted up" to look like it was for a transit company, she said.

LoHud.com - January 11, 2008

Extension of Time Period for Public Comment on New and Revised Board Forms

The Workers' Compensation Board has extended the time period for the public to comment on draft revisions of the Board's three primary claim forms and two new forms.

The public is now invited to view the forms and provide comment by visiting http://www.wcb.state.ny.us  through January 25, 2008.

Forms C-2, C-3, and C-4 are filled out by New York's employers, injured workers and doctors, respectively, to report a workplace injury or illness. The public is also invited to review two additional forms: Form C-3.3, which allows claimants to authorize the release of medical information by health care providers, and Form C-4.2, the treating doctor's continuing/final report. The revised C-4 will be used for the doctor's initial report only.

The forms are being redesigned as part of Governor Spitzer's workers' compensation reform initiative. Enhanced forms that capture more details about a workplace injury or illness will help the Board better serve injured workers, employers and workers' compensation system stakeholders.

NY State Workers Compensation Board

New York Workers Compensation Sole Proprietors and Partners Rule Remuneration for Limited Liability Companies

The Rates Committee has adopted, and the New York State Insurance Department has approved,
an amendment to Rule IX, (B) of the New York Workers Compensation and Employers Liability Manual
to clarify the definition of a member of a Limited Liability Company.

The Rating Board has received several inquiries as to whether or not employees of a Limited
Liability Company (LLC) or a Limited Liability Partnership (LLP) with titles of “officers” qualify for
the minimum and maximum remuneration as shown for Sole Proprietors and Partners on Page 5 of the
Miscellaneous Values pages of the New York Workers Compensation and Employers Liability Insurance
Manual.

In order to clarify this issue, the following guidance was received from the New York Workers’
Compensation Board concerning members of a LLC or a LLP.

Under Section 54 of the Workers’ Compensation Law, members of an Limited Liability Company
(LLC) or a Limited Liability Partnership (LLP) are treated the same as partners of a business that is
a partnership under the laws of New York State.

If the LLC or LLP has employees, the members of the LLC or LLP, themselves, are automatically
excluded from that coverage. The members may elect to have themselves included in that coverage by
filing a proper form (C-105.32) with the insurance carrier.

Workers’ compensation coverage is not required for members of a LLC or LLP that does not have
employees, or any individuals “volunteering” their services to the LLC or LLP.

However, if a LLC or LLP that has no employees obtains a workers’ compensation policy, the
members of the LLC or LLP are automatically included in that policy. The members of a LLC or
LLP may elect to have themselves excluded in that coverage by filing a proper form with the
insurance carrier.

Individuals, who are not members of a LLC but are providing services to the LLC, are employees and
must be covered by workers’ compensation insurance. Since they are not members, there is no cap on
the amount of salary for which they can be charged premium.

Therefore, based on the foregoing, only the “members” of a LLC or LLP qualify for the
minimum and maximum remuneration as shown on Page 5 of the Miscellaneous Values pages.

NYCIRB - January 4, 2008

New York Workers Compensation Miscellaneous Manual Page Revisions

The Rates Committee has recommended and the New York Insurance Department has approved,
with an issue date of January 1, 2008, various amendments to the manual pages in the New York
Workers Compensation and Employers Liability Insurance Manual to reflect current rules and
procedures.

a. New York Construction Employment Payroll Limitation Program
The maximum payroll for premium calculations under this Program is currently $750 per
week. When the Program became effective on October 1, 1999, the New York Manual
outlined rules and examples that applied at the onset of the Program commencing with a
maximum payroll of $900 per week which was subsequently reduced to the current maximum
of $750.

Pages R-29, R-35, R-36, R-47 and R-49 of the Rules section of the Manual and Pages D-11, D-
14 and D-16 through D-22 of the Digest of Rules and Interpretations section have been
updated to reflect the rules and examples applicable to the current maximum payroll of $750
per week for the classification codes subject to Payroll Limitation.
b. Cookie Manufacturing – Code 2001

Code 2003 “Bakery & Route Salespersons, Route Supervisors & Drivers” applies to bakeries
that make cakes, pies, pastries, bread and cookies. However, in New York and in other
jurisdictions as well, if an employer is engaged solely in making cookies, then the cracker
manufacturing code (2001) applies. As there was formerly no phraseology in the Manual for
cookie manufacturing to diminish the potential for misclassification, new phraseology has been
added for Code 2001 as shown on page C-23.

NYCIRB - January 4, 2008

U.S. Insurance Regs Archaic, Execs Charge

Insurance company executives, charging that the current system of state insurance regulation is “archaic” and “broken,” touched off a debate with regulators at a gathering here.

At the Property-Casualty Joint Industry Forum Wednesday, Thomas Wilson, chief executive officer of Northbrook, Ill.-based Allstate, during a panel addressed a question regarding the lack of product innovation by saying that personal lines insurers are thwarted, in part, by a “regulatory environment that is so arcane you can’t get anything done.”

The statement prompted South Carolina Commissioner Scott Richardson to step up to an audience microphone and challenge the CEO to tell him exactly what regulators could do to cease being archaic.

Mr. Richardson also demanded to know why “800-pound gorillas” like Allstate are pushing for federal government solutions to catastrophe insurance problems. The South Carolina commissioner, participating on a prior panel consisting of regulators, had warned against letting the feds into the insurance business.

“Because we’re the ones on the hook,” Mr. Wilson said, choosing to respond to the second part of the regulator’s two-part question.

“But you did that voluntarily,” Mr. Richardson shot back.

“Yes sir, we absolutely did. But we recognize that the risk is too great for the return we’re getting,” Mr. Wilson said, going on to describe how Allstate cut its exposure in Florida to about one-third of its prior size in recent years.

National Underwriter - January 10, 2008

State fee schedules control workers comp costs: Survey

State workers compensation fee schedules are effective in controlling medical costs, but have a limited ability to bring workers comp utilization levels for similar injuries closer to group health levels, according to a study released Thursday by NCCI Holdings Inc.

The study from Boca Raton, Fla.-based NCCI found that most states reimburse workers comp medical care at prices marked above what group health plans pay. Additionally, most states without fee schedules reimburse medical providers at a higher markup over group health than states with fee schedules.

But when comparing workers comp and group health costs for similar injuries, higher utilization in workers comp accounts for more of the difference than the price markups over group health, the NCCI reported. That finding holds true regardless of the type of fee schedule used in a state or whether a state has a fee schedule.

“We conclude that fee schedules by themselves have a very limited ability to bring workers comp utilization closer to group health levels,” the NCCI said.

However, introducing fee schedules can play a significant role in reforming workers comp systems, the NCCI said.

Business Insurance - January 10, 2008

Consumer Group Claims Insurance Companies Overcharge for Coverage, Underpay for Damages

 U.S. insurance companies systematically overcharge customers and underpay home and auto claims to pad their already-fat bottom lines, a consumer group said Thursday.
The Consumer Federation of America's insurance director, J. Robert Hunter, said insurance companies have enjoyed robust profits and contained losses largely by "methodically overcharging consumers, cutting back on coverage, underpaying claims and getting taxpayers to pick up some of the tab for risks the insurers should cover."

Hunter's comments came with the release of a study by Consumer Federation, Consumers Union and several other consumer organizations that said the industry's overcharges reached an average $870 per U.S. household over the last four years.

The loss ratio for property-casualty insurance companies, or the percentage of premiums paid out to policyholders as benefits, was 54.6 percent last year, according to the study, up from 53.3 percent in 2006 but far below the 75 percent level of the late 1980s.

The study -- based on insurance industry data and companies' financial reports -- estimates that the insurance industry's net income after taxes in 2007 will be $65 billion, down from the record $67.6 billion set in 2006 but above 2005's $48.8 billion.

The industry has reaped those profits at the same time that consumers are receiving less money after filing claims, the consumer group said. A study released a year ago by the organization put forward similar conclusions.

Industry executives and experts, meanwhile, are predicting an erosion in profits this year amid punishing price wars and stable or reduced premiums.

Yahoo - January 10, 2008

A regulator helps create a new insurance company

Shortly before the Thanksgiving holiday, Eric Dinallo, the insurance regulator for New York State, did something unusual. He called Warren Buffett's right-hand man on insurance, Ajit Jain, and suggested that he start a new company to insure municipal bonds in New York.

Jain, who oversees one of the biggest insurance portfolios in the business at a subsidiary of Buffett's holding company, Berkshire Hathaway, was surprised. He had never heard from an insurance regulator offering a new business idea.

"I thought, gee, I wonder what he's calling to complain about," Jain said in an interview Tuesday.

Within a little more than a month, Dinallo had cut through red tape to issue a license to Berkshire to sell bond insurance to municipalities in New York.

In the last days of December, as the financial strength ratings of the old bond insurance companies were under pressure and the insurers were being forced to put up additional capital, Buffett announced the start of his new company, Berkshire Hathaway Assurance.

The company sold its first insurance Tuesday on a $10 million bond issued by New York City.

"We're tip-toeing into the market," Jain said, "doing very small deals. We want to see if we can get the pricing that we find acceptable to us. Once we find this is real, we'll put in a lot more capital."

Insurance regulators generally operate with an abundance of caution, well below the radar. Not Dinallo. He has been the superintendent of insurance in New York for just less than a year. His job, he says, is to encourage insurers and protect insurance customers and to come up with ways to do both.

International Herald Tribune - January 9, 2008

 

Protecting Your Insurance Protection

November 2007 - Protecting Your Insurance Protection #4-The Insurance Company's Duty To Defend -

October 2007 - Protecting Your Insurance Protection #3- Carriers Must Act Timely to Disclaim Coverage

July 2007 - Protecting Your Insurance Protection #2- Being an “Additional Insured” Provides Invaluable Protection for a Contractor

January 2007 - Protecting Your Insurance Protection!- Disclaimer of Coverage by Insurance Companies- Contractors  Should Persevere!

Goldberg & Connolly

Life-Insurance Makeover

Now may be the time to get your clients more life insurance: In 2008, life-insurance premiums will be 11 percent lower than they were two years ago - and half of what they were a decade ago, according to the Insurance Information Institute. Meanwhile, new product features that give individuals more flexibility and guarantees have been developed and are gaining popularity.

So why are life-insurance rates dropping? It has everything to do with age demographics: Death rates for individuals aged 25 to 44 - the primary purchasers of life insurance - have decreased significantly over the past 10 years, explains Steven Weisbart, Ph.D., chief economist at the Insurance Information Institute.

In 1996, the death rate per 100,000 for individuals aged 25 to 44 was 177.8. By 2004, it had dropped to 161.8, based on National Vital Statistics Reports preliminary data. That represents nearly a 10-percent drop in the death rate in less than a decade for the individuals who are of prime insurance-buying age.

The drop in insurance rates can yield a substantial savings. The annual premium for a 40-year-old male nonsmoker buying a $500,000, 20-year, level term-life insurance policy runs around $615 if he qualifies as a "standard" risk, and $340 if he meets the more stringent requirements of a "preferred" risk. Rates for women and younger people, and for larger amounts of insurance are even lower, as are premium rates for traditional whole life, universal life and variable universal life insurance. Today, someone age 35 would pay about $8 per $1,000 of coverage for permanent protection. Ten years ago, it was more like $12 per $1,000 of coverage.

Insurance News Net
 

Insured Catastrophe Losses Rise Dramatically

Even though property and casualty insurers had to contend with relatively few hurricanes and other extreme catastrophes in 2007, the increased prevalence of smaller natural disasters throughout the year resulted in a 50 percent increase over 2006’s worldwide insured losses.

That’s according to a report from Munich Re, one of the world’s largest reinsurers . These figures might be surprising, especially considering the fact that both 2006 and 2007 failed to feature typical large-loss scenarios like those in 2004 and 2005, when multiple hurricanes devastated the Gulf and Florida coasts. So why the 50 percent jump? Munich Re attributed it to activity level, saying that 950 natural catastrophes were reported last year, the highest number since 1974 and 100 more than in 2006.

Specifically, Munich Re said that worldwide catastrophe losses reached $75 billion in 2007, with $30 billion of that recorded as insured losses. In comparison, the company said that 2006 had $50 billion in catastrophe losses, with just $15 billion covered by insurance. Placed in recent historical context, however, and it becomes clear that while 2007 might have featured the most events in several decades, it still failed to approach the loss levels of 2005, the year of Hurricane Katrina. In that year, insured losses topped $220 billion.

"The figures confirm our expectations and endorse our insistence that risks be consistently written at adequate prices, despite years with comparatively low losses as in 2006,” said Dr. Torsten Jeworrek , Munich Re board member, in a release. “The trend in respect of weather extremes shows that climate change is already taking effect and that more such extremes are to be expected in the future. We should not be misled by the absence of mega catastrophes in 2007."

Claims Magazine - January 2008

P/C rates dropped 16% in December: MarketScout

Commercial property/casualty insurance rates dropped an average of 16% in December, according to Dallas-based electronic insurance exchange MarketScout.

“2007 finished much the same way it began with rates on a downward trend,” said MarketScout in a statement announcing December’s results. According to MarketScout, the soft market has now lasted 34 months.

“We just don’t have any appreciable evidence which would enable us to predict the market will harden in the first half of 2008,” said Richard Kerr, MarketScout’s chief executive officer, in the statement. “In fact, most of our research is pointing toward a continued soft market for all of 2008.”

Business Insurance - January 9, 2008

What Exactly Is Actual Cash Value? Better Yet, How Do You Calculate It?

Everyone knows what actual cash value (ACV) is, right? Everyone knows that ACV is replacement cost (RC) minus depreciation, right? Well, if everyone knows it, why does it seem that there are so many problems surrounding the issue of ACV at claim time?

Over the years, courts have defined ACV in one of three ways:\

• RC minus depreciation.
• Fair market value.
• According to the "broad evidence" rule—a judicious combination of numbers one and two.

 Option number one is the traditional insurance industry definition. And, over the years, courts have upheld this meaning and interpretation. A Kansas court summed it up nicely: "The definition of 'replacement cost' stated in the policy as the 'full cost of repair or replacement (without deduction for depreciation)' implies that replacement cost is greater than actual cash value, and that actual cash value must mean 'full cost of repair or replacement (with deduction for depreciation)." Option number two—"fair market value"—also seems to be a rather straightforward method. It has always been thought of as "what a willing buyer will pay to a willing seller."

IRMI

Insurable Interests and Interests Insured in Property Insurance

John Doe and three partners purchased a building for $100,000. Each partner had an equal $25,000 ownership. Mr. Doe took out a property policy to insure the building, and his name appears as sole named insured. No other interests are identified in the policy. The building burns, fire is an insured peril, and the loss is considered total.

The insurance adjuster agrees the value of the loss is $100,000. Mr. Doe receives a $25,000 settlement check from the insurer. Whether the policy limit was $25,000 or $100,000, has Doe received an equitable settlement from the insurer? Yes, as his insurable interest in the building was $25,000: 25 percent of $100,000.

What about the three other partners? Unless each was a named insured in this property policy, there would be no coverage for them. While they did have an insurable interest in the building, their interests were not identified—only John Doe appeared as a named insured. Could this situation happen? Yes.

Many risk management professionals spend considerable time on coverage comparison and premium negotiation but spend insufficient time understanding the appropriate interests to be insured in a property policy. Since Doe had insured the building for $100,000, he and his partners may attempt to convince the insurer to correct the policy and add the other interests after the loss. The insurer may take the position that it underwrites not only the pre-loss exposure characteristics of the building (i.e., construction, occupancy, protection) but the moral character of the owners as well. An attempt to reform the policy after loss is an arduous, expensive task and one ripe for failure. In this example, let's assume the three partners are left uninsured due to lack of named insured status. How did this happen? Mr. Doe and partners forgot to think of the "who" when building insurance was first considered.

Considering the "Who"

IRMI
 

I Arthur Yanoff

We are sad to report that a long time member of the insurance industry,  I.Arthur Yanoff, died at his home in Boca Raton, FL on January 7, 2008. Funeral services will be held on Friday, January 11, 2008 at 3pm at:

Temple Beth El,
333 Southwest 4th Avenue
Boca Raton, FL 33432

In lieu of flowers, the family requests donations be made to the American Diabetes Association.

 

Selected Opinions of the Office of General Council

NY Insurance Department

PLAINTIFF'S SOLE NEGLIGENCE LEADS TO DISMISSAL OF SCAFFOLD LAW SUIT

Gittleson v. Cool Wind Ventilation Corp. 2007 NY Slip Op 10516 Decided on December 26, 2007 Appellate Division, Second Department

Plaintiffs appealed from an order of the Supreme Court, Queens County (Dorsa, J.), which dismissed his lawsuit for personal injuries sustained when he fell from a ladder. The Appellate Division affirmed.

"To recover on a cause of action pursuant to Labor Law § 240(1), a plaintiff must demonstrate that there was a violation of the statute, and that the violation was a proximate cause of the accident. A plaintiff cannot recover under Labor Law § 240(1) if his or her actions were the sole proximate cause of the accident."

"Here, the two defendants each made a prima facie showing that the plaintiff Robert Gittleson... was injured in an accident that was not proximately caused by a violation of Labor Law § 240(1). Rather, it was caused solely by the actions of the injured plaintiff in choosing to use an improperly-placed, unopened, and unsecured ladder rather than the one he had brought and used earlier that day. The evidence submitted in opposition failed to raise a triable issue of fact."

Rogak Report - January 7, 2008

Agents, Brokers Expected To Struggle For Growth Despite Softening Market

Expense cuts, coverage expansion not likely to compensate for falling commissions

As prices continue to fall for the vast majority of commercial insurance accounts, agents and brokers are searching for ways to keep growing their top- and bottom lines despite drops in renewal commissions.

“2007 was the year the soft market caught up with everybody, and the boat is leaking,” observed Kevin Stipe, senior vice president and principal at Atlanta-based Reagan Consulting Inc., which developed and produces the “Best Practices” program in conjunction with the Independent Insurance Agents and Brokers of America.

Indeed, the pricing environment going into 2008 is “much softer than what was expected,” according to Robert J. Lieblein, managing principal with the consulting firm Hales & Company in Harrisburg, Pa.

“There appears to be no end in sight,” he said. “There is some realization that rates can’t go too low, but competition is continuing to drop rates. This will continue through 2008.”

“There is no sign prices are firming,” agreed Wayne Walkotten, senior vice president for the Willoughby, Ohio-based consulting firm Marsh, Berry & Company Inc. “This is the third year in a row of deteriorating renewals.”

What makes this particular price softening especially problematic for producers is that while the market is going through one of its traditional cycles, the customary levers to offset the loss of commission income are absent, according to a number of experts queried.

National Underwriter - January 7, 2008

NEW YORK STATE INSURANCE DEPARTMENT TAKES DISCIPLINARY ACTIONS AGAINST COMPANIES, AGENTS, BROKERS & ADJUSTERS

The New York State Insurance Department has taken disciplinary action against the following licensees. Those categorized as stipulations have been agreed to by the licensee. Department actions that result from Department hearings are subject to judicial review and possible stay of enforcement.

NY Insurance Department - January 4, 2008

THOUGH WORKER SLIPPED AND FELL ON ROOF, HE HAS NO SCAFFOLD LAW CLAIM

Favreau v. Barnett & Barnett, LLC 2008 NY Slip Op 00026 Decided on January 3, 2008
Appellate Division, Third Department

This Labor Law action which was commenced in Clinton County stemmed from an accident that plaintiff allegedly had in February 2001 in the course of his employment with a general contractor on a commercial building project. According to plaintiff, on the date of the alleged accident, he was in the process of installing a firewall between defendant's office building and a newly-constructed addition. While walking backwards up the roof of the existing building carrying one end of a piece of sheetrock (a coworker was carrying the other end), he stepped on ice a few feet below the roof's peak and fell backwards. He landed right where he fell without falling off the roof or sliding downward in any way. Indeed, according to his testimony, his head and part of his shoulders were above the peak after he fell. Supreme Court denied defendant's motion for summary judgment dismissing the Labor Law § 240 (1) and § 241 (6) causes of action.

Rogak Report - January 3, 2008

WHEN A RENTAL CAR IS ALSO A TEMPORARY SUBSTITUTE, ANY PERMISSIVE DRIVER IS COVERED UNDER RENTER'S PERSONAL AUTO POLICY

Mercury Insurance Group v. Gaughan et al., 2007 NY Slip Op 34170(U) (Supreme Court, Suffolk County) (Pines, j)

Mercury commenced this declaratory judgment action seeking an order holding that it was not obligated to defend and indemnify defendant Gaughan in a personal injury action pending in Supreme Court , Orange County.

The underlying facts of the personal injury action were undisputed. Gaughan rented a vehicle from defendant Elrac, Inc. , d/b/a Enterprise Rent-A-Car Company because her vehicle was being repaired. Gaughan loaned the vehicle to her daughter, Shannon Gaughan, who then permitted her boyfriend, Montero to operate the vehicle and the subject accident occurred.

Rogak Report - January 3, 2008

Re: Update on broker disclosure of commission and compensation other than commission

The Office of General Counsel issued the following opinion on December 12, 2007, representing the position of the New York State Insurance Department.

Question Presented:

Is an insurance broker required to disclose to its clients the commission it earns on the policies it places?

Conclusion:

No. At present, and as a general matter, there is no legal requirement that a broker disclose to its clients the commission that it earns on the policies that it places.

Facts:

The inquirer’s inquiry, which is general in nature and does not set forth particular facts, refers to both OGC Opinion Number 05-08-18 (08/30/2005), and OGC Opinion Number 06-11-19 (11/20/2006). Those opinions concluded that neither the Insurance Law nor regulations promulgated thereunder require that a broker disclose to its clients the commission it earns on the policies it places. The inquirer also cites Circular Letter Number 22 (August 25, 1998), and asks whether that Circular Letter only requires brokers to disclose compensation other than commission.

Analysis:

Neither the Insurance Law nor regulations promulgated thereunder require that a broker disclose to its clients the commission that it earns on the policies that it places. See OGC Opinion Number 05-08-18 (08/30/2005), and OGC Opinion Number 06-11-19 (11/20/2006). Thus, at present and as a general matter, there is no legal requirement that an insurance broker disclose to its clients the commission that it earns on the policies it places.

Please be advised, however, that in the Insurance Department's Regulatory Agenda published in the New York State Register on June 27, 2007, the Department expressed its intention to adopt "a new part to 11 NYCRR to establish requirements regarding disclosure of all sources and amounts of compensation received by licensed insurance brokers and certain agents." Although the Department will not adopt this regulation during the remainder of 2007, the Department plans on proposing such a regulation in 2008.

The inquirer also refers to Circular Letter Number 22 (August 25, 1998), and asks whether it only requires that brokers disclose compensation other than commission. The Insurance Department did not intend that the Circular Letter apply to a broker's disclosure of commission. Accordingly, the Circular Letter only provides guidance regarding broker disclosure of compensation other than commission.

For further information, you may contact Senior Attorney Robert Freedman at the New York City office.

Office of General Council

Statistics Based on Atlantic Hurricane Activity Can Overestimate Risk

New research on the link between the formation of hurricanes in the Atlantic basin and U.S. landfall activity suggests that using Atlantic basin hurricane activity as a proxy for landfall activity can lead to erroneous estimates of both landfall risk and potential insured losses, according AIR Worldwide Corp. Researchers found that a higher number of tropical storms in the Atlantic basin does not translate to an equivalent increase in hurricanes or landfalling hurricanes.

AIR researchers found that a storm's genesis location, or starting point, greatly influences its probability of making landfall along the North American coastline. The pattern of hurricane genesis locations changes from year to year and by comparing the pattern for a particular season, such as that of the 2004-2005 season, to long-term climatological patterns, one can better understand why in some years the proportion of storms making landfall is high, while in other years it is low.

"By only focusing on the 2004 and 2005 seasons, it is easy to forget that every hurricane season is unique and actual landfall activity is a function of complex interactions between a range of environmental factors such as genesis location, sea surface temperatures and the depth of warm ocean waters, wind shear and atmospheric steering," said Dr. Peter Dailey, director of research in atmospheric science at AIR Worldwide.

AIR's research can be used to analyze the landfall probabilities of the two strongest storms of the 2007 season � Category 5 hurricanes Dean and Felix � based on their genesis locations. Dean and Felix, which were the only storms this year to achieve greater than Category 1 status, both took southerly tracks across the Caribbean and eventually made landfall along the coasts of Mexico and Central America.

"Contrary to popular belief, the U.S. did not 'dodge a bullet' with respect to Hurricanes Dean and Felix," stated Dr. Dailey. "Based on where these storms formed and how they would track under typical steering conditions, our research shows that Hurricane Dean had a low chance of making landfall as a hurricane and Felix was much more likely to strike the Mexico or Central America coastline than the U.S."

Sea surface temperatures in the Atlantic basin have been warmer than average every year since 1995. However, the percentage of Atlantic basin storms that make U.S. landfall as hurricanes has been below the long-term average of 14 percent in nine of those 13 seasons. In 2007, only one of 15 named storms made U.S. landfall as a hurricane, or less than 7 percent. More significantly, total wind energy in 2007 was 33 percent below average despite two Category 5 storms.

Insurance Journal - January 7, 2008

Insurance Groups Seek To Sue Saudi Arabia, Others for Attacks

Whether Saudi Arabia and several members of its royal family can be sued over the September 11, 2001, terrorist attacks will be the topic of arguments this month before a federal appeals court in Manhattan.

Relatives of those killed in the attacks, along with property holders and insurers, have sued more than 200 defendants alleged to have given support in one form or another to Al Qaeda.

"This is the first terrorism case to involve dozens of defendants," a lawyer representing many of those killed in the attacks, James Kreindler, said. "You can't point to one single defendant and say that is the cause. But what we say is that 9/11 could not have happened unless Al Qaeda was able to grow into a large, sophisticated, well-funded terrorism enterprise, and to do that it needed a huge amount of support."

More than six years after the terrorist strike, the lawsuits are still in their preliminary stages.

While several countries, including Iran, Iraq, and Sudan, have been sued over the attacks, the case against Saudi Arabia has moved the furthest along in the courts.

The suit, brought by several insurance companies, claims that Saudi Arabia supported Islamic charities that fund-raised for Al Qaeda.

The plaintiffs face an obstacle in the Foreign Sovereign Immunities Act, which a district court judge ruled prevented the insurance companies from suing the kingdom. Anticipating that result, most of the plaintiffs involved in the September 11, 2001 litigation did not try suing Saudi Arabia, despite its deep pockets.

But the Chubb Group of Insurance Companies, the Zurich American Insurance Company, and other insurers did, betting they could find an exemption in the Foreign Sovereign Immunities Act that would allow the suit.

If the insurers win, and the federal judges who ride the Second Circuit reverse the district-court ruling, Americans would have a much easier time suing foreign countries and officials over terror attacks, lawyers involved in the case say. Currently the Foreign Sovereign Immunities Act permit such suits only against countries that the State Department has named state sponsors of terrorism. Saudi Arabia is not on that list.

NY Sun - January 7, 2008

N.J. Relaxes Rules for Writing Personal Auto Insurance

New Jersey auto insurance agents will have a lot easier time quoting and writing new policies under a bill signed yesterday by Gov. Jon S. Corzine.

The bill, which had awaited his signature since last month, eliminates the so-called "three scenarios" rule, under which agents were required to show three different coverage scenarios to a client as part of a quote.

The new law also ends the mandate that an agent provide quotes to a client from each of his carriers.

The bill carried the backing of both the Professional Insurance Agents of New Jersey and the Independent Insurance Agents and Brokers of New Jersey.

Both rules had become a burden for New Jersey agents since the Garden State opened up its auto insurance market in 2003, and carriers flocked back into the state, the agents' groups said.

Insurance Journal - January 4, 2008

N.J. Territory Map Update Brings Industry Concern

New Jersey officials for the first time in 50 years have approved a new territory map for setting prices on auto insurance risks.

One insurance industry representative said a unique premium redistribution mechanism that accompanies the map is causing underwriters concern.

Department of Banking and Insurance Commissioner Steven M. Goldman approved the new map and rating system late last week.

The new map and rating system was mandated by the state legislature in 1998 under the Automobile Insurance Cost Reduction Act. Prior to that act, New Jersey was considered a pariah among auto insurers because of what many considered onerous regulation.

The new map and accompanying rating schedule does away with a cap of 135 percent in variation of rates but complies with the mandate that rates in new territories “not be ‘significantly disproportionate’ to those in effect in 1998,” according to the proposal submitted by the department in early 2007.

The map was the result of years of work by the Automobile Insurance Territorial Rating Plan Advisory Commission.

The map and rating system includes the Territorial Rating Equalization Exchange (TREE) plan. The purpose of the TREE is to make insurance underwriting fair for all insurers no matter where they write and to give all automobile policyholders in New Jersey a broad range of companies to choose from.

National Underwriter - January 3, 2008

Brokers Agree Market Is Soft, But Is Discipline Gone?

Two major reinsurance brokerages reported falling prices in the reinsurance market and expectations the reductions will continue into 2008. One firm found underwriters are beginning to abandon underwriting discipline in pursuit of market share.

Reinsurance brokers Guy Carpenter & Company, LLC, a subsidiary of New York-based professional services firm Marsh & McLennan, and Willis Re, a unit of Willis Group Holdings, issued their reviews of the reinsurance market for the Jan. 1 renewals.

Both pointed to marked softening in pricing throughout the industry on renewals.

Guy Carpenter in its “Near Misses, Plentiful Reminders: Global Reinsurance Review January 2008” said property catastrophe reinsurance rates were down 9 percent across all markets at Jan. 1 renewals. Many renewals closed late as cedents held out for the lowest rate.

“Barring large catastrophe losses in 2008, we expect to see the downward drift in rates that we have seen recently continue through 2008 into 2009,” said Chris Klein, Guy Carpenter’s global head of business intelligence, in a statement.

Willis Re’s report titled “1st View” said that while there was softening across the board, “the intensity of this competition varies by class, line and region.”

National Underwriter - January 3, 2008

LI INSURER'S AUTO CRASH

For the second year in a row, a Long Island company has fared worst on a state ranking of auto insurance complaints.

The Long Island Insurance Co. of Melville had a complaint ratio of 6.53, putting it at the bottom of a list of 44 auto insurance companies rated in 2007 by the state Insurance Department.

The Infinity Property & Casualty Insurance Group of Birmingham, Ala., which was third-worst on the 2006 list, was second-worst with a ratio of 1.57.

NY Post January 3, 2008
Insurance Department News Release

Insurers in NY May Not Exclude Coverage For Disabilities Arising From Pre-Existing Conditions

U.S. Court of Appeals - Second Circuit

The U.S. Court of Appeals for the Second Circuit, in accordance with an answer from the New York Court of Appeals to its certified question, held that under New York Insurance Law § 3234(a)(2), an insurer may not exclude coverage for disabilities resulting from pre-existing conditions. An insurer may, however, impose a twelve-month tolling period during which no benefits will be paid for disabilities stemming from a pre-existing condition and arising in the first twelve months of coverage.
 

BENESOWITZ v. METROPOLITAN LIFE INS. CO.

Tom Bower's recent interesting NY coverage law news

This month's edition discusses the following topics:

• whether a disability policy's definition of "total disability" was clear and ambiguous;
• whether the antisubrogation rule applies where the same carrier covers two different risks, under two separate policies;
• whether an "earth movement" exclusion applied to a loss;
• whether a liability carrier can be liable for interest on a claim it never investigated, defended, or settled;
• what constitutes a liability carrier's "investigation" of a claim;
• whether a liability carrier must always investigate any claim reported to it, even if it reasonably believes the claim is clearly not covered;
• whether a physician's sexual misconduct was covered under his medical malpractice policy;
• whether a construction defect constituted an "occurrence" under a contractor's CGL coverage; and
• whether a non-profit organization's policy had to pay for the insured's costs of complying with an investigative subpoena.

Tom Bower's News - January 2007

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