INSURANCE NEWS                                                                                          March, 2008

COMMERCIAL WINDOW CLEANER'S FALL WHILE STANDING ON DESK CREATES SCAFFOLD LAW CLAIM: "ELEVATION RISK" CITED BY COURT OF APPEALS

Swiderska v. New York University 2008 NY Slip Op 02503 Decided on March 20, 2008 Court of Appeals

As part of a commercial cleaning contract, plaintiff's employer instructed her to clean the 10-foot-high interior windows in a dormitory building, providing her with only a rag and window washing solution to complete the task. When plaintiff asked for a ladder so that she could reach the tops of the windows, she was instructed to climb on furniture instead. While standing on a bed in an attempt to clean a window, plaintiff fell to the floor, suffering multiple fractures and other injuries. This Labor Law § 240(1) action ensued.

The parties cross-moved for summary judgment on the issue of liability, with both lower courts granting judgment in favor of defendants on the theory that the activity in which plaintiff was engaged constituted routine maintenance not covered by Labor Law § 240(1). The Court of Appeals reversed.

Rogak Report - March 31, 2008

High Wire Act: New Research From The Hartford Finds Family Finances Often Hanging Without A Safety Net

Research discovers many Americans are barely making ends meet and risk financial traps due to lack of life and disability insurance coverage

New research from The Hartford Financial Services Group, Inc., one of the nation’s largest diversified financial services companies, found that most Americans sometimes find themselves in a precarious financial position, without a safety net if they experience a disabling illness or injury.

A large majority of survey respondents (70 percent) reported that they are meeting their expenses with little or nothing left over after bills are paid, and an additional 8 percent said they can’t meet their household expenses. In addition, 95 percent of consumers surveyed said they would have to change their lifestyle if they lost part of their family’s income for three to six months. As a result, they find themselves in an unsettling financial predicament, and yet only about half of the respondents report having short- or long-term disability insurance to cover their needs should the unexpected occur.

“Americans are trying hard to make ends meet and are also feeling the pinch that comes with debt. The delicate budget balance they try to navigate could be upended by a misfortune, such as a disability,” said Ron Gendreau, executive vice president of The Hartford’s Group Benefits Division. “What’s more concerning is that many Americans are braving this risk without income protection at the time when they need it most.”

Yahoo - March 31, 2008

REPORTS FIND MARSH, WILLIS COMPLYING WITH TERMS OF SETTLEMENTS

An outside consultant’s review of current producer compensation practices at insurance brokers Marsh and Willis has found both companies are complying with the terms of settlement agreements with New York’s Insurance Department and Attorney General, First Deputy Insurance Superintendent Kermitt Brooks announced today.

The companies settled with the state agencies in early 2005 in order to resolve concerns about anticompetitive practices, agreeing to provide restitution to policyholders and adopt business reforms designed to avoid conflicts of interest. Marsh is the nation’s largest insurance broker, and Willis the third largest.

“To their credit, both companies have cooperated fully with the Department and are living up to the terms of the settlements,” Brooks said. “They have extensively revised their compensation practices so clients can be confident transactions are transparent and conflicts of interest are avoided.”

The Department today released two reports by consultant RSM McGladrey. The Department had engaged RSM to monitor and test both Marsh and Willis for compliance with the agreements. Such compliance also is pertinent to subsequent Multistate Regulatory Settlement Agreements patterned after the New York Department's agreements with the companies.

RSM found that both restitution funds – $850 million for Marsh and $50 million for Willis – had been appropriately funded and disbursed, with more than 99% of the settlement checks already cashed.

NY Insurance Department - March 31, 2008
 

Industry Lines Up 'Pro and Con' on Bush Plan for Federal Insurance Regulator

Insurance industry groups are lining up quickly with responses to the Bush administration's proposed overhaul of the way the government regulates the nation's financial services industries, including insurance.

The sweeping regulatory reform proposal announced by Treasury Secretary Henry M. Paulson calls for insurance companies to be given the option of federal instead of state regulation, along with the creation of a powerful national insurance regulator and a system of national licensing of producers.

The proposed Blueprint for a Modernized Financial Regulatory Structure would give major new powers to the Federal Reserve to oversee financial services market stability, including powers to examine the books of any institution deemed to represent a potential threat to the proper functioning of the overall financial system.

"We should and can have a structure that is designed for the world we live in, one that is more flexible, one that can better adapt to change, one that will allow us to more effectively deal with inevitable market disruptions and one that will better protect investors and consumers," said Secretary Paulson in remarks at the Treasury Department. "The challenge is to evolve to a more flexible, efficient and effective regulatory framework � and that is the purpose of this Blueprint."

According to the blueprint, the proposed legislation creating a federal insurance regulatory structure would "reestablish the federal government's role in regulating the insurance industry by reclaiming a portion of its delegation of insurance regulation to the states, thereby creating a dual federal-state regulatory structure."

The plan would introduce a system of optional federal chartering (OFC), licensing, regulation, and supervision for insurers, reinsurers, and insurance agents and brokers.

It would also provide that the current state-based regulation of insurance (authorized by the McCarran-Ferguson Act) would continue over insurers and producers not electing to be regulated at the national level.

States would not have jurisdiction over those electing to be federally regulated. However, insurers holding a federal charter could still be subject to some continued compliance with other state laws, such as state tax laws, compulsory coverage for workers' compensation and individual auto insurance, as well as requirements to participate in state mandatory residual risk mechanisms and guarantee funds.

An Optional Federal Charter would specify the lines of insurance that each national insurer would be permitted to sell, solicit, negotiate, and underwrite. For example, an OFC for life insurance could also include annuities, disability income insurance, long-term care insurance, and funding agreements. On the other hand, an OFC for property and casualty insurance could include liability insurance, surety bonds, automobile insurance, homeowners, and other specified lines of business.

Treasury recommends that the federal regulatory powers of the national insurance commissioner should be comparable in scope and force to those of "other world-class financial supervisors."

Treasury also recommends that, as an intermediate step to a federal system, Congress should establish a federal Office of Insurance Oversight within Treasury to establish a federal presence in insurance for international and regulatory issues.

The blueprint explains the reasoning behind the shift to federal regulation of insurance and criticizes state regulators in the process:
"Insurance is truly a global business with an international marketplace subject to international exchanges and negotiations. However, under the current U.S. state-based insurance system, no regulatory official at the federal level can speak for the interests of U.S. regulators of insurers and reinsurers. Assuming that role by default, the National Association of Insurance Commissioners (NAIC) has thus far failed in obtaining a satisfactory degree of state regulatory uniformity."

Regulators balk

National Association of Insurance Commissioners (NAIC) President and Kansas Insurance Commissioner Sandy Praeger said the federal government has enough to do and should keep its hands off insurance.

Insurance Journal - March 31, 2008

Protecting your savings accounts

Even with the troubles plaguing financial institutions these days, if you have less than $100,000 in a bank savings account, you're probably not losing any sleep.

But what if you're a business owner with $100,000 in a corporate savings account?

FDIC insurance covers all depositors, including business accounts, for at least $100,000 per institution. Business accounts are insured separately from personal accounts you have in the same bank. For example, if you have a personal account with $95,000 in deposits and a business account with $85,000 in the same bank, the $180,000 is fully FDIC insured.

If you own several companies, each one's deposits will be insured up to $100,000 per institution. But the FDIC insists the companies be engaged in "independent activity" and won't insure deposits in "shells" set up to get extra insurance.

A few caveats: If your business is a partnership, FDIC insurance applies to the partnership, not individual partners, so no matter how many owners there are, $100,000 is the maximum insurance.

If your business is a sole proprietorship, those deposits are not insured separately. Money in that business account is added to any nonretirement savings accounts you have at the same bank and insured up to $100,000.

Newsday - March 30, 2008

 Search for Worker's Compensation Insurance by Insured's Name

 The website of the State Workers' Compensation Board now allows users to check on employers' coverage by Name, Federal Employers Tax Number, Policy Number or WCB Employer's Number. A search results in several years of policy history

NY Workers Compensation Board

AIG sues Greenberg for breach of fiduciary duty

American International Group Inc has filed a complaint in New York Supreme Court against former Chief Executive Maurice "Hank" Greenberg and six other former directors and officers, accusing them of breaching their fiduciary duty.

In the complaint, filed on Wednesday, AIG alleges Greenberg, former Chief Financial Officer Howard Smith and five others breached their fiduciary duty through "misappropriation of a special block of AIG shares worth approximately $20 billion in 2005."

The shares were held by Starr International Co Inc, a company that had been affiliated with AIG and had been used as a special compensation vehicle for chosen employees of the insurer.

Yahoo - March 27, 2008

Young Drivers on the Radar - Insurers Offer Discounts And Monitoring Services To Capture New Business

Insurers are pursuing a group of drivers that they've traditionally tried to avoid: teenagers and young adults.

Safeco Corp., Nationwide Mutual Insurance Co., American Family Mutual Insurance Co. and Allianz SE unit Fireman's Fund Insurance Co. are among those rolling out significant new discounts for young drivers and their parents -- often with new requirements designed to minimize risk. Some require drivers to take an online safety course or keep a log of their driving. Others are tied to the use of special monitoring technology that allows parents to keep an eye on young drivers behind the wheel.

The moves come amid greater competition among auto insurers as rates drop or hold steady for customers across the board. The programs primarily appeal to parents, since they soften the blow of adding a young driver to a family policy, which can boost premiums 50% to 100%. Insurers also hope that selling auto policies to young drivers will help nurture future customers.

In addition, many states in recent years have placed restrictions on teen drivers, such as not allowing them to drive at night or to transport carloads of friends. All this has had the effect of making the group slightly less risky to insure than in the past.

Nationwide is expected to unveil its "SmartRide" program in Ohio, West Virginia, Maryland, Virginia, Delaware and Washington, D.C., by March 31 for drivers age 16 to 24, offering a discount of up to 5% for customers who participate in an online safety tutorial. Last June, Safeco rolled out its "Teensurance" program for drivers typically up to age 25, which offers as much as a 15% discount for participants who pay $15 a month for a satellite-tracking service that traces young drivers. (Safeco pays for the tracking equipment.) It's available in 44 states.

Fireman's Fund is letting young adult drivers up to age 27 who have their own policies piggyback on their parents' discounts, lowering their premiums 35% to 50%. State Farm, the country's largest auto insurer, was early to the trend: It has offered discounts up to 15% for drivers under 25 in most states who complete its "Steer Clear" safety program, which requires drivers to keep a log of their driving habits, since 2002.

$$ Wall Street Journal - March 27, 2008

Legal Claim Filed in Manhattan Crane Collapse That Killed 7

The brother of a construction worker killed when a New York crane collapsed has filed notice that he plans to sue the city for $30 million for his brother's wrongful death.

The notice of claim filing Monday by Christopher Canzona, brother of Clifford Canzona, apparently was the first legal action against the city arising from the March 15 crane collapse in Manhattan.

The accident killed seven people, demolished a four-story brownstone and damaged several other buildings.

Christopher Canzona's lawyer, Alan B. Leibowitz, also filed a request in Manhattan's state Supreme Court for an order requiring all materials relevant to the accident be preserved for possible use in his client's lawsuit.

Clifford Canzona, of Seaford, was helping to erect a 46-story condominium building when the accident occurred, the notice of claim says. Canzona, 45, and co-workers plunged 18 floors.

Canzona, employed by Rapetti Rigging Service, was found dead "on March 18 under rubble and debris crushed by the crane," the notice of claim says. His was one of the last three bodies found.

The accident was "caused, in part, by the negligence of the city'' and its Department of Buildings for failing to inspect the construction site properly and in "ignoring obvious defects" in how the tower was erected, the claim says.

Insurance Journal - March 26, 2008

ALTERED CERTIFICATE - Arrested on 2/27/08

Charged with criminal possession of a forged instrument in the 2nd degree

The case against this suspect alleged that on 6/8/07 he presented a Certificate of Insurance to a homeowner who had contracted with him for work at her home. However, an investigation by the Frauds Bureau and Nova Insurance Company’s SIU revealed that the suspect allegedly altered the Certificate to show that he had the required commercial general liability insurance coverage when in fact no such coverage was in place.

NY Insurance Department - March 25, 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 State Insurance Department - March 25, 2008

N.Y. project where crane collapsed lacks wrap-up

The Manhattan building project that was the flash point of a deadly and destructive crane collapse is not covered by a wrap-up—or master—insurance program, even though most large projects use wrap-ups to ensure seamless coverage, sources say.

As a result, the project's developer and contractors will have to sort out blame for the March 15 accident while likely also defending against third-party lawsuits and claims filed by the families of six workers killed in the accident, insurance experts said.

While the workers' employers would be responsible only for providing workers compensation benefits, their families could recover additional damages from the developer and other contractors if they are found liable for the accident, experts noted.

The expected finger pointing in determining liability will make the claims process far more complex than if everyone involved in the project were covered by a single group of insurers providing wrap-up coverage, the experts said.

The 200-foot crane collapsed as workers attempted to extend it at a planned 43-story condominium project, currently about 50% complete, that is being developed by Kennelly Development Co. L.L.C. of New York. The crane fell away from the building and toppled across a city block, killing the six construction workers and a woman in one of the seven buildings that the equipment struck and either demolished or damaged.

Business Insurance - March 24, 2008

New York Awards Consequential Damages for Insurer's Bad Faith

Most property insurance claims proceed relatively smoothly. The loss occurs; it is timely reported to the insurer; the insurer timely investigates and evaluates the loss; the parties negotiate and agree on the amount of loss; and the insurer timely pays the agreed amount.

However, there is a significant number of first-party property damage and business interruption claims where disputes arise between the policyholder and insurer over the scope and availability of coverage, or the amount of loss. This can result from either a legitimate disagreement or bad faith conduct on the part of the insurer.

Most states have adopted statutory or common law remedies for bad faith. For example, Pennsylvania and Massachusetts have statutory remedies. See e.g., 42 Pa. CS § 8371 (Pennsylvania) and G.L. c. 93A (Massachusetts). Other states have adopted common law bad faith remedies. For example, New Jersey adopted a common law bad faith remedy in Pickett v. Lloyd's, 621 A.2d 445 (N.J. 1993). Idaho is another common law state. See e.g. Hall v. Farmers Alliance Mut. Ins. Co., 2008 WL 375838.

The Case in New York

New York has been pretty much a black hole for policyholders because it effectively recognizes no bad faith remedy whatsoever in property insurance cases. Unless a policyholder can prove that the insurer has engaged in both "egregious tortuous conduct" directed at the insured and "a pattern of similar conduct directed at the public generally," the only remedy available was the amount due under the policy, plus interest. See New York Univ. v. Continental Ins. Co., 87 N.Y. 2d 308, 316 (1995); Rocanova v. Equitable Life Assur. Society, 83 N.Y. 2d 603, 613 (1994).

Bad faith and consequential damages claims in New York state and federal court have only very rarely survived the pleadings stage in the 13 years since those cases were decided. However, on February 19, 2008, that began to change.

IRMI - March 2008
 

I Did Not Expect That! The CGL Exclusion for Expected or Intended Injury

Raised with three other siblings (an older sister and two younger brothers), the lament "I didn't mean it!" frequently echoed through our ranch house. Of course, this rather feeble excuse was offered repeatedly on the trip to the medical emergency room to treat one of us who received a minor injury when we acted against strict instructions (Don't bounce on your bed! It is NOT a trampoline!).

Whether the medical treatment was a butterfly bandage or the dreaded stitches, one (or all) of us had acted intentionally, but truly did not intend the outcome (the inevitable scolding—we were less concerned with the injury—but we didn't intend that, either). Was this an accident? Who knew that my brother would bounce forward and not straight up? Of course, my parents always said they expected it, in retrospect, of course! It was an accident waiting to happen, they said, and we were old enough to expect this sort of thing too.

Why is any of this important? How the Insurance Services Office, Inc. (ISO) commercial general liability (CGL) insurance policy applies to intentional acts or to deliberate harm or to bodily injury or property damage that is expected are often threshold questions as to whether coverage exists. There is no "right" answer for all situations. Certain jurisdictions interpret the same words differently. Moreover, a slight change of facts may completely change a court's view as to the application of coverage.

Occurrence
The Coverage A Insuring Agreement of the CGL has, for quite some time, required that any bodily injury or property damage be caused by an "occurrence." While a great deal of caselaw exists on what constitutes an "occurrence," most jurisdictions require some degree of fortuity. Despite sports broadcasters' continual butchering of this term, most insurance professionals know fortuity is generally defined as accidental. Black's Law Dictionary (8th edition) states:

Fortuitous—Occurring by chance. A fortuitous event may be highly unfortunate. Literally, the term is neutral, despite its common misuse as a synonym for fortunate.

However, the above does not address a very fundamental question. What is it that must be fortuitous? Does the act itself need to be unintentional, or does the result of the act—the injury or damage—need to be unintentional?

On one end of the spectrum is a Utah case, Fire Ins. Exch. v. Rosenberg, 930 P.2d 632 (Utah App. 1997), in which the court declared that any injury caused by an intentional act cannot be an occurrence. In contrast, the New York Court of Appeals case of Agoado Realty Corp. v. United Int'l Ins. Co., 95 N.Y. 2d 141 (2000), quoting from the Miller v. Continental, 40 N.Y. 2d 675, 677 (1976), case stated:

As we have noted in Miller, true "accidents," taken literally, may be rare occurrences. Indeed, "in the strictest sense and dealing in the region of physical nature, there is no such thing as an accident." Thus, we concluded that, in deciding whether a loss is the result of an accident, it must be determined from the point of view of the insured, whether the loss was unexpected, unusual, or unforeseen.

The focus of this article is on Exclusion a.—Expected or Intended Injury and not the broader issues involved with an occurrence. This is not to suggest that there is not a profound connection between the two; there most certainly is. Further, it is difficult if not impossible to completely separate "occurrence" and Exclusion a. Nonetheless, the subject of this article is what is and what is not excluded by the CGL Exclusion a.

Exclusion a—Expected or Intended Injury

IRMI - March 2008

Construction Risk Management: Avoiding the Incompetent Worker

When a taxi shows up at the curb, you expect the operator to know the town, maneuver carefully, be sober, and have a driver's license. We trust him or her blindly and completely. This inherent trust (likely a behavior learned from well-meaning parents) speaks to a fundamental oversight in the construction world that hurts good people.

Work near a crane, climb a scaffold to inspect a detail, or tie-off to a fall protection anchorage—every construction worker puts inherent trust (life-trust) in someone he or she does not know each day. In Photo 1, a contractor was to erect perimeter protection to provide fall prevention for every person on the floors of a high-rise. The industry standard requires a minimum of at least two such cable clamps at a specific distance from each other. In this case, the minimum was not achieved.

Somewhere along the line, both the supervisor of the work, super of the project, and the installer failed to notice the incompetent installation. The result was what Dave McCollum, one the better safety philosophers in the United States, calls "an armed hazard." Again, this is just one small contributor for an incident, but it was put in-place by an incompetent person who failed the life-trust needed for any successful site.

The intent of this article is to help identify people from our project who should not be there, and highlight the harm the incompetent person does on our projects.

Pinch Points
Though numerous opportunities exist to find life-trust violators, there are five critical pinch points that will flush these folks out. It will take honest questions, close scrutiny of the individual, the ability to listen, and some people skills to identify and rid a project of these hazardous people.

Pinch Point #1: Call a Friend
Among safety professionals, there is an informal but critical link that allows candid conversations about people and firms to occur between competitors. Contractors across the United States identify weak and strong subcontractors. One of the best opportunities to get ahead of an incompetent is to "phone a friend." If a specific contractor has just finished up on a competitor's project, call your competitor and ask not only how the job went, but, more importantly, how their supervisor or foreman performed. Any team is only as strong as its leader, and knowing who your subcontractors "A" players are is critical to your own success.

One of the most critical questions to pose is who would your competitor not want on the project site. By specifically asking, you may learn that the project's crane operator made a tactical decision to move a tracked crane, boom-up, during the windiest day of the month with the outriggers in. This operator, a verified risk-taker and incompetent party, is not someone you would ever want on your project. So ask who he was!
 

IRMI - March 2008

NYSIF Cases Expose Certificate Fraud Involving Two Contractors

NYSIF CEO David P. Wehner announced two separate fraud cases involving Suffolk County contractors and forged certificates of insurance.

“Certificate scams perhaps receive the least notoriety for workers’ compensation fraud, but are a widespread problem,” CEO Wehner said. “Certificate fraud also possibly creates the most fraud-related liabilities by leaving victims vulnerable on three levels — general contractors and other certificate holders including homeowners, along with workers—all of whom have no workers’ compensation protections.”

In one case, a Manorville man, Gary Pastre, pleaded guilty to attempted fraudulent practices, a misdemeanor, in Suffolk County Court and was sentenced to a conditional discharge for one year on March 13. Mr. Pastre also paid restitution of $1,118 to NYSIF.

Suffolk County DA Thomas Spota’s Office arrested Mr. Pastre, 67, and charged him with violating section 114 of the Workers’ Compensation Law, a felony, for doing business as Electrical Ventures with a fraudulent certificate of insurance, leaving a NYSIF policyholder responsible for coverage.

According to investigators, Mr. Pastre previously had a workers’ compensation policy canceled by NYSIF for non-payment.

In the second case, Suffolk County authorities arrested Mark Ferri, 37, of East Setauket, on March 12, charging him with felony workers’ compensation fraud for allegedly operating his business, Dana Contracting, with a forged NYSIF certificate and a forged insurance Accord falsely indicating a valid liability policy with another insurer.

NYSIF - March 25, 2008
 

Suspension of Benefits For Incarcerated Claimants Convicted of Felonies

On March 13, 2007, Workers' Compensation Law (WCL) § 10 was amended to add subdivision 4 which provides that any person incarcerated upon a conviction of a felony is deemed ineligible for all compensation benefits, including causally related medical benefits, but may apply to the Board for benefits upon his/her release from custody.

Specifically, WCL § 10(4) states that:

Any person incarcerated upon a conviction of a felony shall be deemed ineligible for all benefits provided under this chapter. All those whose benefits have ceased by operation of this section may apply to the Board for benefits upon their release from custody pursuant to regulation of the Board.
This statutory change was effective March 13, 2007, and its purpose is to codify existing case law.

Carriers or employers required to suspend benefits based upon the incarceration of a claimant upon conviction of a felony should file Form C-8/8.6 (Notice that Payment of Compensation Has Been Stopped or Modified) with the Board along with proof of the claimant's incarceration upon conviction of a felony.

Claimants wishing to resume benefits following release from incarceration should file Form RFA-1 (Claimant's Request for Further Action) with the Board together with proof of release from incarceration. Any claimant needing assistance in applying for the resumption of benefits may contact the Advocate for Injured Workers at 1-800-580-6665.

NY Workers Compensation Board

The NYAIP is pleased to announce that E-pay for Commercial PASS applications is now available.

This option is only available to certified producers who have a registered E-pay account. If you have already registered an E-pay account, you do not need to do anything, however please be sure your account is still active.

Producers, who have not yet registered for E-pay and would like to do so, please go to our website at www.aipso.com/ny  select "For Producers" in the left column and review the current "Producer Guide for E-pay Process" for information and instructions on completing the registration forms.

NYAIP - March 24, 2008
 

SEASONAL DELIVERY BOY IS "TEMPORARY WORKER," NOT EMPLOYEE, AND IS COVERED UNDER CGL POLICY

Nick's Brick Oven Pizza, Inc. v Excelsior Ins. Co. et al. 2008 NY Slip Op 28103 Decided on March 20, 2008 Supreme Court, Dutchess County Sproat, J.

In this DJ action, defendants Excelsior Insurance Company, Peerless Insurance Company and Liberty Mutual Insurance Company moved for summary judgment dismissing all claims against the defendants and declaring no coverage is afforded for the underlying incident.

This DJ action arose out of defendant Excelsior Insurance Company's failure to defend or indemnify the plaintiff, its insured, in personal injury litigation commenced against the plaintiff. Excelsior Insurance Company issued Policy No. BOP 9170449, a commercial general liability policy, to plaintiff Nick's Brick Oven Pizza, Inc. for the period June 3, 2003 to June 3, 2004. (Defendant Excelsior Insurance Company allegedly is a subsidiary of defendant Peerless Insurance Company which is a member of the Liberty Mutual Insurance Group.)

On June 19, 2003 Travis B. Schmidt, who was in the employ of plaintiff Nick's Brick Oven Pizza, Inc., was operating his motor vehicle when he rear-ended a vehicle operated by Giuliana Mendola. At the time of the accident, Travis B. Schmidt was delivering a pizza to one of plaintiff's customers.

Rogak Report - March 23, 2008

As costs leap, health insurers put limits on advanced imaging

Insurance companies are taking a harder look at advanced medical scans like CT scans, citing spiraling costs and safety concerns. And some doctors agree there's emerging evidence that these scans are being over-prescribed.

"Costs are soaring in this area, quality concerns are mounting and safety concerns are mounting," said Karen Ignagni, chief executive officer of the trade group America's Health Insurance Plan.

Health insurers are requiring more pre-authorizations before patients can receive these scans, and setting other restrictions including mandating that the imaging equipment and medical staff operating it be credentialed in advance.

Insurers fear some patients are being exposed to dangerous radiation levels from having repeated CT and PET scans, which use many times the radiation of a regular chest X-ray. Sometimes scans are repeated because the first ones were not done properly, using outdated equipment or by poorly trained technicians.

Doctors, too, are concerned about patients getting excessive radiation exposure when they receive scans that aren't needed or are ordered as "defensive medicine" to protect against possible lawsuits. There also is concern that a small number of unscrupulous doctors without adequate expertise are referring patients for tests in their own offices or imaging facilities in which they have a financial interest.

"There is a definite concern that in-office imaging could lead to scanning for dollars," said Dr. Robert Hendel, a heart specialist who sits on American College of Cardiology panels focused on quality and appropriateness of imaging.

But doctor experts say the bigger problem with medical imaging tests is the insurance red tape needed to get them.

Newsday - March 23, 2008
 

FSA seeks responses on broker transparency

The United Kingdom's Financial Services Authority has released a discussion paper on broker commission disclosure and transparency in which it considers mandatory automatic disclosure of commissions as one of way to address its concerns.

Other options considered in the discussion paper are "more rigorous enforcement of existing rules" and an "enhanced regime to improve quality of disclosure of commission (on request by the customer), services and status," according to an FSA statement on Thursday.

The FSA's Dan Waters, director of retail policy and themes, said: "It is important that insurance buyers know what they're paying for when they use an intermediary. We remain concerned that for some buyers of commercial insurance this is not the case.”

"Our discussion paper offers some potential regulatory solutions, but the door also remains open for an industry-led response," he said.

Among draft rules suggested in the paper, the FSA says that a rule to require all U.K. intermediaries to inform commercial buyers automatically, of all commission paid on their business throughout the chain.

Business Insurance - March 20, 2008

Court: Taverns liable for drivers who drank elsewhere

Bartenders can be responsible for drunken drivers who visited their establishment, but did not have any alcohol there, a state appellate court ruled Thursday, in a decision that lawyers said expands the duties of tavern operators.

In a unanimous decision, the three-judge panel found that the estate of a man killed when his drunk friend drove off the Garden State Parkway can sue the Cape May bar they visited before the accident.

The driver, Frederick Nesbitt III, was 19 at the time and wasn't served alcohol at the bar, but had been drinking beforehand with the friend, James A. Hamby, 21.

Both were rowdy before leaving the C View Inn the evening of Sept. 3, 2003, their friends testified, although not all agreed that both were drunk.

At the time, Hamby's license was suspended for a drunken driving conviction. He bought a 12-pack or 18-pack of beer, as well as a pint of rum, and the pair began drinking in Nesbitt's car, and later with friends, before getting to the C View Inn for their regular Wednesday "Wing Night" gathering.

A server recalled bringing the five-person group three or four pitchers of light beer, but said she knew Nesbitt from high school and that he was underage, so only brought him soda.

Newsday - March 20, 2008
 

Space insurers look to boost rates in 2008: Aon 

Space insurers are seeking premium increases of up to 30% after several large losses in 2007, according to a report by Aon Ltd. in London.

In 2007, Aon said the entrance of new capacity into the space insurance market saw prices fall for space insurance coverage.

But, according to Aon’s “Space Market Review 2007,” several large losses—including a potential $256 million claim for a helium leak and reduced lifetime for the RASCOM 1 satellite— have prompted insurers to reassess premium rating and income targets for 2008.

In total, claims for 2007 are estimated at about $835 million, Aon said.

"To keep rates competitive, operators will need to demonstrate their quality and reliability, while insurers will be placing extra emphasis on good track records and commitment to quality control,” Peter Elson, senior managing director of Aon Space, said in a statement

Business Insurance - March 20, 2008

Unified Response Is Sought For Flood Plan for the City

The potential reach of flooding in New York City in the event of category 1, 2, 3, and 4 hurricanes is illustrated in a rendering by the Lamont-Doherty Earth Observatory of Columbia University.


City officials are trying to cement a unified response plan to confront what some climate scientists say is an increased risk of flooding in parts of Manhattan.

Floods this week in Missouri, Arkansas, Indiana, Ohio, and Kentucky have resulted in at least 11 deaths. A number of local climatologists are predicting that New York City — with its nearly 600 miles of waterfront — faces similar risks, or worse.

A research scientist at the Lamont-Doherty Earth Observatory of Columbia University, Klaus Jacob, predicts that increasing sea levels and unpredictable weather patterns tied to global warming mean that hurricane-type storms in New York could increase to a frequency of one every decade.

"Precipitation and heat events will be felt more by the general population, but in the background is the giant elephant heading for the porcelain jar, and that is sea level rising," he said.

Over the next 80 years, sea levels around New York City could rise anywhere from 11.8 to 37.5 inches, according to calculations issued by the U.S. Global Change Research Program, a federal agency. The result could be flooding in low-lying neighborhoods and the repeated shutdowns of the metropolitan transportation system.
 

NY Sun - March 20, 2008

Sturdy Cars Make It Harder for Rescuers

 Capt. Clint Roberts makes his living cutting accident victims out of hideously mangled vehicles, but even he could hardly believe it when two people in a 2007 midsize car survived a head-on crash with a full-sized pickup last year.

The Ford Fusion's reinforced steel construction probably saved the lives of the 18-year-old driver and his 16-year-old passenger. But Roberts said it gave his Hillsborough County Fire Rescue crew fits as they tried to free them last November.

Because hydraulic cutters couldn't shear the roof posts, rescue workers had to turn to heavy-duty electric saws, replacing blade after blade as they dulled on the rugged material.

"It was just beating the snot out of the tools," adding minutes and delaying medical treatment, Roberts said.

There is no question that today's cars save lives by cocooning motorists in reinforced alloys, impact-absorbing crumple zones and as many as a dozen air bags.

Newsday - March 20, 2008

Insurer insolvency may put docs on hook for malpractice payout

Dozens of New Jersey doctors could soon be personally liable for settlement payouts now that state officials have declared insolvent what once was the state's largest malpractice insurance company.

The insurer, Medical Inter-Insurance Exchange, has been in bankruptcy for six years. A liquidation hearing was set for April 9 in Superior Court in Mercer County after the state Department of Banking and Insurance moved to sell off the remaining assets of the 31-year-old insurance business.

With the shutdown looming, about 400 malpractice cases _ 236 of them involving New Jersey doctors _ are still unresolved, although the doctors involved will have backup insurance of $300,000 from the New Jersey Property-Liability Insurance Guaranty Association. Regulators expect to settle about 100 of those cases, but nearly half likely will have payouts exceeding $300,000, Jaimie Gilmartin, an insurance department spokesman, told The Star-Ledger of Newark for Wednesday's editions.

Doctors would have to pay the difference, based on a 2006 Supreme Court ruling.

Newsday - March 19, 2008

INSURANCE DEPARTMENT PERSONNEL OFFERING CONSUMER ASSISTANCE AT SITE OF EAST SIDE CRANE COLLAPSE

Consumers affected by last Saturday’s crane collapse on Manhattan’s East Side can get onsite help with insurance issues from the New York State Insurance Department. Department personnel deployed at the site can help consumers file claims for damages caused by the incident.

Eighteen buildings and more than 250 dwelling units were affected by the crane’s collapse.

“Consumers who have suffered damages related to this incident can get immediate help from our consumer services professionals with any questions, claims or other insurance issues,” said New York Insurance Superintendent Eric Dinallo. “We are gratified to be able to work with the city’s Office of Emergency Management and other state and federal agencies to help ease the burden on those affected by this tragedy.”

Assistance will be provided at the Department’s Mobile Command Center, located in front of St. Peter’s Church at the corner of Lexington Avenue and 54th Street. The Center will be staffed daily until 9 p.m. It is expected to remain at the site through the weekend.

NY Insurance Department - March 19, 2008

CITY NOT LIABLE FOR SIDEWALK INJURY CAUSED BY TREE ROOTS LIFTING SLAB

Falco v. Jennings Hall Senior Citizen Housing Development Fund Inc., Index no. 4171/07 (Supreme Court, Kings Co.) (Miller, j)

In this personal injury action, plaintiff Adua Falco ("Falco") alleged in her Notice of Claim filed against The City of New York that on January 9, 2006, while walking on the sidewalk in front of 260 Powers Street in Brooklyn, that she tripped and fell due to a "cracked, broken, raised and uneven" sidewalk.

Falco sued the City as well as the other defendants, Jennings Hall Senior Citizen Housing Development Fund, Inc. (a.k.a. Jennings Hall Senior Citizen Housing Development Fund Corporation) ("Jennings Hall"), the owner and operators of the premises located at 260 Powers Street.

The City moved for summary judgment relying on §7-210 of the Administration Code of the City of New York, commonly referred to as the Sidewalk Law of 2003.
Section 7-210 provides in relevant part as follows:


b. Notwithstanding any other provision of law, the owner of real property abutting any sidewalk, including, but not limited to, the intersection quadrant for corner property, shall be liable for any injury to property or personal injury, including death, proximately caused by the failure of such owner to maintain such sidewalk in a reasonably safe condition. Failure to maintain such sidewalk in a reasonably safe condition shall include, but not be limited to, the negligent failure to remove snow, ice, dirt or other material from the sidewalk. This subdivision shall not apply to one-, two-or three-family residential real property that is (i) in whole or in part, owner occupied, and (ii) used exclusively for residential purposes. c. Notwithstanding any other provision of law, the city shall not be liable for any injury to property or personal injury, including death, proximately caused by the failure to maintain (other than sidewalks abutting one-, two-or three-family residential real property that is (i) in whole or in part, owner occupied, and (ii) used exclusively for residential purposes) in a reasonably safe condition. This subdivision shall not be construed to apply to the liability of the city as a property owner pursuant to subdivision b of this section.

Rogak Report - March 19, 2008

Hundreds of Cranes Loom Over Dense New York City, Pose Constant Risk

They are part of New York's skyline: hundreds of spindly construction cranes like the one that toppled over the weekend, pulverizing parts of a city block below and killing seven people. As the machines work furiously amid a supercharged building boom, experts say it's always a risk.

Operating cranes in a city of 8.2 million people where apartments and offices are stacked so closely and on top of one another is especially tricky.

"Because of the tightness of a construction site in New York City, there's always the problem of having less space, and also there's the problem that if anything does go wrong, there are a lot of people at risk,'' said Gene Corley, a structural engineer.

Six construction workers and a woman in town for St. Patrick's Day were killed Saturday when the crane broke away from an apartment tower under construction and toppled like a tree onto buildings as far as a block away. The last three bodies were found Monday.

The crane was being lengthened with a new section -- a process known as "jumping'' -- when it tumbled to the street. A 6-ton steel collar used to secure he crane to the building came loose, the buildings department said.

When the collar fell, it clanged into another collar on the ninth floor that acted as a major anchor, and without that support the counterweights at the top of the crane's tower pitched it over, the buildings department said.

Pieces of the crane hurled themselves forward as they crashed to the ground, coming to a rest a full block away. By the time it was over, a brownstone was pulverized, at least seven other buildings were damaged, and 24 people were injured.

Insurance Journal - March 19, 2008

The Affluent Underestimate Security Risk

Personal security should be a major concern for the affluent, but many underestimate their need for protection, explained an insurer that is providing its policyholders with free security consultations.

Warren, N.J.-based Chubb Group of Insurance Companies and security consultants Risk Control Strategies (RCS) sponsored an open house at RCS’ headquarters here in Manhattan yesterday.

The event was aimed at informing insurance brokers, risk managers and wealth managers about the security capabilities of RCS and the many crime risks their wealthier clients face.

“Some people are very concerned about their security, and others are not concerned at all,” said Paul Michael Viollis Sr., chief executive officer of RCS. “The concern is very polarized. Rarely do you find anyone in the middle.”

Realizing that the wealthy clients Chubb insures are exposed to risks not experienced by typical homeowners, the carrier associated itself with RCS three years ago to provide affluent and ultra-affluent clients with security oversight for their wealthy lifestyle.

“Some customers understand, like investment bankers and others in finance, the need for security and want to discus it,” explained Peter A. Flynn, vice president, personal lines manager for Chubb. “But many don’t realize the need and they need to be informed.”

National Underwriter - March 19, 2008

Umbrella Coverage for Preventing Your Ruin

HERE’S the nightmare: Your car skids. You crash into a Mercedes with a highly paid business executive at the wheel. He’s hurt so badly he cannot return to work. A jury awards him millions of dollars and you have to pay it.

You’re wiped out financially. The court takes your savings, goes after your home and, for decades, requires you to give up a part of your salary.

For some people such a nightmare could never happen. They have an extra insurance policy, known as umbrella or excess liability coverage, which takes care of their liability for the lawsuits and medical bills of the auto accident victim — or of the teenage guest who dives into the shallow end of the swimming pool or the deliveryman who trips on the front steps.

But many people with major assets either do not buy the extra coverage or do not buy enough. Some do not know about umbrella coverage, which also pays for lawyers and other legal expenses. Others have heard of it but do not understand it. Still others decide that they do not want to pay for it, even though the cost is usually a fraction of the price of a typical package of home and auto insurance.

“This is a neglected area,” said Mark Schussel, a spokesman for the Chubb Group of Insurance Companies, which caters to affluent home and auto owners. “Some people have some coverage. But they haven’t changed the amount in years. Some people have a $1 million figure in their heads, and it just doesn’t make sense anymore.”

Charlotte Edmonston has been an insurance agent for more than 30 years. She works with wealthy clients in Baton Rouge, La., and oversees agents in 29 cities nationwide for the personal insurance unit of Arthur J. Gallagher & Company, a big insurance broker with headquarters near Chicago.

Her first question for new customers is whether they have umbrella coverage. Most of them already do. But “90 percent of them are underinsured,” she said. “Usually they were sold too little from the get-go, and their assets have grown and they never revisited the issue.”

NY Times - March 18, 2008

NY Insurance Department - March 17, 2008

How to avoid being a target for E&O claims

There are two types of insurance agencies: those that have had E&O claims and those that are going to. Indeed, it's amazing that agencies don't have more claims than they do. When you consider the massive volume of transactions that occur in a typical agency over the course of a year, the opportunities for something to go wrong are almost limitless.

That doesn't mean an agency should dispense with precautions and let fate take its course. Conscientious use of the agency management system, coupled with diligent monitoring of procedures, can go a long way toward shielding an agency from E&O claims. In this article, I'll discuss ways to reduce your E&O exposure and present some real-life claims.

The playing field
E&O claims are on the rise. As of two years ago, the average claim exceeded $25,000. The good news is that the insurance industry is placing a greater emphasis on licensing and continuing education, which should enable us to better serve and educate our clients. Most agencies now require all employees who have direct client contact to be licensed. (Some even require the receptionist to be licensed.)

All things being equal, the better educated and trained your staff, the lower your E&O exposure. You should be prudent in how you promote your staff's credentials, however. Recently I asked an attorney who specializes in E&O claims what single piece of advice he would give an insurance agent. It was to refrain from using the terms "professional" or "expertise" on a Web site or business card. He said he sees more claims stemming from a client's heightened expectations of performance than from any other cause.

For many agencies, E&O coverage is their second-largest expense, after payroll. For several years, many agencies saw their E&O premium double or even triple. Fortunately, premiums appear to be leveling off. The typical agency E&O deductible is around $50,000 but can be substantially higher. Because of expensive premiums, large deductibles and increased claims, some agencies have begun charging producers who are substantially at fault in an E&O claim for a portion of the deductible.

Agent & Broker - March 2008
 

Will Dinallo stay as Spitzer goes?

New York Gov. Eliot Spitzer's sudden resignation is creating uncertainty among some industry observers about the tenure of highly regarded Insurance Superintendent Eric R. Dinallo, though most expect no immediate changes at the state agency.

Mr. Dinallo has no plans to resign, an insurance department spokesman said last week. "We have a good working relationship with (incoming governor) David Paterson, and would assume that he would support the kind of work the department is doing," the spokesman said.

Several regulatory experts and insurance trade group representatives agree that changes are unlikely in the short term.

Martin Minkowitz, a former general counsel for the New York Insurance Department now with Stroock & Stroock & Lavan L.L.P., noted that Mr. Paterson, expected to be sworn in today as Mr. Spitzer's replacement, will have more pressing problems, among them dealing with the state budget due April 1.

"I would think that nobody starts focusing right away on making significant changes (at the Insurance Department), especially if things are running so well," he said.

Mr. Dinallo "has started certain projects, and I think he will stay and see them to fruition," said Francine L. Semaya, a partner with Cozen O'Connor P.C.. in New York. "I suspect things are going to stay the same for awhile."

Nevertheless, some express doubts about the longer term, given Mr. Dinallo's longstanding ties to Mr. Spitzer and questions about whether Mr. Paterson's regulatory priorities match his predecessor's.

"It's too soon to tell what the impact will be," a spokeswoman for the American Insurance Assn. said, noting that the industry's biggest potential loss from Mr. Spitzer's troubles would be Mr. Dinallo's resignation. "That's what we're worried about."

Mr. Dinallo may stay on during a transition period, but may then leave to allow Mr. Paterson to make his own appointment, predicted a former regulator who asked not to be named.

Business Insurance - March 17, 2008

INSURED'S FAILURE TO PROVIDE REQUESTED INFORMATION SUPPORTS DISCLAIMER

The Paul Revere Life Insurance Co. v. Cahn, 06 Civ. 4866, (USDC-SDNY) (District Judge William H. Pauley)

(Note to readers: In this declaratory judgment action, plaintiff insurer disclaimed coverage on a disability policy because the insured repeatedly refused to disclose certain information.   I am leaving out the details of the case itself, because disability insurance is outside the scope of this newsletter, but the language from the court regarding an insured's duty to cooperate should be useful to everyone. -- LNR)

"Where an insured willfully fails to comply with the disclosure obligations of its insurance policy, an insurer may disclaim coverage for material breach of the policy. See Rosenthal v. Prudential Property & Casualty Co., 928 F.2d 493, 494-95 (2d Cir. 1991) (applying New York law); 232 B'way Corp. v. N.Y. Prop. Ins. Underwriting Ass'n., 206 A.D.2d 419, 421 (N.Y. App. Div. 1994). A pattern of unexplained non-cooperation by an insured can properly be deemed willful. Rosenthal, 928 F.2d at 494."

"While insurers cannot make unreasonable requests for proof of loss, they generally are entitled access to Facts "material to their rights, to enable them to decide upon their obligations, and to protect them against false claims." Harary v. Allstate Ins. Co., 988 F. Supp. 93, 102 (E.D.N.Y. 1997) (quoting Claflin v. Commonwealth Ins. Co., 110 U.S. 81, 94 (1884)); see also Hurley v. First Unum Life Ins. Co., 24 A.D.3d 509, 512 (N.Y. App. Div. 2005); De Santis v. Dryden Mut. Ins. Co., 241 A.D.2d 916, 917 (N.Y. App. Div. 1997)."

"It is clear that throughout much of this process Cahn failed to cooperate with Paul Revere as required by the terms of the Policy. The Policy requires Cahn to provide written "proof of loss" to Paul Revere within ninety days of each monthly period for which benefits are sought. Cahn's repeated failure - despite Paul Revere's many requests - to provide completed monthly Claimant's Supplemental Statements, Medical Authorizations and Attending Physician Statements, alone, evinces his lack of cooperation. See Rosenthal, 928 F.2d at 494 (affirming summary judgment for insurer where insured delayed his deposition for thirteen months); 232 B'way Corp. v. N.Y. Prop. Ins. Underwriting Ass'n., 206 A.D.2d 419, 421 (N.Y. App. Div. 1994) (insured's failure to cooperate as required under policies at issue precludes recovery).

Drop In Housing Materials Should Help Homeowner Insurers

An investment analyst said homeowner insurers should benefit from the drop in new home construction by lowering the cost for building replacement homes, but the economic slowdown could increase losses in other areas.

In an analyst’s note, Meyer Shields with Stifel Nicolaus said the economic slowdown in the housing market will lead to some increases in areas of loss, but home insurers are “more able and more willing to maintain underwriting profitability for the line of business than in the past.”

According to what he termed as rough analysis of trends affecting the housing market, prices for nonpetroleum construction products are in decline.

For instance, the drop in housing demand has led to the price of lumber falling 22 percent since July. The decline in the cost of materials is lowering construction costs. That, coupled with the drop in demand for housing, will probably drive costs down further, benefiting insurers replacement cost loss.

A weaker economy, he continued, could lead to an increase in crime and arson.

Crime would increase from more burglaries, but that, he said, would amount to a very small proportion of loss.

Arson may see an increase because of the rise in foreclosures as homeowners, desperate to remain out of foreclosure, take extreme measures to raise the money to pay off the mortgage.

National Underwriter - March 13, 2008
 

Comp insurers face declining rates: S&P

Workers compensation insurers are likely to face falling rates this year, according to an article published Thursday by New York-based Standard & Poor’s Corp.

The article—“Weakening Rates Could Squeeze U.S. Workers Comp Insurers Later This Year”—says rates have been declining, which is significantly reducing the margins of workers comp insurers. The declining prices have not led to weak insurer performance so far because of state reforms that have contained loss costs and led to better earnings.

“But such measures can only forestall the inevitable for so long, and the ratings on workers compensation insurers could face negative pressure in the latter part of 2008 and in 2009,” according to the report.

Business Insurance - March 13, 2008

Mercantile Trust Closed; 28 Group Trusts “Underfunded.”

 The majority of closed trusts are not in default. However, when an individual or group self-insured entity cannot pay, the self insurance community is liable for these obligations, through assessments. An earlier (Dec. 2007) report by the Workers’ Compensation Board deals primarily with individual self-insurers. However, its Appendix B contains information on “current defaults” of both individual and group self-insureds: “Beginning in fiscal year 2008, the self-insurer’s assessment will, without remedial action, increase significantly. … Altogether, the total additional costs from defaults will result in estimated additional costs in the tens of millions in the coming year alone. It is expected that bills will begin to be issued on behalf of the defaulted trusts in early 2008 …”

PIA Weekly Reporter - March 13, 2008

N.Y. Insurance Fraud Bureau Busts Up 17%

The New York Insurance Department reported today that there were 708 arrests in insurance fraud cases last year, up from 604 in 2006 for a 17 percent increase.

Insurance fraud schemes investigated by the department’s Frauds Bureau along with local authorities also led to court-ordered restitution of $20 million stemming from convictions against 147 people in 2007, the agency said.

The report noted that this year the bureau established a Major Case Unit to focus on the investigation of systemic insurance fraud involving organized conspiracies with unit investigators handling complex cases involving no-fault, commercial rate evasion, health care fraud and workers’ compensation premium fraud.

Steven Nachman, deputy superintendent for fraud and consumer services, said, “The Insurance Department intends to continue its aggressive efforts to crack down on insurance and health care-related fraud. These activities are illegal and hurt all honest New Yorkers by needlessly driving up the cost of health, auto, property and many other forms of insurance.”

The report also noted the arrest of 149 persons for workers’ compensation fraud, including 89 people arrested for fraudulently taking benefits while secretly working second jobs. New cases opened for investigation by the bureau totaled 1,072

National Underwriter - March 11, 2008

When Your clients ask why they need high Umbrella coverage -
$21M FOR GIRL OF TRAGIC CRASH DAD

A Queens jury awarded a 10-year-old girl more than $21 million after her father was killed in a fiery car crash caused by a doctor nearly five years ago.

Antionette Hawthorne-Stanton was barely 5 years old when her father, James Stanton, was killed in a car crash after being hit by minivan driven by a physician from Teaneck, NJ.

Stanton and his brother were both burned to death as flames engulfed the car.

"She was devastated. There was no more communication, no more hugs and kisses," said the girl's mother, Sheila Hawthorne. "She enjoyed being in his presence, and all that came to a screeching halt."

The Queens Supreme Court jury awarded Antionette $21.35 million - $10 million alone for pain and suffering - after finding Dr. Howard Antosofsky and the company from which he leased the minivan responsible for the crash.

NY Post - March 13, 2008

Selected Opinions of the Office of General Council

Office of General Council - March 2008

Insurers Pressed To Pay More For Prostheses

Big advances in technology have raised the costs of prosthetic limbs, and that has made them a target for cutbacks in health-care coverage.

Many private health plans cap prosthesis coverage at $2,500 or $5,000 a year, or pay for just one device per limb in a lifetime, sometimes even for a growing child. The most basic devices can cost between $3,000 and $15,000, while mechanically advanced or computer-assisted models can cost up to $40,000.

Now, amputees and prosthetic-device makers are pushing state legislatures around the country to pass laws that mandate prosthesis coverage. The goal is to force private health plans to offer coverage comparable to that provided by Medicare, which pays at least 80% of the cost of prostheses and allows regular replacement of artificial limbs. Health insurers oppose such mandates, saying they reduce consumer choice and drive up costs.

Prosthetic devices are among the biggest-ticket items affected by the growing effort of insurers and employers to curb rising health costs by asking patients to pay a bigger percentage of their medical bills. For people who need artificial limbs, the receding coverage can mean paying tens of thousands of dollars to fill the gap.

Sometimes, cuts in prosthetic coverage are tucked into a health plan's fine print, and employers and workers might not be aware of coverage limits. In plan benefit summaries, health insurers increasingly lump prostheses with durable medical equipment -- a catchall category that also includes crutches, wheelchairs and other less expensive items. So accepting a $2,500 cap on such equipment in exchange for a lower premium increase might seem like a reasonable deal, until the employer or employee realizes that the cap counts toward costly prosthetic limbs as well.

$$ Wall Street Journal - March 11, 2008

Nuff Said

"New York State Commission to Modernize the Regulation of Financial Services" - Web site implementation

On May 29, 2007, Governor Eliot Spitzer signed Executive Order No. 15, creating the New York State Commission to Modernize the Regulation of Financial Services. The Commission is charged with identifying ways that New York can modify its regulatory regime to retain and enhance its status as a world financial capital.

Underscoring the historic changes taking place around the world in technological advances and financial innovation, Governor Spitzer reiterated the need for the State’s regulatory regime to adjust and keep pace with global innovation. Accordingly, the Commission will review current financial services statutes, regulations and policies, and propose legislative and other necessary changes to promote competition and the growth of business, while protecting both consumers and honest businesses from unfair or unethical practices. See this link for the Governor's press release: http://www.ny.gov/governor/press/0529072.html

The Members of the Commission represent the insurance, banking and securities industries, and include government officials, business leaders and consumer groups. The Commission is charged with identifying ways in which regulatory powers can be integrated, rationalized and modified in order to promote economic innovation and protect the consumer.

 New York State Commission to Modernize the Regulation of Financial Services

Warren Buffett "Gracefully" Says Goodbye to White Mountains

Seven years after Warren Buffett's Berkshire Hathaway invested $300 million in White Mountains Insurance Group, it is selling its 16.3 percent stake in a $836 million deal.

In a news release this morning, White Mountains CEO Ray Barrette says:

""Warren Buffett and Berkshire Hathaway were key to the financing of our acquisition of CGU/OneBeacon in 2001, and all shareholders benefited handsomely from the relationship. White Mountains is now a larger, more diversified business, competing actively in many areas with Berkshire Hathaway. This is a graceful, value-enhancing way to go our separate ways."

Berkshire gets $751 million in cash and a White Mountains subsidiary containing Commercial Casualty Insurance Company and International American Group.

That works out to $485 per share of Bermuda-based White Mountains, which closed last week at $478.

Warren Buffett Watch - March 10, 2008
 

Spitzer redux: NY's insurance chief strikes a familiar chord

A hard-charging former prosecutor tries to set Wall Street right from his perch as a state official. His activist agenda brings populist praise, but also concerns he might overreach.

Eliot Spitzer as New York attorney general in 2002, right?

No, this time it's state Insurance Superintendent Eric Dinallo, a top aide who helped Spitzer take on Wall Street years ago. Now that Spitzer is governor, Dinallo has been knee deep in attempts to stabilize the bond insurance market before the trouble spread. The efforts culminated with this week's announcement of Ambac Financial Group Inc.'s sale of $1.5 billion in stock in a bid to safeguard its top-notch rating.

He may or may not be the "the most important and powerful man in the insurance business" as CNBC's "Mad Money" host (and old Spitzer chum) Jim Cramer claimed, but Dinallo has shown a willingness to take on big projects, and to throw the occasional elbow.

He just might be the most Spitzer-like of Spitzer's lieutenants.

"I don't think you can accomplish significant matters without taking some prudent risks," Dinallo said recently as he sat in his Albany office, a 17th-floor room that looks down on the state Capitol. "I just keep on saying to myself ... pressure is a privilege."

Newsday - March 10, 2008
 

Cuomo expands health insurer investigation

New York Attorney General Andrew Cuomo said Thursday he issued new subpoenas to Aetna Inc., Cigna Corp., UnitedHealth Group Inc., WellPoint Inc. and other health insurers in a broadening investigation of possible fraud costing consumers hundreds of millions of dollars.

Mr. Cuomo is also looking for documents and to subpoena testimony from the chief executives of Empire Blue Cross Blue Shield, Excellus, and HIP health insurers.

Mr. Cuomo says he believes the companies used UnitedHealth Group subsidiary Ingenix to set rates, which resulted in consumers being reimbursed unfair and unjustifiably low amounts. Low reimbursements mean higher out-of-pocket costs for consumers when they choose or need physicians outside their health plans.
There was no immediate comment from Aetna, Cigna, UnitedHealth Group, and WellPoint, or the other companies subpoenaed Thursday.

''I believe consumers have been defrauded,'' Mr. Cuomo said. ''I believe the companies have been allowed to do it nationwide. I believe there is a certain corporate arrogance to these companies.''

He said the insurers, which face less competition and record profits after a series of mergers, aren't fulfilling their commitment to pay fair reimbursements.

The new subpoenas are part of a case first announced in February. It relies on the state's powerful Martin Act, which provides criminal and civil enforcement powers for publicly traded companies. Mr. Cuomo is basing the other subpoenas on state consumer fraud laws.

Crains - March 6, 2008

Insurance Price Declines Continue Slowing

The downward spiral of insurance rates showed moderating signs last month with a 14 percent composite decrease, one point less than January, according to an insurance exchange report.

Dallas-based MarketScout said its figures, based on its insurance exchange transactions, shows the composite decrease continues to slow, moving from 16 percent in December to 15 percent in January and 14 percent for February.

“Premium reductions are strongest in the service contractor industry group,” said Richard Kerr, founder and chief executive officer of MarketScout, in a statement.

“General liability coverage for a service contractor with total premiums of $25,000 to $100,000 is the most price competitive segment of the U.S. [property-casualty] markets as of February 2008,” he related.

Mr. Kerr said, “Rate reductions are moderating in a select group of industries and coverages. In particular, oil and gas contractors are not seeing price reductions as dramatic as what they enjoyed in 2007.

“Also, many state mandated workers’ compensation rate reductions were implemented in 2007, so premium reductions should moderate in 2008 unless insurers begin to aggressively apply credits, thereby reducing the ultimate premium.”

By class of business, commercial property was down 17 percent, the largest decline of 13 classes listed. Business interruption and general liability were not far behind with a 16 percent decline. Workers’ comp, fiduciary and crime experienced the least decrease at 8 percent. Surety was close at 9 percent decrease. The remaining lines were down 12-to-15 percent.

National Underwriter - March 6, 2008

Reform boosts workers' comp - State board sees more compliance from use of stop-work orders

Comedian and Minnesota Senate candidate Al Franken isn't the only one to feel the sting of a crackdown by the New York Workers' Compensation Board.

So have Paul's Cleaners in Albany and the Ocean Blue Fish Fry in Clifton Park.

While Franken faces a legal judgment to pay about $25,000 in fines for failing to carry workers' compensation insurance for a business he had in New York City, state authorities since last summer have also moved to temporarily shut down businesses like Paul's and Ocean Blue for the same reason.

Both received stop-work orders from the Workers' Compensation Board, which can shutter businesses that lack coverage.

A person who answered the phone at Paul's declined to comment. A woman at Ocean Blue said only the owner could comment, but that the owner was in the hospital. Both reopened after a day, when they agreed to acquire insurance and pay associated fines, said board spokesman Brian Keegan.

The ability to issue stop-work orders stemmed from last year's reform of New York's workers' compensation laws, Keegan noted.

"We want compliance," he said. "We want people to carry coverage."

Judgments, such as that against Alan Franken Inc., have been the usual way of going after nonpayers. Last year, 17,884 such judgments were issued, Keegan said.

By contrast, 63 stop-work orders have been issued since last summer. Most lasted just a day or two, after which the owners typically obtained coverage.

The Franken fine was actually levied in August 2006 for failure to carry the insurance from June 2002 to March 2005.

TimesUnion - March 6, 2008

Homeowners to get more info about (lack of) flood coverage

New York homeowners homeowners will get a letter annually that that standard insurance policies don’t cover flood damage, mud slides and other related events, under a bill signed Tuesday by Gov. Eliot Spitzer.
The bill was sponsored by two Broome County lawmakers, Republican Sen. Tom Libous and Democratic Assemblywoman Donna Lupardo. Their area was devastated by floods in June and July of 2006.

Under the measure, homeowners will also will get information on how to get coverage for these risks, provided by the National Flood Insurance Program.

“An annual notice will give our members’ clients a repeated opportunity to consider the risks posed to their property by flooding,” said Martin Koles, president of the state Professional Insurance Agents association.

Albany Watch - March 5, 2008

Cyber risk may trigger D&O lawsuits: Aon

Cyber risks could be the next big trigger for lawsuits against company directors according to London-based brokerage Aon Ltd.

At its Cyber Risk & Data Management Seminar, held Wednesday in London, Aon warned that directors could be held responsible for loss to companies and their shareholders if they fail in their duty of care by not taking preventative measures against risks such as phishing, improper data manipulation or data loss.

The threat to directors is universal across all sectors, Aon said in a statement, as any company that utilizes technology as a platform or for business support is exposed. But in particular, financial institutions need to be very concerned due to the dependence on the confidentiality of their data and exposures that relate to online banking, the company added.

“We are warning directors that they could find themselves being sued by employees or shareholders for not taking appropriate measures to prevent hacking, for example, or failing to provide back up for lost data,” commented Aon’s technical director, Tom Sheffield, in a statement.

Business Insurance - March 6, 2008

House Approves Bill on Mental Health Parity

After more than a decade of struggle, the House on Wednesday passed a bill requiring most group health plans to provide more generous coverage for treatment of mental illnesses, comparable to what they provide for physical illnesses.

The vote was 268 to 148, with 47 Republicans joining 221 Democrats in support of the measure.

The Senate has passed a similar bill requiring equivalence, or parity, in coverage of mental and physical ailments. Federal law now allows insurers to discriminate, and most do so, by setting higher co-payments or stricter limits on mental health benefits.

“Illness of the brain must be treated just like illness anywhere else in the body,” said Speaker Nancy Pelosi, Democrat of California. Supporters of the House bill, including consumer groups and the American Psychiatric Association, said it would be a boon to many of the 35 million Americans who experience disabling symptoms of mental disorders each year.

Insurers and employers supported the Senate bill. Many opposed the House version, saying it would drive up costs.

President Bush endorsed the principle of mental health parity in 2002. But on Wednesday, the White House opposed the House bill, saying it “would effectively mandate coverage of a broad range of diseases.”

Both bills would outlaw health insurance practices that set lower limits on treatment or higher co-payments for mental health services than for other medical care.

New York Times - March 6, 2008

Bias complaints increased in 2007: EEOC

The U.S. Equal Employment Opportunity Commissions received the highest volume of discrimination charge filings in five years in 2007, the agency reported Wednesday.

The federal agency received 82,792 private sector discrimination charges in 2007, compared with 75,768 in 2006. The 9% increase marks the largest annual increase since 1993.

Allegations of discrimination based on race, retaliation and gender remain the most frequently filed charges, according to the Washington-based EEOC’s fiscal year 2007 statistics. There were 30,510 race discrimination charges filed in 2007, 12% more than in 2006.

The number of retaliation charges surpassed gender-based charges in 2007, the EEOC said. The number of retaliation charges increased 18% in 2007 to 26,663, while gender-based discrimination charges grew 7% to 24,826. The remaining charges were based on age, disability, national origin and religion.

“Corporate America needs to do a better job of proactively preventing discrimination and addressing complaints promptly and effectively,” EEOC Chair Naomi C. Earp said in a statement.


Business Insurance - March 5, 2008
 

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