INSURANCE NEWS                                                                                        April, 2008

Lead poison boy gets a 12M payout

The mother of a Bronx toddler who suffered severe brain damage from lead paint in the family's apartment was awarded $12.7 million Tuesday.

Court documents show that Evette Maldonado found out her son, Steven Lagoa, now 10, tested positive for high levels of lead in his blood after a routine visit to the doctor in 2001.

The boy was 27 months old when he was diagnosed.

Lawyer Alan Shapey, said his client is pleased with the verdict, but her son is still suffering the effects of the lead poisoning.

Shapey said Steven has severe attention deficit disorder and struggles with bouts of depression.

NY Daily News - April 30, 2008

Long-term care costs rise 18 percent in Lower Hudson Valley

As if Lower Hudson Valley residents didn't have enough to worry about with sharply higher prices for gasoline and food, new data show that costs associated with long-term care have also risen dramatically during the last five years.

The annual cost of long-term care rose to $129,570 in Westchester, Rockland and Putnam counties, the boroughs of New York City outside Manhattan and Nassau and Suffolk counties on Long Island, according to a study by Genworth Financial Inc.

The nationwide study found that the cost of such care, provided in nursing homes, assisted-living facilities and in the home, rose for the fifth consecutive year.

Faced with such statistics, many people opt to buy long-term-care insurance policies, which can help pay for expenses related to aging or rehabilitation.

About 21 percent of Americans have such policies, according to the Kaiser Family Foundation, a health-policy advocacy organization.

They include Margaret and Geoffrey Wiener, Larchmont residents who purchased long-term-care insurance in 1999.

Today, the plan pays about 60 percent of the $200 daily that Geriatric Care Consultants charges to provide 83-year-old Margaret Wiener with a live-in aide.

Journal News - April 30, 2008

'It's Not Me Driving Dangerously - It's Them'

Despite the fact that auto crashes are the top killer of U.S. teens, a recent survey by Erie Insurance and Lookin' Out, the company's teen driving awareness program, reveals that most teens consider themselves to be good drivers. But while most respondents (91 percent) believe they're driving safely, their other answers told a different story.

The survey, conducted in spring 2008 among 2,127 licensed drivers aged 16-19 at 16 Lookin' Out participant schools, revealed a number of risky behaviors.

-- Cell phone use among teens is high (76 percent regularly talk on a cell phone while driving). -- Text messaging while driving is common among teens (57 percent sometimes or often read or send text messages while driving). -- Most teens (93 percent) play loud music when they drive. -- Nearly half (48 percent) admit they're easily distracted when friends are passengers.

"These survey results also reveal a real discrepancy between how students perceive their own driving behaviors and how they judge others' habits behind the wheel," said Mark Dombrowski, Public Relations supervisor at Erie Insurance.

While 91 percent consider themselves good drivers, only about a third (34 percent) say their friends are good drivers. And nearly all (97 percent) of the respondents reported seeing other teens taking risks (speeding, not wearing seatbelts, etc.) while driving.

According to the National Safety Council, young drivers aged 15 to 20 are involved in fatal traffic crashes at more than twice the rate as the rest of the population. The Erie Insurance-created Lookin' Out program, which has 72 participating schools for the current school year, is unlike other teen driving programs because it's rooted in positive peer influence.

"Each activity is created by teenagers for their peers," added Dombrowski. "We believe that helping to make teenagers better drivers will make the roads safer for everyone."

InsuraneNewsNet - April 30, 2008
 

2008 HURRICANE SEASON PREDICTED TO BE WELL ABOVE AVERAGE. DO YOU HAVE A DISASTER PLAN?

Meteorologists predict that 2008 will be a very active hurricane season and warn that dangerous storms could threaten coastal communities from Texas to New England this summer and fall. According to the Insurance Information Institute (I.I.I.), now is the time to prepare for a hurricane or other disaster by reviewing your insurance coverage and creating a disaster plan.


Warm sea-surface temperatures combined with favorable winds should make this season “well above average,” said Colorado State University forecasters Dr. William Gray and Philip Klotzbach. They predict that there will be 15 storms in all, including eight hurricanes and four storms that could reach “major” status with Category 3 winds or higher.

“Those living near the coastline should plan for a hurricane by keeping their insurance up to date, and by having an evacuation plan,” said Jeanne Salvatore, senior vice president and consumer spokesperson for the I.I.I. “In the event of a disaster you may have just minutes to gather your family and important papers and get out of your house, possibly for good. With preparation and practice, you stand the best chance of getting out with what you and your family need, and ending up in a safe place.”

To prepare for a hurricane other disasters, the I.I.I. recommends the following six steps:

1. Review Your Insurance Coverage

Speak to your agent or company representative to make sure you have enough of the right kind of coverage.

You need enough insurance to rebuild your home and to replace all of your personal belongings. If you have made a major alteration or improvement to your home, or you have made significant purchases, notify your insurance agent so that the increased value is reflected in your policy.

Ask about flood insurance. Flood damage is not covered under standard home insurance policies. Insurance is available from the National Flood Insurance Program (NFIP) and can be purchased from the same agent or broker who provided your home or renters insurance. Additional information on flood insurance can be found at FloodSmart.gov. Excess flood insurance is also available from some private insurance companies should you need more coverage than the $250,000 for property and $100,000 on contents provided by the NFIP.

2. Arrange Your Evacuation Ahead of Time

InsuranceNewsNet - April 28, 2008

 

Selected Opinions of the Office of General Council

NY Insurance Department - April 30, 2008

HSA enrollment surges: Survey

Enrollment in health savings accounts linked to high-deductible health insurance plans continues to surge with 6.1 million people covered by HSAs as of Jan. 1, a 35% increase over Jan. 1, 2007, according to a survey released Wednesday.

HSA enrollment shot up across all markets, according to the America’s Health Insurance Plans survey, with the biggest percentage increase in the small employer market. Employers with 50 or fewer employees had 1.8 million people in HSAs as of Jan. 1, a roughly 70% increase over the prior year.

Enrollment also increased sharply in other markets. In the large employer market—employers with at least 51 employees—HSA enrollment increased to 2.8 million people, up about 35%, while enrollment in the individual market climbed to 1.5 million, also up about 35% increase.

Enrollment has been growing “at a very consistent and strong pace,” said AHIP President and Chief Executive Officer Karen Ignagni in Washington.

HSAs, authorized under a 2003 federal law, first became available on Jan. 1, 2004, and enrollment has been surging ever since. For example, earlier AHIP surveys found HSA enrollment of 1 million people in March 2005, 3.2 million as of Jan. 1, 2006, and 4.5 million as of Jan. 1, 2007.

AHIP said it believes the survey covers virtually all people with HSAs.

A key reason for the big enrollment gains is that premiums for HSA-linked high-deductible health insurance plans are much less than more traditional health insurance plans, where enrollee cost-sharing is much lower.

Business Insurance - April 30, 2008

 

A Drop In Prices For Agencies Is Forecast

The purchase value for an insurance agency or brokerage firm is expected to drop in 2008 as soft market pressures and the supply and demand dynamics shift to benefit buyers, an agency consulting firm said.

Cleveland-based Marsh, Berry & Company Inc. released a 2008 state of the industry report that predicts prices for the majority of agencies and brokerage firms will begin to stabilize. The insurance market will see fewer buyers combined with an increase in the number of acquisition candidates, the report said.

The supply of agencies will increase for several reasons, according to the report. Among the reasons are:

• There is not broad ownership within agencies and the average age of owners is in their mid-50s.
• Continued soft market conditions will hinder internal financial return expectations.
• There is an increased fear of capital gains increases with a new president.
• Agency values are falling.

National Underwriter - April 28, 2008

Thelma Goodrich

Thelma Goodrich, Past President of the CIBGNY from 1976-1978 and active participant on the Board of Directors passed away on April 18, 2008.   The funeral will be held Thursday May 1, 2008 at St Martins Church, 230 Lenox Avenue, Harlem, N.Y. at 12 Noon.  A charity has not yet been chosen for donations.

Occupation and education are valid factors in formulating auto insurance rates in New Jersey.

The state Banking and Insurance Department says companies can consider whether drivers with limited education or blue collar jobs pose a higher risk. The factors are used in at least 44 states.

The department says it would be illegal to deny coverage based on jobs and education.

In a 581-page report, the department finds no evidence that such factors discriminate against minorities.
 

Newsday - April 25, 2008

PROPERTY OWNER LIABLE FOR SCAFFOLD LAW CLAIM EVEN IF TENANT CONTRACTS FOR WORK WITHOUT OWNER'S KNOWLEDGE

Sanatass v. Consolidated Investing Co., Inc. 2008 NY Slip Op 03515 Decided on April 24, 2008 Court of Appeals Graffeo, J.

"On this appeal, we conclude that a property owner is liable for a violation of Labor Law § 240 (1) that proximately caused injury to a worker even though a tenant of the building contracted for the work without the owner's knowledge. We therefore reverse the order of the Appellate Division and grant plaintiff partial summary judgment."

"Defendant Consolidated Investing Company owned a commercial building located at 423 West 55th Street in Manhattan. C2 Media, LLC occupied the 11th floor of the building under a lease assignment from the original tenant, Chroma Copy International [FN1]. C2 Media agreed to abide by the terms of Chroma's lease, including a provision that the 'tenant shall make no changes in or to the demised premises of any nature without Owner's prior written consent.' In addition, a rider to the lease stated that 'all renovations, decorations, additions, installations, improvements and or alterations of any kind or nature in the Demised Premises . . . shall require the prior written consent of Landlord.' The lease also contained an indemnification clause in favor of Consolidated and obligated the tenant to obtain comprehensive liability insurance coverage naming Consolidated as an additional insured."

"In January 2000, plaintiff Christopher Sanatass, a mechanic employed by JM Haley Corporation, was directed to install a commercial air conditioning unit for C2 Media, which had hired JM Haley without notifying Consolidated. Upon arriving at the work site, plaintiff installed air conditioning ducts and drilled holes into the 10-foot-high ceiling to affix rods designed to hold the 1,500 to 2,500 pound commercial unit. When plaintiff and a coworker hoisted the air conditioning unit about seven feet off the ground, one of the manual material lifts failed, causing the unit to drop and knock plaintiff to the floor. Plaintiff sustained injuries when the unit nearly crushed him."

Rogak Report - April 25, 2008
 

NYC Department Of Buildings: New Procedures For General Contractors.

Effective April 1, 2008, the New York City Department of Buildings requires all general contractors conducting business with the department to submit or update insurance through the Licensing Unit

All general contractors must submit original worker’s compensation, disability and liability (when applicable) insurance certificates to the Licensing Unit by October 31, 2008. Please note you must submit ALL insurance certificates to be updated – partial updates will not be accepted. General contractors missing this deadline will not be granted initial or renewal permits. This requirement applies to all general contractors, including those who already have a tracking number with a borough office.

General Contractor Insurance Requirements

 

The Case For Insurance Consolidation

Liberty Mutual's smart purchase of Safeco could be a sign of broader consolidation on the way in the insurance industry.

On Wednesday, Boston-based Liberty Mutual announced it had agreed to acquire Safeco, a property and casualty insurance provider, for $68.25 per share, or $6.1 billion. The price represents a 50.9% premium over Tuesday's closing price, naturally sending Safeco's shares soaring 45.8%, or $20.71, to $65.94.

Safeco will diversify Liberty's business. Safeco, based in Seattle, which sells insurance to drivers, homeowners and small- to medium-sized businesses, primarily in the West; Liberty's client base is among large businesses, with a stronger presence in the East and some customers overseas. The combination will make Liberty the fifth-largest property and casualty insurer in the U.S. and the second-largest in the surety market.

"Liberty Mutual is smart because they're doing what Warren Buffett talks about: getting greedy when others are fearful," said Douglas Christopher, an insurance industry analyst at Crowell, Weedon.

Forbes - April 24, 2008

Liberty Mutual to Acquire Safeco Insurance in $6.2B Deal

Liberty Mutual Group has agreed to acquire all outstanding shares of common stock of Safeco Corp. for $68.25 per share in cash in a deal that will make Liberty Mutual the fifth largest U.S. property/casualty insurer and second largest surety writer

The proposed transaction, which is valued at approximately $6.2 billion, has been approved by the boards of directors of both companies. It is subject to approval by Safeco's shareholders as well as the customary regulatory approvals and conditions. The transaction is expected to close by the end of the third quarter of 2008. The transaction is not subject to financing contingencies.

Insurance Journal - April 23, 2008

INSURED'S 6-MONTH DELAY IN REPORTING INCIDENT RESULTS IN LATE NOTICE DISCLAIMER

All American Flooring Ltd. v. The Sirius America Ins. Co. et al., 2008 NY Slip Op 31102(U) (Supreme Court, New York County) (York, j)

Plaintiff moved for summary judgment in this action seeking a declaration that one or more of the defendants were contractually obligated to defend and indemnify the insured, All American Flooring, in the underlying action. Sirius Insurance Company and its claims adjuster UTC Risk Management, cross-moved for summary judgment in opposition to the motion. The main issue was whether plaintiff's delay in reporting an accident to its insurance carrier was based on a good-faith belief that it would not be liable to the injured party. For the reasons that follow, the Court denied plaintiff's motion and granted defendants' motion for summary judgment.

The underlying claim was brought by Isabel Rivera after she was allegedly injured as of result of the negligence of All American's employees who were hired to replace floor tiles in her apartment. Ms. Rivera claimed that on July 2, 2004 she was struck by a falling closet door, which the plaintiff's workers had removed during the course of their work. The next day the president of All American, Brian Murray, spoke with the building's superintendant, Senad Djokovic ("Sam"). Sam informed Murray that there had been an accident in Ms. Rivera's apartment and that she had been hurt, but she refused medical attention.

Following these events, Sam made a written report of the incident, and forwarded a copy to Murray a few weeks later. The report contained the following comments: "Resident in Apt 3E Isabel Rivera was hit by a closet door in the work area inside her apt, while All American Flooring Company was doing the repair on the floor. Pain in the left hand and the shoulder. Isabel Rivera refused offer by [Sam] to call the ambulance on a couple of occasions."

"While All American's policy on investigating this type of incident is unclear," held the Court, "Murray admits that, following his phone call with Sam, he did not make any effort to follow-up on Ms. Rivera's condition or to contact her. Murray made no additional inquiries regarding the accident and presumed from his contact with Sam that Ms. Rlvera had not been injured.""All American choose not to apprise defendants of any of the above events until January, 2005, when All American received written notification of Ms. Rivera's claim from her attorneys. At that time, All American forwarded the claim to its insurance broker, who forwarded it to UTC. After reviewing the claim, UTC disclaimed coverage due to late notice of the incident. The general liability policy issued by defendants required plaintiff to notify its carrier 'as soon as practicable of an `occurrence' or offense which may result in a claim.'"

"The phrase, 'as soon as practicable,' is common among insurance policies and has been interpreted to require notice 'within a reasonable time under all circumstances'. Further, timely notification is a condition precedent to coverage and non-compliance vitiates the policy, as a matter of law. The failure to satisfy this condition may be excused 'where the insured has a good-faith belief of non-liability, provided that belief is reasonable.'

Rogak Report - April 21, 2008

Soft Market Average Decline Increased To 13.5%

The average decline in commercial insurance rates for the quarter fell another 1.5 points to negative 13.5 percent, according to a survey by the Council of Insurance Agents & Brokers.

The quarterly survey found the soft market firmly entrenched as none of the 119 broker respondents reported an up-tick in rates for any size accounts.

For the first quarter of this year the average decline in rates for small accounts (commission and fees of less than $25,000) stood at 10 percent.

For midsize accounts (commission and fees between $25,000 and $100,000) the average decline in rates was 14.7 percent. Large accounts (commission and fees above $100,000) experienced the steepest decline at 15.7 percent.

The rates were larger than the fourth quarter average of negative 12 percent, where small account decline stood at negative 8.4 percent and both midsize and large accounts stood at negative 13.8 percent.

Among some of the lines highlighted by the Washington, D.C.-based association’s survey, commercial property showed the sharpest decline at 14.8 percent, a 1.8-point increase over last quarter’s 13 percent rate decrease.

Property was followed by general liability at negative 13.6 percent, a 0.6-point increase over last quarter. Umbrella fell another 2.4 points, going from negative 11.1 percent last quarter to negative 13.5 percent.

National Underwriter - April 22, 2008

 

New York: Car Repair Shops Can Rebate Deductibles

Allowing car collision repair facilities to pay all or part of a deductible to an insured does not constitute a rebate prohibited under New York law, lawyers for the state's insurance department have said.

The reasoning? Repair shops have no relationships with insurance carriers and are not licensees under the state's insurance laws; therefore, deductible payments aren't illegal.

The decision stems from a legal opinion issued by the department in response to an anonymous inquiry, and touches on an issue the department's lawyers previously brought up in an October 2007 legal bulletin. That bulletin came in response to questions from an employee of a law firm who had seen advertisements for a collision repair facility that claimed it would pay back all or part of a deductible to customers who got their cars repaired at the facility.

Advertisements for the unnamed repair facility called it the "Home of the Deductible Rebate" and said the repair shop "will actually pay a portion of your deductible."

Although the department said the rebate is not illegal, the practice of paying clients' deductibles could become a sticky one for repair shops.

That's because failure to inform an insurer of the accurate fee for the repair could in some case constitute insurance fraud, the department said.

Insurance Journal - April 22, 2008

 

State Farm Nonrenewing Some Jersey Shore Policies

A major insurer is telling some Jersey shore customers that their home insurance policies will not be renewed.

State Farm Insurance Company says it is trying to limit its exposure of catastrophic property loss. The company says it's dropping 2 percent of its customers over the next five years.

The plan was approved by the state Banking and Insurance Department.

Some property owners say that without State Farm, their only insurance option is the higher-priced Lloyd's of London.

Insurance experts say the risk-aversion for insurers started with the industry's huge losses due to Hurricane Katrina in 2005.

Insurance Journal - April 22, 2008

Processing of NYS Disability Benefits Insurance Policy Cancellations

To: Insurance Carriers Providing Benefits under the Disability Benefits Law

All carriers must comply with the requirements of Workers’ Compensation Law §226(5) when canceling a NYS Disability Benefits insurance policy. The law requires ten days notice to the employer and the Workers’ Compensation Board when cancellation is due to non-payment of premium and thirty days notice to both when cancellation is for any other reason. If carriers do not strictly adhere to these requirements, a workers’ compensation law judge may deem the policy active for any resulting lapse in coverage by the employer.

Existing Processing Procedure

It has been the practice of the Workers’ Compensation Board to reject and return cancellations to the carrier when timely filing notice has not been given to either the employer or the Board. The carrier was then required to resubmit the cancellation with new cancellation dates to meet the requirements of the law and to record the cancellation in the Board’s Insurance Compliance computer system.

New Processing Procedure

The Board requires all statutory NYS Disability Benefits proof of coverage be filed electronically. Since implementing the initiative for electronic filings, the Board has worked continuously to improve the efficiency and effectiveness of our Insurance Compliance System by progressing towards full automation of all disability benefits proof of coverage transactions for statutory coverage.

Effective April 25th, 2008, the Workers’ Compensation Board will no longer reject untimely cancellation transactions regardless of the time between the notice and date of cancellation. However insurance carriers are still required to comply with the timely filing notice requirements in Workers’ Compensation Law §226(5). Even though the Board will record the submitted cancellation date in its Insurance Compliance System, this will not preclude a finding by the Board or a judge in a disability benefit’s claim that the policy was improperly canceled because the timely filing requirements of §226(5) were not met. Assuming all other required information is properly submitted, carriers will continue to receive an electronic confirmation, via an acknowledgment file, indicating that the cancellation transaction was processed.

The receipt of an acknowledgment file does not represent a timely Proof of Coverage filing.

NY Workers Compensation Board

No Light At The End Of The Tunnel Seen By Brokers On Soft Market Prices

Producers looking for a light at the end of the tunnel in this soft, increasingly competitive commercial insurance pricing cycle see no sign of a turnaround this year—or even into early 2009 at this point, those agents and brokers queried by National Underwriter for their assessment of the state of the market agree.

“My sense is that this is early in the soft market, and we have not seen it fully develop,” according to Don Bowles, president of Dallas-based McQueary Henry Bowles Troy, an insurance brokerage firm that received an “Honorable Mention” in NU’s 2006 “Commercial Insurance Agency Of the Year” award program. “I still see a tremendous amount of capacity, strong balance sheets and adequate reserving.”

H. Wade Reece, chairman and chief executive officer of BB&T Insurance Services in Raleigh, N.C., said he believes there will be some moderation in rate decreases, “but short of a catastrophe, [the current market] will be with us for quite some time. I’m not calling this a soft market—it’s just the market.”

When asked what worries him about the market, Peter F. Garvey, president of New York-based Integro, cited “an underlying concern that there is something we are not anticipating—some bad news we are not expecting. There is no basis for that other than if you look at the financial services business, there have been some surprises there that have had an effect on some of the carriers. But there have not been any significant surprises of note in the insurance business yet, so you hope there won’t be.”

Competition is coming from several directions, noted Tom Coughlin, director of marketing for Willis North America. Not only are traditional U.S. insurers competing with one another, but also London and Bermuda carriers are coming more aggressively into the property-casualty arena here, heating up already stiff competition.

“It just seems that more and more foreign companies are establishing or enhancing operations in the United States,” said Mr. Coughlin.

National Underwriter - April 21, 2008

Copper bandits loot Brooklyn

There’s a new Gold Rush going on in Brooklyn — but the precious metal isn’t the same one that drove the ’49ers crazy.

It’s copper.

Thieves broke into at least five metal companies and construction sites in Greenpoint and Williamsburg last week — the latest in a wave of copper thefts throughout Brooklyn that is directly attributed to the once-cheap electrical conductor’s soaring prices on the international metals market.

Copper now costs $8,700 per metric ton, up from $3,000 a ton just three years ago.

Thefts of the penny-like metal dominated the police blotter in the 90th and 94th precincts this week:

• Thieves got more than $6,000 worth of copper — and $5,000 in cash — from a metal supply company on Vandervort Avenue on April 10 — thanks to some dastardly wiles, cool nerves and some chicken wings.

The crooks got into the shop, which is between Hewes Street and Maspeth Avenue, after the store closed at 7:30 pm and subdued a guard dog by feeding him the poultry, cops say.

Cops believe it’s an inside job, given the weight of the copper stolen.

• A crook stole $5,000 in copper piping from a Newton Street construction site on April 4. This crime was a bit less sophisticated, as the thief merely yanked copper piping from the inside walls on all five floors of the building, between Graham and Manhattan avenues.

The Brooklyn Paper - April 19, 2008

Processing of NYS Disability Benefits Insurance Policy Cancellations

All carriers must comply with the requirements of Workers’ Compensation Law §226(5) when canceling a NYS Disability Benefits insurance policy. The law requires ten days notice to the employer and the Workers’ Compensation Board when cancellation is due to non-payment of premium and thirty days notice to both when cancellation is for any other reason. If carriers do not strictly adhere to these requirements, a workers’ compensation law judge may deem the policy active for any resulting lapse in coverage by the employer.

Existing Processing Procedure
It has been the practice of the Workers’ Compensation Board to reject and return cancellations to the carrier when timely filing notice has not been given to either the employer or the Board. The carrier was then required to resubmit the cancellation with new cancellation dates to meet the requirements of the law and to record the cancellation in the Board’s Insurance Compliance computer system.
New Processing Procedure
The Board requires all statutory NYS Disability Benefits proof of coverage be filed electronically. Since implementing the initiative for electronic filings, the Board has worked continuously to improve the efficiency and effectiveness of our Insurance Compliance System by progressing towards full automation of all disability benefits proof of coverage transactions for statutory coverage.

Effective April 25th, 2008, the Workers’ Compensation Board will no longer reject untimely cancellation transactions regardless of the time between the notice and date of cancellation. However insurance carriers are still required to comply with the timely filing notice requirements in Workers’ Compensation Law §226(5). Even though the Board will record the submitted cancellation date in its Insurance Compliance System, this will not preclude a finding by the Board or a judge in a disability benefit’s claim that the policy was improperly canceled because the timely filing requirements of §226(5) were not met. Assuming all other required information is properly submitted, carriers will continue to receive an electronic confirmation, via an acknowledgment file, indicating that the cancellation transaction was processed.

NY Compensation Board - April 18, 2008

N.Y. Comp Board Acts To Pull TPA’s License For Misconduct

A third-party administrator for self-insured workers’ compensation groups is under investigation by the New York State Attorney General’s Office and faces possible license suspension for failing to pay injured workers awards and submitting false information, it was disclosed today.

Under regulatory fire is Poughkeepsie, N.Y.-based Compensation Risk Managers, a subsidiary of CRM Holdings, Ltd. in Bermuda. The parent firm said CRM has been hit with a subpoena from the AG’s office and is cooperating with authorities.

The New York State Workers’ Compensation Board in a letter to CRM dated Tuesday said it will hold a hearing to revoke the firm’s license on May 20 at WCB’s Albany office based on eight charges lodged by an investigatory panel.

WCB’s letter accused the TPA of:

• Repeated failure to make timely payments of awards and installments of compensation to injured workers, for which the firm was penalized up to 20 percent of the amounts involved and $300 for each late payment.

• Failure to file proper forms.
• Repeated dilatory conduct.
• Failure to list its client Health Quest when it renewed its TPA license.
• Failure to provide timely information to Health Quest.
• Routinely failing to set adequate reserves in connection with claims it administered for self-insured trusts.
• Failure to cooperate with the WCB auditor PricewaterhouseCoopers.
• Submitting false information to clients and the board in connection with 2005 financial statements issued by HITNY, a self-funded workers’ compensation trust CRM offered to New York health care facilities.

National Underwriter - April 17, 2008

2008 Workers' Compensation Rate Filings

STATUTORY REFERENCE: SECTIONS 2304 AND 2305 OF THE INSURANCE LAW

The purpose of this Circular Letter is to provide advice to insurers authorized to write workers' compensation insurance in New York ("insurers") about recent changes to the New York Insurance Law regarding workers' compensation rates and to provide guidance to rate service organizations ("RSOs") and insurers with respect to the new loss-cost approach for workers' compensation rates. This Circular Letter also provides instructional guidance regarding the 2008 procedures for filing and obtaining approval of rates for workers' compensation insurance, as mandated by Chapter 11 of the Laws of 2008.

In March 2007, the Legislature enacted Chapter 47 of the Laws of 2007, which reformed New York's workers' compensation system. Chapter 47 added a new Insurance Law § 308(g), requiring the Superintendent of Insurance (the "Superintendent") to issue a report addressing, among other issues, the rate-making process for workers' compensation insurance and the functioning of the New York Compensation Insurance Rating Board ("CIRB"), which is the only New York licensed workers' compensation RSO. The Superintendent's report recommended that New York move from its current "administered pricing" approach to a "loss costs" system.

In January 2008, the Legislature enacted Chapter 11 of the Laws of 2008, which implemented the Superintendent's recommendations, and brought New York's workers' compensation system into line with a majority ofthe states in the country.

Prior to the enactment of Chapter 11, CIRB, an unincorporated association consisting of insurers and the State Insurance Fund ("SIF"), was designated as the RSO to collect statistical and financial data from each of its insurer members and SIF, and to summarize the information and develop and file manual rates, rating plans, and other statistical information for workers' compensation insurance. Each year, CIRB submitted a rate filing to the Department and the Superintendent issued a decision concerning the rate proposed by CIRB. The CIRB rate filing or an amended rate filing was traditionally approved effective October 1 of the year in which it was filed, and was utilized by almost all workers' compensation insurers.

Chapter 11 of the Laws of 2008, effective January 31, 2008, established a new method for setting workers' compensation rates in New York. This legislation provides for a new, two-step process for establishing workers' compensation insurance rates.

First, the legislation added a new Insurance Law § 2304(g), which defines the term "loss costs" for workers' compensation insurance purposes as "that portion of a rate intended to represent the anticipated costs of claim payments and loss adjustment expenses associated with such claim payments, and may include one or more trend factors." The statutory definition specifies that "loss costs do not include provisions for insurer specific expenses (other than loss adjustment expenses), such as acquisition costs, overhead and taxes, or profit, but reflect industry-wide losses and directly related expenses." Insurance Law § 2305(e) requires the designated RSO to file "loss costs" with the Superintendent, instead of fully developed rates, on or before June 1, or on an earlier date as set by the Superintendent.

Second, in order to establish a proper rate, each insurer must separately file its loss cost multiplier ("LCM") with the Superintendent. Insurance Law § 2305(b) provides that the Superintendent shall define LCM by regulation, and the Superintendent will be doing that for future years, but the short time-frame to implement rates for 2008 precludes the promulgation of a non-emergency regulation on a timely basis. An LCM, as discussed below, reflects each insurer's individual expenses and underwriting skills.

NY Insurance Department - April 16, 2008

House panel passes 401(k) fee disclosure bill

Legislation mandating greater disclosure of fees charged to 401(k)-type retirement plans has passed the House Education and Labor Committee and is headed for a full House vote.

The 401(k) Fair Disclosure for Retirement Security Act also would require plan administrators to offer at least one low-cost, broad-based index fund to be shielded from fiduciary liability lawsuits over investment losses.

Specifically, the bill, which was introduced by Committee Chairman George Miller, D-Calif. and was approved late Wednesday by a vote of 25 to 19, would:

Require service providers and plan administrators to disclose, in the form of a dollar amount or as a percentage of assets, all fees charged on 401(k) plans broken down into four categories: administrative fees, investment management fees, transaction fees and other fees.

Require service providers to disclose financial relationships so that employers that sponsor 401(k) plans can make sure there are no conflicts of interest.

Require that plan participants be given basic information about the investment objectives and strategies of each option, risk levels, how the option is being managed and where they can obtain additional information regarding specific options.

Require plan administrators to provide a history of the returns generated by each option, net of fees and expenses, for the previous year, five years and 10 years, or since inception, if later.

Give the U.S. Department of Labor the authority to enforce the new disclosure rules and fine service providers that violate them.

Business Insurance - April 17, 2008
 

Martin Greenfield

Martin Greenfield, father of our past president Jeffrey Greenfield,  passed away Friday night in Florida. He was the founding father of NGL Insurance Group in Lynbrook, NY.  The funeral was held on Sunday. Shiva will be observed at 111 Cherry Valley Ave., Apt 520, Garden City, beginning at 1 p.m. each day. The building is located behind the Garden City Hotel and valet parking will be available.

Donations can be made to Temple B'Nai Sholom, 100 Hempstead Avenue, in Rockville Centre, NY.
 

Fatal crane accidents highlight need for comprehensive coverage

Recent crane accidents in New York and Miami highlight the importance of knowing the extent of coverage provided by builders risk policies for renovated or new construction projects, an industry expert says.

Construction projects have distinct elements that must be accounted for in determining the amount of coverage, including acquisition and renovation costs, said Jonathon Held, president of construction consulting firm J.S. Held Inc. in Roslyn Heights, N.Y.

Builders risk policies usually provide all-risk coverage valued at replacement cost and cover property intended to become a permanent part of the structure during renovation or construction, he said. Temporary structures and equipment used in the construction of the project, though, usually are excluded, Mr. Held said.

"This is obviously important because cranes now in the modern era seem to have a way of falling out of the sky, unfortunately," he told attendees at the Inland Marine Underwriters Assn. annual meeting held April 5-8 in Dallas.

Less than two weeks apart in March, cranes fell from high-rise construction projects in New York and Miami, killing nine and causing extensive damage.

For large projects, the parties covered by the policy usually include the owner or developer, contractor and construction manager, and lenders and subcontractors, but underwriters can restrict coverage to the owner or developer—usually the first named insured—in certain situations, he said.

Time element coverage, also known as soft costs coverage, responds to delays in the construction or renovation of the project caused by a covered cause of loss. Underwriters should limit soft cost coverage to the first named insured because, if they do not, other named or additional insureds can make claims for time element losses, he said. For example, a subcontractor could make a business interruption claim due to the delay.

Soft costs

Business Insurance - April 14, 2008
 

Co-Payments Soar for Drugs With High Prices

Health insurance companies are rapidly adopting a new pricing system for very expensive drugs, asking patients to pay hundreds and even thousands of dollars for prescriptions for medications that may save their lives or slow the progress of serious diseases.

With the new pricing system, insurers abandoned the traditional arrangement that has patients pay a fixed amount, like $10, $20 or $30 for a prescription, no matter what the drug’s actual cost. Instead, they are charging patients a percentage of the cost of certain high-priced drugs, usually 20 to 33 percent, which can amount to thousands of dollars a month.

The system means that the burden of expensive health care can now affect insured people, too.

No one knows how many patients are affected, but hundreds of drugs are priced this new way. They are used to treat diseases that may be fairly common, including multiple sclerosis, rheumatoid arthritis, hemophilia, hepatitis C and some cancers. There are no cheaper equivalents for these drugs, so patients are forced to pay the price or do without.

Insurers say the new system keeps everyone’s premiums down at a time when some of the most innovative and promising new treatments for conditions like cancer and rheumatoid arthritis and multiple sclerosis can cost $100,000 and more a year.

But the result is that patients may have to spend more for a drug than they pay for their mortgages, more, in some cases, than their monthly incomes.

The system, often called Tier 4, began in earnest with Medicare drug plans and spread rapidly. It is now incorporated into 86 percent of those plans. Some have even higher co-payments for certain drugs, a Tier 5.

Now Tier 4 is also showing up in insurance that people buy on their own or acquire through employers, said Dan Mendelson of Avalere Health, a research organization in Washington. It is the fastest-growing segment in private insurance, Mr. Mendelson said. Five years ago it was virtually nonexistent in private plans, he said. Now 10 percent of them have Tier 4 drug categories.

NY Times - April 14, 2008

5 Tips For Growing More LTC Insurance Business

As 78 million baby boomers prepare for retirement, media attention on long term care insurance has dramatically increased. For many advisors, this presents an ideal opportunity to grow their LTC insurance business and discuss with their clients the importance of this coverage in their comprehensive financial plan.

According to the 2007 MetLife Market Survey of Adult Day Services and Home Care Costs, the average national annual cost for a home health aide is $24,700. The Centers for Medicare and Medicaid Services expect the cost of care to increase three-fold in the next 20 years. LTC insurance can help to prepare for these often unplanned and costly services.

Financial advisors generally understand the protection afforded by LTC insurance. Yet many have felt in the past that LTC insurance was too complicated. They did not want to risk addressing it with their clients for fear of not being able to provide the most appropriate advice. However, certain carriers in the industry have alleviated these concerns by getting back to the basics and simplifying their product offerings.

With that hurdle out of the way, advisors can position themselves as a more valuable resource by presenting LTC insurance as an integral component of securing a successful retirement plan.

Here are 5 tips to keep in mind when approaching LTC insurance with your clients.

1. Expand your target market and reach out to younger boomers. A common belief about LTC insurance is that it is a product primarily for older adults. According to research from the National Alliance for Caregiving and the AARP, however, nearly 40% of adults who need long term care are between the ages of 18 and 64.

Reaching out to a broader age group can help build awareness about LTC insurance and offers clients a cost savings. If clients are in their 40s or 50s, there is a greater chance that they will be in good health and hence insurable. Premiums are also lower the earlier they purchase.

National Underwriter

P-C Agents Group Throws Barb At NAIFA

A top property-casualty insurance agents’ trade group is criticizing a decision by a large industry organization representing life insurance agents to recommend qualified support for legislation creating an optional federal charter for life insurers.

The verbal shot directed at the board of trustees of the National Association of Insurance and Financial Advisors (NAIFA) came today from Charles Symington, senior vice president, government affairs for the Independent Insurance Agents and Brokers of America.

“The NAIFA decision to move from neutrality to conditional support of optional federal regulation doesn’t come as a surprise to many in Washington D.C.; however, it is likely to be questioned by many life agents, particularly those agents who represent more than one insurance company,” said Mr. Symington.

He was commenting on the Friday NAIFA board decision to recommend that its members support an OFC. Many of those members cross-sell and offer property-casualty as well as life coverage. NAIFA is now the fourth largest life group to endorse OFC.

The IIABA and NAIFA have been working together on legislation that would recreate the National Association of Registered Agents and Brokers.

National Underwriter - April 14, 2008

Feds Try to Cut Costs of Hospital Errors

Federal health officials on Monday proposed adding dangerous blood clots in the leg and eight other conditions to the list of complications that Medicare won't pay to treat if they were acquired at the hospital.

Medicare set a new precedent last year by saying it would no longer pay hospitals for treating certain "never events" -- conditions that occur as a result of hospital error. For example, if a patient were given the wrong blood type, Medicare would not pay the hospital more for the subsequent care a patient required. Originally, eight conditions were covered under the new rules, which take effect Oct. 1.

The rules proposed Monday add nine conditions, including:

_Deep vein thrombosis, or a blood clot within the vascular system, which occurred in 140,010 cases for the fiscal year ending Sept. 30.

_Ventilator-associated pneumonia, which occurred in 30,867 cases.

_Bloodstream infections with the staph aureus bacteria, 27,737 cases.

_Legionnaire's disease, which occurred in 351 cases.

Medicare's policy often sets precedent for private insurers, and many of them have already begun to adopt their own never-event policies.

The government estimates the proposed rule will save Medicare an estimated $50 million annually during each of the next three years.

Newsday - April 14, 2008
 

9th Circuit strikes down Nev. countersignature law

A three-judge panel of the 9th U.S. Circuit Court of Appeals struck down Nevada’s countersignature law Thursday in a lawsuit brought against the state by the Council of Insurance Agents & Brokers.

The law required out-of-state insurance agents to get a resident agent to sign off on business written in Nevada, for which the resident agent received 5% of the premium involved. A federal judge initially overturned the statute nearly four years ago, but Nevada appealed. Nevada may appeal the appellate court’s ruling.

“We have challenged these countersignature laws across the country, and at every turn we have run into resistance from local agent groups who are trying to protect themselves from competition and have used every tool they could to try to stop us,” said CIAB President Ken Crerar in a statement. “This Nevada decision makes it clear there is no room for offense, protectionist barriers to competition in this country.”

Business Insurance April 11, 2008

Judge suing city for $1M after fall on wet courthouse floor

Justice Jack Battaglia 'has difficulty walking and is required to use a cane,' says claim against city.
It's the mother of all slip-and-fall cases.

A politically connected Brooklyn judge plans to file a $1 million lawsuit against the city after slipping on a just-mopped floor in his own courthouse, the Daily News has learned.

Supreme Court Justice Jack Battaglia - who hears civil cases and earns $136,000 a year - is even targeting the courthouse cleaning lady who wielded the mop, according to legal papers.

The judge fractured his knee in the Nov. 9, 2007, tumble outside room 452 and was forced to undergo surgery and physical therapy.

In his Jan. 31 notice of claim, Battaglia accuses the city of "negligently using a mop bucket and wringer" and "negligently using a mop and soapy water" to create a "dangerous and hazardous traplike condition."

"It's a bizarre irony that a judge who often makes settlements is himself now seeking compensation from the city," said Dick Dadey, who leads the government watchdog group Citizens Union.

"Everyone is entitled to equal justice, but I hope he's not using his intimate knowledge of the system to maximize his claim."

A courthouse insider took aim at Battaglia's decision to include the janitor responsible for the puddle - identified in court papers only as "Joanna Doe (an Employee of the Department of Citywide Administrative Services)."

"That's pretty petty," he said. "I don't think suing the janitor makes his lawsuit any stronger."

As a result of the claim, city lawyers have asked Battaglia, who routinely heard similar cases against the city, to remove himself from all cases involving the city, courthouse sources said.

NY Daily News - April 14, 2008

The Fatality Analysis Reporting System

The Fatality Analysis Reporting System (FARS) contains data on all vehicle crashes in the United States that occur on a public roadway and involve a fatality. This FARS Query System provides interactive public access to fatality data through this web interface.

FARS

Cooperation To Get Real-Time Efforts Up To Speed

Some fail to get the most out of agency management system capabilities

Ever since insurers started using computers to do business, independent agents have been asking for technology-enabled interfaces with carriers to allow for easier, faster and more efficient rating, administration and processing. In recent years, however, some carriers have been in the forefront of making their agencies’ wishes come true by enabling real-time transactions, only to find that many in the agency community have been slow to adopt the technology.

The battle for real-time capabilities (once referred to as SEMCI—single-entry, multiple-company interface) has been waged for more than 30 years, with agents often complaining of painfully slow progress on the part of carriers. But with many insurers on board, the question now is whether agents will make the effort to keep up.

Accordingly, National Underwriter asked several insurance executives what they would want agents to do to help achieve optimal agency-carrier interface.

STAY CURRENT

“Agents need to stay current on their agency management systems. They need to adopt all these new technologies we’ve been building,” according to Linda Dodson, assistant vice president and e-business manager for the Chubb Group of Insurance Companies in Warren, N.J.

Ms. Dodson said Chubb will be piloting a claims download function for agents by midyear, but many agents won’t be able to take advantage of the technology because they are not running the most current versions of their agency management systems.

“We do first notice of loss, and we have attachment capability, but again, agents can’t use it if they’re not current,” said Ms. Dodson, who noted that prior to joining Chubb, she had worked for an independent agency for 11 years.

National Underwriter - April 14, 2008

Louisiana Supreme Court Rules Flood Damage Exclusion Is Not Vague

The Louisiana Supreme Court handed the insurance industry a major victory last week with a ruling that there is nothing vague about a policy excluding “flood” damage—a decision that the defendant’s attorney said could save insurers between $20 billion and $30 billion.

In its decision concerning a commercial policy covering a small New Orleans apartment extensively damaged by Hurricane Katrina, the high court overturned a finding by the state’s 4th Circuit Court of Appeal that the policy was ambiguous because it used the term “flood.”

The Lafayette Insurance Company policy that insured the building stated it would not cover damage by, among other calamities, “flood, surface water, waves, tides, tidal waves, overflow of any body of water, or their spray, all whether driven by wind or not.”

According to testimony in the case, water rose four feet in the building owned by Joseph Sher after a levee broke.

The appeals court had issued a partial summary judgment for Mr. Sher, saying the policy language was ambiguous, and that because there were various causes of floods, the word “flood” itself was ambiguous.

However, the high court declared dismissively, “the entire English-speaking world recognizes that a flood is the overflow of a body of water causing a large amount of water to cover an area that is usually dry land.” If there were two or more interpretations of “flood,” the policy might be seen as ambiguous, but the appellate court did not state two interpretations, the Supreme Court said.

National Underwriter - April 14, 2008
 

Bill Would Let RRGs Offer Property Coverage

Legislation that would allow risk retention groups to provide property insurance is scheduled to be introduced next week in the House of Representatives.

Besides broadening the products that could be sold by these entities, the legislation will also impose stronger corporate governance standards, National Underwriter has learned.

It will also contain language clarifying that risk retention groups cannot access state guaranty funds that included non-risk-retention groups.

The legislation will be introduced by Rep. Dennis Moore, D-Kans., and Deborah Pryce, R-Ohio, both members of the House Financial Services Committee.

The legislation will be introduced in advance of a Wednesday hearing on financial services regulation scheduled to be held by the Capital Markets Subcommittee of the House Financial Services Committee.

A representative of the industry is expected to testify on the need for the legislation at the hearing, according to insurance lobbyists.

A draft of the legislation indicates that if enacted the bill will allow RRGs to provide property insurance only if they enhance existing safety-and-soundness standards.

These will include prohibiting excess exposure to individual risks, requiring risk-based capital standards, mandating new financial statement standards, and (where possible and nondiscriminatory), requiring participation in National Association of Insurance Commissioners solvency monitoring mechanisms.

National Underwriter - April 10, 2008

Business Insurance - April 10, 2008

Group Trust Assessments Due Today.

Today is the due date for assessments levied on New York state’s workers’ compensation group insurance trusts by the Workers’ Compensation Board under Section 50-5 of the workers’ compensation law. The April 7, 2008, PIANY Reporter summarized publicly available information on the dimension of the financial liabilities for trusts, which have defaulted on their obligations or may do so in the future. Fourteen trusts closing since early 2006 (including six in 2008) currently have a total annual claims cost of about $78 million. Of these, six are being administered by the WCB, meaning their claims costs, estimated at about $47 million annually, will impact self-insurers’ “50-5” assessments. Well over half of this figure is attributable to a single shuttered trust, Healthcare Industry Trust of New York.

Trusts File Suit To Stay Assessments.

Representatives for several group self-insured trusts went to the New York Supreme Court in Albany County this week, seeking to stay the enforcement of their 2008 “50-5” assessments and ultimately to void the WCB’s assessment action. Their petition seeks court review of the law under which the assessments were made and raises constitutional issues.

PIA Weekly Reporter - April 10, 2008

Comp Board Updates Out-of-State Rules

The Workers’ Compensation Board updated its Web site this week regarding coverage requirements for out-of-state employers working in the state. The change clarifies that every out-of-state employer doing any construction related activity in New York is required to carry a full, statutory New York State workers' compensation insurance policy. Rules on determining when incidental exposures require full coverage is still under discussion.

AAA Analysis Finds Teen Crashes Cost Society More Than $34 Billion Annually

A first-ever analysis from AAA finds that crashes involving teen drivers ages 15 to 17 cost American society more than $34 billion annually in medical expenses, lost work, property damage, quality of life loss, and other related costs in 2006.

"The impact of a teen crash extends beyond the emotional tragedies and physical injury at the crash scene, with costs that can extend to employers, families, the government, and society overall," said Robert L. Darbelnet, AAA president and CEO. "These economic figures provide one more reason for legislators to improve graduated driver licensing in their states - a proven measure governments can take to reduce the deadly toll of teen driver crashes."

Comprehensive graduated driver licensing systems ease teens into driving through a combination of mandatory practice and limited driving at night and with peer passengers. Comprehensive GDL systems have been shown to reduce fatal crashes involving teen drivers by an average of 38 percent. AAA is a leading advocate for teen driver safety issues and remains committed to encouraging states to improve upon their GDL systems.

Drivers ages 15 to 17 in 2006 were involved in about 974,000 crashes, injuring 406,427 people and killing 2,541, according to the analysis conducted by the Pacific Institute for Research and Evaluation for AAA,.

The $34.4 billion cost included $9.8 billion in cost from fatal crashes with an average cost of $3.841 million per fatality. Injury crashes averaged $50,512, with their large numbers producing a total cost of $20.5 billion - more than twice the cost of fatal crashes. Property damage crashes accounted for the remaining $4.1 billion.

NAMIC - April 9, 2008

Connecticut Supreme Court Allows State's Damages Suit against Marsh

Connecticut's Attorney General Richard Blumenthal can attempt to recover damages from Marsh & McLennan Inc. for harming the economy of the entire state, the state's Supreme Court ruled.

The ruling stems from a still-pending 2005 suit against Marsh that alleges the mega-brokerage rigged bids and colluded with insurers in a "pay to play" scheme in which it set prices for commercial insurance in the state.

Connecticut is one of only a handful of state's that allows regulators to seek damages for anti-competitive business practices that harm generally the economy of the state.

Blumenthal contends that Marsh's unfair business practices raised the prices of insurance for all consumers and harmed both policyholders and non-policyholders.

Insurance Journal - April 10, 2008

S&P Warns Soft Market Could Mean Downgrades for Commercial Insurers

The U.S. commercial lines property/casualty insurance "soft" pricing cycle will likely mean outlooks on some commercial lines insurers will be revised to negative in the second half of 2008, according to Standard & Poor's Ratings Services.

In a new article, which is titled "As U.S. Commercial Lines P/C Prices Fall Further, It's Time For Insurers To Sink Or Swim," Standard & Poor's says that if price declines continue at their current pace, resulting negative outlooks on individual commercial lines insurers in the second half of 2008 could in turn lead to a negative outlook for the commercial lines sector toward the end of the year.

A negative sector outlook signals that S&P expects downgrades to exceed upgrades in the following 12 months.

Primary commercial lines pricing has been steadily declining since 2005, but until recently, the decrease has been fairly modest, and it followed a run-up in rates that began in 2001, according to the rating agency. However, in the second half of 2007, the rate of decline accelerated, and this trend has continued into 2008.

The negative impact of declining prices--combined with increasing loss costs--is compressing economic margins, and this will increasingly show up in reported earnings, S&P says. The potential impact of falling rates on earnings in 2008 and, particularly, 2009 would be the main reason for revising the outlooks on individual companies and, ultimately, the commercial lines sector. How quickly this occurs will vary by insurer and depend on the market it serves, the accounts it writes, and its competitive position relative to other insurers in those business segments.

Prices in many lines have been dropping very quickly, with some long-tail casualty lines likely to produce underwriting losses in 2008. Other lines, though suffering price declines, still should produce results close to historical norms. The position of any given company will be determined by its target market, its distribution, and its ability to manage its risks.

Insurance Journal - April 9, 2008

Data Shows P-C Insurers’ Quarterly Net Down 36%

Property-casualty insurers’ 2007 fourth-quarter after-tax consolidated net income fell 36.2 percent to $12.5 billion, down from the $19.6 billion in 2006, three insurance organizations reported.

The industry’s net income for fourth-quarter 2007 consisted of $16 billion in pretax operating income and $0.8 billion in realized capital gains on investments, less $4.3 billion in federal and foreign income taxes.

Full-year 2007 after-tax net income dropped 5.8 percent to $61.9 billion from $65.8 billion in 2006, due to slippage in underwriting results.

The data was released by Insurance Services Office (ISO) in Jersey City, N.J., the Property Casualty Insurers Association of America (PCI) in Des Plaines Ill., and the Insurance Information Institute in New York.

Their report said the p-c sector’s overall profitability, as measured by its rate of return on average policyholders’ surplus for the year, dipped to 12.3 percent in 2007 from 14.4 percent in 2006.

Net gains on underwriting fell 38.9 percent to $19 billion in 2007, down from $31.1 billion the year before.

The combined ratio edged up to 95.6 in 2007, from 92.4 in 2006.

National Underwriter - April 9, 2009

Storm Count Could Stay Even Despite Global Warming

While hurricane intensity could likely increase as the Earth warms, the regions in which they form and possibly even the maximum number of storms per season could remain the same, a weather expert said here.

Robert Korty, assistant professor, department of atmospheric science at Texas A&M University, outlined for inland marine underwriters the conditions under which hurricanes form, and provided some insight into what could happen to hurricane activity as global warming conditions progress.

His comments were made during the Inland Marine Underwriters Association’s 75th Annual Conference.

While hurricanes tend to form over water that is around 80 degrees Fahrenheit, Mr. Korty said that 80 degrees is not a “magic number.”

Hurricanes in the Atlantic and identical tropical cyclones in other parts of the world have formed in their respective areas throughout history, during which time the Earth has gone through various heating and cooling cycles, he explained.

If there was something special about the number 80, Mr. Korty said, then hurricanes would begin to form in water that currently averages 77 degrees if the Earth warmed by an average of three degrees, yet that is not expected to happen.

Additionally, he said the number of tropical cyclones and hurricanes each year reaches between 90 and 100.

Scientists, Mr. Korty said, are unsure why exactly that is. “We don’t know why there are any tropical storms at all, or why there are not 1,000 or 10,000. It’s pretty close to 100 each year, and what controls that is something that we are working really hard to figure out.”

Storm intensity, though, Mr. Korty said, will likely increase as the Earth warms. But he noted that certain factors regarding the Earth have and will prevent hurricanes from reaching speeds far in excess of what the maximum is today, which is about winds of 180-to-200 miles per hour.

National Underwriter - April 9, 2009

Active hurricane season predicted

This year’s Atlantic hurricane season will be more active than average, with eight hurricanes forming, forecasters at the Tropical Meteorological Project at Colorado State University predicted Wednesday.

That’s one more hurricane than the forecasting team predicted in its Dec. 7, 2007, projection. Of the eight hurricanes, four will grow to be intense hurricanes, according to the team. Once again, that is an increase of one intense hurricane over December’s prediction.

“Information obtained through March 2008 indicates that the 2008 Atlantic hurricane season will be much more active than the average 1950-2000 season,” the team’s report said. The team predicted that there is a 69% probability that at least one major hurricane—defined as a storm with sustained winds of at least 111 miles per hour—will make landfall somewhere on entire U.S. coastline this year, compared with an average 52% probability in the last century.

Business Insurance - April 9, 2008

DRIVER WITH STOP SIGN STOPS BUT FAILS TO YIELD, GETS SUMMARY JUDGMENT AGAINST HIM

Maliza v Puerto-Rican Transp. Corp. 2008 NY Slip Op 02975 Decided on April 1, 2008 Appellate Division, Second Department

The plaintiffs were passengers in a vehicle operated by the defendant Edison Moposita, which collided with a vehicle operated by the defendant Roberto Luna at the intersection of Knickerbocker Avenue and Jefferson Street in Brooklyn. A stop sign at the subject intersection controls traffic traveling on Jefferson Street, but no stop sign controls traffic traveling on Knickerbocker Avenue. At their depositions, the plaintiffs testified that Moposita brought his vehicle to a complete stop at the stop sign on Jefferson Street before proceeding into the intersection, where his vehicle was struck by Luna's vehicle. Luna subsequently moved for summary judgment, contending that Moposita's negligence was the sole proximate cause of the accident because Moposita came through the stop sign at a high rate of speed and failed to yield the right of way. The Supreme Court, Kings County, denied the motion, finding, inter alia, that there was an issue of fact as to whether Moposita stopped at the stop sign prior to entering the intersection. The Appellate Division reversed.

"A driver who fails to yield the right-of-way after stopping at a stop sign controlling traffic is in violation of Vehicle and Traffic Law § 1142(a) and is negligent as a matter of law

Rogak Report - April 9, 2008

House panel passes combustible dust bill

The House Education and Labor Committee gave its approval Wednesday to a bill that would require federal safety authorities to set rules for regulating combustible dust in the workplace.

An amended version of the Combustible Dust Explosion and Fire Prevention Act passed on a voice vote after a Republican substitute failed. Among other things, the bill directs the Occupational Safety and Health Administration to issue interim rules on combustible dust within 90 days of the bill’s enactment. The rules would include measures to minimize hazards associated with combustible dust through improved housekeeping, engineering controls, worker training and a written combustible dust safety program.

The bill also directs OSHA to issue final rules regarding combustible dust within 18 months of enactment. The rules would be based on voluntary standards devised by the National Fire Protection Assn. These rules would include requirements for building design and explosion protection. The interim rules would remain in effect until the final rule was issued.

Business Insurance - April 9, 2008
 

Selected Opinions of the Office of General Council

NY Insurance Department

New Jersey passes paid family leave bill

New Jersey lawmakers Monday gave final approval to legislation entitling employees to take up to six weeks of paid leave per year to care for a newly born or adopted child or a seriously ill relative.

Under the legislation, which would go into effect next year, parents could take paid leave any time during the first year after a child’s birth or adoption. Employees also could take leave to care for an ill relative receiving in-patient care in a health care facility or one under continuing supervision of a health care provider.

Employees taking leave would receive up to two-thirds of their salary, to a maximum of $524 a week. Lawmakers expect employees, on average, to collect weekly benefits of $415.

The program would be funded entirely through employee payroll deductions, the size of which would be based on salary, with a maximum annual contribution of $33 per employee per year.

Once Gov. Jon Corzine signs the bill, New Jersey will become the third state with a paid family leave law

Business Insurance - April 8, 2008

Treasury Dept. Backs Federal Charters, But Expects ‘Difficult’ Debate Ahead

Industry remains split; state oversight supporters vow stiff resistance

The Bush administration may have rocked the insurance world last week by including optional federal charters for insurance companies, agents and brokers in its proposed overhaul of financial services regulation, but getting its sweeping reform package through Congress will be “difficult,” the blueprint’s architect says.

Indeed, the Treasury Department report detailing the administration’s call for an historic regulatory reorganization conceded that a “difficult and ongoing” debate lies ahead to secure congressional approval.

Insurance industry reaction was split along the usual fault lines, depending on whether a particular association’s membership supports or opposes optional federal charters.

But the Treasury’s position could not be more clear and definitive. “While a state-based regulatory system for insurance may have been appropriate over some portion of U.S. history, changes in the insurance marketplace have increasingly put strains on the system,” the report said.

“Much like other financial services, over time the business of providing insurance has moved to a more national focus even within the state-based regulatory structure,” Treasury added. “The inherent nature of a state-based regulatory system makes the process of developing national products cumbersome and more costly, directly impacting the competitiveness of U.S. insurers.”

Under the solution proposed by the Treasury, an OFC structure should provide for a system of federal chartering, licensing, regulation and supervision for insurers, reinsurers, and insurance agents and brokers. Such a plan “would also provide that the current state-based regulation of insurance would continue for those not electing to be regulated at the national level.”

States would not have jurisdiction over those electing to be federally regulated, the Treasury noted.

National Underwriter - April 8, 2008

WHEN SLIP AND FALL VICTIM IS TAKEN AWAY BY AMBULANCE, INSURED CANNOT HAVE REASONABLE BELIEF THAT NO CLAIM WILL OCCUR

Tower Ins. Co. of N.Y. v. Lin Hsin Long Co. 2008 NY Slip Op 03057 Decided on April 3, 2008 Appellate Division, First Department

In this declaratory judgment action, the Supreme Court, New York County (Judith J. Gische, J.), denied plaintiff-insurer's motion for summary judgment to declare that it is not obligated to defend or indemnify defendant Lin Hsin Long Co., t/a Hunan Ritz Restaurant (the insured), in an action commenced against it by defendant Charlotte Theodoratos. The Appellate Division reversed and summary judgment awarded to plaintiff declaring that it was not obligated to defend or indemnify the insured.
"Plaintiff issued a commercial general liability policy to the insured, a restaurant, that was to provide coverage for the insured's premises from February 3, 2004 through February 3, 2005. The policy contained a provision requiring the insured, "as soon as practicable," to provide notice to plaintiff of an 'occurrence' that may result in a claim."

"On January 29, 2005, Theodoratos slipped and fell near the women's restroom on the lower level of the insured's premises. Theodoratos was removed from the premises on a stretcher and transported by ambulance to a hospital. Employees of the insured were present when the accident occurred, were aware of the accident and offered assistance to Theodoratos. The manager of the insured, while not present when the accident occurred, was informed of the accident the day it occurred by other employees of the insured. Based on the information imparted to him by the employees, the manager has asserted in this litigation that he believed that the accident was 'caused by [Theodoratos'] own actions,' that no claim would be asserted against the insured and that 'no further action' was required."

"Approximately two and a half weeks after the accident, Theodoratos retained counsel to represent her in connection with the accident. Shortly after being retained, counsel requested the name and address of the licensee of the premises where the accident occurred from both the Westchester County Department of Health and the State Liquor Authority (SLA), and a copy of the police report regarding the accident generated by the New Rochelle Police Department. By a letter dated March 3, 2005, the SLA provided counsel with the name and address of the insured."

Rogak Report - April 8, 2008

The Worst Places To Get Sued In America

By the time most law students have finished the first year of law school, they've had the responses "yes" and "no" surgically excised from their thoughts and replaced by the signature American legalism--"it depends."

And it does. Any attorney worth his salt knows a client's fate frequently depends on the location of the courthouse deciding it. Horse thieves never fared well in frontier courts, but outlaws like Billy the Kid did. Even now, the worst place for an oil company to get sued is not necessarily the worst place for an investment bank. Still, defense attorneys largely agree that a few locales are worst-case-scenario venues.

"There is a high degree of stability in what most people think are the most problematic places to get sued," said Walter Olson, a senior fellow at the Manhattan Institute and author of The Rule of Lawyers. "If you put pins on a map for the top 50 most outrageous verdicts, bizarre run-away juries and so forth, you would find this belt around the Gulf Coast that runs from southern Texas across Mississippi, Louisiana, Alabama and Florida. These are also some of the places people consider the worst places to get sued."

In Pictures: The Worst Places To Get Sued In America

The complicated part, Olson adds, is that the map looks different for specific types of lawsuits. Defendants in medical malpractice lawsuits might have the cards stacked against them in a court that tends to favor defendants in mass-tort suits. So Forbes.com asked the American Tort Reform Association (ATRA), which surveys hundreds of defense attorneys and corporate executives every year for its report on litigation abuse on "Judicial Hellholes," to list the places identified by the largest number of survey respondents as the worst possible places to be a defendant in particular types of lawsuits. The list they produced has a surprise or two for nearly everyone.

Hit with a personal-injury lawsuit? Better hope it's not in Starr County, Texas. Class actions? Hopefully you won't find out why John Grisham sets so many legal thrillers in Mississippi. Construction suits? Building's not the only thing booming in Clark County, Nev. And journalists hoping to avoid libel suits may wish to avoid courts in Philadelphia, according to ATRA's report for Forbes.

Last summer, Arelia Margarita Taveras, a once-rising legal star who represented victims of the Sept. 11 terrorist attacks and earned as much as $500,000 annually, was disbarred after she admitted to improperly using client funds to pay for her gambling addiction. In March, Taveras sued several casinos in Atlantic City, N.J., and Las Vegas for allowing her to gamble away nearly $1 million. Taveras had an embarrassment of riches as far as deciding where to file her lawsuit, according to ATRA.

Taveras sued in New Jersey, rather than Nevada, underlining an important difference in how defendants measure litigation risk in certain venues. In states like Mississippi, which respondents to ATRA's survey described as particularly hostile to class-action defendants, local business defendants often have a home-field advantage, whereas other states like New Jersey--home to many of the world's largest pharmaceutical companies, and highlighted as a bad place for them to get sued--treat in-state defendants as roughly as out-of-state defendants.

"There are at least two types of problematic local-lawsuit cultures, the ones where the lawsuits mostly target in-state defendants like doctors and local governments, and the ones where it's mostly out-of-state defendants," says Olson. "As far as I can see, the south takes the shrewd, rational approach on this. In the south, they take out-of-staters and shake them upside down until the coins roll out of their pockets, whereas [litigants in] states like New York are foolish enough to sue the people who will ultimately send it right back to you in the form of medical bills or taxes."

For example, so many doctors in Palm Beach County, Fla., got hit with lawsuits that by 2003, they began to flee the state to escape sky-high malpractice insurance costs. After the state legislature cracked down on the suits, the exodus slowed, but premiums remain astronomically high, especially for specialists like neurosurgeons. In early 2004, Palm Beach County had only four neurosurgeons covering 13 hospitals.

Not surprisingly, survey respondents listed the county as the worst-case-scenario venue for medical malpractice lawsuits.

Forbes - April 7, 2008
 

WSJ article on LTC insurance: "unbalanced"

I recently spent an inordinate amount of time helping the Wall Street Journal with what I thought was an update on what is happening with the Long Term Care Partnerships around the country ("States Draw Fire for Pitching Citizens on Private Long-Term Care Insurance," Wall St. Journal, Feb. 26, 2008.)

Instead, the article turned into another article on what's wrong with the LTC insurance industry. It really should have stuck with the original purpose, because there is a lot of new information that hasn't been published about the Partnerships.

The article is not balanced reporting, and that is so atypical for the WSJ. Here are some concrete examples of erroneous points made in this article:

Example #1: "Rising consumer complaints indicate that it is increasingly tough to collect on benefits."

The article cites three insurance companies with claims complaints. The reporter could have easily gone to the consumer complaint section entitled "Consumer Information Source" on the home page of the NAIC website (www.NAIC.org), looked up the number of LTC insurance complaints for companies that have sold LTC insurance for 20+ years and found a very small number of complaints. While companies having problems need to be cited and held accountable, how can the WSJ ignore all the fine companies that are doing a wonderful job?

Example #2: "Of all the insurance types on the market, long term care is among the most complex - and expensive - forms of coverage."

Says who? My husband and I are 54 years old and pay $9,000 a year for health insurance, much higher than our LTC insurance premium.

LIMRA International, Windsor, Conn., reports the average annual LTC premium is about $2,000, which will buy $150 day benefit for a married 50-year-old that will grow 5% compounded forever and pay three years of benefits. So someone could pay $60,000 in premium over 30 years and receive three years of benefits at age 80 of $690,398. Tell me another investment that will produce a tax-free benefit of this magnitude.

The real kicker is that the $2,000 annual premium is for a totally cash plan, which means the money can be used any way it is needed at claim time. The premium for a plan that reimburses actual costs for professional caregivers is only about 60% of that, or about $1,300, which creates an even more dramatic example.

Then for those who say they could just invest the premium, they could average a 6% annual return on the $2,000 a year investment for 30 years but would only earn $170,000 before taxes and investment fees. This compares to almost $700,000 in tax-free benefits, or one could earn $110,000 before taxes and investment fees if substituting the $1,300 annual premium for the reimbursement-type policy.

Example #3:

National Underwriter - April 7, 2008
 

$40M Assessments Irk New York Insurers

The New York Insurance Association is criticizing the state legislature's passage of the portion of the 2008 budget which hikes assessments on insurers by $40 million � a 20 percent increase over last year, the group said.

The agency budgets passed Friday by the legislature include a breakdown of appropriations and expenditures for the New York Department of Insurance, and those figures include a "$40 million back-door tax on the domestic insurance industry hidden in the budget," said NYIA president Ellen Melchionni

The assessments are on top of a mandatory 2 percent premium tax that insurers already pay to the State's General Fund, the group said.

"The growing burden of assessments and taxes are making the Empire State an increasingly unattractive place to do business in and threaten to drive insurers from the New York market," she said. The total assessments for insurers in 2008 will now be about $340.6 million, up from $300 million last year, she said.

Melchionni said one of the biggest areas of concern for insurers is that the insurance department allocates a significant portion of its budget to fund the programs of other state agencies which are not directly related to insurance, such as the Department of Health, the Department of State and the Department of Law.

The newly passed budget includes $26 million to aid localities without specifying what projects or programs are included.

"The Governor and the legislature treat the insurance industry as a pool of cash it can tap to fund programs that only have a tangential connection to insurance," Melchionni said.

Insurance Journal - April 7, 2008

SHOCKING RAP SHEET OF 'SCAM A DAY' HEALTH INSURER

A giant health-insurance company linked by Attorney General Andrew Cuomo to an alleged scheme to rip off millions of New Yorkers has been accused of numerous tactics to deny coverage for consumers and boost profits, The Post has learned.

Cuomo recently accused a data-collection company, Ingenix Inc., of a scheme to rig health-care cost data - helping major insurance companies slash reimbursement to health-care providers and force patients to pay more out of pocket, he charged.

But Ingenix's parent company, UnitedHealth Group Inc. - which reported $73 billion in revenues last year - has shortchanged New York hospitals, doctors and patients for years, getting away with only slaps on the wrist, critics charge.

"It's a scam a day," said David Rosen, CEO of MediSys Health Network, which includes Jamaica, Flushing and Brookdale hospitals. "Like shoplifters, they constantly find new ways to rip us off."

The MediSys hospitals last year filed a Racketeer Influenced and Corrupt Organizations (RICO) Act suit in Brooklyn Federal court against United and its New York subsidiaries - United Healthcare of New York and Oxford Health Insurance. Company officials call it a "contract dispute".

In 2006, then-Attorney General Eliot Spitzer found that United Healthcare's Empire Plan "erroneously" listed some doctors as in-network, which allows patients to make a small co-payment.

NY Post - April 6, 2008

Suffolk Contractor Pleads Guilty as Repeat Certificate Fraud Offender

A Suffolk contractor who was arrested once before for passing a fraudulent certificate of insurance has pleaded guilty in connection with another case involving certificate fraud, NYSIF CEO/Executive Director David P. Wehner announced.

Authorities said Michael McCartney, 50, of Franklin Square, NY, pled guilty in Suffolk County Court to attempted fraudulent practices on March 12. The case involved an arrest last September 27, in which Mr. McCartney was charged by Suffolk County District Attorney Thomas Spota with operating with a forged certificate of insurance as a felony.

In the case, Mr. McCartney, doing business as MJM Contracting, gave a fraudulent certificate to a Suffolk County homeowner and to the Town of Huntington, Long Island, to obtain a construction permit, which the town granted. The phony certificate, which was later found to be invalid, indicated he had workers’ compensation insurance although he did not, investigators said.

NYSIF - April 3, 2008
 

NYSIF Cases Expose Certificate Fraud Involving Two Contractor

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.

Certificates of insurance and insurance Accords assure recipients that the entity they are dealing with is appropriately insured before they do business with that entity. Expired and fraudulent certificates expose certificate holders to liability in the event of a workers’ compensation claim.

NYSIF

INTERVIEWS AFTER CRANE COLLAPSE FIND FEW RENTERS BUY TENANTS INSURANCE

Only two of 32 renters interviewed by the New York State Insurance Department following last month’s crane collapse on New York City’s East Side were protected by tenants insurance.

That low number is hardly surprising. Nationally, a 2006 survey by the Insurance Research Council found that only 43 percent of all renters were insured. In New York City, that percentage is believed to be significantly lower because of the high cost of living.

“Renters insurance is typically inexpensive and provides valuable protection when the contents of a renter’s apartment are damaged or stolen. This type of insurance may even protect a renter from liability when another person is injured while in the renter’s home,” said Insurance Superintendent Eric Dinallo.

Tenants insurance protects against losses caused by such events as fires, lightning strikes, windstorms or incidents of vandalism or theft. Even water damage from a building’s plumbing is usually covered. In some cases, the insurance will reimburse an insured individual for some of the added expenses incurred when a person is forced out of a rental property damaged by an event such as a fire.

Some renters may believe – mistakenly – that their personal property is covered by a building owner’s insurance. Others, like recent college graduates, may be unaware of tenants insurance and some simply decide not to buy it.

College students residing in off-campus housing are encouraged to purchase tenants insurance. College students residing on-campus and still considered a dependent are generally covered under their parent’s homeowners’ insurance policy. Parents should, however, review their homeowner’s policy to confirm that coverage exists for students living on-campus. Depending upon the location of the parents’ home, coverage may be limited and/or off-premises theft exclusions may need to be added back onto a parent’s homeowners policy.

Tenants insurance is relatively inexpensive, but premium rates can vary significantly based on the insurer, coverage limits, deductibles and the property’s location. Most policies place a cap on coverage for stolen or damaged property, so people considering tenants insurance should verify the limits of individual policies and buy higher limits, if needed. In some cases, such as insuring fine jewelry or valuable artwork, policyholders will often need either a rider or floater added to the insurance policy.

NY Insurance Department - April 2, 2008

Actuarial Consultants Identify Hurricanes as Top Insurance Risk for 2008

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Hurricanes pose the greatest 'act of nature' risk to the U.S. insurance industry for 2008, according to EMB, an actuarial consulting firm. With the hurricane season on the horizon, insurers must prepare for this heightened risk, EMB urges.

"We've seen the devastating effects of hurricanes – homes and other property completely destroyed. Insurance companies are still struggling to recover from Katrina," said Alice Gannon, senior consultant of EMB America. "The past two years have been quieter for insurers, but meteorological research indicates that we still experienced an uptick in North Atlantic hurricane activity. This is a trend that is likely to continue for several years, so insurers must prepare themselves to withstand losses in the event of another catastrophic landfall."

The threat of hurricanes has been at the top of the U.S. property and casualty insurance risk list since Hurricane Andrew devastated southern Florida in 1992, causing an estimated $26.5 billion in damages. Despite a drop in land-falling hurricanes in 2006 and 2007, both years experienced higher-than-average hurricane activity in the North Atlantic.

With the events surrounding Hurricane Katrina in 2005 and multiple land-falling hurricanes in 2004, U.S. insurers have experienced the implications of the increased frequency and severity of hurricanes nationwide. However, EMB cautions insurers not to be lulled into a false sense of security based on the relative calm of the past two years.

While hurricanes top the list of P&C insurance risk, other 'acts of nature,' including tornadoes, earthquakes, winter storms, fire and hail must also be accounted for when insurers assess their pricing strategies. The recent Atlanta tornado, which caused an estimated $250 million in damage and the 2007 California wildfires, which cost insurers over $1.5 billion, have made this clear.

Insurance Journal - April 2, 2008

Most Self-Insured Trusts Administered by CRM Are Terminated

The most recent New York State Workers’ Compensation Board Group Self-Insured Trusts Summary of Funding Status Report as of March 28 indicates five of the six trusts administered by Compensation Risk Managers, LLC of Poughkeepsie, have been terminated. The following is a list of the trusts involved and their termination date:

● New York State Cemeteries Trust - Terminated 3/31/08
● Real Estate Management Trust of NY - Terminated 1/31/08
● Trade Industry WC Trust for Manufacturers - Terminated 1/31/08
● Transportation Industry Workers’ Compensation Trust - Terminated 1/31/08
● Wholesale & Retail WC Trust of NY - Terminated 4/29/08

The remaining trust, Elite Contractors Trust of New York, administered by CRM shows under-funded status with membership restricted and pending action indicated.

Status Report
 

Labor Dept. Benefit Plans Proposal Irks Brokers

Witnesses at a hearing on proposed Department of Labor regulations designed to enhance the transparency of employee benefit plans said the new rules do not fit with the reality of broker compensation and could undermine existing protections for brokers.

The proposed regulations would require that contracts between certain service providers and plans provide for specific and detailed information to be disclosed to plan sponsors.

Additionally, all services furnished to a plan and all compensation, direct and indirect, to be received by the service provider would have to be disclosed in writing. The proposed rules also require the disclosure of possible conflicts of interest of the service provider that may affect the performance of plan services.

Cameron Findlay, Aon Corporation executive vice president and general counsel, who is also a former deputy secretary of labor, appeared on behalf of the Council of Insurance agents and Brokers.

Mr. Findlay said the department’s “primary concern under the proposed regulations appears to be with participant-directed defined contributions plans, in particular with undisclosed, indirect compensation paid in connection with the investment of the assets of those plans,” and he added that the CIAB understands those concerns.

“However, the same concerns are not present with respect to the placement of insurance products with welfare plans,” he said, adding that “the insurance brokerage industry is a different animal.”

National Underwriter - April 1, 2008

Insurers Faulted as Overloading Social Security

The Social Security system is choking on paperwork and spending millions of dollars a year screening dubious applications for disability benefits, according to lawsuits filed by whistle-blowers.

Insurance companies are the source of the problem, the lawsuits say. The insurers are forcing many people who file disability claims with them to also apply to Social Security — even people who clearly do not qualify for the government program.

The Social Security Administration defines “disabled” much more stringently than the insurers generally do, so it rejects most of the applications, at least initially. Often, the insurers then tell their claimants to appeal, the lawsuits say, raising the cost.

The insurers say that requiring a Social Security assessment is a standard practice and that there is nothing wrong with it.

The policies they sell allow them to coordinate their benefit payments with others to make sure no one is paid twice. Thus, if a disabled person can get benefits from somewhere else — like workers’ compensation, a disability pension or Social Security — the insurance company can reduce the benefit check by that amount.

The flood of referrals, however, is making it hard for Social Security to respond to people who are truly disabled, said Kenneth D. Nibali, the former top administrator of the Social Security disability program.

“Anybody who is forced to come into this system, and who doesn’t need to be there, is affecting someone else,” said Mr. Nibali, who retired in 2002 and is serving as an expert witness for the plaintiffs. “They’re holding up cases for the people who have been waiting for months and years, who in many cases are much worse off.”

Already, the disability program is in much worse shape financially than the old-age portion of Social Security. It is projected to run out of money in 2026, 16 years ahead of the old-age trust fund.

The disability caseload is also expected to grow as the work force ages, since recovery time increases with age. The number of people waiting for hearings on their claims by an administrative law judge has more than doubled since 2000, and the average wait has grown to 512 days in that time, from 258 days.

The Social Security Administration is not an active participant in the lawsuits and declined to comment on them. A spokesman, Mark Lassiter, said Social Security does not keep track of how many of its roughly 2.5 million annual applicants for disability are referred by insurance companies. But he cited academic research showing that 18 percent acknowledged privately that they were unqualified, because they could still work. “It is probable that many of these claimants were required to apply,” Mr. Lassiter said.
 

NY Times April 1, 2008

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Insurer Not Required To Pay Claim For Injury Caused By Tortfeasor Living With, But "Not In The Care Of"

Supreme Court, Appellate Division, New York

David Lang was injured by Richard Bachmann, who had been living in the home of Mr. and Mrs. Durbin for several weeks, when Bachmann shot him in the eye with a paintball. Lang received a judgment against Bachmann and sued Hanover, the issuer of the homeowners insurance policy, seeking a declaration of coverage. The subject homeowners insurance policy insured "persons under the age of 21 and in the care of the Durbins or a relative." The lower court ruled, and the Supreme Court upheld, that Bachmann was not "in the care of" the Durbins at the time of injury and, consequently, the insurance policy did not cover him. Even though Bachmann was a resident of the Durbin home under the age of 21, the Durbins had not assumed responsibility for him.

LANG V. HANOVER INS. CO.
 

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