INSURANCE NEWS                                                                                        May, 2008

Taxpayers May Face Hurricane Tab

As hurricane season begins, Democrats in Congress want to nationalize a chunk of the insurance business that covers major storm-damage claims.

The proposal -- backed by giant insurers Allstate Corp. and State Farm Mutual Automobile Insurance Co., as well as Florida lawmakers -- focuses on "reinsurance," the policies bought by insurers themselves to protect against catastrophic losses. The proposal envisions a taxpayer-financed reinsurance program covering all 50 states, which would essentially backstop the giant insurers in case of disaster.

The program could save homeowners roughly $500 apiece in annual premiums in Florida, according to an advocacy group backed by Allstate and State Farm, the largest writers of property insurance in the U.S.

But environmentalists and other critics -- including the American Insurance Association, a major trade group -- say lower premiums would more likely spur irresponsible coastal development, already a big factor in insurance costs. The program could also shift costs to taxpayers in states with fewer natural-disaster risks.

"This bill makes it a little bit too easy for the state to go to the federal government for a bailout," said Eric Goldberg, associate general counsel at the American Insurance Association, an insurers' trade group.

The legislation passed the House with bipartisan support, 258-155, late last year, despite a presidential veto threat. Although a Senate vote is unlikely this year, proponents are trying to make it a litmus-test issue in the presidential race. The two Democratic contenders, Sen. Hillary Clinton of New York and Sen. Barack Obama of Illinois, in their recent visits to Florida -- a key swing state -- have both voiced support for the plan.

Big winners would be coastal states, particularly Florida, where more than half of the nation's hurricane risk is centered. Currently, property-insurance rates in Florida are among the highest in the nation. Florida also has a struggling state reinsurance fund that would be helped by a federal program.

To gin up national attention for the program, Allstate and State Farm have teamed up with the American Red Cross in an advocacy group, ProtectingAmerica.org, pushing for better emergency preparedness, providing disaster news and education to prevent lawsuits. The group also pushes for the federal program.

Red Cross says it didn't lobby for the federal bill, and doesn't take a position on it. Its interest in ProtectingAmerica is solely to encourage preparedness, it says.

The proposed plan is roughly analogous to the National Flood Insurance Program, which has been criticized for encouraging construction in risky floodplains. Nevertheless, in recent weeks the Senate voted to renew the flood-insurance program, and also to forgive $17 billion in debt incurred after Hurricane Katrina.

Critics cite that debt forgiveness as an example of how states with little or no hurricane risk can end up footing the bill for damage in flood-prone areas. "For years, federal flood-insurance backers told us the program was financially sound, but the storms of 2005 left it $17 billion in the hole," said Steve Ellis of nonpartisan budget watchdog Taxpayers for Common Sense.

Even some analysts hired by lobbyists for the federal program acknowledge it has its risks. "If you charge something less than the private-market cost for homeowners' insurance, that creates a potential incentive to increase exposure on the coast" -- in other words, to build in risky or flood-prone areas -- said David Chernick of Milliman Inc., an actuarial firm hired by ProtectingAmerica.

Wall Street Journal - May 31, 2008
 

INSURANCE ASSISTANCE TO BE AVAILABLE NEAR COLLAPSE SITE

Consumers affected by the crane collapse on Manhattan’s Upper East Side may obtain help with insurance issues from New York State Insurance Department personnel who will be deployed near the site starting Saturday, May 31.

Insurance Department personnel will be available at the New York City Office of Emergency Management reception center that has been set up at Public School 198 at 1700 3rd Ave., between 95th and 96th Streets, from 8 a.m. to 8 p.m., until further notice.

Department personnel will be available to answer consumer questions and help consumers file claims for damages caused by the incident.

NY Insurance Department - May 30, 2008
 

State insurance regulator warns industry on pricing
Insurers need to communicate better with consumers, lawmakers

New York’s home and auto insurers need to be careful about how they price their policies so as not to inflame passions, and should start trimming premiums as they reap the benefits of their own lower costs, New York’s top insurance regulator told the industry Thursday.

Speaking at the annual conference of the New York Insurance Association on Grand Island, Superintendent of Insurance Eric R. Dinallo said it’s important for insurers to properly manage their risks to remain strong.

That includes pricing policies accordingly, and possibly choosing not to renew policies when they face too much exposure. But they need to adequately explain those issues to consumers and lawmakers.

And he warned them not to go too far and run afoul of a trigger-happy State Legislature by raising premiums too sharply or not renewing too many customers at once, as some home insurers did in the past couple of years on Long Island.

An estimated 200,000 downstate homeowners have or will lose their insurance coverage over four years because of the threat of hurricanes and flooding. Many of those who are keeping their coverage are seeing rate increases of 10 percent to 20 percent.

“Those kinds of things get people very upset. There’s a recipe for overreaction,” he told more than 200 property and casualty industry executives from around the state, who gathered for the three-day event at the Grand Island Resort. “This is the kind of political fire that gets you bad regs and bad laws.”

Dinallo also said a recent drop in “reinsurance” premiums means insurance carriers aren’t paying as much to buy backup coverage to protect themselves. Such reinsurance policies cover insurers against catastrophic claims costs that might otherwise swamp them.

Buffalo News - May 30, 2008

Insurance Markets May Stabilize, MMC Reports

After a couple of years of dramatic decreases in premium pricing in the insurance market, the industry may be reaching a point of stabilization, according to a broker with Marsh.

During a conference call today, sponsored by New York-based Marsh & McLennan Companies, the parent of insurance broker Marsh and reinsurance broker Guy Carpenter, Robert F. Howe, global leader of Marsh Property operations said that after a “couple years of dramatic decreases” there are signs of stabilization in pricing in commercial insurance.

He said premiums are reaching their “technical rating,” that he explained is the point at which underwriters feel they cannot go below their base line on a risk. Some underwriters are beginning to pull away from risks where they feel the pricing is no longer adequate, he said.

Plenty of capacity remains in the marketplace, he noted, which is fueling the dramatic decreases clients are experiencing.

“The last 18 months have actually been a great time for buyers,” he said.

In Marsh’s client world, 72 percent have had rate decreases in excess of 5 percent and the medium rate reduction has hovered between 11 and 12 percent.

He noted that clients who experienced the steepest price increases in the wake of Hurricane Katrina are benefiting the most in reductions today.

However, there are signs that the rate reductions can not continue. Globally, in the first quarter of this year, there were 15 individual losses of more than $100 million that were considered non-catastrophe events. There were seven losses in excess of $350 million from events connected with explosions, fire and flooding.

“After 18 months of rate decline … some underwriters will say this is enough,” suggested Mr. Howe.

National Underwriter - May 30, 2008

Nearly 40 Percent of Houstonians Say They Won’t Evacuate

Thirty-nine percent of Harris County and surrounding-area residents say they would not evacuate and just stay home if a major hurricane was heading for Houston, according to a report from Allstate Insurance Company.

The insurer says more than half (52 percent) of Houston-area residents who indicated they would not flee an approaching hurricane cite massive traffic jams as reasons for riding out the weather at home. Seventy-nine percent say they wouldn't evacuate because they would be safe at home; and another 40 percent say they need to protect their home from possible looting in the wake of the disaster.

"The idea that nearly 40 percent of Houston would choose to stay home and face a hurricane is disturbing data that illustrates a potentially deadly false sense of security," said Dana Philibert, an Allstate agent in Houston. "The public should always listen to and obey local authorities when and if the call comes to evacuate."

Nearly half (48 percent) of Houston-area residents say regardless of their intent they have no advance plans for a possible hurricane evacuation.

(ed: - Can we expect any different results in NY? -  Where are the residents of Suffolk Co evacuating to?)

NAMIC - May 28, 2008

Report: 33 Million Licensed Americans May be Unfit for Roads

Results from the 2008 GMAC Insurance National Drivers Test released May 22 found that 16.4 percent of drivers on the road - roughly 33 million licensed Americans - would not pass a written driver’s test if taken today. The fourth annual survey, which polled 5,524 licensed Americans from all 50 states and the District of Columbia, is designed to gauge driver knowledge by administering 20 actual questions taken from state Department of Motor Vehicles (DMV) exams. Kansas drivers ranked first in the nation with an average test score of 84 percent. New Jersey drivers ranked last with an average score of 69.9 percent.

Overall, findings from the 2008 survey indicate that an alarming number of licensed Americans continue to lack knowledge of basic rules of the road. While the national average score improved slightly to 78.1 percent – from 77.1 percent in 2007, in general, geographical regions ranked similarly to previous years, with the lowest average test scores in the Northeast. Across the board, respondents continued to have difficulty on questions about yellow lights and safe following distances. Eighty-four percent could not identify the correct action to take when approaching a steady yellow traffic light; and 73 percent could not properly identify a typical safe following distance from the car in front of them.

Additional key findings from the 2008 GMAC Insurance National Drivers Test include:

NAMIC - May 28, 2008

GOVERNOR PATERSON ANNOUNCES NY SMALL BUSINESSES TO RECEIVE $50 MILLION IN INSURANCE REFUNDS

37,000 Small Businesses in New York Will Receive Payments

Refund Points to Need for Insurance Law Reform

Governor David A. Paterson and New York State Insurance Department Superintendent Eric Dinallo today announced that Oxford Health Insurance, Inc. has agreed to refund $50 million to approximately 37,000 small businesses in New York City, Long Island and the northern suburbs for overcharging on health insurance policies in 2006. The refund highlights the need for legislation to reinstate the Insurance Department’s authority to approve rate increases before they go into effect, something the Insurance Department is pursuing this legislative session.

Prior to 1996, the New York State Insurance Department had the authority to pre-approve rate increases for health insurance, a process that helped keep rates relatively stable for decades. Since the law was changed to eliminate the Insurance Department’s prior approval authority, the Department has only been able to look at the rate increases a year after they take effect. For more than a decade the only consequence for excessive rate charges has been repayment in subsequent years.

“We must make New York a good place to do business by keeping costs competitive. We know that small businesses are the engine of growth in this State and the rising cost of health insurance is one of their major complaints,” said Governor Paterson. “If it can help protect business and keep premium rates down for New Yorkers, we should update the laws to give the Insurance Department more oversight.”

Superintendent Dinallo said: “I am pleased that the Department was able to get these refunds for small businesses. But an after-the-fact settlement in 2008 does nothing for those businesses that may have had to drop coverage in 2006 because they could not afford a larger than necessary premium increase. These refunds would be unnecessary if the NYS Insurance Department had the authority to pre-approve rate increases for health insurance premiums. Requiring health plans to get approval from the Department before increasing rates would help keep New Yorkers insured. Lawmakers should restore to the Department the tools to better monitor and manage the marketplace for health insurance rates.”

The $50 million settlement will be paid to 36,746 small business policyholders with approximately 300,000 employees and family members. The refund will vary depending on the number of covered individuals. It amounts to an average of $1,360 per business, which is about 5.5 percent of the total average annual premium in 2006.

NY Insurance Department - May 29, 2008

Common Plaintiff Lawyer Tactics Revealed In 2007 Broker E&O Case

When agents and brokers go to trial on errors and omissions matters, they should be prepared for the possibility that unrelated and wholly irrelevant prior missteps can rear their heads at trial.

That’s just one of the lessons of a 2007 insurance broker E&O case, which started with an underwriter’s mistake and a broker’s failure to renew a policy with the same terms as an expiring one.


LESSON 1: REVIEW EXPIRING COVERAGE

The most basic lesson of the case, Haynes v. Edgerson, is that a request for a policy renewal is not always as simple as it seems.

In Haynes, a Missouri appellate considered the basic issue of whether a broker met his requirement to procure requested coverage or advise of the inability to do so within a reasonable time period.

The broker’s failure to renew the policy with the same terms ultimately put him on the receiving end of a lawsuit alleging breach of duty, although his fate is yet to be decided, because some tactics used by plaintiffs’ lawyers to tarnish the broker’s character resulting in a Missouri appellate court’s decision to grant a new trial.

The underlying situation in Haynes involved the owner of a banquet hall, who was sued for wrongful death after an individual attending a birthday party at the banquet hall was shot and killed during the event. A jury verdict was returned against the banquet hall’s owner, in the amount of $5 million, and he was also hit with an additional award of $560,000 in post-judgment interest.

After the suit was initiated, the banquet hall’s owner notified his general liability insurer, and requested that he be provided with indemnity and a defense. The insurer denied the claim, because the policy contained an exclusion for claims arising from “assault and battery.”

When the policy had first been issued, it actually included coverage for assault-and-battery claims. This was apparently a mistake by the underwriter, however, which would normally have included an exclusion for such coverage absent a request for this specific coverage and payment of an additional premium.

Prior to expiration of the policy, the insured requested that coverage be renewed. On renewal, the broker submitted the same application form he had submitted when he first procured the liability coverage. This time, however, the policy issued contained an assault-and-battery exclusion.

National Underwriter - May 28, 2008

Beware Of Leaky Contractors Coverage

Damage from leaky roofs, other defects may be denied if exclusions present

The housing market is slumping; economists predict it may take several years to sell the inventory that’s currently on the market. That means many potential sellers are re-evaluating their housing needs and making home improvements instead of picking up stakes and moving.

New kitchens, media rooms and master bedroom suites top the list of remodeling additions that are dotting the construction landscape across the country.

For a contractor working on any of these projects, having the right policy can make all the difference should the homeowner have to do the one thing he or she doesn’t want to do—call the contractor because there is a problem with the work.

Every contractor, whether a general contractor or artisan, such as tradesmen in tiling, windows, floors, drywall, carpentry, plumbing and electricians, should have some type of insurance coverage. But all policies are not created equal. Some policies include exclusions that could be detrimental to the contractor if there is a claim.

LOOK OUT FOR EXCLUSIONS

Many different markets offer coverage, but agents need to be up-to-speed on the nuances of the exclusions. Here are some exclusions to be aware of when selecting a policy:

• Residential.

Believe it or not, if a policy has this exclusion, ANY work done on a residential property would not be covered.

National Underwriter - May 28, 2008

Text Messaging While Driving May One Day Bring $100 Fine

Motorists who key text messages into their cell phones while driving in New York State could be slapped with $100 fines under a new bill.

It is already against the law for drivers to talk on their cell phones without a hands-free device.

State Senate Republicans passed legislation yesterday prohibiting drivers from writing, sending, or reading text messages, unless they are able to do so without using at least one hand, according to the bill language.

A Democrat in the Assembly has also sponsored the measure, which has yet to pass the chamber.

Other states have passed similar restrictions on text messaging after reports of fatal accidents involving motorists typing messages into their phones just before collision.

Last year, five Rochester girls who had just graduated from high school were killed when the SUV that one of them was driving swerved into incoming traffic, slammed into a tractor-trailer, and burst into flames.

Reports came out later that a phone belonging to the girl behind the wheel had sent a text message two minutes before the crash. She was also reportedly speeding on the two-lane highway.

"A person simply cannot drive attentively when searching for the needed letters or symbols for texting. Concentration on a text message rather than the road leads to swerving or lane drifting, tailgating, cutting off another driver or hitting another car," the bill memo sta

NY Sun - May 28, 2008

GOVERNOR PATERSON ANNOUNCES FEDERAL AGREEMENT TO ISSUE ENHANCED DRIVER LICENSES IN NEW YORK STATE

New Secure Document Will Speed Border Crossings, Enhance Upstate Economy

Enhanced Licenses Should be Ready by End of Summer

Governor David A. Paterson today announced an agreement between New York State and the Federal Department of Homeland Security (DHS) permitting the state to issue an Enhanced Driver License (EDL). The new license is being developed by the State Department of Motor Vehicles (DMV), and it will boost the Upstate economy by expediting cross-border land and sea travel for the citizens of the State. The secure document can be used in place of a passport, which will soon be required for all border crossings by next summer. It is anticipated that the EDL will be available from the DMV by the end of the summer.

“The development of this license will help to ease long lines at our New York-Canada border crossings, allowing commerce to flow more freely and securely in and out of the state,” said Governor Paterson. “It represents a major step forward that will help the Upstate economy and offer a convenience for all New Yorkers who travel in North America. I commend the Department of Motor Vehicles and the Federal Department of Homeland Security for working out an agreement that allows New York to proceed with the Enhanced Driver License.”

To get an EDL, New Yorkers will be required to visit a DMV office to provide various proofs of identity and citizenship, which will be verified by the DMV. The verification will support the DMV’s core principle of one driver, one license and each EDL will have various security features within the document. The Western Hemisphere Travel Initiative (WHTI)-compliant EDL will cost $30 more than a current state driver license, but will cost less than a U.S. passport. The EDL license will not look significantly different from the current document, but it will have additional features to clearly indicate that it is an Enhanced Driver License.

Participation in the EDL project will be voluntary and open to all New York State residents who are United States citizens. The approved business plan outlines the State’s implementation of the Department of Homeland Security and State of New York Border Crossing project, which involves the development and issuance of an EDL that will be accepted at U.S. land and sea border crossings.

Governor's Press Release - May 27, 2008

Fitch Says Insurers Too Smug After Low Hurricane Years

After two years in a row of relatively light hurricane damage, U.S. insurers and policyholders have become complacent, which carries negative implications, Fitch Rating announced today.

Its comment came as the firm released a special report, “Hurricane Season 2008: A Desk Reference For Insurance Investors,” its annual hurricane season guide. The official start of hurricane season is June 1.

Donald F. Thorpe, senior director, explaining the negative implications as a result of two light hurricane years, said in a statement that Fitch Ratings forecasts for 2008 call for an above-average hurricane season.

This year, he said, follows a season in which there were little or no hurricane losses for most insurers. “In fact, 2007 was the second consecutive year in which high levels of hurricane activity were predicted and insured losses were minimal.

“Fitch believes this situation has negative implications for insurer solvency and profits because it fosters complacency on the part of both policyholders and insurers. More importantly, it provides political ammunition to those who would weaken long-term industry solvency for near-term insurance price reductions,” said Mr. Thorpe.

The company said the hurricane guide contains the most recent forecasts for the upcoming hurricane season from leading forecasters and analyzes the top-10 insurers by market share for each of the 18 coastal U.S. states in both personal and commercial insurance.

Readers using the guide, Fitch said, can quickly assess the effect of a major storm on insurers. If there is a hurricane in 2008, statistical tables from the guide will give investors a quick way to calculate the approximate gross hurricane loss by insurer in the early hours following an event, before companies begin to release loss estimates.

National Underwriter - May 27, 2008

NOAA predicts 6 to 9 hurricanes for 2008

This year's Atlantic hurricane season could see above normal activity, the National Ocean and Atmospheric Administration's Climate Prediction Center said Thursday.

The center said there is a 60% chance of above normal activity and a 25% of what it called "near normal" activity.

"The climate patterns expected during this year’s hurricane season have in past seasons produced a wide range of activity and have been associated with both near-normal and above-normal seasons," a NOAA statement said. "For 2008, the outlook indicates a 60% to 70% chance of 12 to 16 named storms." The projection calls for six to nine hurricanes, two to five of which would grow into major hurricanes packing sustained winds of at least 111 miles per hour.

Hurricane season begins June 1 and runs through Nov. 30.

Business Insurance - May 22, 2008

NOAA Model Projects Fewer but More Intense Hurricanes Late This Century
Greenhouse gases have little impact in tropical storm and hurricane numbers

A new model simulation of Atlantic hurricane activity for the last two decades of this century projects fewer hurricanes overall, but a slight increase in intensity for hurricanes that do occur. Hurricanes are also projected to have more intense rainfall, on average, in the future. The findings are reported in a study by scientists at the National Oceanic and Atmospheric Administration's Geophysical Fluid Dynamics Laboratory in Princeton, N.J., which is scheduled to be published online on May 18 in Nature Geoscience.

"This study adds more support to the consensus finding of the Intergovernmental Panel on Climate Change and other reports that it is likely that hurricanes will gradually become more intense as the climate continues to warm," said Tom Knutson, research meteorologist and lead author of the report. "It's a bit of a mixed picture in the Atlantic because we're projecting fewer hurricanes overall."

Knutson's co-authors are Joseph Sirutis, Stephen Garner, Gabriel Vecchi, and Isaac Held.

The scientists performed hurricane simulations using a new regional model that offers higher resolution and improved ability to simulate past observed changes in Atlantic hurricane activity. In a preliminary study published last October in the Bulletin of the American Meteorological Society, the new model was shown to successfully reproduce Atlantic hurricane counts year-by-year from 1980 to 2006, including the observed increasing trend.

In the new study, the model was used to test the influence of greenhouse gas warming on Atlantic hurricane activity through the end of the 21st century. Simulations reveal higher levels of wind shear and other changes, which act to reduce the overall number of hurricanes in the model.

Tropical Atlantic sea surface temperatures have increased over the past century and several studies have reported strong correlations between increasing tropical Atlantic sea surface temperatures and measures of hurricane activity since at least 1950. Although it is widely accepted in the climate change research community that increases in greenhouse gases have caused most of the global warming of the last half century, the link between increasing greenhouse gases and hurricane activity has been a topic of wide debate and of little consensus.

This new study suggests that in the Atlantic basin, global warming from increasing greenhouse gases will have little impact, or perhaps cause some decrease, in tropical storm and hurricane numbers.

NAMIC - May 22, 2008

More Selected Opinions from the Office of General Council

NY Insurance Department

Insurer FM Global Makes Its Premium Risk Prevention Data Available at No Cost for First Time in 170 Years

For the first time in its 170-year history, FM Global, one of the worlds largest commercial and industrial property insurers, today announced its decision to release thousands of pages of its previously exclusive property loss prevention engineering guidelines at no cost through its Web site www.fmglobaldatasheets.com

FM Globals Property Loss Prevention Data Sheets provide large-scale businesses, facility and risk managers, as well as the architects, consultants and contractors who work for them, a valuable tool to help prevent property damage and maintain business continuity due to threats posed by fire, weather conditions, and failure of electrical or mechanical equipment.

The engineering guidelines contain a wealth of risk prevention information on hundreds of topics, ranging from building construction and fire prevention, to industrial equipment maintenance and natural disaster preparedness. Users who download the content also receive automatic notification via e-mail when data sheets are updated. FM Global is the only commercial property insurer in the world that develops and provides this type of premium technical data, all of which is based on scientific research and nearly two centuries of loss prevention experience.

FM Globals decision to make its loss prevention data available at no cost reflects the changing risk profiles of its clients around the world, especially the increasing interdependence of businesses brought about as a result of globalization and technology.


 

N.Y. Comp Board Emergency Assessments Spark Court Battle

Thirteen self-insured employer group trusts are set to argue in court Friday they should not have to pay millions in New York State Workers’ Compensation Board emergency assessments to pay for worker claims against self-insured trusts that have gone bust.

Richard Honen, an attorney with Phillips Lytle law firm--representing the group self-insured trusts that are fighting the assessments--said they are arguing the board lacks the authority to take such action.

Meanwhile, Art Wilcox, director of the New York AFL-CIO public employee division, said his organization intends to file a brief in support of the board because “if something isn’t done soon, a host of folks might soon not get their benefits.”

Trusts that are objecting to the assessments, according to Mr. Wilcox, are on the hook because they signed a joint and several agreement that they would be responsible for the liabilities of trusts that cannot pay claims. “They might have been misled by brokers, but it’s what they signed,” he said.

The case is due to be heard in Albany Supreme Court, a county level tribunal, by Acting Justice Kimberly A. O’Connor. Earlier this month, the judge ordered the 13 to pay routine assessments, which support Workers’ Compensation Board operational costs, but stayed the emergency assessments.

National Underwriter - May 20, 2008

Empire State: Kids Are Not All Smokers

New York insurance regulators say insurers should check to see whether insureds listed as “smokers” actually use tobacco.

The New York State Insurance Department Life Bureau “has been monitoring instances in which the rate classification of insured persons have changed to smoker status from non-smoker or unismoker status to determine whether smoker designations have been appropriate,” department officials write in their latest annual report to the New York State Legislature.

Life Bureau officials “became aware of instances where juveniles insured undera life insurance policy were, upon reaching a certain age, automatically designated as smokers for purposes of determining the juveniles’ premium rates, regardless of whether the juveniles were actually smokers.”

The bureau has received a complaint from a consumer who converted from a group life policy to an individual policy and was charged smoker rates under the individual policy, even though the consumer was a non-smoker, officials write.

National Underwriter - May 19, 2008

 N.Y. County to Contractors: Prove Workers Are in U.S. Legally

A new law has been passed requiring all of Suffolk County's (New York) 17,000 licensed contractors to prove their workers are in the United States legally.

Critics claim the legislation — passed by the county Legislature — is aimed at thousands of undocumented workers.

The proposal builds on legislation enacted in 2006 that requires any company doing business with the Suffolk County government to verify its employees are in the United States legally. Now every contractor, regardless of whether they have government contracts, will need to verify workers' status.

Insurance Journal - May 16, 2008

Internet Captures Market Share From Traditional Agents in Purchase of Auto Insurance Policies

comScore, Inc. released May 12 results of “The 2008 comScore Online Automobile Insurance Report,” which provides insights into the online auto insurance market and the behaviors and attitudes of auto insurance consumers. The report is based on behavioral data collected from comScore's panel of 1 million U.S. consumers during 2007 and a survey of more than 2,000 U.S. Internet users conducted during the third week of March 2008.

The study revealed that consumers are increasingly turning to the Internet to purchase auto insurance policies. In fact, 15 percent of respondents reported purchasing their current policy online, a 3-percentage-point gain versus the previous year. Meanwhile, the traditional agent channel saw a corresponding decline in market share, decreasing three points to 53 percent of total policies purchased.

Method of Purchasing an Auto Insurance Policy (March 2008)
Total U.S. - Home/Work/University Locations

"Purchasing with a local agent has historically been the dominant method by which people purchased auto insurance," said Kevin Levitt, comScore’s vice president. "While it still remains the primary method, these latest findings show us that the landscape is beginning to change, with more and more consumers turning from traditional, offline channels to the Internet."

NAMIC - May 15, 2008

A bill that would impact the insurance industry and its customers has been introduced by the Division of Insurance and the Department of Health, with some 30 different issues addressed.

Among the proposals are provisions that would limit plans' right to recovery of overpayment, amend the calculation of medical-loss ratio, expand provider credentialing, and authorize the Insurance Division to regulate network adequacy standards, similar to the kind of authority held by the Department of Health. The bill also would redefine experimental treatment for the purposes of external appeal, and prohibit providers from charging an "unconscionably excessive rate as determined by the commissioner" for out-of-network services. However, its chances for passage as a whole package are limited. Instead, it probably will be used as a negotiating tool to help bill supporters pass some of their issues in stand-alone bills.

Aetna Health Reform Weekly Newsletter

New York Workers' Compensation Board Chairman Weiss Takes On Under-funded Trusts

The shaky New York workers' compensation group self-insured trusts (GSITs) financial woes have grown exponentially in magnitude within the workers’ compensation market like the national sub-prime mortgage debacle. And injured workers are at immediate risk!

You may recall that the former Governor Eliot Spitzer issued a budget amendment for $55 million in bonds to cover the then estimated liabilities to injured workers of failed GSITs. Subsequently, Workers' Compensation Board (WCB) Chairman Zachary Weiss ordered, pursuant to law, assessments against remaining GSITs to pay for those liabilities. By then, the liabilities were measured at $78 to $80 million by the WCB. Some are now estimating that the number will approach $100 million as other GSITs are reviewed for financial stability.

Worse, the word on the street in Albany indicate that the Workers' Compensation Board's ability to meet indemnity and medical obligations to thousands of injured workers will be exhausted in as little as three months.

Workers Compensation Alliance - May 15, 2008

Without Real-Time Processing Agents, Carriers’ Future Is Dim

ndependent agencies and their insurance carriers that fail to embrace real-time data processing will start losing market share soon and could find themselves out of business over the long haul, a trio of cutting-edge agents here warned.

“Technology will increasingly become the critical factor in the agency-company relationship,” according to Edgar Higgins Jr., president of Thousand Islands Agency in Clayton, N.Y.

“We’re building a bridge to better business processing, and need to work together with carriers to meet in the middle,” he added during a panel on “The Future of Agency Technology” at the ACORD LOMA Insurance Systems Forum.

Mr. Higgins, the 2008 Champion in the inaugural National Underwriter P&C Agency Technology Achievement Award program, run in partnership with ACORD, said that “most agencies will soon recognize the critical importance of real-time transactions, and those that don’t get on board will be left behind and aged out of the distribution system.”

Mr. Higgins said the burden is also on carriers to “embrace ease of doing business as a process and help agents get transaction headaches out of their systems. They are the ones that will be rewarded with greater market share.”

He added that “company proprietary agent portals are the most overrated tech options we’re offered” because they add more time to an agency’s workflow than they save. “As a company, if you think that’s a silver bullet to solve our problems, they’re not,” he said.

National Underwriter - May 15, 2008

For Independent Contractors, It’s All About Location

A team at the National Association of Insurance Commissioners/International Association of Industrial Accident Boards and Commissions Working Group on Workers’ Compensation has boldly entered the lion’s den of “independent contractor” legal mumbo jumbo.


Headed by IAIABC Executive Director Gregory Krohm, the group recently authored a white paper titled, “The Determination of Independent Contractor Status for Workers’ Compensation.” In it, the authors discuss the various approaches states have taken in defining the nebulous “independent contractor” title, offer up some pros and cons on statutory decisions, and delve into the origins behind the differing regulations.

In the workers’ compensation system, if the injured person is an independent contractor, not an employee, the business that hired him is not liable for benefits if he is injured.

Straightforward enough, except that there isn’t a generally accepted test for determining whether a worker is an employee or an independent contractor. “Independent contractor” can be broadly defined as an individual who has no legally defined employment relationship (for purposes of workers' compensation) with the entity for which he performs paid services.

The devil is in the details. The authors noted that an independent contractor who publicly represents himself as a business, works from his home, uses his own office equipment, and sets his own hours or chooses not to work at all may indeed be an “independent contractor” in one state, but not in another.

The study notes that one core legal principle is at the heart of most tests for determining employment status: Does the hiring entity have the right to control or direct only the result of the work done by the worker, or does the hiring entity also control the means and methods of accomplishing the result? Independent contractors may be told when and how work products must be delivered, but are free to devise their own plans for achieving their obligations.

If the control test is ambiguous or inconclusive, a second common test looks to the dependence of the worker on the hiring entity for his income. An independent contractor would be expected to have multiple sources of income, at least over the span of a year or two.

Given these broad generalities, state workers' compensation systems are all over the board in the number and specificity of criteria used to determine independent-contractor status. In some jurisdictions, a worker’s status does not depend at all on whom they work for, but only on how they do the work. Some states rely exclusively on the nature of the work. Others weigh multiple factors, including but not limited to the right of control and method of payment.

Several states have established licensing as a necessary and sufficient condition for defending one’s status as an independent contractor. Others use a certification process to establish a safe harbor for the alleged independent contractor and the organization that hires him. These certifications run the gamut from simple self-declarations (Rhode Island and Texas) to detailed tests to prove the status of the applicant (Montana)

WCEC - May 15, 2008

VEHICLE LESSEE IS LIABLE TO LEASING COMPANY FOR EXCESS PERSONAL INJURY SETTLEMENT

DaimlerChrysler Insurance Company v. Roubeni, 2008 NY Slip Op 31342(U) (Supreme Court, New York County) (Judge: Walter Tolub)

Defendant Roubeni leased a 2003 Mercedes-Benz E500 from Rallye Motors under a 39 month lease. The Lease was a paragraph whereby Rallye motors assigned a l l of its rights under the Lease, and a l l of its rights and interest in the Vehicle, to plaintiff Daimler Chrysler (DCFS). The assignment paragraph states: "By signing below, the Lessor... accepts the terms and conditions of this Lease." The Lease also contained an indemnification clause under which the Lessee agrees to indemnify DCFS: "If you are subjected to any claims, losses, injuries, expenses or costs related to the use, maintenance, or condition of the vehicle, I will pay a l l of your resulting costs and expenses, including attorneys' fees."

Additionally, the Lease required Rubeni to 0btain an automobile insurance policy, with bodily injury limits of at least $100,000 per person and $ 300,000 per accident , and to name DCFS as an additional insured on that policy.

DCFS was also named an additional insured under an excess insurance policy issued by DaimlerChrysler Insurance Company ("DCIC") . Under thc DCIC policy, DCFS was insured against potential injury liability, in excess of DCFS's coverage under the Roubeni policy, arising from the operation of the Vehicle.

The DCIC policy also provided that, in the event of payment under the policy , DCIC would be subrogated to all of its insured's rights of recovery.

DCFS and Roubeni were sued for personal injuries which resulted from Roubeni's operation of the Vehicle during the terms of the DCIC policy in an underlying personal injury action. In that action, the plaintiff, Hogan, sought recovery for personal injuries she sustained resulting from Roubeni's use of the Vehicle. DCFS's liability was predicated solely on its ownership of t h e Vehicle. The suit was settled on the record, in court, for $790,000. Roubeni's insurer paid $100,000. Pursuant to the DCIC policy, DCIC paid the remaining $690,000 of the settlement and DCFS' s defense costs. The settlement agreement also included an allocution in which Defendant Roubeni personally acknowledged the reasonableness of the settlement and that he understood that DCIC/DCFS reserved the right to sue him for indemnification.

Rogak Report - May 14, 2008

Renter's insurance is worth the cost

Surveys show as many as six in 10 people who rent apartments don't bother to protect their possessions.

But those estimates may be optimistic, especially in high-cost-of-living areas like New York and California. Only two of 32 renters interviewed by the New York State Insurance Department after a crane collapse on the East Side in March had tenants insurance.

Apartments.com, a Web site that helps prospective renters find places to live, found about 58% of the renters who responded to a survey last fall lacked insurance. But more than 70% also admitted that having renters insurance would give them peace of mind.

So why don't they get it? Cost. About 40% of those questions said renters insurance is too expensive.

A typical renters policy provides $30,000 to $35,000 in coverage for personal possessions and between $100,000 and $300,000 in liability coverage. The average renter's policy costs $150 to $300 a year
 

NY Daily News - May 15, 2008

Are the Stars to Blame for Car Accidents?

So, what’s your sign? Finally, the phrase can function as a bona fide conversation starter instead of the eye-roll inducing standby of many a lounge lothario. What’s all the hype about? Well, interestingly enough, new research points to astrology as a predictor of driving habits.

Upon the completion of its five-year survey, The Co-operative Insurance has identified a correlation between a driver’s zodiac sign and the respective likelihood to be involved in a motor vehicle accident. The U.K. study assessed the temperamental qualities assigned to each star sign by astrologers alongside data from more than 700,000 motor claims that took place between 2003 and 2007.

While this survey yields some surprising results, consumers can rest assured that we will not be considering adding one’s ‘star sign’ to our list of rating factors,” said David Neave , director of general insurance at Co-operative Insurance.

The report indicated a celestial stalemate of sorts between the late-autumn signs of Sagittarius and Scorpio, which were rated equally as the safest drivers. Despite clashing personalities— intense Scorpio’s determination, drive and capability to control extreme emotions are at odds with the mellow Sagittarian propensity toward cheerfulness and even carelessness — the two share prowess on the road. Both boasted the fewest accidents of all the star signs.

Claims Magazine - May 14, 2008

Fitch: Federal Regulation Inevitable

A report by Fitch Ratings said that federal regulation of the insurance industry is probably inevitable, but that regulation would not necessarily bring benefits quickly to both the industry and consumers.

“Fitch believes increased federal regulation of the insurance industry is inevitable in the long term,” the report said. Strong opposition by several influential insurance associations, election-year politics and divisiveness in Washington would prevent passage of any federal proposals in the short term, the report added.

A single regulator would conceivably benefit life and annuities markets the most and help reduce or eliminate redundancies and inefficiencies caused by state regulations. Passage of an optional federal charter, however, could have the effect of causing insurers “overlapping and confusing state and federal requirements.”

National Underwriter - May 14, 2008

Berkley Predicts Market Turn In 2010

On an accident-year basis, the property-casualty insurance industry as a whole is probably not making any money from underwriting, setting the stage for a market turn in 2010, an executive said here yesterday.

At a media briefing in New York, William R. Berkley, chair and chief executive officer of Greenwich, Conn.-based W.R. Berkley Corp., told reporters he believes the industry’s underwriting results are either just at breakeven or that the industry is operating at a small underwriting loss for 2008.

“Fundamentally, we think the business will continue in a downward pricing mode through the first half of 2010,” Mr. Berkley said, predicting that more painful results of declining prices would start hitting the books for the industry in 2009.

For accident-year 2009, he estimated the industry combined ratio will be 105 or 106, “assuming inflation stays modestly in control.” He put a “modest” regular economic inflation level at less than 4 percent, with modest medical cost inflation falling in the 5.5-6.0 percent range

National Underwriter - May 14, 2008
 

Senate renews flood insurance program

The U.S. Senate voted Tuesday to extend until 2013 a federal program that insures millions of homes against floods and to forgive $17 billion in debt the program built up during Hurricane Katrina.

In an issue of concern to major insurers such as Allstate Corp. and State Farm, the Senate approved renewing the National Flood Insurance Program (NFIP) in a 92-6 vote. Last week, it rejected adding wind damage coverage to the program.

The House last year also voted to extend the program, but added wind coverage, and refused to forgive the debt. Negotiators from both chambers must now work out those stark differences in a compromise bill to send to President Bush for his signature.

President Bush has threatened to veto the House bill. The insurance industry opposes adding wind coverage to the program.

"Including wind coverage in the NFIP would likely have serious long-term repercussions for the program, from which it might not be able to recover," said Carl Parks, senior vice president for government affairs at the National Association of Mutual Insurance Companies, an industry group.

Business Insurance - May 13, 2008
 

AccuWeather: 12 named storms in '08 hurricane season

The 2008 Caribbean hurricane season will be near average in the number of storms, but there is a higher risk of a destructive storm hitting the East Coast, AccuWeather.com predicted on Monday.

Joe Bastardi, AccuWeather's chief long-range and hurricane forecaster, said in an updated forecast he expects a total of 12 named storms in the 2008 Atlantic hurricane season.

In April, he said the 2008 season would be slightly above average, seeing 12 to 13 named storms, with up to four becoming hurricanes and with the center of the target area being the U.S. Southeast coastline.

In his latest forecast, Mr. Bastardi said a high percentage of tropical storms would make landfall and that the major threat area is further north than normal.

A weakening La Niña weather anomaly and near-normal or below-normal water temperature in most of the tropical breeding grounds of the Caribbean and south Atlantic "will reduce the overall number of storms," Mr. Bastardi said in a release.

"However, with warm waters near the north Atlantic coastline, storms may form closer to the coast, resulting in a higher-than-average storm threat on the East Coast, from the Carolinas to New England," he added.

Mr. Bastardi said he believes at least 40% of the named storms will be of tropical or hurricane strength on the U.S. coastline. That is about 1.6 times the norm.

Two or three storms will bring at least tropical storm-force winds to the coastline between Florida and New England, including one or two that bring hurricane-force winds, and one major hurricane, Mr. Bastardi said in his latest forecast.

Business Insurance - May 12, 2008

Main Street Insurance Agents Facing 'Trojan Horses,' Says Agent Leader

Main Street insurance agents are facing an onslaught with a number of "Trojan Horses" suddenly appearing, all designed to help their competitors win over market share. That is the assessment of the President-elect of the National Association of Professional Insurance Agents (PIA) Kenneth R. Auerbach, Esq.

Auerbach made the comments during an address to the Maine Insurance Agents Association on April 28 in Portland, Maine. He outlined the various efforts that are currently underway by those who want to impose federal regulation of insurance and end its supervision by the states, efforts which agents generally oppose.

"We are witnessing a number of Trojan Horses being rolled up to our gates," Auerbach told the Maine agents. "We have a so-called 'optional' federal charter. We have attempts to reclassify insurance products as banking products. We have a bill now before Congress to establish an 'Insurance Information Office.' And we have the Treasury Department proposing an insurance regulatory office as an 'interim step.' An interim step to what?"

"And bear in mind, all of these regulatory efforts must be funded - at the expense of the states and at the expense of Main Street insurance agents."

Auerbach maintained that despite the arguments advanced by advocates of federal insurance regulation, of which a proposal for a federal Optional Federal Charter for insurers and some agents is only one part, what is really underway is a competition for market share by major players.

He said that federal regulation in general and the OFC in particular "are being pushed by a handful of large banks, securities firms and a few carriers who want to expand their market share by using a federal regulatory system to gain an unfair advantage over their competitors, particularly the regional and mutual insurance carriers that play such an important role in our industry, our agencies and in providing consumers with a wide variety of insurance products in an efficient marketplace."

"Federal involvement is being marketed as a way of making insurance regulation more efficient, but the subprime mortgage meltdown occurred under federal regulation," Auerbach said. "All at the same time that the insurance industry -- which is under state regulation -- remained on a firm financial footing, achieving record profits and lower prices for consumers."

"So our question is, why would it be more efficient for the one sector of financial services that has prudently conducted its business to be subsumed into a federal regulatory structure that has failed in the supervision of banking and securities?" he said.

Insurance Journal - May 5, 2008

Long-term care liability costs fall: Study

For the first time in nine years, average liability claims costs in the long-term care industry are stable, according to an analysis released Monday by Aon Corp.

The study, “The Long Term Care 2008 General Liability and Professional Liability Actuarial Analysis,” used data representing 15% of the total number of long term care beds in the United States, according to a statement by Chicago-based Aon.

According to the study, the average general liability and professional liability loss costs nationwide are approximately $1,460 per bed, down from the peak cost of $2,030 per bed in 1998. According to the study, the average claim fell to $138,000 in 2007 from $261,000 in 1998. The study also says that claims frequency has stabilized.

The study showed that liability costs dropped most significantly in states that passed tort reform over the past several years, as the average loss cost in those states dropped to approximately $1,270 in 2007 from $7,190 in 1998. Additionally, according to the study, the average claim size in tort reform states—Florida, Georgia, Mississippi, Louisiana, Texas, Ohio and West Virginia—dropped to $104,000 in 2007 from $384,000 in 1998.

“The impact of tort reform has been lasting, but it is not the only factor contributing to the stabilization of liability costs in the long term care sector,” Theresa Bourdon, managing director and actuary for Aon Global Risk Consulting, said in a statement. “Many changes, including the withdrawal of some long arbitration for claims settlement and significant improvements in quality of care, have combined to help alleviate the liability crisis.”

Business Insurance - May 12, 2008

Life, Health Insurers Hurt by Investment Losses

Full-year 2007 results of the nation's 1,500 life, health and annuity insurers revealed the impact of the mortgage crisis on an industry that holds nearly $14 billion in real estate and more than $670 billion in mortgage-backed securities.

TheStreet.com had predicted several months ago that the industry would have problems.

A $6.5 billion net realized gain on investments in 2006 turned to a $1.5 billion net realized loss in 2007.

Driving this $8 billion freefall was a $4 billion decline in net realized gains on real estate -- from $4.6 billion in 2006 to $608 million in 2007 -- and a $1.9 billion decline in net realized losses on mortgage-backed securities and other bonds. A $1.1 billion and $1.4 billion worsening of losses on derivatives and miscellaneous investments, respectively, also contributed to the decline.

The net result on overall industry profits was a $4.7 billion, or 11%, decline -- from $41.4 billion in 2006 to $36.7 billion in 2007.

Street.com - May 12, 2008

New York Agents Want to Rein in State Workers' Comp Insurer

A trade group for New York insurance agents wants to rewrite the laws governing the New York State Insurance Fund - a nonprofit state agency which is New York's largest workers' compensation insurer - to put it on a level playing field with private insurers.

Under the proposal, oversight of the State Insurance Fund would be moved to the New York Insurance Department, which would be required to review the fund for solvency and monitor its market practices. It would also rescind a state law that requires policyholders to give the fund 30 days' notice when they cancel their policies.

Legislation making those changes was introduced earlier this month in both the State Senate and State Assembly.

The State Insurance Fund (NYSIF) is a self-supporting, self-run nonprofit state agency which was originally set up to act as a market of last resort to provide workers compensation coverage for high risk insureds. It oversees both the Workers' Compensation Fund and the Disability Benefits Fund, which pay benefits to injured and disabled workers in the state.

Over the years, however, the fund has evolved to compete directly with private carriers and now writes an estimated 40 percent of workers compensation insurance policies in New York. Private carriers, meanwhile, have long-complained about the fund's market practices, claiming it enjoys a number of advantages they do not.

Insurers have several gripes with the fund, said Ellen Melchionni, president of the New York Insurance Association, a trade group for New York insurers. One is that the State Insurance Fund does not make payments to the Aggregate Trust Fund, a pool of money designed to cover adjudicated permanent disability cases. Another grips is the State Insurance Fund also is not subject to the same reserving requirements as private carriers.

Insurance Journal - May 9, 2008

Senate approves bill on flood insurance

The Senate on Thursday approved an amendment that aims to make life at least slightly easier for property owners, including those in Buffalo, who have to buy insurance because their properties are located in federally designated flood zones.

Under the amendment, the Federal Emergency Management Agency would have to notify property owners who are located in a flood zone and inform them about the flood insurance program.

Sen. Hillary Rodham Clinton, D-N. Y., and Sen. Robert Menendez, D-N. J., introduced the amendment because FEMA included some properties in its new flood zone maps without notifying property owners. The amendment was included in a larger bill that authorizes $400 million per year for flood map modernization and re-establishes the Technical Mapping Advisory Council, which will establish standards for mapping.

Buffalo News - May 9, 2008

Senate rejects windstorm amendment to flood bill

The Senate has overwhelmingly rejected an amendment that would expand the National Flood Insurance Program to cover windstorm as well as flood damage.

The 74-to-19 vote came late Wednesday during debate on legislation that would extend the NFIP beyond September, when it is slated to expire unless reauthorized. The windstorm amendment mirrored a provision in an extension bill passed by the House last year. As the Senate prepared to consider the windstorm expansion, the Office of Management and Budget reiterated its position that senior administration officials would recommend that President Bush veto any measure that directed the NFIP to cover windstorm.

The Senate bill also calls for the creation of a national commission to study the catastrophe insurance marketplace.

A vote on the Senate NFIP bill is not expected until next week.

Business Insurance - May 8, 2008

The Importance of Key Person Insurance for Small Business Owners

Do you own a small business? Do you have one or more business partners? Have you stopped to think about exactly what would happen to the business if one of your partners was no longer living? While no one wants to think that anything will ever happen to them or their business partners or loved ones, it’s a fact of life that no one lives forever. If one of your partners is no longer around, separate from the emotional consequences of losing someone you care about, you’re also likely to find yourself dealing with major financial implications for the business.

This is why it’s so important to make sure that you have sufficient key person insurance coverage in place for your small business. No matter how small or how new your business is, each partner should be covered by a sufficient amount of life insurance. Only you and your partners can make a determination of exactly how much insurance coverage is sufficient in your particular situation. Before making a decision, think about what the financial implications of losing one of the partners will be for the company.

If you have a buy-sell stock agreement in place, the business is going to have to come up with the money to purchase the deceased partners stock shares from his or her estate. Most small business operations don’t have large sums of cash lying around, so it’s important to make sure that the insurance policy will at least cover the cost of any necessary share repurchase, as specified in the terms of your particular buy-sell agreement.

However, this isn’t the only important

american entrepreneurship
 

Facility Damage Evaluation Following Major Disasters

Events such as extreme windstorms, earthquakes, and floods severely stress the resources of most cities and counties in addressing the needs of the general population following a major disaster. Municipal authorities may not be prepared to assist the vast number of businesses, building owners, and tenants following a major disaster in assessing the safety condition of their buildings in order to issue re-occupancy permits, or to allow immediate progress towards the restoration of the businesses to normal operations without an engineering inspection.

The majority of businesses and institutions will often be left to rely on their own resources following a major disaster. One proactive approach for businesses and institutions involves the creation of a facility damage evaluation plan as part of a comprehensive emergency response plan. The facility evaluation plan may result in the preparation of a Post-Disaster Facility Inspection Manual (in paper and/or electronic format) which designates qualified personnel to inspect, document, and determine the safety level of impacted facilities.

Pre-Disaster Activities
Pre-disaster activities related to the development of a Post-Disaster Facility Inspection Manual are as important as the activities that will be undertaken following any type of significant event. Similar to standard emergency preparedness plans, it is important to have a comprehensive, well-defined facility evaluation plan that is exercised and updated on a regular basis.

The following pre-disaster activities are typically considered to be essential as part of the development of a Post-Disaster Facility Inspection Manual.

Identification of Facilities
Identify the buildings, equipment, and other facilities that are to be covered in the Facility Inspection Manual. For large complexes and/or where available resources are limited, it may be practical to only include critical facilities in the post-disaster evaluation manual.

Develop Emergency Contact List
Assemble detailed contact lists with primary and secondary contact information for all parties who will participate in a post-disaster facility evaluation. Given that individuals on the contact list may not be accessible after an event, it is important to have primary, secondary, and possibly tertiary contacts for each major task.

Initial Data Collection

IRMI - May 2008

State Trial Judge Stops Emergency Assessments on Workers Compensation Trusts

Acting New York Supreme Court Justice Kimberly O’Connor in the Albany-based Third District has temporarily blocked emergency payments ordered by the state Workers’ Compensation Board. Judge O’Connor was responding to a request from 13 self-insured trusts seeking to prevent the WCB from collecting $10 million in their annual assessments for 2008 and beginning retaliatory action if the trusts refused to pay, reported the online news service. Board Chairman Zachary Weiss, who is also seeking additional money on an emergency basis to cover the costs of claim related to trusts it has terminated and assumed control, had threatened to seize more than $14 in security bonds and revoke the authorization of the 13 trusts if the payments were not made.

Justice O’Connor, however, ruled the trusts must pay the $10 million annual assessment but are not obligated to make the emergency payments, according to workcompcentral, and the workers’ compensation board could not retaliate against the trusts while a temporary injunction remains in force. O’Connor gave Weiss until Wednesday to provide the trusts a final bill on their share of the $10 million assessment approved by the judge.

The trusts filing suit include Contractors Compensation Trust, Cooperative Association of Food Enterprises Workers' Compensation Trusts, The El-Con Trust, Empire State Hospitality Workers' Trust, Empire State Education Trust, Empire State Transportation Workers' Compensation Trust, First Automotive Trust, NYSARC Workers' Compensation Trust, New York Petroleum Associations Compensation Trust, New York McDonald's Operators Workers' Compensation Trust, NY Transportation Workers' Compensation Trust, Retailers of New York Workers' Compensation Trust and Selective Safety Trust.

IIABNY - May 6, 2008

WORKER IS HURT PULLING WALLET OUT OF HIS BACK POCKET WHILE BUYING COFFEE; INJURY HELD TO BE WORK-RELATED

Matter of Marotta v. Town & Country Elec., Inc. 2008 NY Slip Op 04035 Decided on May 1, 2008 Appellate Division, Third Department 

This was an appeal from a decision of the Workers' Compensation Board, filed February 21, 2007, which ruled, among other things, that the claimant's injury did not arise out of his employment and denied his claim for workers' compensation benefits.

On the morning of March 14, 2005, claimant, an electrician and covered salaried co-owner of Town & Country Electric, reported to work at 7:55 A.M., discussed work plans for the week with his partner, and loaded his work truck with supplies and materials. He then drove to the site of his assigned electrical job. On the direct route to the job site, claimant went to a drive-through window to purchase coffee and a muffin and, when he reached for his money in his back pocket, he felt a "pop" in his back and experienced pain radiating down both legs and, later, paralysis in his right leg. He was hospitalized and diagnosed with herniated disks and underwent emergency transpedicular diskectomies, or disk and fragment removal, and decompression.

Claimant, unable to return to work until September 12, 2005, filed a claim for workers' compensation benefits, which the employer's workers' compensation carrier disputed. Claimant testified at a hearing, submitted medical evidence in support of his claim from his treating neurosurgeon and underwent two independent medical exams.

The Workers' Compensation Law Judge determined that claimant's injuries were work-related and awarded him benefits. On the carrier's appeal, the Workers' Compensation Board reversed, finding that claimant had deviated from his employment when he went to the drive-through and, thus, his injury did not arise out of his employment. The Board also concluded that the record did not support a finding of occupational disease. Claimant appealed.

Rogak Report - May 6, 2008

Most Baby Boomers Overestimate Breadth and Depth of Public Safety Net for Disabled Workers

Most baby boomers overestimate the breadth and depth of the public safety net available for workers who suffer a disability, according to a new survey conducted by Harris Interactive on behalf of America's Health Insurance Plans (AHIP). Baby boomers believe public programs provide disability benefits to more people than they actually do and most overestimate the amount of benefits available.

"Baby boomers believe they have more disability income protection than they actually do, giving them a false sense of security against the financial risks of disability," said Karen Ignagni, President and CEO of AHIP.

The survey assessed boomers' knowledge about public disability income programs, such as Social Security Disability Insurance (SSDI) and Workers Compensation. Nearly half of baby boomers believe incorrectly that a working adult would qualify for SSDI benefits if he or she were unable to work at their current job, but could still work at another job that pays less money. More than a third of baby boomers believe a worker is qualified if he or she can work no more than twenty hours a week, and one-in-four say they do not know what the qualifications are. In reality, workers are only eligible for SSDI benefits if they are unable to do any work for which they would earn $1,000 or more per month.

Only one-in-five baby boomers correctly estimated the average monthly SSDI benefit for a disabled worker to be about $1,000 a month. Eighteen percent overestimated the benefit and a significant number of baby boomers (43 percent) said they did not know how much the average monthly SSDI benefit was.

While a majority of baby boomers (60 percent) accurately stated that job-related illnesses and injuries are qualifications for Workers' Compensation, many incorrectly believe this coverage is also available to individuals who suffer a disability in other situations. Many baby boomers believe people can qualify for Workers' Compensation benefits if they suffer a disability that prevents them from working at their previous job (26 percent), forces them to work at a job that pays less than their current job (10 percent), or if they can only work part-time (9 percent).

Thirty-six percent of baby boomers did not know how much of their current income Workers' Compensation benefits would replace and one-in-five overestimated benefits. Only twenty-four percent of baby boomers accurately stated that Workers' Compensation replaces two-thirds of a worker's pre-disability income.

InsuranceNewsNet - May 5, 2008

The skinny on crime insurance

Court cases highlight need for adequate limits and an accurate explanation of crime insurance definitions

Employee dishonesty is one of the loss exposures that is increasingly difficult to control—for both for-profit and not-for-profit organizations. This is especially true for the small to mid-sized organizations that often take a “Pollyanna” approach and discount the potential for employee dishonesty losses.

It is not that all employees are dishonest. Some are. Others are tempted to become dishonest in the work environment when they are exposed to large sums of money and given a large helping of employer trust, coupled with little oversight.

Whenever an employee is trusted to handle money or securities, the employer has to assume that no matter how trustworthy an employee may appear to be, the employer is vulnerable to a loss that ends up being far more than an entity can withstand. Since many entities cannot fully control the possibility of an occurrence, the next best alternative is to purchase insurance.

The question is how much insurance should be purchased? This is the identical question that businesses ask in reference to liability limits. Or, asking how high one’s limits should be is like asking how high is the sky. The standard answer should be: Purchase all the limits you can afford.

The business owner, of course, has the final say on what those limits should be. Too often, however, businesses purchase insurance based on price. The problem is that at the time of loss, they are not concerned with how much the insurance cost, but rather when the insurance check for loss payment is going to be cut.

Crime policy—limitations

Many entities do not understand how the crime policy insurance limits for employee dishonesty actually work until after they are confronted with a loss that far exceeds their policy limits. Insofar as the application of limits is concerned, there are limitations.

The first limitation is that the loss is limited to each occurrence, and the second limitation is that the policy limits are not cumulative from year to year. While both of these aspects need to be explored further, only the first such limitation is discussed here. The second limitation will be discussed in a subsequent column.

Crime policies have long provided that, as far as employee dishonesty coverage is concerned, the insurer will not pay any more in any one occurrence than all loss caused by one or more employees (acting in collusion) whether the loss is the result of a single act or a series of acts. That seems clear enough, but apparently it is not to everyone.

A clarifying case is Thornburg Insulation, Inc. J.T.J.R., Inc., et al. v. J.W. Terrill, Inc., et al., 236 S.W. 3d 661 (Mo. App. E.D. 2007.) This involved two corporations owned by the same persons.

Both companies separately purchased a commercial crime policy that included employee dishonesty coverage subject to a $50,000 limit per occurrence. The policy defined “occurrence” to mean “all loss caused by or involving one or more ‘employees’ whether the result of a single act or a series of acts.”

One of the corporations, J.T.J.R., employed an office manager and bookkeeper. This employee also periodically worked for the other corporation but was not paid directly by it. That corporation, however, reimbursed the J.T.J.R. for the wages earned by this employee.

For two years, this employee embezzled money from both corporations. The amount taken from her immediate employer, J.T.J.R., was $508,350 and $745,800 from the other corporation. As a result of this loss, the insurer issued a check for each corporation in the amount of the policy limit of $50,000.

The corporate owners did not like the idea that all they were getting was a total of $100,000 when their combined loss total was in excess of $1 million. They maintained that because each fraudulent check required a series of actions including writing out the check, stealing the signature stamp, applying the signature stamp and depositing the check, the series of acts for each check was an occurrence. In other words, from the perspective of the corporate owners, each loss was considered to be a separate occurrence.

Rough Notes - April 2008

 

P-C Composite Rate Down 12% In April: MarketScout

The composite rate for all lines of U.S. property-casualty business is down 12 percent for April, MarketScout the electronic insurance exchange reported.

The 12 percent overall decline for April is the same as the reported decline for March, and two percentage points less than the 14 percent drop reported for February.

Richard Kerr, founder and chief executive officer of the Dallas-based concern said in a statement that admitted insurers “continue to carve market share from the surplus lines insurers by assuming risks which had been traditionally placed in the non-admitted market. Vanilla accounts are coveted by everyone so they also go to the admitted market, but at extremely competitive rates."

By coverage class, general liability insurance was reported as leading the declines at minus 15 percent. Small accounts declined by 14 percent versus 12 percent the month before, while jumbo accounts actually increased in price moving from a overall decline of 13 percent to a decline of 11 percent.

Service contractors, MarketScout said, are very competitively priced at minus 15 percent.

MarketScout’s Barometer is created using data assimilated via its online insurance exchange and is supported by in person surveys of retail agents, company personnel, wholesale brokers, and managing general agents.

The declines in rates for April 2008 broken down by coverage class:
• Commercial property, 14 percent
• Business interruption, 11 percent
• Inland marine, 10 percent
• General liability, 15 percent
• Umbrella/excess, 12 percent
• Commercial auto, 9 percent
• Workers’ compensation 8 percent
• Professional liability, 7 percent
• Directors and officers liability, 6 percent
• Employment practices liability, 12 percent
• Fiduciary, 7 percent
• Crime, 8 percent
• Surety, 7 percent

National Underwriter - May 5, 2008

Lawmakers seek hearing on trial lawyer practices

Two high-profile Republicans are asking the chairman of the House Judiciary Committee to hold a hearing concerning the practices of plaintiffs attorneys.

In a Friday letter to Judiciary Committee Chairman John Conyers, D-Mich., House Minority Leader John Boehner, R-Ohio, and the Judiciary Committee’s ranking member—Rep. Lamar Smith, R-Texas—note that William Lerach, who recently pleaded guilty to “charges of criminal conspiracy in conjunction with a class action scheme involving his former law firm, formerly known as Milberg Weiss,” is slated to report to federal prison on May 19.

“According to federal investigators, Milberg Weiss officials masterminded a $250 million illegal kickback scheme involving their clients, and then lied in court about their actions,” according to the letter, which goes on to note that Mr. Lerach said that the illegal conduct was an “industry practice.”

The lawmakers called on Rep. Conyers to schedule a hearing no later than May 19 to address a series of questions, such as:

“How many of these cases are brought as a result of illegal payments to plaintiffs?” c “What other types of conflicts exist between trial lawyers and the injured investors they purport to represent?”

“What reforms should Congress enact to eradicate these abuses from our judicial system?”

Business Insurance - May 2, 2008
 

Workers’ Compensation Security Fund

STATUTORY REFERENCE: Sections 108 and 109 of the Workers’ Compensation Law

Please be advised that determinations made in accordance with the requirements of Section 109 of the Workers’ Compensation Law indicate that the amount of assets in the Workers’ Compensation Security Fund as of March 31, 2008 exceeds $74 million dollars. Section 109 provides that when the amount of assets of the Fund equals or exceeds $74 million dollars, no further contributions shall be required.

Section 108 of Article 6-A of the Workers’ Compensation Law provides that for the privilege of carrying on the business of workers’ compensation insurance in this state, every carrier (as defined in Section 106) shall pay into the Fund, on a quarterly basis, a sum equal to not more than two percent of its net written premiums, less the amount of dividends paid to policyholders, as shown on the quarterly return form required to be filed by Section 108.

Section 109.1 provides that when the Superintendent determines, as of the end of any quarterly period, the amount of assets in the Workers’ Compensation Security Fund equals or exceeds $74 million dollars, no further payment under Section 108 shall be required to be made after that quarterly period. However, whenever as of any subsequent quarterly period, the amount of such assets is less than $74 million dollars, contributions shall be resumed at the beginning of the next quarter.

The first quarterly contribution to be suspended will be the contribution due on or before May 15, 2008 for the quarter ending March 31, 2008. In addition, no quarterly returns will be required to be filed until contributions are resumed.

NY Insurance Department - May 1, 2008

NYAIP - NY-2008-Revision-001.pdf Rule 80 is amended as follows:

The limousine, school bus, church bus, medicar, ambulette, airport bus or airport limousine, and social service agency auto nonprofit classifications are amended to (1) clarify what type of autos may be rated under each classification; (2) specify the required documentation that must be submitted with the application; (3) specify the documentation that a company may require to substantiate the classification; (4) specify that if the risk fails to provide the required verifiable documentation to support the requested classification, the carrier will rate the risk under the rating classification supported by the information it receives.

A new hotel/motel courtesy bus classification is introduced and the public auto not otherwise classified classification is amended to delete courtesy buses run by hotels.

The record keeping requirements for medicars and ambulettes are relocated to the medicar and ambulette classifications.

The fleet and nonfleet primary classification tables are amended to add factors for hotel/motel courtesy buses.

These amendments are effective June 1, 2008 for new business and July 1, 2008 for renewals.

NYAIP

 

Catalytic converter thieves target car dealerships

The thieves who once targeted cars parked at railroad stations in Nassau County for the precious metals in their catalytic converters have moved on, police said.

Now, after cops began stationing officers at train stations last fall, police say the thieves are working elsewhere - at the Island's car dealership lots and other locations.

Wherever they work, thieves yank off catalytic converters for the metals inside, to be sold to junkyards and then traded at high commodities-market prices, police said.

While thieves make top dollar - rhodium fetches more than $9,000 an ounce on the market while other metals earn hundreds of dollars an ounce - victims get stuck with a bill of anywhere from a few hundred dollars to as much as $1,000 to replace the devices, which help reduce exhaust emissions, police and car dealers say.

Nassau police have seen fewer reports of catalytic converter thefts since last fall, a spokesman said.

And while statistics from Suffolk County police were not immediately available, Det. Sgt. John Capute of the property recovery section said he has noticed a spike in the theft of all sorts of unlikely items containing scrap metal, including catalytic converters.

Thefts of the converters - and the platinum, rhodium and palladium contained in them - are by no means peculiar to Long Island. Across the United States, experts say, the car part is among countless everyday items in homes, businesses and public spaces that are being ripped off and vandalized as commodities prices continue to rise to record highs.

Newsday - May 1, 2008

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