Ask Tim

Episode #16 -- On the Spot With InVEST Students

A few weeks ago, 42 students from four high schools in the Ithaca area paid a visit to IIABNY headquarters to learn about the insurance business. Seriously. Okay, yes, we gave them lunch, too, but they really did want to learn about insurance. A few of them passed the background check, wrote acceptable essays, verified that they were H1N1-negative, and were able to recite the IIABNY mission statement from memory. These lucky students were permitted entrance to the Not-Quite-Abbey-Road Studios deep in a secure and heavily fortified corridor in IIABNY headquarters.

Actually, they just gave me some Christmas candy, so I let 'em in.

While they were there, Ask Tim producer and my erstwhile nemesis J.B. McCampbell filmed them asking me questions about insurance. I was looking for gentle questions, the kind with which I could dazzle them with my brilliance. J.B., however, encouraged them to toss me hand grenades, preferring to make me squirm on camera. The actual questions were somewhere in between. Do you want to know what's on the minds of the people who will be your customers in a few years? Watch parts one and two of the InVEST episode of Ask Tim. That's right, this episode was so big, so holiday-sized, that we had to split it into two segments. What this means to you is that you will be able to eat two doughnuts while you watch instead of the usual one.

Thanks to all the students who participated! This episode is brought to you by InVEST.

Download Ask Tim, Dec. 29, 2009, Part 1 -- InVEST Students Visit

Download Ask Tim, Dec. 29, 2009, Part 2 -- InVEST Students Visit

 

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Should N.Y. Umbrella Policies Schedule the Workers' Comp Policy?

Question from an IIABNY member: We were hoping you could shed some light on why a carrier we use refuses to schedule workers' compensation coverage on an umbrella policy.  The carrier is referencing Circular Letter No. 17 from 10/16/1987 (yes 1987!), in which it states that the commercial umbrella policies should not contemplate Coverages A and B since they are unlimited in NYS.  "Consequently, rate and form filings of Employers' Liability and Workers' Compensation should not be shown as underlying coverages nor included in computing the umbrella premium."

We don't agree with this and feel the workers' compensation policy should definitely be scheduled on the underlying policy schedule of the umbrella policy to avoid coverage gaps.  For example, if a worker is injured in a state other than NY and there IS a cap on employers' liability and such liability exceeds the policy limit and penetrates the umbrella.  

Do you agree?  If so, can you provide other claim examples or reason why the WC should be scheduled on the umbrella?

Answer: A little background first, for those unfamiliar with New York coverage. Every Workers' Compensation policy insuring risks in New York must include endorsement number WC 31 03 08, New York Limit of Liability Endorsement. It states that the insurer may not limit its liability to pay damages for which it becomes legally liable to pay because of bodily injury to the insured's employees if the bodily injury arises out of and in the course of employment that is subject to and is compensable under the Workers' Compensation Law of New York. In other words, Employers' Liability Coverage for New York risks is unlimited, regardless of any limits shown in the policy Declarations. Consequently, Commercial Umbrella policies covering New York risks typically do not list the Workers' Compensation policy in the schedule of underlying coverages, and they normally include a New York Employers' Liability Exclusion.

The umbrella underwriter is correct in referencing Circular 1987-17, but he isn’t going far enough. The Insurance Department issued a supplement to that circular in June 1990. The key points of the letter are:

...(I)t was not the intent of this Department to proscribe the inclusion of Workers' Compensation and Employers' Liability insurance coverage in the writing of umbrella policies for insureds with an identifiable exposure to losses that would fall outside the scope of the unlimited coverage provided by the New York Workers' Compensation policy…The terms of the Unlimited Liability Endorsement, which is appended to all Workers' Compensation and Employers' Liability Policies, indicate that such unlimited coverage is applicable only in situations where an employee is subject to the New York Workers' Compensation Law and such employee's injuries are within the scope of such law. If an injured employee is not subject to the New York Workers' Compensation Law, or a covered employee's injuries are deemed to be outside the scope of the law (such as injuries to employees subject to a federal or another state's workers' compensation act), the provisions requiring that such coverage be unlimited would be inapplicable…Accordingly, it is not inappropriate for an umbrella carrier to contemplate underlying Workers' Compensation and Employers' Liability insurance coverage in the writing and rating of commercial umbrella policies, but only to the extent that such underlying coverage might be limited, as described above.

I think the examples the department gave in the circular are the best ones – employees covered by federal labor laws or other state laws. The umbrella should provide excess Employers’ Liability coverage for those exposures. If the risk has no out-of-state operations or operations involving federal law (operations on navigable waterways come to mind), then the underwriter is correct about not scheduling the EL policy. Otherwise, the Umbrella should schedule it and the underwriter should make the appropriate premium charge for the exposure.

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Ho-Ho-Ho: Keep I.D. Thieves From Maxing Out Your Credit Cards

This advice from the Insurance Information Institute is worth heeding any time of year, but especially during the holiday season when so many of us are out in the malls with our wallets open. This is good information to share with insurance clients. While many Homeowners insurance policies provide some coverage for identity theft expense, they don't come close to compensating for the sheer hassle of dealing with this type of situation.

Holiday shoppers can reduce the chances of becoming an identity theft victim this year by taking some simple preventative measures, according to the Insurance Information Institute (I.I.I.).

 

“The hustle and bustle of the holidays creates the perfect opportunity for thieves bent on stealing your credit cards or other financial information,” said Jeanne M. Salvatore, senior vice president and consumer spokesperson for the I.I.I. “Shoppers are tired, stores are crowded and it’s easy to become less guarded about personal information that appears on personal checks, drivers licenses and credit cards.”

 

Thieves can take information from identifying documents and use them to impersonate a victim, steal from bank accounts, establish phony insurance policies, or open unauthorized credit card accounts.

 

In 2008, 1.2 million identity theft and fraud complaints were filed with federal, state and local law enforcement agencies and private organizations, based on data tracked by the Federal Trade Commission.

 

The 2009 Identity Fraud Survey by Javelin Strategy & Research found that the number of identity fraud victims has increased 22 percent from 2007 to 2008 to 9.9 million adults. The survey points out that, historically, higher rates of fraud occur during economic downturns.

 

While many identity theft schemes rely on credit card data, there are other ways of accessing a victim’s information. Some employ electronic means such as online "phishing” scams—where thieves use email inquiries purporting to be from financial or other online organizations seeking sensitive account information. And the advent of “no-swipe” credit cards, which transmit account and user information through a radio frequency, makes it possible for identity thieves to use an electronic device to capture the information. And there are, of course, still the old-fashioned methods, such as “dumpster diving”—rooting around in people’s garbage to collect financial information.

 

No matter what the ruse, identity theft victims are often left with lower credit scores and spend months getting their credit records corrected. Frequently these victims have difficulty getting credit, obtaining loans and, in some cases, even finding employment.

 

“Consumers should carefully monitor their bank balances and credit card bills to make sure that they actually made all of the transactions attributed to them,” said Salvatore.

 

More than half of all identity theft victims discover that their identity was stolen by monitoring their bank and credit card accounts, according to the FTC.

 

To help protect your identity this holiday season, the I.I.I. has the following tips:

• Keep the amount of personal information in your purse or wallet to the bare minimum. Avoid carrying additional credit cards, your social security card or passport unless absolutely necessary.

• Guard your credit card when making purchases. Use your hand as a shield when using ATM machines or making long distance phone calls with phone cards. (continued)

via www.iii.org

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Workers' Comp -- When is a Volunteer Not a Volunteer?

This post from Lynch Ryan's Workers' Comp Insider blog describes a case from across the state line in Massachusetts, but it still raises an interesting question. If a school teacher volunteers to participate in a school-related activity, will Workers' Compensation cover injuries she suffers during the activity? If the activity is related to her employer's main function, is she truly volunteering, or is she making a prudent decision when faced with the choice of "volunteer or else"?

I'm curious as to whether anyone reading this blog has experienced a Workers' Comp case like this one. How did it turn out? Tell your story in the comments.

MA Supremes: teacher chaperoning ski trip due workers comp

In a recent decision that shouldn't be too surprising to those who follow workers' comp compensability issues, the Massachusetts Supreme Court recently upheld a decision by the Department of Industrial Accidents to grant workers compensation benefits to Karen Sikorksi, a Peabody teacher injured while chaperoning high school kids on a 2004 ski trip. The City of Peabody had contested the award on the basis that she was a volunteer engaged in a recreational activity.

We've seen many of these cases and the decision often hinges on the voluntary nature of the activity. In this case, the city of Peabody probably thought they were well within the law in denying benefits. According to Insurance Journal, the Massachusetts legislature added a little twist to the workers' comp statue in 1985, when it excluded "... any injury resulting from an employee's purely voluntary participation in any recreational activity, including but not limited to athletic events, parties, and picnics, even though the employer pays some or all of the cost thereof."

Note the adjective "purely."

When is a volunteer really not a volunteer? Usually, when an employer encourages the employees to participate in said activity. (Everybody who has ever been an employee is likely familiar with the concept of so-called voluntary recreational activities - non-participation can be a career-limiting option.) According to reports, the Peabody school administration has historically expected teachers to become involved with the school's extracurricular activities and, in this particular case, the school principal and the ski club adviser solicited teachers to serve as chaperones. In Sikorski's case, the Supreme Court justices unanimously found that she was "acting in the course of her employment" and not in a recreational activity as described in the law. The court found that her responsibilities as chaperone were "...essentially the same ones teachers must exercise while working in the school building during school hours." Chaperones were expected to supervise students both in the lodge and on the slopes.

Another common criteria that courts use is in determining whether an activity is "voluntary" is how beneficial it is to the employer and whether it furthers the employer's interests. In this case, the court found that it did: "...the ski club's trips benefited the city by furthering the school's educational mission."

Of course, nothing is ever simple with workers' comp - there are 50 different flavors, so every state law may have its own particular nooks and crannies related to these issues. Andrew G. Simpson has an excellent article on 'Forced Fun' and related workers' compensation problems, in which he discusses variations in state laws.

via www.workerscompinsider.com

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What's Good for Lawyers is Good for Insurance Professionals: Write Grammatically

Terrific post from Roy Mura's Coverage Counsel blog. Those who know me know that clear, concise writing is one of my favorite causes. Our former communications specialist probably muttered the words, "No passive sentences" in his sleep at night as a result of my badgering. I'm considering a petition drive for a constitutional amendment banning the use of the word "utilize." I keep a copy of William Zinsser's book "On Writing Well" on my desk. So, Roy's post struck a chord.

As insurance professionals, we must daily explain to the public products that most of them find pretty confusing. How we communicate insurance concepts, coverages, exclusions, conditions and the like plays a huge role in how people view our industry. We can take a lot of the mystery out of insurance just by writing about it well. If we can eliminate the mystery, then maybe the public will start to have a more positive opinion of us.

And if we can insurance understandable, there's hope for the people who design television remote controls.

Most lawyers are poor writers.  Poor at regular writing and poor at legal writing, the latter requiring both good regular writing and analytical skills.  Analysis aside, the body of routine legal writing is fat with verbosity and rife with punctuation and grammar mistakes.  Practicing law doesn't necessarily make one a better writer.  Instead, in many cases it seems to make one worse.

Auto mechanics, carpenters, and electricians who misuse their tools suffer injury or unemployment.  The same can't be said of lawyers and their misuse of words.  As inexplicable as it may seem, profitability as a lawyer does not depend on mastering the rules of syntax and semantics.  But "legalese" is a criticism, not a compliment, my professional colleagues.  Like it or not, how lawyers write, and how they're perceived to write, negatively affect our collective public image. 

Who cares?  Some judges do.  Like United States Bankruptcy Judge Robert Kressel from Minnesota.  Last week he sent out guidelines for lawyers submitting proposed orders to him.  Some of those guidelines address and exhort lawyers to use to "use regular grammatical English as much as possible."  That lawyers practicing in Judge Kressel's court apparently had not been using "regular grammatical English" is understood, but not understandable, prompting the judge's issuance of guidelines such as these: (see post for more.)

via nycoveragecounsel.blogspot.com

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Small-Business Guide - Buying the Best Insurance for Your Business - NYTimes.com

Gabrielle Melchionda broke into tears when firefighters accidentally flooded the headquarters of Mad Gab�s, the beauty company she had founded two decades ago, even though she knew that insurance would replace the desks, computers, and shelves of lip balm she had lost. To her surprise, however, the real pain came in the months that followed, when she continued to owe salaries and rent while her sales slowed to a trickle.

via www.nytimes.com

Interesting article in today's NY Times about the insurance small businesses should buy. It quotes Steve Spiro, New York's representative to the IIABA board of directors, and Tom Minkler, a New Hampshire agent who is also in the IIABA leadership. I think the writer's claim that broker's may be tempted to place insurance with companies that pay higher commissions was unnecessary; commission levels are irrelevant if you don't write the account because your price was too high. However, it's generally a well-written piece, and the advice about business interruption coverage alone makes it essential reading for business owners.

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Insurance Dept. Opinions: Failure to Pay Audit Premium, Public Construction Contracts

The New York Insurance Department’s Office of General Counsel posted seven new advisory legal opinions to its Web site last week – five from November, one from August, and one from June 2008.

• Nothing in the New York Insurance Law or regulations prohibits an insurer from cancelling a marine insurance policy for non-payment of premium when the insured has filed for Chapter 11 bankruptcy protection.
• An insurer may cancel an insured’s current Workers’ Compensation insurance policy for non-payment of the prior policy’s audit premium if the current policy does not limit the insurer’s ability to do so and if the insurer otherwise complies with New York laws and regulations.
• A non-admitted insurer may maintain an office in New York if it has no contact with the public, its functions are primarily ministerial in nature, and its functions do not involve the sale or solicitation of insurance.
• New York Insurance Law does not require a contractor that bids on a public construction contract to obtain insurance from an admitted insurer, but it gives public authorities the right to require it.
• The Insurance Law and regulations do not require an insurer to keep duplicate copies of insurance declaration pages.

The other two opinions pertained to a proposed medical service plan and No-Fault attorneys’ fees. These and all other opinions the OGC has issued since 2000 are available from the department’s Web site.

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Client Has Two HO Policies -- Will They Both Cover the Same Liability Loss?

Question from an IIABNY member: I am hoping that you can help me with a basic opinion on a complicated HO Liability claim situation.  I will try to keep the details simple as follows:

1.  Insured has a Homeowners policy on Long Island that has Comprehensive Personal Liability attached.

2.  The insured has a separate Homeowners policy with the same carrier on an upstate home.

3.  Two years ago, a neighbor to the upstate home was killed while riding an ATV, not on our insured's premises, but on a neighbors premises--a road that has rights of way to each neighbor's parcel.

4.  The accident involved the ATV hitting a chain and/or post that was across the road to the other neighbor's property.

5.  Our insured is now being sued, along with every other neighbor in the area.  The suit alleges that our insured was responsible for maintenance of the road (which he was not at the time of the accident,)  and should have known that this post and chain created a dangerous condition.

There are two CPL policies involved. The accident did not happen on the insured premises.  The carrier is saying that only one policy will cover this loss.  I am thinking that both CPL polices should be involved.

Answer: Interesting question. I’m starting with the definition of “insured location” in the ISO Homeowners 3 policy, which states:

"Insured location" means:

a. The "residence premises"; (NOTE: The one-family dwelling where the named insured resides; the one, two, three or four family dwelling where the named insured resides in at least one of the units; or the part of any other building where the named insured resides, but only if the premises is shown as the “residence premises” in the policy Declarations. It also includes grounds at that location.)

b. The part of other premises, other structures and grounds used by you as a residence; and

(1) Which is shown in the Declarations; or

(2) Which is acquired by you during the policy period for your use as a residence;

c. Any premises used by you in connection with a premises in a. and b. above;

d. Any part of a premises:

(1) Not owned by an "insured"; and

(2) Where an "insured" is temporarily residing;

e. Vacant land, other than farm land, owned by or rented to an "insured";

f. Land owned by or rented to an "insured" on which a one, two, three or four family dwelling is being built as a residence for an "insured";

g. Individual or family cemetery plots or burial vaults of an "insured"; or

h. Any part of a premises occasionally rented to an "insured" for other than "business" use.

Both a. and b. require the premises to be shown in the policy Declarations unless the named insured acquired them during the policy period. The adjacent roadway sounds as if it fits into c. None of d., e., f., g., or h. seem to apply. Therefore, a home is an “insured location” under both policies only if the Declarations for both policies lists it.

Exclusion 4 in Section II—Liability Coverages states that Personal Liability Coverage and Medical Payments To Others Coverage do not apply to:

"Bodily injury" or "property damage" arising out of a premises:

a. Owned by an "insured";

b. Rented to an "insured"; or

c. Rented to others by an "insured";

that is not an "insured location"

Because of this exclusion, the policy covering the Long Island home will not provide Personal Liability Coverage for an injury arising out of the upstate home unless that home is an insured location under the policy (i.e., is scheduled in the Declarations.) Assuming that the policy covering the Long Island home does not list the upstate home on its Declarations, I agree with the carrier.

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Homeowners Insurance and Coverage for a Trustee

Question from an IIABNY member: If I am trustee for trust on a home in which my parents have lifetime tenancy, can I add the location onto my personal Homeowners policy and umbrella?  In essence, if a claim was filed for trip and fall at this location and the injured person sued my parents and the trust, would my personal HO coverage respond to the claim? Would my policy not respond, since the entity being sued is the trust, not me? 

Answer: A Homeowners policy, under Coverage E – Personal Liability, covers damages for which an insured is legally liable because of bodily injury or property damage caused by an occurrence to which the coverage applies. Exclusion 4 states that the coverage does not apply to bodily injury or property damage arising out of a premises owned by, rented to, or rented to others by an insured if that premises is not an “insured location.” The policy defines “insured location” as:

• The "residence premises" (the premises where the named insured resides)
• The part of other premises, other structures and grounds used by the named insured as a residence; and
  1. Which is shown in the Declarations; or
  2. Which is acquired by the named insured during the policy period for his/her use as a residence;
• Any premises used by the named insured in connection with a premises in a. and b. above;
• Any part of a premises:
  1. Not owned by an "insured"; and
  2. Where an "insured" is temporarily residing;
• Vacant land, other than farm land, owned by or rented to an "insured";
• Land owned by or rented to an "insured" on which a one, two, three or four family dwelling is being built as a residence for an "insured";
• Individual or family cemetery plots or burial vaults of an "insured"; or
• Any part of a premises occasionally rented to an "insured" for other than "business" use.

I don’t see how a residence of which you are a trustee but in which you do not live would meet any of these definitions. In my opinion, your Homeowners policy will not protect you against losses arising out of the residence. If the trust holds legal title to the residence, the safest course would probably be to buy a Dwelling policy in the name of the trust and have liability coverage endorsed onto it. Also, your parents should purchase an HO-4 to cover them for contents, additional living expense, and liability.

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Which Policy Covers a Truck That Never Leaves the Premises?

Question from an IIABNY member: My insured owns a home on a few acres of land. He has a pickup truck that he has not registered with the Department of Motor Vehicles. He uses it only to do chores on his property, such as plowing out his driveway. The truck does not go out on public roads. I think his Homeowners policy should cover the truck for liability, but the company underwriter is saying that it won't because the truck could be registered, even though it isn't now. He's saying the insured has to buy coverage for the truck under his auto policy. Who is right?

Answer: New York Vehicle and Traffic Law Sect. 401 states, "No motor vehicle shall be operated or driven upon the public highways of this state without first being registered..." Your insured is not driving the pickup truck on New York public highways, so the law does not require him to register it. In the ISO Homeowners 3 -- Special Form, Section II--Liability Coverages, Exclusion A. states:

1. Coverages E and F do not apply to any "motor vehicle liability" if, at the time and place of an "occurrence", the involved "motor vehicle":

a. Is registered for use on public roads or property;

b. Is not registered for use on public roads or property, but such registration is required by a law, or regulation issued by a government agency, for it to be used at the place of the "occurrence";...

If the insured injures someone with the pickup at a place (public highways) were the law requires it to be registered, the policy excludes coverage. However, if he injures someone in a place where the law does not require registration (vacant land he owns,) then this part of the exclusion does not apply.

The exclusion goes on to say:

2. If exclusion A.1. does not apply, there is still no coverage for "motor vehicle liability" unless the "motor vehicle" is:...

b. Used solely to service an "insured's" residence;...

Therefore, coverage applies if the insured uses the pickup solely to service the residence. If he were to use it for other purposes (hunting, for example,) the coverage question becomes murkier. It depends on how strictly the insurer defines the word "solely."

If your insured is using the truck only for errands on the premises, then I agree with you that the Homeowners policy should provide coverage and there is no need to add the vehicle to the Auto policy.

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