Ask Tim

Calling All IIABNY Members: Come To Washington in April!

I think we can all agree that last year's elections pretty dramatically altered the political landscape. We have a popular new president with large ambitions and a Congress controlled by the president's party. We also have some issues on the table that have some serious implications for insurance agents and brokers. Consequently, if you haven't done it before, this is the year you should make the trip to Washington, D.C. for the Big "I" Legislative Conference & Convention, April 29 through May 1.

Why is it so important to get involved this year? The big reason: The drive for federal regulation of the insurance industry seems to be gathering momentum. IIABA and IIABNY have steadfastly opposed taking insurance regulation away from the state governments, but the collapse of the banking system has many in Congress thinking that increased regulation of the financial services sector (including insurance) is desirable. This may well be the year that a federal insurance bill begins to move. If you believe in state regulation of insurance, your participation this year is vital.

Other key issues include modernization and reform of the National Flood Insurance Program, health care reform, reform of non-resident licensing rules, changes to the crop insurance program proposed in the president's budget, and funding for natural catastrophes. If these issues are important to you, you need to come to Washington.

The deadline for booking hotel rooms at the Marriott Wardman Park Hotel is March 20, so don't delay in making your reservations. Both IIABNY and IIABA will provide you with materials to get you up to speed on the issues, and there will be briefing on Wednesday, April 29 put on by IIABA's highly-regarded lobbying team. I'm your contact for New York if you have any questions about this event, and you can reach me through the usual channels. This not being a podcast, I won't even throw anything.

I hope to see you all in Washington.        

Insurance Dept. Opinions: Flex-Rating, Life Agent Advertising, New Types of Policies

The New York Insurance Department’s Office of General Counsel continued its recent pattern of having little to say in January. The six new opinions for the second half of the month gives them a grand total of 12 to ring in the New Year.

• New York law prohibits an insurer from marketing a policy intended to protect the value of a retirement account in the event of divorce.
• An automobile dealer may offer its customers an Automotive Replacement Coverage plan that provides a discount toward the purchase of a replacement vehicle when there is a total loss of the original vehicle due to theft, collision or comprehensive causes. However, the amount of the discount cannot exceed the dealer’s cost, and the plan administrator may not indemnify the dealer.
• A provision in a vacation rental lease agreement that affords the renter a full or partial refund of his or her security deposit where the renter cancels for any reason and the amount of the refund that is due is dependent only upon the timing of the cancellation does not meet the definition of insurance in New York law.
• An insurer may use flexible rating for private passenger automobiles predominantly used for business purposes if the automobiles are not used for the transportation of persons for hire. N.Y. Insurance Law Sect. 3426 governs insurance policies that cover private passenger autos predominantly used for business purposes.
• A co-operative property-casualty insurance company may not purchase share certificates from a federally-insured credit union.
• A life insurance agent or broker, in soliciting structured settlement annuities, may not lawfully use a brochure published by a trade association that states, “state insurance guaranty associations provide an additional level of protection for future structured settlement recipients.”

All OGC opinions issued since 2000 are available on the department’s Web site.

When the Insured is His Own Landlord

A member called today with this question, which I get from time to time. His client owns a building in his own name and leases it to a corporation, which he also owns. The question is, what is the best way to cover both the individual and the corporation for their interests in the property and liability exposures.

There are a couple of ways to do this. You can write one package policy naming both the individual and entity as named insureds. This policy would provide coverage on both the building and the contents. However, the underwriter may be unwilling to do this. When an individual is a named insured, the liability insurance picks up coverage for every business that person has ever operated. The underwriter may not want that exposure.

Another alternative is to add the building owner as additional insured under the corporation's GL coverage. That is a perfectly acceptable way to arrange coverage; I imagine that a great many policies are written this way. However, the two insureds will share the liability limits. If the policy carries a limit of $1,000,000 each occurrence, that $1,000,000 applies collectively to the two insureds. That may not be enough to cover judgments against the two of them.

The best way to avoid that situation is to insure the two separately. Write a package policy covering the building owner and a separate policy covering the corporation. True, there is an extra premium cost for this, but now each insured has its own liability limits. The net effect is to give the client more coverage.

I'm curious as to how most agents handle this. What do you do in situations like this? Post your answers in the comments section.    

What is Your Insured's Car Doing This Weekend?

Very interesting post on Roy Mura's Coverage Counsel blog yesterday. Apparently, some car owners are trying to bring in a few extra bucks these days by renting out their vehicles for weekends or longer. I'll let Roy explain it:

One of the pluses of practicing insurance coverage and fraud law is learning new things.  Like yesterday.  A claim rep from a major auto insurer called and told me that their insured had "rented" her personal auto from the metropolitan New York City area to a woman from California, who drove to Maryland to pick up her fiancé (at least, that was her story and she's sticking to it) and became involved in a two-car accident, causing physical damage to the insured vehicle, property damage to the other vehicle and injuries to the other vehicle's occupants.  How did the California driver find the NYC insured?  Craigslist.  That's right.  Craigslist.

Now I myself have bought and sold fishing equipment through Craigslist, but have never seen or even considered making my personal autos available through Craigslist for rental to strangers when I'm not using them.  Auto underwriters take notice:  some of your insureds apparently are doing this.

This is somewhat similar to what folks in the D.C. area were doing last month when they rented out their homes for the inauguration (see my post of Dec. 2.) Of course, a home is stationary, whereas a motor vehicle can travel at high speeds and cause serious injuries and damage. When auto insurance companies sell personal auto policies, I doubt that they have this particular exposure in mind. The underwriter has no way of evaluating the quality of the drivers because she doesn't know who they will be.

These arrangements have all sorts of implications for agents as well. A few pop losses from casual rental situations may sour a good company relationship. Not to mention that they might make the whole controversy over profit sharing moot.

It might be a good idea to ask new customers whether they're doing this (existing customers, too, when the opportunity arises.) These are economically tough times; people are trying to make ends meet any way they can. I hope insurers don't start blanket non-renewals of customers who do this, but they have a right to price for the exposure.

Episode #11 -- Licensing

When one person writes something, he has a pretty good idea of what he meant, even if the writing may not make that clear. It gets a little more complex when two people are involved, more so when three people try to write something together. At some point, as the group grows, you've got a committee. As we all know, committees are the most popular way to take a good idea and bludgeon it to the point where the the original concept is recognizable only through dental records. This is especially so when the committee in question goes by the name of "Congress" or "New York State Legislature."

Because the end results of those esteemed bodies' work product is often baffling on the best of days, I get a lot of questions about licensing (as I am writing this, I have a voice message on my phone from an IIABNY member with a licensing question.) That brings us to episode #11 of Ask Tim. In this installment of the only IIABNY podcast to win a Hermes Gold Award, I discuss:

• Why an agency CSR probably does not need a license unless the insurance company requires it;

• The New York Insurance Department's criteria for an acceptable name on a license issued to a business entity; and

• The legality of paying renewal commissions to the unlicensed survivors of a deceased agent.

New York Insurance Department Office of General Counsel opinions referred to in this episode:

• Dec. 1, 2004: Permissable Duties of Unlicensed CSR of Agency or Brokerage

• June 21, 2005: An Individual Licensed as an Insurance Agent and Broker Using a Trade Name to Transact Business in New York State

• March 25, 2002: Receipt of Insurance Broker's Future Commissions by Unlicensed Executor

Keep an eye peeled for the next episode, which will feature a special guest.

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