Ask Tim

How Does Employee Benefits Liability Apply to Workers' Comp?

Question from an IIABNY member: I have attached the Company X and Company Y Employee Benefits Liability forms. Under the definitions on both forms, Workers Compensation and Disability Benefits are listed. Can you advise how the EBL forms apply to these coverages?

Answer: Both forms cover liability arising out of negligent acts, errors or omissions in the “administration” of employee benefit programs, including workers’ compensation. (Side note: The Company X form calls it “workmen’s compensation”. What century are they living in?) The definitions of “administration” are very similar, including:

• Counseling employees on the plans
• Record handling
• Enrollment and termination of participation

The Company X form also includes “interpreting” the plans in its definition. Since employees do not enroll or dis-enroll from workers’ comp coverage, the real exposure is in counseling, record handling, and interpretation. For example, if management advised an employee not to submit a workers’ comp claim for an injury, I expect the EBL form would cover any resulting legal liability should the employee’s condition worsen.

Record handling is a little more self-evident; losing paperwork, not filing forms with the Workers’ Compensation Board in a timely manner, not completing forms at all, failing to respond to insurance company requests – I think the EBL form would cover liability resulting from these. As far as the one form’s coverage for “interpreting” the plan, the only example I can think of is a manager reading the New York Workers’ Comp Law, applying it to a particular injury situation, and getting it completely wrong. The form should cover resulting liability. 

All of these answers assume that no exclusions or conditions negate coverage.

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Health Care Reform 101

Health reform's complicated - but it can be easily explained. The good folks at the Kaiser Family Foundation have produced a terrific video - that's entertaining to boot - laying out pros and cons, explaining the rationale behind and opposition to reform, and all from a neutral perspective.

via www.joepaduda.com

This post from Joe Paduda's Managed Care Matters blog lists several excellent resources for those of you trying to understand the Patient Protection and Affordable Care Act (aka health care reform.) I especially recommend the Kaiser Family Foundation's video. It's about 9 minutes long, illustrates the various features of the law, and points out the arguments of those on both sides of the debate. It's a good educational tool for both clients and insurance professionals trying to get a handle on the changes we'll see over the next several years.

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Insurance Dept. Opinions: Occupational Titles, Fees, & Compensation Disclosure

The New York Insurance Department’s Office of General Counsel issued 6 new advisory legal opinions between Sept. 7 and 14 and posted them to its Web site last week.

• Nothing in the Insurance Law bars a licensed insurance agent or broker from using an occupational title in addition to her title of insurance agent or broker. However, she should not use the title in a way that could mislead an insured or prospective insured.
• An insurance company’s requirement that a customer insure her primary home with the company as a condition of covering her second home violates the anti-rebating law because it is an inducement not specified in the policy covering the primary home.
• A managing general agent may not charge an insured an inspection fee even if the insurer the MGA represents requires the MGA to order and pay for the inspection.
• A so-called “lease deposit bond” is either surety insurance, financial guaranty insurance or both, but not residual value insurance.
• Interest on overdue no-fault benefit payments stops accruing on the date the claimant fails to commence a legal action within 30 days of the receipt of a denial of claim form; it does not resume accruing until the claimant actually commences the action.
• Regulation 194 (the producer compensation transparency regulation) does not require an insurance broker to provide information about his compensation if an insured requests it 45 days before or 90 days after the renewal of the policy. However, he may find it desirable to provide the information to a renewing insured at the insured’s request regardless of the time of the insured’s request. The broker must disclose certain general compensation information to a new insurance purchaser without the purchaser asking. The regulation takes effect on Jan. 1, 2011.

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

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Ask Tim Episode #20 -- Golf Carts and Insurance Coverage

Summer has made its annual exit here at IIABNY headquarters. This means the rapidly approaching end to the golf season, and that's too bad, because my game really improved this year. I don't mean to brag, but the last time I played I came this close to hitting the ball on the fairway and my 15 year-old son only rolled his eyes at me on five of the nine holes we played. Yes, my friends, this has been a summer of personal growth.

The new episode of Ask Tim finds me on the green going for a quintuple bogie (yeah, I wear a jacket and tie when I golf -- you got a problem with that?) While I let a few foursomes play through, I discussed how auto and homeowners insurance apply to golf carts.

• This episode is brought to you by Trusted Choice^®
• The Homeowners policy does not cover a motor vehicle used for business except for a motorized golf cart being used on a golf facility
• Homeowners policy covers personal golf carts while being used, stored or parked at a golfing facility
• It also covers personal golf carts used at a private residential community where golf carts can legally travel on public roads, if the community is under the authority of a property owners' association and the insured has a residence there.
• The Personal Auto Policy does not provide liability coverage for vehicles designed for use off public roads, but it does cover non-owned golf carts.
• For more information, visit the IIABNY Research Library
• Thanks to Tom Drury for the use of his putter

 

Download Ask Tim Episode #20

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No Driver's License, No Coverage?

Question from an IIABNY member: We have a client that has a business auto policy. He gave permission to one of his employees to drive one of the cars and there was an accident. The driver didn't have a license, but the insured did not know that. Would he be covered for that accident?

Answer: If the policy is equivalent to the ISO Business Auto Policy, it should cover both the organization and the driver for liability. The “Who Is An Insured” provision in the Liability section of the policy states:

The following are "insureds":

a. You (The named insured shown in the declarations) for any covered "auto".

b. Anyone else while using with your permission a covered "auto" you own, hire or borrow except:

(1) The owner or anyone else from whom you hire or borrow a covered "auto". This exception does not apply if the covered "auto" is a "trailer" connected to a covered "auto" you own.

(2) Your "employee" if the covered "auto" is owned by that "employee" or a member of his or her household.

(3) Someone using a covered "auto" while he or she is working in a business of selling, servicing, repairing, parking or storing "autos" unless that business is yours.

(4) Anyone other than your "employees", partners (if you are a partnership), members (if you are a limited liability company), or a lessee or borrower or any of their "employees", while moving property to or from a covered "auto".

(5) A partner (if you are a partnership), or a member (if you are a limited liability company) for a covered "auto" owned by him or her or a member of his or her household.

c. Anyone liable for the conduct of an "insured" described above but only to the extent of that liability.

Therefore, a person using an auto owned, hired or borrowed by the named insured, with the named insured’s permission, is an insured unless he owns it, is in the auto business, or is moving property to or from a covered auto. The policy does not address the question of licensing status, so the driver’s lack of a license will not affect coverage. It might affect the underwriter’s decision-making at the next renewal, but the loss should be covered unless a policy exclusion applies.

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N.Y. Insurance Dept. Proposes New Regulations for Coastal Properties

Insurance companies soon may not be permitted to apply a special deductible for wind damage unless a hurricane actually makes landfall in New York. This is one of a number of consumer protection measures in proposed new regulations announced today by New York State Insurance Superintendent James Wrynn. The regulations are part of a comprehensive plan by the Department to help ensure the availability and affordability of homeowners insurance in coastal areas, Wrynn said.

via www.ins.state.ny.us

The weather experts keep telling us that it's not a question of if a hurricane will strike the New York City metro area, it's a question of when. The forecasters and the insurance companies have been waiting for the big one to pummel Long Island ever since Hurricane Andrew in 1992. The effect on the homeowners insurance market there has been dramatic. Depending on your proximity to the Atlantic Ocean in those areas and the replacement cost of your home, you may be unable to get coverage in the admitted market. Wherever you get coverage, you will buy a very high windstorm deductible and pay a large premium. Insurers properly argue that they must underwrite and price in accordance with the risk, and the risk is high. In addition, reinsurers often force primary insurers to take these measures as a condition of assuming part of the risk. These arguments, however, are small comfort to homeowners in those areas.

Now comes the news that the New York Insurance Department has prepared regulations to address the market situation there. The biggest change in the proposal would create separate wind deductibles -- one for hurricanes and the other for all other types of wind-related losses. The hurricane deductible would retain the characteristics that we've come to associate with the old windstorm deductibles, expressed as a percentage of the limit of insurance covering the home and ranging from one percent to five. The new windstorm deductible (the one applicable to non-hurricane losses) will apply in the same way as the deductible that applies to other covered perils (fire, explosion, etc.) The hurricane deductible will apply only when the National Weather Service has determined that a Category One or higher hurricane has made landfall in New York State. It will apply to direct damage losses occurring during the window starting 12 hours before the hurricane makes landfall in New York and ending 12 hours after the National Weather Service cancels the last hurricane watch or warning it issued for that storm in New York.

The department is proposing other changes that I'll discuss in future blog posts. This news has to come as something of a relief to agents and brokers in the coastal areas, particular eastern Suffolk County. However, I'm interested in your reactions. What do you think about the department's proposal. Is it enough? Is it too little, too late? How will the companies react? Leave your thoughts in the comments.

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Health Care Reform Phase 1: Changes Effective Tomorrow

While much of the federal Patient Protection and Affordable Care Act (aka health care reform) does not fully take effect until 2014, some key provisions affecting health insurance apply to health plan years beginning on or after tomorrow, September 23, six months from the date the president signed the law. The changes include:

• Young adults can stay on their parents' plans until age 26 unless the parents have a group health plan and the young adult has the option to purchase a plan where he works.
• Plans created since March 23, 2010 must cover certain preventive care procedures such as cancer screenings, mammograms and colonoscopies and may not charge deductibles, co-payments or coinsurance. The plan may charge a fee if the patient uses an out-of-network provider. Plans created before March 23 are not subject to this requirement.
• Insurers may not rescind coverage after an insured gets sick. This was a larger issue in states, such as California, that have a large individual health policy market; New York's individual market is comparatively small, so it has not been a major issue here.
• New procedures for patients to appeal insurers' claims decisions and an external review process apply to plans created after March 23.
• Insurers may no longer apply lifetime dollar limits on "essential" benefits, such as in-patient care at hospitals, and new restrictions on annual limits apply. 
• Insurers may not deny coverage for children under age 19 who have pre-existing conditions.

These changes come on top of those implemented earlier this year, including small business health insurance tax credits, the closure of the so-called "donut hole" for Medicare prescription drug beneficiaries, funding to state governments for expanded Medicaid coverage, new screening procedures to reduce fraud in public health programs, an early retiree reinsurance program, and coverage pools for uninsured persons with pre-existing conditions.  

This law remains controversial six months after its enactment, particular the requirement beginning in 2014 that most individuals purchase health coverage or pay a tax penalty. That requirement is more than three years away. What do you think of the changes that take effect this month or that have already taken effect? Are they desirable? Too expensive? Too intrusive? Long overdue? Do they not go far enough? Leave your thoughts in the comments.

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How NOT To Use Social Media

, Price Chopper Attacks Customer's Job Over Negative Tweet

Last week, I posted comments from Kelly Lux's blog as an example of how insurance agencies should be using social media to build strong relationships with their customers. Today, I have the exact opposite, ironically coming from the same industry as the first example.

Whether or not you think the business in question here was justified in its reaction, there is no doubt in my mind that this is a public relations disaster for the company. Unless you think that appearing vindictive and mean-spirited is a valid marketing strategy, you may want to avoid doing this sort of thing in the future. (For informational purposes only, let me clarify that this is my opinion and not IIABNY's.)

What do you think? Was the business's response appropriate or excessive? How would you or your staff respond to similar criticism posted on Twitter or Facebook? I suspect that this sort of thing is bound to happen to most organizations, my own included. Someone, somewhere will not like something the organization does and will say so on a social media site. What can we learn from the incident described in this post, and how should we handle it when it happens to us?

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Ask Tim Special Episode #3: Additional Named Insured vs. Additional Insured

Back with another quick special episode, this one inspired by an e-mail question I got last week. The member wanted to know the difference between an additional insured and an additional named insured. I try to sum it up in two minutes and 37 seconds.

 

Download Ask Tim Special Episode #3

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Friday Pot Pourri: A Mish-Mash of Questions

It's after five on a Friday, and the research director's brain is officially oatmeal. At this point, the toughest questions I want to answer are, "What do you want for dinner?" and "Heineken or Sam Adams?" However, before I sprint out of the Geek Cave for the weekend, here's some answers to a few of the questions that have come across my e-mail and phone in the last couple of days:

• When it comes to an insurance agency holding a raffle, the New York Insurance Department says there are two requirements to avoid violating the anti-rebating law: The raffle must be open to the public, and "the ability to win or enter the raffle must not be an inducement for, or interdependent with the purchase or solicitation of insurance." If a raffle entry results in the agency soliciting the contestant's business, the raffle violates the anti-rebating law. I'm not sure why else an agency would hold a raffle, so take this under advisement.
• A life insurance company may have to pay the death benefit to the survivors of an insured who lied about his smoking habit when he applied for the insurance 10 years prior. However, the ultimate answer depends on the facts of the case and whether certain court decisions apply.
• A not-for-profit organization's bulk mailing that contains an advertisement for an insurance policy is not eligible for a reduced postage rate unless the organization promoting the policy is authorized to mail at the nonprofit rates at the office of mailing; the policy is designed for and primarily promoted to the members, donors, supporters, or beneficiaries of that organization; and the coverage provided by the policy is not generally otherwise commercially available.
• New York law requires insurers to obtain anti-arson applications for all policies insuring properties in New York City, Rochester and Buffalo for fire explosion except for those covering owner-occupied residential properties with less than five units.
• Insurers, agents and brokers have no statutory responsibility under the New York State Construction Industry Fair Play Act to provide the required notices to contractors.
• The ISO Commercial General Liability Coverage Form probably will not cover the insured's legal liability for a misleading advertisement, an unsuccessful transaction on the Web, or theft of information from the insured's computer systems. A specialty cyber-risk policy, the ISO Electronic Data Liability Coverage Form and the ISO Crime Computer Fraud and Funds Transfer Fraud coverages are the appropriate policies for these types of losses.
• A New York insurance broker may accept commissions and service fees for the same transaction.
• The insurance license for an agency cluster must name at least one actual person as a sub-licensee, but it should not list the names of the agencies that are members of the cluster.
• When a commercial package policy insured a property destroyed by fire, and the insured wishes to cancel the property coverage but continue the liability coverage, the only practical way to do so is to cancel the package and issue a standalone liability policy.

And that will close the book on the week of September 13. A blessed and enriching Yom Kippur to all my readers of the Jewish faith, and a restful weekend to all!

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