Ask Tim

The NYS Insurance Fund and 30 Days' Notice of Cancellation

Question from an IIABNY member: We continually have major issues with the New York State Insurance Fund. One of the most confusing issues is cancellation of policies with them and their "30 days after notice is given" policy. When we send them a Lost Policy Release, it is noted in their system, but they will not cancel a policy for 30 days, leaving insureds with large bills and over-lapping coverages. Given this day and age of people changing insurance companies at the drop of a dime, it is very hard to explain to them that NYSIF will not cancel their policy for an additional 30 days despite a legal document authorizing them too.
 
I guess I am looking for a little guidance on whom to contact at NYSIF or how to go about raising this issue (I am positive it is not the first time it has come up) with them. 

Answer: In this case, I have to let the State Insurance Fund off the hook and blame the New York State Legislature. The legislature writes the laws, and this is what they wrote in New York Workers’ Compensation Law Section 94:

Any employer may, upon (obtaining insurance coverage from a private carrier or providing proof of its ability to self-insure), withdraw from the fund by turning in his insurance contract for cancellation, provided he has given written notice to the fund of his intention to withdraw not less than thirty days before the effective date of such cancellation. Upon receipt of such notice the fund shall, at least ten days prior to the effective date file in the office of the chairman a notice of such cancellation date. (emphasis added)

In no event shall the insurance contract be deemed cancelled until at least ten days after the date of such filing, any earlier date mentioned in the notice to the contrary notwithstanding. (emphasis added again)

If an employer withdraws from the fund upon (obtaining coverage from a private carrier), the new insurance contract with the stock corporation, mutual corporation or reciprocal insurer shall be deemed not to take effect until the cancellation of such employer's contract with the state insurance fund has become effective.

Therefore, by law an employer cannot withdraw from the NYSIF without providing at least 30 days’ notice. Plus, the NYSIF must give at least 10 days’ notice to the Workers Compensation Board, and the policy is not cancelled until those 10 days are up. You don’t add these together – the Fund could receive a notice today advising of cancellation on Aug. 5, send the notice to the WCB tomorrow, and the cancellation will take effect on Aug. 5. Nothing in the law requires the Fund to wait. But the fact remains that the law requires the employer to give the 30 days’ notice.
 
Because this is a legal requirement, I don’t think the Fund is in a position to do anything about your insureds’ problem. By law, the replacing policy cannot take effect until the end of the 30-day notice period, so there really should not be dual coverage and premiums for the same time period.

Leave a Comment

Book Review: 'General Liability Insurance Coverage: Key Issues in Every State'

Occasionally, I’ll answer a research question for an IIABNY member and I’ll be asked, “How do you know this stuff? How do you get these answers so fast? You must be the answer man!” It’s flattering, but I would be lying if I called myself a walking insurance encyclopedia. I’m not. I’m only half kidding when I tell people my job is to look stuff up. After all, one of my titles is “director of research,” and what is research other than looking things up? I can get answers quickly for IIABNY members because I have some excellent research tools, and I’ve become adept at using them (nine years on the job will do that for you.)

Last winter, I got another great research tool, one that will serve me well for a long time to come. Often, a member will ask me if there are any court decisions that might bolster his position in a dispute over a claim. Sometimes I can find one, but they can be hard to find given the resources I have. Now, however, it’s a little easier, at least with regard to commercial general liability coverage. That’s because I have a terrific book by Randy Maniloff and Jeffrey Stempel titled General Liability Insurance Coverage: Key Issues in Every State (Oxford University Press, New York, trade paperback, 514 pp., $125.00.) If you underwrite or sell CGL coverage or if you adjust CGL claims, you need to have a copy of this book in your office.

Maniloff and Stempel have examined a number of CGL coverage issues, such as:

• When does the insured have a right to independent counsel?
• How do you determine how many occurrences took place?
• Is faulty workmanship an occurrence?
• What triggers coverage for latent injury and damage claims?
• Coverage for innocent co-insureds when another insured committed the harm.
• How the qualified and absolute pollution exclusions apply.
• Just how far indemnification agreements in construction contracts can go.

Each chapter has the same structure. A few pages (four to six) discussing the issue and the different approaches taken by courts, followed by a survey of statutes and/or court precedents in each of the 50 states. I of course made a beeline for the discussions of New York law after each chapter. The section on indemnification agreements quotes a provision from New York General Obligations Law Sect. 5-322.1 that prohibits indemnification for the indemnitee’s own negligence. The discussion of the duty to defend cites the New York Court of Appeals’ decision in Fitzpatrick v. American Honda Motor Co., Inc. and quotes an illustrative passage from the opinion. The chapter on whether faulty workmanship is an occurrence is especially valuable given that this is a major area of dispute right now (South Carolina has actually enacted a law to answer this question.) The material is well-organized and it’s easy to find the section and state you’re looking for.

Maniloff and Stemple couldn’t cover everything in one book, and some areas of the law are still developing. Still, I would have liked to see some discussion of cyber liability issues. A review of personal and advertising injury coverage as it relates to web sites, email and social media tools would also be interesting. And, though it’s a completely separate policy, I’d like to see a review of employment practices liability issues such as disparate treatment and disparate impact claims, harassment, and wage discrimination claims.

Those are nitpicks, however. This is an excellent resource, one that I hope will see future updates as the body of case law grows. I highly encourage everyone reading this to make sure their offices have a copy.

Leave a Comment

 

Health Care Reform Primer: Cost-Sharing Reductions

My last post in the health care reform primer was on tax credits to help individuals and families buy health insurance. Closely related to that is today's topic: Cost-sharing reductions.

Individuals with incomes between 100 and 400 percent of the poverty line for their family size, and who enroll through an exchange in a plan providing the silver coverage level are eligible for reduced cost-sharing. Legal aliens who are ineligible for Medicaid are considered to have household income equal to 100 percent of the poverty line. The federal department of Health and Human Services must notify the plan issuer that the person is eligible. The amount of the cost-sharing reduction varies by income level and works like this:

Income compared to poverty line is —	Cost-sharing is reduced by —	Plan's share of total allowed cost of benefits cannot exceed ——
101 to 150%	Two-thirds	90%
151 to 200%	Two-thirds	80%
201 to 300%	One-half	70%
301 to 400%	One-third	70%

The plan must notify HHS of the reductions. HHS will make "periodic and timely payments" to the plan equal to the value of the reductions. 

Additonal notes:

• Cost-sharing reductions do not apply to benefits that are over and above the essential health benefits, other than pediatric dental benefits. 
• Individuals of American Indian descent with household incomes of 300 percent of the poverty line or less have no cost-sharing at all. Plans cannot reduce their payments to designated Indian health providers by the amounts of the eliminated cost-sharing.
• Illegal immigrants are ineligible for cost-sharing reductions. For purposes of determining income eligibility, family size does not include household members that are illegal immigrants. The family's household income is calculated by reducing it to reflect the presence of the illegal immigrant.
• The law considers a person to be in the U.S. legally if he is, and "is reasonably expected to be" for the enrollment period for which cost-sharing reduction is claimed, a citizen, national, or alien lawfully present in the U.S.

The next post will be about how the government will determine whether someone is eligible to participate in the exchanges, receive the tax credits and cost-sharing reductions, and claim an exemption from the individual mandate.

Leave a Comment

How Does Daughter's Car Affect Mom's Auto Insurance?

Question from an IIABNY member: We recently wrote an auto policy for a child of an insured.  The car insured is titled to the parents.  We wrote the policy with Progressive, as they will write a parent and child as Named Insured.  The car is solely driven by the child. The underwriter at the parent’s company is now coming back to us with a concern that the parent (in this case, the mother) is listed as a Named Insured on the policy with the daughter.  The underwriter says “leaving the mother on the policy can come back on their account if a serious incident occurs.”   By “their account”, I assume she means the parent’s policy.   Before I call the underwriter back, I wanted to consult with you.  Am I correct that the car in question would not meet the definition of a “covered auto” under the parent’s policy, since it isn’t listed on their policy?   I’m sure the underwriter is concerned that their policy could be dragged in somehow on a clam for the daughter’s car.  Is this a genuine concern in your opinion?

Answer: If the daughter is under age 18, this could be a valid concern. Otherwise, however, the parents’ company does not have to worry about being dragged into a liability claim involving the child’s use of her car. The ISO Personal Auto Policy’s Definitions section states:

J. "Your covered auto" means: 

1. Any vehicle shown in the Declarations. 
 
2. A "newly acquired auto". 
 
3. Any "trailer" you own.
 
4. Any auto or "trailer" you do not own while used as a temporary substitute for any other vehicle described in this definition which is out of normal use because of its:
 
a. Breakdown; 
b. Repair;
c. Servicing;
d. Loss; or
e. Destruction.

This Provision (J.4.) does not apply to Coverage For Damage To Your Auto.

The Liability section states:

B. We do not provide Liability Coverage for the ownership, maintenance or use of:…

3. Any vehicle, other than "your covered auto", which is:

a. Owned by any "family member"; or
b. Furnished or available for the regular use of any "family member".

However, this Exclusion (B.3.) does not apply to you while you are maintaining or "occupying" any vehicle which is:

a. Owned by a "family member"; or
b. Furnished or available for the regular use of a "family member".

Therefore, because the daughter’s vehicle does not fall within the definition of “your covered auto,” the policy does not cover her vehicle unless the parents are using it, in which case the parents’ policy will apply on an excess basis. 
 
Where the parents’ carrier could get caught is if the daughter bought low liability limits (i.e., the minimum or slightly above) and the parents have an accident while using her car. Example: Assume she bought the minimum limits from Carrier X. The family is having a backyard barbeque and they run out of charcoal. Dad, after consuming a couple bottles of beer, volunteers to run to the supermarket, but his daughter’s car is blocking his car in the driveway. He borrows her car, heads for the store, and clips a bicycle rider, causing significant injuries. Carrier X is on the hook for the first $25,000 in damages (the New York minimum is $25,000 for injury to any one person), and the parents’ policy is responsible for the excess. If the bicyclist is seriously injured, this could be a very large loss for the parents’ carrier.
 
The obvious solution is to have the daughter buy limits at least equal to those of her parents. Of course, cost becomes a consideration with youthful operators. 

Leave a Comment

 

Health Care Reform Primer: Premium Tax Credits

What better way to pass these hot summer days than a cool glass of lemonade and the federal health care reform primer? Don't answer that. Just read on about the premium tax credits available under the federal Patient Protection and Affordable Care Act. And get ready for some math.

Starting in 2014, taxpayers with household incomes between 100 percent and 400 percent of the federal poverty line for their family size may receive monthly premium assistance (in the form of federal income tax credits) in an amount equal to:

• The monthly premium for one or more qualified health plans, offered in the state's individual market and enrolled in through the state's exchange, covering the taxpayer, his or her spouse, and/or his or her dependents; or
• The excess (if any) of the adjusted monthly premium for the applicable second lowest cost silver plan for the taxpayer over 1/12 of the applicable percentage multiplied by the taxpayer's household income

Whichever is less.

Want that in English? Let's start by explaining those terms in bold.

The applicable second lowest cost silver plan (see my prior explanation of gold, silver and bronze plans) is the second lowest cost silver plan of the individual market in the rating area where the taxpayer resides. It must be offered through the same exchange that offered the plan the taxpayer actually bought and must provide either self-only coverage or family coverage.

The adjusted monthly premium is the premium that would have been charged for the "applicable second lowest cost silver plan" if it had covered each covered individual and if the premium had been adjusted only to reflect the ages of the covered individuals.

The applicable percentage is a number between 2.8 and 9.8 percent. It's calculated by adding 2.8 to the result of the following formula:

Annual household income minus 100% of the federal poverty line   X    7
200% of the federal poverty line

For example, assume a family of four with a household income of $40,000. The 2011 federal poverty line for a family of four is $22,350. Our calculation looks like this:

$40,000 - $22,350    X   7
$44,700

0.39485   X   7   =   2.8

Applicable percentage = 2.8 + 2.8 = 5.6

Still with me? To figure out this family's monthly premium tax credit, you need to know A) the monthly cost of the plan they bought, and B) the adjusted monthly premium for the second lowest cost silver plan in their rating territory. Let's assume that their actual monthly premium is $1,200 and the adjusted premium for the second lowest cost silver plan is $1,000. Our new calculation is:

Adjusted monthly premium for second lowest cost silver plan - (1/12 X applicable percentage X annual household income)

$1,000 - (5.6% X $40,000
                      12)

$1,000 - ($2,240/12)

$1,000 - $187 = $813

We now compare this to the amount they're actually spending on their plan ($1,200 per month.) Since $813 is less than $1,200, this family gets a tax credit of $813 for each covered month for the purchase of health insurance. Their net cost for health insurance falls from $1,200 to $387 per month.

An exception applies for families with incomes between 100 percent and 133 percent of the poverty line. The applicable percentage for a family in this category is a flat 2 percent. In my example above, if the family's household income is $25,000 (112 percent of the poverty line), the tax credit jumps to $958, reducing their net monthly cost for health insurance to $242. That may look small, but it's still more than 11 percent of the household's monthly income. Not exactly a free ride.

A few final notes:

• To qualify for the credit, married couples must file joint tax returns.
• The federal Treasury Department must adjust the applicable percentage calculation each year to reflect the amount that premium growth exceeds income growth.
• The amounts used in the calculation for monthly premium and adjusted monthly premium for the second lowest cost silver plan may not include the cost of benefits above and beyond the essential health benefits, whether required by state law or offered voluntarily by the plan. However, they do include the costs of pediatric dental plans.
• Legal aliens who are ineligible for Medicaid are considered to have a household income equal to 100 percent of the poverty line.
• The premiums used for calculating the credit are reduced by the amount of premium attributable to each covered person who is an illegal alien. A similar reduction applies to the calculation of the ratio of household income to the federal poverty line.
• If a taxpayer has taken an advance payment of the credit (I'll cover that in a later post,) the amount of the actual credit is reduced by the amount of the advance. If the amount of the advance is greater than the amount of the actual credit, the taxpayer will owe the excess as an additional tax. The additional tax is capped at $400 for families below 400 percent of the poverty line, and the cap will be indexed each year to increase with the cost of living.
• The U.S. Comptroller General must conduct a study on how the tax credits have impacted maintaining and expanding health insurance coverage for individuals, the availability of affordable health plans, and the ability of individuals to maintain coverage. A report on the study is due to Congress by by March 23, 2015.

I know this post is heavy on technical tax detail, but I think it's important to know what the government intends to do to help people pay for health insurance. Many have argued that the country cannot afford these premium subsidies, while others argue that the country cannot afford the financial strain of tens of millions of uninsured people. I won't argue one side of the other; my purpose here is just to show you how the numbers work for you, your families, and your clients.

I'll be back shortly with a new post on the reduced cost-sharing provisions for individuals.

Leave a Comment

 

Ask Tim, Episode #22 -- NY No-Fault and Intoxicated Drivers

Now that I have episode #21 posted, it's time to turn to episode #22 of Ask Tim. This time, I give an in-depth discussion of a topic that I previously covered in a blog post. Effective last January, insurance carriers must provide no-fault insurance benefits for emergency health services when the injured person was operating a vehicle while intoxicated or while impaired by a drug.

• Previously, no-fault did not cover these services, which resulted in health care providers giving treatment for free
• Coverage is for services provided under the direction of a physician or emergency medical technician, including ambulance services, provided at the scene of the accident and at the hospital.
• Coverage ceases when the patient is stabilized
• The carrier may have the right to recover its payments from the injured person
• For more information, read the New York Insurance Department's Circular Letter No. 4 of January 12, 2011

 

Download Ask Tim #Episode 22

Leave a Comment

Ask Tim, Episode #21 -- Where You Reside

Somehow or other, I never posted episode #21 of Ask Tim, which hit the streets almost four months ago. I think I was traveling that week. No matter, here I am in an out-of-this-world setting discussing a very earthly problem: The fate of an insured's homeowners insurance coverage when he owns the home but no longer resides there.

• The ISO Homeowners policy covers the dwelling and other structures at the "residence premises" -- the dwelling where the named insured and spouse reside
• Some carriers have interpreted this to mean that, once the named insured leaves the dwelling with no intent to return, coverage for the dwelling, other structures and additional living expenses ceases immediately
• Court decisions across the country are divided on this
• Clients in this situation need dwelling policies
• More information on the Big I Virtual University Web site

 

Download Ask Tim Episode #21

 

Leave a Comment

Coverage on a Golf Cart When It's Not Used for Golfing

Question from an IIABNY member: I would like some information on golf carts and what & when  insurance applies.  We have a customer who belongs to a  Yatch Club and drives the golf cart around on the camp site  and stores it there for the summer.  He is not using it for golfing. Is there coverage?

Answer: With regard to liability coverage, Exclusion A.2. of the ISO Homeowners 3 policy states:

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

e. A motorized golf cart that is owned by an "insured", designed to carry up to 4 persons, not built or modified after manufacture to exceed a speed of 25 miles per hour on level ground and, at the time of an "occurrence", is within the legal boundaries of:

(1) A golfing facility and is parked or stored there, or being used by an "insured" to:

(a) Play the game of golf or for other recreational or leisure activity allowed by the facility;

(b) Travel to or from an area where "motor vehicles" or golf carts are parked or stored; or

(c) Cross public roads at designated points to access other parts of the golfing facility; or

(2) A private residential community, including its public roads upon which a motorized golf cart can legally travel, which is subject to the authority of a property owners association and contains an "insured's" residence.

I don’t think an insurer would consider a yacht club or a camp site to be a private residential community, since it is not under the authority of a homeowners or condo association and the insured does not have a residence there. Consequently, I believe there would be no liability coverage under the Homeowners policy.

With regard to property coverage, Section I -- Property Coverages, Coverage C—Personal Property states:

4. Property Not Covered

We do not cover:…

c. "Motor vehicles".

(1) This includes:

(a) Their accessories, equipment and parts; or

(b) Electronic apparatus and accessories designed to be operated solely by power from the electrical system of the "motor vehicle". Accessories include antennas, tapes, wires, records, discs or other media that can be used with any apparatus described above.

The exclusion of property described in (a) and (b) above applies only while such property is in or upon the "motor vehicle".

(2) We do cover "motor vehicles" not required to be registered for use on public roads or property which are:

(a) Used solely to service an "insured's" residence; or

(b) Designed to assist the handicapped;...

Since the insured is not using the golf cart to service his residence and a golf cart is not designed as a handicapped assistance vehicle, the HO policy will not cover damage to it.

The appropriate way to insure an owned golf cart is to add ISO endorsement PP 03 29 01 05, Miscellaneous Type Vehicle Endorsement – New York to the insured's personal auto policy.

Leave a Comment