Ask Tim

So How Do You Like Giving Your Money To No-Fault Crooks?

ALBANY, N.Y., Sept. 15 /PRNewswire-USNewswire/ -- Excessive billings by medical mills, fraudulent companies that provide few if any real health care services to the public, are a key factor in driving New York State's no-fault automobile insurance fraud crisis. New data shows the problem with medical mills' excessive treatment is growing, according to the New York Alliance Against Insurance Fraud (NYAAIF).

via www.prnewswire.com

Think about this next time you write a check for auto insurance or deliver a policy to a client. A large chunk of the premium goes to cover the cost of criminal activity. Unfortunately, this is an old story here in the Empire State. Organized crime is making a bundle off fraud in the no-fault system. Someone recruits someone to stage an accident, and that someone goes to someone else for "medical treatment", and that someone reports 10 tests on the bill to the auto insurer when maybe he actually only did one. And every participant in this dance gets a little piece of the action, and heck, they're only screwing insurance companies, so who cares, right?

Well, they're not only screwing insurance companies because most insurance companies are not non-profit organizations. They want to recover their costs and then some. Their stockholders have kind of come to expect it (mutuals are another story, but they have revenue pressure as well.) So, if no-fault fraud is raising their costs, and they can invest the premium money and make a whopping 0.5 percent interest, they have little choice but to get revenue from their customers. So we all pay for the ruthless, immoral actions of common thugs.

IIABNY, along with its partners in the New York First reform coalition, has been lobbying the New York State Legislature for years to enact serious no-fault reform. If acting as a "runner" (the person who recruits the participants) was a felony, and if companies had more time to investigate potential fraud, and if arbitration of disputed claims was mandatory, and if there were written medical protocols for treatment of no-fault injuries, the numbers the NYAAIF described in this release might shrink. And that would be good for everyone who uses a car in New York.

Until that happens, we can continue cheerfully handing over our money to the medical mills and the crooks who are backing them.

UPDATE Sept. 27, 2010: Say what you will about Geico (yes, their ads are so ubiquitous that I sometimes feel like the sound of one more will inspire me to stick sharp objects in my eyes and ears,) but they are putting their money behind the fight against no-fault fraud. Good for the gekko! I hope their lawsuits are successful.

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New Law Lets Municipal Reciprocals Write Some Fidelity and Surety Coverage

Question from an IIABNY member: We are looking for someone that can tell us what Senate Bill 5110, which changes the authority for municipal reciprocals, means. What does it allow the reciprocals to offer for insurance in New York?  Does the reciprocal now have the ability to bond all employees for dishonesty beyond the individuals doing official undertakings? Or is it just the people handling the financials? Such a bond would be a blanket bond and not a specific bond on a person or job title? Can the reciprocal offer that? Does the reciprocal have the ability to offer crime insurance for non-employees such as forgery, money and securities, computer fraud and wire transfer? If they do not now would it be just a matter of them filing the necessary paperwork to be able to offer this type of insurance?

Answer: Senate Bill 5110, which the governor signed into law on Aug. 13, changes N.Y. Insurance Law Sect. 6102(a). That section permits 25 or more various governmental units (counties, towns, school districts, etc.) to organize a statewide municipal reciprocal insurer. Under the prior law, the reciprocal could provide one or more of the following coverages:

• Fire
• Burglary and theft
• Glass
• Boiler and machinery
• Elevator
• Animal
• Personal injury liability
• Property damage liability
• Marine protection and indemnity

The new law authorizes the reciprocal to provide fidelity and surety for official undertakings conditioned for the faithful performance of official duties by a public officer, as referenced in N.Y. Public Officers Law Sect. 11. N.Y. Public Officers Law Sect. 2 defines “officers” this way:

The term "state officer" includes every officer for whom all the electors of the state are entitled to vote, members of the legislature, justices of the supreme court, regents of the university, and every officer, appointed by one or more state officers, or by the legislature,  and  authorized  to exercise his official functions throughout the entire state, or without limitation to any political subdivision of the state, except United States senators, members of congress, and electors for president and vice-president of the United States. The term "local officer" includes every other officer who is elected by the electors of a portion only of the state, every officer of a political subdivision or municipal corporation of the state, and every officer limited in the execution of his official functions to a portion only of the state. The office of a state officer is a state office. The office of a local officer is a local office.

Therefore, the reciprocal’s ability to offer fidelity and surety coverage is limited only to officers as defined above and not to all municipal or state employees. As to the structure of the bonds (blanket vs. position), I imagine that they would probably be position or name based, since it is only certain officeholders who must obtain these bonds.

With regard to whether the reciprocal can offer crime insurance, you have to refer back to the definitions of “burglary and theft insurance” and “fidelity and surety insurance” in N.Y. Insurance Law Sect. 1113(a). Sorry, but they’re kind of long:

(7) " Burglary and theft insurance ," means:

(A) Insurance against loss of, or damage to, any property resulting from burglary, theft, larceny, robbery, forgery, fraud, vandalism, malicious mischief, confiscation, or wrongful conversion, disposal, or concealment by any person, or from any attempt thereof;

(B) Insurance against loss of, or damage to, moneys, coins, bullion, securities, notes, drafts, acceptances, or any other valuable papers or documents, resulting from any cause, except while in the custody or possession of, and being transported by, any carrier for hire or in the mail;

(C) Insurance of individuals by means of an all-risk type of policy commonly known as the "Personal Property Floater" against any kind and all kinds of loss of, or damage to, or loss of use of, any personal property other than merchandise;

(D) Insurance covering a ransom or reward payment incurred as the result of an abduction or the theft of property; travel and lodging expense and lost wages incurred as the result of an act or threatened act of violence; expense incurred to locate or identify a missing or abducted person; or other expenses to respond to a violent act or threatened act, or to prevent a reoccurrence thereof; and

(E) Insurance against losses and expenses resulting from a " stolen identity event ," which shall include the theft, accidental release, or publication of, or misappropriation of information related to, an individual's personal identification, social security number, or other method of identifying the individual, that has resulted in, or could reasonably result in, the wrongful use of the information.

(16) " Fidelity and surety insurance ," means:

(A) Guaranteeing the fidelity of persons holding positions of public or private trust; and indemnifying banks, thrifts, brokers and other financial institutions against loss of money, securities, negotiable instruments, other specified valuable papers and tangible items of personal property caused by larceny, misplacement, destruction or other stated perils including loss while being transported in an armored motor vehicle or by messenger; and insurance for loss caused by the forgery of signatures on, or alteration of, specified documents and valuable papers;

(B) Insurance against losses that financial institutions become legally obligated to pay by reason of loss of customers' property from safe deposit boxes;

(C) Any contract bond; including a bid, payment or maintenance bond or a performance bond where the bond is guaranteeing the execution of any contract other than a contract of indebtedness or other monetary obligation;

(D) An indemnity bond for the benefit of a public body, railroad or charitable organization; a lost security or utility payment bond;

(E) Becoming surety on, or guaranteeing the performance of, any lawful contract, not specifically provided for in this paragraph, but does not include becoming surety on, or guaranteeing the performance of:

(i) any insurance contract except as authorized pursuant to section one thousand one hundred fourteen of this article; or

(ii) any contract, if becoming surety on, or guaranteeing the performance of that contract, would constitute:

a. mortgage guaranty insurance as defined in subsection (a) of section six thousand five hundred one of this chapter;

b. financial guaranty insurance as defined in subsection (a) of section six thousand nine hundred one of this chapter; or

c. service contract reimbursement insurance as defined in paragraph twenty-eight of this subsection;

(F) Becoming surety on, or guaranteeing the performance of, bonds and undertakings required or permitted in all judicial proceedings or otherwise by law allowed, including surety bonds accepted by states and municipal authorities in lieu of deposits as security for the performance of insurance contracts;

(G) Becoming surety on, or guaranteeing the performance of, any agreement for the lease or rental of non-residential real property or tangible personal property, provided that the obligation of the insurer shall not exceed a period of five years, and the bond is not issued directly or indirectly in connection with the sale of securities, a pooling of financial assets or a credit default swap as defined by article sixty-nine of this chapter;

(H) Becoming surety on, or guaranteeing the performance of, a contract of indebtedness or other monetary obligation where: (i) the aggregate gross principal, interest, and other amounts of indebtedness or other monetary obligations of any obligor whose obligations are guaranteed by the insurer under all bonds issued to that obligor pursuant to this subparagraph by the insurer does not exceed ten million dollars; and (ii) the bond is not issued directly or indirectly in connection with the sale of securities, a pooling of financial assets, or a credit default swap as defined by article sixty-nine of this chapter; and (iii) the bond by its terms terminates upon any sale or other transfer of the insured obligation in connection with the sale of securities, a pooling of financial assets, or a credit default swap as defined by article sixty-nine of this chapter;

(I) A depository bond that insures deposits in financial institutions to the extent of the excess over the amount insured by the Federal Deposit Insurance Corporation; and

(J) Becoming surety on, or guaranteeing the performance of, a bond, which shall not exceed a period greater than five years, that guarantees the payment of a premium, deductible, or self-insured retention to an insurer issuing a workers' compensation or liability policy.

In this chapter "fidelity" insurance shall have the meaning set forth in subparagraphs (A) and (B) of this paragraph.

It appears that the law authorizes the reciprocal to provide money and securities, computer fraud, forgery, and wire transfer insurance. As you suggested, the reciprocal must file its program with the Insurance Department if it hasn’t already.

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More on the Big "I" National Legislative Conference & Convention

Last month I wrote a post about why New York insurance producers should make the trip to Washington, D.C. at the end of April for the Big "I" National Legislative Conference and Convention. National Underwriter's Mark Ruquet published an article about the event in the online magazine's March 23 issue. He interviewed IIABA CEO Bob Rusbuldt, who laid out the stakes very clearly and starkly. Well worth the read if you've been on the fence about whether to attend.

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.        

Episode #10 -- The Self-Insured Trusts Reform Law

As I write this, I have just gotten off the phone with an attorney representing an employer who belonged to an under-funded group self-insured trust. Fortunately, he was just looking for information, not threatening to bill or sue me. His client, however, is staring at an assessment bill for a rather large amount of money. That's one story out of far too many that arose this year with the surprising decline in the group self-insured trust industry. The state legislature enacted reform legislation last June to prevent repeats of stories like this one, and that law is the focus of episode 10 of Ask Tim.

SHOW SUMMARY:

• The law is Chapter 139 of the Laws of 2008, formerly known as Senate Bill S.8708
• It clarifies that the New York Workers' Compensation Board has authority to assess group self-insured trusts
• It requires the board to assess employers in an insolvent trust within 120 days of the trust's insolvency
• It contains several anti-fraud protections
• It requires trusts toreport on their financial conditions to the board at least annually
• It requires trusts to be fully funded
• It authorizes the board to borrow up to $52 million to meet short-term claim obligations
• It places new limits on the ability of employers to join a trust or move from one to another
• It creates an advisory committee and a task force to make recommendations for system improvements

Our sponsor this episode is AgentQuote.com.

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Dems Solidify Grip on Albany; What Will the Future Hold?

New York voters on Tuesday sent a shock wave through Albany by giving the Democrats a majority in the State Senate. The last time the Senate was out of GOP control, many (if not most) Americans did not yet have color television. The last time the Democrats controlled both legislative chambers and the governor's mansion, Joe DiMaggio had yet to play a baseball game for the New York Yankees.

What will it all mean for New Yorkers in general and the New York insurance industry in particular? For one thing, the industry's long relationship with Republican Senator James Seward has been rudely interrupted. Seward, long-time chair of the Insurance Committee, will be replaced by an as-yet unknown Democrat. The industry had a relatively cooperative relationship with Seward; many insurance players fear a cooler reception from the new sherriff.

However, the champagne glasses hadn't yet dried before the new majority ran into problems. As Tom Precious reported in the Nov. 6 Buffalo News:

But while they high-fived in the hallways in Albany on Wednesday, Democrats, who enjoy a long New York tradition of infighting, provided a sizable dose of political intrigue as four New York City lawmakers — dubbed the Gang of Four — refused to back the current top Democrat as the next majority leader.

The possible renegade Democrats sent signals that one or more could even join up with Republicans to block a Democratic takeover, a theory prodded along when the four huddled to discuss their strategy and what they want in return for their support of a new Senate leader. They even released a photograph of their session just for good measure.

Top Democrats, however, insisted all was fine, though insiders note that Gov. David A. Paterson is not a major fan of Malcolm Smith of Queens, the senator in line to take over the Senate.

Meanwhile, the Associated Press reported that people living in Upstate are worried that, with the Senate in Democratic (read: New York City) control, the state government will forget that New York State extends north of Yonkers. Some commentators believe those fears are exaggerated:

But Smith, the Senate Democratic leader, has given greater attention to upstate concerns in recent years. He formed an upstate caucus within his delegation to draw up laws and programs to help those lawmakers' regions, proposed revamping economic development programs aimed at upstate to make them more effective and sought the hardest cap on property tax growth.

"Just because it's Democratic controlled doesn't mean it's liberal control," said Steven Greenberg of the Siena College poll, noting that a narrow Senate Democratic majority can't afford to lose any upstate Democrats.

Democrats clearly know the potential power of an upstate vote. Brooklyn-born Democrat Sen. Charles Schumer and Westchester County resident Sen. Hillary Rodham Clinton often travel upstate to talk about the likes of apples, dairy farming and rural truck traffic.

With the state government facing a large and growing budget deficit, insurance issues may get short shrift when the new legislature convenes in January. When former Governor Eliot Spitzer took office in 2007 and chose Assemblyman (and Insurance Committee chair) Pete Grannis to run the Department of Environmental Conservation, the legislative session nearly ended before Assembly Speaker Sheldon Silver picked Rochester Assemblyman Joseph Morelle to head up the committee. If the new Senate majority leader, whoever that may be, takes a similar approach to naming a Senate Insurance Committee chair, the insurance industry can probably look forward to a whole lot of not much legislative activity in 2009.

One never knows what may happen in the state capitol, however, so don't touch that dial.

Episode #9 -- The Late Notice Reform Law

In episode #9, I discuss the new law that reforms insurers' ability to deny liability claims on the grounds of late notice by the insured or claimant.

• The law applies only to bodily injury and property damage liability claims

• For the first time, New York law defines the rights and responsibilities of insurers, insureds and claimants with regard to claim reporting.

• If the insurer receives the notice within two years of the time the policy requires, it has the burden of proving that the late notice prejudiced its interests. After two years, the insured or claimant must prove that the late notice did not prejudice the insurer's interests.

• The law defines "prejudice" as when "the failure to timely provide notice materially impairs the ability of the insurer to investigate or timely defend the claim."

• More information on the IIABNY Web site in the Research section under New and Notable and Market Conduct Rules & Regulations.

• Closing song:

“I’m Gonna Procrastinate” by Rob Balder
Used with permission
www.thefump.com
Licensed under a Creative Commons Attribution-Noncommercial-Share Alike 3.0 License

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U.S. House of Reps Approves NARAB II

Now that things with AIG have settled down a bit, it's time to focus on some good news. The House of Representatives approved the NARAB II bill yesterday. Now the bill moves to the Senate for consideration. NARAB II will make it much easier for insurance agents to get non-resident licenses in other states. The members who call me about licensing tell me that the hurdles they have to jump to get non-resident licenses border on the ridiculous. NARAB II will go a long way toward improving the situation.

It's an open question as to whether the Senate will have time to act on it before it adjourns for the election, but at least the bill has passed the first major test.

Episode #7: New Legislation, Part One -- The Coastal Property Bill

You may have always suspected that I'm all wet, but you never had conclusive proof until now. Take a look at part one of my discussion of the coastal property insurance bill enacted last month by the New York legislature and the governor. This is the first in a series of episodes that will examine recent legislation and its effect on your business.

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NARAB II Clears Its First Hurdle in Congress

A congressional subcommittee has taken the first step toward making the National Association of Registered Agents and Brokers Reform Act (aka NARAB II) bill law. The Subcommittee on Capital Markets, Insurance and Government Sponsored Enterprises, part of the House Financial Services Committee, approved NARAB II yesterday. It now moves to the full Financial Services Committee for consideration.

NARAB II is designed to create reciprocity among the 50 states for licensing of insurance producers. The IIABA is a strong supporter of the bill; it was high on the agenda during the Big "I" National Legislative Conference and Convention in Washington last April. No word yet on when the full committee will consider it. Because of the upcoming presidential nominating conventions, Congress has a relatively small number of work days left in the session before it recesses in early October for the elections.