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Available Now - 'IIABNY Big Book of Form Letters & Other E&O Tools'

It's December 19. Christmas Eve is in five days, as is the first night of Hanukkah. The Pagan holiday of Midwinter (also known as Yule) arrives on December 21. Kwanza kicks off one week from today. For those who celebrate that particular holiday, Festivus will be upon us in a mere three days. That's an awful lot of celebrating, and an awful lot of gift-giving. Here in the Geek Cave, I can get just as stumped as anyone else when looking for the perfect gift.

Well, look no further, because IIABNY has come to the rescue. It has been said that nothing says "Happy holidays!" like a good errors and omissions loss prevention tool. (No, I don't remember who said that; stop interrupting.) Therefore, just in time for you to snag a copy for that special someone, IIABNY is proud to announce the publication of –

THE IIABNY BIG BOOK OF FORM LETTERS & OTHER E&O TOOLS

This handsome volume (or electronic file; we're a 21^st century publisher) offers more than 120 pages of E&O loss prevention goodness, designed to either help keep your agency out of litigation or give you documents to fight off any legal actions that may come your way. Most of the book consists of prepared form letters, ready to be copied and pasted onto your agency letterhead or into the body of an email, to address dozens of situations.

Read the Policy You’re Selling

“Insurance professionals should seek continually to maintain and improve their professional knowledge, skills, and competence.” (The Canons, Rules, and Guidelines of the CPCU Code of Professional Conduct, Canon 2)

“Insurance professionals should be diligent in the performance of their occupational duties and should continually strive to improve the functioning of the insurance mechanism.” (Canon 4)

“Last Sunday morning there was a 24-inch water main break on the road where my insured is located. The water main was only 20 yards from the insured. We have them written under a Businessowners policy that has the broadest coverages available. Yesterday, the adjuster indicated, ‘the claim might be not covered because of surface water.’ However, when we Google what is surface water, it‘s quite vague. Therefore, it has been difficult to explain to our client that the water main damage most likely will not be covered by the comprehensive policy we tailored for them. I hope you might have other similar claims that you recall, or perhaps there is some case law(s) or bulletins which you might be able to research.” (Email, sent with no citations or attachments of policy forms, from the president of an agency outside New York in the eastern U.S.)

Carry Cyber Insurance or Be Sorry

If you are in business today, cyber insurance is no longer optional. It’s not optional for insurance clients, and it’s not optional for insurance agencies. As if the point needed further emphasis, a New York appellate court drove it home yesterday.

The operator of several Five Guys restaurants in the Albany area got hacked. Criminals accessed customers’ credit card information and went shopping. The credit card holders naturally protested the unauthorized charges to their card issuers. The issuers got stuck absorbing the costs of these fraudulent charges. At least one of the issuers, Trustco Bank, sued the restaurant operator for failing to take reasonable care of the data. According to a report in the Albany Times-Union, the bank sought more than $104,000 in damages.

Think All Policies Are the Same? (Part 4)

Sure, I haven’t been blogging lately, but nothing gets the ol’ creative juices flowing like a “gotcha” denied claim. Today’s example in 151 Reasons Why People Hate Insurance Companies comes to us from a trial court in Manhattan. The man owned a home. He lived in the home. He insured the home. His insurance covered fire damage. He had a fire. He didn’t have insurance.

Just a bit of background and refresher: If you have read this blog for any length of time, you have probably read my discussions of the “where you reside” issue with Homeowners insurance. In a nutshell, some carriers have taken the position that, when a homeowner moves out of the home with no intention to return, all coverage on the dwelling, other structures, loss of use, liability and medical payments vanishes. This is the problem that ISO’s new “residence premises” endorsements (not available yet in New York) are designed to address.

Do Agents Have To Encrypt Emails Containing Customer Information?

Text of an email recently sent to an IIABNY member:

​I was asked to respond to your inquiry. As I understand it, you want to know whether your agency is required by law or regulation to encrypt certain customer information, such as when you prepare and email auto insurance I.D. cards. I apologize for the length of this response, but my conclusion is that the law and regulations do require an agency to encrypt such communications.

Certain sections of the federal Gramm-Leach-Bliley Act imposed requirements for the protection of customer information on insurance licensees. This law directed state insurance departments to implement and enforce the requirements. In New York, the Department of Financial Services enforces them by way of Insurance Regulations 169 and 173 (both are available for download from the Privacy page in the Member Answer Center of our Web site.) Regulation 169 pertains to privacy of consumer financial and health information; Regulation 173 pertains to standards for safeguarding that information. It is Regulation 173 that directly addresses your question.

2 Minutes With Tim: Emailed Policies

Some insurance carriers are no longer sending print copies of policies. What should their agents do about it?

Determining the Right Cyber Liability Policy for a Client

​A convenient follow-up to yesterday's post showed up in my inbox this morning. InsuranceJournal.tv has a five-minute interview with Chris Christian from US Risk Brokers that is well worth your time. I would especially direct the attention of insurance producers to her comments at the end about whether producers have an obligation to find the right policy for the client when all the client asks for is invasion of privacy coverage. Her point: You may not have a legal obligation, but you have an ethical one. To which I give a hearty, "Amen!"

 

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An American E&O Horror Story: The Broker’s Check That Got Lost in the Mail

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IIABNY members who place business through wholesale brokers know the drill. Client writes check to retail broker; retail broker deposits check and writes a new check to wholesale broker; wholesale broker deposits check and writes a new one to insurance carrier; carrier deposits check and issues policy; everyone lives happily ever after.

Unless, of course, one of those checks gets lost. A New York broker found out last year that the cost of a check mailed to the wrong address can be steep.

An executive recruiting firm retained the broker to obtain errors and omissions coverage. The broker obtained coverage from Liberty Surplus Insurance Corp. via a wholesale broker that acted as Liberty’s program administrator. One week before the end of the first policy term, the broker sent the insured a renewal application. The insured completed the application and sent it back to the broker. Twelve days after the renewal date, the broker forwarded the application to the program administrator and requested a quote for the new term. The wholesaler immediately asked Liberty for a quote and permission to backdate coverage. Liberty issued a quote the same day and gave the administrator permission to issue the renewal upon receipt of the premium payment.

Worth a Listen: E&O Risks of Brokers vs. Agents

The first four minutes of this podcast from A.M. Best describe a recent California court decision on the liability of an insurance broker for a misstatement on an application. If you are a New York producer, you're acting as a broker any time you submit an application to an MGA; a wholesale broker; the New York Automobile Insurance Plan; the New York State Insurance Fund; and the New York Property Insurance Underwriting Association. In other words, almost any New York producer reading the blog post acts as a broker at least on occasion. Therefore, you should listen to this. Even though this is not a New York court decision, the lessons from it apply everywhere.

More episodes the Best Day Audio Podcast are available on the A.M. Best Web site.

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Beware the 'Conditions of Coverage' Endorsement

Judging from the calls and emails I get, I'd say that New York contractors are buying a lot of Commercial General Liability Insurance policies that don't provide a whole lot of insurance. Excess and surplus lines carriers, and even some admitted carriers, are more frequently attaching endorsements that remove all coverage for a particular loss if the insured failed to meet specified conditions of coverage. And here's the not-so-secret news: These endorsements work.

Exhibit A: A New York appellate court last fall upheld a carrier's denial of coverage based on the insured's failure to comply with policy conditions. The carrier's endorsement listed a number of conditions relating to the use of subcontractors, including:

• The insured had to obtain certificates of insurance showing liability limits equal to or greater than the insured's from all subs prior to the commencement of work
• The insured had to verify prior to the commencement of work that the sub's policies had not been cancelled
• The insured had to obtain hold harmless agreements from all subs
• The insured had to verify that all subs' CGL policies named the insured as an additional insured
• The insured had to give notice of claim to all potential insurers as soon as practicable

Faiulre to comply with these conditions entitled the carrier to void the policy with regard to a particular claim. 

A construction worker fell off a ladder and was injured. He sued the general contractor, who in turn submitted a claim to its CGL carrier. The carrier denied coverage on the grounds that the GC failed to comply with the conditions in the endorsement. The GC sued and won in trial court, but the appellate court reversed the verdict. "(T)he conditions to coverage outlined in endorsement 102A are clear and unambiguous," the court said. "Each of the requirements in endorsement 102A is an express condition precedent to coverage, and the failure to comply with any one of them is a sufficient basis to disclaim coverage."

These endorsements are out there, being sold to contractors who are desperate for liability insurance and who can't get standard coverage. The people who work for carriers are not stupid. They can understand the implications of the seven-figure liability settlements resulting from violations of New York's scaffolding law as well as anyone, and they are acting accordingly. One way not to pay seven-figure settlements is to attach endorsements like this one. In this case, the carrier got the result it wanted. 

The court's decision doesn't identify the GC's insurance broker, but I think it's highly probable that the broker is now having regular contact with the GC's lawyer. Hopefully, the broker has good documentation to help defend against the inevitable lawsuit. Regardless, who needs this? Be very afraid of these endorsements, folks.

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