As you may have noticed, today is Friday, July 13. Friday the 13th is traditionally seen by some better safe than sorry superstitious individuals as a day when one must take care to avoid catastrophe terminal embarrassment certain doom being unlucky. We here at Big I New York are, of course, above such silliness. As a rule, our staff members are stupid reckless confident enough to go on about their lives as if it were any other day.
However, when if the predictable unexpected happens, insurance is there to say I-told-you-so pay for the financial fallout. Here, in no particular order, from the home office in Harpursville, New York, are the top five Friday the 13th hazards and how prudent superstitious individuals and businesses avoid big trouble an eternal curse OMG-what-were-you-thinking accidental loss:
Ladders. Look, if you insure contractors, you know all about New York's scaffold law. Many scaffold law claims involve someone standing on a ladder and suddenly finding himself subject to the earth's gravitational pull in a most unwelcome way. The ladder shifts, it moves, it spins, it does the hokey-pokey, whatever, and a worker falls and gets hurt. But what about if someone walks under the ladder? The ancient Egyptions caught onto this one 5,000 years ago. Fortunately, while many Commercial General Liability insurance policies exclude coverage for an employee falling off a ladder, relatively few exclude coverage when someone tempts fate by walking under one. So far.
Black cats. I know someone who has a black cat. At some point, that cat must have crossed in front of her. You know what it did? It developed a taste for the water supply line leading from her plumbing system to her toilet. Said cat also had reasonably sharp cat teeth. The result was a pond in what was at one time her downstairs. It took six months and thousands of dollars from her homeowners insurance company to repair the damage. Against her better judgment, she still has the cat.
Mirrors. Ever stop to think how often you come across mirrors during the day? They're in multiple rooms in your home. There are at least three of them attached to your car. They're in public restrooms. And any one of them can break. Sure, your car insurance and homeowners insurance will cover the cost of broken mirrors if the amount of damage clears the deductible. And if your skin happen to contact the broken glass, medical insurance covers part of the cost to sew you up. But what do you do about the next seven years? Not leaving the house isn't an option. There are mirrors in there.
Step on a crack ... In general, I believe I caused my mother enough grief during my formative years. I don't want to be responsible for putting her in traction because I failed to step cleanly on a single panel of a sidewalk. However, should I chew gum while walking fail to pay attention, the good news is she has Medicare.
Umbrellas. No, not an umbrella insurance policy, though that would certainly mitigate my financial burden should Medicare choose to subrogate against me following the previous item on this list. I'm referring to opening an umbrella in the house. Generally speaking, unless one owns a black cat with a tendency to gnaw on water supply conduits, there is little need for an umbrella whilst indoors. However, the possibility can't be ruled out that someone may want to show off their brand new The Avengers: Infinity Wars umbrella in the living room. This could dislodge household furnishings, scratch walls, and potentially put someone's eye out. My advice is to make sure you're carrying either homeowners or renters insurance with high limits for both personal property and personal liability. Or make sure you're outdoors when you show off your umbrella. But that's just me.
So, if you're one of those people who believe in fate karma bad luck, these are the top insurable hazards and how you can cover them. If you have any questions or comments, look for me in the Big I New York lunchroom. I'll be the one tossing salt over my left shoulder.
Life insurance agents should take note of a ruling handed down by the U.S. Supreme Court a month ago. It involved one of an insurance agent's worst nightmares: The divorce of married clients. The dispute pitted a former spouse against her step-children and revolved around a relatively new law. The outcome has implications for life insurance policyholders in New York and elsewhere.
Mark Sveen and Kaye Melin, a Minnesota couple, married in 1997 and divorced ten years later. One year into the marriage, Mr. Sveen bought a
life insurance policy, named his wife as the primary beneficiary and his two children from a previous marriage as contingent beneficiaries. The divorce decree ending the marriage did not mention the life insurance policy, and Mr. Sveen did not change his beneficiary designations.
Upon his passing in 2011, his ex-wife and his children got into a dispute over the insurance proceeds. In 2002, Minnesota adopted a “revocation-on-divorce" law which holds that a divorce automatically revokes any revocable beneficiary designation of property made by an individual to his or her former spouse in a “governing instrument." The law defines “governing instrument" as including insurance or annuity policies and wills. Citing this law, Mr. Sveen's children argued that Ms. Melin did not have a valid claim on the life insurance proceeds, since her designation as a beneficiary automatically disappeared when the divorce was decreed. Consequently, they were the rightful beneficiaries under the policy.
Ms. Melin countered that argument by noting that her ex-husband bought the policy and named her as beneficiary in 1998, four years before the state adopted the revocation-on-divorce law. Applying the law to a policy sold before its enactment, she argued, would violate Article 1 of the
U.S. Constitution, which states in Section 10, “No State shall … pass any … Law impairing the Obligation of Contracts …" Therefore, she should receive the policy's proceeds.
A federal trial court sided with the children, but the appellate court agreed with Ms. Melin and held that retroactively applying the law violated the Constitution. The children appealed to the Supreme Court, which heard arguments last March. On June 11, the court awarded the proceeds to the children by a vote of 8 to 1.
Writing for the majority,
Associate Justice Elena Kagan said that the Contracts Clause in Article 1 applies to insurance policies. However, “not all laws affecting pre-existing contracts violate the Clause." To determine whether a particular law violates the Clause, she wrote, the Court must consider “the extent to which the law undermines the contractual bargain, interferes with a party's reasonable expectations, and prevents the party from safeguarding or reinstating his rights." In the case of the Minnesota law and Mark Sveen's life insurance policy, she said that the law did not do any of these things.
Justice Kagan wrote,
“…(T)he insured's failure to change the beneficiary after a divorce is more likely the result of neglect than choice. And that means the Minnesota statute often honors, not undermines, the intent of the only contracting party to care about the beneficiary term. The law no doubt changes how the insurance contract operates. But does it impair the contract? Quite the opposite for lots of policyholders."
“(E)ven when presumed and actual intent diverge, the Minnesota law is unlikely to upset a policyholder's expectations at the time of contracting. That is because an insured cannot reasonably rely on a beneficiary designation remaining in place after a divorce."
Lastly, she noted, “The law puts in place a presumption about what an insured wants after divorcing. But if the presumption is wrong, the insured may overthrow it. And he may do so by the simple act of sending a change-of-beneficiary form to his insurer. … The statute thus reduces to a paperwork requirement (and a fairly painless one, at that): File a form and the statutory default rule gives way to the original beneficiary designation." She cited cases dating back to the 19th century in which the Court held that laws imposing minimal paperwork burdens do not violate the Contracts Clause.
Associate Justice Neil Gorsuch, the newest member of the court, dissented. He pointed out that recent Court precedents held that a state law “substantially impairing" contracts violates the Contracts Clause unless they are “reasonable" in light of a “significant and legitimate public purpose." He wrote:
“No one pays life insurance premiums for the joy of it. Or even for the pleasure of knowing that the insurance company will eventually have to cough up money to
someone. As the Court concedes, the choice of beneficiary is the 'whole point.' ... So when a state alters life insurance contracts by undoing their beneficiary designations it surely 'substantially impairs' them."
He also argued that Minnesota could have achieved the goal of ensuring that insurance proceeds are not misdirected to a former spouse without impairing the insurance contracts. Further, he disagreed with the retroactive application of the law:
“A court can fine you for violating an existing law against jaywalking. That doesn't mean a legislature could hold you retroactively liable for violating a new law against jaywalking that didn't exist when you crossed the street. No one would take that idea seriously when it comes to crime, and the Contracts Clause ensures we don't when it comes to contracts, either."
Justice Gorsuch was a minority of one, so the Court reversed the appellate court's decision and awarded the life insurance proceeds to the children.
If you're reading this and you're a life insurance agent in New York, why should you care? Well, New York also has a revocation-on-divorce law,
Section 5-1.4 of the Estates, Powers & Trusts Law. Gov. David Paterson signed it into law on July 7, 2008, and its text is very similar to that of the Minnesota law. If you have clients for whom you have obtained life insurance, and you learn that they have divorced (and I realize the insurance agent is often the last to know), it might behoove you to inform the insured of this law. The Supreme Court has now ensured that the law will apply to life insurance policies you sold before July 7, 2008.
The insured may well say, “Good riddance," but it's possible that the couple parted on amicable terms and the insured still wants the ex-spouse to receive the life insurance proceeds. If that's the case, the insured will need to take action. He or she can't do that if they're unaware.
A word of caution: If you decide to provide this service,
consistency will be important. If you have attended Big I New York's annual errors and omissions loss control seminars, you have heard the attorneys who present them stress this. Do it for all your clients or don't do it at all. Part one of Murphy's Law implies that the one insured who does not get notified will be the one who has a contested claim. Part two states that Murphy was optimistic. Unless getting deposed is on your bucket list, you should implement air-tight procedures for doing this.
The Supreme Court's vote on this indicates that it was not a controversial decision. We can expect these types of laws to stick, so life insurance providers must be prepared for the consequences.
The New York State Department of Financial Services yesterday released its periodic report of disciplinary actions taken against insurers, agents, brokers and adjusters. I review each of these reports when they come out, for a couple of reasons:
- To see if any Big I New York members are named
- To see the types of violations for which producers are being disciplined
I often get questions from members that can be summed up as, "What will happen to me if I do X?" These reports give me examples that I can cite when I get those questions.
I'll leave out names (the report is a public document posted on the DFS website, so anyone can review it and find out identities), but here are some of the more eye-catching violations and consequences:
- "Respondents commingled insurance premium funds and personal funds. Respondents also collected an insurance premium from an insured and failed to timely remit said insurance payment to the insurer." -- $3,000 fine
- "Respondent issued a certificate of insurance for an insured when in fact no such policy existed." -- License Revoked
- "Respondents, in connection with the sale of automobile insurance policies, charged and collected different service fee amounts from numerous insureds. Respondents also in their service fee agreements stated the amount of the service fee to be charged as “up to” a dollar amount, which resulted in numerous insureds being charged different service fee amounts as stated above." -- $75,000 fine
- "Respondents, after the expiration of (its) insurance agent’s license, acted as an insurance agent in this State without a license." -- $180,000 fine
Regarding this last one, the size of the fine for this violation is unusual. In contrast, the same report cites an Illinois agency for acting as an insurance producer without a license, and the fine was $500. An attorney in Cooperstown was fined $650 for acting as an insurance producer without a license. For an agency to incur a $180,000 fine, the violation must have been pretty extreme. I wonder how many years the agency did business without a license.
More typical in the report are penalties for failing to disclose that the agency or individual producers had been targets of criminal proceedings:
- One upstate agent lost her license because she failed to disclose a misdemeanor conviction on four license applications (the original and three renewals.)
- A Long Island agent and broker lost his license for failing to disclose that he had been charged with a crime and for submitting documents to an insurer and the DFS that contained false information.
- A Manhattan agency paid a $1,500 fine for failing to report administrative actions taken against it by federal regulators.
- Two sublicensees of an agency in Queens lost their licenses after they were convicted of felonies.
- An upstate agent paid $1,000 for failing to inform the DFS within 30 days that she had been charged with a crime and for operating without a license.
Lastly, a few producers got caught essentially defrauding insurers out of charity money:
- One agent and broker submitted false receipts to a foundation in order to obtain matching charitable contributions. She also submitted false evidence of volunteer activities in order to receive a volunteer grant. She paid a $2,250 fine.
- Another lost his license for submitting false documents in order to get more than $40,000 from an insurer's gift matching program.
Here's the good news: There are thousands of New York licensed insurance producers, yet this disciplinary action report is only eight pages long. Now, is everyone who is breaking the rules getting caught? I don't think so. However, if cheating and lawbreaking were rampant in the insurance community, this report would be easily twice as long.
I know from the phone calls and emails I get that Big I New York members are very concerned about even accidentally breaking the law. The folks I hear from don't want to give the appearance that they might even possibly be doing something less than above board. Just yesterday I spoke with a member who was concerned about whether certain job titles for unlicensed employees would be a problem. Insurance producers are, as a group, pretty honest. You should feel good about that.
And if you ever are unsure about whether something is permissible or has to be reported or requires a new license, get in touch with us. We're happy to help, and none of us wants to see your name in one of these reports.
If your agency has governmental units for clients, you need to watch this video about a regulation you have to comply with by April 15.
An infographic for your reference (right-click on the image and choose "Save link as ..." or "Save image as ..." to download it):
Watch the excitement of an insurance geek researching the answer to a member's question and finding out he told the member the wrong thing!
We are now eleven days away from New Yorkers becoming eligible for paid family leave benefits under a law enacted in 2015. Questions from Big I New York members continue to come in (see my Nov. 15, 2017 post for a previous one), and I thought I'd share a few of them, along with my attempts at answers.
Question from a member: Are part-time employees who are high school students eligible for paid family leave and disability benefits under New York law?
Answer: High school students are
ineligible for benefits under the NYS Disability Benefits Law and Paid Family
Leave Benefits Law (Article
9 of the New York Workers’ Compensation Law). Section 204 of
that article says,
Disability benefits shall be payable to an eligible employee for
disabilities, beginning with the eighth day of disability and thereafter during
the continuance of disability ... Family leave benefits shall be payable to an eligible
employee for the first full day when family leave is required and
thereafter during the continuance of the need for family leave …”
DBL and PFL benefits are payable
to “eligible employees”. Section 203
describes who is an eligible employee:
in employment of a covered employer for four or more consecutive
weeks and employees in employment during the work period usual to and available
during such four or more consecutive weeks in any trade or business in which
they are regularly employed and in which hiring from day to day of such
employees is the usual employment practice shall be eligible for disability
benefits as provided in section two hundred four of this article. Employees
in employment of a covered employer for twenty-six or more
consecutive weeks and employees in employment during the work period usual to
and available during such twenty-six or more consecutive weeks in any trade or
business in which they are regularly employed and in which hiring from day to
day of such employees is the usual employment practice shall be eligible for
family leave benefits as provided in section two hundred four of this
Among other things, employees
are eligible if they are in “employment.” Section 201
defines the word “employment”:
‘Employment’ means employment in any trade, business or occupation carried on
by an employer, except that the following shall not be deemed employment
under this article: … service during all or any part of the school year or
regular vacation periods as a part-time worker of any person actually in
regular attendance during the day time as a student in an elementary or
secondary school. …”
Part-time work by an elementary
or secondary school student during the school year or vacation periods is not
“employment.” To be eligible for DBL and PFL benefits, an employee must be
engaged in employment. Since high school students are not engaged in
employment, they are ineligible for DBL and PFL benefits.
Question from a member: I was with a client yesterday discussing the Paid Family Leave and they asked the following:
- Can PFL be taken before DBL, when both can be taken? Let's say for a pregnant woman.
- Following #1, if so is the job or equivalent position still guaranteed? (that would be 14 weeks effectively for an employer not subject to FMLA).
- Are all existing full-time employees grandfathered in as of 1/1/18, so they can take the benefit immediately, if called for? Or must they work the 26 weeks first in 2018?
Answer: Regarding your client's first question, Section 380-2.2(c) of the Workers' Compensation Board's regulations says, “An eligible employee may opt to receive disability and family leave benefits during the post-partum period but may not receive both benefits at the same time." It doesn't specify in which order they must be taken. However, the state's Paid Family Leave website says, “Paid Family Leave only begins after birth and is not available for prenatal conditions." Therefore, if Mom needs to take time off before giving birth, she must take disability benefits first, not PFL benefits. Presumably, they can be taken in either order after the child is born. One advantage of taking PFL second is that it can be taken in periods of days, rather than weeks, so if Mom wanted to work two or three days a week after DBL ends, she could take her PFL time that way.
With regard to the second question, New York Workers' Compensation Law Section 203-b says, “Any eligible employee of a covered employer who takes leave under this article [NOTE: That means Article 9, Disability Benefits] shall be entitled, on return from such leave, to be restored by the employer to the position of employment held by the employee when the leave commenced, or to be restored to a comparable position with comparable employment benefits, pay and other terms and conditions of employment." The employee is entitled to his or her job back at the end of the PFL period. The law is silent about the end of a disability period. Conceivably, an employee who took the 8 weeks of PFL first could have a job waiting at the end of the 8 weeks but not at the end of the additional 6 weeks of disability leave. Again, though, I think it would be unusual and possibly inadvisable for an employee to take PFL first.
Regarding the third question, Section 380-2.5 of the WCB's regulations says:
“a. An employee of a covered employer whose regular employment schedule is 20 or more hours per week will become eligible to take family leave during his or her employment with such employer, provided the employee has been either:
- In employment, as defined in this Title, of the covered employer for at least 26 consecutive work weeks preceding the first full day family leave begins; or
- In employment, as defined in this Title, of the covered employer during the work period usual to and available during the entirety of such 26 consecutive weeks preceding the first full day the leave begins in any trade or business in which he or she is regularly employed and in which hiring from day to day of such employees is the usual employment practice; or
- In employment, as defined in this Title, of the covered employer for at least 26 consecutive weeks, such consecutive weeks may be tolled during periods of absence that are due to the nature of that employment, such as semester breaks, and when employment is not terminated during those periods of absence."
In most situations, the employee is eligible if he or she has worked for that employer for at least 26 weeks prior to the first day of PFL. Anyone who started working full time for an employer on or before July 1, 2017 will be eligible immediately.
In the two months since the New York Times reported allegations of serial sexual harassment against Hollywood film producer Harvey Weinstein, public attention to the problem of harassment has exploded. Two members of Congress have resigned because of their own personal histories. Revelations have cost prominent members of the news media their jobs. Harassment charges were publicly made against the current president of the United States during the 2016 election campaign, and two former presidents have had accusations leveled against them.
And it's not just the media, movies and members of Congress - it's also the business world. An Amazon.com executive resigned in October over public accusations of sexual harassment. The U.S. Equal Employment Opportunity Commission reported that one-third of the 90,000 charges it received in 2015 include harassment allegations. Further, EEOC said that three out of four individuals who experienced harassment never reported it to a supervisor, manager or union representative. The report said as many as 85 percent of women have reported experiencing sexual harassment in American workplaces (the low number was 25 percent.) That means in an office where 20 women work, between five and seventeen have been sexually harassed while trying to do their jobs. That could be "quid pro quo" harassment ("I can get you that promotion you want if you make it worth my while"); hostile working environments (obscene jokes, comments about appearance); invasion of privacy; or uninvited and unwelcome touching.
Women (and men, though they are the minority of victims) shouldn't keep quiet about it, and given all the recent headlines, I suspect they will go public in greater numbers in the future. This begs the question of whether American employers are ready for it. How many of them have purchased employment practices liability insurance? Will the policies they have cover liability for alleged sexual harassment?
EPLI policies cover an organization's legal liability arising out of "wrongful acts" or "covered acts" (policies may use either term.) Most policies include "harassment" as a covered wrongful act. Some policies have separate definitions of "workplace harassment" and "sexual harassment." The Travelers 2009 edition of its policy has separate definitions. The ISO coverage form simply covers "harassment" without defining it. The Philadelphia policy that IAAC sells to Big I New York members covers "sexual or workplace harassment of any kind."
Remember, though, that these policies provide coverage on a claims-made basis. They probably do not cover liability for wrongful acts that began before the policy's retroactive date. One man in Massachusetts went to court after his former company's EPLI carrier ruled that his alleged acts did not happen entirely after the retroactive date (he won that argument but lost coverage due to an exclusion.)
Also, a business may think it has an EPLI policy but might not actually have one. A New Jersey ambulance service argued that its liability insurance from Lloyds of London covered allegations of sexual harassment made by a former receptionist because the policy contained a Sexual Misconduct endorsement. Unfortunately, the court found that the endorsement applied only to misconduct directed toward patients.
If the policy does provide coverage, there's still the question of whether the limits are adequate. A commercial umbrella policy might exclude EPL claims. Depending on the nature of the harassement and how long it took place, a resulting judgment or settlement could be very expensive. I think this is one area of liability insurance where skimping on limits is a poor idea.
Lastly, let's not ignore the possibility that this is happening in our own offices. The EEOC found that up to 85 percent of women have been harassed in this country's workplaces. That harassment is occurring somewhere, and it's naive to think that it doesn't happen in insurance offices. Every workplace needs common sense measures in place to prevent this from happening and adequate insurance in case it does.
This is not a comfortable time in American workplaces, but it's an overdue time. Every employee has a right to feel safe while on the job. We're paid to produce good results for our employers, not to tolerate boorish behavior. America's women are right to call to account men who wrong them. Those men who are in the wrong will have to pay, in some form, for their actions, and so will their employers who, wittingly or unwittingly, permitted those actions to happen.
The claims will inevitably start to come in. As insurance professionals, we need to make sure clients are ready for tomorrow's wrongful acts, because it's probably too late to insure yesterday's.
Question from a Big I NY member: We have an auto repair shop/auto dealer who purchased a 2013 Ferrari and was driving back to the shop with dealer plates on the vehicle when he was rear-ended. The other party was clearly at fault, and the claim was submitted to their carrier who paid for the repair to the vehicle. However, the client is wanting further payment for the "diminished value" due to the car being in an accident and no longer worth what he paid for it ($240K). We have been checking any and all resources to see if New York State considers “diminished value” in claims of this nature and would appreciate any information or your expert opinion on New York State law regarding this issue.
[PRELIMINARY NOTE: I'm not sure I would call the following an "expert" opinion, but here's what I found.]
Answer: It appears to me that the auto
liability insurer owes the vehicle owner either:
Whichever is less.
I base this on a 1949 New York
court decision, Johnson v. Scholz. While the text of the opinion is not
easily available online (I imagine I could get it from paid subscription
sources), it was cited
this past April in a case that reached the Appellate Division’s 2nd
Department (which covers downstate
counties): “‘The measure of damages for injury to property resulting from
negligence is the difference in the market value immediately before and
immediately after the accident, or the reasonable cost of repairs necessary to
restore it to its former condition, whichever is the lesser'‘ (Babbitt
v Maraia, 157 AD2d 691, 691, quoting Johnson v Scholz, 276 App
Div 163, 164; see Ever
Win, Inc. v 1-10 Indus. Assoc., 111 AD3d 884,
v Stavsky, 109 AD3d 646, 647-648).”
I’m not an attorney, but I interpret this to mean that the cost of the
repairs to the Ferrari is the maximum recovery your client is entitled to under
A few weeks ago, New York's highest court rendered a decision that could impact the state's Workers' Compensation insurance market, and not necessarily in a good way.
The New York State Workers' Compensation system used to have a special fund that paid for claims that were not as closed as insurers thought. The fund, known as the Special Fund for Reopened Cases, covered benefits for injured workers whose claims had been closed and who qualified for additional benefits at least seven years after the injury and three years after the last claim payment. For example, treatment for a new flare-up of pain from an old injury thought to have been successfully treated would have been covered by this fund. Workers' Compensation insurance premium surcharges financed it. Cases transferred to the fund were often based on speculation about what might happen in the future, and disputes over them tended to end up in front of a judge.
Between 2006 and 2013, costs associated with this fund exploded. Assessments to finance the fund rose from $95 million in 2006 to more than $300 million by year-end 2012. Insurers blamed rising medical costs for the jump; others blamed cost-shifting by insurers.
Four years ago, in an effort to address the state's high Workers' Compensation costs, the New York State Legislature passed a bill that closed the Special Fund for Reopened Cases to new applications, and Gov. Cuomo signed it into law. The New York State Workers' Compensation Board would not accept any new applications for transfer of liability to the fund after Jan. 1, 2014.
Insurers noted that future reopened cases might come from injuries covered under policies effective before 2014. They argued that closing the fund to applications for these cases was unfair because the approved loss costs for those policies did not include a loading for potential reopened cases. In addition, they hadn't reserved for these losses because they didn't expect to be liable for them. The New York Compensation Insurance Rating Board estimated that insurers' unfunded liabilities resulting from the closure could be as large as $1.6 billion, costs they could not recoup through future loss cost increases. Not surprisingly, 20 insurers sued the WCB.
The trial court dismissed the case, but the appellate court reversed that decision and ruled the change in the law to be an unconstitutional imposition of unfunded obligations on the insurers. The WCB appealed to the New York State Court of Appeals, the state's highest court. In late October, the court unanimously ruled against the insurers.
The court found that the retroactive impact of the closure was constitutional because it did not interfere with the insurers' contracts with their insureds. It also said that the creation of an unfunded liability was not the same as taking private property in which the insurers had a vested interest (something that is prohibited by the U.S. Constitution.) Finally, the judges said that the retroactive impact of the closure was justified by a rational legislative purpose, as required by the "Due Process" clause of the Constitution (that is, the purpose was to "save New York businesses hundreds of millions of dollars in assessments every year.")
How will this decision affect the New York Workers' Comp market? Will underwriting appetites decrease, ceding more business to the New York State Insurance Fund? Or will carriers adjust and continue business as usual? Or will they avoid certain high loss activity classes of business in favor of the less expensive ones? I'm curious to hear your predictions, so sound off in the comments.
Question from a Big I NY agency principal: If a part-time employee or a commissioned salesperson takes Paid Family Leave, how are the benefits calculated when the employee's weekly compensation varies? Also, what is the premium rate for Paid Family Leave insurance coverage?
Answer: The PFL benefit uses the same basis as does the Disability Benefits Law benefit – it's a percentage of the employee's average weekly wage. The NYS Workers' Compensation Board's
PFL regulations say:
"(2) 'Average Weekly Wage (AWW)' means, for the purpose of computing the rate of payment of family leave benefits,
the amount determined by dividing either the total wages of such employee in the employment of his last covered employer for the eight weeks or portion thereof that the employee was in such employment immediately preceding and including his last day worked prior to the first day of paid family leave, or the total wages of the last eight weeks or portion thereof immediately preceding and excluding the week in which the paid family leave began, whichever is the higher amount, by the number of weeks or portion thereof of such employment. For individual business owners, as defined in paragraph 11 herein, who elect coverage under Article 9 of the Workers' Compensation Law, average weekly wage shall be determined by computing the individual business owner's total net income in the 52 week period immediately preceding the period of leave and dividing such total wages by 52."
Based on this, it sounds like the benefit for both part-time and commissioned employees would be their wages for the eight weeks immediately preceding the leave, divided by eight. The regulation defines "wages" like this:
"(19) 'Wages' means the money rate at which employment with a covered employer is recompensed by the employer
as more fully set forth in section 357.1 of this chapter. For the purposes of paid family leave, the computation shall include the reasonable value of board, rent, housing, lodging or similar advantage received where such are withheld by the employer during the period of family leave and shall not include the cash value of benefits, the receipt of which by an employee is not subject to the New York State personal income tax. Wages for an individual business owner, as that term is defined in paragraph (11) herein, shall be earnings subject to federal self-employment tax."
Sections 357.1 and 357.2 go into a lot more detail:
"Wages mean the money rate at which employment with a covered employer is recompensed under the contract of hiring and includes every form of remuneration for employment paid by the employer to his employee, whether paid directly or indirectly, including
salaries, commissions, bonuses and the reasonable money value of board, rent, housing, lodging or similar advantage received."
"Employee and employer contributions shall be computed and determination of employee benefit rights shall be established on the basis of wages paid to employees. The term wages paid includes amounts actually paid.
Amounts not actually paid shall be deemed paid:
as of the day when the amount thereof both has been calculated and has become due, as determined by the established and customary payroll practices of the employer;
(b) wages paid pursuant to an order of a competent tribunal, or an agreement between an employer and his employees or their respective representatives following negotiations or a dispute or disagreement with respect to the amount or the liability for wages shall be deemed paid, as of the date the amount thereof both has been calculated and has become due."
So, the term "wages" includes commissions, and commissions are considered to be paid (for purposes of calculating benefits) as of the day when they are calculated and become due "as determined by the established and customary payroll practices of the employer." The regulation essentially adapts to the employer's practices.
The premium rate is
0.126% of the employee's weekly wage. The weekly wage used to calculate the premium is capped at the statewide average weekly wage,
currently $1,305.92. Therefore, the maximum weekly premium is $1.65 (.00126 x $1,305.92).