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).
Well, not so much two minutes ... more like eight and a half. I'm trying something new - going with audio only, no video. This is quicker and easier and much more gentle on everyone's eyes.
So, can an insurance company deny payment of a liability claim because it feels the insured was not liable? Listen to me explain two recent New York court cases - one where the judge was not certain the driver who caused the accident was negligent, and the other where the court let the insurance company off the hook because its customer did nothing wrong.
Links to the court opinions:
Post a comment with your thoughts about these cases.
I've just spent a fulfilling afternoon reading through the Better Care Reconciliation Act of 2017, better known as the health care bill that was released to the public last Thursday by U.S. Senate Majority Leader Mitch McConnell (R - Kentucky). Many pixels have been spilled analyzing this legislation (numbered H.R. 1628), particularly the effects it would have on federal premium subsidies, coverage provided through the health insurance exchanges, taxes, and the Medicaid program. I want to focus on how the bill might affect the coverage IIABNY members sell, which in general is group health coverage sold outside the exchanges.
The 142-page text is devoted largely to Medicaid; most of the provisions that affect non-exchange private coverage are only in the last 10 pages or so.
Section 103 ends the small business tax credit program starting in 2020. That program gives two-year tax credits to employers with 25 or fewer full-time equivalent employees, average annual wages of $50,000 (in 2014 dollars; this is indexed for inflation), and that pay at least 50 percent of the premium. The credit can be as high as 50 percent (35 percent for non-profits) of the aggregate amount of the employer's premium contributions, though the percentage declines the closer the employer gets to 25 employees. I haven't seen any data as to how successful this program has been in encouraging small businesses to buy coverage (employers this size are exempt from the employer mandate.) All things being equal, I think it's reasonable to expect at least some employers may forego coverage without this incentive, though some of them might have dropped it after the two-year credit period expired anyway.
Section 204 changes the extent to which insurers can vary health insurance premium rates. Currently, the law prohibits varying premium rates except for:
- Family status versus individual status
- Geographic rating area
- Age, with a limit on the variance of 3 to 1 for older adults
- Tobacco use
The Senate bill would increase that age variance to 5 to 1, so insurers could charge older individuals up to five times what they charge younger ones. New York is a community-rating state for small groups, so this change will likely affect only individual policies sold through New York State of Health and large groups.
Section 205 addresses the medical loss ratio requirement. Current law requires insurers to rebate premiums to enrollees if health care costs for a given year make up less than 85 percent of premiums for large groups and 80 percent for individual and small group plans. This bill would phase out that requirement for plan years starting in 2019. In its place, each state would determine its own medical loss ratio requirement. New York law already requires 82 percent for individuals and small groups and 85 percent for large groups.
Section 206 permits states to escape some of the insurance requirements put in place by the Affordable Care Act. The ACA has always had a provision allowing states (starting with the 2017 plan year) to apply for waivers from ACA requirements, such as the exchanges, the establishment of qualified health plans (including essential health benefits), reduced cost-sharing, premium subsidies, and the employer and individual mandates. It allows the Department of Health and Human Services to grant requested waivers if the state plan:
- Will cover at least the essential health benefits
- Will provide coverage and cost-sharing protections against excessive out-of-pocket spending that are at least as good as those the ACA requires
- Will cover at least a comparable number of its residents as the ACA does
- Will not increase the federal deficit
The Senate bill would significantly modify that. It would require DHS to grant the waiver as long as the state plan does not increase the federal deficit. The other conditions would be eliminated. That means that individual states could get waivers from coverage requirements and scope, thus lowering premiums but providing less comprehensive coverage. Also, the current law requires a state that wants to request a waiver to enact a law. The Senate bill would enable a state to request a waiver by submitting a certification signed by the governor and the state's insurance regulator. The state legislatures would not have to be involved.
The proposed legislation would make a number of other significant changes, such as repealing the employer and individual mandates, capping Medicaid expenditures, prohibiting premium subsidies from paying for plans that cover abortions, and defunding Planned Parenthood for one year. It also repeals all the taxes earmarked to fund expanded coverage under the Affordable Care Act. I'll leave it to others to debate the merits of those proposals. The changes I've described here, if enacted, would have significant effects on IIABNY members and their clients. Forthcoming events on Capitol Hill may change your business in a big way. Stay tuned.
Earlier this month, the New York State Court of Appeals, the state's highest court, issued a ruling that will affect the business of every insurance agency in the state that insures construction risks. By a vote of 4 to 2 (the court was short one judge due to the recent death of Judge Sheila Abdus-Salaam), the court held that additional insureds under Commercial General Liability Insurance polices have coverage only for occurrences "proximately caused by" the named insured. Previously, all that was required was for the occurrence to have some connection with the named insured's work. Under this ruling, there is no coverage for the additional insured unless the named insured's own negligence is the proximate cause of the accident.
It is unclear how this might affect the liability insurance market for contractors in New York. One outcome I can foresee is that owners and general contractors may start to reject the modern versions of the Insurance Services Office's (ISO) additional insured endorsements. That is by no means a certainty, but it's possible.
The Burlington Insurance Co. v. NYC Transit Authority, involved a policy issued to a contractor doing tunnel excavation work on a New York City subway construction project. The insurance requirements in the contract for the job required the contractor to carry CGL insurance that named the New York City Transit Authority (NYCTA), the Metropolitan Transit Authority and New York City as additional insureds. This part of the court's opinion is key: "As specified by NYCTA, BSI (the named insured) agreed to use language in the endorsement adopted from the latest form issued by a trade organization known as the Insurance Services Office (ISO) ..." The project owner
told the contractor to obtain this endorsement. The endorsement covered the additional insureds ". . . only with respect to liability for 'bodily injury', 'property damage' or 'personal and advertising injury'
caused, in whole or in part, by:
1. Your acts or omissions; or
2. The acts or omissions of those acting on your behalf."
During the project, a BSI machine touched a live electrical cable buried in concreate at the excavation site. This set off an explosion. An NYCTA employee was standing on an elevated platform at the time, and he fell as he tried to avoid the explosion. He and his spouse sued the City and BSI for damages resulting from his injuries. The City sought coverage under BSI's insurance, then brought MTA and NYCTA into the suit. They both also submitted claims to BSI's carrier.
During discovery, it was revealed that the reason the BSI machine hit the live wire was that "NYCTA failed to identify, mark, or protect the electric cable, and that it also failed to turn off the cable power. Documents further established that the BSI machine operator could not have known about the location of the cable or the fact that it was electrified." The insurance carrier then sued NYCTA and MTA for a judgment that it owed them no defense or indemnity, arguing that they were not additional insureds because the injury was not caused by the named insured's acts or omissions. It also sought the money it had paid to the plaintiff on the City's behalf.
The carrier won in trial court but lost on appeal. The appellate court found that BSI's act of triggering the explosion was
a cause of the injury. The carrier argued that BSI's act was not
the proximate cause of the injury and therefore NYCTA and MTA were not additional insureds. On June 6, the Court of Appeals agreed:
"The endorsement's reference to 'liability' caused by BSI's acts or omissions further confirms that coverage for additional insureds is limited to situations where the insured is the proximate cause of the injury. Liability exists precisely where there is fault ...That the policy extends coverage to an additional insured 'only with respect to liability' establishes that the 'caused, in whole or in part, by' language limits coverage for damages resulting from BSI's negligence or some other actionable 'act or omission.'"
A dissenting opinion noted that, if the carrier had intended coverage to apply to injuries arising out of the named insured's negligent acts or to injuries proximately caused by the named insured, it could have worded the endorsement to say so. Since it did not, the dissenting judge voted for granting coverage to the additional insureds. He also warned of possible dire consequences: "The majority's approach could threaten the stability and sureness of our bedrock rules of insurance policy interpretation ... By extension, that approach could also threaten the likely millions of consumers of insurance in this state by providing a rationale to read into insurance contracts language that is not there."
Whether the judge's words of warning will prove to be prophecy, we can't know. However, it is certain that this ruling will change the way project owners and general contractors view the protection they receive under additional insured endorsements. I am concerned that insurance agencies, who regularly get haranged by project owners over certificate of insurance wording, will now face regular rejections of additional insured endorsements and will be powerless to replace them. The carrier paid a $950,000 judgment on behalf of New York City for this loss, so this was not a small matter.
Depending on the part of New York State you do business in, the liability insurance market for contractors is already tough. With this ruling, it may get tougher.