ISO’s New Ride Sharing Endorsements

In a post about a month ago, I summarized the new law passed by the Georgia legislature earlier this year that, as of January 1, 2016, will require Uber, Lyft, and other Transportation Network Companies to maintain specified levels of insurance on their drivers from the time they are logged onto the company’s network and available to accept passengers until the driver is logged off that network.  The new law imposes the insurance requirement on the Transportation Network Companies, but permits those requirements to be satisfied by either the company through a commercial lines insurance policy or their drivers through an endorsement or rider to the drivers’ personal lines motor vehicle policy, or a combination of the two.

I mentioned in my earlier post that the Insurance Services Office would be issuing a new motor vehicle policy form that covers the services provided by drivers for Transportation Network Companies.  A series of forms were issued by ISO on May 1, 2015, to be effective on October 1, 2015, subject to their adoption by each state’s insurance regulatory body.  In a well written article in the May 1, 2015 issue of the newsletter from IIABA’s Virtual University, Bill Wilson explained in detail what the new forms do and more importantly, don’t do.

Four new endorsements were issued by ISO, three for its personal auto policy and one for its personal umbrella policy.  The one for the personal umbrella policy is merely a modification of the existing exclusion for the use of a personal motor vehicle for carrying paying passengers.  The new language refers specifically to any period of time that the insured is logged into a “transportation network platform”, as a driver, whether or not there is a passenger in the vehicle.  Thus, there is no coverage under the ISO personal umbrella policy for the use of a motor vehicle to carry paying passengers or even for the time when no passengers are in the vehicle, but the insured is available to carry such passengers.

One of the endorsements for the personal auto policy has the same exclusion language as for the personal umbrella policy.  It applies to Part B medical coverage and Part D damage to motor vehicle coverage, as well as Part A liability coverage.  The other two endorsements offer coverage for the insured while he or she is logged onto a “transportation network platform”, but does not have a passenger in their motor vehicle.  One endorsement provides coverage up to the time a passenger enters the vehicle, while the other stops coverage when the insured accepts a request to carry a passenger.

Given the narrowness of the ISO endorsements, my earlier prediction that “there will most probably be personal lines insurance companies that begin to offer the type of coverage required by” Georgia’s new law doesn’t appear to have been a good one.  Instead, it looks like those who want to carry passengers for a Transportation Network Company will have to rely on the company to provide the required insurance coverage or buy their own commercial lines coverage, if the company does not do so.


Are Your Agency’s Employees Engaged? Part 2

A few weeks ago, I wrote a blog post about the importance of having engaged employees.  I recently came across an article in a magazine devoted to human resource issues in the workplace that provided some important caveats to what I said in my blog post.  The title of the article is “8 Common Misperceptions About Employee Engagement That Can Seriously Harm Your Company.”

A couple of the misperceptions discussed in the article were already addressed in my blog post, the most important being the belief that it’s all about money.  The article listed five things that are most valued by employees, with flexible work arrangements and opportunities for training and other skill enhancement activities being two of the more important ones.  Three of the more interesting misperceptions to me were the belief that it is important to engage everyone, employees know what will engage them, and satisfied employees are engaged employees.

The article makes the common sense point that it is impossible to get some employees who are disengaged to be engaged no matter how hard you try.  The employer’s efforts to engage employees should be mainly directed at those employees who are satisfactory or above average performers.  The article advises not to waste much time on the poor performers.  Instead, look to replace them with people who are more like your satisfactory or preferably, your above average performers.  Similarly, while you need to ask everyone what would make for a better work experience, you should pay closer attention to the responses of your satisfactory and above average performers than those of the poor performers.

However, the article advises not to accept at face value responses of employees to the question of what would make for a better work experience, especially if those responses are focused on perks.  Regardless of what employees may say, research has shown that the work itself must be meaningful and well-managed for employees to be truly engaged.  One strategy for handling requests for perks is to ask your employees what they would be willing to do to get them.  By doing so, there is no sense of entitlement to the perk.  Instead, the employees make a commitment to improve the business in some way for an improvement in the work experience.  This is one way to foster employee engagement.

But according to the article, the most important way to foster employee engagement is to have good managers and supervisors, which point was also made in the article that was referenced in my earlier blog post.  Having a good relationship with their supervisor was the single most important factor for engaged employees.  To create a good relationship, the supervisor must have a sincere interest in the personal well-being of the employees under their supervision.  Unless that interest exists and is apparent to those employees, nothing else the supervisor may do will create the same level of engagement that would otherwise exist.

The article ends with some suggestions for how to achieve an engaged workforce, which should be of interest to any employer.

What is a Covered Entity and Why Should You Care?

The term “Covered Entity” refers to those organizations that are subject to the information privacy provisions contained the Health Insurance Accountability and Portability Act (“HIPAA”) and its companion the Health Information Technology for Economic and Clinical Health Act (“HITECH”).  HIPAA was enacted by Congress in 1996 and among other things, imposed requirements for how Protected Health Information (“PHI”) is to be handled by Covered Entities.  HITECH was enacted in 2009 and formally extended those requirements to “Business Associates” of a Covered Entity.

A Covered Entity is (i) a health plan, (ii) a health care information clearinghouse, or (iii)  a health care provider that transmits certain health related information electronically.  A “health plan” includes any insurance company, as well as a group health plan that has 50 or more participants or that is administered by someone other than the employer who established and maintains the plan.  A Business Associate includes anyone who ‘creates, receives, maintains, or transmits” PHI for “claims processing or administration”, among other reasons.  PHI is information about a person’s past or present mental or physical health, treatment provided to that person, or payments made for such treatment, which information reveals the identity of that person.

An independent insurance agency that sells individual or group health insurance is a Business Associate of the insurance company that issues the policy and probably has already seen agreements from those companies that it represents that are intended to comply with the privacy requirements imposed by HIPAA and HITECH.  What such an agency may not have realized is that it is also a Business Associate of each customer to whom it sold a group health insurance plan that falls within the definition of health plan set forth above.  HIPAA and HITECH require that each Covered Entity have a written agreement with each of its Business Associates that satisfies the requirements of those laws.  The penalties for the failure to have such agreements in place can be significant and the Department of Health and Human Services (“HHS”) is focusing on this area in its enforcement efforts.  Both the Covered Entity and the Business Associate can be held liable for the failure to have the required written agreement in place.

The Agents Council for Technology has held a webinar on what HIPAA and HITECH mean for independent insurance agents, which goes into greater detail about the requirements imposed by those laws and the penalties for not satisfying those requirements.  HHS has a website devoted to HIPAA and HITECH, which has a sample Business Associates agreement that could be useful for those insurance agencies that do not yet have such agreements in place with their group health plan customers that meet the above criteria for coverage by those laws.

Here is yet another area where independent insurance agents can provide added value to their customers and at the same time protect themselves.  While they are at it, such agents should also determine if they need to have Business Associate agreements with other parties with which they do business, e,g,, companies that provide IT services to the agent the provision of which services would give them access to PHI stored on the agent’s computer system.

A Simple But Effective Marketing Suggestion

Carrie Reynolds is an independent insurance agent in Ohio who has a blog that she calls “Confessions of an Insurance Goddess“, with her tongue planted firmly in her cheek.  In a recent post, she recounted how a simple act, writing a handwritten note to a new business that had been featured in her local newspaper, resulted nine months later in her agency writing the insurance coverages for the business and a personal automobile policy for its owner.  The note congratulated the business owner on the opening of the new business, welcomed it to the community, and ended with ““If you are ever in need of my services or an introduction to someone in the community, please let me know.”  Enclosed with the note was the article from the newspaper and her business card.

The 15 minutes or so it had taken Ms. Reynolds to write the note and mail it, along with the enclosures, led to a substantial commission on the insurance coverages she later wrote for the business and its owner.  She had done no follow-up marketing to this business. In this increasingly fast paced world that we live in, one way to stand out is to do something that is not done much any more, but that shows you care about more than selling your product or service.  Handwritten notes are a thing of the past (my law partner was doing this type of thing for his clients 20 years ago), but they still make an impact.  Even more so because they are now unusual.

If your agency does not subscribe to the local paper anymore, maybe it should think about doing so, because that is where news about new businesses or important life events of those in the community will be found.  Such news can be the basis for sending a congratulatory or even in appropriate cases a sympathy note that does no more than say you noticed what had happened and took the time to reach out and offer to help.  The handwritten part is the most important because it lets the recipient know you actually took the time to create it, instead of using a computer program.

Ms. Reynolds’ blog post contains other suggestions for sources to use to find potential customers on which this marketing approach can be used.  I am sure with a little thought there are other sources in their communities that my readers can find.  Please share with me any other simple, but effective, marketing suggestions you may have.


Georgia Legislature Creates Need for New Personal Lines Coverage

The 2015 session of the Georgia General Assembly tackled several insurance related issues.  For a complete rundown on what the General Assembly did and did not do this year, click here for the Capitol Report from Gould Hagler, the lobbyist for IIAG.  The General Assembly’s handling of perhaps the most high-profile insurance issue resulted in creating a need for a specific type of new personal lines coverage.  Beginning January 1, 2016, anyone who carries passengers for what the General Assembly has chosen to call a “Transportation Network Company” (think Uber or Lyft) must either have specified insurance coverage through such a company or as part of their personal motor vehicle policy.

House Bill 190 requires that either the Transportation Network Company or each of its drivers must have minimum coverages of $100,000 for bodily injuries or death in one accident with a maximum of $50,000 per person and $50,000 for property loss or damage in one accident for the time period during which the driver is logged onto the company’s network and available to accept passengers until the driver is logged off, except for the period of time beginning when the driver accepts a ride request on the network and ending when the ride is complete, or “the driver completes the transaction”, whichever is later.  During this latter time period, there must be minimum insurance coverage of $1 million for death, personal injury, and property damage per accident and $1 million for uninsured and underinsured motorist coverage per accident.

The new law allows for the above minimum coverage requirements to be provided by both the driver and the Transportation Network Company, if the driver obtains a motor vehicle insurance policy or an endorsement to their existing motor vehicle policy that specifically covers the above services and periods of time and the Company obtains an excess coverage policy, which together satisfy those requirements.  The new law specifically states that an insurance company authorized to transact business in Georgia will not be required to provide either a policy or an endorsement to existing policies that satisfies those requirements and such a company can exclude coverage for the activities described above from any motor vehicle insurance policies it may issue.  Not surprisingly, if a company chooses to provide the statutorily required coverage in either a new insurance policy or an endorsement to an existing policy, the new law authorizes the company to charge an additional premium for such coverage.

It remains to be seen whether the Transportation Network Companies will choose to obtain the required insurance coverage themselves or require their drivers to obtain some or all of those coverages. Most likely, some will obtain such coverage and some won’t.  However, given the rapid growth of the type of services offered by companies like Uber and Lyft and the controversy that has been created by them, there will most probably be personal lines insurance companies that begin to offer the type of coverage required by HB 190.  In fact, the Insurance Services Office is set to file a new motor vehicle policy form that covers these type of services.  For more on this new filing, be on the look out for the May 1, 2015 issue of the newsletter from IIABA’s Virtual University, which will contain an article on it. (Click here to sign up for the newsletter if you aren’t already on the list. You don’t have to be a IIABA member to subscribe to this newsletter.)

Agents should not wait to begin contacting their personal lines customers about HB 190.  Most commentators agree that existing personal motor vehicle policies do not provide coverage for ride sharing services like Uber and Lyft, so the liability exposure already exists.  Informing your customers of this exposure is another way to provide value added services to them and in the process offer a way to mitigate that exposure, now that you know how much coverage they will need.

Are Your Agency’s Employees Engaged?

About 10 days ago, the Atlanta Journal Constitution published its annual ranking of the top places to work in the Metro Atlanta area.  Two years ago J. Smith Lanier & Co. was ranked in the top 5 midsize business places to work and this year was ranked 13th in that group. (Click here for my blog post in 2013.)  Congratulations are due to it for maintaining its status as a top workplace.  As was the case in 2013, no other independent insurance agencies were ranked and there were no insurance companies anywhere to be found.

What most interested me were the results of a survey that the AJC gave the employees of the top ranked workplaces to find out what was most important to them about where they worked.  The three most important factors cited by those employees all had to do with the feeling of connection between them and their employer.  The most important factor was feeling genuinely appreciated by their employer, followed closely by a feeling of confidence about their future at work and that their employer was going in the right direction.  To my surprise, the two things that were least important to these employees were feeling that their pay was fair for the work they did (cited by only 51%) and bringing up the rear, feeling that their benefits package was good compared to similar companies (cited by only 37%).

Engagement is the buzzword in human resources circles for creating a connection between the employee and employer.  A recent survey of employees found that over 68% of them self-identified as being disengaged at work.  Other studies show that disengaged employees are not as productive as employees who feel engaged at work and by some estimates cost the American economy $550 billion a year as a result.

In addition to productivity loss, disengaged employees can negatively affect office morale and generally do not provide the type of customer service that is needed in today’s economic environment to distinguish your insurance agency from everyone else.  From the above description of the negative effects that disengaged employees can have on a workplace, it should not be hard to figure out which employees in your agency may be disengaged.

Three general rules for creating a workplace of engaged employees are:  1) listen to them, especially about problems they may see and suggestions they may have for improvements in workflow and other office procedures; 2) encourage them to work together to solve the problems that may exist and advance the goals of the agency; and 3) give them regular feedback on their performance, praise where warranted and constructive criticism where necessary.  The key here as in most areas of life is regular and honest two-way communication.

For an article on seven actions that can be taken to implement the above general rules, click here.  For those who want more information, click here to register for a free one hour webinar on creating an engaged workforce that will be held next week on April 8 at 1 p.m.  Finally, if you are looking for suggestions on how to use reward and recognition to boost the productivity of your agency’s employees, click here to download a free booklet on that subject.

Authority to Make Changes to an Insurance Policy – Part II

I have been informed that my post last week generated a comment on IIAG’s Facebook page.  That comment made a valid point that I neglected to make in my post, but also expressed an attitude that may be shared by many other agents, which attitude I think could cause problems for the agent in some situations.

The point made that I neglected to make was that, if the language of an insurance policy states who is authorized to make changes to it, then that language will control in the absence of any statute or regulation to the contrary.  The same principle applies to any questions that may arise about an insurance policy.  My post last week addressed the situation in which the policy does not contain any language about who is authorized to make changes to its coverages.

The person who posted the Facebook comment went on to say that agents should advise their customers to look out for themselves in the divorce situation that I used as an example in last week’s post.  Georgia law does presume that an insured has read their policy and therefore, understands what coverages and other rights they have under it.

However, as noted in an earlier blog post, an agent may well have a duty to an insured that goes beyond just obtaining the type of insurance coverage requested by the insured and leaving it up to the insured to take care of themselves after that.  An agent’s words, conduct, or both can give rise to duties to the insured that go beyond those of a mere order taker.  In the context of a family personal lines insurance policy, an agent who is trying to provide “added value” to the family can easily say or do things that would lead the husband and wife to reasonably believe that they both have control over what happens to that policy.

I think an agent will expose themselves to potential liability if they are aware of a divorce proceeding and do not at least ask the spouse requesting a change in the insurance policy if there has been an order entered in the proceeding that addresses what can be done with the policy in question.  In the absence of any attempt by the agent to make such a determination and the occurrence of a subsequent uninsured event involving the other spouse, the agent can expect to be sued for negligent performance of their duty to the other spouse, who was a named insured.  It will then be up to the agent to explain to a jury why it was unreasonable to expect them to make any effort to determine whether the requesting spouse had the authority to request the change in question.  The agent may win in the end, but at the cost of significant time and expense that could have been avoided by asking a simple question. 


Who Can Make Changes to an Insurance Policy?

The above question arose out of a call that I recently received on the Free Legal Service Program that I run for the IIAG.  The caller had been directed by one spouse who was involved in a contentious divorce proceeding to delete the other spouse and their child from a motor vehicle insurance policy on which the requesting spouse was the named insured.  I did not have to give my opinion on whether that could be done because an order had been entered in the divorce proceeding that prohibited any changes in existing insurance coverages pending the outcome of that proceeding. The question posed by the caller and my response will be the subject of a future blog post.

The above call caused me to start thinking about what an agent’s duty would be in the situation described above where no court order had been entered.  Given that almost half of all marriages end in divorce, agents are probably put in such situations on a regular basis.  A quick search of the Georgia Insurance Code and case law did not reveal any statute or appellate court decision that directly addressed the above question.  The closest statute I could find was the one that governs how an “insured” can cancel an insurance policy.

If the “insured” can cancel an insurance policy, it is logical to assume that they can ask that changes be made to it.  Unfortunately, that statute does contain any definition for the “insured.”  In practice, most agents (and I) would assume that the “insured” who can cancel the policy is the named insured on the policy.  Where there is more than one such named insured, the question arises whether all such named insureds must agree to any changes in the policy.  I don’t know the answer to that question, but I think it is clear that one named insured cannot do anything that would change the coverage available to the other named insured(s) without their consent.

This would be helpful in the context of spouses involved in divorce proceedings if they are both considered to be the named insured on the policy in question.  If not, I would advise that an agent refuse to make any changes requested by the named insured spouse, where the agent is aware of divorce proceedings having been commenced, without first finding out if any order has been entered in the proceeding that would prohibit such changes being made.  If no such order has been entered, the agent should document the steps taken to make that determination and that the changes requested were made only after those steps were taken.

I welcome comments from my readers about their experiences with the above situation and how they have handled similar requests.




Does an Insured Have a Right to Obtain Copies of the Documents in Their File?

A client of mine recently asked a really good question to which I cannot give a very good answer.  His question was what right does an insured have to get copies of the documents in his agency’s file for the insured.  I am not aware of any law or regulation that specifically addresses this question, except with respect to any documents that may contain information covered by the Health Insurance Portability and Accountability Act, commonly known as HIPAA.  That Act imposes obligations on those who have such information in their files that are beyond the scope of this post.  Those of my readers who are members of IIAG and thus, members of IIABA, can go to the IIABA’s members only section and find more information on those obligations under Legal Advocacy, Memoranda and FAQs.   My other readers can find such information on a blog found here.

For all other documents found in an agency’s files for their insureds, we are left with the general principle that an agent is considered to be the agent of the insurance company first.  As such, he or she owes no duties to an insured, other than to obtain the policy requested by the insured and by extension, any documents created by the agent during the course of obtaining such policy would belong to the agent and/or insurance company that issued the policy.  This same rule would apply to any documents acquired by the agent during the course of obtaining the insurance policy requested, except for those documents that were supplied by the insured.

As noted in an earlier blog post, under Georgia law, by his or her words or conduct an agent can create duties to an insured that do not exist otherwise.  That same principle would apply to the documents in an insured’s file.  If the agent by words or conduct leads an insured to believe that the documents in the agent’s file for the insured belong to the insured or that the insured will be able to get a copy of any such documents upon their request, the agent would have created a duty to the insured to provide copies of all such documents upon the insured’s request.

This principle can also work the other way.  If the agent informs the insured at the beginning of the relationship that any documents created or obtained by the agent during the course of providing services for the insured will belong to the agent and that the insured has no right to obtain copies of them, that rule will govern the relationship.  In any event, there is nothing to prevent an agent from charging a reasonable fee for making copies of any documents requested by the insured that the insured either has a right to obtain or that an agent agrees to provide.

So the answer to the above question is that it depends on the type of document being requested and on whether the agent has established a policy about the provision of copies of the documents in their file for an insured, either one way or the other.  If not and the document requested was not one that had been provided by the insured initially, then the default rule would be that an agent has no obligation to provide an insured with copies of documents in their file for the insured.



Which Agency Employees Can Be Exempt Employees for Overtime Pay Purposes?

In last week’s post, I mentioned the concept of exempt and nonexempt employees and provided a brief description of what makes an employee exempt from the requirement under the Fair Labor Standards Act (“FLSA”) that employees be paid extra compensation for any work done in excess of 40 hours per week.  This subject is an important one, as the misclassification of an employee as being exempt when in fact they are not can be very costly to the employer, as explained later in this post.

A few weeks ago, I listened to a webinar that focused on whether certain employees of insurance agencies could be classified as exempt employees.  In particular, what it would take for customer service representatives, or account executives, and producers to be classified as exempt employees.  The presenter discussed in some detail the two main exempt categories that may apply to the former type of employees, known as the executive and administrative employee exemptions.  As noted in last week’s post, at this time, to qualify for either exemption an employee must be paid on a fixed salary basis in an amount that equals at least $455 per week ($23,660 per year) and that salary cannot be reduced based on the quality or quantity of the work performed by the employee during any one work week.

I say at this time because, at the direction of President Obama, the Department of Labor has been reviewing those and the other exemptions from the overtime pay requirement and is expected to release updated regulations for them sometime this Spring. Most knowledgeable commentators expect the minimum salary requirement for the administrative and executive exemptions to be increased significantly.

The most likely exemption for customer service representatives would be the administrative exemption, which requires that the employee’s primary duty be the performance of “office or non-manual work directly related to the management or general business operations of the employer or the employer’s customers” and include the “exercise of discretion and independent judgment with respect to matters of significance” to the employer’s business.  Such employees can engage in some sales activity on behalf of the employer, but that activity cannot be their primary duty. (Click here for a more detailed explanation of the requirements of the administrative exemption.)

For producers, the most likely exemption is one for outside sales persons for the reasons discussed in a 2009 opinion by the Wage and Hour Division of the Department of Labor that focused on life insurance producers, but the language of which would apply equally to property and casualty or health insurance producers.  That exemption requires the employee’s primary duty to be the making of sales or the obtaining of orders for services and they must “customarily and regularly” perform that duty outside of the employer’s place of business, which for this purpose means at the home or office of the customer or potential customer. (Click here for a more detailed explanation of the outside sales person exemption.)

If an agency’s producers don’t meet the second part of the outside sales person exemption, it is possible that they can meet what is known as the commissioned sales person exemption.  That exemption requires that the employee be paid at a rate in excess of the overtime pay rate (at this time $10.88) for every hour worked and that more than half of their total compensation be from commissions. (Click here for a more detailed explanation of the commissioned sales person exemption.)

An employee who was not paid overtime compensation when they should have been has the right to sue the employer in federal court to recover the extra compensation they should have been paid for up to three years before the lawsuit is filed.  In addition, if the employee convinces the court that the employer willfully violated the FLSA, they can receive liquidated damages up to double the amount of extra compensation they should have been paid.  Finally, a successful employee is entitled to an award for the attorney fees and other litigation expenses incurred by them, which award can sometimes be far higher than the amount of extra compensation the employee recovers.  Last year, an employee in Georgia who was awarded a little over $6,500 in extra compensation, also received an attorney fees award of over $173,000.00.  It is easy to see why lawsuits for unpaid overtime compensation are the most frequently filed employment related lawsuits in Georgia and elsewhere.