For those of us who have watched and studied the ways of Albany over the years, we thought we had seen it all in March of 2008 with the sudden and shocking demise of a Governor, who had been elected by nearly 70% of the voters, and the unseemly admissions of his successor which took place on his first day in office. However, we learned on the 8th day of June of this year we hadn’t seen anything yet. Late in the afternoon of that day, thirty republican state senators, along with two democrats, purposefully and confidently strode into the ornate Senate Chamber and began to implement a painstakingly and secretly developed game plan designed to alter the balance of power in that house. Through some clever parliamentary maneuvering, Senator Thomas Libous of Binghamton introduced a resolution to elect democrat Senator Pedro Espada of The Bronx President Pro Tempore of the Senate and Senator Dean Skelos of Long Island as the majority leader. Senator Neil Breslin from Albany, who suddenly found himself in the middle of the surprise move as the Temporary President of the Senate that day, hesitated to move a vote on the resolution and then abruptly attempted to adjourn the session.

Libous protested and insisted on a vote. The resolution passed 32-30 because two democrat Senators, Espada and Monserrate vote in favor. The new “coalition” majority proclaimed victory and announced that they were now in charge of New York’s senior deliberative body. Democrats strongly disagreed and said that the vote was illegal because the session had adjourned. Bedlam ensued. Since that day, New Yorkers have been treated to an astonishing show of lawsuits, insults, threats, promises, boasts and claims of legitimacy. What they haven’t been treated to has been the passage of any legislation since the coup. The Senate has essentially stopped functioning. Shortly after the coup took place, one of the democrat Senators who had been a part of the “coalition” announced he was going back to vote with the democrats.

As a result, each side to the dispute now claimed 31 votes which effectively prevented the body from taking any affirmative action whatsoever. With democrats refusing to recognize that the body’s leadership had changed on June 8th, each side claimed that they controlled the Senate. For a time each side met in the chamber at separate times. As the official end of session came and went on June 21st without a resolution to the impasse, Governor Paterson exercised his constitutional authority to force the Senate to come back to a “special session”. The Governor also had to go to court to force the two sides to meet in the chamber at the same time.
As I type this piece on a rainy Albany day in my office which directly faces the Capitol, there is no resolution to this situation. In order to satisfy the Governor’s order, and the order of the Albany County Supreme Court, the Senate “gaveled in” to begin the session, and then almost immediately “gaveled out”. Since the body remains deadlocked at 31 each, and neither side recognizes the other’s leadership, no legislation can be passed. So each day they go into session and then they go out. The Governor has now ordered them to go into “special session” each day over the 4th of July weekend. No quick resolution is expected.

Democracy is not always pretty and it is almost never efficient. While many New Yorker’s are outraged by the events of the past month I see it as the occasional price we must pay for living in a republic. The enduring strength of our system, which is the fact that the people elect representatives who become part of a deliberative legislative body – each of whose members gets a vote, can sometimes be its weakness as well. Since power is pluralized into 62 separate votes, the ability of a representative body to conduct the public’s business is always reliant on the continued good will and cooperation of its elected members. Right now, for many reasons, there is no good will between the sides and no cooperation. As angry as we all have a right to be at them at this point, I urge all of us to remember that this “situation” cannot happen in North Korea. It did not occur in the age of Kings either.

The tragedy in all of this is that while this struggle plays out, hundreds of pieces of urgent legislation sit idle and bear the risk of not getting passed this year. Some of the more immediate effects of the standoff will be felt by municipalities that depend on revenue from a portion of the sales tax which must be renewed by the legislature each year. While this type of impact has received the most attention in the media, the insurance industry will be similarly impacted by the failure of the Senators to resolve the conflict. Many industry lobbyists have been told that nearly all the insurance legislation that was slowly moving through the legislative process on June 8th has been put indefinitely on hold. Thus, important bills, such as the Insurance Department’s life settlement proposal, appear to be dead in the water at this point. Similarly, there may not be any action on the proposal to license title insurance agents or on the bill which would expand the authorized lines that may be written in the excess market. Other important insurance legislation that will most likely not receive consideration this session is in the areas of medical liability insurance and health insurance rating reform.
In a year in which the insurance industry took such a significant hit in the budget and on the Insurance Department’s Section 332 assessments, the failure to obtain any significant legislation that the industry deemed important works as a double hit. Many people have asked me in recent days what I believe will eventually happen with the 2009 session. The honest answer is that I have no idea. The Albany legislative process has always been driven by deadlines, much like a college student who puts off a paper for months only to pull an “allnighter” on the day before the deadline.

I thought that the end of the month deadline, which marked the expiration of over sixty laws that are all vital to some person or government, would force the parties to at least temporarily work out their differences to extend the bills. However, as the deadline passed without action I began to believe that the standoff could go on for some time. The Senate will resolve this dispute and find a way to conduct business at some point, although no permanent solution will probably happen until after next year’s election. However, the level of animosity on both sides, coupled with the uncertainty of operating in this unprecedented political and logistic atmosphere will make any eventual “mini-session” short and limited to only the most important and pressing legislation. There may also be a series of one or two day sessions that could be held as agreements on important legislation are developed. Of course, any new legislative calendar for the balance of this year must have the cooperation of Speaker Silver and the Assembly, which may be difficult.

So for those of you in the industry who were counting on one particular piece of legislation or another this year my advice is to standby, keep your powder dry, and let your spouse know that all vacation plans for this summer are very fluid.

Weiss Steps Down as Chair of the Workers’ Compensation Board
On June 12th, Governor David Paterson announced that Zachary S. Weiss would be stepping down as Chair of the Worker’s Compensation Board (WCB) after 21 months in that position. The Chair of the WCB is the chief executive of the agency which employs over 1500 people and operates over thirty hearing locations and eleven district offices. The Governor stated, Since October 2007, when he was appointed as Chair of the New York State Worker’s Compensation Board, Zach Weiss has worked tirelessly to successfully implement the 2007 Worker’s Compensation reforms. He has demonstrated great compassion and a profound sense of fairness to both the injured workers of New York and those who employ them. Under Chair Weiss’ leadership, our worker’s compensation system has shown unprecedented improvement. Two years ago, New York had one of the most expensive worker’s compensation programs in the country. Now, we are much more competitive. Even more impressive is that these gains have not been on the backs of injured workers. Rather, we have increased their maximum benefit and decreased the time in which a disputed case is resolved. I would like to thank Zack for all he has done to benefit the employers and employees of our State and wish him well with his future endeavors.

While the Governor’s statement is quite kind, it falls short of accurately summarizing the personal role and impact of Zack Weiss on the state’s worker’s compensation system. More than any single individual in the Spitzer/Paterson administrations, Weiss has been involved in every aspect of the implementation of the comprehensive reforms enacted in early 2007. As Special Counsel in the New York State Insurance Department, Weiss played a critical role in the planning and formation of the three agency [Insurance, WCB and State Insurance Fund (SIF)] task force, formed by Governor Spitzer in March of 2007 and charged with the daunting task of implementing the sweeping reforms contained the legislation. Weiss’ influence was felt in the hiring of task force staff and in the retainer of consultants. Then, after playing a significant role in the formation and early work of the task force Weiss became a natural choice as Chair of the WCB, where he could implement the plans developed by the task force. As Chair he spearheaded the implementation of a “rocket docket” designed to provide swifter adjudications for injured workers, and objective medical guidelines to promote certainty and consistency in disability determinations. Weiss also was instrumental in the development of the new “individualized” company system for filing and obtaining Insurance Department approval for policy rates. His importance to the Worker’s Compensation system could not have been predicted only a few years ago when Zack Weiss was a prosecutor in the Manhattan District Attorney’s office. In that role Weiss obtained convictions against some of the most dangerous mobsters of the day. He then made the move to the State Attorney General’s office to work with Eliot Spitzer on complex enforcement litigation designed to protect consumers of investment, banking and insurance services. He took a keen interest in insurance issues, particularly worker’s compensation. He was desirous of assisting Governor Spitzer in his campaign promise to implement badly needed reforms in the worker’s compensation system so he learned the system from the bottom up.

Weiss emphasized the collection of empirical information designed to measure the speed and efficiency of the adjudication process. This information was then used in the design of new programs intended to enable the massive administrative adjudicatory system to work better. He also spent a great deal of time on the WCB’s internal operations design. He carried a pleasant demeanor and the word from some of his fellow Board members is that he has been a pleasure to work with. Chairman Weiss was hard on the attorney practitioners who make their living off the daily representation of parties before the system. He was impatient and intolerant of practitioners who did not carry the best interests of their clients at heart. The word I hear is that some of the practitioners in the latter category may not be too broken up at his departure. Sometimes if you’re doing the job right you’re bound to upset some.

Weiss will embark on his next career as a federal administrative judge. I wish him well. I know Zack Weiss very well and I have always been impressed with his encyclopedic knowledge of whichever subject area he is discussing at the moment. However, most impressive is his heart and compassion for the employees he supervised, and the injured workers he was charged to protect. He listened to all points of view and told you straight out how he felt. In the world of government today those traits are an unfortunately rare commodity. I am now able to envision him skewering those poor practitioners who will appear before him in the federal administrative realm. My advice to them is that they better prepare their cases well, or they risk wishing that they had never gone to law school.

The New York Times has just announced that Governor Paterson has appointed new Board member Robert Beloten to succeed Weiss as Chair. Beloten has been a sitting hearing judge at the Queens District office of the WCB for the past several years. I will have more on him in the future. I wish him well.

The New York Insurance Department Approves The Sale of Two AIG Auto Subs
The New York State Insurance Department has approved the sale of the AIG personal auto group to Farmers Group, Inc., a division of Zurich Financial Services for $1.9 billion. The AIG group, known as the 21st Century Insurance Group, had sales of $3.5 billion last year. Overall the deal includes 18 insurance companies and 10 related non-insurance entities. The deal provides for $1.7 billion in cash and $200 million in face amount of subordinated, Euro-denominated capital notes backed by Zurich Insurance Co.

The deal has been processed through a number of regulatory approvals, as the NAIC announced that nine of its member states approved the purchase. Thus, the process set up by the NAIC last fall appears to have worked very well in this instance. California Commissioner Steven Poizner, the lead regulator on the case, said “the successful and efficient nature of this transaction is a testament to the value of state collaboration.”
Joel Ario, Pennsylvania Commissioner, said “the overriding goal of this transaction was to ensure that policyholders would not be adversely impacted, this is evidenced by the subgroup’s commitment to a thorough and comprehensive review of the terms of the purchase agreement.”

The approving states were California, Colorado, Delaware, Hawaii, Minnesota, New Jersey, New York, Pennsylvania and Texas.

Thus, AIG keeps going in spite of all odds to the contrary. The timely and efficient regulatory approval process is a positive sign for the company’s future.