There is much to report on this month, but since most of you are already aware of the dire situation the American Transit Insurance Company (ATIC) is facing, I’m going to start with the good news: The New York Black Car Fund (BCF) recently celebrated its 25th anniversary.
The strides the BCF has made since its inception in 1999 are nothing less than extraordinary. More than 55,000 drivers from over 500 bases regulated by the NYC Taxi & Limousine Commission (TLC) are supported, not only with workers’ compensation, but they now have access to a laundry list of free physical and mental health benefits, as well as educational opportunities that drivers are paid to attend.
The BCF’s 25th Anniversary Celebration was hosted at the TWA Hotel at JFK Airport on September 17 (see photos on the cover), and special guests included NYC Council Member Selvena Brooks-Powers, Deputy Queens Borough President Ebony Young, NYS Assembly Member Catalina Cruz, TLC Commissioner David Do, Nick Abramovich, CEO of the Workers Benefit Fund, Brendon Sexton, President of the IDG and James Conigliaro Jr, President of the Workers Benefits Fund. Although they did not personally attend, NYC Council Speaker Adrienne Adams, NYS Assembly Speaker Carl Heastie, and Queens Borough President Donovan Richards each gave The BCF Proclamations recognizing the event and the organization’s many achievements. Ms. Young presented the Proclamation from Queens.
That’s a serious list, and proof of all the good the BCF has done and continues to do.
“Twenty-five years ago, The Black Car Fund revolutionized workers’ compensation for independent contractors, and now we’re once again setting a nationwide example of what can be achieved and provided to these workers,” said Berj Haroutunian, Executive Chairman of the BCF. “From off-the-job income protection, to one of the best dental insurance benefits I’ve ever seen, our Drivers Benefits program is making a meaningful impact in the lives and health of the drivers who keep New York moving.”
“As we celebrate our 25th anniversary, we are excited to be celebrating another incredible milestone; surpassing 55,000 enrolled drivers in our Drivers Benefits program. This achievement is a testament to our unwavering commitment to protecting and enhancing the safety, health and well-being of the drivers we cover,” said Ira Goldstein, Executive Director of the BCF. “As independent contractors, black car drivers in New York have never been more protected than they are now, both on and off the job. Thank you to our dedicated team and our partners who have made this possible for the tens of thousands of drivers who trust and rely on us.”
I would like to personally congratulate Ira, Berj, the rest of the BCF board, and my late friend and mentor, Victor Dizengoff, who was integral in founding this exceptional organization, that has helped so many people over the years.
Now, onto the (potentially) really bad news…
Looming Insurance Crisis Threatens NYC’s Regulated Drivers
If by some chance, you hadn’t already heard, ATIC – which provides insurance coverage for more than 60% of our industry’s vehicles – is on the verge of financial collapse. This not only means that hundreds of millions of dollars in accident claims and medical bills could go unpaid, it could literally force thousands of drivers out of service, until they can find another insurance company. It will also almost surely lead to higher costs for drivers and passengers.
It’s an issue that apparently dates all the way back to the 1980s, and it has set off a flurry of finger pointing, with countless people clearly to blame.
According to The New York Times, “In its latest financial filing, the privately owned company reported that it was insolvent, with more than $700 million in losses from existing and projected claims from past accidents – a huge hole that has been growing for years in part because of questionable financial practices, according to state officials.”
The Department of Financial Services (DFS) piled on, recommending that ATIC recover payments made to affiliates and bonuses paid to company officers totaling $22 million… but that wasn’t until May 17, according to an article in Insurance Journal. And while I agree, it won’t do much to fix a $700 million problem.
Hmm… then there’s the fact that state officials have literally known for decades that ATIC was falling deeper and deeper into a hole every time they checked on the company, and did nothing substantial about it, until now.
While ATIC still apparently has options, I’m struggling to see a way forward without significant government intervention. State officials said that the company’s “inadequate reserves were not illegal,” though the extent of its insolvency has given the DFS legal grounds to take over the company to prevent further financial problems. That smells a lot like a bailout to me, which would be annoying, but clearly better than the alternative.
The best option would be for another insurance company to take control, but it remains unclear how (or why) one would step into that nightmare, in part because of the higher costs and risks of covering TLC-regulated vehicles, which spend far more time on the road than personal cars.
State regulators ordered ATIC to explore all options to obtain more funding – which included a potential sale of the company – but the firm submitted two remediation plans, which included rate increases and setting up a blockchain platform where policies could be bought and sold as nonfungible tokens, The Times reported.
Neither seem viable to me… but anyway, as the finger-pointing continues, ATIC is blaming insurance fraud as a significant contributor to its financial problems, and the New York Post editorial board tends to agree this a serious issue. In September, they penned an article stating that: “Insurers in recent years have seen a jump in bogus claims involving commercial fleets, from ride-share cars to Amazon delivery trucks. One big reason: The city requires the highest commercial-vehicle coverage in the country, making those policies a potential gold mine for enterprising trial lawyers and fraudsters. It’s another way scam rings (involving unethical lawyers and doctors, as well as scuzzy ‘litigation lenders’) enrich themselves at the expense of small businesses and their insurers.”
The Post editorial board went on to blame mobsters and said, “New York badly needs tort reform to bring down all insurance costs, but a crackdown on these fraud rings is even more urgent. Attorney General Letitia James needs to go after them, along with county district attorneys and federal prosecutors.”
Media outlet, AutoMarketplace noted in late August that, “The unpopular truth in all of this, and very few want to hear this, is TLC commercial auto liability insurance is likely underpriced. However, a NYC driver or fleet can only afford so much. For example, if a ‘true’ sustainable insurance premium is a price only 40% of the marketplace can afford, what do you do? It points to deeper issues that need to be addressed at the State and City level, such as cracking down on ‘lawsuit lending’ practices or disincentivizing frivolous insurance claims.”
Now, all of this may be true, but it doesn’t explain the fact that state regulators flagged the company’s reserves as “inadequate” way back in 1979, “and later found increasing levels of insolvency in eight examinations that were conducted between 1987 and 2020. State officials said it was not clear why five of those earlier reports had not been released,” The Times reported, adding: “State officials said they had made past attempts to intervene, including filing a petition in state court in 1979 seeking to liquidate the company. The effort failed. In 1987, state officials filed a petition to put the company into rehabilitation, a formal process meant to restore it to financial stability, which was resolved when American Transit secured more funding. But four years later, in 1991, state officials again filed a petition to rehabilitate the company and later moved to liquidate it. American Transit challenged those proceedings, and in 1996, reached a settlement with state regulators that allowed it to remain in business under certain conditions, including that it be closely monitored by state regulators. Since then, however, the firm’s finances have continued to deteriorate.”
To make matters worse, Insurance Journal noted that ATIC is also being sued in federal court by Uber for a “consistent pattern of failing to honor coverage for ride-share drivers in New York City who get into accidents.”
“There is a perception that they are too big to fail,” Andrew Don, chief operating officer of Research Underwriters told Insurance Journal. If that happened, “there would be a large void in the ability to get a taxi or an Uber or a Lyft or a limo in New York as all of these vehicles would suddenly be without insurance. The only other insurance carriers that would be able to pick them up currently would possibly struggle with the volume of business.”
In that case, “every taxi driver or limo driver is going to have a significant increase in their insurance premium” as rates adjust to reflect real risk, Don said.
“DFS has to step in and do something,” Matthew Daus, a partner at the Windels Marx’s Transportation Practice Group, founder of its Transportation Practice Group and former TLC chairman said. The company’s latest financial filing paints a picture so dire that it’s “creating unrest in the industry.”
Daus added that ATIC has been underpricing insurance for decades, snapping up business from competitors.
Crain’s New York Business said, “Drivers insured by ATIC typically pay annual premiums of $4,000 to $6,000, depending on their experience, accident claims and different actuarial calculations – rates that competitors say are not commensurate with the risk.”
Honestly, it’s unclear where this goes from here…
TLC Chair David Do told The New York Times that city officials were taking the situation “very seriously,” as “its stability has a direct impact on our fleets, drivers and ultimately passengers.”
Holy crap, that’s a lot to take in… but at this point, all we can do is wait and see what happens as this potential catastrophe continues to unfold.
