August 2010 Alert

Greetings,

Welcome to the August edition of the FORC Alert. I hope you find the information useful.  If you have any colleagues that may be interested in this publication, please forward it on. There is a link below this message allowing them to opt-in so they can receive these FORC Alerts automatically.

Best Regards,

Kevin G. Fitzgerald
Editor, FORC Alert

August 2010 Alerts

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Category(s): Connecticut - 12/21/2016

New Connecticut Law Extends Continuation of Group Health Coverage to 30 Months

Public Act 10-13, effective as of May 5, 2010, permits employees/group certificate-holders who have lost their health insurance coverage due to a layoff, reduction of hours, leave of absence, or termination of employment, to continue health coverage under their former employer’s group health plan for up to 30 months.  Prior to Public Act 10-13, Connecticut had followed the federal COBRA rule, which allows such employees to continue coverage for up to 18 months.  Individuals who are currently on state or federal COBRA continuation due to one of the events described above are also eligible to extend their current continuation under this law.  The new law does not apply to self-insured employer health plans, policies not issued in Connecticut, or dental, vision, or prescription drug coverage, where such coverage is in a separate free-standing policy.  The law does apply if the dental, vision, or prescription drug coverage is combined with, and included under, the group health policy.

Michael T. Griffin, Esq. - ACCEL LAW GROUP, (860) 761-8550 , mgriffin@accelcompliance.com

Category(s): Connecticut - 12/21/2016

The Connecticut Insurance Department Issues Guidance Clarifying Form D Filing Requirements

The Connecticut Insurance Department recently issued Bulletin FS-23, which clarifies Form D filing requirements.  With respect to transactions or agreements involving Connecticut domiciled insurance companies, Bulletin FS-23 provides: (i) all non-cash contributions or distributions not otherwise considered an extraordinary dividend are considered material and require a Form D filing; and (ii) all management agreements, service contracts and cost-sharing arrangements are presumed to require a Form D filing, except for: (1) agreements between an insurer and an affiliated broker/producer; (2) the addition or deletion of companies to an already approved agreement; and (3) such other agreements, contracts and arrangements or amendments thereto that the Financial Regulation Division may exempt as not necessary for effective financial surveillance.

Alan J. Levin, Esq. - LOCKE LORD LLP, (860) 541-7747 , alan.levin@lockelord.com

Category(s): Florida - 12/21/2016

Case Summary: Insurers' Obligation to Defend and Pay on a Policy Claim Under a Reservation of Rights

A recent Florida federal appeals court decision involving an insurance company's duty to defend and pay a claim against a policyholder underscored the need for all insurers to take diligent and good faith steps to properly define all terms of their defense in advance when obtaining the cooperation of their insured during the defense of an underlying lawsuit under a reservation of rights.

Richard J. Fidei, Esq. - GREENBERG TRAURIG LLP, (954) 768-8286 , fideir@gtlaw.com

Category(s): Florida - 12/21/2016

Confidential Regulatory Action Versus the Public's Right to Information

The competing interests of Florida's broad public records law and the need for confidentiality in certain regulatory actions have clashed in recent weeks.  A state legislator and other groups have asserted that the Office of Insurance Regulation should have made more information available to the public relating to an insurer that was placed into administrative supervision but ultimately was ordered into rehabilitation.  The Office of Insurance Regulation has responded that provisions in current law providing for confidential supervision are necessary to prevent "run on the bank" scenarios.  The OIR points out that the state should continue to address the so-called cost drivers putting pressure on insurers, which were among the issues addressed in a broad property insurance bill vetoed earlier this year.

Travis L. Miller, Esq. - RADEY LAW FIRM, (850) 425-6654 , tmiller@radeylaw.com

Category(s): Florida - 12/21/2016

Consumer Advocate Moves Forward with Report Card Rule

The Office of the Insurance Consumer Advocate (ICA) has resumed efforts to adopt an administrative rule by which an insurer "report card" will be prepared.  The ICA initiated rulemaking last year, and members of the industry raised a series of concerns at rule workshops and hearings.  Legislation modifying the report card requirements passed in the 2010 legislative session as part of this year's primary property insurance bill, but Governor Charlie Crist vetoed the bill.  Despite continuing concerns from the industry, the rule currently is scheduled to be presented to the state's Financial Services Comission for adoption on August 26, 2010.

Travis L. Miller, Esq. - RADEY LAW FIRM, (850) 425-6654 , tmiller@radeylaw.com

Category(s): Florida - 12/21/2016

First District Court of Appeal Affirms Florida Office of Insurance Regulation's Right to Review Non-Florida-Related Viatical Settlement Provider Records

The Florida Office of Insurance Regulation ("OIR") announced on June 16, 2010 that the First District Court of Appeal has affirmed the OIR's right to review non-Florida related records for viatical settlement providers by ruling in favor of the OIR in its litigation with Coventry First, LLC, ("Coventry") of Florida.   Coventry had entered into litigation with the OIR over the issue of whether Section 626.9922, Florida Statutes allowed the OIR to examine non-Florida books and records, or whether this legal authority was limited to Florida-only records.  To view the First District Court's opinion and a chronology of OIR litigation with Coventry, click on the hyperlinks below:

First District of Court Appeal Ruling
Chronology of OIR litigation with Coventry

Fred E. Karlinsky, Esq. - GREENBERG TRAURIG LLP, (954) 768-8278 , karlinskyf@gtlaw.com

Category(s): Florida - 12/21/2016

Florida Hurricane Catastrophe Fund Coverage Selections and Premium Calculations Updated

Florida Hurricane Catastrophe Fund Coverage Selections and Premium Calculations from the past three Contract Years have updated as of June 30, 2010.  To view each year, click on the corresponding hyperlinks below:

2009/2010 Contract Year
2008/2009 Contract Year
2007/2008 Contract Year

Richard J. Fidei, Esq. - GREENBERG TRAURIG LLP, (954) 768-8286 , fideir@gtlaw.com

Category(s): Florida - 12/21/2016

Florida Insurance-Related Rules Effective July, August 2010

Effective July 19, 2010, Rule 69O-157.302,.303,.304; Long Term Care, New Business Rates  pertains to Facility-Only Rates, Home Health Care-Only Rates and Comprehensive-Only Rates, respectively, and provides for the publication of new business rates that will be effective for 2010.  Section 627.9407(7)(c), F.S. relating to long-term care insurance requires that any premium increase for existing consumers not result in a cost that exceeds the premium charged on a newly issued policy.  This statute further provides that, if the insurer is not issuing new coverage, the new business rate shall be as published by the OIR, at the rate representing the new business rate of insurers representing 80 percent of the carriers currently offering policies with similar coverage as determined by the prior calendar year earned premium.

Richard J. Fidei, Esq. - GREENBERG TRAURIG LLP, (954) 768-8286 , fideir@gtlaw.com

Category(s): Florida - 12/21/2016

Legislature to Conduct Interim Projects

The Senate Banking and Insurance Committee staff has announced several interim projects of interest to insurers.  The interim projects reflect the legislature's efforts to analyze key issues between legislative sessions.  Projects conducted this fall in anticipation of the 2011 session include studies of Florida's sinkhole insurance problem, financial alternatives to reinsurance, and public adjuster regulations.  The Senate committee staff also will monitor the impact of federal health care reforms on the private health insurance market in Florida.

Travis L. Miller, Esq. - RADEY LAW FIRM, (850) 425-6654 , tmiller@radeylaw.com

Category(s): Florida - 12/21/2016

New Florida Condo Law Changes Insurance Requirements for Associations and Unit Owners Effective July 1, 2010

Effective July 1, 2010, Senate Bill 1196 by Senator Mike Fasano relating to Community Associations makes several changes to insurance requirements for condominium associations and condominium unit owners.  The bill repeals the requirement that unit owners maintain property insurance coverage, as well as the requirement that the condominium association be an additional named insured on the policies issued to unit owners. It further requires loss assessment coverage of $2,000 for policies issued or renewed on, or after July 1, 2010.  A deductible of no more than $250 is to be applied per loss. However, if a deductible applies to another property claim to the unit owner resulting from the same direct loss, then no deductible will apply to the loss assessment coverage.  The bill also corrects a "glitch" in the law by replacing the terms "hazard" and "casualty" with the term "property."  To view complete information on SB 1196, click here.

Fred E. Karlinsky, Esq. - GREENBERG TRAURIG LLP, (954) 768-8278 , karlinskyf@gtlaw.com

Category(s): Georgia - 12/21/2016

Georgia Court of Appeals Affirms Grant of Summary Judgment to Insurer based on Estoppel Arising from Insured’s Failure to File an Answe

In Roundtree v. Everest Security Insurance Company (“Everest”), the Georgia Court of Appeals affirmed a lower court’s grant of summary judgment that Everest was not required to provide coverage for a car accident involving Angela Roundtree and the wife of an insured under an Everest automobile insurance policy.  Under the terms of the policy, the insured’s wife was specifically listed as an excluded party and, thus, Everest filed a complaint for declaratory judgment asserting that it was not required to provide coverage.  The appellant did not file an answer, the action went into default and although the appellant opened the default, such default resulted in the court treating the appellant as if she admitted to each material allegation in Everest’s complaint, which estopped her from arguing that the insured’s wife was not an excluded party under the policy.

Brian T. Casey, Esq. - LOCKE LORD LLP, (404) 870-4638 , bcasey@lockelord.com
Enan E Stillman, Esq. - LOCKE LORD BISSELL & LIDDELL LLP, (404) 870-4622 , estillman@lockelord.com

Category(s): Georgia - 12/21/2016

Georgia Insurance Commissioner Issues Directive Applying to Claims of Diminution of Value for Commercial Real Property

In Directive 10-EX-1 (“Directive”), Georgia Insurance Commissioner John Oxendine informed property and casualty insurers that, barring specific policy language to the contrary, a “liable party must restore a property owner to the same position as the property owner was in prior to loss.”  Despite the foregoing, the Directive noted that in certain cases it is possible that the property in question may be worth less after the loss occurred than prior to the loss notwithstanding the repairs to the property paid for by the insurer.

Brian T. Casey, Esq. - LOCKE LORD LLP, (404) 870-4638 , bcasey@lockelord.com
Enan E Stillman, Esq. - LOCKE LORD BISSELL & LIDDELL LLP, (404) 870-4622 , estillman@lockelord.com

Category(s): Georgia - 12/21/2016

Georgia Supreme Court Upholds Decision Preventing the Tolling of a Time-to-Sue Clause in an Insurance Policy

In Thornton v. Georgia Farm Bureau Mutual Insurance Company, the Georgia Supreme Court held that a time-to-sue clause, requiring an insured to file suit within one year from the date of loss under a homeowner’s insurance policy, was not tolled by a separate provision in the policy providing the insurer with a 60 day proof of loss investigation period.  As grounds for this decision, the Court noted that Georgia’s Insurance Commissioner had previously approved of a one year time-to-sue period, the time-to-sue clause was clear and unambiguous, and that the insured had ample time to file suit.

Brian T. Casey, Esq. - LOCKE LORD LLP, (404) 870-4638 , bcasey@lockelord.com
Enan E Stillman, Esq. - LOCKE LORD BISSELL & LIDDELL LLP, (404) 870-4622 , estillman@lockelord.com

Category(s): Iowa - 12/21/2016

Managing General Agent Loses Right to Policy Renewals or Expirations by not Accounting to Insurer for Premiums Collected

Interpreting an agency contract tightly worded from the standpoint of the insurer, an Iowa federal court held that a managing general agent forfeited its right to policy renewals or expirations on policies written on the insurer's paper by not promptly accounting for, and paying to the insurer, premiums collected.  Notwithstanding that equity ordinarily does not lie for monetary relief for breach of contract, the court found that a constructive trust or equitable lien had been created since the insurer was merely seeking injunctive relief on specific assets it owned, held in the hands of the agent. (The agent had refused to allow the insurer - even after a temporary restraining order was issued - access to financial records revealing the location of the assets.  In fact, he invoked the Fifth Amendment at the hearing on requested relief, since insurer had alleged commingling of funds by the agent.)  So an order was entered granting a preliminary injunction. Western Heritage Ins. Co.v. RDS Group, Inc, et al., No. 4:10 - cv - 00262 (June 22, 2010 S.D. Iowa).

Fred M Haskins, Esq. - PATTERSON LAW FIRM, (515) 283-2147 , fhaskins@pattersonfirm.com

Category(s): Minnesota - 12/21/2016

2010 Producer Licensing Changes

Significant changes to Minnesota laws governing insurance producers, insurance adjusters, and license education providers took effect on July 1, 2010.  Further detailed information is available either by contacting us or look up on the Minnesota Department of Commerce's web site at http://www.state.mn.us/portal/mn/jsp/content.do?id=-536893704&agency=Insurance.

Michael J Rothman - Minnesota Department of Commerce, commerce.commissioner@state.mn.us

Category(s): Minnesota - 12/21/2016

2010 Surplus Lines Bulletin

The Minnesota Department of Commerce issued Bulletin 2010-3 on June 25, 2010, regarding a surplus lines stamping fee reduction to .0008 of the policy premium for transactions effective on or after 1/1/2011. The surplus lines stamping fee is imposed on all premium bearing surplus line insurance transactions in the State of Minnesota by the authority of Minnesota Statute § 60A.2085, subd. 7.

Michael J Rothman - Minnesota Department of Commerce, commerce.commissioner@state.mn.us

Category(s): New Jersey - 12/21/2016

New Jersey's Supreme Court Addresses Exclusionary Clauses and Concurrent Causation in Third-Party Claims

In Flomerfelt v. Cardiello, the New Jersey Supreme Court considered an insurer's duty to defend and indemnify where the manner in which the injury was caused and the role that controlled dangerous substances played in the plaintiff's injuries were in dispute, addressing a concurrent cause question under a policy exclusion in the third-party insurance context.  The plaintiff in the case filed the action for injuries she sustained, which she claimed to be the result of injesting multiple drugs and alcohol, which she was served after she was visibly intoxicated, and a delay in receiving medical treatment because of a negligent failure to call for assistance, during a party held by the insureds' son at their home in their absense.  The defense asserted that the plaintiff's injuries were due to prior drug abuse and a genetic predisposition.  The insurer declined to defend or indemnify under the policy, based on an exclusion for claims "[a]rising out of the use, ... transfer or possession" of controlled dangerous substances, arguing that all of the plaintiff's injuries were due, at least in part, to the use of illegal drugs.  The Court's opinion, issued on July 7, 2010, offers a lenghty discussion of the evolution of New Jersey law regarding the separate duties of an insurer to defend and to indemnify, and then finds the "arising out of" language of the exclusion to present a "heretofore unseen ambiguity" in circumstances presenting potentially concurrent causes.  The Court thus imposed upon the insurer the duty to defend, because the facts underlying the asserted causes of the plaintiff's damages were intertwined, but could not reach the issue of the insurer's duty to indemnify based on the record before it.  In a separate concurring opinion, Justice Roberto Rivera-Soto noted that under New Jersey law, in order to be unambiguous, the policy should have excluded coverage for injuries arising out of the use of illegal drugs, "regardless of any other cause or event contributing concurrently or in any sequence to the loss."

Susan Stryker, Esq. - BRESSLER, AMERY & ROSS, P.C., (973) 966-9681 , sstryker@bressler.com

Category(s): New Jersey - 12/21/2016

Proposed New Rules Regarding Changes to Medical Malpractice Liability Insurance Rates

Proposed new rule N.J.A.C. 11:27-14, regarding insurers' changes to medical malpractice insurance rates, has been filed by the New Jersey Department of Banking and Insurance for public comment by September 17, 2010.  See PRN 2010-149. The proposal implements N.J.S.A. 17:29AA-1 et seq., effective August 1, 2010, which essentially changes New Jersey, from a "file and use" jurisdiction for medical malpractice insurance rate changes, to a prior approval jurisdiction for those filers proposing a rate change which exceeds on an annual basis the designated maximum rate change applicable to designated categories established by the Commissioner.  Under the proposal, the Commissioner may determine to apply different ranges of rate changes for different categories and subcategories of providers and specialties. Where the Commissioner determines that there are signficant restrictions on availability and affordability or access to care, and there is no "significant negative impact to the capitalization and reserve requirements necessary to ensure the solvency of insurers," the range of annual rate change shall be plus or minus five percent for that category or subcategory.  Where these limitations are not found, if data indicates high claims frequency or severity, or upwards cost trends, then the range shall be plus or minus 15 percent.  These ranges shall not apply where the Commissioner finds that:  the data does not support these limitations; the provider's insurance requirements are complex and the provider has access to professional risk management services and should be rated individually; or the risk is unusual, a high loss hazard or difficult to place.

Susan Stryker, Esq. - BRESSLER, AMERY & ROSS, P.C., (973) 966-9681 , sstryker@bressler.com

Category(s): New Mexico - 12/21/2016

Acting Superintendent of Insurance Suspends BCBSNM Rate Increase Settlement While BCBSNM Appeals to Supreme Court

On Tuesday, June 22, 2010, New Mexico’s Acting Superintendent of Insurance, Johnny L. Montoya, signed an order suspending a settlement agreement on recently-approved Blue Cross and Blue Shield of New Mexico (BCBSNM) health insurance premium rate increases.  The order suspended the April 26, 2010 settlement agreement between the Insurance Division, New Mexico Attorney General, BCBSNM, and the aggrieved party for the proceeding.  The rate increases at issue are for individual health products held by an estimated 40,000 New Mexicans and would increase premiums by an average of 21.3 percent.  The suspension order requires an evidentiary hearing at which Insurance Division staff is required to present an overview of how it reached its decision to approve the original settlement, while BCBSNM representatives are expected to provide evidence and testimony to justify the double-digit rate increases.  Additionally, public comment – both written and oral – will be taken during the hearing.  Montoya stated that he opted to sign the suspension order to ensure that the rates are justified and to bring transparency to the rate approval process.  The suspension order also includes a provision that allows BCBSNM to collect the agreed and increased fees pending the hearing and any related decision.  Upon receiving the suspension order, BCBSNM immediately sought a writ of mandamus with the New Mexico Supreme Court on June 25, 2010.  Oral argument on the request for a writ of mandamus is set for July 28, 2010.

Gary Kilpatric, Esq. - MONTGOMERY & ANDREWS, P.A., (505) 982-3873 , gkilpatric@montand.com

Category(s): New Mexico - 12/21/2016

N.M. Public Regulation Commission Appoints New Superintendent of Insurance

On Tuesday, July 27, 2010, the New Mexico Public Regulation Commission appointed John G. Franchini as Superintendent of Insurance.  Franchini has worked in various aspects of the insurance industry for more than 35 years.  He started his insurance career when he joined his father’s insurance brokerage as a salesman.  Most recently, he served as vice president for government affairs at New Mexico Mutual, one of the state’s largest workers’ compensation insurers (2002-2010).  Prior to that, he served as vice president of Brown & Brown of New Mexico, Inc. (1998-2002), and he served as president and owner of Franchini Consolidated Agency, Polson Mercer Insurance & Real Estate, Williams Consolidated, Chama Insurance Services, Consolidated Mortgage, and Franchini Travel (1984-1988).  The Commission selected Franchini with the assistance of a 17-member search committee that provided the names of five finalists.  The Commission interviewed all five finalists and selected Franchini, who will take office in August.

Gary Kilpatric, Esq. - MONTGOMERY & ANDREWS, P.A., (505) 982-3873 , gkilpatric@montand.com

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