December 2010 Alerts

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Category(s): Connecticut - 12/01/2010

Connecticut Insurance Department issues Warning regarding Expansive Certificates of Insurance

The Connecticut Insurance Department (the “CID”) issued Bulletin S-14 on November 9, 2010, regarding the proper use of certificates of insurance and warning that the improper modification of certificates of insurance is a violation of Connecticut law.  Bulletin S-14 states certificates of insurance should not be used to amend, expand or alter the terms of the underlying policy and warns producers “providing a certificate of insurance that misrepresents policy terms or conditions would violate Connecticut law and subject the insurance producer to penalties that may include suspension or revocation of the producer’s license.”  The CID further “urges all insurers to review their oversight procedures regarding the issuance of certificates of insurance in order to avoid the misrepresentation of the terms and conditions of their policies and to periodically remind their producers about the consequences of providing improper certificates of insurance to the public.”

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

Category(s): Connecticut - 12/01/2010

Connecticut Names Acting Insurance Commissioner

Barbara C. Spear was appointed Acting Insurance Commissioner by Governor M. Jodi Rell on November 12, 2010, succeeding Thomas R. Sullivan, who resigned from the position November 3, 2010.  In addition to her role as Acting Commissioner, Ms. Spear is also Director of Consumer Services and Business Regulation at the Connecticut Insurance Department (the "CID").  Prior to joining the CID, Ms. Spear spent 28 years in the property and casualty industry in various roles involving claims and client services at local, regional and national levels.

Connecticut Governor-elect Dannel Malloy will appoint a permanent Insurance Commissioner after he takes office on January 5, 2011.

Michael T. Griffin, Esq. - ACCEL LAW GROUP, (860) 761-8550 , mgriffin@accelcompliance.com
Alan J. Levin, Esq. - LOCKE LORD LLP, (860) 541-7747 , alan.levin@lockelord.com

Category(s): Connecticut - 12/01/2010

Connecticut to Require that All Filings be Submitted Electronically effective January 1, 2011

The Connecticut Insurance Department (the “CID”) issued Bulletin IC-26 on November 8, 2010, notifying all entities that submit form, rate or rule filings to the CID that such submissions made on or after January 1, 2011 must be filed electronically using the National Association of Insurance Commissioners’ System for Electronic Rate and Form Filings (“SERFF”).  According to Bulletin IC-26, paper filings received on or after January 1 will be rejected.

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

Category(s): Federal - 12/01/2010

Citizens HRA Boundaries to be Reduced

The boundaries of Citizens Property Insurance Corporation's High Risk Account (HRA) will have to be reduced significantly to achieve the required 25% Probable Maximum Loss reduction, according to a report for the Citizens Board of Directors. The HRA boundary will need to change from the current definitions to approximately 1,000 feet from the coastal waters. An estimated 195,000 wind-only policies now covered in the HRA will have to be non-renewed, and multi-peril replacement coverage sought either in the voluntary market or within Citizens' Personal Lines Account/Commercial Lines Account (PLA/CLA). Following these changes, there would be approximately 121,000 policies remaining in the HRA.

Gary Sumner - MANG & SANTURRI, P.A., (850) 222-7710 , gsumner@manglaw.com

Category(s): Florida - 12/01/2010

Electronic Premium Tax Reporting Available for 2010 Reports

The Florida Department of Revenue is moving to an electronic platform for the reporting of premium taxes.  In response to insurer feedback, the Department is expected to allow reporting insurers to upload supporting schedules through file attachments rather than inputting the individual data elements.  Insurers are encouraged to review the new reporting portal before returns are due in the spring.

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

Category(s): Florida - 12/01/2010

Florida Office of Insurance Regulation 2010 'Fast Facts' Report: Florida Ranks 15th in World/State Premium Comparison

The Florida Office of Insurance Regulation "2010 Fast Facts" report, issued on November 28, 2010, indicates that the State of Florida ranks 15th compared with the amount of insurance premium generated by nations as large as the United States and China.  The report also ranks Florida's largest insurance writers by premium in various lines of business.

As of December 31, 2009, Citizens Property Insurance Corporation dominated Florida's "Top 20" list of personal residential property insurance writers.  Florida insurance regulatory and enforcement statistics for 2009 through 2010 are also provided in the report, which can be viewed by clicking here.

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

Category(s): Florida - 12/01/2010

Florida Supreme Court: PIP policy provisions not directly mirroring Florida statutes may be unenforceable

In its November 4, 2010 opinion on Custer Medical Center v. United Automobile Insurance Company, the Florida Supreme Court indicated that Personal Injury Protection ("PIP") policy provisions that do not directly mirror the State's PIP statutes may be unenforceable. The opinion ultimately addresses the granting of a motion for directed verdict and the burden of proof for an affirmative defense that an insured unreasonably refused to submit to a medical examination pursuant to Florida Statute § 627.736(7). The Court's opinion says:

    Unless otherwise provided by statute, a PIP carrier may not deny payment of medical expenses incurred and submitted by the insured prior to the date of a scheduled independent medical exam ("IME"), even if an insured does not attend the IME.
    Unless otherwise provided by statute, a PIP carrier may only deny payment of an insured's medical expenses incurred and submitted after the date of the IME if the carrier can affirmatively prove the unreasonableness of an insured's failure to attend an IME. Thus, the burden of proving the unreasonableness of the insured's action or non-action rests with the insurer.
    Denial of benefits for an insured's failure to submit to an examination under oath ("EUO") may no longer be permissible, inasmuch as the Court points out that EUOs are not expressly permitted under Florida's PIP statutes. 

The effects of the Supreme Court's decision are yet to be determined, but the use of IMEs appears to be significantly impaired. Widespread litigation of these issues is anticipated.

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

Category(s): Florida - 12/01/2010

Insurer Report Card Rule on Hold

A recent postponement of a planned insurer report card rule has caused the administrative rulemaking process to exceed its allowable time.  The Financial Services Commission therefore will need to reinitiate rulemaking if it intends to proceed with the rule.  The rule has been the subject of concern among residential insurers due to the proposed scoring methodology.

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

Category(s): Florida - 12/01/2010

Insurers Cannot Challenge Now Non-Existent Rate Filing Arbitration Rules

In a November 10, 2010 opinion, the First District Court of Appeal overruled an administrative law judge's decision that Florida Administrative Code Rule 69O-170.105(1)(d), which relates to the costs, expenses and fees of rate filing arbitration, was an invalid exercise of delegated legislative authority.  In lieu of demanding a hearing under Florida's Administrative Procedure Act, former section 627.062(6), F.S. permitted an insurer to request arbitration of a rate filing once the Florida Office of Insurance Regulation made its final decision on the rate filing. This law was amended in 2008, after which it no longer provided an insurer with the option to request rate filing arbitration.

In June 2009, Service Insurance Company instituted a Rule challenge on Rule 69O-170.105(1)(d), F.A.C, arguing that the Florida Department of Financial Services and the Florida Financial Services Commission's adoption the Rule was an invalid exercise of delegated legislative authority. Section 120.56(3)(a), Fla. Stat. provides that "[a] substantially affected person may seek an administrative determination of the validity of an existing rule at any time during the existence of the rule."  In effect, the First District Court of Appeal held that the amendment to Section 627.062(6), F.S., which removed the insurer's option to seek arbitration of a rate filing, caused Rule 69O-170.105(1)(d) to automatically expire.  Section 120.536(1), F.S. provides that a grant of rulemaking authority and a specific law to be implemented is required for an agency to adopt a Rule and that an agency may only adopt rules that implement or interpret the specific powers and duties granted by the enabling statute. Once the Rule's enabling statute is repealed, the Rule automatically expires. (Canal Ins. Co. v. Cont'l Cas. Co., 489 So. 2d 136, 138 (Fla. 2d DCA 1986).  As a result, Service Insurance Company cannot pursue its action with regard to Rule 69O-170.105(1)(d), because section 120.56(3)(a) of the Administrative Procedure Act requires that the Rule exist.  Other Rules relating to the arbitration of rate filings have not been administratively repealed.  Therefore, this conclusion would appear to apply to these Rules as well.

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

Category(s): Florida - 12/01/2010

Senate Committee Sinkhole Report Imminent

The Senate Committee on Banking and Insurance has conducted several interim studies or reviews in anticipation of the 2011 legislative session.  The committee's report on Florida's sinkhole insurance problem is expected soon (and likely by the time this Alert is published).  Mounting sinkhole insurance losses in Florida are expected to draw legislative attention in 2011.

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

Category(s): Florida - 12/01/2010

Third District Court of Appeal: Citizens' Homeowners Policy Conditions Must Be Met to Trigger Appraisal Provisions

On November 24, 2010, Florida's Third District Court of Appeal issued an opinion in Citizens Property Insurance Corporation v. Galeria Villas Condominium Association, Inc., 2010 WL 4740049 (Fla. 3rd DCA 2010), in which it re-established that policy conditions and post-loss obligations must be met in order for a request for an appraisal to be "ripe."  In this case, the Court found that the appraisal provisions of the homeowner's policy at issue were not triggered because Galeria did not provide Citizens with a reasonable opportunity to investigate and adjust the claim. Thus, no "disagreement" had arisen. Galeria had refused to comply with certain policy conditions and post-loss duties by failing to provide Citizens with requested documentation and refusing to allow Citizens' loss consultant to inspect the property.

As a side issue and in reliance on its recent decision in Sunshine State Ins. Co. v. Rawlins, 34 So. 3d 753 (Fla. 3d DCA 2010) the Third District Court noted that the lower court "has the discretion to control the order in which an appraisal and coverage determinations proceed." (Galeria Villas Condominium Association, 2010 WL 4740049.)  The Rawlins decision, and now the Galeria decision are in direct conflict with the Fourth District Court of Appeal's recent opinion in Citizens Property Insurance Corporation v. Michigan Condominium Association, 2010 WL 4226281 (Fla. 4th DCA 2010). Essentially, the Third District permits courts to order appraisals prior to, and while reserving jurisdiction on, the determination of coverage issues.  The Fourth District's opinion disagrees with this "dual-track" approach, holding that liability on coverage issues must precede the determination of damages, i.e. the appraisal. (Michigan Condominium Association, 2010 WL 4226281 at *1.)  The Fourth District has certified the conflict between its opinion and Rawlins. The Supreme Court of Florida may decide to hear the issue and resolve the conflict.

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

Category(s): Florida - 12/01/2010

Third District Court of Appeal: Citizens' Homeowners Policy Conditions Must Be Met to Trigger Appraisal Provisions

On November 24, 2010, Florida's Third District Court of Appeal issued an opinion in Citizens Property Insurance Corporation v. Galeria Villas Condominium Association, Inc., 2010 WL 4740049 (Fla. 3rd DCA 2010), in which it re-established that policy conditions and post-loss obligations must be met in order for a request for an appraisal to be "ripe."  In this case, the Court found that the appraisal provisions of the homeowner's policy at issue were not triggered because Galeria did not provide Citizens with a reasonable opportunity to investigate and adjust the claim. Thus, no "disagreement" had arisen. Galeria had refused to comply with certain policy conditions and post-loss duties by failing to provide Citizens with requested documentation and refusing to allow Citizens' loss consultant to inspect the property.

As a side issue and in reliance on its recent decision in Sunshine State Ins. Co. v. Rawlins, 34 So. 3d 753 (Fla. 3d DCA 2010) the Third District Court noted that the lower court "has the discretion to control the order in which an appraisal and coverage determinations proceed." (Galeria Villas Condominium Association, 2010 WL 4740049.)  The Rawlins decision, and now the Galeria decision are in direct conflict with the Fourth District Court of Appeal's recent opinion in Citizens Property Insurance Corporation v. Michigan Condominium Association, 2010 WL 4226281 (Fla. 4th DCA 2010). Essentially, the Third District permits courts to order appraisals prior to, and while reserving jurisdiction on, the determination of coverage issues.  The Fourth District's opinion disagrees with this "dual-track" approach, holding that liability on coverage issues must precede the determination of damages, i.e. the appraisal. (Michigan Condominium Association, 2010 WL 4226281 at *1.)  The Fourth District has certified the conflict between its opinion and Rawlins. The Supreme Court of Florida may decide to hear the issue and resolve the conflict.

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

Category(s): Illinois - 12/01/2010

Legislature Overrides Veto of Interstate Compact Bill

During the November legislative session, the Illinois General Assembly overrode Governor Quinn's amendatory veto of SB 2544.  The bill authorizes Illinois' participation in the Interstate Compact for life and annuity products giving insurers the ability to obtain approval from a single source for the sale of policies in multiple states.  The amendatory veto delayed the implementation of the compact in Illinois until July 1, 2011.   The rationale for the veto was that implementing the compact at this time is too burdensome on the insurance department and will draw resources from efforts like health insurance reform.  The override makes the law effective upon becoming law.

Steve W. Kinion, Esq. - ZACK STAMP, LTD, (217) 525-0700 x108 , skinion@601w.com

Category(s): Mississippi - 12/01/2010

Supreme Court Affirms Hurricane Katrina Wind Verdict -- Reverses Extra-Contractual Damages

The Mississippi Supreme Court has affirmed a Jackson County jury's award of more than $900,000 in compensatory damages against USAA for wind damage allegedly caused to a Gulf Coast couple's home during Hurricane Katrina.  In United Services Automobile Association ("USAA") v. Lisanby, the Lisanbys sued USAA for breach of contract and bad faith after USAA paid them $46,345 for wind damage, but denied the remainder of the claim as damage caused by the excluded peril of flood.  However, the Court reversed the jury's $86,000 per plaintiff award for emotional distress, as well as the $302,920 in attorneys' fees and $211,069 in litigation expenses awarded to the plaintiffs at trial, finding that USAA had an arguable basis for contesting the claim.  The Supreme Court also affirmed the trial court's refusal to submit the issue of punitive damages to the jury.  The trial court's ruling on two other points were also affirmed, including: (1) allowing the jury to consider evidence of replacement costs, even though the policy at issue entitled plaintiffs only to actual cash value, and (2) refusing to transfer the venue of the trial outside the Mississippi Gulf Coast.

Robert B. House, Esq. - JONES WALKER LLP, (601) 949-4830 , rhouse@joneswalker.com
David L. Martin, Esq. - JONES WALKER LLP, (601) 949-4901 , davidmartin@joneswalker.com

Category(s): Mississippi - 12/01/2010

Supreme Court Denies Public Records Request

The Mississippi Supreme Court has denied the public records request of an individual seeking information from the Mississippi Insurance Department on claims paid - and not paid - by homeowner insurance companies after Hurricane Katrina, as well as information from a Special Target Market Conduct Examination of State Farm's claims handling practices in the aftermath of Hurricane Katrina.  In Kevin Buckel v. Mike Chaney, Commissioner of Insurance , No. 2009-CA-01602, the Supreme Court upheld the trial court's grant of summary judgment on Buckel's Public Records Act request on grounds that the Department did not possess actual records reflecting the information requested regarding payment of claims and was not required to artificially create them.  The Court also affirmed the trial court's holding that documents related to State Farm's market conduct exam were protected from disclosure under a section of the insurance statutes exempting materials produced "in the course of an examination."  In addition, the Court affirmed the trial court's ruling that Buckel made an improper request for the market conduct documents by failing to include the request in his initial public records request, even though he included them in his Complaint.

Robert B. House, Esq. - JONES WALKER LLP, (601) 949-4830 , rhouse@joneswalker.com

Category(s): Nebraska - 12/01/2010

New Nebraska Director

Governor Heineman, who was re-elected in November to a second four year term, has appointed Bruce Ramge Director of Insurance. Ramge is a 25 year employee of the Department and succeeds Ann Frohman who resigned in October.

Lawrence F. Harr, Esq. - LAMSON, DUGAN & MURRAY, LLP, (402) 397-7300 , lharr@ldmlaw.com

Category(s): Ohio - 12/01/2010

Anti-STOLI Questions Required in Life Applications

More than two years after enactment of Ohio's tough anti-STOLI law, rules implementing portions of the law have been completed and will take effect in 2011.  The statute requires that life insurance applications include questions designed to identify and prevent STOLI; the administrative rule exempts certain products from the rule (Ohio Admin. Code 3901-9-04).  Compliance with this rule will be required by November 2011.  Other administrative rules govern licensure of life settlement companies and brokers, and regulate continuing education requirements for settlement brokers.

Faith M Williams, Esq., (614) 227-2374

Category(s): Ohio - 12/01/2010

Ohio to require use of Electronic Funds Transfer

Effective January 1, 2011, the Ohio Department of Insurance will require insurers to use electronic funds transfers to pay fees for product filings made via SERFF.   Also, non-rate, rule and form filings that do not require a filing fee, such as life illustrations and Rx ID Card Annual Certifications, will no longer be accepted via SERFF. As of Jan. 1, 2011, these must be submitted in hard copy to the Department.   Details are available at www.insurance.ohio.gov.

Faith M Williams, Esq., (614) 227-2374

Category(s): Oklahoma - 12/01/2010

John Doak Elected Insurance Commissioner

Tulsa insurance executive John Doak defeated incumbent Insurance Commissioner Kim Holland on November 2 as the GOP swept all statewide elective offices. The final results were Doak, 555,677 votes, or 54.5 percent to Holland's 464,247 votes 45.5 percent.  One of Commissioner-elect Doak’s priorities after taking office is to attack the federal health care reforms enacted earlier this year.  His quote for the Daily Oklahoman was, "Repeal, replace, resist Obamacare."

Steve W. Kinion, Esq. - ZACK STAMP, LTD, (217) 525-0700 x108 , skinion@601w.com

Category(s): United Kingdom - 12/01/2010

EU Solvency II equivalence assessments for other jurisdictions

The European Commission has confirmed the countries that will undergo the first wave of equivalence assessments under the Solvency II regime.  Bermuda and Switzerland will undergo a full assessment and Japan will be assessed for equivalence in relation to reinsurance under Article 172 only. This reflects the draft advice published in July 2010.

Rather than undertake a full assessment of the US, the Commission has instead proposed a transitional regime.  Third countries eligible for inclusion in this regime, which is likely to include the US along with any of Bermuda, Switzerland and Japan (should they not be deemed equivalent in the first wave of assessments), would be deemed equivalent for a limited time.  If, at the end of that time, the third country was in a position to satisfy all of the equivalence requirements, a permanent equivalence finding would be made.

Richard Spiller, Esq. - HOLMAN FENWICK WILLAN LLP, (1144207) 264-8770 , richard.spiller@hfw.com

December 2010 Alert

Greetings,

Welcome to the December 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,

David K. Liggett

Editor, FORC Alert

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