October 2010 Alert

Greetings,

Welcome to the October 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

October 2010 Alerts

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Category(s): Connecticut - 10/01/2010

Connecticut Insurance Department Imposes Strict Data Breach Notification Requirement

On August 18, 2010, the Connecticut Insurance Department (the “Department”) issued Bulletin IC-25, which requires all entities doing business in Connecticut that are licensed by or registered with the Department to notify the Department of information security incidents affecting Connecticut residents within five days of discovery.  Bulletin IC-25 outlines the detailed information regarding the incident that must be included in such notifications.  According to Bulletin IC-25, once the Department has received such notifications, it intends to be involved in reviewing draft notices to Connecticut residents affected by information security incidents and in mandating that certain levels of credit monitoring and insurance protection be offered to affected consumers.

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

Category(s): Connecticut - 10/01/2010

Connecticut Insurance Department Issues Bulletin Regarding Patient Protection and Affordable Care Act Policy Filing Guidelines

Pursuant to the federal Patient Protection and Affordable Care Act (the “PPACA”), health policies currently in effect must be revised to satisfy certain specific benefit and coverage requirements by September 23, 2010.  The Connecticut Insurance Department (the “CID”) issued Bulletin HC-80 on July 22, 2010 in order to outline the requirements for filing PPACA policy revisions with the CID.  Information provided by Bulletin HC-80 includes the requirements for expediting PPACA filings and the requirement that rate filings be made at the same time as PPACA form filings even if there is no adjustment to the rates.

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

Category(s): Florida - 10/01/2010

Citizens Approves Rate Hikes for 2011

The Citizens Board of Governors has approved its Actuarial Committees recommended rate hikes for 2011. The indicated need for personal residential multi-peril, and personal residential wind homeowners policy product lines, is a 58% increase.  However, the actual rate change recommendation is for only a 9.5% increase. Due to recent Florida law, Citizens rates can not exceed 10% per policyholder (excluding coverage changes and surcharges). There is an even more disparity in the commercial non-residential wind-only policies product line which revealed an uncapped rate need of 118% percent; while the commercial residential product line has a need of 79% percent. The proposed rate filing now only needs the Office of Insurance Regulations final approval.

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

Category(s): Florida - 10/01/2010

Effective August 12, 2010, Penalties for Florida Insurance Code Licensee Violations Updated

Effective August 12, 2010, Rule 69B-231.110, entitled “Penalties for Violation of Other Specific Provisions of the Florida Insurance Code” prescribes penalties for insurance-related licensees who have been found to violate certain provisions of the Florida law pertaining to insurance.  To view the complete Rule text, click here.

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

Category(s): Florida - 10/01/2010

First Party Automobile Policy Claims Involving Assertions of Class Action Could be Defeated Under Certain Circumstances

A recent Fourth District Court of Appeal decision resulted in the reversal of class certification in an action brought against an insurance company on behalf of premium finance companies.  Prior to certifying a class action, a trial court must conduct a rigorous analysis to determine whether the elements for class certification exist, including whether sufficient evidence has been offered by the plaintiff that the putative class members are sufficiently numerous so that separate joinder of each class member's claim is impracticable.  In addition, the class definition must permit a court to reasonably ascertain if a person or entity is a class member.  This often contentious element of proof of numerosity in a class action lawsuit was the subject of the Fourth District Court of Appeal decision in the case of Canal Ins. Co. v. Gibraltar Budget Plan, Inc., 35 Fla. L. Weekly D1690 (Fla. 4th DCA July 28, 2010).

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

Category(s): Florida - 10/01/2010

Florida Court Defines Wind Loss Mitigation Discount Dispute Process

Recently, a Florida appellate court held that an insured who does not receive a statutorily-mandated premium discount for wind loss mitigation must first pursue administrative remedies with the Florida Office of Insurance Regulation ("OIR") before seeking court action against the insurer.  Serchay v. State Farm Ins. Co., 25 So. 3d 652, 652 (Fla. 4th DCA 2010).  In this case, the insured had filed an action in circuit court and sought class action certification against State Farm, alleging that the insurance company did not notify him of the right to receive the discount, nor did it provide him with the discount.  State Farm moved to dismiss the action based upon the insured's failure to exhaust his administrative remedies before filing the lawsuit.  The trial court granted the insurer's motion and the insured appealed.  Subsequently, the appellate court affirmed the trial court's determination and held that the insured should have exhausted the statutory administrative procedure before filing a judicial action against State Farm.

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

Category(s): Florida - 10/01/2010

Florida Health Insurance Advisory Board Releases Status of Florida Health Care Marketplace Report

At its September 24, 2010 meeting, Florida’s Health Insurance Advisory Board ("FHIAB") approved the 2009 FHIAB Report, which summarizes the status of the Florida health care marketplace.  To view the report, click here.  Relative to comparable 2007 health care insurance data, information submitted by Florida insurers for 2008 reveals a stable market.  Covered lives in the in-state small group (1-50 members) declined 13.4 percent to 1,088,334, while large group coverage experienced a 7.4 percent gain to 2,174,190.  (“In-state” coverage means plans governed primarily by Florida law and represents the dominant form of insurance plans provided in the state.  In contrast to “in-state” coverage, “out-of-state” coverage is group coverage that is primarily governed by the laws of another state.)  Further, there appears to be a minor shift away from out-of-state coverage in Florida.  In terms of covered lives, 2008 featured a decline in number of Florida consumers utilizing out-of-state individual health coverage (down 9.9 percent), out-of-state small group coverage (down 9.8 percent) and out-of-state large group coverage (10.1 percent decline).  Although some of these declines appear worrisome in percentage terms, in nominal terms the decline in coverage is relatively minor.  According to data reported to the Florida Office of Insurance Regulation, commercial health insurance covered 4,279,395 lives in 2008--a decline of 1.4 percent from the 2007 total of 4,340,499.

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

Category(s): Florida - 10/01/2010

Florida Office of Insurance Regulation Signs Agreement With Mexican Counterpart

The Florida Office of Insurance Regulation ("OIR") announced on September 28, 2010 that it has signed a Memorandum of Understanding ("MOU") with its Mexican counterpart, the Insurance and Surety National Commissioner of the United Mexican States, that will serve to coordinate regulatory actions affecting insurers and consumers in Florida and Mexico, as well as allow the agencies to exchange information in a confidential manner.  To access the MOU, click here.  The OIR has signed similar agreements with counterparts in Bermuda, Germany and the United Kingdom.

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

Category(s): Florida - 10/01/2010

Mitigation Discount Form Under Review

Earlier this year, the Florida Office of Insurance Regulation adopted a series of improvements to the state-mandated form used to determine policyholders' eligibility for windstorm mitigation discounts.  Due to a subsequent law change, the OIR now has initiated rulemaking to consider further revisions to the form.  Changes under consideration relate primarily to the qualifications of inspectors, although the Office of Insurance Regulation also has expressed interest in adopting other changes to further improve the implementation of Florida's discount program.

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

Category(s): Florida - 10/01/2010

Revised Florida Annual Audited Financial Reports “Model Audit” Rule Effective September 21, 2010

Effective September 21, 2010, Rule 69O-137.002, entitled "Annual Audited Financial Reports"(also known as the "Model Audit Rule") was revised to improve the Florida Office of Insurance Regulation's surveillance of insurers' financial condition, as well as conform the existing Rule to the National Association of Insurance Commissioners' ("NAIC") Model Audit Rule amendments.  The interstate uniformity resulting from the adoption is expected to reduce the cost of doing business in Florida.  Also, substantial conformity of these amendments to the Model Audit Rule is also required for NAIC accreditation.  As adopted, Rule 69O-137.002 provides for the exemption of certain insurers under certain circumstances.  To access the complete Rule text, click here.

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

Category(s): Florida - 10/01/2010

Terry Butler Named Interim Consumer Advocate

Terry Butler has been named interim Insurance Consumer Advocate.  He takes over the position formerly held by Sean Shaw, who left the consumer advocate's office at the beginning of September to work on CFO Alex Sink's campaign for Governor.  Butler, an attorney, is a longtime regulator and most recently was serving as counsel in the consumer advocate's office.

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

Category(s): Georgia - 10/01/2010

Georgia Insurance Commissioner Begins Regulating and Licensing Pharmacy Benefit Managers

The Georgia Assembly passed Georgia Senate Bill 310 (the “Bill”) in its 2010 session.  The Bill was signed into law by Governor Perdue on June 2, 2010 and became effective on July 1, 2010.  Under the Bill’s provisions, codified at O.C.G.A. § 33-64-1 et seq., pharmacy benefit managers (“PBM”) are subject to regulation by and must obtain licensure from the Insurance Commissioner’s Office; however, exceptions are provided for unlicensed PBMs operating in partnership with a medical facility or health insurer.  The new Georgia law also provides for regulation and licensure of multiple employer self-insured health plans by the Insurance Commissioner.

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 - 10/01/2010

Georgia Insurance Commissioner Issues Bulletin Applying to all Captive Insurance Companies Doing Business in Georgia

In Bulletin 10-EX-1 (“Bulletin”), Georgia Insurance Commissioner John Oxendine directed all captive insurance companies (“Captives”) transacting in Georgia to review their rates for adequacy and compliance with state law.  Although Georgia law does not subject Captives to traditional rate filing requirements, pursuant to O.C.G.A. § 33-9-4 all rates charged by Captives must comply with various standards designed to protect consumers from insurer insolvency, discriminatory practices and inadequate or excessive rates.

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 - 10/01/2010

Georgia Insurance Commissioner Issues Directive Affirming Prohibition on “Most-Favored-Nation” Clauses

In Directive 10-EX-2 (“Directive”), Georgia Insurance Commissioner John Oxendine directed insurers to undertake an immediate review of all hospital agreements to ensure that such agreements do not contain a “most-favored-nation” clause.  A “most-favored-nation” clause prohibits, or grants a contracting insurer an option to prohibit, a hospital from contracting with another party to provide health care services at a lower rate than the payment or reimbursement rate specified in the contract with the contracting 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 - 10/01/2010

Insurer Entitled to Summary Judgment Based on the Unambiguous Language of its Applicable General Indemnity Agreement

In Cagle Construction, LLC v. The Travelers Indemnity Co. (“Travelers”), the Georgia Court of Appeals affirmed a lower court’s grant of summary judgment in favor of Travelers.  Under the facts in the case at bar, Travelers sought reimbursement from Cagle Construction, LLC (“Cagle”) for costs incurred by Travelers in completing Cagle’s bonded project work for the Georgia Department of Defense (“GDOD”) pursuant to the terms of construction surety bonds issued by Travelers on behalf of Cagle and a related general indemnity agreement executed between Travelers and Cagle in partial consideration of Traveler’s issuance of the bonds.  Prior to completion of the construction, the GDOD declared Cagle to be in default, demanded that Travelers complete each bonded project, and after the work was completed, Travelers sought indemnity from Cagle.  Cagle argued that the issue of liability and damages should not be decided under the indemnity agreement but rather by a jury and that the one year statute of limitations for the surety bond had expired.  The court disagreed with Cagle’s argument and upheld the validity and enforceability of the indemnity agreement on the grounds that the agreement’s language with regard to the issue of liability and calculation of damages was plain, unambiguous and capable of only one reasonable interpretation.  Further, the court ruled that the action was commenced under the terms of the general indemnity agreement and, thus, the statute of limitations for contracts under seal had not expired.

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): Louisiana - 10/01/2010

Producer Compensation, Rebates/Inducements and Value-Added Services

The Louisiana Department of Insurance (“LDOI”) has issued two missives on related topics relative to producer compensation, rebates/inducements and value-added services: Advisory Letter 2010-01 (the “Advisory Letter”) and Bulletin 2010-05 (the “Bulletin”).

Advisory Letter No. 2010-01 

The Advisory Letter states that its purpose is to advise all insurers, brokers and producers that “serious issues exist regarding producer compensation agreements and the manner in which producer compensation is being addressed among insurers, producers and insureds in Louisiana.”  The Advisory Letter goes on to list out a number of specific statutes, including LSA-R.S. 22:855 requiring the quoted premium to include all charges, and LSA-R.S. 22:1964(8) providing that paying or offering any valuable consideration or inducement whatsoever, not specified in a contract for life, health or annuity business, is an unfair or deceptive trade practice.

The Advisory Letter states that, with respect to each separate product line of insurance for which an insurer is required to file rates, the insurer must use “one rating scheme that establishes either a commission based on a percentage of the premium or a commission based on a flat fee.”  This scheme must be made available to all producers authorized to write that business for the insurer.

Further, the Advisory Letter specifically prohibits an insurer, producer or broker from quoting a premium “net of commission” because such a quote does not include all charges as required by LSA-R.S. 22:855, and therefore, such a quote does not accurately reflect the total cost of the insurance.

Bulletin No. 2010-05 

The Bulletin is directed to all brokers and producers selling accident and health insurance in Louisiana regarding rebating and inducements in the accident and health market.  Its stated purpose is to “provide guidance and clarification as to the services often referred to as ‘value added’ services that may be provided to insureds or potential insureds” without violating the rebating and inducement prohibitions set forth in the Louisiana Insurance Code.

Indicating that providing prohibited value-added services may be considered an unfair trade practice, the Bulletin lists examples of services that may be provided in a fair and nondiscriminatory manner, as well as certain services that may run afoul of the applicable rebating and inducement provisions.  Examples of prohibited services include, among others:

    ? COBRA administration beyond billing and collecting insurance premiums for former employees that are forwarded to the contract holder or insurer;

    ? payroll processing and/or services such as providing employers with check creation and distribution services for their employees; and

    ? certain types of risk management or loss control services, such as services not routinely available to all clients or that are typically provided on a fee for service basis.

The Bulletin directs all brokers and producers to conduct themselves accordingly, and to bring their practices into immediate compliance with the Code.

Van R. Mayhall, III, Esq. - BREAZEALE, SACHSE & WILSON, L.L.P., (225) 381-3169 , van.mayhall.iii@bswllp.com

Category(s): Mississippi - 10/01/2010

Allstate Denied Rate Increase

Mississippi Insurance Commissioner Mike Chaney recently denied Allstate Property and Casualty Insurance Company's requested 44 percent statewide rate increase on homeowners coverage.  MID has been reviewing Allstate's rate increase since March, along with several requests for additional information.  The 44 percent increase request came shortly after denial of a 65 percent rate hike.  In denying the rate increase Chaney said "We have worked very hard, very diligently, very openly and very honestly with Allstate on this rate increase.  However, I will not approve a 44 percent rate increase for Allstate without a court order.  Based on our internal reviews and that of our actuary, I do not believe a 44 percent increase is justified."

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): Nebraska - 10/01/2010

Nebraska Director Resigns

Nebraska Director Ann Frohman has submitted her resignation effective October 29.  She has not announced her future plans.  Her sucessor will be appointed by the Governor, who is running for re-election this November and is a strong favorite to win.

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

Category(s): New Jersey - 10/01/2010

New Jersey DOBI Identifies Six-Point Plan To Address PIP

The New Jersey Department of Banking and Insurance (NJDOBI) is in the process of addressing certain issues and formulating responsive approaches to various issues presented by New Jersey's current Personal Injury Protection (PIP) system.

During a meeting held at the NJDOBI on September 24, 2010, Director of Insurance Douglas Wheeler identified a tentative, six-point plan to address ongoing PIP issues and PIP reform, as follows: (1) offering a managed care option to insureds at policy inception or on renewal; (2) updating and revising the current medical fee schedules; (3) addressing PIP arbitration reform; (4) increasing the focus on insurance fraud and handling PIP fraud similarly to other health care cases; (5) developing pain management protocols and care paths; and (6) moving to electronic records in order to reduce costs, streamline operations and improve the quality of healthcare delivery.

The NJDOBI will be considering these proposals over the next several months.

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

Category(s): New Jersey - 10/01/2010

New Jersey Issues Order Regarding Retained Asset Accounts

On September 24, 2010, New Jersey Commissioner of Banking and Insurance Thomas B. Considine issued Order No. A10-119  (Order) regarding retained asset accounts (RAAs). The Order was issued in anticipation of rules to be proposed in the future regarding the disclosures required related to RAAs and the standards for the review and approval of such disclosures.

The Order requires that commencing 120 days from September 24, 2010, all insurers authorized or admitted to transact life insurance in New Jersey offering RAAs shall provide written notice to the owner of a group policy or the beneficiary of a death benefit in bold, easy-to-understand language, the following information: (1) there is no FDIC protection for funds in the RAA, and in the unlikely event of an insurer insolvency, the protections afforded by the New Jersey Life and Health Insurance Guaranty Association are up to a maximum of $500,000; (2) the non-variable interest rate that the funds will earn until withdrawn; (3) a statement indicating that the entire balance may be withdrawn at once without fees or penalties; (4) a statement indicating whether fees on the RAA are chargeable, and if so, in what amounts; (5) a statement indicating the frequency and method of providing statements on the RAA; and (6) the insurer's contact information for questions concerning the RAA.

The Order further directs insurers to submit forms and other written materials to the Department for review within 150 days of the date thereof.

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

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