December 2011 Alert

Greetings,

Welcome to the December 2011 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

December 2011 Alerts

Blurb

Category(s): Connecticut - 12/01/2011

Connecticut Amends Regulation of Domestic Captives

Connecticut has amended its captive law pursuant to Public Act No. 11-1
 (the “Act”).  The Act creates three new subgroups of Connecticut-domiciled captives: sponsored, branch, and special purpose financial captives.  Sponsored captives are formed and operated by one or more sponsors approved by the Connecticut Insurance Department and fund their liability to each participant insured through protected cells with segregated assets.  Branch captives are alien captives licensed to transact business in Connecticut through a business unit with a principal place of business located in the state.  Finally, special purpose financial captives are reinsurance captives that fund their obligations through insurance securitizations.  Significantly, the Act also expands the types of coverage that may be insured through Connecticut-domiciled captives.

The Act makes the following additional changes: (1) establishes a reinsurance premium tax requirement (under current law, Connecticut only taxes captives’ direct written premiums); (2) establishes a $7,500 nonrefundable tax credit for a captive’s first taxable year; and (3) authorizes the Connecticut Insurance Commissioner to adopt implementing regulations.

The relevant sections of the Act take effect July 1, 2012, and the premium tax provisions apply to calendar years beginning on or after January 1, 2012.

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

Category(s): Connecticut - 12/01/2011

Connecticut Insurance Department Extends Regulation to Third Party Administrators

Third party administrators (“TPA’s”) of life, annuity or health insurance products who operate in Connecticut are now subject to regulation by the Connecticut Insurance Department (the “CID”), pursuant to Sections 20 through 36 of Connecticut Public Act 11-58 (the “Act”).  The Act defines a TPA as “any person who directly or indirectly underwrites, collects premiums or charges from, or adjusts or settles claims on, [Connecticut residents] in connection with life, annuity, or health coverage offered or provided by an insurer.”  The Act: (1) requires that TPAs be licensed or registered, as applicable, with the CID; (2) requires that TPAs submit annual reports; (3) subjects TPAs to market conduct examinations and administrative actions; and (4) establishes operating requirements for TPAs.

A recent news release issued by Connecticut Insurance Commissioner Thomas Leonardi stated, “This is another important consumer protection that allows us to scrutinize and regulate administrators of self-insured plans . . ..  In order to operate in Connecticut, TPAs must be licensed with the Department beginning October 1.  Those entities exempted by statute from TPA licensure, but perform some elements of TPA service must register annually with the Department.” 

To view the Act, click here.
  For CID Bulletin L-17, which outlines the TPA licensing and registration processes and requirements, annual report filing requirements, and renewal information, click here.

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

Category(s): Florida - 12/01/2011

Florida Cabinet Reviews Citizens Property Insurance Downsizing Recommendations

At the Florida Cabinet meeting on December 6, 2011, Citizens Property Insurance Corporation ("Citizens") Chairman of the Board of Governors ("Board") Carlos Lacasa made a presentation to the Financial Services Commission in which he outlined the Board's recommendations for reducing Citizens' size and exposure as requested by Florida Governor Rick Scott. To access the report, click here.

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

Category(s): Florida - 12/01/2011

Florida Commission on Hurricane Loss Projection Methodology Completes Revisions to Acceptability Standards

After several hours of detailed review on November 16, 2011, the Florida Commission on Hurricane Loss Projection Methodology ("FCHLPM") approved a long list of revisions to the 2009 Standards to Determine Acceptability ("Standards"). The final version of these Standards will become the 2011 version, which must be formally published by December 31, 2011.

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

Category(s): Florida - 12/01/2011

Florida Department of Financial Services' Division of Consumer Services Instructs Neutral Evaluators on SB 408 Sinkhole Claims Changes

Upon further review to the recent amendments to Florida's neutral evaluation program made by SB 408, the Florida Department of Financial Services ("DFS") issued a September 13, 2011 letter from DFS Division of Consumer Services Bureau Chief Barb Szumowski instructing neutral evaluators on corresponding changes to all new and pending neutral evaluations. To view the letter, click here.

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

Category(s): Florida - 12/01/2011

Florida Division of Workers' Compensation Announces Enhancements to Construction Policy Tracking Database

The Florida Division of Workers' Compensation advised on October 27, 2011 that it has made enhancements to its Construction Policy Tracking Database that will allow interested parties to track contractors' Certificates of Election to be Exempt, as well as workers' compensation policies. Registered Database users can receive an automatic e-mail notification of any changes in a contractor's coverage or exemption status.

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

Category(s): Florida - 12/01/2011

Florida Insurance Commissioner Kevin McCarty Elected President of the National Association of Insurance Commissioners (NAIC)

Florida Insurance Commissioner Kevin McCarty was elected 2012 President of the National Association of Insurance Commissioners ("NAIC") on November 4, 2011. Outgoing NAIC President and Iowa Insurance Commissioner Susan Voss announced that Commissioner McCarty will officially ascend to the NAIC presidency effective January 1, 2012 and continue to serve as President-Elect of the NAIC through 2012.

"It is an honor and privilege to be elevated by my colleagues and to this leadership role," remarked Commissioner McCarty, "Over the next year we must confront several important challenges. Whether it is Dodd-Frank or the Affordable Care Act, the federal government has become increasingly involved in the insurance arena. As your president, I intend to vigorously defend the role of state-based regulation, highlight our accomplishments, and continue to work for regulatory modernization and national uniformity to create an insurance framework that benefits both consumers and the insurance industry."

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

Category(s): Florida - 12/01/2011

Florida Office of Insurance Regulation Approves 8.9 Percent National Council on Compensation Insurance (NCCI) Rate Increase Request, Effective January 1, 2012

The Florida Office of Insurance Regulation ("OIR") issued a Final Order on October 31, 2011 regarding an 8.9 percent rate increase requested by the National Council on Compensation Insurance and approved by the OIR on October 24. The OIR issued the following statement:

"On October 26, 2011, the Office received a rate filing from the National Council on Compensation Insurance (NCCI) that modified its original filing of August 18, 2011. The modified filing includes changes referenced in the Office's order issued October 24. Today, the Office has issued an order approving this modified filing."

The rate increase is effective January 1, 2012 for workers' compensation insurance rates in Florida. To view the Final Order, click here.

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

Category(s): Florida - 12/01/2011

Florida Senate Committee on Judiciary Released Interim Report 2012-132 on Insurance Bad Faith

The Florida Senate Committee on Judiciary released Interim Report 2012-132 on Insurance Bad Faith on November 16, 2011. The Report outlines related current practices based on the experiences of legal practitioners, insurance companies and others with expertise in insurance bad faith. It also reviews case law, statutes, legal scholarship and data associated with bad faith in Florida and other jurisdictions in order to give legislators a basis for evaluating what potential changes to Florida law are needed, if any. The Report concludes that Florida's current Bad Faith Law is a complicated combination of statutory and common law that affects a number of varied interests, and thus sparks philosophical, economic, and policy debate from different perspectives. According to the Report, while some argue that Florida's Bad Faith Law offers important and properly balanced protections to insurance consumers while remaining fair to insurers, others insist that the law's valid intentions have been distorted by excessive litigation and unfair gamesmanship, making it difficult for insurers to settle claims.

While the Report presents information on the legal landscape for insurers, insureds and third parties, it does not offer specific recommendations for legislative action on bad faith. Rather, it recommends a "policy decision" for the Legislature to consider whether the current law is being applied as intended to effectively encourage good faith settlement practices and should remain unchanged, or whether the current system encourages abuse and should be changed.

To view the entire Report, click here.

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

Category(s): Georgia - 12/01/2011

Colony Bank v. Hanover Insurance Co., No.: 4:10-CV-131 (CDL), United States District Court for the Middle District of Georgia (Nov. 9, 2011)

On November 9, 2011, the U.S. District Court for the Middle District of Georgia granted the defendant insurance carrier’s motion for summary judgment in an action brought against the insurance carrier by the plaintiff lienholder of a commercial building that sustained substantial fire damage which loss occurred 13 months after the commercial insurance policy was cancelled by the carrier.  The issue before the Court was whether the cancellation of the commercial insurance policy was ineffective as to the lienholder, when the insurance carrier failed to provide notice of cancellation to the plaintiff.  The Court found that even though the policy provided for notice to be sent to the lienholder any time the property owner cancelled or failed to renew the policy and O.C.G.A. §33-24-44(b) provides that an insurer must provide a notice of cancellation to the insured and any lienholder, unlike in the case of automobile and homeowners’ insurance policies where the failure to provide notice of cancellation to the lienholder makes a cancellation by an insurer ineffective, Georgia law does not provide for any adverse consequences to insurers when they fail to provide the required notice to lienholders with respect to a commercial insurance policy.

Brian T. Casey, Esq. - LOCKE LORD LLP, (404) 870-4638 , bcasey@lockelord.com
William M Osterbrock, Esq. - Locke, Lord, Bissell & Liddell, LLP, wosterbrock@lockelord.com

Category(s): Georgia - 12/01/2011

Department of Health & Human Services Grants Georgia Commissioner of Insurance’s Request to Adjust 80% Medical Loss Ratio Requirement for Georgia Insurers

In a letter dated November 8, 2011, the federal Department of Health & Human Services (the “DHHS”) responded to the Georgia Commissioner of Insurance’s (the “Commissioner”) request to lower the eighty percent (80%) medical loss ratio (“MLR”) standard applicable to individual health insurers in the State of Georgia. Although the Commissioner requested that the MLR be adjusted to 65%, 70% and 75% for reporting years 2011, 2012 and 2013, respectively, the DHHS granted the request but only adjusted the MLR to 70% for 2011 and 75% for 2012, stating that “the MLR standard sought by the [Commissioner] exceeds the adjustment necessary to avoid the likelihood of market destabilization between now and 2014, and therefore would unnecessarily deny consumers some of the benefits of section 2718” of the Public Health Service Act.

Brian T. Casey, Esq. - LOCKE LORD LLP, (404) 870-4638 , bcasey@lockelord.com
William M Osterbrock, Esq. - Locke, Lord, Bissell & Liddell, LLP, wosterbrock@lockelord.com

Category(s): Georgia - 12/01/2011

Durrah v. State Farm Fire & Casualty Co., No.: A11A0854, Georgia Court of Appeals (Oct. 14, 2011)

On October 14, 2001, the Georgia Court of Appeals affirmed a trial court’s dismissal of a plaintiff’s action filed against her uninsured motorist (“UM”) carrier, State Farm Fire & Casualty Co., resulting from an accident she had with an uninsured motorist. In this action, the plaintiff failed to provide personal service of the complaint to the uninsured motorist in a renewal action, which was filed after the statute of limitations had expired. The Court of Appeals agreed with the trial court “based upon the rule that when an uninsured motorist is dismissed based on lack of personal service before a plaintiff obtains a nominal judgment against the UM carrier, the case against the UM carrier must be dismissed as well.” The Court also stated that since the plaintiff could no longer obtain a judgment against the uninsured motorist she was unable to recover from the UM carrier, denying the plaintiff’s argument that O.C.G.A. §33-7-11 did not require that a judgment must first be obtained against the uninsured motorist prior to being able to recover uninsured motorist benefits.

Brian T. Casey, Esq. - LOCKE LORD LLP, (404) 870-4638 , bcasey@lockelord.com
William M Osterbrock, Esq. - Locke, Lord, Bissell & Liddell, LLP, wosterbrock@lockelord.com

Category(s): Georgia - 12/01/2011

Flynt v. Life of the South Ins. Co., No.: A11A1379, Georgia Court of Appeals (Nov. 7, 2011)

On November 7, 2011, the Georgia Court of Appeals reversed a trial court’s denial of the plaintiff’s motion for summary judgment that the defendant-insurance carrier was precluded from rescinding a credit life insurance policy the plaintiff’s deceased husband obtained in connection with three loans.  In this case, the decedent originally obtained the credit life insurance in 2003 and 2004 but was issued a new certificate each time the loans were renewed.  According to case records, the decedent allegedly made materially false representations about having diabetes in a “Statement of Debtor’s Physical Condition” that was submitted to the insurance carrier in 2006 in connection with a revised application when the insurance carrier revised the group life insurance policy and policy certificates, which the insurance carrier used as the basis for rescinding the policy based on decedent’s fraud. Using principles of contract construction, the Court of Appeals read the terms of each of the renewals together with the original policy and agreed with the plaintiff that the insurance carrier was precluded from rescinding the policy because the two-year incontestability period commenced at the time the original certificate was issued and not each time the certificate had been renewed. The Court wrote that “[i]f the incontestability clause were interpreted to mean that the two-year period would begin to run upon the issuance of each new certificate of insurance, it would render the clause ineffectual because of the certificate issued to the decedent had not more than a one-year term of duration. As such, if the two-year period ran anew upon the issuance of each certificate, the incontestability clause could never become operative.”

Brian T. Casey, Esq. - LOCKE LORD LLP, (404) 870-4638 , bcasey@lockelord.com
William M Osterbrock, Esq. - Locke, Lord, Bissell & Liddell, LLP, wosterbrock@lockelord.com

Category(s): Georgia - 12/01/2011

Hernandez Auto Painting & Body Works, Inc. v. State Farm Mutual Automobile Co., Nos.: A11A0962, A11A0963, Georgia Court of Appeals (Nov. 21, 2011)

On November 21, 2011, the Georgia Court of Appeals reversed a trial court’s denial of the defendant insurance carrier’s motion to dismiss the claims brought by the plaintiff automobile repair facility against the insurance carrier for allegedly “steering” consumers away from using the plaintiff’s facilities.  In this case, the plaintiff claimed that, through the insurance carrier’s actions, the insurance carrier committed trade libel and violated the provisions of the Georgia Motor Vehicle Accident Reparations Act (“MVARA”).  After surveying case law precedent, the Court of Appeals held that (a) no Georgia court has recognized the tort of trade libel and it refused to create such a right of action at this time and (b) that the MVARA created no private right of action and only the Georgia Insurance Commissioner had the authority to enforce any requirements thereunder.

Brian T. Casey, Esq. - LOCKE LORD LLP, (404) 870-4638 , bcasey@lockelord.com
William M Osterbrock, Esq. - Locke, Lord, Bissell & Liddell, LLP, wosterbrock@lockelord.com

Category(s): Georgia - 12/01/2011

HHS APPROVES HIGHER MLR STANDARD FOR GEORGIA INDIVIDUAL MARKET

On November 8, the U.S. Department of Health and Human Services ("HHS") granted the Georgia Department of Insurance's application for a waiver from the medical loss ratio (MLR) standard required by the Patient Protection and Affordable Care Act for the individual health insurance market in Georgia. While the waiver was less than the Department's request, HHS's decision still offers relief to Georgia insurers operating in the individual health insurance market. The MLR standard for 2011 is 70 percent; 2012 is 75 percent; and 2013 is 80 percent.

Tony Roehl, Esq. - MORRIS, MANNING & MARTIN, LLP, (404) 495-8477 , troehl@mmmlaw.com

Category(s): Nevada - 12/01/2011

Nevada Division of Insurance Appoints New Insurance Commissioner

On October 24, 2011, the Nevada Division of Insurance announced the appointment of a new Insurance Commissioner, Scott J. Kipper.  Commissioner Kipper was previously the Nevada Insurance Commissioner from December 2008 through June 2010.

Vernon E. Leverty, Esq. - LEVERTY & ASSOCIATES LAW, (775) 322-6636 , Gene@levertylaw.com

Category(s): New York - 12/01/2011

Large Commercial Insureds

Under legislation effective November 15, 2011, New York has expanded commercial deregulation by amending New York Insurance Law Article 63, to permit insurers admitted in New York to provide more kinds of insurance to large commercial insureds, defined in detail in the amendment, without prior approval of rates and forms.  The statute permits such policies to be issued until June 30, 2013.  Policies issued under the new standards must comply with New York policy requirements and the Superintendent has authority to order an insurer to cease using a non-complying form, after notice and a hearing.  Among the types of insurance that can now be issued to qualifying large commercial insureds are fidelity-surety, motor vehicle and legal services insurance.  These amendments permit such commercial insurance to be written in the admitted market through the New York Free Trade Zone.  The amendment comes on the heels of the amendments to the surplus lines law providing for commercial exempt policyholders as mandated by the Dodd-Frank Wall Street Reform and Consumer Protection Act.

Francine L Semaya, Esq. - LEGAL AND REGULATORY CONSULTANT, (732) 241-8090 , flsemaya@gmail.com
William K Broudy, Esq. - NELSON LEVINE de LUCA & HORST, LLC, (212) 233-3254 , wbroudy@nldh.com

Category(s): New York - 12/01/2011

Merger of New York's Banking and Insurance Departments Creates the Department of Financial Services

On October 3, 2011, New York's Department of Financial Services (DFS) began operations, headed by Superintendent Benjamin Lawsky.  Created as part of Governor Andrew Cuomo's budget legislation, the DFS merges the Banking and Insurance Departments, following the lead of New Jersey, Florida and other jurisdictions.  Deputy Superintendents head the Banking and Insurance Divisions of DFS.  All current banking and insurance licensing and regulations remain in place.  The Financial Frauds and Consumer Protection Division, the Real Estate Finance Division and the Capital Markets Division of the DFS provide expanded consumer protection

Francine L Semaya, Esq. - LEGAL AND REGULATORY CONSULTANT, (732) 241-8090 , flsemaya@gmail.com
William K Broudy, Esq. - NELSON LEVINE de LUCA & HORST, LLC, (212) 233-3254 , wbroudy@nldh.com

Category(s): Tennessee - 12/01/2011

Insurance Division Posts Captive Formation Information

Tennessee Commissioner of Commerce and Insurance Julie Mix McPeak announced this week that the Insurance Division has established a new Web page with detailed information about the benefits of Tennessee as a captive domicile.  The new site, captive.tn.gov, includes the required application forms and instructions for companies interested in formation of a captive insurer in the state.

T. Stephen C. Taylor, Esq. - BASS, BERRY & SIMS, PLC, (615) 742-7758 , staylor@bassberry.com
Robins H. Ledyard, Esq. - BASS, BERRY & SIMS, PLC, (615) 742-6259 , rledyard@bassberry.com

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