February 2011 Alert

Greetings,

Welcome to the February 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

February 2011 Alerts

Blurb

Category(s): Arizona - 02/01/2011

Certificates of Insurance

The Arizona Department of Insurance has just issued Regulatory Bulletin 2011-1 re: Certificates of Insurance that states if either an insurer or an insurance producer misrepresents or obscures the terms or conditions of an insurance policy such person or entity may be subject to the revocation of its license or certificate of authority, as well as the imposition of civil penalties and possibly restitution. Knowingly issuing such a certificate may be prosecuted as a Class 5 felony.

J. Michael Low, Esq. - KUTAK ROCK LLP, (480) 429-4874 , Michael.Low@kutakrock.com

Category(s): Connecticut - 02/01/2011

Connecticut Amends Standards for Determination of Hazardous Financial Condition; Remedial Measures

The Connecticut Insurance Department (the “CID”) has amended Conn. Agencies Regs. § 38a-8-103, which outlines the standards the Connecticut Insurance Commissioner (the “Commissioner”) may consider in determining whether the continued operation of an insurer transacting business in Connecticut might be deemed hazardous to policyholders, creditors and the general public.  The amendment revises several existing standards and adds new standards that the Commissioner is now permitted to consider, including a catch-all provision permitting the Commissioner to consider “any other finding determined by the Commissioner to be hazardous to the insurer’s policyholders, creditors or general public.” 

The CID also amended related Conn. Agencies Regs. § 38a-8-104 to provide the following additional remedial measures that the Commissioner may require of an insurer that he or she determines to be in hazardous financial condition: (1) correct corporate governance practice deficiencies; (2) provide a business plan to the Commissioner; and (3) adjust rates for non-life insurance products.

The amendments, which were promulgated in order to bring Conn. Agencies Regs. §§ 38a-8-103 and 104 into consistency with the NAIC model regulations on-point, became effective December 8, 2010.

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

Category(s): Florida - 02/01/2011

Actuarial Panel: Recovery of Payment of Policyholder Attorneys' Fees Is Part of Florida Hurricane Catastrophe Fund Coverage

In the matter of a 2004 dispute between Sunshine State Insurance ("Sunshine State") and the Florida Hurricane Catastrophe Fund ("FHCF"), an actuarial panel recently sided with Sunshine State on its position that recovery of payment of policyholder attorneys' fees is, in fact, part of the coverage provided by the FHCF.   In the panel's ultimate commutation decision, a copy of which can be viewed by clicking here, policyholder legal fees are fully included within the commutation amount.  Ultimately, FHCF officials have indicated that they do not believe that the FHCF is authorized by Florida law to reimburse insurers for anything other than "direct incurred losses" or adjusted living expenses up to a certain amount.

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

Category(s): Florida - 02/01/2011

Case Involving Omission of Separate Hurricane Deductible Warning Language in Florida Surplus Lines Policies Advances After Federal Judge Denies Lloyd's Motion to Dismiss

In an October 18, 2010 order, a federal judge denied a Defendants' motion to dismiss a putative class action alleging that Lloyd's of London property insurance policies violate Florida law by omitting the existence of separate deductibles for hurricane damage.  In the case, the Plaintiffs sought to represent a class of policyholders who submitted claims for hurricane damage to Lloyd's under surplus lines policies that did not contain Florida statutory language requiring property insurance policies to include a consumer warning about the existence of a separate hurricane deductible in 18-point or larger boldface type.  The Lloyds Defendants asserted that the Plaintiffs' Fifth Amended Complaint should be dismissed, since section 626.913(4), F.S. states that "Except as may be specifically stated to apply to surplus lines insurers, the provisions of chapter 627 do not apply to surplus lines insurance authorized under ss. 626.913-626.937, the Surplus Lines Law."  The statute, which was amended in 2009 to include the above provision, makes it applicable to all lawsuits filed after May 15, 2009.  The Court, however, determined that in the instant case, the Fifth Amended Complaint related to the prior litigation, which was commenced in 2008.  Hence, the legislative change did not prohibit the Plaintiffs' cause of action.   To view the October 18 order, click here.

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

Category(s): Florida - 02/01/2011

Florida Governor Rick Scott Suspends State Agency Rulemaking

By Executive Order signed on January 4, 2011, newly inaugurated Florida Governor Rick Scott suspended rulemaking by Florida regulatory agencies under the direction of his office, effective immediately.

Among four other Executive Orders and an official Code of Ethics that was also promulgated, Governor Scott's Order 11-01 establishes the Office of Fiscal Accountability and Regulatory Reform ("OFARR") to review all rules (including those suspended by the Order) prior to promulgation.  All agency practices and contracts also will be reviewed.  Meanwhile, agencies will be prohibited from promulgating rules unless they obtain prior approval from the OFARR.

Also imposed is a 90-day suspension on execution of any contracts with a value in excess of $1 million without prior approval from the OFARR.

To view the corresponding news release from the Office of Governor Scott, along with hyperlinks to each Executive Order, click here.

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

Category(s): Florida - 02/01/2011

Florida Hurricane Catastrophe Fund Publishes Coverage Selections and Premium Calculations for 2010/2011 Contract Year; Updated Information for Previous Years

The Florida Hurricane Catastrophe Fund ("FHCF") has published coverage selections and premium calculations as of December 31, 2010 for the 2010/2011 FHCF Contract Year.  To view this information, click here.  Coverage selections and premium calculations for the FHCF's 2006/2007, 2007/2008, 2008/2009 and 2009/2010 Contract Years, updated as of December 31, 2010, are accessible by clicking here.  To view 2010/2011 FHCF Contract Year payout multiples for mandatory and Temporary Increase in Coverage Limits coverage, click here.

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

Category(s): Florida - 02/01/2011

Florida Senate Sinkhole Report Addresses Potential Insurance Coverage Solutions

The Florida Senate’s January 3, 2011, Interim Project Report ("Report") on sinkholes outlines extensive recommendations designed to aid decision makers in their consideration of various public policy choices related to sinkholes.  The Report provides a review of Florida laws and academic studies related to sinkholes, an analysis of sinkhole claims and costs, a review of single-peril residual market facilities and a summary of problem areas relating to sinkholes.

According to the Report, there are two basic directions Florida's Legislature could take in addressing sinkhole coverage:

--Consider the sinkhole peril to be fundamentally an uninsurable risk and establish a sinkhole repair program that, by its creation, would eliminate major cost drivers and help restore the solvency of the private market and Citizens; or
--Leave sinkhole coverage in the private insurance market, but make substantial changes directed at removing the current cost drivers. 

To view the complete Report, click here.

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

Category(s): Florida - 02/01/2011

Florida's Public Adjuster Ban Ruled Unconstitutional

In the recent case of Frederick W. Kortum, Jr. v. Alex Sink, the Florida First District Court of Appeal issued an opinion holding unconstitutional section 626.854(6), Florida Statutes (2008), which barred solicitation initiated by public adjusters for a period of 48 hours after the occurrence of an event that may be the subject of a claim under an insurance policy. The Circuit Court for Leon County had previously upheld the ban.  In reversing, the Court set forth that the statutory provision regulates commercial speech and is protected by the First Amendment.  As such, the matter was governed by the U.S. Supreme Court decision in Central Hudson Gas & Electric Corp. v. Public Service Commission of New York, 447 U.S. 557 (1980).

The Court ultimately held the statutory provision unconstitutional because it determined that it was more extensive than necessary to serve the asserted governmental interest.  The decision hinged on whether the statute contained a complete ban on all solicitation for 48 hours, or prohibited face-to-face and telephonic solicitation, while still allowing for written and email solicitations.  After a lengthy discussion, the Court determined that it had no evidence to suggest the limitation did not include all public adjuster-initiated contact, whether electronic, written or oral.  The Court pointed out that there is no legislative history to support a limiting interpretation, and the plain language of the statute is all-encompassing.  On a positive note, the Court seems to have left the door open for legislative action limiting the statutory ban to only in-person and telephonic conduct initiated by public adjusters.  

To view a copy of the opinion, click here.

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

Category(s): New Mexico - 02/01/2011

New Commissioners and a New Chairman for PRC

The New Mexico Public Regulation Commission, which oversees the Superintendent of Insurance and the regulation of insurance, has two new members.  These two new members are Patrick H. Lyons and Ben L. Hall.  Lyons was elected to fill the seat of out-going Chairman David King who served two full terms.  In addition to being elected to the Commission, Lyons was appointed chairman by a 3-2 vote during the Commission’s first regular open meeting of 2011.  Lyons is no stranger to New Mexico government, having served as the state’s Commissioner of Public Lands since 2002 and eight years in the New Mexico State Senate.  Ben Hall was elected to replace Sandy Jones, who chose to not seek re-election to the Commission in order to pursue election as the state’s Commissioner of Public Lands.  Commissioner Jerome D. Block was selected to serve a second consecutive term as vice chairman of the Commission.

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

Category(s): New Mexico - 02/01/2011

New Mexico Supreme Court Issues Two Opinions on Rejections of U.M. Coverage

On October 18, 2010, the New Mexico Supreme Court issued a pair of slip opinions regarding the requirements for insurers to obtain valid rejections of uninsured motorist/underinsured motorist (“UM/UIM”) coverage in New Mexico.   In Progressive Northwestern Ins. Co. v. Weed Warrior Services, the Court held that the New Mexico Motor Vehicle Code, specifically NMSA 1978, § 66-5-301, requires an insurer to offer UM/UIM coverage in an amount equal to the liability limits of the policy and that the choice of the insured to purchase any lower amount functions as a rejection of the maximum amount of coverage statutorily possible.  The court held that the offer of UM/UIM coverage must include the maximum amount statutorily available in order to effectuate the policy of the Legislature.   In Jordan v. Allstate Ins. Co., the Court held that the rejection of UM/UIM coverage equal to the liability limits in an automobile insurance policy must be made in writing and must be made a part of the insurance policy that is delivered to the insured.  In order to honor these requirements effectively, insurers must provide the insured with the premium charges corresponding to each available option for UM/UIM coverage so that the insured can make a knowing and intelligent decision to receive or reject the full amount of coverage to which the insured is statutorily entitled.  If an insurer fails to obtain a valid rejection, the policy will be reformed to provide UM/UIM coverage equal to the limits of liability.

Gary Kilpatric, Esq. - MONTGOMERY & ANDREWS, P.A., (505) 982-3873 , gkilpatric@montand.com
J. Brent Moore, Esq. - Montgomery & Andrews, (505) 986-2648 , bmoore@montand.com

Category(s): New Mexico - 02/01/2011

Superintendent Proposes Legislation for Public Adjustors

During the 2011 Legislative Session, Superintendent of Insurance Johnny Franchini will sponsor legislation that would regulate public adjustors.  The proposed legislation was the work product of a stakeholder group that included representation from the Insurance Division, insurance industry, and consumers.  The main purpose of the proposed legislation is to provide for the regulation of public adjustors, but the legislation also includes provisions which:  (1) allow for non-resident adjustors; (2) require bonds by adjusting entities to cover their employees; (3) require licensing of adjustor trainees; (4) require bi-annual license renewals; and (5) limit the definition of public adjustor to not include personal injury claims.  Because the proposed legislation is the product of the stakeholder group, the legislation is expected to be supported by these various sectors.

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

Category(s): Ohio - 02/01/2011

Newly Elected Ohio Lt. Governor - Mary Taylor - Appointed Ohio Superintendent of Insurance

On January 10, 2011, newly elected Ohio Lt. Governor, Mary Taylor was appointed Ohio Superintendent of Insurance. She will hold both jobs at the same time.  Ms. Taylor is a CPA and was most recently Auditor of the State of Ohio.  She previously was a state representative from Northeastern Ohio.

Alan F. Berliner, Esq. - THOMPSON HINE LLP, (614) 469-3268 , Alan.Berliner@ThompsonHine.com

Category(s): Rhode Island - 02/01/2011

Amendments to Suitability in Annuity Transactions Regulation

Insurance Regulation 12, governing suitability in annuity transactions, has been amended to reflect the current version of the National Association of Insurance Commissioners' model regulation and to put into effect mechanisms for enhanced consumer protection.  Among those mechanisms are the following: 1) a requirement that insurers establish, carry out, and actively enforce a system designed to supervise producers on annuity recommendations and suitability determinations for regulatory compliance; 2) a requirement that an insurer representative or producer undergo approved training on annuity products; 3) a requirement that an insurer representative or producer document all annuity recommendations and obtain signed statements from consumers who refuse to provide suitability information or act contrary to recommendations; and 4) a requirement the insurer representative or producer provide specific disclosures to consumers about the features and risks of recommended products.

Jennifer R Cervenka, Esq. - PARTRIDGE SNOW & HAHN LLP, jrc@psh.com
Melissa E Darigan, Esq - PARTRIDGE SNOW & HAHN LLP, med@psh.com
John J. Partridge, Esq. - PARTRIDGE SNOW & HAHN LLP, (401) 861-8200 , jjp@psh.com

Category(s): Rhode Island - 02/01/2011

Amendments to Surplus Lines Broker Regulation

Insurance Regulation 11, governing surplus lines brokers, was recently amended to: 1) allow a non-resident surplus lines broker to apply for a non-resident surplus lines broker's license without first obtaining a resident property and casualty insurance producer’s license; 2) increase the tax from 3% to 4% on gross premiums for policies effective on or after July 1, 2011; 3) maintain the 3% tax on gross premiums for policies effective prior to July 1, 2010; and 4) require brokers to include written notice in applications and policies about the unavailability of benefits under Rhode Island’s Insurers Insolvency Fund.  The amended regulation became effective January 14, 2011.

Jennifer R Cervenka, Esq. - PARTRIDGE SNOW & HAHN LLP, jrc@psh.com
Melissa E Darigan, Esq - PARTRIDGE SNOW & HAHN LLP, med@psh.com
John J. Partridge, Esq. - PARTRIDGE SNOW & HAHN LLP, (401) 861-8200 , jjp@psh.com

Category(s): United Kingdom - 02/01/2011

EU launches European Insurance and Occupational Pensions Authority (EIOPA)

The European Insurance and Occupational Pensions Authority (EIOPA) - the EU's equivalent of the NAIC - held its first meeting on 10 January 2010 and promptly elected its management board and selected Gabriel Bernardino as its first Chairperson.  As of 1 January 2011, EIOPA replaced, with enhanced powers, the Committee of European Insurance and Occupational Pensions Supervisors (CEIOPS).  It is mandated to improve the functioning and transparency of the markets and to protect the stability of the financial system. EIOPA is also mandated to address compliance with laws, in particular those related with systemic and cross-border risks.;

The new body quickly got work by announcing the launch of the second EU-wide stress test for the insurance sector. EIOPA states that "the goal of the stress test is to identify and quantify the impact of the different stress scenarios on an insurer’s financial position in an adverse and very severe economic environment".  The test will be one of a range of supervisory tools used by EIOPA and will include a minimum of 50% of insurance companies per EU Member State measured by gross premium income.  EIOPA is expected to consult with national supervisors and insurance associations before finalising the framework of the test.

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

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