April 2012 Alert

Greetings,

Welcome to the April/May 2012 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

April 2012 Alerts

Blurb

Category(s): Arizona - 04/01/2012

Arizona Moderizes Insurer Financial Regulation

Gov. Brewer signed into law HB 2153 which makes several important changes intended to modernize Arizona's insurance regulation. The bill which takes effect 90 days after the Legislature adjourns makes examination workpapers confidential; provides a "greater than" standard for determining an extraordinary dividend; increases from 10% to 20% of assets the amount an insurer can invest in foreign securities; permits up to 25% of assets to be invested in a separate category of Canadian securities; and adopts the NAIC Model Derivative Transactions Regulation.

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

Category(s): Federal - 04/01/2012

FIO Advisory Committee

On March 30, Federal Insurance Office Director Michael McRaith convened the inaugural meeting of his 15-person Insurance Advisory Committee.  The Committee has seven state regulators on it, plus industry, academic and consumer advocates.    The Committee is likely to meet quarterly and to take up big-picture issues where Director McRaith would like outside advice, counsel and input.

Charles T. Richardson, Esq. - FAEGRE BAKER DANIELS LLP, (202) 312-7487 , crichardson@faegrebd.com

Category(s): Florida - 04/01/2012

Citizens Property Insurance Releases Performance Measures

Florida's large residual property insurance market, Citizens Property Insurance Corporation, recently released statistics providing a look at not only its operations but also the state of Florida's property market as a whole.  Citizens continues to reinspect homes to identify errors in storm loss mitigation discounts.  Fully 68% of the reinspected properties have shown premium errors, with 62% being undercharges and 6% being overcharges.  Citizens' claims-paying process is operating well, but its claims count is up.  Nearly half of the claims it receives are for water damage.

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

Category(s): Florida - 04/01/2012

Class Certification Denied to Challengers of Medicare Outpatient Prospective Payment System Personal Injury Protection Fee Schedule Reimbursement

On March 7, 2012, Judge Ursula Ungaro of the Southern District of Florida denied class certification in a case brought against State Farm Mutual Automobile Insurance Company by a class of providers challenging the application of the Medicare Outpatient Prospective Payment System to fee schedule reimbursements for Personal Injury Protection insurance. The court had previously ruled against State Farm on the merits of the claim, finding that the PIP statute did not allow the use of OPPS to cap reimbursements. However, in deciding not to certify the class, the trial court specifically found that whether or not a payment utilizing OPPS was "reasonable" was an individual inquiry which depended on the circumstances of each claim.

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

Category(s): Florida - 04/01/2012

Florida Legislature Clarifies Nonrenewal of Policy Issue

The Florida Legislature has clarified the intent of the Notice of cancellation or nonrenewal of a surplus lines insurance policy, which had been interpreted by a Florida court to require that an insurer issue a notice of nonrenewal even when the insurer intended to renew.  The law now states that if the insurer has manifested its willingness to renew, and not withdrawn the offer prior to termination of the policy, no "notice of nonrenewal" is required.  It further clarifies that notice is not required in cases of nonpayment of premium.

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

Category(s): Florida - 04/01/2012

Florida Office of Insurance Regulation Announces NIMA, Inc. Enters into Agreement with the Florida Surplus Lines Service Office (FSLSO) As Clearinghouse Provider

The Florida Office of Insurance Regulation announced on April 17, 2012, that NIMA, Inc. will contract with the Florida Surplus Lines Service Office to serve as its central clearinghouse provider for the collection and allocation of surplus lines premium tax payments for multi-state surplus lines policies.

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

Category(s): Florida - 04/01/2012

Florida Office of Insurance Regulation Order Exempts Commercial Lines Risks from Form Filing Requirements Under Certain Circumstances

The Florida Office of Insurance Regulation has issued an Order exempting certain property and casualty policy forms, policy endorsements, applications or other forms from the requirements of Section 627.410, F.S., in certain circumstances. The Order is effective for one year beginning April 9, 2012. To view the Order, click here.

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

Category(s): Florida - 04/01/2012

Florida Office of Insurance Regulation Orders Safe Harbor Christian Foundation to Cease and Desist Writing Donor Annuities

Florida Insurance Commissioner Kevin McCarty issued an April 5, 2012 order to Safe Harbor Christian Foundation (Safe Harbor) to cease and desist writing any new donor annuity business in Florida. Safe Harbor was registered as a donor annuity in Florida in 2007, and has home offices in Newark, Ohio. Safe Harbor reported a total of three annuities in force in Florida totaling $100,000. The order was precipitated by action by the U.S. Commodity Futures Trading Commission in the U.S. District Court for the Western District of North Carolina. To view the order, click here.

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

Category(s): Florida - 04/01/2012

Florida Office of Insurance Regulation Orders United States Contractors Trust and Access Health Now to Cease and Desist Unauthorized and Unlicensed Insurance Sales

Florida Insurance Commissioner Kevin McCarty issued a March 20, 2012 order to United States Contractors Trust ("USCT") and ACCESS Health Now to cease and desist engaging in the unauthorized and unlicensed sale of insurance in the State of Florida. The Florida Office of Insurance Regulation conducted an investigation and concluded that both companies provided and/or offered to provide limited health insurance to Florida residents without a license. USCT is a Delaware statutory trust and ACCESS does business via its website, www.accesshealthnow.com. Both represent themselves as membership associations that offer their members accident and healthcare benefits, but records indicate that USCT and ACCESS have never been authorized to sell health insurance in the State of Florida. To view the order, click here.

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

Category(s): Florida - 04/01/2012

Governor Regains Control Over Administrative Rulemaking

Governor Rick Scott's first official act when he became Governor was to issue an Executive Order suspending agency rulemaking.  Agencies under his direct control were obligated to comply and other executive branch agencies were asked to voluntarily comply.  A court ruling determined, however, that the Governor overstepped his authority in the Executive Order because administrative rulemaking is a function delegated to agencies by the legislature.  The Florida Legislature fixed this in the recently concluded legislative session by specifying that the Governor indeed retains control over rulemaking by the agencies he oversees.

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

Category(s): Florida - 04/01/2012

PIP Reform and Other Bills Head to Governor

On Friday, April 20, the Governor received several insurance-related bills passed by the legislature during the 2012 legislative session.  This begins a 15-day period in which the Governor must sign the bills into law, allow them to become law without signature, or veto them.  Perhaps the most notable of the bills is the hotly debated reform to Florida's Personal Injury Protection (PIP) auto insurance law.  Other bills pertain to title insurance, agents and adjusters and general insurance issues.  The outcome of the Governor's actions can be found at the legislative session of our website at www.radeylaw.com.

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

Category(s): New Mexico - 04/01/2012

Insurance Regulation Reform in New Mexico

During the 2012, the New Mexico Legislature approved a resolution which will allow the voters to decide whether to remove the Insurance Division and Superintendent of Insurance from the New Mexico Public Regulation Commission.  House Joint Resolution 17, if approved by the voters, would remove responsibility for regulating insurance companies from the public regulation commission and amend the Constitution of New Mexico to create the office of "superintendent of insurance".  Under the amendment, the Office of the Superintendent of Insurance would regulate insurance companies and others engaged in risk assumption in such manner as provided by law as of July 1, 2013.  The superintendent of insurance would be appointed by an insurance nominating committee and serve for such terms as provided by law.  The insurance nominating committee would be appointed, and the committee would evaluate applications for superintendent of insurance in accordance with qualifications established by statute.  The resolution will be submitted to the voters for their approval or rejection during 2012 general election.

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 York - 04/01/2012

New Free App Provides Information on New York Product Filings

The New York Department of Financial Services has launched a free online application to make it easier for the public to review the data used by property/casualty insurers to support rate increases, introduce new products or change existing insurance products.  The app takes the place of a Freedom of Information Law (FOIL) request for obtaining product and rate filing data.  Information designated by filers as confidential is not subject to release.

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 - 04/01/2012

New York Appellate Court Upholds Broker Compensation Regulation

On March 8, 2012, a panel Of New York's Appellate Division, Third Department let stand New York Insurance Regulation 194, a controversial rule requiring New York insurance producers to disclose to their clients how they are compensated, including compensation from insurers.  Referring to the New York Department of Financial Services, the Court found: "respondent rationally determined that, while incentive-based compensation need not be banned or limited, disclosure of such compensation structures would promote needed transparency and arm consumers with relevant information regarding the role of insurance producers and the compensation that they receive."

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 - 04/01/2012

Pending Legislation Benefits Executive Life Insurance Company

The New York State Senate passed S6507 on March 29, 2012, providing for an increase in the statutory total assessment against member insurers of the life insurance company guaranty corporation of New York from $500 million to $558 million.  The increase is intended to provide a fund for claims against Executive Life Insurance Company of New York, currently subject to an order of rehabilitation.  The measure is pending in the New York Assembly.

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 - 04/01/2012

Commissioner McPeak Issues Bulletin on Certificates of Insurance

Commissioner of Commerce and Insurance Julie Mix McPeak has issued a Bulletin to P&C Insurers licensed in Tennessee confirming that all certificates of insurance must conform to the terms of the underlying  policy and that any improper modification or fabrication of a certificate will be considered an unfair trade practice.  The Bulletin, issued on March 21, obviated a push for legislation proposed by a producer trade group that would have similarly clarified current law.

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

Category(s): Tennessee - 04/01/2012

Netting of Qualified Financial Contracts Becomes Law

Governor Bill Haslam on March 6 signed into law a bill clarifying rights of counterparties to swaps and other derivative contracts in the event of an insurer’s receivership or liquidation.  Public Chapter 540 generally tracks Section 711 of the NAIC’s Insurer Receivership Model Act, making Tennessee one of 20 states that have enacted similar provisions beneficial to life insurers and their counterparties.

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

Category(s): Tennessee - 04/01/2012

New Law Expands Types of Custodians Available to Insurers

Effective July 1, insurers will have welcomed flexibility in choosing custodians and clearing corporations under a new law signed by Governor Bill Haslam on April 4.  Based on legislation proposed by the Tennessee Department of Commerce and Insurance, the law (Public Chapter 680) broadens the types of eligible custodians through which an insurer’s securities are deposited to include national banks, state banks, Federal Home Loan Banks, trust companies, and broker/dealers that participate in a clearing corporation.

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

Category(s): Texas - 04/01/2012

Texas Supreme Court Issues Opinion Regarding Stop-Loss Insurance

The Texas Supreme Court issued an opinion on May 18, 2012 in Texas Department of Insurance et al. v. American National Insurance Company et al (No. 10-0374) that supports the Texas Department of Insurance's position that stop-loss insurance sold to self-funded employee health benefit plans is "direct health insurance," and not "reinsurance."  Therefore, American National was improperly recording the premiums obtained from the self-insured employer plans as "assumed reinsurance," and those premiums were subject to assessments due to the Texas Health Insurance Risk Pool.

David D Knoll, Esq. - THOMPSON, COE, COUSINS & IRONS, L.L.P., (512) 703-5090 , dknoll@thompsoncoe.com

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