February 2013 Alert

Greetings,

Welcome to the February 2013 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 2013 Alerts

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Category(s): Connecticut - 02/01/2013

Guidance Published for Health Benefit Plan Annual Filing

Connecticut law requires the annual filing, on or before March 1, of various information concerning health benefit plan utilization review programs and grievance procedures.  The Connecticut Insurance Department recently issued Bulletin HC-89-13, which provides guidance regarding what must be filed and the format to be used in reporting requested information.

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

Category(s): Connecticut - 02/01/2013

Interstate Insurance Product Regulation Compact Legislation Filed in Connecticut

On January 9, the first day of the new legislative session, Connecticut State Senator Joseph Crisco filed legislation to adopt the NAIC Interstate Insurance Product Regulation Compact.  Forty-one U.S. jurisdictions have adopted the Compact, which provides a single-regulator alternative mechanism for review of life insurance, annuity, disability income and long-term care insurance policy forms in compacting states.  Senator Crisco’s bill was referred to the Joint Committee on Insurance and Real Estate.

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

Category(s): Florida - 02/01/2013

Florida Cabinet Adopts Personal Injury Protection Insurance Emergency Rule, Related Amended Rules Pursuant to HB 119

During its December 11, 2012 meeting, the Florida Cabinet approved Emergency Rule 69OER12-01, entitled "Emergency Adoption of Revised Notification of Personal Injury Protection ("PIP") Benefits Form," which allowed the Florida Office of Insurance Regulation ("OIR") to adopt Form OIR-ER1-1149, "Notification of Personal Injury Protection Benefits" on January 1, 2013--the same day on which a number of changes to Florida's PIP law took effect.  Along with the aforementioned Emergency Rule, the Cabinet considered other PIP-related items and approved publication of proposed amendments to Rule 69O-170.0155, "Forms," and Rule 69O-176.013, "Notification of Insured's Rights and Standard Disclosure Form," consistent with changes to PIP benefits effectuated by the 2012 enactment of HB 119.

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

Category(s): Florida - 02/01/2013

Florida Governor Rick Scott Releases Inspector General Report on Citizens Property Insurance, Calls for Immediate Travel Policy Reforms

In a statement issued on January 17, 2013, Florida Governor Rick Scott called for immediate reforms in the corporate travel policies of Citizens Property Insurance Corporation and released a detailed report by the Florida Office of the Chief Inspector General which states that all Citizens employees and Board members should follow state travel laws. The report also calls from more internal controls at Citizens. To view the Governor's complete statement and the Inspector General's entire report, click here.  here.

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

Category(s): Florida - 02/01/2013

Florida Office of Insurance Regulation Provides Clarification on Self-Certification Language in Amended Order on Property and Casualty Forms Expedited Review Process

In an e-mail issued December 12, 2012, the Florida Office of Insurance Regulation ("OIR") clarified certain language contained in a previously amended Order providing an expedited review and self-certification process for all property and casualty personal lines forms except workers' compensation. Under the expedited process, insurers can submit any property and casualty policy form, policy endorsement, application or other form which would otherwise be subject to the requirements of s. 627.410, F.S., in an informational filing to the OIR 30 days prior to use with a notarized certification. The Order provides that the certification must confirm that the filed forms are "in compliance with all applicable Florida Laws." In the December 12 e-mail, Sandra Starnes, OIR Director of Property and Casualty Product Review, states that by "Florida Laws," the OIR means all applicable Florida Statutes and Rules.  To view the amended Order, click here.

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

Category(s): Florida - 02/01/2013

Florida Office of Insurance Regulation Releases 2012 Fast Facts Report

The Florida Office of Insurance Regulation published its 2012 Fast Facts report on January 7, 2013. The report is a compilation of financial and regulatory information to include categories highlighting the agency's resources, insurance premium volume, number of domestic insurance companies and related entities, enforcement actions/consumer recoveries, public hearings and more. To access the report, click here.

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

Category(s): Florida - 02/01/2013

Florida Office of Insurance Regulation Releases 2012 Workers' Compensation Annual Report

The Florida Office of Insurance Regulation issued its 2012 Workers' Compensation Annual Report to the Florida Legislature on January 2, 2013. The report highlights information about Florida's workers' compensation insurance market statewide. To access the report, click here

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

Category(s): Florida - 02/01/2013

Florida Surplus Lines Service Office Service Fee for Single-State Florida Policies to Increase From 0.1 to 0.2 Percent

The Florida Surplus Lines Service Office announced on December 20, 2012, that its service fee will increase from 0.1 percent to 0.2 percent, effective April 1, 2013. The service fee is applicable only to single-state Florida policies. All new and renewal policies/certificates with an effective date on or after April 1, 2013 will incur a service fee of 0.2 percent of the total gross premium as defined in Section 626.9325, F.S. To access the Florida Office of Insurance Regulation order approving the increase, click here.

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

Category(s): Georgia - 02/01/2013

America’s Health Insurance Plans v. Ralph T. Hudgens, in his official capacity as Georgia Insurance and Safety Fire Commissioner, 1:12-cv-2978-WSD, United State District Court, Northern District of Georgia, Atlanta Division (December 31, 2012)

On December 31, 2012, the United States District Court, Northern District of Georgia, Atlanta Division (“District Court”) denied the Commissioner’s motion to dismiss America’s Health Insurance Plans’ (“AHIP”) complaint challenging Georgia’s amended prompt pay law as preempted by ERISA and granting AHIP’s motion for a preliminary injunction against the enforcement of the amended prompt pay law.  The prompt pay law came into existence in Georgia in 1999 with the passage of Ga. L. 1999, Act No. 263, § 2, 1999, codified at O.C.G.A § 33-24-59.5.  In substance, the prompt pay law requires all health benefit plans to pay claims within 15 working days or face an 18% per annum interest charge on the outstanding claim balance.  Importantly, the 1999 prompt pay law specifically excluded health benefit plans that were subject to the exclusive jurisdiction of ERISA.  In 2011, this exclusion for ERISA welfare plans was removed from the prompt pay statute through the Georgia General Assembly’s enactment of the Insurance Delivery Enhancement Act of 2011, No. 196, 2011 Ga. Laws 595, codified in relevant part as amended O.C.G.A. § 33-24-59.5 and newly created O.C.G.A. § 33-24-59.14 (note that these laws are virtually the same insofar as both apply same prompt pay requirements to ERISA plans).  The Commissioner argued that the prompt pay law only regulated third party administrators, which are not ERISA fiduciaries, and that alternatively the prompt pay law regulated insurance and was therefore not preempted by ERISA by virtue of its insurance savings clause.  The Court rejected the Commissioner’s argument, concluding that the plain terms of the amended prompt pay statute clearly “related to” an employee benefit plan and that, while the prompt pay law did regulate insurance in accordance with the requirements of the ERISA savings clause, the ERISA deemer clause also applied and preempted the new prompt pay law insofar as it deemed a self-funded employer benefit plan to be insurance.  Consequently, the District Court dismissed the Commissioner’s motion to dismiss AHIP’s preemption challenge to the amended prompt pay law and granted AHIP’s motion for preliminary injunction prohibiting the enforcement of the amended prompt pay law against self-funded employer benefit plans and administrators thereof.

Brian T. Casey, Esq. - LOCKE LORD LLP, (404) 870-4638 , bcasey@lockelord.com
Trey Sivley, Esq. - LOCKE LORD LLP, (404) 870-4657 , tsivley@lockelord.com

Category(s): Georgia - 02/01/2013

Bell v. Liberty Mut. Fire Ins. Co., A12A1094, Georgia Court of Appeals (December 11, 2012)

On December 11, 2012, the Georgia Court of Appeals upheld the grant of summary judgment to Liberty Mutual concerning a disputed claim arising from a house fire.  The Bells, the insured homeowners, and Liberty Mutual submitted the disputed claim to two appraisers and to an umpire to determine the actual value and amount of loss.  The umpire issued awards for the loss of the dwelling and loss of personal property in amounts less than the policy limits and the Bells filed a motion to set aside the awards.  The Bells argued the umpire’s failure to include a list of damage or loss to any specific articles of personal property or components of the house was an irregularity, palpable mistake of law, or fraud, as the state standard fire insurance policy requires such itemization.  The court held the standard insurance policy in Georgia places a duty to make such an itemization on the insured, but not on the umpire, and it was not erroneous for the court to refuse to require the umpire to perform the itemized listing in the absence of an explicit provision requiring such in the policy.  The trial court did not rule on the issues of whether the house was wholly destroyed or whether Liberty Mutual denied the claim in bad faith by omitting the itemization provision from the contract, and thus were not decided on review.

Brian T. Casey, Esq. - LOCKE LORD LLP, (404) 870-4638 , bcasey@lockelord.com
Trey Sivley, Esq. - LOCKE LORD LLP, (404) 870-4657 , tsivley@lockelord.com

Category(s): Georgia - 02/01/2013

Georgia Adopts NAIC’s Hazardous Financial Condition Model Act

Effective as of January 23, 2013, the Georgia Department of Insurance adopted the NAIC’s Hazardous Financial Condition Model Act.  The Model Act defines the standards and the Commissioner’s ability for determining when companies are deemed to be in a hazardous financial condition.  The regulation is available in Regulation Chapter 120-2-54.

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

Category(s): Georgia - 02/01/2013

Georgia Requires Health Insurers to Offer Child Only Coverage

Effective January 1, 2013, Georgia is requiring health insurers and HMOs to submit at least one policy of child-only individual health coverage in a form that complies with PPACA along with child-only premium rates.  The rates are not required to be approved if they are already on file with the Georgia Department of Insurance.  The regulation permits an insurer to impose a surcharge on any individual who enrolls in a child-only policy and has not had prior credible coverage in the 63-day period preceding the date of the application.  The statute authorizing the regulation will be repealed effective January 1, 2014, when the full provisions of PPACA are in effect.  The regulation also provides additional detail on form and rate filing requirements through SERFF and a report from the insurer detailing the demographics of its 2013 child-only health insurance customers.  The report is due by March 1, 2014.

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

Category(s): Georgia - 02/01/2013

Lloyd’s Syndicate No. 5820 d/b/a Cassidy Davis v. AGCO Corp.; AGCO Corp. v. Lloyd’s Syndicate No. 5820 d/b/a Cassidy Davis; Glynn Gen. Purchasing Grp. Inc. v. AGCO Corp., A12A1125, A12A1126, A12A1281, Georgia Court of Appeals (December 11, 2012)

On December 11, 2012, the Georgia Court of Appeals affirmed the grant of partial summary judgment to AGCO Corp. and denial of summary judgment to Lloyd’s Syndicate No. 5820 d/b/a Cassidy Davis (“Cassidy Davis”) on the issue of whether there was insurance coverage for obligations of AGCO arising from its liability to customers pursuant an extended warranty plan, and denying summary judgment to AGCO for its claims of bad faith against Cassidy Davis and its claims of estoppel against certain contractual defenses. AGCO Corp. manufactured and sold an agricultural spray applicator, the RoGator.   AGCO purchased extended protection plans (EPP) from Warranty Specialists d/b/a Glynn General Corporation and offered them to customers who purchased RoGators.  The EPP provided coverage required due to a mechanical breakdown or failure that is the result of a true defect in material or workmanship.  Glynn General Purchasing Group (GGPG) obtained a master policy of liability insurance for AGCO from Cassidy Davis to provide coverage to AGCO for its liability to AGCO’s customers pursuant to the EPPs.  The RoGator at issue was powered by four wheel motors and the failure of one wheel motor stopped the machine.  Initially, the ACGO dealer repaired the machine, submitted a claim for reimbursement for the repair cost to Warranty Specialists, who paid premiums to Cassidy Davis, and Cassidy Davis paid Warranty Specialists for claims deemed valid.  After paying approximately 25 wheel motor claims, Warranty Specialists stopped paying the claims because Cassidy Davis had invoked the Epidemic Failure Clause (EFC).  AGCO then paid the claims and filed this action.  The Court affirmed that the master policy provided coverage for the wheel motor claims; it was unambiguous and contained no exclusion for mechanical breakdowns or failures resulting from design or engineering defects and only a causal connection is required to show a loss arose out of a specified act set forth in a contract.  Whether Cassidy Davis acted in bad faith denying the warranty claims is question for the trier of fact, the Court determined, as it could not find that the insurer’s defense to coverage was reasonable as a matter of law under the circumstances presented in the case in order to grant summary judgment.  The Court denied Cassidy’s argument that there was no bad faith because payment was not yet due as AGCO did not have a judgment rendered against it, finding no judgment had to be rendered against AGCO before it could demand payment from Cassidy or before Cassidy was obligated to reimburse AGCO.  The Court held that Cassidy, Warranty Specialists, and GGPG were not estopped from asserting other grounds to deny coverage because they initially denied the claims based on the EFC.

Brian T. Casey, Esq. - LOCKE LORD LLP, (404) 870-4638 , bcasey@lockelord.com
Trey Sivley, Esq. - LOCKE LORD LLP, (404) 870-4657 , tsivley@lockelord.com

Category(s): New Mexico - 02/01/2013

New Mexico Insurance Superintendent suspended by Public Regulation Commission

The New Mexico Public Regulation Commission (PRC) placed Insurance Superintendent John Franchini on a two week unpaid suspension on January 11.  Although the PRC would not discuss the reason for the suspension, State Senator Carroll Leavell, who is carrying the legislation to formalize the removal of the Insurance Division from PRC oversight beginning on July 1, 2013 as approved by the voters last November, said publically that he was told that Franchini was placed on leave for two reasons; first, that Franchini allowed insurance staff to leave the office an hour early on December 24 because a snowstorm was making driving conditions difficult and, second, because he failed to attend a meeting on his day off which he was alerted to late the day before. An Albuquerque Journal editorial cited this action by the PRC as more evidence that the insurance division needs to be removed from PRC oversight.

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

Category(s): New Mexico - 02/01/2013

New Mexico Legislature to consider NAIC model law updates

The Insurance Division of the New Mexico Public Regulation Commission will pursue a number of model law updates in the 2013 legislative session.  The Insurance Division is pursuing the model law updates in order to satisfy the requirements necessary to maintain its NAIC accreditation.  Senator Carroll Leavell (R), NCOIL’s Past President, has indicated that he will sponsor the legislation for the Insurance Division.  The legislation will contain updates to current New Mexico law and will be based on the following model laws:  NAIC Risk Based Capital;  NAIC Credit for Reinsurance;  NAIC Standard Valuation Law (Principle-Based Reserves Implementation); NAIC Standard Nonforfeiture Law (Principle-Based Reserves Implementation);  NAIC Insurance Holding Company Act;  and NAIC Hazardous Financial Condition.  In addition, the Insurance Division will pursue two NCOIL model laws in the 2013 session.  This second bill is expected to be more controversial.  It will contain updates to current New Mexico law and will be based on the following model laws:  NCOIL Certificates of Evidence of Insurance and NCOIL Unclaimed Life Insurance Benefits.

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

Category(s): New York - 02/01/2013

New York Extends Policy Termination Moratorium

In response to "Storm Sandy," the New York Superintendent of Financial Services issued an Order declaring a temporary moratorium in certain designated New York counties that prohibits the termination, cancellation or non-renewal of certain personal and commercial lines property/casualty insurance policies (referred to as “covered policies”).  The Order also declares ineffective during the moratorium any automatic policy renewal provisions contained in a covered policy (but permits the owner of a covered policy to voluntarily terminate a covered policy during the moratorium).  On January 16, 2013, after several interim extensions, the moratorium was extended for an additional 14 days for certain zip code regions within seven New York counties (New York, Bronx, Kings, Richmond, Queens, Nassau and Suffolk).

Frederic Garsson, Esq. - SAUL EWING ARNSTEIN & LEHR LLP, (973) 286-6719 , fgarsson@saul.com

Category(s): New York - 02/01/2013

New York Licensed Insurers Paid More Than $665 Million in Unclaimed Life Insurance Benefits

On January 29, 2013, New York Governor Cuomo announced that as a result of an investigation by the New York Department of Financial Services (the "New York Department") that began in July of 2011, New York licensed insurers have now paid more than $665 million in unclaimed life insurance benefits to individuals who were unaware that they were owed such funds.  As a result of the investigation, in June of 2012 the New York Department adopted, on a temporary basis, New York Insurance Regulation 200 (entitled "Unclaimed Life Insurance Benefits and Policy Identification"). In December of 2012 the New York legislature made New York’s unclaimed benefits rules permanent by enacting New York Insurance Law Section 3213-a (entitled "Unclaimed Benefits"). Section 3213-a becomes effective on June 15, 2013. In addition to requiring New York licensed insurers to quarterly search the Social Security Administration’s master death file to identify deceased insureds and to locate beneficiaries, the new law and regulation also establishes a "Lost Policy Finder" application on the New York Department’s website that can be used to assist beneficiaries in locating lost policies (and obtaining the associated unclaimed death benefits).

Frederic Garsson, Esq. - SAUL EWING ARNSTEIN & LEHR LLP, (973) 286-6719 , fgarsson@saul.com

Category(s): South Carolina - 02/01/2013

First Consumer Operated and Oriented Plan Conditionally Licensed by South Carolina Department of Insurance

The South Carolina Department of Insurance has conditionally licensed the first Consumer Operated and Oriented Plan (CO-OP) in the southern United States.  The Charleston based company was created under the Affordable Care Act as an option on the federal health insurance exchange for South Carolina businesses and individuals who are not Medicaid eligible but cannot afford traditional health insurance plans.  Young Clement Rivers, LLP prepared the application and facilitated the administrative licensure process, and continues to assist the CO-OP as it prepares to begin offering coverage on January 1, 2014.

Michael A. Molony, Esq. - YOUNG, CLEMENT, RIVERS, LLP, (843) 724-6631 , mmolony@ycrlaw.com

Category(s): Tennessee - 02/01/2013

Administration Package Includes Surplus Lines, Health Insurance Measures

The Haslam Administration has included two additional insurance-related bills in its legislative package that are now under consideration by the 107th General Assembly.  The measures would clarify (1) calculation of the gross premium tax due on premiums charged for surplus lines insurance (SB0150/HB0144), and (2) procedures for external review of health insurance claims (SB0147/HB0140).

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 - 02/01/2013

PBR Implementation Bill Introduced

At the request of the Tennessee Department of Commerce and Insurance, the Haslam Administration has included in its legislative package a bill to implement principles-based reserve methodology for life reserves by adoption of the Standard Valuation Law.  Tennessee Commissioner Julie Mix McPeak, who spearheaded passage of PBR during the NAIC’s 2012 Fall Meeting, is expected to be a strong advocate of the bill (SB0145/HB0139) during legislative deliberations in the first session of the 107th General Assembly.

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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