Category(s): Florida - 03/22/2017

The “assignment of benefits” issue continues to dominate public policy discussions in the Florida property insurance market.  The most contentious issue is whether the one-way right to attorneys’ fees inherited by assignees should be continued.  A compromise approach would allow either the assignee or the insurer to recover fees, but only if the prevailing party achieves a better result than set forth in a settlement proposal previously offered.

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

Category(s): Florida - 03/22/2017

On February 10, 2017, the 5th District Court of Appeals reversed and remanded a lower court ruling, which had dismissed with prejudice an insured’s first-party action to recover policy benefits against an insurer that later became insolvent.  In reversing and remanding the lower court’s decision, the Appeals Court found that a one-year statute of limitations provision barring claims against the Florida Insurance Guaranty Association (“FIGA”) only applies if a first-party suit is not filed against the insolvent insurer before insolvency occurs.  Moreover, the Court found that the statute of limitations cannot be read in insolation from a stay provision contained in the Florida Insurance Guaranty Association Act, which provides, in pertinent part, that “all proceedings in which the insolvent insurer is a party . . . shall be stayed for 6 months . . . to permit proper defense by [FIGA] of all pending causes of action as to any covered claims.”  Read together with the statute of limitations, the Court found that the stay provision operated to allow the Plaintiff to proceed with her claim against FIGA.
 
The lawsuit was filed by Patricia Morrison (“Morrison”) after her property and casualty insurer, Homewise Preferred Insurance Company (“Homewise”), denied a claim she filed to recover for damages her home sustained as a result of sinkhole activity.  Homewise became insolvent after filing an answer to Morrison’s complaint.  The lower court denied as untimely a motion filed by Morrison to amend her complaint to substitute FIGA as the proper defendant and then dismissed her suit.  Morrison appealed the lower court’s decision, arguing that the statute of limitations did not apply to her lawsuit, which was filed before Homewise became insolvent.

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

Category(s): Florida - 03/22/2017

On December 1, 2016, in Sebo v. Am. Home Assurance Co., the Florida Supreme Court held that the concurrent causation doctrine (“CCD”) applies when independent causes contribute to property damage and no single cause can be considered the sole or proximate cause of the damages.  In Sebo, the plaintiff sued American Home Assurance Company (“AHAC”) after it denied his claim for damage to his home caused by rain and Hurricane Wilma, based on the policy’s exclusion for faulty, inadequate or defective planning.  A jury ruled in favor of the plaintiff and awarded him $8 million, however, the Second District Court of Appeals held that the CCD did not apply and reversed the award.  The Supreme Court disagreed and reversed the Second District’s ruling, holding that the CCD applied to the plaintiff’s claim.  Under the CCD, coverage may exist if a covered risk is a concurrent cause of a reported loss, even if the risk is not the proximate cause of the loss.  To avoid application of the CCD, the Court noted carriers must include explicit language in their policies to that effect.  The Court’s holding in Sebo will likely lead to an increased number of new claims filed against property insurers in Florida, and could also lead to a resurgence of pursuit of previously denied claims.

Richard J. Fidei, Esq. - GREENBERG TRAURIG LLP, (954) 592-5530

Category(s): Florida - 03/22/2017

The National Council of Compensation Insurance (the “NCCI”) has released a preliminary evaluation of the cost impact analysis of the Florida House Insurance and Banking Subcommittee March 7, 2017 Workshop Bill Drafts.  The NCCI analysis reflects its preliminary review of proposed legislation to address some recent Florida Supreme Court decisions holding provisions related to caps on the recovery of claimant’s attorneys’ fees and limitations on certain disability benefits to be unconstitutional.  

According to the NCCI, if enacted, the bill provisions “could result in a moderate to sizable decrease in overall system costs in Florida” as it relates to claimant attorney’s fees.  With respect to Temporary Total Benefits and Temporary Partial Benefits, “NCCI estimates that increasing the maximum duration for TTD benefits from 260 weeks to 286 weeks and codifying the maximum duration for TPD benefits at 260 weeks would result in a small increase in WC system costs since only a minimal number of cases would be impacted.”  The NCCI further indicated that Medical Fee Schedule provisions (for Hospital Outpatient and ASC services based on Medicare’s OPPS rates) “may result in a sizable decrease on workers’ compensation system costs”.  Importantly, for Public Records Exemption, the NCCI stated it “is unable to estimate the magnitude of such a decrease, which could become material over time.”

Richard J. Fidei, Esq. - GREENBERG TRAURIG LLP, (954) 592-5530

Category(s): Florida - 03/22/2017

The Florida Senate will consider a proposal to eliminate the salary credit against Florida’s insurance premium tax in favor of lowering the communications tax.  The insurance industry responds that the salary credit is beneficial because it is based on actual job creation.  In addition, the interplay between the premium tax and the corporate income tax already produces a higher effective tax rate for insurers than for other types of businesses, which are subject only to the corporate income tax.

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

Category(s): South Carolina - 03/22/2017

The South Carolina Department of Insurance recently authorized yet another special purpose financial captive (“SPFC”) transaction to finance the reserves for a large block of term life insurance policies.  The approved transaction is the state’s second to comply with the rules and standards established by National Association of Insurance Commissioners (“NAIC”) in newly-promulgated Actuarial Guideline 48 to govern reserve financing transactions involving term life insurance.  The NAIC’s earlier implementation of principles-based reserving reduced, but did not eliminate, life insurance companies’ need to affordably fund reserves for its term life insurance products, and SPFCs continue to be a suitable vehicle for meeting these needs affordably and practically through credit linked notes and other financial structures.  South Carolina set the national standard for SPFCs by enacting the first statute governing them and their reinsurance and financial transactions in 2004.

Michael A. Molony, Esq. - CLEMENT RIVERS, LLP, (843) 724-6631 , mmolony@ycrlaw.com
T. Douglas Concannon, Esq. - CLEMENT RIVERS, LLP, (843) 724-6605 , dconcannon@ycrlaw.com

Category(s): Tennessee - 03/22/2017

The legislative package proposed by Gov. Bill Haslam’s Administration includes a bill drafted by the Tennessee Department of Commerce and Insurance to enhance the Department’s authority to retaliate against foreign insurance companies doing business in Tennessee.  The bill (S.B. 1189/H.B.301) would broadly take into account all  taxes, assessments, monetary charges, deposit requirements, and other obligations  imposed by another state on Tennessee insurance companies doing business in such state for purposes of calculating the retaliatory tax imposed by the Department on insurance companies domiciled in such state with regard to their Tennessee written premium.

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

Category(s): Wisconsin - 03/22/2017

The Wisconsin Deputy Commissioner of Insurance recently reiterated the need for a separate committee to obtain a full policy understanding of this subject, which includes issues around how deeply you slice the market with different data points, with the possible result that the spreading of risk that is the essence of insurance no longer exists, because each insured is rated separately; the need for consistency in the use of data to avoid unfair discrimination; ensuring that use of data still results in a premium that is based on risk; and how regulators might use big data (though they have traditionally not had access to big data or the technology to use it). Questions include:

•	Whether the consumer owns his or her own data, which the Deputy Commissioner said needs to develop over time; however, the hope is that it will be portable from company to company if that is practical (e.g., if it can be transferred safely).
•	Whether the usual prohibition against unfairly discriminatory rates would prevent use of data showing a very small change in risk; he noted that the purpose of using data is to get to a reasonable estimate of risk.
•	Whether, even though the granularity of data is important, most of the premium is determined by basic risk factors; the Deputy Commissioner said how risk is pooled may be something states will look at, though it is not necessarily a Wisconsin concern.

William J. Toman, Esq. - QUARLES & BRADY LLP, (608) 283-2434 , william.toman@quarles.com

Category(s): Wisconsin - 03/22/2017

A policy advisor at the Wisconsin Office of the Commissioner of Insurance recently reported that the Office hopes to pass its technical bill this spring, which will include the NAIC model Corporate Governance Annual Disclosure, with initial disclosures due June 1, 2020; agent modernization; elimination of obsolete disclosure reports; network adequacy (to avoid application of federal law); and death master file transparency (the Deputy Commissioner said that some legislators are interested in the model law adopted by the National Conference of Insurance Legislators on unclaimed life insurance benefits). The head of the Office's Division of Regulation and Enforcement said the purpose of the corporate governance law is to provide annual disclosures that will align with international standards; and that there is no small insurer exemption. The model requires a confidential annual filing at the group level on corporate governance (e.g., director qualifications, selection, and independence; and the board's role in evaluating and compensating senior management, strategic planning, reinsurance, compliance, and the like).

William J. Toman, Esq. - QUARLES & BRADY LLP, (608) 283-2434 , william.toman@quarles.com

Category(s): Wisconsin - 03/22/2017

Wisconsin Commissioner Ted Nickel is President of the NAIC this year, and his Deputy Commissioner recently said his main priority as President will be to clean up and finish the many projects already under way at the NAIC, so his tenure will be more "blocking and tackling" than big initiatives. But the Commissioner also believes that the NAIC must take bold action when needed (so he sent all his fellow commissioners a pair of brightly colored socks as a reminder). In addition, he is subtly focused on governance issues, making certain that processes are fair and that committee appointments reflect a broader base of participants.

William J. Toman, Esq. - QUARLES & BRADY LLP, (608) 283-2434 , william.toman@quarles.com