March 2017 Edition of Alerts

Welcome to the March 2017 edition of the FORC Alert. If you have any colleagues that may be interested in this publication, please forward it on. There is a link on the Alerts main page where they can subscribe to receive FORC Alerts automatically.

Regards,
Ryan Smart, Esq., FORC Alert Editor
Blurb

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

New Corporate Governance Annual Disclosure Requirements for Connecticut Insurers Take Effect

A recently enacted Connecticut statute will impose significant new obligations on Connecticut domestic insurers, and their holding companies. Pursuant to Public Act No. 16-206, by June 1 of this year, and annually thereafter, each domestic insurer or the insurance group of which that insurer is a member must submit to the Insurance Commissioner a confidential Corporate Governance Annual Disclosure (“CGAD”). If an insurer is a member of an insurance group, the insurer must submit the CGAD to the lead state commissioner, as determined by the procedures in the NAIC’s applicable financial analysis handbook. Although the new statute is essentially a disclosure obligation, it will focus directors and senior management on analyzing and improving their corporate governance practices.

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

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

Assignment of Benefits Issue Dominates Property Insurance Discussions

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

FEMA Extends Filing Deadlines for Florida NFIP Flood Insurance Claims; Proof of Loss Extension Associated with Hurricane Hermine Claims Has Expired

The Florida Office of Insurance Regulation (the “OIR”) issued a consumer alert to notify all National Flood Insurance Program (“NFIP”) policyholders in Florida that they now have an additional 60 days to file a flood insurance claim associated with Hurricane Matthew.  Accordingly, policyholders now have 120 days from the date of loss to file a claim.  This decision expands the total number of days to file a proof of loss for damage caused by Hurricane Matthew to a total of 180 days.  Additionally, OIR noted that the period to file proofs of loss associated with Hurricane Hermine had expired as of January 31, 2017.  In November, the Federal Emergency Management Agency (“FEMA”) granted an additional 30-day extension for NFIP policyholders to file claims associated with Hurricane Hermine.  Then, in December, FEMA granted another 30 day extension for proof of loss claims associated with Hurricane Hermine.

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

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

Fla. Appeals Court Extends Time To Sue Bankrupt Insurers - Morrison v. Homewise/FIGA

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 LLP, (954) 768-8278 , karlinskyf@gtlaw.com

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

Florida Office of Insurance Regulation Staff Changes

The Florida Office of Insurance Regulation (the “OIR”) announced the appointment of Susanne Murphy to assume the role of Deputy Commissioner of Property & Casualty.  Prior to her appointment, Ms. Murphy served as the OIR’s Special Deputy Commissioner of Market Investigations, as well as a senior policy advisor to Commissioner David Altmaier.  As part of her new role, Ms. Murphy will oversee the Bureaus of Property & Casualty Financial Oversight and Product Review, in addition to being responsible for overseeing a newly created unit known as the Property & Casualty Market Conduct unit.  The OIR also announced the appointment of Eric Johnson as Deputy Commissioner of Life & Health.  Previously, Mr. Johnson served as Deputy Director of the Life & Health Actuarial, Life & Health Product Review, and was responsible for managing product review and evaluation of actuarial staff, as well as evaluation of the appropriateness of health insurance rates, including long-term care and major medical.  Mr. Johnson will now oversee the Bureaus of Life and Health Financial Oversight and Product Review, as well as a newly created unit known as the Life & Health Market Conduct unit.

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

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

Florida Supreme Court Holds Coverage May Exist Where Policyholders’ Loss is Caused by a Combination of Covered and Excluded Concurrent Causes

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) 768-8286 , fideir@gtlaw.com

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

Florida Supreme Court Reinforces Right of Insureds to Recover Attorneys’ Fees

On September 29, 2016, in Johnson v. Omega Ins. Co., the Florida Supreme Court issued a ruling that reinforced the right of insureds to recover attorneys’ fees when they prevail in lawsuits against their insurers.  Section 627.428 of the Florida Statutes provides for an award of reasonable attorney fees in favor of an insured or named beneficiary who prevails in litigation against an insurer regarding his or her rights under an insurance policy.  In Johnson, the Court held that, to recover attorneys’ fees pursuant to Section 627.428, it was not necessary for a policyholder to demonstrate that a carrier acted in bad faith when it denied the policyholder’s claim for benefits in relation to sinkhole loss.  While the Johnson case does not create a new substantive right to recover attorneys’ fees against insurers in Florida, it stands as an affirmation by the Court that insured’s will not need to meet a heightened “bad faith” standard when seeking attorneys’ fees under Section 627.428.

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

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

NCCI Releases Estimate on Effect of Proposed House Workers’ Compensation Proposal

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) 768-8286 , fideir@gtlaw.com

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

OIR Names New Deputy Commissioners

The Florida Office of Insurance Regulation has named Susanne Murphy as its deputy commissioner for property and casualty insurance and Eric Johnson as its deputy commissioner for life and health insurance.  Ms. Murphy and Mr. Johnson previously have held positions within OIR.  The OIR also announced the Ms. Murphy and Mr. Johnson will oversee separate market conduct sections for property and casualty and life and health, respectively.

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

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

Salary Credit Under Review

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): Pennsylvania - 03/22/2017

Truth in Insurance Advertising Over The Internet

Pennsylvania HB 468, P.N. 488 (introduced 2-13-17) targets protecting/helping consumers as they shop for insurance over the Internet.  Based on existing Texas law, this Pennsylvania legislation requires appropriate disclosures and information on a licensee's website in instances where its web page describes coverages available in Pennsylvania or permits consumers to apply for coverage or obtain a quote from an insurer for coverage. The bill also authorizes the Insurance Commissioner to assess certain penalties for violations. For more information on this legislation click here.

William R. Balaban, Esq. - BALABAN & COBLE, (717) 695-2901 , WBalaban@BalabanCobleLaw.com

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

South Carolina Update

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. - YOUNG, CLEMENT, RIVERS, LLP, (843) 724-6631 , mmolony@ycrlaw.com
T. Douglas Concannon, Esq. - YOUNG CLEMENT RIVERS, LLP, (843) 724-6640 , dconcannon@ycrlaw.com

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

Legislation to Enhance Tennessee Captive Laws Introduced

Legislation intended to help maintain Tennessee’s status as a favorable and competitive domicile for captive insurers is being considered by the Tennessee General Assembly as part of the Haslam Administration’s legislative package.  Among other things, the measure (S.B.1190/H.B.302) would authorize domestic pure and protective cell captives to apply for and operate under a letter of dormancy issued by the Tennessee Department of Commerce and Insurance, and permit protected cells to spin off into freestanding pure captives.

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 - 03/22/2017

TDCI Proposes Legislation to Broaden Retaliatory Taxes on Foreign insurers

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 , rledyard@bassberry.com

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

Washington State Update

Washington State’s legislature is in session with little substantive progress on insurance-related bills.  A couple of noteworthy bills have progressed, including: (1) a modification of surplus lines broker licensing to require an accompanying producer license for residents (SHB 1027), and (2) a quest to end “surprise” or “balance” billing where an insured visits a covered hospital to later discover responsibility for [higher priced] services that are outside of the medical insurance network (ESHB 2114). 

A more exciting development comes from the state Supreme Court’s unanimous decision in Perez-Cristantos v. State Farm Fire & Casualty Co., ___P.3rd__, No. 9226-5 (February 2017), whereby the court held there is no independent cause of action for first party bad faith for “mere procedural violations” of the insurance fair claims act.  The result is to narrow first party bad faith claims that otherwise put insurers in jeopardy for attorney’s fees, treble damages, and sometimes, removal of coverage limits.

Steven Beeghly, Esq. - KREGER BEEGHLY PLLC, (206) 618-6110 , sb@kregerbeeghly.com

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

NAIC Work on Big Data

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

NAIC Work on Cybersecurity

A policy advisor at the Wisconsin Office of the Commissioner of Insurance recently reported that the NAIC cybersecurity task force's second draft of an Insurance Data Security Model Law raised several issues, including uniformity among the states, the harm trigger in the definition of a data breach, the definition of personal information, and the role of third party service providers. The task force is working on a third draft, and will continue its bimonthly calls in order to complete its work by the NAIC meeting in April.

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

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

OCI "Technical" Legislation

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 Issues as NAIC President

In terms of specific issues for Wisconsin Commissioner Ted Nickel as President of the NAIC, his Deputy Commissioner recently said that:

•	It is clear that big data and cybersecurity issues are here to stay, so the Commissioner would like to see a major ("letter") committee on this subject.  
•	The Market Actions Working Group (MAWG) and other groups are trying to regularize and avoid redundant market conduct exams, including through a certification program for regulators.
•	The NAIC should look closer at the unclaimed life insurance benefits (death master file, or DMF) issue.  Wisconsin signed on to some early settlements at the request of the insurers, but has become concerned about the fairness of the process.
•	The Federal Insurance Office doesn't have a lot of value, especially since it has now put an agreement with the European Union in place, and its functions could be handled elsewhere in the Treasury Department.
•	Cross border sales of insurance should not put state regulation at risk, as the focus is really on speed-to-market, and other state-based improvements (such as through interstate compacts) that will avoid top-down federal regulation.

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

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

Wisconsin Commissioner's Term as NAIC President

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

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