Alert Edition January 2018

Welcome to the January 2018 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): Arizona - 02/08/2018

Arizona Interim Insurance Director Resigns

On January 11, 2018, Arizona Interim Insurance Director Leslie Hess resigned her position effective as of the close of business on January 26. The Governor’s Office has not yet named a replacement for Ms. Hess but is expected to make an announcement in the near future.

S. David Childers, Esq. - KUTAK ROCK LLP, (480) 429-4880 , David.Childers@KutakRock.com

Category(s): Florida - 02/08/2018

Florida No-fault Insurance Repeal Bill Revived in the Senate

The Florida Senate revived Senate Bill 150, which could potentially end the requirement that drivers in Florida secure $10,000 in mandatory personal injury protection coverage, also known as “PIP.”  The bill would repeal the no-fault law and would replace the PIP coverage mandate with a medical payments coverage mandate of $5,000.  The proposal must make it through two additional committees before reaching the Senate floor.  For additional information, please refer to the Florida Senate’s webpage.

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

Category(s): Florida - 02/08/2018

Florida OIR Issues Orders Establishing 2018 Rates for Citizens

On December 6, 2017, the Florida Office of Insurance Regulation (OIR) established the 2018 personal and commercial property insurance rates for Citizens Property Insurance Corporation (Citizens).  OIR’s rate filing review process for Citizens was delayed due to Hurricane Irma and the subsequent Emergency Order OIR issued to assist consumers recovering from that storm.  In developing the new rates, OIR considered testimony it received during a public rate hearing it held on August 23, 2017, in Miami, Florida, and also considered comments it received via email.  The Orders establishing the new rates can be accessed here: Personal Property Order, Commercial Property Order.  The effective date (for both new and renewal rates) is no earlier than May 1, 2018.  For additional information, please refer to the OIR's Press Release.

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

Category(s): Florida - 02/08/2018

Florida Supreme Court Holds Construction Defect Notice May Trigger Duty to Defend

On December 14th, 2017, the Florida Supreme Court issued an opinion in Altman Contractors, Inc. v. Crum & Forster Specialty Insurance Company that could have a lasting impact on duty to defend cases in Florida.  The case involved Florida’s Construction Defect Act, Chapter 558, Florida Statutes, which gives parties an opportunity to resolve claims without resorting to litigation.  Chapter 558 lays out a process for the resolution of construction defect claims prior to litigation (a condition precedent to filing suit on such claims in Florida).  In resolving a dispute between a contractor and its general liability insurer, the Court held that the Chapter 558 process did not qualify as a “civil proceeding” under a commercial general liability policy because participation was not mandatory and there was no adjudication.  However, the Court ruled the Chapter 558 process qualified as a form of “alternative dispute resolution,” noting the process was intended to allow parties an opportunity to reach a settlement or perform repairs in lieu of a lawsuit.  Accordingly, as a form of “alternative dispute resolution,” the Court held the Chapter 558 process meets the definition of a “suit” under the policies.  For additional information, please refer to the Court’s Opinion.

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

Category(s): Florida - 02/08/2018

Second AOB Bill Filed in the Florida Senate

On December 7, 2017, Florida Senator Greg Steube introduced Senate Bill 1168, which would amend certain sections of the Florida Insurance Code to provide, in pertinent part, that certain attorney fees and costs paid by property insurers may not be included in the property insurer’s rate base and may not be used to justify a rate increase or rate change.  The bill would further amend the Code to provide that personal lines residential and commercial residential property insurance policies may not restrict the assignment of post-loss benefit.  Importantly, under the new statutory language proposed by the bill, an agreement to assign post-loss benefits of a residential homeowner’s property insurance is not valid unless specified conditions are met.  For additional information, please refer to the Florida Senate’s webpage.

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

Category(s): Florida - 02/08/2018

U.S. Court of Appeals for the Eleventh Circuit Holds Bad Faith Insurance Claims Have 5-Year Statute of Limitations

The United States Court of Appeals for the Eleventh Circuit has revived a $2.7 million bad faith claim against an auto insurer for failing to settle an insurance dispute after determining a lower court applied the wrong statute of limitations to bar the claim.  The Court’s per curium order held that bad-faith claims filed against an insurer in Florida qualify as contract claims, which have a five-year statute of limitations in Florida.

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

Category(s): Georgia - 02/08/2018

Allstate Insurance Company v. Airport Mini Mall LLC, WL42800628 (N.D. Ga. 2017)

Allstate Insurance Company v. Airport Mini Mall LLC, WL42800628 (N.D. Ga. 2017)

On September 26, 2017, the United States District Court for the Northern District of Georgia ruled that Airport Mini Mall could not avoid an Allstate Insurance Company’s commercial general liability insurance policy’s notice requirement based on Airport Mini Mall’s subjective belief that it was not liable to third party claimants and that cease and desist letters sent to Airport Mini Mall were sufficient to trigger the insured’s duty to provide notice to Allstate.

Allstate had issued a commercial general liability insurance policy to Airport Mini Mall.  The mall was raided by the Department of Homeland Security, and counterfeit items were seized and some of the mall’s tenants were arrested.  Subsequent to the raid, Airport Mini Mall received cease and desist letters from a retailer alleging trademark violations related to the sale of sunglasses at the mall and then filed a lawsuit against the mall alleging contributory trademark violations by Airport Mini Mall.  Airport Mini Mall did not notify Allstate of the lawsuit until almost two months after it had been filed.  Allstate sought a declaratory judgment that Airport Mini Mall had failed to comply with the notice provisions contained in the commercial general liability insurance policy issued to Airport Mini Mall which required it to notify Allstate of an occurrence or an offense which may lead to a claim “as soon as practicable.”  Both parties filed motions for summary judgment in the declaratory judgment action.  Allstate argued that Airport Mini Mall’s delay in providing notice to Allstate had prejudiced its ability to investigate the claim, consider pre-suit settlement and adequately prepare a defense. Airport Mini Mall argued that it did not notify Allstate of the claim until after the lawsuit was filed, because it did not believe it could be held responsible for the sale of counterfeit goods by its tenants.

The United States District Court for the Northern District of Georgia granted Allstate’s motion for summary judgment ruling that the insured’s failure to comply with a proper notice provision bars insurance coverage under Georgia law, because the notice provision is a proper condition precedent to coverage.  The District Court further noted that Georgia courts have interpreted “as soon as practicable” in notice provisions as requiring immediate notice based on the reasonable diligence of the insured.  Finally, the District Court ruled that an insured cannot avoid the notice provisions in an insurance policy based upon the subjective belief by the insured that it may not be liable for a particular claim; and that in the instant case, the cease and desist letters provided the insured with sufficient information to trigger its duty to provide notice to Allstate.

Brian T. Casey, Esq. - LOCKE LORD LLP, (404) 870-4638 , bcasey@lockelord.com
David M. Green, Esq. - LOCKE LORD LLP, (404) 870-4657 , david.green@lockelord.com

Category(s): Georgia - 02/08/2018

Gloria Silva v. Liberty Mutual Fire Insurance Company. Civil Case A17A1503 (Ga. App. 2017)

Gloria Silva v. Liberty Mutual Fire Insurance Company.  Civil Case A17A1503 (Ga. App. 2017)

On November 14, 2017, the Georgia Court of Appeals affirmed the trial court’s grant of summary judgment to Liberty Mutual Fire Insurance Fire Insurance Company on Gloria Silva’s uninsured/ underinsured motorist claim which arose out of Silva’s personal injury lawsuit to recover damages for her injuries sustained in an automobile accident with James Glover on September 28, 2010.  Silva filed a personal injury lawsuit against Glover on September 21, 2012, but dismissed this suit and re-filed a lawsuit against Glover on September 20, 2013.  Glover was insured for liability insurance coverage with Allstate Insurance Company with policy limits of $50,000 per person/$100,00 per accident.  On March 27, 2015, Silva settled her lawsuit against Glover for $36,950 which represented the remaining limits of liability coverage available under Glover’ insurance policy due to prior settlements that Glover had reached with other individuals involved in the accident.

On May 4, 2015, Silva amended her complaint to include a claim that the automobile accident with Glover was also covered by her uninsured/underinsured motorist coverage with Liberty Mutual.  Liberty Mutual answered Silva’s complaint for uninsured/underinsured motorist coverage and raised the defense that Silva had not properly complied with the notice provisions contained in her policy.  Liberty Mutual moved for summary judgment alleging that Silva did not notify Liberty Mutual of the lawsuit until 18 months after she had re-filed her suit against Glover and that, as a matter of law, Silva had failed to comply with the notice provisions contained in her policy, which were a condition precedent to coverage.  The trial court agreed and granted Liberty Mutual’s motion for summary judgment, ruling that Silva had failed to promptly notify Liberty Mutual of the accident or the personal injury lawsuit; and therefore, Silva forfeited her uninsured/underinsured motorist coverage as a matter of law.

The Georgia Court of Appeals affirmed the trial court’s grant of summary judgment to Liberty Mutual, ruling that Silva failed to provide prompt notice to Liberty Mutual of the accident and lawsuit.  The Georgia Court of Appeals further noted that Silva’s only excuse for the delay,  that she and her counsel were not aware that she would need her uninsured/underinsured motorist coverage until learning that Silva’s damages would exceed Glover’s available liability insurance coverage, was not a valid excuse for the nearly four year delay from the date of the accident in providing notice to Liberty Mutual.

Brian T. Casey, Esq. - LOCKE LORD LLP, (404) 870-4638 , bcasey@lockelord.com
David M. Green, Esq. - LOCKE LORD LLP, (404) 870-4657 , david.green@lockelord.com

Category(s): Georgia - 02/08/2018

Hughes v. First Acceptance Insurance Company of Georgia, Inc. Civil Case A17A0735 (Ga. App. 2017)

Hughes v. First Acceptance Insurance Company of Georgia, Inc.  Civil Case A17A0735 (Ga. App. 2017)

On December 1, 2017, the Georgia Court of Appeals reversed summary judgment granted to First Acceptance’s claims, but affirmed the denial of summary judgment to Robert Hughes, as administrator of Ronald Jackson’s estate, on Hughes’ claims alleging First Acceptance failed to properly settle insurance claims, because genuine issues of material fact remained.  In addition the Court affirmed the grant of summary judgment to First Acceptance on Hughes’ claims for bad faith and punitive damages.

The lawsuit arose out of an automobile accident caused by Jackson which resulted in Jackson’s death and injuries to Julie An and her minor child, Jina Hong.  Jackson had an automobile insurance policy with First Acceptance with liability insurance limits of $25,000 per person and $50,000 per accident.  Counsel for An and Hong contacted First Acceptance and sent two letters to counsel for First Acceptance.  Forty-one days after sending the letters, counsel for An and Hong asserted to counsel for First Acceptance that the letters had constituted an offer to settle their claims and set a thirty day deadline for response.  Counsel for An and Hong then filed a lawsuit against Jackson’s estate and sent counsel for First Acceptance another letter withdrawing the settlement offer.  First Acceptance later offered to settle both An and Hong’s claims for $50,000, but counsel for An and Hong rejected the offer.  The lawsuit proceeded to a jury trial and a final judgment was entered in favor of An and Hong, including a jury award of $5,334,200 for Hong’s injuries.  Hughes then filed a lawsuit against First Acceptance claiming that First Acceptance had negligently or in bad faith failed to settle Hong’s claim.  First Acceptance had tendered $25,000 as payment for Hong’s judgment; and thus, Hughes sought to recover the remaining unpaid portion of the judgment, plus punitive damages and attorney’s fees from First Acceptance.

The Georgia Court of Appeals found that the trial court erred in granting summary judgment to First Acceptance on Hughes’ claim for failure to settle.  Specifically, the Georgia Court of Appeals determined that First Acceptance had knowledge of the letters from An and Hong’s counsel and genuine issues of material fact existed as to whether Hong had offered to settle her claims within First Acceptance’s insurance policy limits.  The Georgia Court of Appeals further determined that genuine issues of material fact existed as to whether First Acceptance acted reasonably in responding to such offer by Hong to settle.  However, the Georgia Court of Appeals determined that the trial court properly granted First Acceptance’s motion for summary judgment on Hughes’ claim for punitive damages and attorney’s fees on the grounds that Hughes failed to present any evidence of bad faith or willful or wanton conduct by First Acceptance.  Finally, the Georgia Court of Appeals confirmed the denial of Hughes’ motion for summary judgement on the failure to settle claim, finding that genuine issues of material fact existed as to whether there was a time limited settlement offer and whether First Acceptance acted as a reasonably prudent insurer would in responding to any such offer.

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

Category(s): Georgia - 02/08/2018

State Audit of Georgia Insurance Department

The Georgia Department of Audits and Accounts in January 2018 published its audit report for its audit of the Georgia Insurance Department (“GA DOI”) as a result of the GA DOI’s budget shortfall that occurred in its 2017 fiscal year (July 1, 2016 to June 30, 2017.  As a result of this shortfall, the GA DOI remedied that by downsizing its staff by 12 employees and furloughing 212 employees for four days.  According to audit report, the GA DOI experienced overspending because it had internally funded employee pay increases and hired additional staff, even though the GA DOI had collected slightly over $1 billion in revenue, during that fiscal year.  In addition, the audit report recommends that the Georgia Assembly consider transferring the regulation of industrial loans from the GA DOI to the Georgia Department of Banking and Finance.

Brian T. Casey, Esq. - LOCKE LORD LLP, (404) 870-4638 , bcasey@lockelord.com
David M. Green, Esq. - LOCKE LORD LLP, (404) 870-4657 , david.green@lockelord.com

Category(s): Illinois - 02/08/2018

Illinois DOI Asks Court of Appeals to Require CMS to Honor Obligations

Illinois DOI Director Jennifer Hammer recently asked the United States Court of Appeals for the Federal Circuit in Washington D.C. to require the federal Centers for Medicare and Medicaid Services (CMS) to honor its statutory and contractual obligations to Land of Lincoln Mutual Health Insurance Company (LLH) under the federal Risk Corridor Program. LLH is in liquidation in part due to the failure of CMS to pay such obligations.

Daniel A. Cotter, Esq. - LATIMER LEVAY FYOCK LLC, (312) 422-8000 , dcotter@llflegal.com

Category(s): NAIC, Tennessee - 02/08/2018

TDCI Commissioner McPeak Assumes NAIC Presidency

Effective January 1st, Tennessee Commissioner of Commerce and Insurance Julie Mix McPeak became President of the National Association of Insurance Commissioners (NAIC), following her election in December during the NAIC Fall Meeting in Hawaii.  Commissioner McPeak is the fifth Tennessee Commissioner to serve as President of the NAIC, and the first from the Volunteer State since 1958.

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): Nebraska - 02/08/2018

Matt Holman has been appointed General Counsel of the Nebraska Department of Insurance

Matt Holman has been appointed General Counsel of the Nebraska Department of Insurance. He succeeds Christine Neighbors who resigned to join Ameritas.

Lawrence F. Harr, Esq. - LAMSON, DUGAN & MURRAY, LLP, (402) 397-7300 , lharr@ldmlaw.com

Category(s): New York - 02/08/2018

DFS Issues Statement Delaying Implementation of Part 228 of Title 11

A new Part 228 of Title 11 of the Official Compilation of Codes, Rules, and Regulations of the State of New York (Insurance Regulation 208 - TITLE INSURANCE RATES, EXPENSES AND CHARGES) was scheduled to take effect on December 18, 2017. However, the following day, DFS issued the following statement delaying implementation of Section 228.2 of the regulation:

 Given the important consumer protections and impact of the necessary reforms of the title insurance industry that DFS has implemented pursuant to Regulation 208, DFS recognizes that a longer implementation period may be necessary to ensure full compliance. Accordingly, DFS will commence enforcement of Section 228.2, Prohibition on Inducements for Future Title Insurance Business on February 1, 2018. 

Maxine Blake, Esq. - Maxine Blake, Esq., (917) 836-1308 , mblake@mblakelawfirm.com

Category(s): New York - 02/08/2018

New York Department of Financial Services (DFS) Superintendent Appoints State Insurance Advisory Board (SIAB)

On December 12, 2017, New York DFS Superintendent Maria T. Vullo announced the ten appointees who will constitute New York’s first State Insurance Advisory Board (SIAB).  See DFS Press release: Superintendent Maria T. Vullo Announces Formation of New State Insurance Advisory Board. The Board consists of seven representatives of domestic insurers, one insurance producer, and two consumer representatives. Id.; New York Insurance Law § 201. 

 The initial Assembly bill, from which NYIL § 201 is derived, called for a seventeen-person board that would have included “five representatives of foreign insurance companies,” and one representative each for consumers and producers.   Governor Andrew Cuomo intervened and the Chair of the Senate Insurance Committee proposed several amendments to the Assembly bill, including the elimination of representatives of foreign insurers doing business in New York State, a reduction in the required number of annual meetings, and other changes, including a change that allows the SIAB  to comment on proposed regulations only at the Superintendent’s request.

James Veach, Esq., (201) 927-0759 , jveach@moundcotton.com

Category(s): New York - 02/08/2018

New York DFS Proposes Amendments to its Annuity Suitability Rule

New York’s Department of Financial Services is proposing to amend Suitability in Annuity Transactions, 11 NYCR 224 (the Annuity Suitability Rule). Proposed 1st Amendment of Regulation 187 (11 NYCRR 224).  On December 27, 2017, an amendment to the Suitability Rule was published in the New York State Register (the Amendment). The Amendment  would rename the Annuity Suitability Rule to the Suitability in Life Insurance and Annuity Transactions (the Life & Annuity Suitability Rule) and would impose a host of new requirements with which insurers and producers would be required to comply. The Amendment is broader in application than the Department of Labor’s (DOL's) fiduciary investment advice rule (Fiduciary Rule) , requires compensation  disclosures which are already required under New York State law, and creation of a best interest standard requiring a prudent person standard of care and suitability of the transaction, similar to the NAIC’s  proposed Suitability and Best Interest Standard of Conduct in Annuity Transactions Model Regulation’s (NAIC’s Suitability and Best Interest Model) requirement.  Despite the breadth of the proposal, a multitude of questions remain unanswered with respect to interpretation of the Annuity Suitability Rule.

Cynthia J. Borrelli, Esq. - BRESSLER, AMERY & ROSS, P.C., (973) 514-1200 , cborrelli@bressler.com

Category(s): Tennessee - 02/08/2018

TDCI Clarifies Notice Requirements for Payment of Dividends

The Tennessee Department of Commerce and Insurance (TDCI) has issued a Bulletin (17-03) requiring domestic stock insurance companies to provide both electronic and hard copy notice to TDCI’s Financial Affairs Section prior to payment of ordinary and extraordinary dividends.  The dual notice requirement is effective as of January 1, 2018, with the electronic notice to be submitted via email to NoticeTo.TDCI@tn.gov .

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 - 02/08/2018

TDCI Issues Guidance on Forced Bundling of Umbrella and Personal Lines Policies

The Tennessee Department of Commerce and Insurance (TDCI) has issued guidance on the forced bundling of personal lines policies and umbrella policies by property and casualty insurers.  Pursuant to Bulletin 17-02, TDCI’s position is that the required bundling of a personal lines policy with an umbrella policy is permissible and does not constitute an unfair or deceptive act or practice; however, an insurer may not require a consumer or insured to apply for an umbrella policy in order to obtain or renew coverage under a personal lines policy.

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): Virginia - 02/08/2018

Scott White Appointed Virginia Commissioner of Insurance

Scott White, formerly Deputy General Counsel—Financial Services of the Virginia State Corporation Commission, was appointed to serve as the Virginia Commissioner of Insurance on January 1, 2018, replacing Commissioner Jackie Cunningham, who retired.  Commissioner White, who has nearly 20 years of experience at the Commission, is expected to maintain continuity but also bring change to the Virginia Bureau of Insurance, which is the largest division of the Commission.  Commissioner White brings extensive experience in navigating the changing health insurance landscape, while also having a broader understanding of financial services, given his previous work with the banking and securities divisions at the Commission.  Commissioner White, educated at the University of Virginia and University of Missouri School of Law, will lead the Bureau’s legislative efforts at the Virginia General Assembly, which commenced on January 10, 2018.

Duke de Haas, Esq. - Allianz Global Assistance, (804) 281-6707 , duke.dehaas@allianzassistance.com

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