Alert Edition October 2018

Welcome to the October 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): Florida - 10/07/2018

Florida Appeals Court Authorizes Assignment of Benefits Restrictions in Homeowner Policy

On September 5, 2018 the Fourth District Court of Appeal of the State of Florida rejected a breach of contract suit filed by a restoration contractor against a property insurance company under an assignment of benefits (“AOB”) in a homeowners water damage claim. The homeowners insurance policy had a condition requiring that “[n]o assignment of claim benefits, regardless of whether made before a loss or after a loss, shall be valid without the written consent of all ‘insureds,’ all additional insureds, and all mortgagee(s) named in this policy.” The contractor sued after the insurer denied its AOB claim on the grounds that the contractor failed to secure written authorization from all insureds and the mortgagee. The trial court granted the insurer’s motion to dismiss on the basis that “the Assignment of Benefits fails to comply with the subject policy’s unambiguous condition that claims assignments be executed by all insureds and mortgagees.” The contractor appealed and the Fourth District Court of Appeal affirmed the dismissal, holding that “[t]he contract . . . does not prohibit assignment --- it imposes a condition, requiring the approval of all insureds and the mortgagee.”  The court’s ruling is significant because it contradicts findings issued by a sister court, the Fifth District Court of Appeal, in December 2017, which prohibited similar policy restrictions. The opinion of the Fourth District Court of Appeal can be viewed here.

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

Category(s): Florida - 10/07/2018

Florida OIR Releases 2019 PPACA Health Insurance Plan Rates

On August 28, the Florida Office of Insurance Regulation (OIR) announced the premiums for individual major medical plans will increase by an average of 5.2%.  Federal review of the rate filing has not yet been finalized by the Department of Health and Human Services.  If approved, the increase will take effect January 1, 2019.  The premiums are in compliance with the federal Patient Protection and Affordable Care Act (PPACA).  For more information, visit the Federal Government’s website or OIR’s Federal Health Care Insurance Reform webpage.

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

Category(s): Florida - 10/07/2018

NCCI Recommends Florida Workers’ Comp Rate Decrease

On August 27, the National Council on Compensation Insurance (NCCI) recommended a 13.4% decrease for workers' compensation premiums to the Florida Office of Insurance Regulation (OIR).  The decrease is proposed to take effect January 1, 2019. The filing states that the proposed rate decrease is based on the long-term decline in claim frequency which offsets increases in claim severity and cost increases from the Castellanos and Westphal court cases from 2016.  Policy Year 2017 will be the first full policy year following the Castellanos decision which rendered the attorney's fee provisions of the state's workers' compensation law unconstitutional.  NCCI notes that the full effects of that decision will not fully materialize for several years. NCCI also states that the Castellanos and Westphal decisions are exerting upward pressure on costs in the system and will increase workers' compensation premiums.  You may access the full NCCI report here.

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

Category(s): Florida - 10/07/2018

OIR Approves Changes to Citizens’ Monroe County Coverages

On July 26, Citizens Property Insurance Corporation (Citizens) announced that the Florida Office of Insurance Regulation (OIR) approved changes to the new-business capping factors and some territory relativities for Monroe County, effective September 1, 2018.  The approved changes ensure the rate freeze for Monroe County is maintained as part of 2018 rate order 211627-17. Changes include updates for all Personal Lines policy types excluding the following: (1) Citizens Homeowners 4 — Contents Broad Form (CIT HO-4); (2) Citizens Homeowners 6 — Unit-Owners Form (CIT HO-6); (3) Homeowners 4 — Contents Wind-Only Form (HW-4); (4) Homeowners 6 — Unit-Owners Wind-Only Form (HW-6); and (5) All mobile home policy types. For more information, click here.

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

Category(s): Illinois - 10/07/2018

Governor Rauner Vetoes Legislation

On August 26,2018, Governor Bruce Rauner vetoed a piece of legislation that the Illinois Department of Insurance had proposed. The legislation contained changes to the workers’ compensation insurance line, which was what led to the veto by the governor. The legislation also had included a division bill that would have permitted a company to divide its business into a runoff and ongoing one.

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

Category(s): Kansas - 10/07/2018

The Kansas Insurance Department (“Department”) sent out an e-mail recently reminding TPAs that due to recent revisions to Kansas TPA statutes, any TPAs who held a Kansas TPA license as of March 2017 must submit either a Kansas Non-Resident TPA application

The Kansas Insurance Department (“Department”) sent out an e-mail recently reminding TPAs that due to recent revisions to Kansas TPA statutes, any TPAs who held a Kansas TPA license as of March 2017 must submit either a Kansas Non-Resident TPA application or a Kansas Home State TPA application.  These applications must be submitted by no later than October 15th.  To be eligible for a non-resident TPA license in Kansas, TPAs must hold a home state administrator license in one of eight states that have been determined by the Department to have substantially similar TPA laws as Kansas (Alaska, Delaware, Florida, Idaho, Indiana, Missouri, New Hampshire, and Virginia).  

If the TPA does not hold a home state administrator license in one of those states, then the TPA must apply for a Home State TPA application in Kansas.  TPAs that only administer self-funded ERISA business may qualify for a Certificate of Registration and may convert their present license or Certificate of Registration with the submission of an Application for Certificate of Registration.     

The e-mail also reminded TPAs that the renewal dates for all licensed TPAs have changed in Kansas and is now December 31st, which will be good through December 31, 2020.  Beginning around November 1, 2018, a portal will open on the Department’s website to permit on-line renewal of a TPA’s Certificate of Authority.  If the Certificate of Authority is not renewed on-line by December 31, 2018, it will be cancelled by the Department.  TPAs will still be required to file their annual report by July 1 each year.

Steve Imber, Esq. - POLSINELLI, P.C., (913) 451-8788 , simber@polsinelli.com

Category(s): Louisiana - 10/07/2018

Insurance Persons Convicted of a Felony – Treatment In Louisiana

On July 31, 2018, the Louisiana Department of Insurance (“Department”) issued Advisory Letter 2018-02 giving its thoughts on both state law and federal law dealing with felons involved in the business of insurance. Louisiana law currently prohibits producers from employing in the business or allowing to associate with the business any person convicted of a felony. This statute was amended in the 2018 regular session of the Louisiana legislature to allow an insurance producer to employ in his business or to associate with his business an individual previously convicted of a felony if the producer first obtains the written consent of or a waiver from the Commissioner (Act 299). The Department notes that it is incumbent upon producers to make written request to obtain the consent of or a waiver from the Commissioner under such circumstances. The consent or a waiver is specific to and exclusively in favor the hiring producer to avoid regulatory action by the Commissioner as provided for in the statute.

The Advisory Letter notes that the cited Louisiana statutes operate independently from federal law contained in 18 U.S.C. 1033, as the federal law places the responsibility of obtaining a waiver on individuals who have been convicted of a felony involving dishonesty or a breach of trust. Such individuals are “prohibited persons” and cannot engage in the business of insurance unless they are given written consent to work in the business of insurance by an appropriate insurance regulator in this case, the Commissioner of Insurance. The Department states that such a written consent merely releases the holder of the consent from his or her status as a prohibited person under federal law. Thereafter, whether the holder of the consent is qualified to engage in the business of insurance becomes a matter of state law as it would have been in absence of 18 U.S.C. 1033. The Department closes this analysis by advising that state law requires a hiring producer to obtain the consent of or waiver from the Commissioner for any and all felony convictions of a potential or current employee.

While the definitions of felony under federal law and state law differ somewhat, and the approach differs, the Department’s concluding admonition is that in some situations, both the producer and the convicted felon will be required to obtain the consent of or waiver from the Commissioner. Even though a waiver has been granted under 18 U.S.C. 1033 by the Commissioner, the failure of a producer to obtain the consent or waiver in compliance with Louisiana state law (Act 299) may result in regulatory action against the producer.

Affected producers, those with current employees who have felony convictions, will have until December 31, 2018 to come into compliance with current state law, as amended by Act 299, but any employee hired after August 1, 2018, is immediately subject to that law as described herein.

Van R. Mayhall, Jr., Esq. - BREAZEALE, SACHSE & WILSON, L.L.P., (225) 381-8009 , van.mayhall.jr@bswllp.com
Sunny Mayhall West, Esq. - BREAZEALE, SACHSE & WILSON, L.L.P., (225) 381-8049 , sunny.west@bswllp.com
Van R. Mayhall, III, Esq. - BREAZEALE, SACHSE & WILSON, L.L.P., (225) 381-3169 , van.mayhall.iii@bswllp.com

Category(s): Oklahoma - 10/07/2018

OK Enacts Insurance Business Transfer Act

Oklahoma recently enacted the Insurance Business Transfer Act permitting an insurer or reinsurer, through a court supervised process, to transfer insurance business to an Oklahoma-domiciled insurer without obtaining affirmative consent of the insureds, and applies to a broad variety of lines of business. On August 21, 2018, the Oklahoma Insurance Department held a conference to discuss the legislation, featuring both Governor Mary Fallin and the Oklahoma DOI.

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

Category(s): Puerto Rico - 10/07/2018

Chapter 46 of Puerto Rico Insurance Code Amended

Chapter 46 of the Puerto Rico Insurance Code, 26 L.P.R.A. §4601 et seq, was recently amended through Act No. 150 of July 22, 2018, primarily to allow credit for reinsurance to cedents contracting with “certified reinsurers”-i.e. foreign unauthorized reinsurers hailing from a “qualified jurisdiction”, as defined therein and in consideration of, among other things, the NAIC’s list of qualified jurisdictions, which, as of January 1st, 2017, included Bermuda, France, Germany, Ireland, Japan, Switzerland, and the United Kingdom. Secondly, Chapter 46 was amended to establish a prior notice mechanism for domestic insurers (i) whose reinsurance recoverables from a single reinsurer or group of affiliated reinsurers, exceed fifty percent (50%) of surplus, or (ii) who cede more than twenty percent (20%) of gross written premiums to a single reinsurer or group of affiliated reinsurers.

C. Ignacio Matos, Esq. - Rexach & Pico, CSP, (787) 723-8520 , imatos@rexachpico.com

Category(s): Puerto Rico - 10/07/2018

Governor Rosselló Proposes Improved Catastrophe Response

Puerto Rico Gov. Ricardo Rosselló submitted several proposals for the legislature’s consideration to improve the response of insurance companies to their policyholders after a catastrophe. The proposed measures include: (i) a mandatory appraisal process through an arbitrator for claims disputes, (ii) in the event of a declared State emergency, requiring partial or advanced payment to cover undisputed items and eliminating the period policyholders have to make an insurance claim, (iii) allowing qualifying entities to place certain commercial risks with surplus lines insurers, or those that cover risks that are typically declined by other insurance carriers, without the requirement to circulate the risk among insurers of the Island before turning to a surplus lines insurer, (iv) creation of “low-cost coverage with limited benefits” programs (i.e. microinsurance), (v) creation of a specialized courtrooms prepared to expeditiously view insurance cases regarding common legal disputes such as the existence of coverage; the interpretation of the terms or conditions of the policy -including applicable limits-; review of final resolution of the claim; (vi) additional penalties such as payment of all legal fees, damages or losses caused for cases where the insurer has not proceeded in good faith or where the handling of the claim was determined to be unreasonable.

C. Ignacio Matos, Esq. - Rexach & Pico, CSP, (787) 723-8520 , imatos@rexachpico.com

Category(s): Puerto Rico - 10/07/2018

Puerto Rico Insurance Code Amended Act No. 151

Act No. 151 of July 22, 2018 amended Chapter 21 of the Puerto Rico Insurance Code, 26 L.P.R.A. §2101 et seq, governing service contract providers to conform the existing legal framework for service contracts with certain aspects of the Service Contract Model Act adopted by the NAIC.

C. Ignacio Matos, Esq. - Rexach & Pico, CSP, (787) 723-8520 , imatos@rexachpico.com

Category(s): Tennessee - 10/08/2018

TDCI Amends and Restates Regulation on Minimum Health Insurance Reserves

TDCI has amended and restated its regulation establishing minimum reserve standards for individual and group health insurance contracts to require that such reserves track the NAIC Valuation Manual in effect as of the time of the reserve review.  The revised Regulation 69 (Chapter 0780-01-69) will become effective on October 17, 2018.

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 - 10/08/2018

TDCI Appoints New Director of Financial Analysis

Trey Hancock has been named Director of Financial Analysis with the Insurance Division of the Tennessee Department of Commerce and Insurance.  Prior to leaving TDCI three years ago to join Aetna, Inc., Mr. Hancock served as the Assistant Director.

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 - 10/08/2018

TDCI Issues Bulletin to Insurance Producers on Deceptive Names

On August 31, Tennessee Commissioner of Commerce and Insurance Julie Mix McPeak issued a bulletin advising producers that the use of “Medicare,” “Medicaid,” “Social Security,” or “TennCare” in advertising or business names is prohibited unless the producer includes a “clear and prominent disclaimer”  that the business is not authorized by, affiliated with or endorsed by a government agency.  Use of any of the four references without such disclosure constitutes an unfair and deceptive trade practice under Tenn. Code Ann. Section 56-8-104.

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 - 10/08/2018

TDCI Posts Final CGAD Regulation

Following a July 10 public hearing, the Tennessee Department of Commerce and Insurance has finalized and posted its rules to implement the Corporate Governance Annual Disclosure Act (Section 8 of Public Chapter 873).  The new Regulation 35 (Chapter 0780-01-35) will become effective on November 18, 2018.

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 - 10/07/2018

Virginia Bureau of Insurance Amends Rules Governing Claims-Made Liability Insurance Policies

The Virginia State Corporation Commission’s Bureau of Insurance has amended the rules governing claims-made liability insurance policies (the “Rules”) (14 VAC 5-335-10 et seq.).

The amendments to the Rules update the Rules to reflect current positions and practices for filing and approval and are intended to clarify and modernize the Rules to create more consistency with the regulatory requirements of other states.   The amended Rules clarify and define that the Rules do not apply to non-admitted insurers or to incidental claims-made liability insurance, distinguish between a basic extended reporting period and a supplemental extended reporting period and identify certain standards for each, clarify and simplify provisions to offer a supplemental extended reporting period and the effective date for such period, add requirements for the insurer to provide loss information to the insured, and clarify certain prohibitions and minimum standards.

The amended Rules were effective October 1, 2018.

Scott J. Sorkin, Esq. - BLAND & SORKIN P.C., (804) 747-6667 x12 , ssorkin@blandsorkin.com

Recent Editions

Alerts for October 2018

Posted on 10/7/2018

Alerts for July 2018

Posted on 7/30/2018

Alerts for May 2018

Posted on 5/25/2018

Alerts for March 2018

Posted on 3/26/2018

Alerts for January 2018

Posted on 1/31/2018