Alert Edition January 2019

Welcome to the January 2019 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 - 01/08/2019

DFS Publishes 2019 Regulatory Plan

On October 1, the Department of Financial Services (DFS) published its 2019 regulatory plan including new laws. The Bureau of Insurance Fraud and a Bureau of Workers’ Compensation Fraud was created in HB 1073 / SB 1292 and allows DFS to disclose personal information of injured employees to contracted DFS vendors to carry out workers’ compensation claims. Within the new budget, DFS was awarded $210,000 to cover attorney fees to combat insurance fraud in Miami-Dade County, where property insurance fraud is prevalent. HB 465 eliminates the mandate for insurance companies to mediate Assignment of Benefits (AOB) claims.

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

Category(s): Florida - 01/08/2019

DOH Issues Notice of Emergency Rule to Waive Vital Records Fees for Hurricane Michael Victims

On October 22, the Department of Health (DOH) issued a notice of emergency for Rule 64ER18-1, Waiver of Fees for Vital Records - Hurricane Michael.  This is in response to Governor Scott issuing Executive Order 18-276 directing disaster response for Florida residents.  The emergency rule provides for the waiver of certain vital records fees set forth in Chapter 64V-1, F.A.C. for people in Bay, Calhoun, Franklin, Gadsden, Gulf, Holmes, Jackson, Leon, Liberty, Taylor, Washington, and Wakulla counties.  This rule takes effect upon filing with the Department of State.  Questions can be directed to Ken Jones, State Registrar, Bureau of Vital Statistics, at 904-359-6900, extension 1001, or Kathleen Patton, Client Services Manager, at extension 1004, or you can email  VitalStats@flhealth.gov.

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

Category(s): Florida - 01/08/2019

Florida Supreme Court May Hear AOB Dispute

The debate over Assignment of Benefits (AOB) in Florida has made its way to the State’s highest court.  On Sept. 5, 2018, Florida's Fourth District Court of Appeal (DCA) ruled that a provision in an insurer’s policy placing conditions on AOBs was not prohibited.  The court disagreed with the December 2017 decision of the Fifth DCA prohibiting any such conditions and certified a conflict which has made its way to the Florida Supreme Court.  The Fourth DCA disagreed with its sister court and found that a homeowner's insurance policy may contain a restriction requiring the consent of all insureds and the mortgagees before a valid assignment of benefits.  Specifically, it found that, unlike prior case law which merely prohibited assignment of benefit restrictions based on the insurer's consent, an assignment restriction that required the consent of all insureds and all mortgagees named in the policy was not prohibited because the insureds and mortgagees have a vested interest to ensure that a reputable third-party contractor perform repairs on the home. The Florida Supreme Court has not yet decided whether to hear the case.  A copy of the decision of the Fourth DCA can be view here.

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

Category(s): Florida - 01/08/2019

Governor Issues Consumer Protection Executive Order

On October 15, Governor Rick Scott directed Florida Insurance Commissioner David Altmaier to take every action authorized pursuant to Executive Order 18-276  to provide additional protections to support recovery efforts in the areas of the state impacted by Hurricane Michael.  Specifically, the Governor directed Commissioner Altmaier to take certain actions to provide additional protections for Florida policyholders in the impacted area.

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

Category(s): Florida - 01/08/2019

OIR Approves 13.8% Decrease to Florida's Workers' Compensation Insurance Rates

On November 8, Commissioner David Altmaier issued a Final Order granting approval to the National Council on Compensation Insurance (NCCI) for a statewide overall rate level decrease of 13.8 percent. This applies to both new and renewal workers' compensation insurance policies effective in Florida as of January 1, 2019. The approval is a result of the November 7 amended rate file submission. For more information, the full press release can be found here.

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

Category(s): Florida - 01/08/2019

OIR Issues Insurance Emergency Order

On October 15, at the direction of Governor Scott, Insurance Commissioner David Altmaier issued an Emergency Order suspending and activating certain insurance rules and statutes for the health, safety, and welfare of Florida's policyholders. Among other provisions, the Order provides an additional 90 days to policyholders to supply information to their insurance company; prohibits insurance companies from canceling or non-renewing policies covering residential properties damaged by the hurricane for at least 90 days; and freezes any and all efforts to increase rates on policyholders for 90 days.  The Order can be found here.

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

Category(s): Georgia - 01/07/2019

Georgia Insurance Commissioner Race Results

Jim Beck (R) won the election for Georgia Insurance Commissioner.  Mr. Beck will succeed Commissioner Ralph Hudgens, who retires in January 2019.  Mr. Beck’s priorities will be include working to make a free-market centered health system, double the penalties on insurance companies guilty of victimizing seniors and protect consumers against skyrocketing automobile insurance rates.

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

Category(s): Georgia - 01/10/2019

Georgia Midterm Election Results

Georgia is one of a minority of states that elects its insurance commissioner every four years. The three candidates for the 2018 race for Georgia’s Insurance Commissioner were Jim Beck (Republican), a former Deputy Insurance Commissioner, Janice Laws (Democrat), who is an insurance agent, and Donnie Foster (Libertarian), who is a businessman and a former sheriff’s deputy.  The vote tallies of Beck and Laws were extremely close with Beck polling 50.4%, Laws 46.9%. Foster garnered 2.6%. In the end, Beck was declared the winner of this race. The Governor’s race was also very tight with Brian Kemp (Republican) holding a narrow lead over Stacey Adams (Democrat) with slightly 50.3% of the votes cast. As was the case with the Insurance Commissioner’s race, a Libertarian candidate was on the ballot and attracted about 1% of the vote. While controversy ensued for several weeks following election day as to who won the Governor’s race, Kemp eventually won this race. Both houses of the state legislature remain in Republican control. National Casualty Company v. Georgia School Boards Association Risk Management Fund.  Case No. S18Q0757 (Ga. Supreme Ct. August 14, 2018). On August 14, 2018, the Georgia Supreme Court determined that neither Georgia law nor public policy considerations forbid commercial insurance coverage excess to coverage provided by pooled risk funds established by boards of education under O.C.G.A. §20-2-2001 et seq.   National Casualty Company and a risk fund established by the George School Boards Association (the “Risk Fund”) provided overlapping liability insurance coverage to members of a Georgia professional association of teachers and administrators. National Casualty’s insurance policies provided that National's insurance coverage was excess if the insured had any other insurance coverage, including pooled risk funds established by school boards or other educational entities. The Risk Fund’s coverage agreements also limited coverage where the insured had other coverage. Consequently, a conflict between the National Casualty insurance policy and the Risk Fund’s coverage agreements existed. National Casualty refused to defend or indemnify several insureds named in lawsuits until the Risk Fund's coverage was exhausted. The Risk Fund sued in a Georgia federal district court, seeking declaratory relief. Initially, the district court found in the Risk Fund's favor and ruled that National Casualty should share defense and indemnity coverage for the insureds’ lawsuits with the Risk Fund. The district court reasoned, under an established rule of Georgia law, that irreconcilable coverage clauses mandated shared defense and indemnity coverage. The Risk Fund sought reconsideration, arguing that, as a matter of law and policy, commercial insurers could not provide coverage excess to that provided by risk funds established by state school boards under O.C.G.A. §20-2-2001. The trial court asked the Georgia Supreme Court to resolve the issue. The Georgia Supreme Court ruled that National Casualty had charged a premium to the Risk Fund based upon a contractual term that its insurance policy was excess above any other source of insurance or indemnity, including, as in this case, any state risk management pools or self-insurance program and that such excess insurance was not prohibited under applicable Georgia law. The Georgia Supreme Court further concluded that applying National Casualty’s insurance coverage excess to that provided by the Risk Fund was not void as against any public policy as any public policy concerns were considered and addressed by the Georgia legislature when it enacted O.C.G.A. §20-2-2001 et seq. Fulton County School District v. Jenkins, Case No. A180991 (Ga. Ct. App. October 1, 2018). On October 1, 2018, the Georgia Court of Appeals determined that the Fulton County School District (“FCSD”) had not waived sovereign immunity to the extent that it had purchased liability insurance coverage.  In the underlying action, Loretta Jenkins, the natural grandmother of a minor child, filed a negligence action against the Fulton County School District (FCSD) on the child's behalf. Jenkins's grandchild, a special needs student, boarded a school bus but failed to exit when the bus arrived at school and remained on the bus while it was parked throughout the evening. Jenkins alleged that the child suffered physical and mental harm and trauma from being locked in the bus for an extended time. FCSD answered the complaint and asserted affirmative defenses, including sovereign immunity. FCSD also moved to dismiss the complaint on sovereign immunity grounds. In reply, Jenkins filed an amended complaint with arguments that O.C.G.A §20-2-1090 requires school districts to carry insurance and that O.C.G.A §33-24-51(b) and other statutes waive sovereign immunity to the extent of that insurance coverage. The trial court concluded that sovereign immunity had been waived. It then granted FCSD's request for an immediate review and the court granted FCSD's application for an interlocutory appeal. The Georgia Court of Appeals determined that while O.C.G.A §20-2-1090 requires FCSD to maintain liability insurance it makes no mention of sovereign immunity. Consequently, the Georgia Court of Appeals concluded that O.C.G.A. §20-2-1090 similarly does not provide for a waiver of sovereign immunity. The court distinguished O.C.G.A §33-24-51 which expressly provides for a waiver of sovereign immunity when the state purchases insurance to cover injuries associated with the ownership, maintenance, and operation of motor vehicles. The Georgia Court of Appeals further reasoned that the state legislature’s omission of similar express waiver language in O.C.G.A. §20-2-1090 indicated the legislature's intent to retain sovereign immunity in matters covered by that statute. National Union Fire Insurance Company of Pittsburgh v. Scapa Dryer Fabrics Inc., Case No. A18A1173 (Ga. Ct. App. October 26, 2018). On October 26, 2018 the Georgia Court of Appeals ruled that the definition of “Ultimate Net Loss” in multiple general liability insurance policies issued by National Fire Union Insurance Company of Pittsburgh (“NFU”) to Scapa Dryer Fabrics (“Scapa”) was ambiguous and that defense costs were not included in “Ultimate Net Loss.” From 1983 to 1987, Scapa purchased multiple general liability insurance policies to cover sums that it would be obligated to pay as a result of property damage or bodily injury. Those policies obligated the insurer to reimburse Scapa's litigation costs. The policy limit, as amended by endorsements, was $7.2 million for losses resulting from one occurrence. Another endorsement included a non-cumulative provision. Scapa then purchased multiple insurance renewals that amended the policies' liability limitations. In 2014, the insurer's administrator informed Scapa that it had almost exhausted the $7.2 million policy limit that was established under certain of the policies. Scapa responded that the aggregate limit under all of the policies was $17.4 million. Scapa sought declaratory judgment for breach of contract against the insurers, including NFU, based on their denial and discontinuation of coverage. The insurers sought a declaration on coverage and policy limits. The trial court ruled that Scapa could stack the limits of each primary policy because of ambiguity in the non-cumulative policy provisions. It also ruled that an excess policy was triggered by exhaustion of primary coverage and that defense costs eroded certain policy limits. Both parties appealed the ruling. The Georgia Court of Appeals rejected NFU’'s argument that the trial court had erred in ruling that the limits in multiple policies can be stacked because non-cumulative provisions in those policies are ambiguous. Thos

Category(s): Illinois - 01/07/2019

Illinois Legislature Overrides Veto of Division Statute

On August 26, 2018, Governor Bruce Rauner vetoed SB1737, the Domestic Stock Company Division Law, which would have permitted insurance company divisions.   In the recent Veto Session, the Illinois Legislature overwhelmingly overrode the governor’s veto.  Illinois now has legislation that permits stock companies to create a new company and divide assets.

Daniel A. Cotter, Esq. - Howard & Howard Attorneys PLLC, (312) 456-3674 , dcotter@howardandhoward.com

Category(s): New Mexico - 01/07/2019

Superintendent Issues Extraterritorial Jurisdiction Bulletin

On November 30, 2018, the New Mexico Superintendent of Insurance, John G. Franchini, issued Bulletin 2018-018.  This Bulletin contains substantive requirements for insurers that issue group life or group health insurance policies to out-of-state groups that cover New Mexico residents.  The Bulletin requires these insurers to submit these types of policy forms to the agency on an informational basis.  The requirement to submit these group forms is not intended to be for approval by the Superintendent.  The scope of the Bulletin’s filing requirement includes group master policies, riders, endorsements, and any certificates of coverage that could be issued to residents of New Mexico.  In addition, the informational filings, the Bulletin goes on to require each insurer to submit a certification that confirms the coverage provided meets the applicable minimum standards in New Mexico.  The certification must be by an officer of the insurer and confirm that the insurer understands that the Superintendent may initiate market conduct examinations to determine compliance with the applicable New Mexico minimum standards.

J. Brent Moore, Esq. - Montgomery & Andrews, (505) 986-2648 , bmoore@montand.com

Category(s): New York - 01/07/2019

Agents and Brokers Fight Back Against Application of the Best Interest Standard in the Sale of New York Contracts

On November 16, 2018, the National Association of Insurance and Financial Advisors for New York State (NAIFA-NYS), Big I NY and PIANY, filed a lawsuit seeking declaratory relief, challenging the legality of the New York Department of Financial Services’ (DFS) “best-interest” regulation (Regulation 187, 11 N.Y.C.R.R. § 224) (the “Regulation”), alleging that DFS’s regulation directly contradicts existing New York law.  NAIFA-NYS’s lawsuit alleges that existing New York statutes require insurance agents “to act as an agent of [an] authorized insurer,” thereby creating a conflict between governing statues and implementing regulations.  The Regulation also requires insurers to establish standards and procedures for supervising agent and broker recommendations to consumers.  While certain exceptions from application of the Best Interests Rule are embodied within the Regulation, NAIFA-NYS challenges these exemptions as well. Big I NY and PIANY have characterized the new, best interests standard as “wildly subjective” and further contend that the amended Regulation 187 fails to instruct agents whose best interest they must consider, i.e.  the applicant, insured, beneficiary, or owner of a policy – “interests which are rarely, if ever perfectly aligned.” In summary, each of these trade associations contends that the new standard will not serve to protect consumers but instead will be detrimental to them.

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

Category(s): Tennessee - 01/07/2019

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 - 01/07/2019

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 - 01/07/2019

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 - 01/07/2019

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) became 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 - 01/08/2019

Virginia Bureau of Insurance Allows Participating Insurers of an RSO to Either Adopt RSO Filings or Authorize an RSO to “File on Behalf Of.”

The Virginia State Corporation Commission’s Bureau of Insurance has issued Administrative Letter 2018-07 which, effective as of October 30, 2018, allows participating insurers to adopt materials filed by rate service organizations (RSOs) instead of authorizing RSOs to file materials on their behalf.
Participating insurers are insurers which are members or subscribers of an RSO. The option to adopt an RSO filing eliminates (i) the need to authorize an RSO to file materials on the insurer’s behalf and (ii) the need for an insurer to manually file RSO materials as an alternative to authorizing the RSO to file on the insurer’s behalf. It is important to note that no changes were made to the “file on behalf of” process that RSOs currently use, the procedures for advisory filings, or the filing procedures for RSOs.
For further details, please, access the full letter at https://www.scc.virginia.gov/boi/adminlets/18-07.pdf

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

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