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Greetings, The June 2009 issue of FORC Alert is now available. We hope you find this information useful. If you have interested colleagues, please forward to them a link to the publication. Best regards, Kevin G. Fitzgerald Sign up to receive FORC Alerts (and Journals) via email.
Bills Introduced in U.S. House of Representation Concerning Federal Involvement in Insurance - On May 21, 2009, two bills were introduced in the U.S. House of Representatives potentially affecting state-based insurance regulation. HR. 2609, entitled "The Insurance Information Action of 2009," seeks to establish an Office of Insurance Information in the Department of the Treasury. HR. 2609 has been referred to the Committee on Financial Services. H.R. 2571, entitled "The Non Admitted and Reinsurance Reform Act of 2009," seeks to streamline the regulation of non-admitted insurance and reinsurance. H.R. 2571 has been referred to the Committee on Financial Services and the Committee on Judiciary. Kelly A. Cruz-Brown, Esq. - CARLTON FIELDS, P.A., (850) 513-3610, kcruz@carltonfields.com2009 Florida Hurricane Catastrophe Fund Final Adopted Rules - Complete text and information on Florida Hurricane Catastrophe Fund ("FHCF") regulations finalized and adopted by the Florida State Board of Administration during March 2009 can be accessed by clicking here. An Emergency Rule took effect on June 1, 2009 in order to implement legislative changes in the FHCF's Temporary Increase in Coverage Limits layer of coverage. To view the Emergency Rule, click here. Fred E. Karlinsky, Esq. - COLODNY, FASS, TALENFELD, KARLINSKY & ABATE, P.A., (954) 492-4010/(954) 332-1749, fkarlinsky@cftlaw.com
Order Entered by Florida Office of Insurance Regulation to Reduce Worker's Compensation Rates - The Florida Office of Insurance Regulation ("FOIR") approved the National Council on Compensation Insurance's (NCCI) filing to decrease worker's compensation rates for new and renewal business effective July 1, 2009 by 6%. The filing was submitted by NCCI and approved by the FOIR as a result of the signing into law of House Bill 903, which restored the statutory attorney's fee cap and clarified the statutory language concerning attorney's fees in worker's compensation cases the Florida Supreme Court determined ambiguous in its opinion in Emma Murray v. Mariner Health Inc., 994 So. 2d 1051 (Fla. 2008). Kelly A. Cruz-Brown, Esq. - CARLTON FIELDS, P.A., (850) 513-3610, kcruz@carltonfields.comBad Faith Case Law Update - Breach of Implied Covenant of Good Faith and Fair Dealing - Insured failed to state a cause of action for bad faith against an insurer for breach of the implied covenant of good faith and fair dealing under section 624.155(1)(b), Florida Statutes, where the insurance policy does not provide the specific mechanism by which the insurer must adjust, investigate, settle or pay claims. Policy language that merely stated that the insurer has a "duty to defend or settle" does not constitute an express provision upon which a claim for breach of the implied covenant of good faith and fair dealing may be based in the insurance context. See AMICA Mutual Insurance Company v. Morowitz, 2009 WL 1310215 (S.D. Fla. May 11, 2009). Kelly A. Cruz-Brown, Esq. - CARLTON FIELDS, P.A., (850) 513-3610, kcruz@carltonfields.comCondo Bill Veto Wipes Out Insurance Changes - Citing reasons unrelated to the bill's insurance provisions, Governor Charlie Crist vetoed a bill that made changes to condominium association governance statutes. The bill included several revisions to condominium insurance requirements. Among these, the bill would have deleted an unpopular statute giving condominium associations authority to require unit owners to carry insurance and to place it for them, at the unit owners' expense, if they do not. Travis L. Miller, Esq. - RADEY THOMAS YON & CLARK, P.A., (850) 425-6654, travis@radeylaw.comDepartment of Financial Services Reminds of Agency Renewal Requirement - The Florida Department of Financial Services is reminding insurance agencies that they must renew their licenses. Renewal is required every three years. However, because licensing agencies (as opposed to merely the individual agents) is relatively new in Florida, agencies will not have previously been through the renewal process. Renewal can be accomplished at the Department's website, at www.myfloridacfo.com/agents. Travis L. Miller, Esq. - RADEY THOMAS YON & CLARK, P.A., (850) 425-6654, travis@radeylaw.comDepartment of Financial Services Proposes Annuity Suitability Form for Use with Seniors - The Florida Department of Financial Services has proposed administrative rule 69B-162.011 seeking to adopt a suitability form and questionnaire to be used by agents when transacting annuities with senior citizens. The rule would require the agent or insurer to obtain the form in connection with each transaction. Insurers would be allowed to make minor changes to the form with prior approval of the Department as long as the primary features of the form are not altered. Increasing statutory and regulatory protections for seniors remains a top priority of state Chief Financial Officer Alex Sink. Travis L. Miller, Esq. - RADEY THOMAS YON & CLARK, P.A., (850) 425-6654, travis@radeylaw.comFHCF Releases May 2009 Bonding Capacity Report - The Florida Hurricane Catastrophe Fund ("FHCF") has released its May 2009 Bonding Capacity Report, which may be viewed by clicking here. In May and October of each year, the FHCF is required to publish an estimate of its borrowing capacity and projected balance as of December 31. The May 2009 Bonding Capacity Report focuses on the ways in which the FHCF's estimated loss reimbursement capacity will be impacted with the passage of HB 1495 into law on May 27, 2009. FHCF-related provisions in HB 1495 include:
2009 Major Florida Insurance Legislation Summary - Florida's 2009 Regular Legislative Session successfully yielded a number of major insurance-related bills, many of which Florida Governor Charlie Crist has signed into law as of June 10, 2009. The Governor must address these bills within 60 days of their respective passage (most of which occurred on, or about May 1, 2009). He may either sign a bill, veto it, or allow it to become law without his signature. Richard J. Fidei, Esq. - COLODNY, FASS, TALENFELD, KARLINSKY & ABATE, P.A., (954) 492-4010, rfidei@cftlaw.comFlorida Governor Signs Bill Extending Cat Fund Reimbursement Coverage to Certain Insurers - Florida Governor Charlie Crist signed House Bill 569 into law on June 10, 2009. Effective on July 1, 2009, HB 569 relates primarily to financial instruments insured by the Federal Deposit Insurance Corporation and extends the availability of an additional amount of Florida Hurricane Catastrophe Fund ("FHCF") reimbursement coverage up to $10 million until December 31, 2011 for limited apportionment companies, insurers that purchased such coverage in 2008, and for insurers that qualified for Florida's Insurance Capital Build-Up Incentive Program. Without this extension, the availability of this coverage would cease on May 31, 2009. The insurance portion of HB 569 also specifies that the optional coverage retention as provided for limited apportionment insurers and others will be triggered prior to the mandatory coverage under the FHCF reimbursement contract; however, once the limit of the optional coverage is exhausted, the insurer's retention under the mandatory coverage will apply. Of note: Similar coverage was offered in 2006, 2007, and 2008 that reimburses an insurer for up to $10 million in losses for each of two hurricanes during those years. As it has been in past years, under HB 569 this coverage will be priced at a 50 percent rate on line (e.g., $5 million premium for $10 million in coverage) with a free reinstatement for a second event. An insurer's retention for such coverage remains at 30 percent of its surplus. Richard J. Fidei, Esq. - COLODNY, FASS, TALENFELD, KARLINSKY & ABATE, P.A., (954) 492-4010, rfidei@cftlaw.com
Georgia Legislature Amends Life Settlements Act - The recently amended Georgia Life Settlements Act, effective July 1, 2009, makes several changes to the law related to life settlements and those effectuating these transactions. Under the revised law, the definition of a life settlement contract includes the transfer in ownership or beneficial interest of a trust or other entity that owns a life insurance policy if the entity was formed or used for the primary purpose of acquiring life insurance policies insuring the life of someone residing in Georgia. Further, stranger originated life insurance now falls within the definition of a fraudulent act and is defined as originating a life insurance policy for the benefit of a third-party investor who does not have an insurable interest in the life of the insured. In addition to changing several definitions, the amended act also requires life settlement brokers to complete 15 hours of training every two years. Brian T. Casey, Esq. - LOCKE LORD BISSELL & LIDDELL LLP, (404) 870-4638, bcasey@lockelord.com and Alexis W. Summers - LOCKE LORD BISSELL & LIDDELL LLP, (404) 870-4649, asummers@lockelord.comGeorgia State Court Finds Statutory Cap on Noneconomic Damages for Medical Malpractice Plaintiffs Unconstitutional - In Nestlehutt v. Atlanta Oculoplastic Surgery, P.C., a state court found that the Georgia statute that limits the amount of noneconomic damages that may be awarded to a medical malpractice plaintiff is unconstitutional. As grounds for this decision, the court cited an invasion of the right to a jury trial, as well as a contravention of the separation of powers clause and a violation of the equal protection clause of the Georgia Constitution. Brian T. Casey, Esq. - LOCKE LORD BISSELL & LIDDELL LLP, (404) 870-4638, bcasey@lockelord.com and Alexis W. Summers - LOCKE LORD BISSELL & LIDDELL LLP, (404) 870-4649, asummers@lockelord.comMGAs Can Charge a Fully Earned Policy Fee - SB 144 was signed into law and is effective July 1, 2009. SB 144 amends the Georgia Insurance Code by repealing the requirement that prospective agents secure an insurance company sponsor before sitting for the agent licensing examination. The bill also permits MGAs to charge a fully earn policy fee of $25 if the fee is included in an insurer's rate filing. Thomas A. Player, Esq. - MORRIS, MANNING & MARTIN, L.L.P., (404) 504-7623, tplayer@mmmlaw.comAmendment to Georgia Statute Prohibits Use of Theories Related to Industry-Wide Liability in Product Liability Actions against Manufacturers - Senate Bill 213, which took effect upon being signed by the Governor on May 4, 2009, amends O.C.G.A. § 51-1-11, relating to product liability actions, by precluding manufacturers of alleged defective products from being held liable for the manufacture of such defective products or public nuisance based on theories of market share or enterprise, or any other theories of industry-wide liability, regardless of privity. Brian T. Casey, Esq. - LOCKE LORD BISSELL & LIDDELL LLP, (404) 870-4638, bcasey@lockelord.com and Alexis W. Summers - LOCKE LORD BISSELL & LIDDELL LLP, (404) 870-4649, asummers@lockelord.comNew Law Gives Mutual Life Insurers Another Means for Paying Policyholders’ Equity in a Demutualization - As of July 1, 2009, O.C.G.A. § 33-14-76, as amended by House Bill 550, will provide mutual life insurers with an additional method for fulfilling one of the requirements for converting to a stock insurer. Under this statute, as part of their conversion plans, mutual life insurers must provide their policyholders with payment in the form of cash or shares of proposed capital stock. House Bill 550 amended this requirement to give mutual life insurers the option of providing each policyholder payment in the form of a paid-up life insurance policy in lieu of cash, so long as such life insurance policy has a cash value equal to 100% of the policyholder’s equity in the mutual insurance company and so long as there is no charge for the policyholder to surrender such life insurance policy for its cash value. Brian T. Casey, Esq. - LOCKE LORD BISSELL & LIDDELL LLP, (404) 870-4638, bcasey@lockelord.com and Alexis W. Summers - LOCKE LORD BISSELL & LIDDELL LLP, (404) 870-4649, asummers@lockelord.com
New Indiana Insurance Commissioner Named - On June 16, 2009, Governor Mitch Daniels appointed Carol Cutter as Indiana Insurance Commissioner. Cutter succeeds Jim Atterholt, who has been appointed to the Indiana Utility Regulatory Commission. Cutter was Atterholt’s chief deputy and served as deputy commissioner of health issues since 2005. She led efforts to eliminate an 18-month backlog of rate and form filings for health, life, and property/casualty products in her first two years on the job. Cutter also helped establish a self-certification process for life and annuity rate and form filings to allow for a faster turnaround for approval of those insurance products for marketing. Prior to serving in state government, Cutter worked in various capacities in the insurance industry for nearly 30 years. Scott M. Kosnoff, Esq. - Baker & Daniels, LLP, 317.237.1201, scott.kosnoff@bakerd.com
Mississippi Supreme Court to Interpret ACC Clause - The Mississippi Supreme Court heard oral argument on June 9, 2009 in Corban v. USAA, the first Hurricane Katrina coverage case to reach that court. For the first time, the Mississippi Supreme Court will interpret the meaning of an anti-concurrent causation ("ACC") clause under Mississippi law. In the seminal case of Leonard v. Nationwide Mutual Insurance Company, 449 F.3d 419 (5th Cir. 2007), the U.S. Court of Appeals for the Fifth Circuit, applying Mississippi law, upheld and enforced the ACC clause in Nationwide's standard homeowner's policy. The Leonard court held that hurricane damage caused by wind and water acting concurrently, or in any sequence, was excluded from coverage. In Corban, the court will decide whether to follow the reasoning of Leonard and enforce a similar ACC clause under Mississippi law. In addition to the primary parties, the Mississippi Supreme Court heard oral argument from the Mississippi Attorney General and Nationwide Insurance as amicus curiae. Robert B. House, Esq. - WATKINS LUDLAM WINTER & STENNIS, P.A., (601) 949-4830, rhouse@watkinsludlam.comJudge Dismisses Lawsuit By Insurers Challenging Reinsurance of Hurricane Katrina Losses - Following a two and one-half week trial, United States District Judge Keith Starrett dismissed on directed verdict a case brought by four member companies of the Mississippi Windstorm Underwriting Association against the Association's Board of Directors alleging that the Board failed to purchase adequate catastrophe reinsurance for the 2004-2005 storm years. The dismissal came after a trial in the Southern District of Mississippi, Hattiesburg Division, where Plaintiffs sought to recover millions of dollars in assessments levied on them for their portion of the Association's losses stemming from Hurricane Katrina. The Association purchased $175 million of reinsurance for the 2004-2005 storm years, but policyholder losses far exceeded this amount, requiring the Association to assess its members to help cover those losses. Judge Starrett found that the Business Judgment Rule applied to preclude liability of the Board for its reinsurance decisions, specifically noting that the Board made an informed decision in its purchase of reinsurance for the 2004-2005 storm years by reviewing various catastrophe models and meeting with various reinsurance brokers in making its decision on the amount of reinsurance to purchase. In addition, the Court ruled that Plaintiffs failed to show any injury different from that suffered by all of the Association's members following Hurricane Katrina. Judge Starrett further found that no fiduciary relationship between the Association's Board of Directors and the Plaintiffs existed and that the Plaintiffs were sophisticated insurance companies themselves who could have made the Board aware of their opinions on the Association's purchase of reinsurance. Finally, the Court ruled that the Board made a reasonable and informed decision in its purchase of reinsurance for the 2004-2005 storm years and Plaintiffs failed to show that the Board had any conflict of interest or engaged in self dealing. Robert B. House, Esq. - WATKINS LUDLAM WINTER & STENNIS, P.A., (601) 949-4830, rhouse@watkinsludlam.com
Proposed Amendment to NY Regulation 41 Would Expand Export List Coverages - Proposed Eleventh Amendment to New York Insurance Department Regulation 41 (11 N.Y.C.R.R. 27) would expand New York's "export list" making it easier to find certain coverages which have been largely unavailable in the admitted market. Such coverages are not subject to the requirement for declinations in the admitted market. These coverages include, among others, special multi peril coverage for general and subcontractors and construction trades; property insurance for vacant commercial property; commercial excess and umbrella liability coverage; indemnification of professional athletes and their teams, professional entertainers and their employers and business executives under contract as well as the organizations they work for in connection with financial loss incurred due to death or injury making their contracts impossible to perform ("Contract Frustration Coverage"); in-house attorney liability ("Employed Lawyers Liability"); and other difficult-to-place coverages. For certain other lines of insurance the number of required declinations by the admitted market would be reduced from three to two. The proposed regulation is subject to comment through August 1, 2009. Frederick J. Pomerantz, Esq. - WILSON, ELSER, MOSKOWITZ, EDELMAN & DICKER LLP, (212) 490-3000, fred.pomerantz@wilsonelser.com
Pennsylvania Supreme Court Rules on Pre-Liquidation Payments to Insureds - The Supreme Court of Pennsylvania held in Ario v. Ingram Micro, Inc., 965 A.2d 1194 (Pa. 2009) that payments made by an insurance company pre-insolvency to insureds in the ordinary course were excluded from the ambit of Pennsylvania's voidable transfer statute. In doing so, the Supreme Court for the first time adopted bankruptcy law as analogous to the Pennsylvania insurance insolvency statutes and immunized pre-insolvency payments to insureds from being clawed back under the voidable transfer provisions. Michael F. Consedine, Esq. - SAUL EWING LLP, (717) 257-7502, mconsedine@saul.comPennsylvania Supreme Courts Limits UR on Mandated Drug and Alcohol Benefits - Recently a divided Pennsylvania Supreme Court held in Insurance Federation et al v. Insurance Department that managed care plans cannot use standard utilization review procedures in covering drug and alcohol benefits mandated by Act 106 of 1989. The ruling settles a dispute which has raged since August, 2003, when the Insurance Department issued a notice reversing its position on the issue. Michael F. Consedine, Esq. - SAUL EWING LLP, (717) 257-7502, mconsedine@saul.comPennsylvania Senate Pursuing Bad Faith Reform - The Pennsylvania Senate is moving forward a bill, SB 746, that would amend Pennsylvania's Bad Faith Law to require juries, and not a judge, to determine all bad faith allegations, plus the appropriate level of punitive damages, attorney fees, and interest. Pennsylvania is one of the few states that makes the court solely responsible for determining bad faith. Various insurance industry groups are attempting to block the bill, but it appears it has a good chance of being passed by the Senate. Michael F. Consedine, Esq. - SAUL EWING LLP, (717) 257-7502, mconsedine@saul.comPennsylvania Rehabilitator Seeks to Cut Off Agent Commissions - In an unusual step, Pennsylvania Insurance Commissioner Joel Ario, acting in his capacity as Rehabilitator of Penn Treaty Network America Insurance Company (“Penn Treaty”), filed an Application on June 3, 2009 with the Pennsylvania Commonwealth Court seeking to cut off payment of all commissions to Penn Treaty agents, including earned commissions. The Application does not distinguish between earned and unearned commission, but simply seeks to extinguish all of Penn Treaty’s commission obligations. Prior Pennsylvania precedent holds that earned commissions are not assets of an insurance estate but of the agent. We expect that agents and agent associations will contest the Rehabilitator’s Application because of its financial impact not only in Penn Treaty but in future receiverships. Michael F. Consedine, Esq. - SAUL EWING LLP, (717) 257-7502, mconsedine@saul.com
European Union passes Solvency II - The Solvency II framework directive was agreed in March 2009 and passed by both the European Parliament and the European Commission shortly afterwards. EU member states must implement the directive by 31 October 2012. The final directive omitted group supervision proposals to the disappointment of some larger member states such and insurance groups, however this issue can be revisited in 2015. In reaction to the financial crisis, the European Commission has also recently proposed the creation of a new European Systemic Risk Council and European System of Financial Supervisors. Responses to these proposals are sought by the Commission before 15 July 2009. Richard Spiller, Esq. - EDWARDS ANGELL PALMER & DODGE UK LLP, 011 44 20 7556 4541, rspiller@eapdlaw.com |
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