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Greetings, The August 2007 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.
Arizona Omnibus Insurance Legislation, SB1242 - SB1242 sponsored by the Arizona Department of Insurance, made a number of changes clarifying existing insurance regulatory requirements. The changes include:
SB1242 takes effect on September 19, 2007. J. Michael Low, Esq. - LOW & CHILDERS, P.C., (602) 266-1166, mlow@lowchilders.com
Special Purpose Financial Captive - Throughout the spring of this year, a committee of attorneys, industry representatives and Insurance Department staff convened a series of meetings in order to develop a special purpose financial captive insurance subchapter to Delaware's recently revised captive insurance law. The result of these meetings, House Bill 214, was introduced into the Delaware State House of Representatives on June 14, 2007, was passed by the General Assembly on July 1, 2007, and was signed into law by Governor Minner on July 18, 2007. HB 214 authorizes the licensing of special purpose captive insurers intended to facilitate access to capital and financial markets. These structures (often formed in South Carolina or offshore) have been utilized in recent years by life insurers to fund Regulation XXX reserve requirements on term life business. However the possible applications for such structures go far beyond Regulation XXX. Accordingly, HB 214 has been drafted to allow a substantial degree of flexibility with respect to both risk assumption and financing in order to better accommodate future uses for special purpose financial captive insurers. Michael W. Teichman, Esq. - PARKOWSKI, GUERKE & SWAYZE, P.A., (302) 594-3331, mteichman@pgslegal.com
Florida OIR Again Attempts to Limit the Use of Credit Reports - Round two of the Florida Office of Insurance Regulation's fight to limit the use of credit information in insurance rating and underwriting has officially begun. A public hearing was held in Tallahassee on August 9, 2007, during which the industry pledged to challenge the new proposed rules, which were promulgated following an Administrative Law Judge's determination that predecessor rules on the same subject were invalid. The principal issue in the dispute is whether the prohibition on "unfair discrimination" in Florida's Insurance Rating Law requires insurers to make certain that the use of credit does not result in a disparate impact on protected classes of Floridians. The industry contends that "unfair discrimination" is an actuarial term, and requires only that the premium charged bear a reasonable relationship to the risk assumed. In an attempt at compromise, alternative proposed rules have been or will shortly be submitted by the industry and Florida's Financial Services Commission. Kevin G. Fitzgerald, Esq. - FOLEY & LARDNER LLP, (414) 297-5841, kfitzgerald@foley.com and Austin B. Neal - Foley & Lardner, , aneal@foley.comGovernor Crist Turns Up the Heat -
Florida Governor Charlie Crist is turning up the heat on insurance companies who he believes are not acting in the best interests of Florida's policyholders. He commented at a meeting of the Cabinet that insurance companies may be colluding with each other by not lowering rates to reflect the savings in connection with the recent legislative changes which expanded the Florida Catastophe Fund with the intent to provide cheaper reinsurance so that the savings would be passed on to the consumer. Since companies have not passed on the savings anticipated, at least to the levels previously thought, he warned insurance companies of potential consequences. The Governor believes insurers were provided the tools to lower costs to consumers, but instead are using it to protect their own interests. One particular option the Governor may utilize is to repeal the additional $12 billion which was allocated to the CAT Fund's capacity. Florida's Chief Financial Officer Alex Sink is on record already voicing her concerns that the CAT Fund's recent expansion puts Florida's citizens on the hook for future assessments, and should be addressed. Douglas A. Mang, Esq. - MANG LAW FIRM, P.A., (850) 222-7710, dmang@manglaw.com and Gary Sumner - MANG LAW FIRM, P.A., (850) 222-7710, gsumner@manglaw.com Governor Vetoes Legislation Creating Debt Cancellation Insurance - In a surprising move, Governor Charlie Crist of Florida vetoed legislation expressly authorizing insurers to provide coverage for lenders against financial loss resulting from lenders' issuance of debt cancellation products to their borrowers. Notwithstanding the fact that HB 7087 was considered by most to have a much better chance of becoming law than its predecessor legislation that was vetoed by Governor Bush in 2006, Governor Crist vetoed the bill because it also contained a provision that increased the fees that could be charged to delinquent borrowers. The veto leaves the debt cancellation insurance issue in limbo for another year. Kevin G. Fitzgerald, Esq. - FOLEY & LARDNER LLP, (414) 297-5841, kfitzgerald@foley.com and Austin B. Neal - Foley & Lardner, , aneal@foley.com
Insurer has Duty to Defend Insured for an “Accident” -
In The Cincinnati Ins. Co. v. Magnolia States, Inc., No. A07A0103 (Ga. Ct. App. June 27, 2007) the Georgia Court of Appeals affirmed the trial court's grant of summary judgment in ruling that an underlying claim against a personal care facility, the insured, fell within the insurance policy's coverage, and therefore the insurer was obligated to defend and indemnify the insured. The policy at issue contained an exclusion for intentional acts, but such exclusion was expressly limited to the intentional acts of the insured. The insurer asserted that the underlying occurrence--an attack upon one of the insured's residents by another resident--was not accidental, but intentional, which the insurer contended excluded it from coverage. Because the injury at issue occurred without the insured's "foresight, expectation, or design", the Georgia Court of Appeals held the occurrence to be "accidental" for purposes of insurance coverage. Brian T. Casey, Esq. - LOCKE LORD BISSELL & LIDDELL LLP, (404) 870-4638, bcasey@lockelord.com and Hemant Piduru - LORD, BISSELL & BROOK, LLP, 404.870.4686, HPiduru@lordbissell.com General Contractor and Owners Covered as Additional Insureds Under Subcontractor’s CGL Insurance Policies -
Brian T. Casey, Esq. - LOCKE LORD BISSELL & LIDDELL LLP, (404) 870-4638, bcasey@lockelord.com and Hemant Piduru - LORD, BISSELL & BROOK, LLP, 404.870.4686, HPiduru@lordbissell.com
Illinois Governor Seeks Regulations Limiting Health Premiums -
On July 12, 2007 Governor Blagojevich ordered the Division of Insurance to file rules which prevent insurers from considering health status when setting a premium on a renewed individual health insurance policy. Insurers will only be permitted to consider demographics and medical cost inflation when setting premiums for such policies. The Division of Insurance also filed emergency rules which effective September 30, 2007 will require health insurers to report quarterly how much they collect in premiums and how much is spent on healthcare claims. Steve W. Kinion, Esq. - ZACK STAMP, LTD, (217) 525-0700 ext. 108, skinion@601w.com
The Long Arm of the Law in Insurance Agency Purchase Disputes - Federal Court allows non-resident party to contract for sale of insurance entity to be sued in state where other party to contract resided notwithstanding that contract was negotiated for the most part outside forum state. In Int'l Administrators v. Pettigrew, 430 F.Supp. 890 ( S.D. 2006 ), sellers, principals of a corporation formed and located in Texas, negotiated with buyer, an Iowa resident, for sale of a third-party administrator entity. Negotiations were primarily by telephone. Sellers did travel to Iowa once in the course of discussions but buyer went to Texas to sign the ultimate written contract (which evidently contained no choice of forum provision). Applying constitutional standards on sufficient minimum contacts for jurisdictional reach, an Iowa federal Court held that a forum in the buyer's state of residence could hear a dispute that resulted over the contract. Fred M. Haskins, Esq. - PATTERSON LAW FIRM, (515) 238-2147, fhaskins@pattersonfirm.com
2007 Legislative Highlights - Insurance issues received significant attention during the 2007 Minnesota Legislative Session, with the debate over so-called "Insurer Bad Faith" legislation taking center stage. While, in the end, no action was taken, the bad faith debate turned into one of the major flash points of the session, with the threat of a gubernatorial veto of a large appropriations bill that included this legislation turning the tide. The legislation had initially been passed by the Minnesota House and was up for debate on the Senate floor, when the Governor indicated his intent to veto the entire Public Safety Finance bill if it included insurer bad faith provisions. Following negotiations between legislative leadership and the Governor's office, the provision was removed with the agreement that a new version of the bad faith bill would be introduced and given a full hearing. This second version of the bill was then introduced and quickly moved through the process, but did not advance off the Senate floor due to significant opposition from the insurance industry. The bad faith issue is expected to be considered again when the Legislature returns in 2008. John A. Knapp, Esq. - WINTHROP & WEINSTINE, P.A., (612) 604-6404, jknapp@winthrop.comBusiness Use of Social Security Numbers -
Laws of Minnesota 2007, Chapter 129 (HF 131, incorporated into HF 1306) - Legislation that would have placed new regulations on the business use of social security numbers also received significant attention, as members of the Minnesota Fair Information Practices Coalition (FIPC) worked closely with the Attorney General's office to find compromise on the issue. After lengthy negotiations in conference committee, legislators decided to put off action on the new language until next session, pushing back the effective date of similar legislation passed in 2006, from July 1, 2007 to July 1, 2008, giving legislators and interested parties more time to find final resolution on the issue. John A. Knapp, Esq. - WINTHROP & WEINSTINE, P.A., (612) 604-6404, jknapp@winthrop.com Repeal of Random Insurance Verification Law -
Laws of Minnesota 2007, Chapter 22 (HF 448) - This legislation repeals Minnesota's Random Insurance Verification Law, which was suspended by the Legislature in 2005. It was originally intended to enforce the requirement that all motor vehicle owners have auto insurance by requiring the Minnesota Department of Public Safety to send a letter to a monthly sampling of drivers requesting that they provide insurance information on all vehicles owned by the driver. If they failed to respond, the driver's license would be suspended. Effective: August 1, 2007. John A. Knapp, Esq. - WINTHROP & WEINSTINE, P.A., (612) 604-6404, jknapp@winthrop.com Aircraft Owner Liability Insurance Modifications -
Laws of Minnesota 2007, Chapter 79 (SF 608) - Legislation that increases the minimum liability insurance coverage for licensed pilots in Minnesota was passed by the Legislature and signed into law with an effective date of January 1, 2009. The legislation, which as originally proposed would have substantially increased the cost of this type of coverage, was the focus of significant negotiations throughout the session, which resulted in the delayed effective date. The legislation also established a working group to study the issue of third-party liability issues for aircraft insurance, which will issue a report to the Legislature in November 2007. John A. Knapp, Esq. - WINTHROP & WEINSTINE, P.A., (612) 604-6404, jknapp@winthrop.com Insurance Regulatory Modernization Act -
Laws of Minnesota 2007, Chapter 104 (SF 1581) - This legislation made a number of positive changes to various insurance regulatory laws, including a principle-based reserves interim solution (enacting mortality tables and amending the standard valuation law); updated acceleration of life benefits language to reflect NAIC changes; clarifying state statute allowing insurers to offer another continuation of coverage; clarifying the term ‘staff-adjuster' to include an employer of an affiliate of an insurance company; a right to cancel/free look period notice, which enacts interstate compact language to replace the current required Minnesota notice; enactment of the NAIC life illustration model and repeal of interest rate disclosure requirements and private right of action; and a reduction from 60 to 30 days for the required notice of increased rates to commercial liability or property policy holders. Various effective dates. John A. Knapp, Esq. - WINTHROP & WEINSTINE, P.A., (612) 604-6404, jknapp@winthrop.com Rental Car Priority of Coverage -
Laws of Minnesota 2007, Chapter 72 (SF 744) - This legislation changes the priority of liability insurance coverage for rented vehicles from the rental firm's rental policy to the driver's personal policy. Effective: August 1, 2007. John A. Knapp, Esq. - WINTHROP & WEINSTINE, P.A., (612) 604-6404, jknapp@winthrop.com
Hurricane Katrina Homeowner Litigation -
The United States Court of Appeals for the Fifth Circuit conducted oral argument August 6, 2007 in Leonard v. Nationwide, the first Hurricane Katrina homeowner insurance coverage case to go to trial. In a bench trial, Senior Judge L. T. Senter ruled that water damage exclusions in homeowner policies were valid and enforceable under Mississippi law, and that the water inundation caused by Hurricane Katrina was a "flood" within the meaning of that exclusion. The judge awarded Leonard $1,200 in wind damages, which were covered by the policy, and did not award any damages for water damage to the property. Judge Senter also ruled that "anti-concurrent cause" language in the policy - which would exclude coverage if the damage was caused by more than one event and any of those events was an excluded event - was ambiguous and could not be enforced to exclude coverage under homeowner policies. Both Leonard and Nationwide filed appeals from the trials court's ruling. Nationwide Mutual Insurance Company v. Leonard, No. 60-61130 (5th Cir. 2006). Robert B. House, Esq. - WATKINS LUDLAM WINTER & STENNIS, P.A., (601) 949-4830, rhouse@watkinsludlam.com and David L. Martin, Esq. - WATKINS LUDLAM WINTER & STENNIS, P.A., (601) 949-4901, dmartin@watkinsludlam.com Policyholder Bill of Rights -
Mississippi Department of Insurance Regulation 2007-1 establishes a Policyholder Bill of Rights and requires insurance companies writing homeowners personal lines residential property insurance in Mississippi to provide a written outline of coverage and policy checklist upon issuance or renewal of the coverage effective September 1, 2007. The Commissioner of Insurance may grant an extension upon a written request filed by the insurer. Robert B. House, Esq. - WATKINS LUDLAM WINTER & STENNIS, P.A., (601) 949-4830, rhouse@watkinsludlam.com and David L. Martin, Esq. - WATKINS LUDLAM WINTER & STENNIS, P.A., (601) 949-4901, dmartin@watkinsludlam.com Commissioner Dale Defeated -
Commissioner of Insurance George Dale was defeated by former state fiscal officer Gary Anderson in the August 7 Democratic primary. Dale has been Mississippi Commissioner of Insurance since 1975 and is the longest-serving commissioner of insurance in the United States. Anderson will face Warren County (Vicksburg) Republican State Senator Mike Chaney in the November 6 general election. Robert B. House, Esq. - WATKINS LUDLAM WINTER & STENNIS, P.A., (601) 949-4830, rhouse@watkinsludlam.com and David L. Martin, Esq. - WATKINS LUDLAM WINTER & STENNIS, P.A., (601) 949-4901, dmartin@watkinsludlam.com
Takeover of Sierra Health Services by United Health Group, Inc. Under Close Watch - Nevada Commissioner is being closely followed by the Governor, Attorney General and Director of Business and Industry concerning the proposed $2.2 billion takeover of Sierra Health Services by United Health Group, Inc. The Governor directed Commissioner to conduct additional hearings on the takeover and attend the July 27th Las Vegas hearing. August 3, 2007 was the last day for submittal of comments on the takeover. Commissioner must now make her determinations within 30 days of July 27th. Vernon E. Leverty, Esq. - LEVERTY & ASSOCIATES LAW, (775) 322-6636, gene@levertylaw.com
Oklahoma Commissioner Testifies Before Congress -
Insurance Commissioner Kim Holland testified before the Senate Special Committee on Aging about the lack of state oversight over Medicare Part D or Medicare Advantage sales. The Medicare Modernization Act of 2003 preempts state authority over the licensing and marketing of agents who sell Medicare Part D and Medicare Advantage plans. Holland appealed for changes in the Medicare laws to allow state regulators to regulate such sales. Commissioner Holland is the vice chair of the NAIC Health and Managed Care (B) Committee. Steve W. Kinion, Esq. - ZACK STAMP, LTD, (217) 525-0700 ext. 108, skinion@601w.com
New Statute Limiting Use of Windstorm Deductibles -
The Rhode Island General Assembly recently enacted a new statute limiting the use of windstorm deductibles for homeowners policies within Rhode Island. The new law, R.I. Gen. L. § 27-5-3.7, provides that (i) windstorm deductibles are only allowable for hurricanes; (ii) windstorm deductibles are capped at certain percentages of the dwelling's insured value based upon the dwelling's proximity to tidal waters with maximum charges of 2% for the first $150,000.00 and 5% of the insured value over $150,000.00; and (iii) windstorm deductibles may not be applied at all where the insured has installed mitigation measures approved by the Rhode Island Insurance Commissioner. Brian Spero - PARTRIDGE SNOW & HAHN LLP, 401.861.8200, bjs@psh.com
Vermont Legislature Concludes Session -
The Vermont legislature recently concluded a one-day veto session and failed to override the two specific vetos (H.520-energy bill & S.164-campaign finance) by the Republican Governor Douglas. The legislature only looked at those two bills and will reconvene in January 2008 for the second half of the biennium. Jeffrey P. Johnson, Esq. - PRIMMER PIPER EGGLESTON & CRAMER PC, (802) 864-0880, jjohnson@ppeclaw.com and Jonathan D. Wolff - PRIMMER PIPER EGGLESTON & CRAMER PC, 802.223.2102, jwolff@ppeclaw.com
Senior Suitability Supervision Systems -
Commissioner Sean Dilweg is creating a committee that includes representatives of industry, trade associations, regulators, the Department of Financial Institutions, the National Association of Securities Dealers, consumers, and agents to recommend rules requiring insurers to have systems to supervise compliance with Wisconsin's law prohibiting unsuitable sales of annuities to seniors (which will be extended to all consumers). The committee will look at systems required by other states and IMSA, and those currently used by insurers. The Commissioner hopes the committee's product will be used by the NAIC as a national model. William J. Toman, Esq. - QUARLES & BRADY LLP, (608) 283-2434, wjt@quarles.com New Deputy Commissioner - Commissioner Sean Dilweg appointed Kim Shaul as Deputy Commissioner beginning April 3, 2007. Ms. Shaul was an attorney with American Family Insurance for 16 years working in a variety of areas including compliance, corporate, life and health, property and casualty, and workers comp. William J. Toman, Esq. - QUARLES & BRADY LLP, (608) 283-2434, wjt@quarles.com |
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