Greetings,
The November 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
Editor, FORC Alert
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Regulation 1-1-8 Fines Declared Invalid -
The Colorado Division of Insurance brought an action against an insurer who failed to resond "completely" to a Division request. Regulation 1-1-8 allows the Division to assess a $500 fine for failure to respond within the alloted time frame or completely. The insuer disagreed with the fine assessment and took the matter to the ALJ. The ALJ in its proposed Order ruled that the Division did not have the statutory authority to fine an insurer. Under the Order, the Divsision no longer has the authority to assess fines for failure to respond within the time frame set forth in the communication or to fine an insurer if the insurer failed to respond completely to a Division request.
Hugh Alexander, Esq. - ALEXANDER LAW FIRM, P.C., (303) 825.7307, ha@alexlawfirm.com
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Delaware Imposes Further Restrictions on the Use of Credit Scoring -
On August 1, 2007 Governor Minner signed into law Senate Substitute for Senate Bill 31, which prohibits the use of insurance credit scoring on renewal, but permits the use of insurance credit scoring on initial application provided that all carriers using credit recalculate an insurance credit score if requested by a policyholder at renewal. Although this recalculation may form the basis for a premium decrease, it is not permitted to form the basis for an increase in premium.
To implement this new statute, the Delaware Department of Insurance has recently promulgated proposed changes to Delaware's insurance credit scoring regulation, Regulation 906, that would require insurers using credit to provide a notice to each policyholder, eight weeks prior to renewal, of that policyholder's right to request recalculation of credit score. These proposed changes would further require each insurer providing this notice to also provide a special request form to facilitate the policyholder's request for recalculation.
A hearing on these revisions to Regulation 906 is set for December 4, 2007.
Michael W. Teichman, Esq. - PARKOWSKI, GUERKE & SWAYZE, P.A., (302) 594-3331, mteichman@pgslegal.com
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House Hearings on Need for Insurance Regulatory Reform -
On October 3 and again on October 30, the insurance subcommittee of the House Financial Services Committee held lively hearings on the need for insurance regulatory reform. Subcommittee Chairman Paul Kanjorski (D-PA) said this would be the first in a series regarding insurance regulatory reform issues. You can obtain copies of the witnesses' prepared statements at http://www.house.gov/apps/list/hearing/financialsvcs_dem/hr092607.shtml.
Charles T. Richardson, Esq. - BAKER & DANIELS LLP, (202) 312-7487, crichardson@bakerd.com
NAIC Interstate Compact -
One of the NAIC's key modernization initiatives - the interstate product compact that applies to life, annuity, disability and long-term care products - is now up and running. Thirty states have signed on (50% of premium volume, with more in the pipeline). The Compact's new executive director is Fran Arricale, headquartered in Washington, DC. She reported on the Compact's plans and activities so far at the NOLHGA Legal Seminar in San Francisco in July and the ACLI's Annual Meeting in October.
Charles T. Richardson, Esq. - BAKER & DANIELS LLP, (202) 312-7487, crichardson@bakerd.com
TRIA Extension a Question Mark -
In September, the House of Representatives approved an extension of the federal terrorism insurance backstop for 15 years. The Terrorism Risk Insurance Revision and Extension Act - which passed by a vote of 312 to 110 - would also add group life to the list of insurance lines covered by the backstop, which is slated to expire December 31. The measure would also expand the program to respond to acts of both domestic and foreign-initiated terrorism and by requiring insurers to offer coverage for acts of nuclear, chemical, biological and radiological terrorism. The Bush Administration promptly issued a policy statement saying that the President would veto the bill in its current form. The Administration believes that the backstop should be steadily reduced and that the private insurance market should eventually handle terrorism risk.
The Senate Banking Committee has yet to unveil its own TRIA legislation. When the program was last extended in late 2005, the basis was a Senate measure that ignored a more detailed House extension bill and scaled the existing program back in a way that finally won Administration support.
Charles T. Richardson, Esq. - BAKER & DANIELS LLP, (202) 312-7487, crichardson@bakerd.com
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Personal Injury Protection Coverage Updates -
Florida's Motor Vehicle No-Fault Law (sections 627.730-627.7405, Fla. Stat.) expired on October 1, 2007, under a sunset repeal enacted in 2003. Later that month, the state legislature, meeting in a special session, revived the no-fault law, effective January 1, 2008. The major difference between the old no-fault law and the new law is a medical fee schedule for personal injury protection (PIP) coverage. In most cases, fees may be capped at 200% of the fee allowed under Medicare; hospital charges for emergency services may be capped at 75% of the hospital's usual and customary charge; and charges for emergency services provided in a hospital by a physician or dentist may be capped at the usual and customary charges in the community. The legislation allows an insurer to continue to use the PIP forms and rates that it had in place immediately prior to the repeal, until new forms and rates are used as authorized by law. The new law (chapter 2007-324, Laws of Florida, http://election.dos.state.fl.us/laws/07laws/ch_2007-324.pdf), which took effect on October 11, also immediately restored the requirement that vehicle owners maintain property damage liability coverage, together with an enforcement system based on insurers' reports to the Department of Highway Safety and Motor Vehicles.
Kevin G. Fitzgerald, Esq. - FOLEY & LARDNER LLP, (414) 297-5841, kfitzgerald@foley.com and Leonard E. Schulte - FOLEY & LARDNER LLP, (850) 513-3380, lschulte@foley.com
Citizens to Offer Multi-Peril Commercial Insurance Program -
The Florida Office of Insurance Regulation approved a new multi-peril commercial non-residential insurance program that will provide up to $2.5 million in coverage from Citizens Property Insurance Corp- Florida's Insurer of 'last resort' by January 1, 2008. The policies will cover damage from wind as well as fire and other perils traditionally included in a commercial property insurance policy. Further, the Office ordered Citizens to make a rate filing for its commercial program every year so that any rate increases that are necessary in the future can be done in smaller increments to make them more affordable to policyholders.
Douglas A. Mang, Esq. - MANG LAW FIRM, P.A., (850) 222-7710, dmang@manglaw.com
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FELA Case Requires Specific Causation Through Expert Testimony -
In Shiver v. Georgia & Florida Railnet Inc., No. A07A0920 (GA. Ct. App. September 27, 2007), The Georgia Court of Appeals affirmed a grant to G&F of a motion in limine to exclude the testimony of one of Shiver’s expert witnesses and granted summary judgment to G&F on Shiver’s claim for his respiratory ailments, concluding that the expert’s testimony did not satisfy the requirements for a reliable differential diagnosis, which would include considering all relevant potential causes of the symptoms. Because the physician did not rule out all other possible causes of Shiver’s condition after taking into account the entire medical history, the Appeals Court found that the trial court did not abuse its discretion in issuing its opinion.
Brian T. Casey, Esq. - LOCKE LORD LLP, (404) 870-4638, bcasey@lockelord.com and Lynn Lugo - LOCKE LORD BISSELL & LIDDELL LLP, (404) 870-4686, llugo@lockelord.com
Georgia Adopts New Regulation to Protect Military Recruits from Deceptive or Misleading Life Insurance Sales Practices or Products -
New Regulation Ga. Comp. R. & Regs. 120-2-95. The new regulation sets forth standards to protect active duty service members of the United States Armed Forces from dishonest and predatory insurance sales practices by declaring certain identified practices to be dishonest, unfair, or deceptive. This regulation became effective September 1, 2007.
Brian T. Casey, Esq. - LOCKE LORD LLP, (404) 870-4638, bcasey@lockelord.com and Lynn Lugo - LOCKE LORD BISSELL & LIDDELL LLP, (404) 870-4686, llugo@lockelord.com
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Minnesota Attorney General Settles Annuity Suit with Allianz Life -
The Minnesota Attorney General Lori Swanson settled a suit against Allianz Life Insurance Company of North America over allegations of unsuitable sales of deferred annuities to seniors, which Allianz denied throughout the litigation. The settlement calls for additional suitability standards and procedures, as well as restitution for claimants if it is determined that certain prior transactions were unsuitable at the time of purchase.
Michael J. Rothman - WINTHROP & WEINSTINE, P.A., (612) 604-6486, mrothman@winthrop.com
In the Matter of American Investors Life Insurance Company, AmerUs Life Insurance and Senior Benefit Services (Department File No. IN 2406570/PEG) -
The Minnesota Department of Commerce ("Department") entered into a Consent Order with the American Investors Life Insurance Company and two of its subsidiaries (collectively, "AIL") following a market conduct examination of the companies. The Consent Order alleged, inter alia, that AIL and its agents made numerous unsuitable sales, engaged in deceptive sales practices, and sold products that had not been approved in Minnesota. According to the terms of the Consent Order, AIL agreed to pay civil penalties of $1.4 million, establish an independent third-party process to review consumer complaints (and make restitution, if appropriate), and implement numerous internal compliance controls relating to suitability, training and marketing.
John A. Knapp, Esq. - WINTHROP & WEINSTINE, P.A., (612) 604-6404, jknapp@winthrop.com
Title Insurance Enforcement Actions (Miscellaneous Department Files) -
Over the past year and a half, the Minnesota Department of Commerce ("Department") working independently and/or jointly with the U.S. Housing and Urban Development ("HUD"), has cracked down on various alleged kickback schemes in which title insurance companies set up sham affiliated business arrangements with real estate developers, real estate agents and brokers, residential building contractors, and mortgage originators. The purpose of such arrangements, according to the Department's allegations, was to circumvent state and federal laws which prohibit direct payment for referral of services. The Department imposed total civil penalties of more than $1 million, with the largest being a $500,000 penalty against First American Title Insurance. First American had arranged at least thirty-five (35) sham affiliated businesses with more than 600 referral partners.
John A. Knapp, Esq. - WINTHROP & WEINSTINE, P.A., (612) 604-6404, jknapp@winthrop.com
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Fifth Circuit Upholds Policy Exclusions in Katrina Homeowner Litigation -
On November 6, 2007, in Tuepker v. State Farm Fire & Casualty Company, App. No. 06-61075, the United States Court of Appeals for the Fifth Circuit reaffirmed its prior holdings in Leonard v. Nationwide Mutual Insurance Co., App. No. 06-61130, that flood exclusions in homeowner policies are valid under Mississippi law and can be used to exclude water damage caused by Hurricane Katrina. The Court also reaffirmed that anti-concurrent causation language is valid and enforceable under Mississippi law. Leonard held that the anti-concurrent causation language in the policy was not ambiguous, the water damage exclusion in the policy was valid and enforceable and excluded from coverage damage caused by "storm surge" associated with hurricanes. Leonard was the first appellate ruling concerning Hurricane Katrina-related insurance litigation in Mississippi.
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
New Commissioner of Insurance Elected -
Republican State Senator Mike Chaney was elected Commissioner of Insurance in the November 6 general election. Chaney will replace George Dale who was defeated 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.
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
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Governor Richardson Announces Plan to Achieve Universal Health Coverage -
On October 25th New Mexico Governor, Bill Richardson, announced his "Health Solutions New Mexico Plan" which is a comprehensive reform proposal to provide all New Mexicans with health insurance and to redesign the way health care is delivered in the state. The governor will propose legislation to implement his plan in the 2008 session which will include among other elements, guaranteed issue of coverage, maximum administrative expense levels, phased in employer coverage mandates and electronic medical records and the creation of the Health Coverage Authority to manage this new system.
Gary Kilpatric, Esq. - MONTGOMERY & ANDREWS, P.A., (505) 982-3873, gkilpatric@montand.com
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New York Liquidation Bureau Not a State Agency Subject to Audit by State Comptroller -
New York's highest Court, the Court of Appeals, has held that the New York Liquidation Bureau is not a state agency subject to audit by the State Comptroller. The key to the decision was the Court's finding that the assets of the estates of insurance companies in receivership are not state funds.
Francine L. Semaya, Esq. - , (732) 241-8090, flsemaya@gmail.com and William K. Broudy, Esq. - NELSON LEVINE de LUCA & HORST, LLC, (212) 233-3254, wbroudy@nldh.com
New York Insurance Department Issues Proposed Regulation for Comment -
The New York Insurance Department has issued for comment a proposed regulation that would require property/casualty insurance companies and reinsurers doing business in New York to set aside reserves, based on a percentage of premiums, to fund the payment of claims resulting from catastrophic losses. Superintendent Eric Dinallo stated that the purpose of the fund is to start building protection against the potential for large hurricane losses.
Francine L. Semaya, Esq. - , (732) 241-8090, flsemaya@gmail.com and William K. Broudy, Esq. - NELSON LEVINE de LUCA & HORST, LLC, (212) 233-3254, wbroudy@nldh.com
Proposed Amendments to Regulation 20 (11 N.Y.C.R.R. 125) -
In a move to increase capacity in the reinsurance market, the New York Insurance Department has released a working draft of amendments to a regulation that would make it much easier for the highest rated U.S. and non-U.S. reinsurance companies to assume reinsurance in New York. Under the proposed amendments to Regulation 20 (11 N.Y.C.R.R. 125), targeted to go into effect on July 1, 2008, reinsurers not authorized or accredited to do business in New York with a triple A credit rating, or its equivalent, from two rating companies would be exempt from posting collateral to qualify to write business in New York.
Francine L. Semaya, Esq. - , (732) 241-8090, flsemaya@gmail.com and William K. Broudy, Esq. - NELSON LEVINE de LUCA & HORST, LLC, (212) 233-3254, wbroudy@nldh.com
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Corporate Governance Standards -
The Rhode Island General Assembly has enacted new legislation which requires domestic insurance companies to establish certain minimum corporate governance standards by July 1, 2008. The key components of the new law, R.I. Gen. L. § 27-1-2.1, are that (i) the board of directors be compromised of between five and twenty-one members, meet a minimum of twice a year, maintain a written attendance policy, establish an audit committee, and review audit committee minutes; (ii) the audit committee meet twice a year, act pursuant to a charter, and approve the selection of and ensure proper reporting by the insurer's independent auditor; (iii) the insurer adopt a written code of ethics for officers and directors and a policy for employees to report malfeasance; (iv) for domestic mutual insurers and insurers writing more than one hundred million dollars in premium, the majority of board and audit committee members be independent and the audit committee approve all related party transactions; and (v) the bylaws be consistent with the new governance standards.
John J. Partridge, Esq. - PARTRIDGE SNOW & HAHN LLP, (401) 861-8200, jjp@psh.com, Brian Spero - PARTRIDGE SNOW & HAHN LLP, 401.861.8200, bjs@psh.com and Jennifer R. Cervenka, Esq. - PARTRIDGE SNOW & HAHN LLP, , jrc@psh.com
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Proposed Rule on Auto Clubs out for Comment -
The Tennessee Department of Commerce and Insurance has issued a proposed rule relating the to licensure and regulation of automobile clubs and associations operating in the state. A public rulemaking hearing on the proposed rule is scheduled for December 20.
T. Stephen C. Taylor, Esq. - BASS, BERRY & SIMS, PLC, (615) 742-7758, staylor@bassberry.com and Robins H. Ledyard, Esq. - BASS, BERRY & SIMS, PLC, (615) 742-6259, rledyard@bassberry.com
TDCI Releases Three Draft Bills on Protection of Seniors -
The Tennessee Department of Commerce and Insurance recently circulated three draft bills related to protection of senior citizens residing in the state that it will seek to enact when the Tennessee General Assembly reconvenes after the first of the year. The three measures would enhance the Department's jurisdiction and authority over charitable gift annuities, long term care insurance and viatical settlements -- all areas where the Department is concerned seniors are particularly vulnerable to fraud and abuse.
T. Stephen C. Taylor, Esq. - BASS, BERRY & SIMS, PLC, (615) 742-7758, staylor@bassberry.com and Robins H. Ledyard, Esq. - BASS, BERRY & SIMS, PLC, (615) 742-6259, rledyard@bassberry.com
Insurance Producer Bill Could Require Fingerprints -
Proposed legislation circulated by the Tennessee Department of Commerce and Insurance would authorize the Commissioner to require applicants for Tennessee producer licenses to submit fingerprints as part of the application process. The measure, which would amend TCA 56-6-106, also would require applicants to pay a fee to cover federal and state criminal background checks by the FBI and the Tennessee Bureau of Investigation.
T. Stephen C. Taylor, Esq. - BASS, BERRY & SIMS, PLC, (615) 742-7758, staylor@bassberry.com and Robins H. Ledyard, Esq. - BASS, BERRY & SIMS, PLC, (615) 742-6259, rledyard@bassberry.com
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Assembly Committee on Insurance Public Hearing -
An informational hearing will be scheduled for Thursday, November 29, 2007, from 11:00 a.m. to 1:00 p.m. for the Assembly Committee on Insurance. NOTE: This is not the regularly scheduled meeting date.
The topic will be the use of credit reports by insurance companies and will be invited speakers only.
Kevin G. Fitzgerald, Esq. - FOLEY & LARDNER LLP, (414) 297-5841, kfitzgerald@foley.com
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