Federation of Regulatory Counsel, Inc.

February 2008

Greetings,

The February 2008 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

Federal News

US Treasury Regulatory Review -

In October, the US Treasury Department asked for public comment on the regulatory structures for financial institutions -- including insurance companies -- as a part of Treasury's on-going initiatives to maintain the competitiveness of United States capital markets. Treasury's request was focused on a series of specific questions and had a relatively short time fuse -- November 21. Over 370 comments were filed, including several from Baker & Daniels clients. It is likely that Treasury will eventually publish the comments and then release a reform blueprint for the U.S. marketplace. As Treasury said in its press release, "Treasury believes it is important to continue to evaluate our regulatory structure to consider ways to improve efficiency, reduce overlap, strengthen consumer and investor protection and ensure that financial institutions have the ability to keep pace with evolving markets." In short, it appears that Treasury may this year propose changes for regulatory reform to be considered by the next Administration and Congress.

Charles T. Richardson, Esq. - BAKER & DANIELS LLP, (202) 312-7487, crichardson@bakerd.com

TRIA Extended -

On December 26, President Bush signed a 7-year extension of the Terrorism Risk Insurance Act. Five days later, the US Treasury Department issued interim guidance on TRIA. Treasury's notice provides guidelines to insurers, policyholders, state insurance regulators, and the public concerning changes to the law, including a revised definition of an "act of terrorism" covered by the Act and changes to mandatory availability and disclosure requirements.

Charles T. Richardson, Esq. - BAKER & DANIELS LLP, (202) 312-7487, crichardson@bakerd.com

Arizona

State Compensation Fund -

The Arizona State Compensation Fund, which has a 55% workers' compensation market share, indicated that it intends to request the Legislature to permit it to become a private mutual workers' compensation insurance company pursuant to a plan of mutualization to be filed with the Arizona Department of Insurance within the next two (2) years. The intent of the legislation is to convert the State Fund to a private insurer with the same benefits and burdens as any other licensed workers' compensation insurer doing business in the State.

J. Michael Low, Esq. - LOW & CHILDERS, P.C., (602) 266-1166, mlow@lowchilders.com

Captive Insurance Administrator -

Rod Morris, the Captive Insurance Administrator at the Arizona Department of Insurance, announced that he would be leaving the Department to accept the position of Vice President of Political Risk with the Overseas Investment Corporation in Washington, D.C. Arizona currently has over 100 captive insurance companies and the Director, Christina Urias, indicated that she would be actively recruiting a new Administrator to replace Mr. Morris.

J. Michael Low, Esq. - LOW & CHILDERS, P.C., (602) 266-1166, mlow@lowchilders.com

Connecticut

Connecticut Bulletin Exempts Certain Commercial Lines from Filing Requirements -

On January 7, 2007, Connecticut Commissioner of Insurance, Thomas R. Sullivan, issued Bulletin PC-03 (the "Bulletin"), announcing a one-year pilot program under which certain lines of commercial insurance will be exempt from state rate and form filing requirements. During this period, insurers must submit to the Connecticut Insurance Department (the "Department"), for informational purposes only, forms, rates and rule filings exempted by the Bulletin with a cover letter or electronic code indicating the filings' exempt status. The Department will utilize this program to analyze whether these commercial product lines are suitable for further exemption or should again be subject to rate and form filing requirements.

Michael T. Griffin, Esq. - Edwards Angell Palmer & Dodge LLP, 860.541.7764, mgriffin@eapdlaw.com and Alan J. Levin, Esq. - EDWARDS ANGELL PALMER & DODGE LLP, (860) 541-7747, alevin@eapdlaw.com

Delaware

Delaware Department of Insurance Reversed by Delaware Supreme Court -

After two years of litigation, on January 2, 2008, the Delaware Supreme Court (Del Pesco, J.) issued an opinion and order holding that the Department's 2005 adoption of Regulation 703 was an invalid exercise of the Department's rulemaking authority. The opinion can be found at American Insurers Association, et al., v. Dep't of Ins., 2008 WL 44322 (Del.Super.). Regulation 703 would have banned the practice of canceling or non-renewing homeowners coverage on the basis of claims experience. Substantially similiar legislation is expected to be introduced into the Delaware State Senate this session.

Michael W. Teichman, Esq. - PARKOWSKI, GUERKE & SWAYZE, P.A., (302) 594-3331, mteichman@pgslegal.com

District of Columbia

Dictrict Of Columbia Approves Reciprocal RRG -

The Department of Insurance Securities and Banking approved a reciprocal risk retention group created by the conversion of an incorporated D.C. domiciled rrg into a reciprocal and the assumption by that reciprocal of policies issued by a Cayman Island captive which reinsured the original rrg. All members of the reciprocal are non profit entities which obtained very favorable federal tax treatment as a result of the conversion.

Arthur D. Perschetz, Esq. - MULDOON MURPHY & AGUGGIA LLP, (202) 686-8624, aperschetz@muldoonmurphy.com

Florida

Florida OIR Issues Draft PIP Health Care Provider Certification Form -

Pursuant to a public hearing relating to Proposed Rule 690-170.0155(n), "Personal Injury Provider Certification of Eligibility" held on December 18, 2007 at which comments were provided, the Florida Office of Insurance Regulation ("OIR") has created and issued a draft copy of the Certification form for consideration.

Completion of the form is necessary for a health care provider to become certified to perform reimbursable medical procedures under the newly-created Personal Injury Protection ("PIP") insurance law passed by the Florida Legislature in October, 2007.

The new law requires medical providers to meet specific certification criteria in order to provide treatment to patients covered by PIP. In order to be eligible for reimbursement, providers will be required to affirm, under penalty of perjury, that they are statutorily authorized to treat PIP patients.

To view a draft copy of the Certification form and read the recap of the December 18 hearing, click here.

Fred E. Karlinsky, Esq. - COLODNY, FASS, TALENFELD, KARLINSKY & ABATE, P.A., (954) 332-1749, fkarlinsky@cftlaw.com

Florida CFO Proposes Managing Cat Fund Within the SBA -

The House Insurance Committee plans to hold a workshop to review a proposal by Florida Chief Financial Officer Alex Sink that would create a division within the Florida State Board of Administration ("SBA") to manage the Florida Hurricane Catastrophe Fund ("FHCF").

The proposal appears to decrease the amount of reinsurance offered by the FHCF in the Temporary Increase in Coverage Limit ("TICL") from an aggregate of $12 billion to $9 billion, and the proposal also limits an insurer's reimbursement amount to 70 percent of the TICL coverage.

To view the CFO's proposal, click here.

Fred E. Karlinsky, Esq. - COLODNY, FASS, TALENFELD, KARLINSKY & ABATE, P.A., (954) 332-1749, fkarlinsky@cftlaw.com

Deadlines for the April 2008 Citizens Takeout Have Changed -

The April 2008 Citizens Property Insurance Corporation assumption date has been changed from April 15, 2008 to April 8, 2008.

To view the revised 2008 assumption calendar which reflects the new deadlines for this assumption, as well as assumptions for the remainder of 2008, click here.

Also, as the assumption date has been moved up, the deadline to submit an application to the Florida Office of Insurance Regulation to participate in the April 8th takeout has been changed to Monday, February 4, 2008. The previous deadline was Friday, February 8, 2008.

Fred E. Karlinsky, Esq. - COLODNY, FASS, TALENFELD, KARLINSKY & ABATE, P.A., (954) 332-1749, fkarlinsky@cftlaw.com

Florida Insurer Tax Returns and Reports To Be Made on Florida Department of Revenue Forms -

The Florida Department of Revenue has issued forms that must be used by insurers to complete tax returns and reports as of January 1, 2008. Requirements for attorney or executive officer affidavits on these forms are described by the new Rule, 12B-8.003 Tax Statement; Overpayments. The Department also stipulates how refunds will be made to insurers for tax overpayments.

Department of Revenue Forms for Insurance Premium Taxes

(5)(a) DR-907 Florida Insurance Premium
(b) DR-907N Information for Filing Insurance Premium
(6)(a) DR-908 Insurance Premium Taxes and Fees Return for Calendar
(b) DR-908N Instructions for Preparing Form DR-908 Florida
(7) DR-350900 2007 Insurance Premium Tax Information for Schedules XII and XIII, DR-908

Link to full text of Rule: https://www.flrules.org/gateway/ruleNo.asp?id=12B-8.003

Fred E. Karlinsky, Esq. - COLODNY, FASS, TALENFELD, KARLINSKY & ABATE, P.A., (954) 332-1749, fkarlinsky@cftlaw.com and Richard J. Fidei - COLODNY, FASS, TALENFELD, KARLINSKY & ABATE, (954) 332-1758, rfidei@cftlaw.com

Fifth District Court: PIP Insurers Not Required To Release Records To Insureds Pre-Suit -

In a unanimous opinion, the Fifth District Court of Appeal has held that Personal Injury Protection ("PIP") insurers are not required to release their PIP logs to an insured or his/her assignee. The decision in Geico v. Florida Emergency Physicians relied on an earlier Third District Court of Appeal decision, which determined that the PIP statute neither requires nor addresses "the insured's right to access documents prepared internally by the insurer" pre-suit. A similar case involving the same central issue is still pending before the Fifth District.

To view a copy of the Opinion, click here: http://www.cftnews.com/uploads/1595_Geico%20v%20Florida%20Emergency%20Physicians.doc

Citizens Insurance files changes to eligibility and cancellation rules -

Citizens Property Insurance Corporation recently filed changes to its eligibility and cancellation rules in an attempt to mitigate the negative impacts of short-term surplus lines policies.

The Rule changes include:

Not permitting the transfer of coverage into Citizens for a period of six months if the current policy is written for less than an annual term.

Amending the short rate cancellation provision to apply to Citizens wind-only policies that are cancelled mid-term and replaced with coverage that is issued for less than an annual policy term.

Florida Reinsurance Collateral Change Rule Development Recently OKd -

During the 2007 Regular Session, the Florida Legislature passed a rule that modifies reinsurance requirements by giving the Insurance Commissioner the ability to establish lower collateral requirements for foreign reinsurers that are highly rated (by A.M. Best or Moodys, for example) and are financially sound. Recently approved for publication by the Florida Cabinet, Proposed Rule 69O-144.005: Credit for Reinsurance implements this new legislation by setting up a procedure by which a reinsurer can become an "eligible reinsurer," and receive the benefit of this new law, as well as allow a primary insurer to receive credit when it purchases reinsurance from an eligible reinsurer.

For the complete text of the Proposed Rule, click: https://www.flrules.org/gateway/readFile.asp?sid=1&tid=4839735&type=1&File=69O-144.005.htm

Florida Senate Announces Property Insurance Accountability Committee -

The Florida Senate will hold joint meetings of the Banking & Insurance and the Judiciary committees beginning January 22^nd to examine why the property insurance rate filings have not gone down as much as was anticipated after the legislative actions over the past year. The "Select Committee on Property Insurance Accountability" will require insurance company executives to appear before the select committee and provide sworn testimony regarding rate filings they have made this past year. Although the list of executives that will be called to testify is unknown at this point, the Chairman, Senator Atwater has indicated they are ready to issue subpoenas to require those who are asked will testify. The Chairman stated that only about 17% of the market share providers have complied with the legislation to this point, which was not the level of savings legislators were told would occur during negotiations with lobbyists who cited reinsurance as the biggest hurdle in lowering rates. Both the Insurance Commissioner Kevin McCarty, and Governor Crist, support the committee's formation.

Gary Sumner - MANG LAW FIRM, P.A., (850) 222-7710, gsumner@manglaw.com

Georgia

Loan Insurance Class Action Settles for $45 Million -

Muscogee County Superior Court Judge Douglas C. Pullen preliminarily approved the settlement on October 31, 2007. The settlement agreement provides that JMIC Life Insurance Co., will refund each class member unearned premiums for credit life and credit disability insurance policies, purchased at the time loans were taken out and paid up-front, to cover payments of the loans in case of death or disability. The named plaintiff claimed that the company violated the terms of his policy by not providing him with a refund on the unearned portion of the premium, after early payment of the loan.

Brian T. Casey, Esq. - LOCKE LORD BISSELL & LIDDELL LLP, (404) 870-4638, bcasey@lockelord.com

Fireman's Fund Insurance Co. v. University of Georgia Athletic Association -

The state Court of Appeals has decided an insurance coverage dispute in favor of the University of Georgia Athletic Association in a case stemming from a suit brought against the association by a former football player injured in the field. The issue in the underlying case is based on what the coach may have promised the player in the wake of his injury. The majority concluded that Fireman’s Fund must defend the association despite the Fund’s argument that two exclusions to the association’s policy meant that it had no duty to defend the association against the claim.

Brian T. Casey, Esq. - LOCKE LORD BISSELL & LIDDELL LLP, (404) 870-4638, bcasey@lockelord.com

Georgia Adopts New Uninsured Motorist Coverage Notice Regulation -

Georgia Adopts New Regulation Requiring Uninsured Motorist Coverage Notice (Ga. Comp. R. & Regs. 120-2-95). The Georgia Office of Insurance and Safety Fire Commissioner has issued an order adopting an amendment to Regulation 120-2-28-.06 of the Georgia Motor Vehicles Accident Reparations Act. The amendment requires automobile insurance companies issuing new or renewed policies to provide policyholders with an informational notice concerning uninsured motorists coverage. The notice requirement is effective for new policies on January 15, 2008, and April 1, 2008 for renewals.

Brian T. Casey, Esq. - LOCKE LORD BISSELL & LIDDELL LLP, (404) 870-4638, bcasey@lockelord.com

Maine

Updated Coverage Requirements Relating to Acts of Terrorism -

The Maine Bureau of Insurance has recently released Bulletin 348, which replaces Bulletin 341, and advises insurers doing business in Maine of the updated coverage requirements relating to acts of terrorism in light of the Terrorism Risk Insurance Program Reauthorization Act of 2007 (the “Reauthorization Act”), and to provide guidance regarding rate and form filing procedures. The original Terrorism Risk Insurance Act of 2002 has now been extended for an additional seven years through December 31, 2014 with the enactment of the Reauthorization Act.

D. Michael Frink, Esq. - CURTIS THAXTER STEVENS BRODER & MICOLEAU LLC, (207) 774-9000, mfrink@curtisthaxter.com

Mississippi

Fifth Circuit Upholds Legislative Taking -

The Fifth Circuit Court of Appeals recently ruled that the Mississippi Legislature had authority to raid an insurance fund in 2004 to balance the state budget. The Mississippi Surplus Lines Association (stamping office) claimed it was a private entity and not subject to legislative appropriation or control by the state. The Court affirmed the District Court's ruling that the funds were never private, but were public funds collected on behalf of the Commissioner of Insurance . Mississippi Surplus Lines Association v. State of Mississippi, 2008 U.S. App. LEXIS 855 (January 15, 2008).

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

Hurricane Katrina - Criminal Indictments and Pleas -

In November 2007, lawyer Richard "Dickie" Scruggs was indicted in federal court along with four others for allegedly conspiring to bribe a Mississippi judge in exchange for making a ruling favorable to Scruggs in a fee dispute with other lawyers concerning Hurricane Katrina-related homeowner insurance litigation. Two of the five, former State Auditor Steve Patterson and lawyer Tim Balducci, have agreed to plead guilty. The trial for Scruggs, his son and another law partner is scheduled to begin March 31.

Another prominent Mississippi plaintiffs lawyer, Joey Langston, agreed to plead guilty to conspiring to improperly influence a different Mississippi judge for a ruling favorable to Scruggs in a separate fee dispute involving asbestos litigation.

Finally, State Farm has filed suit against Mississippi Attorney General Jim Hood alleging that Hood used the threat of criminal prosecution to extract civil settlements in Katrina related litigation where Scruggs represented homeowners. Scruggs was issued a subpoena requiring him to testify on February 1, 2008. Hood filed suit against State Farm and other major carriers shortly after Hurricane Katrina seeking to strike down certain contractual provisions, but State Farm was dismissed from that suit after mass settlement of the homeowners suits.

Legislation -

The 2008 Regular Session of the Mississippi Legislature convened January 8. Insurance legislation being considered includes making the office of Commissioner of Insurance an appointed rather than elected position, policyholder bill of rights, various mandated health benefits, requirements for carriers to provide written notice of flood exclusions and revisions to laws that regulate stacking of uninsured motorist coverage.

New Commissioner of Insurance Mike Chaney -

Republican Mike Chaney was sworn in as Commissioner of Insurance on December 31. Chaney replaces George Dale who was defeated in the August 7 Democratic primary. Dale had been Mississippi Commissioner of Insurance since 1975 and was the longest-serving commissioner of insurance in the United States.

Nebraska

Nebraska Department of Insurance -

Ann Frohman has been appointed Nebraska Director of Insurance. She previously was Deputy Director and General Counsel. Director Frohman suceeds L. Tim Wagner, who who passed away last October. Bruce Ramgy who has served as Chief of Market Regulation was named Deputy Director. Christine Neighbors was prmoted to the General Cousel position.

Lawrence F. Harr - LAMSON, DUGAN & MURRAY, LLP, (402) 397-7300, lharr@ldmlaw.com

New Mexico

New Mexico Legislature Debates Competing Health Care Reform Bills -

In response to Governor Bill Richardson's announcement in his state of the state address that the New Mexico Legislature will focus on health care issues in the 2008 session, legislators have introduced a number of bills that would alter significantly the way that health care is delivered and financed in the state, the most important of those being the Governor's proposal entitled "The Health Solutions Act " (HB 62) and identical single payer proposals both entitled "The Health Security Act" found in HB 214 and SB 3. Based in part on recommendations of the Health Coverage for New Mexicans Committee, the Governor's bill would establish a Health Coverage Authority, put in place both individual and employer mandates, and enact a number of reforms to the private market, while the other two bills are single-payer bills which Governor Richardson has pledged to veto although interest in the single payer approach has increased over the past few years as evidenced by the facts that 24 counties and cities have passed resolutions requesting that the legislature pass the Health Security Act and a coalition supporting a single payer system has attracted over 125 organizations including churches, medical societies, NAACP chapters, and unions.

Gary Kilpatric, Esq. - MONTGOMERY & ANDREWS, P.A., (505) 982-3873, gkilpatric@montand.com

New York

Broker Not Required to Disclose Commission to Insured -

The Office of General Counsel of the New York Insurance Department has issued an Opinion Letter advising that: "At present, and as a general matter, there is no legal requirement that a broker disclose to its clients the commission that it earns on the policies that it places". The Opinion Letter also advises that the Department expects to promulgate a regulation in 2008 "to establish requirements regarding disclosure of all sources and amounts of compensation received by licensed insurance brokers and certain agents".

William K. Broudy, Esq. - COZEN O'CONNER, (212) 908-1289, wbroudy@cozen.com and Francine L. Semaya, Esq. - COZEN O'CONNER, (212) 908-1270, fsemaya@cozen.com

Rhode Island

Filing of Surplus Lines Affidavits -

The Rhode Island Department of Business Regulation has issued Insurance Bulletin 2008-2 relating to the filing of surplus lines affidavits that are presently required of licensed surplus lines brokers by R.I. Gen. L. § 27-3-38 and Insurance Regulation 11. To facilitate their timely filing, effective January 25, 2008, surplus lines affidavits may be filed electronically with the Insurance Commissioner within 60 days of a broker's procurement of a surplus lines policy.

John J. Partridge, Esq. - PARTRIDGE SNOW & HAHN LLP, (401) 861-8200, jjp@psh.com, Jennifer R. Cervenka, Esq. - PARTRIDGE SNOW & HAHN LLP, , jrc@psh.com and Melissa E. Darigan, Esq - PARTRIDGE SNOW & HAHN LLP, , med@psh.com

Tennessee

Administration Legislative Package Expected to Include TDCI Bills -

Up to five bills previously circulated to insurance industry representatives by the Tennessee Department of Commerce and Insurance are expected to be introduced this month as part of the Bredesen Administration's legislative package in the second session of the 105th General Assembly. The measures, which generally track NAIC model laws, would enhance and clarify TDCI's regulatory authority in the areas of unfair trade and unfair claims settlement practices, producer licensing, charitable gift annuities, long term care insurance and viatical settlements.

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

Meeting Scheduled for Proposed Rule on Workers' Compensation Pools -

The Tennessee Department of Commerce and Insurance has scheduled a meeting on February 15, 2008 to receive industry comments on draft proposed amendments to regulation of self-insured workers' compensation pools operating in the state. The proposed amendments would revise current Rule 54 in a number of substantive areas, including financial reporting requirements, reserves, dividends, examinations and assessments.

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

Financial Analysis Director Position Open -

The important position of Financial Analysis Director within the Insurance Division of the Tennessee Department of Commerce and Insurance is vacant following the recent departure of Louise Booth. Commissioner Newman has not as yet announced a successor for the position.

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

Washington

Triple Damages for Insurer Bad Faith Approved by Voters -

The insurance industry's multi-million dollar campaign failed to convince voters to overturn 2007 legislation allowing an award of triple damages for bad faith insurance claim handling. The "unreasonable" standard is a comparatively low one; proof of malice or recklessness is not required. By its terms, the legislation applies to "first party" claims but this may include the relationship between a liability insurer and its insured. One of the first court battles will likely address retroactivity of the legislation. Health insurance is not subject to the act.

Timothy J. Parker - CARNEY BADLEY SPELLMAN, P.S., (206) 622-8020, parker@carneylaw.com