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Greetings, The May 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 Sign up to receive FORC Alerts (and Journals) via email.
U.S. Rep. Ron Klein Holds Press Conference Regarding the Homeowners’ Defense Act of 2007 - On Thursday, March 20, 2008, United States Representative Ron Klein held a Press Conference to provide an update regarding the National Catastrophe Insurance Bill. Congressman Klein's legislation, the Homeowners' Defense Act of 2007, passed the U.S. House of Representatives on November 8, 2007 and is currently pending in the U.S. Senate. Congressman Klein stated that this Bill has national relevance inasmuch as many states recently have experienced catastrophic events and the corresponding issues relating to homeowner's insurance. Congressman Klein explained that the purpose of the National Catastrophe Insurance Bill is to provide for a viable, self-sustaining system whereby states are able to pool and blend their catastrophe risk, thereby fostering a competitive market and providing affordability and accessibility to homeowners. Congressman Klein emphasized that the National Catastrophe Bill is a proactive approach that allows state-sponsored insurance funds to voluntarily pool their catastrophe risk, and then transfer that risk to the private markets through catastrophe bonds and reinsurance contracts. The Congressman's bill also provides for a ‘backstop' mechanism whereby the federal government would be empowered to make loans to a state facing financial shortfalls after a natural catastrophe. Congressman Klein expects that the bill will likely reach the Committee level in the U.S. Senate within the next two months. To view the complete press conference report, click here. Fred E. Karlinsky, Esq. - COLODNY, FASS, TALENFELD, KARLINSKY & ABATE, P.A., (954) 332-1749, fkarlinsky@cftlaw.com
Commissioner Over Rules ALJ - The Colorado Commissioner overrode a recent ALJ decision that ruled that the Division did not have authority to levy fines for filing documents late or for incomplete responses. The Commissioner determined that the Division had sufficient authority to fine an insurance company and that its regulation was valid. Hugh Alexander, Esq. - ALEXANDER LAW FIRM, P.C., (303) 825.7307, ha@alexlawfirm.com
Citizens Property Insurance Corporation Issues Assumption Calendar - Citizens Property Insurance Corporation ("Citizens") issued a revised assumption calendar for the depopulation of its commercial residential multi-peril account as a result of a recent Order issued by the Florida Office of Insurance Regulation ("OIR") pertaining to the takeout program. To view a copy of the OIR Order, click here. Fred E. Karlinsky, Esq. - COLODNY, FASS, TALENFELD, KARLINSKY & ABATE, P.A., (954) 332-1749, fkarlinsky@cftlaw.comFlorida Office of Insurance Regulation Files Formal Complaint to Suspend American General Life Insurance Co. License - Florida Insurance Commissioner Kevin McCarty announced that the Office of Insurance Regulation (Office) filed an administrative complaint against the American General Life Insurance Co. (American General) seeking to suspend or revoke its certificate of authority to write insurance policies in Florida and requiring the company to cease and desist from unfair trade practices as defined in the Freedom to Travel Act, Section 626.9541(1)(dd), Florida Statutes. The complaint specifically cites multiple counts of American General refusing to provide policies or limiting the amount, extent or kind of life insurance based solely on the individual’s future lawful travel plans. “When assessing their life insurance needs, consumers should not have to worry about how their travel plans might affect their ability to get insurance,” said General Counsel Steve Parton. “Seeking to suspend a company’s license is not something we take lightly; however, given that these actions are in clear violation of the law, the Office is left with little choice. The Office has warned American General in the past, but they have refused to change their practices.” This is the first time the Office has sought to suspend or revoke a life insurance company’s license for violating the Freedom to Travel Act. To read the complete report, click here. Fred E. Karlinsky, Esq. - COLODNY, FASS, TALENFELD, KARLINSKY & ABATE, P.A., (954) 332-1749, fkarlinsky@cftlaw.comFlorida Insurance Commissioner McCarty Amends Citizens’ Take-Out Procedures and Requires Policyholder Notification of Offers from Private Insurance Companies - Florida Insurance Commissioner Kevin McCarty signed an Order on March 31, 2008 approving Citizens’ take-out plans for the year and requiring Citizens Property Insurance Corp. (Citizens) to notify policyholders whose agents have refused to allow their policies to be removed from Citizens. The plans also provide for the first take-outs of commercial-residential or condominium association policies. Under current Florida law, companies approved to remove policyholders from Citizens, known as take-out companies, must first get permission from the policyholder’s agent. If the agent is unable or unwilling to transfer the Citizens’ policy to the take-out company, the policy stays in Citizens.
As a time-saving measure, Citizens notifies take-out companies of agencies that will not agree to take-outs. Because take-out companies have been instructed to avoid selecting policies from these agencies that do not consent to take-outs, the policyholders may never know that a take-out offer was received. Beginning May 1, the Order requires Citizens to send all qualified policies to take-out companies for selection without instructing them not to choose qualified policies from a list of agents and agencies that have refused in the past. If the agent refuses the take-out, Citizens must notify the policyholder of their agent’s refusal and provide the take-out company’s contact information should the policyholder wish to be removed from Citizens. To view the complete report, click here. Fred E. Karlinsky, Esq. - COLODNY, FASS, TALENFELD, KARLINSKY & ABATE, P.A., (954) 332-1749, fkarlinsky@cftlaw.com Florida Office of Insurance Regulation Submits Annual Report on Freedom to Travel Law - Florida Insurance Commissioner Kevin McCarty submitted the 2008 Freedom to Travel Report to legislative leaders detailing the Office of Insurance Regulation’s (Office) efforts to implement the “Freedom to Travel Act,” which was passed in 2006, and codified into law at Section 626.9541(1)(dd), Florida Statutes. The legislation placed strict limitations on insurance companies’ ability to deny or increase premiums for life insurance based on foreign travel. The law states that an insurer may not refuse to issue life insurance to; refuse to continue the life insurance of; or limit the amount, extent, or kind of life insurance coverage available to an individual based solely on the individual's past lawful foreign travel experiences or future travel plans. Task Force on Citizens Property Insurance Corporation Claims Handling and Resolution -- February 26, 2008 - The Task Force on Citizens Property Insurance Corporation ("Citizens") Claims Handling and Resolution ("Task Force") held a meeting on Tuesday, February 26, 2008. Discussion included Citizens' policy administration, its customer service call center, non-claim concerns, daily claims handling, hurricane claims, and proposed appraisal umpire legislation issues. To view a copy of the agenda, click here. Paul Palumbo, Citizens' Senior Vice President of Underwriting, gave a report detailing Citizens' policy application process, underwriting, inspection criteria, Coverage A replacement cost estimating, policy issuance, premium collection and processing, policy renewal, the schedule of improvements to the claims process, and an update on high-risk multi-peril policies. Citizens will be implementing the following underwriting changes as of January 1, 2009:
To view a copy of Mr. Palumbo's report, click here. To view the complete meeting report, click here. Fred E. Karlinsky, Esq. - COLODNY, FASS, TALENFELD, KARLINSKY & ABATE, P.A., (954) 332-1749, fkarlinsky@cftlaw.comCitizens Property Insurance Corporation Actuarial and Underwriting Committee Meeting Report--February 28, 2008 - Citizens developed and filed a hurricane coverage exclusion for mobile homes that is inclusive of carports, screened enclosures and any attached structures added to the mobile home after it leaves the manufacturer’s premises. This exclusion plan has been expanded from the original carport and screened enclosures-only limitation due to actuarial findings. The new, more comprehensive exclusion list includes sunrooms as well as any other after-market addition to a mobile home. A similar change also has been effected to the optional coverage endorsement form that adds hurricane coverage for these structures into the policy on a limited basis. Policyholders and applicants with specified excluded attached structures will be eligible to add optional hurricane coverage for an additional fee. Wind-only policies will be affected by this new exclusion starting September 1, 2008 and multi-peril policies will be affected starting January 1, 2009. The Committee approved the changes. To read the complete report, click here. Fred E. Karlinsky, Esq. - COLODNY, FASS, TALENFELD, KARLINSKY & ABATE, P.A., (954) 332-1749, fkarlinsky@cftlaw.comFlorida Insurance Commissioner Orders Workers’ Compensation Insurance Companies to Refund Millions in Excess Profits - Florida Insurance Commissioner Kevin McCarty on February 20, 2008 ordered six workers' compensation insurance companies to return $4.2 million in excessive profits to their policyholders. Workers' compensation insurers are required to return profits in excess of 5 percent as set forth in Section 627.215, Florida Statutes. The Florida Office of Insurance Regulation performed an evaluation of submitted data that included, among other things, earned premium and incurred losses to determine if the insurers realized an excess profit for the three most recent calendar/accident years reported – 2003, 2004 and 2005. Fred E. Karlinsky, Esq. - COLODNY, FASS, TALENFELD, KARLINSKY & ABATE, P.A., (954) 332-1749, fkarlinsky@cftlaw.comState Considers New Round of Capital Build-Up Funding - The Florida Legislature continues to advance legislation that would allow residential property insurance to qualify for state-funded surplus notes. Like the initial program enacted two years ago, insurers would be able to obtain surplus notes of up to $25 million from the state to match new capital on a dollar-for-dollar basis. Travis L. Miller, Esq. - RADEY THOMAS YON & CLARK, P.A., (850) 425-6654, travis@radeylaw.comDFS Seeks Recoveries in Poe Insolvencies - The Florida Department of Financial Services has filed a lawsuit against certain individuals and entities associated with the Poe group of insurance companies. Three Poe insurers became insolvent as a result of the 2004 and 2005 hurricanes, ultimately leading to many of their 300,000+ policies being assumed into Florida's residual property insurance market. The suit alleges that certain individuals received improper distributions and caused the insurers to submit false financial statements. Travis L. Miller, Esq. - RADEY THOMAS YON & CLARK, P.A., (850) 425-6654, travis@radeylaw.comSuit Alleges Mediation Requirements Were Not Enforced - A plaintiff has filed suit against the Department of Financial Services and the Office of Insurance Regulation alleging that they did not properly enforced requirements for insurers to mediate property insurance claims. The state operated a mediation program after the 2004 and 2005 programs, and insurers were required to notify insureds of their right to participate in this program. The lawsuit alleges some insurers, and the Florida Insurance Guaranty Association as the party responsible for insolvent insurers' claims, did not refer cases to mediation when required to do so. The complaint asserts this resulted in insurers' underpaying claims and avoiding mediation fees they otherwise would have paid. Travis L. Miller, Esq. - RADEY THOMAS YON & CLARK, P.A., (850) 425-6654, travis@radeylaw.comAllstate Companies to Continue Writing New Business in Florida Pending Request for Rehearing on OIR Suspension - The Florida Office of Insurance Regulation (“OIR”) previously suspended the certificates of authority of Allstate Companies to write new insurance in Florida until they fully complied with OIR subpoenas served on Oct. 16, 2007. The suspension came after Florida Insurance Commissioner Kevin McCarty abruptly halted an OIR hearing into the Allstate Companies’ reinsurance program, their relationships with risk modeling companies, insurance rating organizations and insurance trade associations. Allstate appealed the suspension to the First District Court of Appeals, asserting that the Commissioner exceeded his authority. The Court stayed the suspension until it could consider the issue. On April 4, 2008, a First District Court of Appeals affirmed the suspension of the Allstate Companies. Currently, Allstate has filed a request for rehearing to the First District Court of Appeals, during which time it is authorized to continue writing new business in Florida. To view more information regarding this matter, click here. Fred E. Karlinsky, Esq. - COLODNY, FASS, TALENFELD, KARLINSKY & ABATE, P.A., (954) 332-1749, fkarlinsky@cftlaw.comOIR Proposed Rule Hearing: Credit for Reinsurance From Eligible Reinsurers - The Florida Office of Insurance Regulation (“OIR”) held a hearing on April 29, 2008, to discuss Proposed Rule 69O-144.007 regarding Credit for Reinsurance from Eligible Reinsurers. To view a copy of the hearing notice and Proposed Rule text, click here. The Proposed Rule would allow Florida Insurance Commissioner Kevin McCarty the discretion to enable unaccredited reinsurers to conduct business in Florida without having to post 100 percent collateral for their obligations under reinsurance contracts with Florida insurers. To view the complete report, including insurance industry comments offered at the hearing, click here. Fred E. Karlinsky, Esq. - COLODNY, FASS, TALENFELD, KARLINSKY & ABATE, P.A., (954) 332-1749, fkarlinsky@cftlaw.com
Uninsured Motorist Benefits - The grant of summary judgment to first insurer was affirmed and denial of summary judgment to second insurer was affirmed in the case where a motorist who was injured in an automobile accident brought personal injury action against driver of car that rear-ended her vehicle in a case where the parties disagreed on how O.C.G.A.§ 33-7-11’s $25K setoff should be divided between them. The Court of Appeals held that trial court could allocate half of the setoff to each insurer. Dairyland Ins. Co. v. State Farm Auto, Ins. Co., A07A1919 (01/17/08), 08 FDCR 158. Brian T. Casey, Esq. - LOCKE LORD BISSELL & LIDDELL LLP, (404) 870-4638, bcasey@lockelord.com and Lynn Lugo - LOCKE LORD BISSELL & LIDDELL LLP, (404) 870-4686, llugo@lockelord.comGeorgia General Assembly Passes UM Insurance Measure - The current law in Georgia prohibits the “stacking” of policies, however, a new measure received final approval from the General Assembly on March 6, 2008, allowing additional coverage (Senate Bill 276). The plan would give drivers the option to “stack” or supplement their UM policy on top of the at-fault driver's policy, giving additional coverage for individuals who are hit by drivers with low levels of insurance or none at all. The new measure allows insurers to set rates for private passenger motor vehicle insurance, other than the mandatory minimum limits, without approval of the insurance commissioner. Brian T. Casey, Esq. - LOCKE LORD BISSELL & LIDDELL LLP, (404) 870-4638, bcasey@lockelord.com and Lynn Lugo - LOCKE LORD BISSELL & LIDDELL LLP, (404) 870-4686, llugo@lockelord.comDeath Benefits - Evidence - In a case involving an appeal by a decedent's children from a prior marriage, the Georgia Court of Appeals held that evidence concerning change of beneficiary in the form of an affidavit stating that decedent had told witness that he mailed letter to insurer stating that he was divorced and wanted to change beneficiary on his policy was inadmissible hearsay. The court affirmed the summary judgement to decendent's ex-wife, who was the named beneficiary on his insurance policy. Stanton v. Fisher, A071916 (03/13/08), 08 FCDR 924. Brian T. Casey, Esq. - LOCKE LORD BISSELL & LIDDELL LLP, (404) 870-4638, bcasey@lockelord.com and Lynn Lugo - LOCKE LORD BISSELL & LIDDELL LLP, (404) 870-4686, llugo@lockelord.com
Fifth Circuit: ERISA Does Not Preempt Louisiana Insurance Directive - In January of 2003, the Louisiana Department of Insurance issued Directive 175 stating that, pursuant to public policy, subrogation provisions in insurance contracts cannot harm the insured, and an insurer invoking a subrogation or reimbursement provision is required to contribute to the attorney's fees incurred in obtaining recovery from a third party.
Further, the Directive stated that the Department will only consider for approval subrogation provisions which clearly convey to the insured that any right of recovery from third parties of the insurer is subordinate to the insured's right to be fully compensated for his damages. The Directive makes it clear that the Department will not approve subrogation language in a policy that excludes or reduces coverage for expenses incurred as a result of the treatment of injury or sickness caused by the fault of a third party.
A company providing subrogation services to employer health benefit plans asserted that Directive 175 was preempted by ERISA in an action that reached the United States Fifth Circuit Court of Appeals.
Noting that the savings clause of ERISA applies to "any law of any State" that "regulates insurance," the Fifth Circuit determined that the Directive did, in fact, qualify as a state law, and that it was specifically directed at the transaction of insurance and substantially affects insurance risk-pooling. Therefore, the Fifth Circuit found that the ERISA savings clause excluded Directive 175 from federal preemption. Van R. Mayhall, III - BREAZEALE, SACHSE & WILSON, LLP, (225) 381-3169, VM@bswllp.com and Van R. Mayhall, Jr., Esq. - BREAZEALE, SACHSE & WILSON, L.L.P., (225) 381-8009, vrm@bswllp.com Louisiana DOI 2008 Legislative Package - The Louisiana Department of Insurance is advancing an ambitious package of bills at the ongoing 2008 Regular Session of the Louisiana Legislature. Among the initiatives being supported by the Department:
A number of other initiatives are also being supported by the Department for the 2008 Regulation Session. Van R. Mayhall, Jr., Esq. - BREAZEALE, SACHSE & WILSON, L.L.P., (225) 381-8009, vrm@bswllp.com and Van R. Mayhall, III - BREAZEALE, SACHSE & WILSON, LLP, (225) 381-3169, VM@bswllp.com
New Insurance Superintendent Confirmed - Mila Kofman has been confirmed to fill the unexpired term of Alessandro Iuppa as the Superintendent of the Maine Bureau of Insurance. Prior to her appointment, Ms. Kofman, a lawyer, was an Associate Research Professor and Project Director at the Georgetown University Health Policy Institute. She studied state private health insurance market reforms, regulation, products, and financing strategies. She served on the NAIC Consumer Participation Board of Trustees for 6 years, the Board of Directors for URAC for 5 years, and was Co-editor for the Journal of Insurance Regulation for 3 years. She was also a federal regulator at the U.S. Department of Labor and was appointed Special Assistant to the Senior Health Care Advisor to the President at the White House to work on legislative and regulatory intiatives. She has appeared on NPR, CNN, CBS Evening News and has been widely cited in the national press. D. Michael Frink, Esq. - CURTIS THAXTER STEVENS BRODER & MICOLEAU LLC, (207) 774-9000, mfrink@curtisthaxter.com
Three-Point Plan for Strengthening Capacity of Financial Guaranty to Insure Municipal Bonds - New York Insurance Superintendent Eric Dinallo has outlined the New York Insurance Department's three-point plan for strengthening the capacity of financial guaranty insurers to insure municipal bonds. As the primary regulator for most of the nation's financial guaranty insurers with authority to insure municipal bonds ("bond insurers") , the Department has a) facilitated the flow of additional capital to distressed bond insurers; b) worked on a contingency plan in the event a bond insurer is unable to find adequate capital to maintain its ratings and stabilize its business and c) commenced the drafting of new regulations to prevent a repeat of the bond insurance crisis. The Department made headlines in late 2007 by expediting the licensing of the Berkshire Hathaway Assurance Corporation, a new company with authority to insure municipal bonds. Francine L. Semaya, Esq. - COZEN O'CONNER, (212) 908-1270, fsemaya@cozen.com and William K. Broudy, Esq. - COZEN O'CONNER, (212) 908-1289, wbroudy@cozen.com
Ohio Department Reorganizes - With the retirement of Peg Ising, a long-time ODI employee, and the Deputy Director of the Ohio Department of Insurance, Director Mary Jo Hudson reorganized the Department of Insurance. Bill Rossbach, the former Assistant Director of Financial Regulation was named the Chief Regulatory Officer. Doug Anderson who has been in charge of Health Care Policy was named the Chief Policy Officer. Alan F. Berliner, Esq. - THOMPSON HINE LLP, (614) 469-3268, Alan.Berliner@ThompsonHine.com
Four Department Bills Proceeding in General Assembly - Four major bills, which would promote uniformity with other states while enhancing and clarifying the Tennessee Department of Commerce and Insurance's regulatory authority in the areas of unfair trade and unfair claims settlement practices, producer licensing, charitable gift annuities, and long term care insurance, are currently proceeding toward enactment in both the House and Senate of the 105th Tennessee General Assembly. A fifth TDCI bill, based on the NAIC model law for viatical settlements, has been pulled from the legislative calendar due in part to lack of industry consensus. 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.comMark Jacquish Named Director of Financial Affairs - Mark Jacquish has been named Director of Financial Affairs within the Insurance Division of the Tennessee Department of Commerce and Insurance. Mr. Jacquish, who is also retaining his position as Receivership Director, is an 18 year veteran of the Department. 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
Interstate Compact; Annuity Suitability - Wisconsin became the 31st state to join the Interstate Insurance Product Regulation Compact with enactment of 2007 Act 168. The same legislation changed Wisconsin from a "file, approve, and use" state to a "file and use" state for most policy forms effective July 1, 2008, and extended annuity suitability requirements from seniors to all consumers. William J. Toman, Esq. - QUARLES & BRADY LLP, (608) 283-2434, wjt@quarles.comWisconsin Act 168 Amends Section 628.347, Wis. Stat., Suitability of Annuity Sales to Consumers - Act 168 amends s. 628.347, Wis. Stat., to make the statute applicable to annuity sales to all individuals. Prior to Act 168 this section applied only to annuity sales to individuals age 65 or older. These changes first apply to annuity contracts issued on or after October 1, 2008. However, an insurer may elect to comply with the changes to s. 628.347, Wis. Stat., with annuity contracts issued on or after March 28, 2008. Kevin G. Fitzgerald, Esq. - FOLEY & LARDNER LLP, (414) 297-5841, kfitzgerald@foley.com |
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