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INSURANCE REGULATORY INVESTIGATIONS: PRIVILEGES, CONFIDENTIALITY
John A. Knapp, Esq. Recent high-profile investigations of insurance companies, agents and brokers have resulted in penalties and restitution of hundreds of millions of dollars. The fact investigations which preceded these settlements have been done within the legal authority of state insurance regulators and state attorneys’ general. Those investigations entail unique discovery, confidentiality and privilege issues which are not usually present in ordinary business litigation.
VERMONT SPONSORED CAPTIVE INSURERS
Jeffrey P. Johnson, Esq. In 1981 Vermont first enacted a statute permitting the formation of captive insurance companies. The legislation was endorsed by every voting representative and senator with only one dissent. A Vermont farmer serving in the Vermont House objected to the bill stating, “There is nothing all good.” In the ensuing twenty-five (25) years, the Vermont Department of Banking, Insurance, Securities & Health Care Administration (“BISHCA”) issued seven hundred and fifty-four (754) licenses to captive insurers, thereby validating the consensus wisdom of the Vermont Legislature.
RECENT PROPOSED STATUTORY CHANGES IN IOWA INSURANCE REGULATORY LAW
Fred M. Haskins, Esq. In its annual “cleanup”, or “Omnibus”, bill, the Iowa Insurance Division of the Department of Commerce has proposed a number of significant changes. The Commissioner of Insurance would cease to be agent for service of process for a number of types of companies: life insurers, fraternals, property/casualty insurers, and reciprocals. Company certificates of authority no longer will renew automatically. Annual application for renewal would have to be made. Fines for annual statements filed in a tardy fashion would be imposed.
DISTINCTION BETWEEN INSURANCE AGENT AND INSURANCE BROKER IN CALIFORNIA
Robert W. Hogeboom, Esq. The legal distinction between an insurance agent and insurance broker is under examination in California following Krumme v. Mercury and recent investigations by New York Attorney General Eliott Spitzer which resulted in criminal and civil suits against several insurers and producers. This distinction is important in determining insurer and producer liability to insureds and third party claimants as well as the propriety of charging broker fees. This article examines the legal distinction between “agents” and “brokers” in California both from a historical perspective and in light of the recent case, Krumme v. Mercury. Finally, it provides an overview of the California Department of Insurance’s (“CDI”) current position on the issue.
OHIO'S TAX REFORM OF THE NON-ADMITTED INSURANCE MARKET
Robert H. Katz, Esq. As part of a significant and major overhaul of its business taxes, Ohio after a contentious legislative process reformed the taxes imposed on business conducted in the state. 1 Tucked away in HB 66 were amendments to Ohio’s taxing scheme on the insurance business conducted in the unauthorized market and/or the surplus lines market. The significant changes were (1) the elimination of the “employer insured” exemption, and (2) the adoption of new exemptions. The new exemptions were intended to benefit certain narrow interests in the medical malpractice market. This article will review the background for the amendments and the unintended consequences that have occurred since their enactment.
FLORIDA BEGINS LICENSING AND REGISTERING INSURANCE AGENCIES
Kevin G. Fitzgerald, Esq. In 2005, the Florida Legislature enacted a law which substantially changed the way insurance agencies are licensed and regulated in Florida. While the law is already one year old, the implementation of it has really just begun. Not surprisingly, given the breadth of the law, and the Florida Department of Financial Services’ interpretation of certain of its provisions, many questions remain unanswered. Nonetheless, there is a pending deadline of October 1, 2006, for compliance with the law, with strict penalties for any compliance failures. The key provisions of this law, along with some of the unresolved issues, are discussed below.
MAINE'S DIRIGO HEALTH REFORM ACT - IS IT WORKING?
D. Michael Frink, Esq. George M. Linge, Esq. As reported in the winter 2004 issue of this Journal, in 2003 the Maine Legislature enacted An Act to Provide Affordable Health Insurance to Small Businesses and Individuals and to Control Health Care Costs. Commonly referred to as the “Dirigo Health Reform Act” (hereinafter the “Act”), this ambitious law, proposed by Governor John Baldacci, has been touted as a comprehensive, system-wide strategy to improve Maine’s health care system. The Act includes three interrelated approaches: a new state-sponsored health insurance product (“Dirigo Choice”) to achieve universal access to coverage; new and improved systems to control health care costs; and initiatives to ensure the highest quality of care statewide.
MARKET CHECKS IN HOLDING COMPANY ACT TRANSACTIONS
James M. Kennedy, Esq. There is significant commentary on the fiduciary duties of directors of public companies in mergers, acquisitions, takeovers and tender offers. Although a substantial body of case law has been generated from transactions involving public companies, the sale of control triggers essentially the same fiduciary duties for directors of public companies and non-public companies alike. The board’s duty to maximize the target company’s value for the benefit of shareholders/members often results in the utilization of market check mechanisms. Transactions that involve the change of control of an insurance company trigger a regulatory approval process under state counterparts of the NAIC Model Insurance Holding Company System Regulatory Act (the “Holding Company Act”). This article explores the interface between market check mechanisms and the state insurance regulatory process. |
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