January 2010 Alert


Welcome to the January edition of the FORC Alert. I hope you find the information useful. If you have any colleagues that may be interested in this publication, please forward it on. There is a link below this message allowing them to opt-in so they can receive these FORC Alerts automatically.

Best Regards,

Kevin G. Fitzgerald
Editor, FORC Alert

January 2010 Alerts


Category(s): - 12/21/2016

Supreme Court upholds constitutionality of statute permitting termination of work comp benefits upon eligibility for retirement benefits

On November 3, 2009, the Montana Supreme Court issued its decision in Satterlee v. Lumberman’s Mut. Cas. Co., 2009 MT 368, 353 Mont. 265, affirming the Workers’ Compensation Court’s holding that 39-71-710, MCA, which allows termination of PTD benefits when the injured worker becomes eligible for retirement benefits, does not violate the worker’s equal protection or substantive due process rights under the Montana constitution.  Ms. Satterlee incurred a compensable injury for which she received PTD benefits. When she became eligible for Social Security benefits, her PTD benefits were terminated under 39-71-710, MCA.  Satterlee and others challenged the constitutionality of 39-71-710, MCA.  Montana workers’ compensation employers and insurers expressed serious concern regarding the financial impact of a plaintiffs’ decision in the case, which was estimated to increase premiums by between 11-21 %.  The decision aligns Montana with the majority of other states holding such statutes to be constitutional.

Jacqueline T. Lenmark, Esq. - JACKSON MURDO & GRANT, P.C., (406) 513-1113 , jtlenmark@jmgattorneys.com

Category(s): Delaware - 12/21/2016

Delaware Grows as a Captive Domicile

The Delaware Insurance Department's Captive and Financial Insurance Products division capped off a busy fourth quarter 2009 by adding eight new captives to the Delaware domicile, bringing Delaware's captive count to 48.  With the addition of these new licensees, Delaware will have grown its stable of captives by 600% since it revised its captive laws and created a special captives unit in 2005. 

One of the newly licensed captives is an agency captive formed to reinsure surety business.  Demonstrating the high degree of flexibility that characterizes the Captive and Financial Insurance Products unit, this particular captive was actually licensed under Delaware's "Special Purpose" provisions because Delaware law does not currently address agency captives.  To correct for this, the Delaware Captive Insurance Association will seek to introduce legislation in coming session of the 145th General Assembly that will provide for both agency captives and branch captives.

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

Category(s): Federal - 12/21/2016

Senate Passes Health Care Reform

On Christmas Eve, the Senate by a strictly party line vote of 60-39 passed H.R. 3590, the Patient Protection and Affordable Care Act, setting the stage for negotiations with the House over the elements of a final bill.  Democrats hope to get something to President Obama’s desk by the State of the Union Address at the end of January, but that is a tall order given the number of contentious issues that separate the House and Senate on this landmark legislative effort.  To view the 2074-page Senate bill, click here.  To view the 2016-page House version, click here.  House and Senate leaders are now working with the Administration to merge the two bills.

Charles T. Richardson, Esq. - FAEGRE BAKER DANIELS LLP, (202) 997-0681 , crichardson@faegrebd.com

Category(s): Florida - 12/21/2016

Florida Insurance Commissioner Chairs December 7 NAIC Chinese Drywall Hearing

Florida Insurance Commissioner Kevin McCarty chaired a public hearing held by the National Association of Insurance Commissioners ("NAIC") Catastrophe Insurance Working Group of the Property and Casualty Insurance Committee on December 7, 2009 as part of the NAIC 2009 Winter Meeting in San Francisco.

The purpose of the hearing was to gather information regarding any implications to regulators and insurers that may arise as result of the alleged defective Chinese drywall installed in homes across the nation.   To view the hearing notice, click here.  To view the materials discussed during the hearing, click here.

Fred E. Karlinsky, Esq. - GREENBERG TRAURIG, P.A., (954) 768-8278 , karlinskyf@gtlaw.com

Category(s): Florida - 12/21/2016

Florida Legislators Introduce Bill That Would Afford Partial Deregulation to All Florida Insurers

Florida Senator Mike Bennett and State Representative Bill Proctor have introduced identical bills (HB 447 and SB 876) for the 2010 Regular Legislative Session that would afford the opportunity for all licensed insurance companies to charge partially deregulated rates. The bill would accomplish this by removing the eligibility thresholds contained in a bill vetoed by Florida Governor Charlie Crist in 2009 that contained slightly different language regarding insurer eligibility for the deregulated rates. That bill initially was known as the "Consumer Choice" bill, but quickly became known as the "State Farm" bill, because of the specific deregulation eligibility thresholds.

Supporters of a partially deregulated rate environment anticipate that passage of HB 447 would revitalize Florida’s private insurance market by retaining carriers and attracting new capital into the State. This is expected to reduce the market burden on Citizens, which, in turn, would reduce the financial burden on Florida taxpayers. Transparency issues also have been addressed in HB 447.

In a media conference held on December 8, 2009 to announce the filing of HB 447, Senator Bennett and Representative Proctor stated that through the bill, they are trying to depopulate Citizens, or prevent policyholders from winding up there. To accomplish this, HB 447 requires Citizens policyholders to be advised of the insurer’s capacity to levy a surcharge in the event it does not have adequate claims-paying funds. Senator Bennett said that an extensive amount of work still needs to be done regarding the Citizens-related provisions in the bill. He indicated he will probably file a bill this year to sunset Citizens because of his sentiment that this is the proper course of action for the State to take.

Neither legislator felt that removing the OIR’s ability to prohibit rate increases, coupled with increasing the ability for insurers to drop policies would force even more policyholders into Citizens.

Governor Crist has not yet indicated his willingness to sign HB 447.

Fred E. Karlinsky, Esq. - GREENBERG TRAURIG, P.A., (954) 768-8278 , karlinskyf@gtlaw.com

Category(s): Florida - 12/21/2016

Florida Office of Insurance Regulation Approves Citizens Rate Increases

Florida Insurance Commissioner Kevin McCarty signed an order on November 19, 2009 that established higher rates for Citizens Property Insurance Corporation's ("Citizens") high-risk account.  To view the Florida Office of Insurance Regulation order issued prior to that for Citizens personal and commercial lines accounts, click here.

The rates were reviewed to determine whether or not they were actuarially sound under Section 627.351(6)(n)5, Florida Statutes.  Since July 15, 2009, the law has required Citizens to make rate filings effective for each personal and commercial line of business no earlier than January 1, 2010.  These rate filings begin a "glide path" to allow Citizens eventually to achieve actuarially sound rates. This will occur over time, inasmuch as Citizens' rate adjustments are limited to a 10 percent increase for any policyholder per year.

A Florida Office of Insurance Regulation ("OIR") public rate hearing was held in Tallahassee on November 10 to review Citizens' rate filings. The final rates are similar to the requested rates, although the OIR did make adjustments. 

"Recent legislation requires this office to establish the rates for Citizens' policyholders, and our actuaries did that in their usual deliberative and disciplined manner," said Commissioner McCarty. "The intent of the legislation is to annually adjust Citizens' rates so they become actuarially sound."

Although the Florida Legislature capped Citizens' annual rate increases at 10 percent, one line of business shows a higher increase because the law allows companies to pass a cash build-up factor paid to the Florida Hurricane Catastrophe Fund on to policyholders that is not subject to the 10 percent limit.

The order also included technical guidelines to be followed when the next rate filings are made in 2010.  It also requires Citizens to respond to concerns raised regarding Monroe County rates.

Members of the grass-roots organization Fair Insurance Rates in Monroe had given a presentation at the November 10 hearing during which concern was expressed that the computer model used by Citizens to calculate rates does not take into account several factors specific to Monroe County.

The following are the approved statewide average high-risk account rate increases that were included in the OIR Order: 

Homeowners: 5.2 percent
Dwelling Fire: 4.0 percent
Mobile Homeowners: 11.0 percent
Commercial Property - Nonresidential: 9.3 percent
Commercial Property Residential - Excluding Condo Associations: 9.4 percent
Commercial Property Residential - Condo Associations: 9.4 percent

Richard J. Fidei, Esq. - GREENBERG TRAURIG LLP, (954) 592-5530

Category(s): Florida - 12/21/2016

Florida Office of Insurance Regulation Final Adopted Rules Effective January 4, 2010 and Earlier

To view complete information on the most recent Florida Office of Insurance Regulation final adopted Rules, many of which are effective as of January 4, 2010, click here.

The following insurance-related Rules were approved during the November 17, 2009 Florida Cabinet meeting:  

Final Adoption of Amendments to Proposed Rule 69O-156 Part 1 Medicare Supplement Insurance

On September 24, 2008, the National Association of Insurance Commissioners ("NAIC") adopted revisions to the NAIC Model Regulation to Implement the NAIC Medicare Supplement Insurance Minimum Standards Model Act.  The revisions included major changes to Medicare Supplement plans and benefits that initially had been approved by the NAIC in March 2007 and subsequently authorized by the Medicare Improvements for Patients and Providers Act of 2008.  In addition, the model revisions contain changes required by the Genetic Information Nondiscrimination Act of 2008.  States are required to adopt the NAIC model revisions in order to continue to regulate the Medigap market.  (Note:  Medicare supplement plans are commonly referred to as Medigap.) 

Final Adoption of Amendments to Proposed Rule 69O-137.001 Annual and Quarterly Reporting Requirements

Florida law requires every authorized insurer to file annual and quarterly statements of its financial condition with the OIR. To allow uniformity in filing, the Florida Legislature permitted the Financial Services Commission to adopt the NAIC-approved form for financial statements.  With the Cabinet's approval today, the existing Rule was amended to adopt the NAIC's 2009 annual and quarterly statement instructions.  The Rule also was amended to adopt the 2009 NAIC Accounting Practices and Procedures Manual.  The 2009 versions of these manuals are the most recent and will replace the current Rule that adopted the 2008 version.

Final Adoption of Amendments to Proposed Rule 69O-138.001: NAIC Financial Condition Examiners Handbook

Florida law requires the OIR to examine the affairs, transactions, accounts and records of authorized insurers.  It also allows the Financial Services Commission to adopt the NAIC Financial Condition Examiners Handbook in order to facilitate uniformity in examinations and reduce the frictional costs of doing business in Florida.  The existing Rule was amended to adopt the 2009 NAIC Financial Condition Examiners Handbook.  The now-previous Rule adopted the 2008 version.

Richard J. Fidei, Esq. - GREENBERG TRAURIG LLP, (954) 592-5530

Category(s): Florida - 12/21/2016

Modeling Commission Works on Mitigation Discount Report

At the direction of the 2009 Florida legislature, the Florida Commission on Hurricane Loss Projection Methodology continues to work on a draft report identifying issues and concerns relating to windstorm loss mitigation discounts in Florida.  The commission held a series of meetings in the fall and received input from interested parties.  The commission is now distilling the feedback it received into a report that ultimately will contain recommendations for the 2010 legislature about how to improve the program by which Florida requires residential property insurers to make discounts available for mitigation efforts.  Florida's 2010 legislative session begins March 2.

Travis L. Miller, Esq. - RADEY LAW FIRM, (850) 425-6654 , tmiller@radeylaw.com

Category(s): Florida - 12/21/2016

New Florida Workers' Compensation Employee Assistance and Ombudsman's Office Dispute Letter Must Be Used After April 1, 2010

Technical changes requested by the Florida Division of Workers' Compensation ("Division") recently were approved for Rule 69L-26.004, Florida Administrative Code, that include a notice commonly known as the “Employee Notification Letter."  

Rule 69L-26.004 establishes that injured workers, or any other party to a dispute involving a workers' compensation issue, must contact and request assistance from the Division's Bureau of Employee Assistance and Ombudsman's Office ("EAO"), as well as make a good faith effort to participate in the informal dispute resolution proceedings of the EAO.A worker's request for assistance will be accepted by the EAO and constitute contact with the EAO only if it is submitted on a completed Request for Assistance form (EAO-1) and is otherwise in compliance with these Rules. 

In order to facilitate a Request for Assistance, employers or carriers must provide the "Employee Notification Letter" within three days as required by law. 

A new "Employee Notification Letter" is posted on the Division's website at the following address:   http://www.myfloridacfo.com/WC/publications.html.  Employers and carriers must begin using this letter on, or before April 1, 2010. 

The technical changes to Rule 69L-26.004, F.A.C. include corrections in statutory citations, updates to Division Web addresses and the addition of an e-mail address for contacting the EAO.

Fred E. Karlinsky, Esq. - GREENBERG TRAURIG, P.A., (954) 768-8278 , karlinskyf@gtlaw.com

Category(s): Florida - 12/21/2016

Report Card Rule Withdrawn

The Florida Office of Insurance Regulation has withdrawn an administrative rule that would have adopted a system for assigning letter grades to insurers based on their complaint handling and claims handling practices.  A similar rule might be proposed next year by the Department of Financial Services.  The Insurance Consumer Advocate, who is responsible for administering the grading system, is housed within the Department of Financial Services.  The grading system has been discussed at a rule workshop, and insurers have raised a number of concerns about the scoring methodology.

Travis L. Miller, Esq. - RADEY LAW FIRM, (850) 425-6654 , tmiller@radeylaw.com

Category(s): Florida - 12/21/2016

State Farm, OIR Resolve Withdrawal Issues

The Florida Office of Insurance Regulation and State Farm Florida Insurance Company recently settled administrative litigation pertaining to the insurer's planned withdrawal from the Florida property market.  The insurer filed a withdrawal plan, arguing that it could not attain rate adequacy in Florida.  The OIR imposed stringent conditions on the company's withdrawal, and the insurer challenged those conditions.  The parties resolved this dispute with the OIR agreeing to allow State Farm Florida to nonrenew 125,000 policies and approving a rate increase of almost 15%, while State Farm Florida agreed to limit its nonrenewals to that number and to allow its agents to place the nonrenewed business with other insurers.

Travis L. Miller, Esq. - RADEY LAW FIRM, (850) 425-6654 , tmiller@radeylaw.com

Category(s): Georgia - 12/21/2016

Georgia Commissioner of Insurance Promulgates New Life Settlements Regulation

The Georgia Commissioner of Insurance recently promulgated new life settlement regulations that went into effect on November 18, 2009.  The new regulations reflect the changes in the Georgia Insurance Code brought about by the recently amended Georgia Life Settlements Act.  Under the new regulations, which affect licensing procedures, among other things, a life settlement provider applicant or licensee must prove a minimum net worth of $300,000 rather than deposit $100,000 in eligible securities as a condition precedent to receiving a license, as was required under the prior regulations.  Those applying for registration as life settlement brokers in Georgia must have a current and valid resident or non-resident life insurance agent license in Georgia and have held a life insurance agent license for at least one year.  Further, any person who engages in the business of life settlements without the appropriate license has committed a felony and will be subject to various fines and penalties associated with committing fraudulent life settlement acts.  Ga. Comp. R. & Regs. § 120-2-93-.01 et seq.

Brian T. Casey, Esq. - LOCKE LORD LLP, (404) 870-4638 , bcasey@lockelord.com
Alexis W Summers

Category(s): Georgia - 12/21/2016

Georgia Court of Appeals Penalizes Insurer and Its Outside Counsel for Frivolous Appeal

The Georgia Court of Appeals recently fined an insurer and its outside counsel for filing what the panel of judges believed was a frivolous appeal used to delay payment of the trial court’s award.  The panel’s November 13, 2009 ruling affirmed the lower court’s decision that the insurer was liable to its policyholder, a contractor who was hired to do work on a dormitory which was significantly damaged when a subcontractor’s plumber’s torch ignited a wooden wall stud in the building.  Despite law to the contrary, the insurer argued that its comprehensive general liability insurance policy’s business-risk exclusion applied in this case.  The trial court determined that this was an invalid interpretation of the business-risk exclusion and that the insurer was liable for penalties and attorneys’ fees because of its bad faith failure to provide the insured contractor with a defense.  The Georgia Court of Appeals affirmed the trial court’s findings and ordered that additional fines be imposed by a jury for the insurer’s frivolous appeal.  Transportation Insurance Co. v. Piedmont Construction Group, LLC, A09A1200, A09A1201, A09A1202 (Nov. 13, 2009).

Brian T. Casey, Esq. - LOCKE LORD LLP, (404) 870-4638 , bcasey@lockelord.com
Alexis W Summers

Category(s): Georgia - 12/21/2016

Georgia Supreme Court Overturns Decision Allowing “Stacking” of Auto Insurance Policies

The Georgia Supreme Court recently considered whether an employee could “stack” uninsured motorist coverage available under his employer’s automobile insurance policies covering three different cars when he was involved in an accident in only one of the employer’s vehicles.  In this case, an individual was injured in an automobile accident while driving a car owned by his employer.  The automobile insurance policy covering the car involved in the collision listed the employer as the named insured.  The employer owned two other vehicles that were separately insured under its name but that were not involved in the accident; however, the employee sought to stack the uninsured motorist benefits under the two other policies with the uninsured motorist coverage available under the policy on the vehicle he was driving at the time of the accident.  The employer’s insurer argued that because the injured individual was not the named insured under the policies, he could seek uninsured motorist coverage only under the insurance policy that covered the car involved in the wreck.  The Georgia Supreme Court reversed the appellate decision, finding no ambiguity regarding the fact that the employer and not the employee was the named insured under the insurance policy, and, as a result, the employee was not entitled to stack the uninsured motorist coverage available under the policies covering the employer’s other vehicles that were not involved in the accident.  State Farm Mut. Auto Ins. Co. v. Staton, S09G0348 (Oct. 19, 2009).

Brian T. Casey, Esq. - LOCKE LORD LLP, (404) 870-4638 , bcasey@lockelord.com
Alexis W Summers

Category(s): Iowa - 12/21/2016

Supportive Iowa Academic Study on Insurance Based Credit Scoring Released

Earlier in the year,  after several public hearings on the subject of insurance based credit scoring , an academic study was commissioned by the Consumer Advocate in the Iowa Insurance Division  to be undertaken by St. Ambrose University in Davenport, Iowa. At a recent public hearing by the Advocate, the  conclusions of the study were unveiled by its authors. The participating faculty members reaffirmed that insurance based credit scoring does indeed predict risk and is therefore not unfair. Further the study could not  conclude there was an unfair impact on minorities from its use.

A survey of 1240 Iowans was conducted by the authors of the study. While a majority of respondents believed credit scoring is not an accurate predictor of risk, the authors, after studying the extensive literature on the subject, including studies in other states, concluded this was not the case and that credit scoring actually  was an accurate predictor. Likewise, regarding racial impact, it was concluded that the data was just too mixed to justify a finding there was in fact an adverse impact.

The study itself may be found at the Iowa Insurance Division's website, www.iid.state.ia.us.

Fred M Haskins, Esq. - PATTERSON LAW FIRM, (515) 283-2147 , fhaskins@pattersonfirm.com

Category(s): New York - 12/21/2016

New York Doubles Extension of Coverage Under COBRA to 36 Months

Under New York legislation signed in November, 2009, a person who is an employee or member of a group health insurance plan may continue group health insurance coverage under the plan for up to a total of 36 months, regardless of the reason the person lost eligibility for coverage.  The extension of coverage doubles the existing 18-month continuation period, applies to persons eligible for federal Consolidated Omnibus Budget Reconciliation Act (COBRA) or state (mini-COBRA) continuation of coverage and applies only to group health insurance contracts delivered in New York.  The law covers every group health insurance policy or contract that was issued, renewed, modified, altered or amended between July 1, 2009 and October 31, 2009 and applies to all policies or contracts on or after November 1, 2009.  Persons whose 18-month extensions expired between July 1, 2009 and November 1, 2009 are afforded a 60-day enrollment period to apply for the additional 18-month extension made available by law.

Francine L Semaya, Esq. - LEGAL AND REGULATORY CONSULTANT, (732) 241-8090 , flsemaya@gmail.com
William K Broudy, Esq. - NELSON LEVINE de LUCA & HORST, LLC, (212) 233-3254 , wbroudy@nldh.com

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