Alert Edition March 2020

Welcome to the March 2020 edition of the FORC Alert. If you have any colleagues that may be interested in this publication, please forward it on. There is a link on the Alerts main page where they can subscribe to receive FORC Alerts automatically.

Regards,
Ryan Smart, Esq., FORC Alert Editor

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Category(s): Alabama - 05/20/2020

ALDOI Legislative Agenda

Below are links to the Alabama Department of Insurance’s legislative agenda for the 2020 Regular Session of the Alabama Legislature.  The session begins on February 4, 2020.
Download PDFs

Stephen W. Still, Esq. - BALCH & BINGHAM LLP, (205) 488-5512 , sstill@balch.com

Category(s): Arizona - 03/17/2020

National Search for Next AZ Director of Insurance

The Arizona Director of Insurance, Keith Schraad, has resigned effective February 13, 2020 and will be pursuing a position in the private sector.   He will be replaced by Christina Corieri, the Governor’s Senior Policy Advisor who will serve as Interim Director of the Department.   The Governor’s Office has indicated that it will be undertaking a national search for Director Schraad’s replacement.

S. David Childers, Esq. - KUTAK ROCK LLP, (480) 429-4880 , David.Childers@KutakRock.com

Category(s): Florida - 03/17/2020

Citizens to Issue Policyholder Savings from AOB Reform

On February 4, 2020, Citizens Property Insurance Corporation issued an Agent Update Bulletin outlining measures to be taken in light of the 2019 AOB reform. The bulletin links a draft letter that will be mailed to current policyholders detailing the effect of last year’s AOB reform legislation and any potential premium savings due to the policyholder.

Richard J. Fidei, Esq. - GREENBERG TRAURIG LLP, (954) 768-8286 , fideir@gtlaw.com

Category(s): Florida - 03/17/2020

Department of Health Issues Emergency Rules for Medical Marijuana Use

In December 2019, the Florida Department of Health took a significant step forward in the regulation of Medical Marijuana Treatment Centers (MMTCs) by issuing notices of proposed rules and rule development for a variety of long-awaited regulations. Emergency rules were also noticed for MMTC Renewal Applications and Background Screening. Emergency rules may be adopted if an agency finds there is an immediate danger to the public health, safety, or welfare, and are effective for 90 days while an agency undertakes the rulemaking process. The full GT alert can be found here.

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

Category(s): Florida - 03/17/2020

FHCF Posts Insurer Reporting Requirements and Responsibilities

The Florida Hurricane Catastrophe Fund has posted seven documents pertaining to Rule 19-8.029: Insurer Reporting Requirements and Responsibilities. These documents and forms can be found here.

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

Category(s): Florida - 03/17/2020

Florida Hurricane Catastrophe Fund Issues 2020 Annual Report

On February 4, 2020, the Florida Hurricane Catastrophe Fund issued their 2020 Annual Report of Aggregate Net Probable Maximum Losses, Financing Options, and Potential Assessments. Section 627.35191, Florida Statues, enacted in 2013, requires the Florida Hurricane Catastrophe Fund to provide a report for the upcoming contract year to the Legislature and the Financial Services Commission regarding the aggregate net probable maximum losses, financing options, and potential assessments of the FHCF. Please click here to view the report.

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

Category(s): Florida - 03/17/2020

Florida Property Insurers Face Rating Downgrades

In early January, it was announced that more than a dozen Florida domestic insurers could receive downgrades by the rating agency responsible for assigning financial stability ratings (FSR) through January, February, and March 2020 as a result of deteriorating conditions in the state’s property insurance market. The Florida Office of Insurance Regulation will continue to work with the governor, Florida Cabinet, and Florida Legislature this session to promote a stable marketplace.

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

Category(s): Florida - 03/17/2020

FSLSO Releases Notice of Discontinuation of the Citizens Regular and Emergency Assessments

On January 23, 2020, the Florida Office of Insurance Regulation issued a bulletin regarding an Order issued on January 22, 2020 stating that, as of April 1, 2020, surplus lines policies issued or renewed prior to July 1, 2015 and all related transactions reported to FSLSO will not have the CPIC assessment charged or credited. The last day to report surplus lines policy data through the FSLSO system where the CPIC assessment will be charged or credited is March 31, 2020.

Richard J. Fidei, Esq. - GREENBERG TRAURIG LLP, (954) 768-8286 , fideir@gtlaw.com

Category(s): Florida - 03/17/2020

Governor DeSantis to Fill Open Supreme Court Spots from Nine Named Finalists

On January 23, 2020, a group of nine finalists were announced as potential replacements for the former Supreme Court Justices Barbara Lagoa and Rubert Luck. The Florida Supreme Court Judicial Nominating Commission (JNC) selected these finalists from 32 submissions received in late December.

Richard J. Fidei, Esq. - GREENBERG TRAURIG LLP, (954) 768-8286 , fideir@gtlaw.com

Category(s): Georgia - 03/19/2020

Georgia Insurance Department Issues Directive 20-EX-1 Regarding Pharmacy Benefit Managers

On January 9, 2020, Georgia Insurance Commissioner John F. King (the “Commissioner”) issued Directive 20-EX-1 (the “Directive”) summarizing O.C.G.A. §33-64-11(a) which imposes certain restrictions upon Pharmacy Benefit Managers.  Specifically, as set forth in the Directive, Pharmacy Benefit Managers are proscribed from certain practices, including but not limited to:
  • Prohibiting a pharmacist, pharmacy or other dispenser from providing information to an insured individual cost share of an individual drug and the effectiveness of a more affordable alternative drug;
  • Prohibiting a pharmacy or pharmacist or other dispenser from offering and providing direct store delivery;
  • Charging or collecting from an insured a copayment that exceeds the total submitted charges by the network pharmacy;
  • Charging or holding a pharmacist; pharmacy or other dispenser responsible for a fee or penalty relating to the adjudication of a claim or audit under O.C.G.A. 26-4-118 (the “Pharmacy Audit Bill of Rights”) or penalizing a pharmacist or pharmacy for exercising its rights under the provisions of the Pharmacy Audit Bill of Rights).
  • Ordering and insured for the filling of a prescription to an affiliated pharmacy or offering or implementing prescription benefit plan designs that require patients to utilize an affiliated pharmacy.
  • Transferring or sharing records relative to prescription information containing patient identifiable and prescriber identifiable data to an affiliated pharmacy for any commercial purpose.
The Directive reminds pharmacy benefit managers that violations of O.C.G.A. §33-64-11(a) may result in the Commissioner placing any pharmacy benefit manager on probation for a period of time not to exceed one (1) year and a fine of up to $1,000 for each and every violation of O.C.G.A. §33-64-11(a)?; provided that the Commissioner may impose a fine of up to $5,000 for each and every violation of O.C.G.A.§33-64-11(a) that the pharmacy benefit manager knew or should have known was a violation.

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

Category(s): Georgia - 03/17/2020

Hallums v. Infinity Insurance Company (Case No. 18-121238, 11th Cir. Dec. 17, 2019)

On December 17, 2019, the 11th Circuit Court of Appeals, applying Florida law, ruled that a Lessor Liability Endorsement to a personal automobile insurance policy was not illusory insurance coverage.   In the Hallum case a putative class action was brought against insurance companies by lessees who sought damages alleging that the coverage provided under a Lessor Liability Endorsement (“the Endorsement”) was illusory insurance coverage because it provided insurance coverage only for vicarious liability against lessors and that a federal statute, the Graves Amendment, 49 U.S.C. § 30106(a), bars claims of vicarious liability against vehicle lessors.

The class action claim for illusory coverage stemmed from the Graves Amendment, which precludes claims of vicarious liability against vehicle lessors. The vehicle leases in question required the lessee to obtain a certain level of insurance coverage.  In the event the lessee failed to obtain the required insurance coverage, the lessor could terminate the lease and repossess the vehicle.  The class action policyholders claimed that the Graves Amendment rendered the Endorsement illusory because it insured no risk for which the insured can be liable. 
The 11th Circuit Court of Appeals disagreed, holding the Endorsement was not illusory coverage because it imposed upon the insurers a duty to defend lessors from claims of vicarious liability.  The Court of Appeals found that the duty to defend under Florida law (as it is in most states) was broader than the duty to indemnify and that the insurers had the duty to defend the lessors even if the claim was solely one of vicarious liability. The Graves Amendment, held the court, is a defense to liability, not coverage, so for duty-to-defend purposes it did not matter that the Endorsement may only protect against claims foreclosed by the statute. Thus, the insurance companies had the duty to defend the lessors regardless of whether the lawsuits alleging acts within the Endorsement’s scope were likely or even able to succeed in court. The court concluded that because the Endorsement imposed a duty to defend lessors from claims of vicarious liability, the Endorsement was not illusory.

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

Category(s): Georgia - 03/17/2020

Hunter v. Progressive Mountain Insurance Company, (Case No. A192074 Ga. Ct. Appeals Jan. 17, 2020).

On January 17, 2020 the Georgia Court of Appeals ruled that a request to increase standard automobile liability insurance coverage limits did not constitute the issuance of a new insurance policy and that the insurer was not required to obtain a new rejection of uninsured motorist coverage at the time of the insured’s request for increased standard automobile liability insurance limits. 
The insureds under a Progressive Mountain Insurance Company (“Progressive”) had purchased automobile insurance from Progressive beginning in 2010.  The automobile insurance policy had renewed every six months through 2015.  In 2012, the insured had increased its automobile liability insurance coverage, but Progressive did not obtain a new rejection of the statutory minimum UM Insurance Coverage.  The insured was involved in an automobile accident in 2015 and claimed that Progressive should have offered the insured the statutory minimum UM limits at the time of the insured’s 2012 increase to the automobile liability insurance policy standard limits which would have resulted in additional UM insurance coverage available to the insured at the time of the 2015 accident.  
The Georgia Court of Appeals ruled that Progressive did not have a statutory duty to obtain a new rejection of the statutory minimum UM coverage based on the September 2012 change in standard automotive coverage, and that Progressive also did not have a statutory duty to reoffer the Hunters the statutory minimum UM coverage at that time.  The Court reasoned that a change in the existing policy during the course of one of the policy’s periods had no impact on the insureds’ UM coverage and was not sufficient to trigger the duty to offer the statutory minimum coverage in OCGA § 33-7-11 (a) (1) or to reobtain a rejection of that coverage under OCGA § 33-7-11 (a) (3).

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

Category(s): Louisiana - 03/17/2020

Statute of Limitation Applicable to First Party Bad Faith Claims

The Supreme Court of Louisiana recently clarified the applicable statute of limitation with regard to a first party bad faith claims against an insurer. The insurer argued that the claim was a delictual (tort) action subject to a one-year prescriptive period. The claimant, on the other hand argued that it was a contractual claim arising out of the insurer’s contractual obligations subject to a ten-year prescriptive period. The Louisiana Supreme Court in the case of Smith v. Citadel Ins. Co., as successor to Gramercy Insurance Company and Go Auto Insurance Company (Smith v. Citadel Ins. Co., 2019-00052 (La. 10/22/19), held that the insurer’s duty of good faith owed to its insured under La. R.S. 22:1973 is but an outgrowth of the contractual and fiduciary relationship between the insured and the insurer, and that the duty of good faith and fair dealing emanates from the contract between the parties. Thus, the court held that first party bad faith claims against an insurer are governed by the ten-year prescriptive period set forth in La. Civil Code art. 3199.
BREAZEALE, SACHSE & WILSON, L.L.P.

Van R. Mayhall, Jr., Esq. - BREAZEALE, SACHSE & WILSON, L.L.P., (225) 381-8009 , van.mayhall.jr@bswllp.com
Sunny Mayhall West, Esq. - BREAZEALE, SACHSE & WILSON, L.L.P., (225) 381-8049 , sunny.west@bswllp.com
Van R. Mayhall, III - Investar Bank, (225) 227-2309 , van.mayhall@investarbank.com

Category(s): Minnesota - 03/17/2020

Minnesota Revenue Department Clarifies Surplus Lines Taxation and Broker Fees

The Minnesota Department of Revenue recently published Revenue Notice 20-01 to clarify how surplus lines brokers can calculate the fee revenue to be included as taxable gross premium, addressing a statutory ambiguity that has existed since 2010. 
In 2010, Minnesota law was amended to include broker fee revenue within the definition of surplus lines gross premium for purposes of calculating surplus lines tax. See, Minn. Stat. 297I.05. The amendment was Revenue's attempt to capture broker fee revenue earned for placing surplus lines business placed net of commission. Determining what portion of a broker placement fee was compensation for surplus lines policies sold net versus compensation for unrelated activities tends to be highly subjective and has resulted in protracted and difficult audits.
Revenue Notice 20-01 sets forth three ways that a broker can report the portion of its fee as "gross premium": A broker that uses one of these methods will comply with Minnesota's surplus lines tax law, thereby providing a measure of certainty in how to report fee income as taxable gross premium in a manner that should be consistent among brokers. 
https://www.stinson.com/newsroom-publications-Minnesota-Revenue-Department-Issues-Notice-on-Surplus-Lines-Insurance-Taxation

Peter H. Thrane - Stinson Leonard Street LLP, (612) 335-1779 , pete.thrane@stinson.com

Category(s): New York - 03/19/2020

Department of Financial Services (DFS) will hold its first Symposium on Financial Innovation and Inclusion on Thursday, April 2, 2020

DFS Superintendent Linda A. Lacewell announced on February 7, 2020 that the Department of Financial Services (DFS) will hold its first Symposium on Financial Innovation and Inclusion on Thursday, April 2, 2020, during New York Fintech Week, which is taking place March 30 to April 3.

The symposium aims to bring together the entire ecosystem of stakeholders, including policymakers, regulators, innovators, established financial institutions, investors, and those representing consumer perspectives. The agenda will explore the intersection of innovation and inclusion, looking at opportunities to help consumers benefit from new developments and mitigate potential risks.

As previously announced, DFS is also hosting the private annual meetings of the Global Financial Innovation Network (GFIN) during the same week. Last year, DFS became the first U.S. state banking regulator to join GFIN after Superintendent Lacewell traveled to Europe and met with international regulators.

Frederick J. Pomerantz, Esq. - INSURANCE LEGAL & REGULATORY CONSULTING, PLLC, (516) 297-3101 , PomerantzF35@gmail.com

Category(s): New York - 03/17/2020

FY 2021 NYS Executive Budget to Protect Elder New Yorkers This From Financial Exploitation.

Governor Andrew M. Cuomo announced legislation in the FY 2021 Executive Budget to protect elder New Yorkers from financial exploitation. This proposal will strengthen banks' ability to place a hold on the bank account of a vulnerable adult if there is sufficient reason to believe that the adult is a victim of actual or attempted financial exploitation by creating parameters for the holds, providing financial institutions and employees with immunity from civil liability for holding transactions, and requiring reporting of the hold to the Office of Children and Family Services. DFS will also create a new certification program for banking institutions to bolster training and education in financial exploitation.

While current law permits a financial institution to place a hold on a bank account for suspected financial exploitation of a vulnerable person, banks, fearing potential civil liability if they institute such a hold, have hesitated to act on such a suspicion. This proposal would create parameters for the holds and provide financial institutions and employees with immunity from civil liability for holding transactions and reporting when there is a reasonable suspicion of elder financial abuse. Banks will be able to more effectively deploy a transaction hold on the account of an elder adult when there is sufficient reason to suspect financial exploitation and a transaction hold appears necessary for asset protection. During the course of the transaction hold, the account holder will have access to account funds to meet ongoing housing, living, and emergency expenses.

Governor Cuomo has made it a top priority to deter unlawful actions against New Yorkers and put an end to senior financial abuse.

Frederick J. Pomerantz, Esq. - INSURANCE LEGAL & REGULATORY CONSULTING, PLLC, (516) 297-3101 , PomerantzF35@gmail.com

Category(s): New York - 03/17/2020

Insurance Circular Letter No. 1 (January 16, 2020)

Governor Andrew M. Cuomo signed the Green Light Law into law on June 17, 2019 as Chapter 37 of the Laws of 2019.   Chapter 37 amended Vehicle and Traffic Law § 502(1) to allow all New Yorkers 16-years-of-age and older to apply for a standard, not for federal purpose, non-commercial driver license or learner permit, regardless of their citizenship or lawful status in the United States.  According to the legislative sponsor’s memo, the Green Light Law was enacted to address “the long-held need by undocumented immigrants and workers to secure driving privileges not only to get back and forth to work but to conduct tasks in their personal lives like going to doctor visits and taking their children to school.” The Green Light Law took effect in December 2019.

All Addressees are on notice that holders of learner’s permits and licenses obtained under the Green Light Law (“Licensed Person”) should not be subjected to any unfairly discriminatory practices when they seek motor vehicle insurance.  

In furtherance of that purpose, the Department reserves the right to audit and examine an insurer’s underwriting criteria, programs, records, algorithms, and models, including within the scope of regular market conduct examinations, and to take disciplinary action, including fines, revocation and suspension of a license, and require the withdrawal and suspension of rates pursuant to Insurance Law § 2321.

Frederick J. Pomerantz, Esq. - INSURANCE LEGAL & REGULATORY CONSULTING, PLLC, (516) 297-3101 , PomerantzF35@gmail.com

Category(s): New York - 03/19/2020

Managing LIBOR Risks

DFS Superintendent Linda A. Lacewell announced on December 23, 2019 that the New York State Department of Financial Services (DFS) is directing New York-regulated depository and non-depository institutions, insurers and pension funds to submit their plans for managing the risks relating to the likely discontinuation of the London Interbank Offered Rate (LIBOR) at the end of 2021.

LIBOR is widely used to price a vast number of loans, derivatives and securities transactions.  According to estimates, the value of all financial products linked to U.S. dollar LIBOR is approximately $200 trillion, including $3.4 trillion of business loans, $1.3 trillion of consumer loans (held by about four million retail consumers) and $1.2 trillion of residential mortgage loans. The remaining 95% of exposures are in derivative contracts, notably interest rate swaps.

With this letter, the Department is taking action to ensure that regulated institutions’ boards of directors, or the equivalent governing authorities, and senior management fully understand and have assessed the risks associated with the potential cessation of LIBOR, have developed an appropriate plan to manage them, and have initiated actions to facilitate transition to alternative reference rates.

DFS is requiring its regulated depository and non-depository institutions, insurers, and pension funds to submit to the Department their plans to address their LIBOR transition risk management plan by February 7, 2020.

Frederick J. Pomerantz, Esq. - INSURANCE LEGAL & REGULATORY CONSULTING, PLLC, (516) 297-3101 , PomerantzF35@gmail.com

Category(s): Wisconsin - 03/17/2020

Agent Licensing Modernization

As noted in our report, an attorney at the Wisconsin Office of the Commissioner of Insurance said that rule changes to modernize and streamline the agent licensing process are almost ready for the Governor's review, and that there were no changes after the comment period.

William J. Toman, Esq. - QUARLES & BRADY LLP, (608) 283-2434 , william.toman@quarles.com

Category(s): Wisconsin - 03/17/2020

Corporate Governance Annual Disclosure

As described in our article, the Wisconsin corporate governance annual disclosure (CGAD) regulations should be in place so that the first CGAD report is due June 1, 2020. And as noted in our report, the chief legal counsel at the Wisconsin Office of the Commissioner of Insurance (OCI) said that the Commissioner sees corporate governance as important to sound operation, so he hopes the disclosure is taken seriously, and the first disclosure should be done right, as only updates are required after that. The disclosures are given OCI's highest level of confidentiality.

William J. Toman, Esq. - QUARLES & BRADY LLP, (608) 283-2434 , william.toman@quarles.com

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