Category(s): Connecticut - 12/01/2011

Connecticut has amended its captive law pursuant to Public Act No. 11-1
 (the “Act”).  The Act creates three new subgroups of Connecticut-domiciled captives: sponsored, branch, and special purpose financial captives.  Sponsored captives are formed and operated by one or more sponsors approved by the Connecticut Insurance Department and fund their liability to each participant insured through protected cells with segregated assets.  Branch captives are alien captives licensed to transact business in Connecticut through a business unit with a principal place of business located in the state.  Finally, special purpose financial captives are reinsurance captives that fund their obligations through insurance securitizations.  Significantly, the Act also expands the types of coverage that may be insured through Connecticut-domiciled captives.

The Act makes the following additional changes: (1) establishes a reinsurance premium tax requirement (under current law, Connecticut only taxes captives’ direct written premiums); (2) establishes a $7,500 nonrefundable tax credit for a captive’s first taxable year; and (3) authorizes the Connecticut Insurance Commissioner to adopt implementing regulations.

The relevant sections of the Act take effect July 1, 2012, and the premium tax provisions apply to calendar years beginning on or after January 1, 2012.

Alan J. Levin, Esq. - LOCKE LORD LLP, (212) 912-2777 , alan.levin@lockelord.com

Category(s): Florida - 12/01/2011

At the Florida Cabinet meeting on December 6, 2011, Citizens Property Insurance Corporation ("Citizens") Chairman of the Board of Governors ("Board") Carlos Lacasa made a presentation to the Financial Services Commission in which he outlined the Board's recommendations for reducing Citizens' size and exposure as requested by Florida Governor Rick Scott. To access the report, click here.

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

Category(s): Florida - 12/01/2011

Upon further review to the recent amendments to Florida's neutral evaluation program made by SB 408, the Florida Department of Financial Services ("DFS") issued a September 13, 2011 letter from DFS Division of Consumer Services Bureau Chief Barb Szumowski instructing neutral evaluators on corresponding changes to all new and pending neutral evaluations. To view the letter, click here.

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

Category(s): Florida - 12/01/2011

Florida Insurance Commissioner Kevin McCarty was elected 2012 President of the National Association of Insurance Commissioners ("NAIC") on November 4, 2011. Outgoing NAIC President and Iowa Insurance Commissioner Susan Voss announced that Commissioner McCarty will officially ascend to the NAIC presidency effective January 1, 2012 and continue to serve as President-Elect of the NAIC through 2012.

"It is an honor and privilege to be elevated by my colleagues and to this leadership role," remarked Commissioner McCarty, "Over the next year we must confront several important challenges. Whether it is Dodd-Frank or the Affordable Care Act, the federal government has become increasingly involved in the insurance arena. As your president, I intend to vigorously defend the role of state-based regulation, highlight our accomplishments, and continue to work for regulatory modernization and national uniformity to create an insurance framework that benefits both consumers and the insurance industry."

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

Category(s): Florida - 12/01/2011

The Florida Senate Committee on Judiciary released Interim Report 2012-132 on Insurance Bad Faith on November 16, 2011. The Report outlines related current practices based on the experiences of legal practitioners, insurance companies and others with expertise in insurance bad faith. It also reviews case law, statutes, legal scholarship and data associated with bad faith in Florida and other jurisdictions in order to give legislators a basis for evaluating what potential changes to Florida law are needed, if any. The Report concludes that Florida's current Bad Faith Law is a complicated combination of statutory and common law that affects a number of varied interests, and thus sparks philosophical, economic, and policy debate from different perspectives. According to the Report, while some argue that Florida's Bad Faith Law offers important and properly balanced protections to insurance consumers while remaining fair to insurers, others insist that the law's valid intentions have been distorted by excessive litigation and unfair gamesmanship, making it difficult for insurers to settle claims.

While the Report presents information on the legal landscape for insurers, insureds and third parties, it does not offer specific recommendations for legislative action on bad faith. Rather, it recommends a "policy decision" for the Legislature to consider whether the current law is being applied as intended to effectively encourage good faith settlement practices and should remain unchanged, or whether the current system encourages abuse and should be changed.

To view the entire Report, click here.

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

Category(s): Georgia - 12/01/2011

In a letter dated November 8, 2011, the federal Department of Health & Human Services (the “DHHS”) responded to the Georgia Commissioner of Insurance’s (the “Commissioner”) request to lower the eighty percent (80%) medical loss ratio (“MLR”) standard applicable to individual health insurers in the State of Georgia. Although the Commissioner requested that the MLR be adjusted to 65%, 70% and 75% for reporting years 2011, 2012 and 2013, respectively, the DHHS granted the request but only adjusted the MLR to 70% for 2011 and 75% for 2012, stating that “the MLR standard sought by the [Commissioner] exceeds the adjustment necessary to avoid the likelihood of market destabilization between now and 2014, and therefore would unnecessarily deny consumers some of the benefits of section 2718” of the Public Health Service Act.

Brian T. Casey, Esq. - LOCKE LORD LLP, (404) 870-4638 , bcasey@lockelord.com
William M Osterbrock, Esq. - Locke, Lord, Bissell & Liddell, LLP, wosterbrock@lockelord.com

Category(s): Georgia - 12/01/2011

On November 7, 2011, the Georgia Court of Appeals reversed a trial court’s denial of the plaintiff’s motion for summary judgment that the defendant-insurance carrier was precluded from rescinding a credit life insurance policy the plaintiff’s deceased husband obtained in connection with three loans.  In this case, the decedent originally obtained the credit life insurance in 2003 and 2004 but was issued a new certificate each time the loans were renewed.  According to case records, the decedent allegedly made materially false representations about having diabetes in a “Statement of Debtor’s Physical Condition” that was submitted to the insurance carrier in 2006 in connection with a revised application when the insurance carrier revised the group life insurance policy and policy certificates, which the insurance carrier used as the basis for rescinding the policy based on decedent’s fraud. Using principles of contract construction, the Court of Appeals read the terms of each of the renewals together with the original policy and agreed with the plaintiff that the insurance carrier was precluded from rescinding the policy because the two-year incontestability period commenced at the time the original certificate was issued and not each time the certificate had been renewed. The Court wrote that “[i]f the incontestability clause were interpreted to mean that the two-year period would begin to run upon the issuance of each new certificate of insurance, it would render the clause ineffectual because of the certificate issued to the decedent had not more than a one-year term of duration. As such, if the two-year period ran anew upon the issuance of each certificate, the incontestability clause could never become operative.”

Brian T. Casey, Esq. - LOCKE LORD LLP, (404) 870-4638 , bcasey@lockelord.com
William M Osterbrock, Esq. - Locke, Lord, Bissell & Liddell, LLP, wosterbrock@lockelord.com

Category(s): Georgia - 12/01/2011

On November 8, the U.S. Department of Health and Human Services ("HHS") granted the Georgia Department of Insurance's application for a waiver from the medical loss ratio (MLR) standard required by the Patient Protection and Affordable Care Act for the individual health insurance market in Georgia. While the waiver was less than the Department's request, HHS's decision still offers relief to Georgia insurers operating in the individual health insurance market. The MLR standard for 2011 is 70 percent; 2012 is 75 percent; and 2013 is 80 percent.

Tony Roehl, Esq. - BAKER HOSTETLER LLP, (404) 256-8419 , troehl@bakerlaw.com

Category(s): New York - 12/01/2011

Under legislation effective November 15, 2011, New York has expanded commercial deregulation by amending New York Insurance Law Article 63, to permit insurers admitted in New York to provide more kinds of insurance to large commercial insureds, defined in detail in the amendment, without prior approval of rates and forms.  The statute permits such policies to be issued until June 30, 2013.  Policies issued under the new standards must comply with New York policy requirements and the Superintendent has authority to order an insurer to cease using a non-complying form, after notice and a hearing.  Among the types of insurance that can now be issued to qualifying large commercial insureds are fidelity-surety, motor vehicle and legal services insurance.  These amendments permit such commercial insurance to be written in the admitted market through the New York Free Trade Zone.  The amendment comes on the heels of the amendments to the surplus lines law providing for commercial exempt policyholders as mandated by the Dodd-Frank Wall Street Reform and Consumer Protection Act.

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

Category(s): Tennessee - 12/01/2011

Tennessee Commissioner of Commerce and Insurance Julie Mix McPeak announced this week that the Insurance Division has established a new Web page with detailed information about the benefits of Tennessee as a captive domicile.  The new site, captive.tn.gov, includes the required application forms and instructions for companies interested in formation of a captive insurer in the state.

T. Stephen C. Taylor, Esq. - BASS, BERRY & SIMS, PLC, (615) 742-7758 , staylor@bassberry.com
Robins H. Ledyard, Esq. - BASS, BERRY & SIMS, PLC, (615) 742-6259