Category(s): Florida - 10/07/2018

On September 5, 2018 the Fourth District Court of Appeal of the State of Florida rejected a breach of contract suit filed by a restoration contractor against a property insurance company under an assignment of benefits (“AOB”) in a homeowners water damage claim. The homeowners insurance policy had a condition requiring that “[n]o assignment of claim benefits, regardless of whether made before a loss or after a loss, shall be valid without the written consent of all ‘insureds,’ all additional insureds, and all mortgagee(s) named in this policy.” The contractor sued after the insurer denied its AOB claim on the grounds that the contractor failed to secure written authorization from all insureds and the mortgagee. The trial court granted the insurer’s motion to dismiss on the basis that “the Assignment of Benefits fails to comply with the subject policy’s unambiguous condition that claims assignments be executed by all insureds and mortgagees.” The contractor appealed and the Fourth District Court of Appeal affirmed the dismissal, holding that “[t]he contract . . . does not prohibit assignment --- it imposes a condition, requiring the approval of all insureds and the mortgagee.”  The court’s ruling is significant because it contradicts findings issued by a sister court, the Fifth District Court of Appeal, in December 2017, which prohibited similar policy restrictions. The opinion of the Fourth District Court of Appeal can be viewed here.

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

Category(s): Florida - 10/07/2018

On August 27, the National Council on Compensation Insurance (NCCI) recommended a 13.4% decrease for workers' compensation premiums to the Florida Office of Insurance Regulation (OIR).  The decrease is proposed to take effect January 1, 2019. The filing states that the proposed rate decrease is based on the long-term decline in claim frequency which offsets increases in claim severity and cost increases from the Castellanos and Westphal court cases from 2016.  Policy Year 2017 will be the first full policy year following the Castellanos decision which rendered the attorney's fee provisions of the state's workers' compensation law unconstitutional.  NCCI notes that the full effects of that decision will not fully materialize for several years. NCCI also states that the Castellanos and Westphal decisions are exerting upward pressure on costs in the system and will increase workers' compensation premiums.  You may access the full NCCI report here.

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

Category(s): Illinois - 10/07/2018

On August 26,2018, Governor Bruce Rauner vetoed a piece of legislation that the Illinois Department of Insurance had proposed. The legislation contained changes to the workers’ compensation insurance line, which was what led to the veto by the governor. The legislation also had included a division bill that would have permitted a company to divide its business into a runoff and ongoing one.

Daniel A. Cotter, Esq. - Dickinson Wright PLLC, (312) 423-8170 , DCotter@dickinson-wright.com

Category(s): Louisiana - 10/07/2018

On July 31, 2018, the Louisiana Department of Insurance (“Department”) issued Advisory Letter 2018-02 giving its thoughts on both state law and federal law dealing with felons involved in the business of insurance. Louisiana law currently prohibits producers from employing in the business or allowing to associate with the business any person convicted of a felony. This statute was amended in the 2018 regular session of the Louisiana legislature to allow an insurance producer to employ in his business or to associate with his business an individual previously convicted of a felony if the producer first obtains the written consent of or a waiver from the Commissioner (Act 299). The Department notes that it is incumbent upon producers to make written request to obtain the consent of or a waiver from the Commissioner under such circumstances. The consent or a waiver is specific to and exclusively in favor the hiring producer to avoid regulatory action by the Commissioner as provided for in the statute.

The Advisory Letter notes that the cited Louisiana statutes operate independently from federal law contained in 18 U.S.C. 1033, as the federal law places the responsibility of obtaining a waiver on individuals who have been convicted of a felony involving dishonesty or a breach of trust. Such individuals are “prohibited persons” and cannot engage in the business of insurance unless they are given written consent to work in the business of insurance by an appropriate insurance regulator in this case, the Commissioner of Insurance. The Department states that such a written consent merely releases the holder of the consent from his or her status as a prohibited person under federal law. Thereafter, whether the holder of the consent is qualified to engage in the business of insurance becomes a matter of state law as it would have been in absence of 18 U.S.C. 1033. The Department closes this analysis by advising that state law requires a hiring producer to obtain the consent of or waiver from the Commissioner for any and all felony convictions of a potential or current employee.

While the definitions of felony under federal law and state law differ somewhat, and the approach differs, the Department’s concluding admonition is that in some situations, both the producer and the convicted felon will be required to obtain the consent of or waiver from the Commissioner. Even though a waiver has been granted under 18 U.S.C. 1033 by the Commissioner, the failure of a producer to obtain the consent or waiver in compliance with Louisiana state law (Act 299) may result in regulatory action against the producer.

Affected producers, those with current employees who have felony convictions, will have until December 31, 2018 to come into compliance with current state law, as amended by Act 299, but any employee hired after August 1, 2018, is immediately subject to that law as described herein.

Van R. Mayhall, Jr., Esq. - BREAZEALE, SACHSE & WILSON, L.L.P., (225) 381-8009 , van.mayhall.jr@bswllp.com
Sunny Mayhall - The LDS Group and The Versant Group, (225) 768-6160 , Sunny.Mayhall@theLDSgroup.com
Van R. Mayhall, III - Investar Bank, (225) 227-2309 , van.mayhall@investarbank.com

Category(s): Puerto Rico - 10/07/2018

Chapter 46 of the Puerto Rico Insurance Code, 26 L.P.R.A. §4601 et seq, was recently amended through Act No. 150 of July 22, 2018, primarily to allow credit for reinsurance to cedents contracting with “certified reinsurers”-i.e. foreign unauthorized reinsurers hailing from a “qualified jurisdiction”, as defined therein and in consideration of, among other things, the NAIC’s list of qualified jurisdictions, which, as of January 1st, 2017, included Bermuda, France, Germany, Ireland, Japan, Switzerland, and the United Kingdom. Secondly, Chapter 46 was amended to establish a prior notice mechanism for domestic insurers (i) whose reinsurance recoverables from a single reinsurer or group of affiliated reinsurers, exceed fifty percent (50%) of surplus, or (ii) who cede more than twenty percent (20%) of gross written premiums to a single reinsurer or group of affiliated reinsurers.

C. Ignacio Matos, Esq. - REXACH & PICO, CSP, (787) 723-8520 , imatos@rexachpico.com

Category(s): Puerto Rico - 10/07/2018

Act No. 151 of July 22, 2018 amended Chapter 21 of the Puerto Rico Insurance Code, 26 L.P.R.A. §2101 et seq, governing service contract providers to conform the existing legal framework for service contracts with certain aspects of the Service Contract Model Act adopted by the NAIC.

C. Ignacio Matos, Esq. - REXACH & PICO, CSP, (787) 723-8520 , imatos@rexachpico.com

Category(s): Tennessee - 10/08/2018

Trey Hancock has been named Director of Financial Analysis with the Insurance Division of the Tennessee Department of Commerce and Insurance.  Prior to leaving TDCI three years ago to join Aetna, Inc., Mr. Hancock served as the Assistant Director.

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

Category(s): Tennessee - 10/08/2018

Following a July 10 public hearing, the Tennessee Department of Commerce and Insurance has finalized and posted its rules to implement the Corporate Governance Annual Disclosure Act (Section 8 of Public Chapter 873).  The new Regulation 35 (Chapter 0780-01-35) will become effective on November 18, 2018.

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