June 2012 Alert


Welcome to the June 2012 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,

David K. Liggett

Editor, FORC Alert

June 2012 Alerts


Category(s): - 06/01/2012

Connecticut Enacts NAIC Model Law Reducing Collateral Requirements for Alien Reinsurers

On June 4, 2012, Connecticut Governor Dannel P. Malloy signed into law Public Act 139, which tracks recent amendments to the National Association of Insurance Commissioners’ (“NAIC”) Credit for Reinsurance Model Law. Public Act 139, which will take effect October 1, 2012, eases collateral requirements for unauthorized and unaccredited alien reinsurers providing reinsurance to Connecticut-domiciled insurers.  Under current law, the alien reinsurer must provide 100% collateral in order for Connecticut-domiciled cedents to receive full credit for reinsurance.  Public Act 139 authorizes the insurance commissioner to employ a sliding scale for collateral requirements based on the reinsurer’s financial strength and other factors, such as the regulatory requirements of the alien jurisdiction in which the reinsurer is domiciled.

Michael T. Griffin, Esq. - ACCEL LAW GROUP P.C., (860) 761-8550 , mgriffin@accelcompliance.com

Category(s): Arizona - 06/01/2012

Arizona Insurance Director Resigns

After nearly nine years in office, and having served under two Governors, Christina Urias has announced that she intends to leave office effective May 29, 2012.  As most of you know, Director Urias was among the ranks of senior regulators at the NAIC, serving in several leadership positions during her lengthy tenure.  As of this writing a replacement for Director Urias has not been announced by Governor Brewer.

S. David Childers, Esq.

Category(s): Connecticut - 06/01/2012

Connecticut Enacts NAIC Model Law Regarding Enterprise Risk

On June 4, 2012, Connecticut Governor Dannel P. Malloy signed into law Public Act 103, which follows a model law recently adopted by the National Association of Insurance Commissioners (“NAIC”). Public Act 103 requires the ultimate controlling parent of a holding company system to annually file an enterprise risk report.  The annual enterprise risk report must identify, to the best of the filer’s knowledge and belief, the material risks within the insurance holding company system that could pose enterprise risk to the domestic insurance company.  “Enterprise Risk” is defined as, “any activity, circumstance, event or series of events involving one or more affiliates of an insurer that, if not remedied promptly, is likely to have a material adverse effect upon the financial condition or liquidity of the insurer or the insurer’s insurance holding company system as a whole. . ..”

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

Category(s): Florida - 06/01/2012

Florida Legislature Passes Compromise PIP Bill

The Florida Senate passed an amended PIP reform bill (HB 119) on a narrow 22-17 vote.  With the vote, Governor Scott accomplished a top legislative priority, to reform Florida’s mandatory motor vehicle no-fault law and crack down on the fraud abuses in PIP cases that have led to skyrocketing costs for coverage.  According to the Governor’s office and industry experts, PIP costs have risen by $1.4 billion since 2008, largely because of fraud imbedded in the system.

The new legislation requires the reimbursement of medical benefits if the insured obtains initial services and care within 14 days after a motor vehicle accident from a limited list of providers.  The full $10,000 PIP medical benefit is available only if a physician, osteopathic physician, dentist, or a supervised physician’s assistant or advanced registered nurse practitioner determines that the insured has an “emergency medical condition.” Otherwise, the PIP medical benefit is limited to $2,500.  Further, the bill clarified that death benefits are limited to $5,000, not $10,000, but may supplement medical and disability benefits.  Follow-up services require a referral from a physician, osteopath, chiropractor or dentist.  Massage therapy and acupuncture are no longer considered a reimbursable benefit under PIP.  PIP insurers must also maintain a log of benefits paid under PIP on behalf of the insured, to be provided to the insured if litigation is commenced. The bill also did away with contingency fee multipliers for a claimant’s attorneys fees but did not place caps on attorneys fees.

The final bill was a combination of the initial preferred House and Senate versions.  The Senate wanted a guaranteed 25 percent rate reduction on PIP, but settled for a 10 percent reduction.  If PIP insurers do not provide their policyholders a minimum 10 percent base rate reduction, they must explain in detail why they have not. A PIP insurer must make a second rate filing by January 1, 2014, to achieve a cumulative 25 percent base rate reduction for policyholders unless the insurer shows why it is unable to provide the cut.  The bill suspends an insurer’s ability write new PIP coverage in Florida if the insurer fails to make either required filing or showing.  The newly enacted reforms are effective July 1, 2012.  The Office of Insurance Regulation must publish the results of a comprehensive PIP data call by January 1, 2015.  To see a summary of the Amended HB 119 click here.

A. Kenneth Levine, Esq. - COZEN O'CONNOR, (561) 515-5256 , klevine@cozen.com

Category(s): Florida - 06/01/2012

Florida Office of Insurance Regulation Establishes Speed-to-Market Property Casualty Personal Lines Form Filings Review

The Florida Office of Insurance Regulation ("OIR") issued an Executive Order on June 25, 2012, in which it established "speed-to-market" review of all property and casualty personal lines forms except workers' compensation. OIR officials indicated that, while approximately 1,200 commercial form filings are eligible for the speed-to-market initiative, insurers have utilized the process for only 36 of these filings to date. To view the Order, click here.

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

Category(s): Florida - 06/01/2012

Florida Office of Insurance Regulation Seeks to Expand Credit for Reinsurance From Eligible Reinsurers to Apply to Life Insurance

The Florida Office of Insurance Regulation is seeking to amend Rule 69O-144.007, F.A.C, entitled "Credit for Reinsurance From Eligible Reinsurers" to apply to life insurance and not just property and casualty insurance.  The Rule was initially adopted to implement provisions of Section 624.610(3)(e), F.S., which give the Florida Insurance Commissioner authority to allow credit for reinsurance that does not meet criteria established in Sections 624.610(3)(a)-(d), if the assuming insurer holds surplus in excess of $250 million and has a secure financial strength rating from at least two nationally recognized statistical rating organizations deemed acceptable by the Commissioner.

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

Category(s): Florida - 06/01/2012

Florida Office of Insurance Regulation: Workers' Compensation Excessive Profits Reporting Form (OIR-B1-15) Not Required Under CS/HB 941

The Florida Office of Insurance Regulation issued an Informational Memorandum on May 9, 2012, advising insurers that the Workers' Compensation Excessive Profits Reporting Form (Form OIR-B1-15) is not required to be filed this year due to changes under CS/HB 941, which was recently enacted. To view the Informational Memorandum, click here.

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

Category(s): Florida - 06/01/2012

Key Legislators Release White Paper

Senator Garrett Richter and Representative Bryan Nelson have released a white paper discussing Florida's residential property insurance market.  The legislators have been key figures in efforts to reduce the state's involvement in the insurance business.  Their latest effort, set forth in the white paper, highlights the assessment burden on Floridians that would arise from simultaneous assessments from Citizens Property Insurance Corporation, the Florida Hurricane Catastrophe Fund, and the Florida Insurance Guaranty Association.

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

Category(s): Florida - 06/01/2012

OIR Allows P&C Insurers to Certify Forms

The Florida Office of Insurance Regulation has expanded its self-certification process for property and casualty forms to include all P&C lines except workers' compensation.  Earlier this year, OIR began allowing certain commercial insurers to certify their forms meet regulatory requirements and thereby avoid the traditional review-and-approval process.  A follow up order in late June expands the available lines of business, perhaps most notably including the personal lines.  To see a copy of the order click here.

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

Category(s): Florida - 06/01/2012

Personal Injury Protection (PIP) Insurance Fee Schedule Issue Certified to Florida Supreme Court

n the case of Geico v. Virtual Imaging, No. 3D11-581, the Third District Court of Appeal has certified the following question to the Florida Supreme Court as being one of great public importance:  "WITH RESPECT TO PIP POLICIES ISSUED AFTER JANUARY 1, 2008, MAY THE INSURER COMPUTE PROVIDER REIMBURSEMENTS BASED ON THE FEE SCHEDULES IDENTIFIED IN SECTION 627.736(5)(a), FLORIDA STATUTES, EVEN IF THE POLICY DOES NOT CONTAIN A PROVISION SPECIFICALLY ELECTING THOSE SCHEDULES RATHER THAN 'REASONABLE MEDICAL EXPENSES' COVERAGE BASED ON SECTION 627.736(1)(a)?" To view the Court’s full opinion, click here.

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

Category(s): Georgia - 06/01/2012

Expansion of Counselor Licensing

The Commissioner of Insurance promulgated an emergency rule, effective June 4, 2012, that will allow more agents to obtain group health counselor’s licenses.  The emergency rule comes as a result of the Patient Protection and Affordable Care Act, and the negative impact it has had on agent commission rates.  In Georgia, an agent must be licensed as a counselor to earn a fee and a commission on the same transaction.  Since fees counselors earn from health insurance policies have been unaffected by the PPACA, the new emergency rule will make it easier for agents to obtain counselor licenses and thus have the ability to offset income lost by reductions in commissions and continue to service the group health market.

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

Category(s): Georgia - 06/01/2012

Hover v. Maxum Indem. Co., S11G1681; S11G1683, Georgia Supreme Court (June 18, 2012)

On June 18, 2012, the Georgia Supreme Court issued a divided opinion in which it reversed the Georgia Court of Appeals’ reversal of a partial summary judgment to James M Hoover on his claim that Maxum Indemnity Company breached its duty to defend its insured, Emergency Water Extraction Services, LLC (“Emergency”) which employed Mr. Hoover.  Mr. Hoover was assigned the breach of duty claim by Emergency, and the underlying claim was based upon injuries that Mr. Hoover suffered while working as a technician for Emergency.  Maxum denied coverage on the basis of an employer liability exclusion and refused to undertake a defense of Emergency.  In reversing the Court of Appeals, the Supreme Court held that Maxum could not deny the claim based upon employer liability exclusion and reserve its rights to assert other defenses later.  The Supreme Court also ruled that even if Maxum could both deny the claim and reserve its rights for later defenses, the language of the reservation was ambiguous and thus would be construed in favor of the insured, to wit: “the right to disclaim coverage on any other basis that may become apparent as this matter progresses and as Maxum obtains additional information.”  Finally, the Supreme Court ruled that Maxum waived its notice defense because it did not specifically raise it in the denial of claim/reservation of rights letter or its motion for summary judgment.  Based upon the foregoing, the Supreme Court ruled that the Court of Appeals’ reversal of the trial court’s partial sum judgment order holding that Maxum breached its duty to defend Emergency was error and reversed.

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

Category(s): Georgia - 06/01/2012

Royal Capital Dev. LLC v. Maryland Cas. Co., S12Q0209 Georgia Supreme Court (May 29, 2012)

On May 29, 2012, the Georgia Supreme Court addressed the applicability of its ruling in State Farm Mut. Auto. Ins. Co. v. Mabry ("Mabry"), wherein it held that diminution of value is a recoverable component of a loss in first party insurance physical damage claims for automobiles, to Royal Capital Development, LLC v. Maryland Cas. Co. ("Royal Capital"), 659 F.3d 1050 (11th Cir. 2011), a case that is currently pending in the 11th Circuit of Appeals.  In response to the 11th Circuit’s certified question regarding the applicability of Mabry to Royal Capital, the Georgia Supreme Court answered that its ruling in Mabry applies to the facts considered in Royal Capital.  Though the Royal Capital case is differentiated in that it involves a commercial real estate property insurance policy and a claim by the policyholder for diminished value of the insured property, the Georgia Supreme Court indicated that its ruling in Mabry is not limited by type of property, but rather speaks generally to damages.

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

Category(s): Georgia - 06/01/2012

State Farm Mut. Auto. Ins. Co. v. Meyers, A12A0489 Georgia Court of Appeals (June 8, 2012)

On June 8, 2012, the Georgia Court of Appeals reversed a summary judgment motion arising from a declaratory action filed by State Farm arising out of a sexual battery that occurred when a disabled adult ward was riding in the back seat of a car insured by State Farm.  The car was driven by the husband of the insured as part of his job of transporting medical patients to and from medical appointments.  The disabled adult ward was inappropriately touched by another passenger in the car on the way to one of her appointments.  In reversing the summary judgment in favor of the adult disabled ward, the Court of Appeals held that the damages alleged in the suit did not arise out of the ownership, maintenance or use of the car and were thus not covered under the policy of insurance.

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

Category(s): Iowa - 06/01/2012

Iowa Elects Not to Join Either Surplus Lines Allocation System

Exercising its option under the Nonadmitted and Reinsurance Reform portion of the federal Dodd-Frank bill, Iowa has declined to enter either the NAIC's Nonadmitted Insurance Multistate Agreement (NIMA) or NCOIL's Surplus Lines Insurance Multistate Pact (SLIMPACT) for premium tax allocation on multistate state risks covered by surplus lines.  Instead, Iowa will receive premium tax only for risks of its own home state insureds, whether on in-state or out-of-state risks.  No revenue will be received from insureds whose home state is not Iowa, even on Iowa risks.  Iowa felt it could not determine whether it was going to lose more revenue flowing from Iowa on out-of-state risks of Iowa home state insureds than it would gain on Iowa risks of non-Iowa home state insureds.  Nor were the NIMA and SLIMPACT allocation systems fully developed and implemented.  Recent regulatory enhancements for surplus lines put forth by NAIC were adopted, though.

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

Category(s): Iowa - 06/01/2012

Iowa Proposing New Rule Governing Certificates of Insurance

Against the background that a certificate of insurance cannot add, detract, or otherwise vary the terms of the underlying policy and a dispute between lenders and insurers over whether, and to what extent, a binder constitutes evidence of insurance, the Iowa Commissioner of Insurance is proposing a new, formal administrative rule setting forth the content and timing of issuance of certificates of insurance and binders. The rule prescribes that forms of the Association for Cooperative Operations Research and Development (ACORD) or ISO binder forms shall be utilized within 20 business days upon request in certain commercial transactions.

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

Category(s): North Carolina - 06/01/2012

North Carolina Senate Bill 647 Authorizes Domestic Mutual Insurance Holding Companies

North Carolina Senate Bill 647 authorizes a domestic mutual insurance company to form an insurance holding company.  The mutual plan filed with the North Carolina Department of Insurance will provide for the continuation of the insurance company as a stock insurance company subsidiary of the newly formed holding company.  The membership interests of the policyholders in the mutual company shall become membership interests in the mutual insurance holding company.  The holding company must, at all times, hold a majority of the voting shares of stock of the reorganized stock insurance company.  The policyholders of the mutual company must approve the reorganization by a two-thirds majority of those voting.  There are approximately thirty three domestic mutual insurance companies in North Carolina.

David K. Liggett, Esq. - RAGSDALE LIGGETT PLLC, (919) 881-2209 , dliggett@rl-law.com

Category(s): New Mexico - 06/01/2012

Governor & Superintendent Respond to Record Wildfires in New Mexico

Governor Suzanna Martinez and Superintendent of Insurance John Franchini each issued proclamations to aid victims of two major New Mexico wildfires, the Whitewater Baldy Complex fire in the Gila Wilderness, the largest wild fire in state history, and the Little Bear wildfire near the resort town of Ruidoso which destroyed over 230 homes. 

The Governor issued declarations of emergency for Catron and Lincoln Counties and a statewide emergency declaration calling for the mobilization of additional state resources to assist local efforts in flood mitigation and emergency preparedness to deal with the damage caused by these fires.

Superintendent Franchini issued an Insurance Division bulletin (No. 2012-07 declaring the wildfires to be a "catastrophe" as defined by NMSA 1978 §59A-16-20(f) which implements enhanced claims procedures for insurance claims resulting from these fires.

Gary Kilpatric, Esq. - MONTGOMERY & ANDREWS, P.A., (505) 982-3873

Category(s): New York - 06/01/2012

New York Adopts Regulation Requiring Life Insurers to Check Social Security Death Master File

The New York Department of Financial Services (DFS) has promulgated Regulation 200 (11 NYCRR 226), requiring life insurers doing business in New York to cross-check the Social Security Death Master File on a regular basis against their lists of policy holders and to cross-check with New York's Lost Policy Finder, an on-line service designed to help consumers locate life policies. The regulation also requires insurers to locate and pay beneficiaries of policies when no post-death claims have been made. DFS Superintendent Benjamin Lawsky reported that as a result of a July 5, 2011 letter to insurers concerning Social Security Death Master File checking procedures, over $262 million has been paid to beneficiaries nationwide, including more than $95 million paid to New York beneficiaries.  Those results led to promulgation of Regulation 200.

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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