July 2017 Edition of Alerts

Welcome to the July 2017 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.

Ryan Smart, Esq., FORC Alert Editor

Category(s): Connecticut - 07/26/2017

Connecticut Governor Signs Bill Authorizing Domestic Insurers to Divide

On May 16, Governor Dannel P. Malloy signed HB 7025, which creates a new legal process whereby a Connecticut domestic insurer may divide into multiple insurers and allocate assets and obligations to the “new” insurer. The new insurer would become a legal successor to the original insurer. HB 7025, which is now known as Connecticut Public Act 17-2, requires dividing insurers to develop a division plan before effectuating a division. The plan must comply with requirements specified in Public Act 17-2 and be approved by the insurance commissioner and the dividing insurer.

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

Category(s): District of Columbia - 07/26/2017

DC DISB Issues New Rules for RRG’s

The DC Department of Insurance, Securities and Banking issued in June for public comment its draft of new corporate governance standards for RRGs, and the comment period has expired.  Upon final adoption, these rules will be effective immediately for new RRGs, and will be effective January 1, 2018 for RRGs licensed prior to January 1, 2017.  In compliance with the NAIC accreditation requirements, DC is requiring all new RRGs licensed in 2017 to be in compliance with these requirements upon licensing.

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

Category(s): Florida - 07/26/2017

Final Florida Insurance Bills Signed by Florida Governor Scott

On June 26, 2017, Florida Governor Rick Scott signed the remaining five insurance-related bills from the 2017 Regular Session. Outlined below are the signed five bills that are of interest to insurers: 
Anti-Fraud Efforts – HB 1007 by Rep. Holly Raschein (R-Key Largo)
This measure requiring all insurers to adopt an anti-fraud plan was a priority of outgoing CFO Jeff Atwater. Smaller insurers are required to also establish and maintain a special investigative unit (SIU) for contract for SIU services. In addition, the bill requires every insurer to designate an employee who is responsible for implementing the requirements related to fraud investigation. 
Anti-Fraud Efforts Public Records Exemption – HB 1009 by Rep. Holly Raschein (R-Key Largo) 
This bill was a companion to HB 1007 and provides that the following information about a Special Investigative Unit (SIU) held by DFS is confidential and exempt from the public records law:  
•	An insurer description of its anti-fraud education and training; 
•	A description of the insurers anti-fraud unit; 
•	The rationale for the staffing level and resources provided to the anti-fraud unit; 
•	The number of: 
o	Claims referred to the insurer anti-fraud investigative units;
o	Other insurance fraud matters referred to the insurer anti-fraud units that are not claim related;
o	Claims investigated or accepted by insurer anti-fraud unit; and
o	Insurance fraud matters investigated or accepted by the insurer that are not claim related; and 
•	The estimated dollar amount or range of damages on cases referred to DFS or other agencies. 

Department of Financial Services (DFS) – HB 925 by Rep. Mike Miller (R-Orlando)
The DFS legislative package contains mostly clarifying provisions for the Divisions of Treasury, Accounting and Auditing, State Fire Marshal, Agents and Agency Services, and Risk Management.
Workers’ Compensation Public Records Exemption – HB 1107 by Rep. Ben Albritton (R-Bartow)
This measure clarifies that personally identifying information of an injured or deceased worker filed with the Department of Financial Services (DFS), the Agency for Health Care Administration (AHCA), and the Division of Administrative Hearings (DOAH) is confidential and exempt from the public records mandates, both constitutional and statutory. 
Bail Bonds – HB 361 by Rep. David Santiago (R-Deltona)
A number of ambiguities and inconsistencies within the statutes addressing bail bonds are addressed in this bill. Specifically, the bill Narrows the obligation of the bail bond agent, such that the defendant’s failure to appear at proceedings not specifically ensured by the bond and the defendant’s breach of any other condition no longer constitute a breach of the bail bond agent’s commitment and obligation. It also provides the reasons for which forfeiture can be discharged.

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

Category(s): Florida - 07/26/2017

FL Supreme Court Strikes Down Statutory Caps on Noneconomic Damages in Medical Malpractice Lawsuits

On June 8, 2017, in a 4-3 decision, the Florida Supreme Court affirmed the decision of the Fourth District Court of Appeal, in North Broward Hospital District v. Kalitan. The Court concluded that caps on noneconomic damages in section 766.118 violate the Equal Protection Clause of the Florida Constitution.
In 2007, the plaintiff went to the defendant hospital’s outpatient surgery center for surgery to treat carpal tunnel syndrome in her wrist. A jury determined that, in connection with the surgery, the plaintiff suffered substantial injuries and awarded $4,718,001 in total damages. Included in that amount were $4 million in non-economic damages -- $2 million for past pain and suffering and $2 million for future pain and suffering. The non-economic damages award was, however, substantially reduced by the trial court, which applied the non-economic damages caps in Section 766.118(2) and (3), Florida Statutes. The Fourth District, finding those statutory limitation unconstitutional directed the trial court to reinstate the full award.
In the ensuing appeal to the Florida Supreme Court, the Court agreed with the Fourth District, concluding that the caps on noneconomic damages in sections 766.118(2) and (3) violate the Equal Protection Clause of the Florida Constitution. In so doing, the Court pointed to its decision in Estate of McCall v. United States, 134 So. 3d 894 (Fla. 2014), in which the Court concluded that the noneconomic damages caps provided in Section 766.118 were unconstitutional in a wrongful death case. Importantly, because the Court’s current and prior decisions are based on the Court’s interpretation of the Florida Constitution, there is no issue of constitutionality under the United States Constitution that would provide a basis for review by the United States Supreme Court.

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

Category(s): Florida - 07/26/2017

Florida FSC Approves OIR Commissioner’s Performance Review and Rule Changes

On June 14, 2017 before the Cabinet, sitting as the Financial Services of Commission (“FSC”), Florida Office of Insurance Regulation (“OIR”) Commissioner, David Altmaier presented his yearly performance evaluation and leadership assessment, as well as a number of proposed rule changes that update or repeal obsolete or statutorily duplicative language for approval.

The Commissioner also issued a commendation of the new Deputy Commissioners, Susanne Murphy (Property & Casualty) and Eric Johnson (Life & Health), and outgoing Chief of Staff (COS), Belinda Miller. The Commissioner has a shortlist of names to fill the COS position and is eager to do so.   

The FSC ultimately adopted the following specific rules changes:
•	Changing the definition of “personal financial and health information” contained in Rule 69O-128.025 (“Confidentiality of Personal Financial and Health Information”) because it conflicted with the definition in section 624.23, F.S.
•	Updating the standards used by OIR to review insurers’ quarterly and annual financial reports to the most current versions adopted by the National Association of Insurance Commissioners (NAIC).  
•	Modernizing provisions in 41 rules regarding the rate and form review processes by requiring insurer to submit all documents electronically and eliminated obsolete language. 
•	Authorizing OIR to publish a proposal to repeal duplicative laws for the following rules to streamline Florida law:  Rules 69O-136.002 (“Foreign and Alien Insurers Filing for a Certificate of Authority (COA)”); and 69O-136.006 (“Domestic Insurers Filing for an Application for Permits”).  
•	Authorizing OIR to hold rule hearings to update Chapter 69O-136, F.A.C. regarding the forms needed to issue COAs and licenses to insurers.  A new rule is being proposed that, if approved, would require domestic captives to complete an application for licensure and submit documents electronically.

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

Category(s): Florida - 07/26/2017

Florida Governor Signs Hurricane Preparedness Sales Tax Holiday and Decrease in Commercial Rental Sales Tax

On May 25, 2017, the Tax-Cut Package (HB 7109) that passed during the 2017 Florida Legislative Session was signed into law by Governor Rick Scott. Provisions of HB 7109 took effect on July 1, 2017.
Tax Cut Package – HB 7109 by Rep. Jim Boyd (R-Bradenton)
The 2017 Tax Relief package which amounts to approximately $75 million in savings for Floridians was approved in the final week of session. A major component of the measure was a reduction of the sales tax on commercial rental property, which has long been sought by the business community. Florida is the only state in the nation with this tax in place. The bill permanently lowers the tax on commercial leases from six to 5.8 percent, effective January 1, 2018. Other provisions include: 
•	Establishing two sales tax holidays: 
o	Three days from August 4-6, 2017, for clothing and footwear costing $60 or less, school supplies costing less than $15, and for the first $750 of the cost of a personal computer; and
o	Three days from June 2-4, 2017, for disaster preparedness supplies including flashlights and lanterns costing $20 and less; radios and tarps costing $50 and under; coolers and first-aid kits for $30 and under and generators priced at $750 and less.

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

Category(s): Florida - 07/26/2017

Governor Scott Announces New Chief Financial Officer

On June 26, 2017, Florida Governor Rick Scott named Jimmy Patronis, former member of the House of Representatives and restaurateur, as the new Chief Financial Officer (CFO) for the state. Patronis will replace current CFO Jeff Atwater who announced in April he would vacate his post to assume the CFO position at Florida Atlantic University.

Patronis was first elected to the Florida House in 2006 and served until 2014 when term limits prevented him from running again. Patronis currently serves on the Public Service Commission (PSC), a position he must vacate when he joins the Florida Cabinet. Further, in early March, Governor Scott appointed Patronis to the Constitutional Revision Commission, on which he will continue to serve during his tenure as CFO.

Patronis was sworn in on June 30, 2017 and will serve until November 2018.

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

Category(s): Florida - 07/26/2017

NAIC Executive (EX) Committee Approves First Step in Model Law Development Requests

On June 19, 2017, the National Association of Insurance Commissioners (“NAIC”) Executive (EX) Committee (the “Committee”) held a conference call to consider adoption of certain amendments to several of its model laws and to consider revised charges of the Innovation and Technology (EX) Task Force (the “Task Force”).
The following Model Law Development Requests were adopted:  
1.	Amendments to the Life Insurance disclosure Model Regulation (#580) re: Buyer’s Guide;
2.	Amendments to the Life Insurance Disclosure Model Regulation (#590) and Life Insurance Illustrations Model Regulation (#582) re: Policy overview document;
3.	Amendments to the Annuity Disclosure Model Regulation (#245; and
4.	The Travel Insurance Model Law 

Through votes during the meeting, the Executive Committee has given its approval for each of the appropriate NAIC groups to start working on a draft model. Once a draft model is developed and approved by a parent committee, it will be submitted to the Executive Committee for adoption, which requires a two-thirds (2/3) majority.

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

Category(s): Georgia - 07/26/2017

Georgia Case Summaries

Government Employers Insurance Company v. Morgan, A17A0020, 2017 WL21119165 (Ga. App. 2017).
On May 16 2017, the Georgia Court of Appeals ruled that, in the absence of an affirmative selection of a lower amount of insurance coverage, that O.C.G.A. Section 33-7-11(a) provides, as a default, a limit of uninsured motorists insurance coverage equal to the automobile liability insurance limits of coverage under an auto insurance policy.  The Morgan’s had purchased an auto insurance policy from GEICO beginning in 1986 and had made several changes to the policy over several subsequent years, including rejecting uninsured motorist insurance coverage in its entirety in 1992, but adding uninsured motorist insurance coverage back to the policy in 2003.  The Morgan’s did not complete an uninsured motorist selection form in 2003, although GEICO claimed that the request was made by telephone.  The Court of Appeals concluded that O.C.G.A. Section 33-7-11(a) was intended to make an auto insurance policy’s liability limits the default amount for uninsured motorist insurance coverage unless the insured affirmatively elects  uninsured motorist coverage in a lesser amount and that there is no requirement that the uninsured motorist coverage affirmative election be made in writing.  Further, the UM default provision of O.C.G.A. Section 33-7-11(a) applies whenever the insured obtains uninsured motorist insurance coverage, whether that occurs when the insured first obtains uninsured motorist insurance coverage or requests uninsured motorist insurance coverage at a later date during the insurance policy’s term or renewal term.

Massey v. Allstate Insurance Company, A17A0524, 2017 WL2265380 (Ga. App. 2017).
On May 24, 2017, the Georgia Court of Appeals reversed the trial court’s grant of summary judgment to Allstate Insurance Company (“Allstate”) that an umbrella insurance policy issued to Jody Massey (“Massey”) did not include uninsured motorist insurance coverage. The Georgia Court of Appeals ruled that: (1)  O.C.G.A. Section 33-24-45, which contains the requirements for cancelling and non-renewing an auto insurance policy, applies to an umbrella insurance policy which includes uninsured motorist insurance coverage and (2) Allstate’s failure strictly to adhere to the non-renewal requirements of O.C.G.A. Section 33-24-45 rendered the non-renewal of the uninsured motorist insurance coverage in the umbrella policy ineffective, thus continuing Massey’s uninsured motorist insurance coverage in the umbrella insurance policy at its original limits.

Camacho v. Nationwide Mutual Insurance Company, No. 16-1425, 2017 WL 2889470 (11th Cir. July 7, 2017)
On July 7, 2017, the 11th Circuit Court of Appeals, in a per curiam opinion, affirmed the federal district court’s $8 million dollar bad faith award against Nationwide for failure to settle claims based upon an automobile accident which occurred in 2006.  The 11th Circuit had been urged by numerous amicus groups, including the Georgia Chamber of Commerce, to overturn the district court award based on several errors, including a jury instruction which permitted an award to the plaintiff based upon of finding of either negligence or bad faith.  The 11th Circuit, in affirming the district court, confirmed that plaintiff’s in Georgia may prevail in bad faith actions based upon merely the negligence of an insurer.

Brian T. Casey, Esq. - LOCKE LORD LLP, (404) 870-4638 , bcasey@lockelord.com
David M. Green, Esq. - LOCKE LORD LLP, (404) 870-4657 , david.green@lockelord.com

Category(s): Louisiana - 07/26/2017

2017 Louisiana Legislature Active in Insurance Industry

Although the 2017 legislative session was a so-called “fiscal only” session, nevertheless, numerous non-fiscal Bills were heard, as each legislator is able to introduce not more than five (5) non-fiscal measures. These included a number of Bills affecting the insurance industry. 
A summary of a few of the more notable Bills is as follows:
•	HB 89 (now Act No. 29) provides for an exemption from licensure as a claims adjuster to allow non-licensed claims adjusters to adjust certain losses that do not exceed $500.00. An individual employed by an insurer who adjusts a loss not to exceed $500.00 or authorizes a payment on a claim for a loss for which there is a specified coverage limit of $500.00 or less arising from a first party claim under a property and casualty insurance policy is exempt from the licensure requirement.
•	HB 283 sought to amend the provisions of the Louisiana Administrative Procedures Act (“APA”) relative to judicial review of administrative hearings involving the Commissioner of Insurance. Prior to the proposed amendment, the law in Louisiana was that no agency or official thereof, or any other person acting on behalf of an agency or official thereof, shall be entitled to judicial review of a determination under the APA. This Bill would have created a legislation exception specific to the adjudication by an Administrative Law Judge of any fine, revocation, denial or suspension of any license, certificate or registration or any order or directive issued pursuant to Title 22 of the Louisiana Revised Statutes of 1950. Title 22 is the Louisiana Insurance Code. This provision was deferred and failed to pass in the 2017 legislative session.
•	HB 289 (now Act No. 10) requires the submission on an annual basis of certain contact information with respect to all “risk bearing entities” authorized by the Commissioner. This information includes the name, mailing address, telephone number and electronic mail address of each individual responsible for each of several categories of information, including:
i. receipt of and response to consumer complaints;
ii. receipt of rules, regulations and other directives from the Commissioners;
iii. receipt and filing of inquiries regarding financial condition of the entity;
iv. receipt and filing of inquiries regarding tax payments; and
v. any other function the Commissioner deems necessary to the exercise of his
This information must be kept current and the Commissioner shall be informed within thirty (30) days of any change in the information.
•	HB 407 made certain changes in the Louisiana Insurance Code relative to producer compensation, specifically authorizing the charging of agency fees on individual and group health insurance policies and supplemental benefit insurance policies. The expenses or agency fees charged with respect to individual health insurance policies must be disclosed on a separate document which has to be signed by the named insured. The exclusive remedy for failure to obtain a signed disclosure on an individual health insurance policy is the return of expenses and agency fees. A requirement was added that the producer also provide notification in a separate written document of sufficient size and legibility that advises the insured he may purchase the same health insurance policy online or by contacting a healthcare navigator. This disclosure must also inform the insured that if he elects to purchase the health insurance policy from his current agent, he may be charged a fee and expenses that he would not incur if he purchases a policy online or through a healthcare navigator. The form has to be signed by the named insured.
• HB 503 (now Act No. 154) confirms that, in addition to realigning fees for various licenses issued by the Louisiana Department of Insurance for producers, a business entity acting as an insurance producer shall obtain an insurance producer license. Also, every member, partner, officer, director and person who controls directly or indirectly ten percent (10%) or more of a resident business entity producer shall be registered with the Louisiana Department of Insurance under such business entity’s license. A nonresident business entity producer shall provide to the Commissioner, upon request, the name of every member, partner, officer, director and person who controls, directly or indirectly, more than ten percent (10%) of the nonresident business entity. Control is generally considered to be ownership or control of ten percent (10%) or more of the voting securities of an entity.
• SB 117 (now Act No. 380) provides, with respect to certain insurance producers, a requirement for the maintenance of professional liability insurance for the benefit of insurance customers and for related matters. Every insurance producer who is actively writing insurance policies in Louisiana and is subject to the applicable provisions of the Insurance Code shall maintain professional liability insurance or an errors and omissions policy which includes coverage for acts and omissions as a non-captive insurance producer and which policy is for the purpose of providing coverage for the benefit of insured customers of the producer. Similar provisions apply for certain other producers. If an insurance producer is required to maintain professional liability insurance or an errors and omissions policy as provided, such failure shall constitute an unfair trade practice under the Unfair Trade Practices section of the Insurance Code and subject the insurance producer to sanctions thereunder.
The above Bills which became Acts of the 2017 Legislature are generally effective in August of 2017 with the exception of Acts 10 and 154, which are effective January 1, 2018.

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

Category(s): Minnesota - 07/27/2017

Minnesota Legislature Materially Modifies Market Conduct Examination Process

Minnesota Governor Mark Dayton signed into law significant revisions to Minnesota’s market conduct examination law with the unanimous support of the Minnesota legislature. These revisions, with some input from the Minnesota Department of Commerce, came as a result of perceived overreach and abusive tactics by the Minnesota market conduct examination team. Among other things, the revised law requires the Commissioner to provide the insurance company to be examined with the details associated with the proposed examination, as well as the estimated length of the examination, a budget for the examination, and detailed descriptions regarding how the market conduct examination will be conducted.

David M. Aafedt, Esq. - WINTHROP & WEINSTINE, P.A., (612) 604-6447 , daafedt@winthrop.com

Category(s): Tennessee - 07/26/2017

TDCI Proposes Comprehensive Regulations for Captive Insurers

In concert with the May enactment of legislation to enhance Tennessee’s status as a favorable domicile for captive insurers (Pub. Ch. 354), the Tennessee Department of Commerce and Insurance has issued a Notice of Rulemaking Hearing to amend and restate Regulation 41 (Chapter 0780-01-41) – Tennessee Captive Insurance Companies.  The proposed re-write of Regulation 41, which will comprehensively delineate and clarify regulatory requirements for Tennessee captives, will be the subject of a rulemaking hearing on July 26.

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): Texas - 07/26/2017

Texas Adds Domestic Surplus Lines

Effective January 1, 2018, Texas domestic property and casualty insurers can insure excess and surplus lines risks, if the insurer writes no business in the admitted market; has $15 Million in capital and surplus or is listed on the NAIC Quarterly Listing of Alien Insurers; and all the risks insured are eligible surplus lines risks.

Domestic Surplus Lines Insurers may not issue policies to meet auto financial responsibility requirements or provide workers compensation insurance. These companies will enjoy rate and form freedom and will not be subject to guaranty fund assessments. 

Property and casualty insurers domiciled in other states may re-domesticate to take advantage of the new Texas law. The Texas Department of Insurance will be adopting rules regarding forms, documents, and disclosures for Domestic Surplus Lines Insurers.  

For more information contact Burnie Burner or Julie Pomerantz.

Burnie Burner, Esq. - MITCHELL, WILLIAMS, SELIG, GATES & WOODYARD, P.L.L.C., (512) 480-5100 , bburner@mwlaw.com
Julie M. Pomerantz, Esq. - MITCHELL, WILLIAMS, SELIG, GATES & WOODYARD, P.L.L.C, (512) 480-5100 , jpomerantz@mwlaw.com

Category(s): Virginia - 07/26/2017

Virginia Commissioner of Insurance Announces Retirement Plans

Jacqueline Cunningham, Virginia’s 13th commissioner of insurance, will retire at the end of the year after serving a distinguished 30 year career with the State Corporation Commission’s Bureau of Insurance.  She was appointed by the Commission to serve as commissioner of insurance on January 1, 2011, after serving as the deputy commissioner within the Bureau’s Life and Health Division.  The Commission is currently seeking her successor.

Scott J. Sorkin, Esq. - BLAND & SORKIN P.C., (804) 747-6667 x12 , ssorkin@blandsorkin.com

Category(s): Wisconsin - 07/26/2017

Update from Wisconsin

In late June, Wisconsin became the latest state to adopt a domestic surplus lines law when Governor Scott Walker signed 2017 Wisconsin Act 16 (https://docs.legis.wisconsin.gov/2017/related/acts/16.pdf).  This law permits Wisconsin domestic insurers to sell surplus lines insurance in Wisconsin, which will allow Wisconsin domestic companies to sell surplus lines insurance in all 50 states from a single insurer.  Companies must have at least $15 million in capital and surplus and, if it has previously issued admitted policies in Wisconsin, must establish a plan for the treatment of such policies once it becomes a domestic surplus lines insurer.  Policies issued in Wisconsin by a domestic surplus lines insurer are treated as surplus lines policies for all purposes, including taxation and the Wisconsin Insurance Guaranty Fund.

Feel free to contact us if you have any questions.

Kevin G. Fitzgerald, Esq. - FOLEY & LARDNER LLP, (414) 297-5841 , kfitzgerald@foley.com
Morgan J Tilleman, Esq. - Foley & Lardner LLP, (414) 297-5871 , mtilleman@foley.com

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