Alert Edition July 2024

Welcome to the July 2024 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,
C. Ignacio Matos, Esq., FORC Alert Co-Editor
Ryan Smart, Esq., FORC Alert Co-Editor
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Category(s): National - 07/29/2024

Chevron Doctrine Overruled and Implications for State Insurance Departments’ Interpretations of State Insurance Codes

In a momentous 6-3 decision handed down on June 28, 2024, the SCOTUS abolished the Chevron doctrine that stood the test of time for forty years. In the consolidated cases of Loper Bright Enterprises v. Gina Raimondo, Secretary Commerce and Relentless, Inc. v. Department of Commerce, the SCOTUS held that federal government agencies are no longer the arbiter of an ambiguous or a silent federal statute because the exercise of the power conflicts with the federal Administrative Procedures Act and the judiciary’s responsibility to interpret those statutes and decide questions of law regarding their meanings. Under the Chevron case, which the SCOTUS decided in 1984, the federal courts were required to give deference to a federal government agency’s rules in interpreting federal statutes that were ambiguous or silent on a matter if the agency’s interpretation was “permissible”. Although SCOTUS did not undo the many prior court decisions that relied on Chevron, it is a new day for how statutes will be drafted and new agency rules will be challenged. This is true for state insurance statutes as some, but not all, states have embraced the Chevron doctrine for state law purposes.

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

Category(s): National - 07/29/2024

Insurance Companies Are a “Party in Interest” in Chapter 11 Bankruptcy Cases

In an 8-0 decision of the SCOTUS issued on June 4, 2024, the court held in Truck Insurance Exchange v. Kiser Gypsum Co. that an insurer with financial responsibility for bankruptcy claims against a debtor is Chapter 11 “party in interest” that “may raise and may appear and be heard on any issue”. In this case, the debtor faced over 38,000 asbestos-related lawsuits and filed for bankruptcy protection. Given its direct financial interest in how claims would be handled under the trust arrangement, Truck Insurance objected to the debtor’s reorganization plan’s establishment of a trust to handle payment of these claims where the debtor would assign its right sunder the Truck Insurance policies to the funding trust. The SCOTUS overruled the district court’s application of the “insurance neutrality” doctrine, which looks only at whether a reorganization plan alters the insurer's contract rights or quantum of liability.

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

Category(s): National - 07/29/2024

Supreme Court Holds Life Insurance Proceeds Paid to Company Are Includible in Company Valuation for Estate Tax Purposes

On June 6, 2024, the SCOTUS decided an important estate tax case for closely held corporations and their use of life insurance as a funding vehicle for shareholder redemptions upon the death of a shareholder. Connelly v. United States held that, for federal estate tax purposes, the valuation of a corporation’s stock held by the estate of a deceased shareholder must include the value of life insurance proceeds obtained by the corporation from the death of a shareholder, despite the corporation’s obligation to use the life insurance proceeds to redeem the stock held by the deceased shareholder’s estate. Brothers Michael and Thomas Connelly were the two shareholders of Crown C Supply Company, who had entered into a buy-sell agreement with Crown to ensure the business stayed in the family after they died. Upon the death of a shareholder, the other brother had an option to purchase the deceased brother’s stock in Crown. If the surviving brother declined to purchase the deceased brother’s stock, Crown was required to purchase the shares from the decedent brother’s estate. Michael obtained a $3.5 million life insurance policy on his own life and assigned it to Crown, and Crown purchased life insurance policies on Thomas’s life. When Michael died in 2013, Thomas declined to purchase Michael’s stock pursuant to the buy-sell agreement and Crown then used $3 million from the $3.5 million in life insurance proceeds from the policy on Michael’s life to purchase the stock from Michael’s estate. Thomas, as executor of Michael’s estate, filed an estate tax return reporting a $3 million value of Michael’s stock in Crown. The IRS determined on audit that the entire $3.5 million of life insurance proceeds were includible in valuing Crown, despite that Crown was required to use $3 million of those proceeds to redeem Michael’s stock in Crown, resulting in the IRS’s determination that the value of Crown as of Michael’s date of death was $6.86 million and making Michael’s stock in Crown worth $5 million with the estate owing an additional $889,914 in estate tax. The SCOTUS held that the buy-sell agreement’s stock redemption obligation was not a liability that decreased the net value of Crown by the amount of the life insurance used to purchase Michael’s shares in Crown, based on the analysis that a corporation’s contractual obligation to redeem its shares at fair market value where no life insurance is used does not reduce the value of the shares.

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

Category(s): Alabama - 07/29/2024

The Alabama Department of Insurance Has Issued or Updated the Following Legal Regulations and Bulletins

- Bulletin No. 2024-02: Short-Term Limited Duration Plans and Independent Non-coordinated Excepted Benefits Coverage
Short-Term Limited Duration Plans and Independent Non-coordinated Excepted Benefits Coverage 

- Bulletin No. 2018-05r: Rescinded regarding Association Health Plans
Association Health Plans (Bulletin 2018-05 Rescinded 5-30-24) 

- Regulation Number: 130
Recognition of the 2001 CSO Mortality Table for Use in Determining Minimum Reserve Liabilities and Nonforfeiture Benefits 

- Regulation Number: 81
Licensing of Sales Agents for Health Maintenance Organizations 

- Regulation Number: 75
Smoker - Non-Smoker Mortality Tables for Use in Determining Minimum Reserve Liabilities and Nonforfeiture Benefits 

- Regulation Number: 159
Strengthen Alabama Homes (effective January 1, 2025) 

- Regulation Number: 76
Alabama Procedures for Recognizing a New Annuity Mortality Table for Use in Determining Reserve Liabilities for Annuities 

- Bulletin No. 2024-03
Date: 7/9/2024
Hurricane Sally Data Call 

- Regulation Number: 139
Recognition of Preferred Mortality Tables for use in Determining Minimum Reserve Liabilities 

- Regulation Number: 112
Actuarial Opinion and Memorandum 

- Regulation Number: 148
Title Insurance Agents (effective October 1, 2024) 

- Regulation Number: 120
Valuation of Life Insurance Policies (Including the Introduction and Use of New Select Mortality Factors) 

- Regulation Number: 111
Licensing of Limited Line Credit Insurance Producers

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

Category(s): Florida - 07/29/2024

FLOIR Agency Bill with Changes to Surplus Lines Property Cancellations and Nonrenewals and QUASR Reporting Becomes Law

HB 1611, the OIR agency bill, became law on May 10, 2024, when Governor DeSantis signed the bill. The bill takes effect on July 1, 2024, except the provision relating to public housing self-insurance funds which took effect when the bill was signed. The new QUASR reporting takes effect on July 1, 2024, but insurers do not have to do the new reporting until January 1, 2025.

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

Category(s): Florida - 07/29/2024

Florida Governor DeSantis Signs Citizens Insurance Bill

On May 10, Governor Ron DeSantis signed 20 bills, including a measure that could expand efforts to move policies from the state’s Citizens Property Insurance Corp. into the private market. Under the bill, some non-homesteaded properties could be taken out of Citizens by what are known as “surplus lines” carriers, which do not face the same regulations as more-typical insurers on issues such as rate.

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

Category(s): Florida - 07/29/2024

Governor DeSantis Signs Bill Preventing HOAs from Blocking Hurricane Protection Measures

On May 28, Governor Ron DeSantis approved legislation on Tuesday that prevents Homeowners Associations (HOAs) or Architectural Review Committees (ARCs) from denying the installation of hurricane protection measures. The measure, House bill 293, specifies hurricane protection improvement as including, but not limited to, roof systems, storm shutters, impact-resistant windows and doors, and other approved protective installations in order to create a standardized baseline across the state.

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

Category(s): Florida - 07/29/2024

Health Insurance Shared Savings Program and Advanced EOB Bill Approved by Governor DeSantis

On the final day of the 2024 Legislative Session, HB 7089, the bill requiring health insurers to provide advanced EOBs to insureds, requiring facilities to post a list of at least 300 shoppable services for transparency, and dealing with medical debt passed the Legislature. However, the implementation of the advanced EOB part of the bill is delayed until the federal government enacts rules on the issue.

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

Category(s): Florida - 07/29/2024

Property Insurance Premium Reductions Due to Tax Changes Approved By Governor DeSantis

On May 7, 2024, Governor Ron DeSantis signed the tax package for the 2024 legislative session. Most of the tax provisions in HB 7073 do not relate to insurance. However, the insurance premium tax paid on property and flood insurance is affected by the bill, starting October 1, 2024. In this regard, the bill requires property insurers to reduce property insurance premiums for residential coverage on a dwelling by 1.75% for the insurance premium tax and by 1% for the State Fire Marshal regulatory assessment. In addition, personal lines and commercial lines property policies that cover flood must reduce the premium by 1.75% for the insurance premium tax.

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

Category(s): Florida - 07/29/2024

Reciprocal Insurer Rules and Forms Created by FLOIR

Recently, the FLOIR released two new rules and four new forms for reciprocal insurers. The reciprocal insurer rules and forms were included in a larger rule package by FLOIR. The Florida Legislature overhauled the statutes related to reciprocal insurers during the 2024 legislation session and the overhaul is the impetus for the new rules and forms.

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

Category(s): Florida - 07/29/2024

Workers’ Comp Reimbursement Increase Approved by Governor DeSantis

Governor Ron DeSantis signed SB 362 on June 14, 2024. It takes effect on January 1, 2025. The bill increases provider reimbursement fees from 110% of Medicare to 175% and increases reimbursement for surgery from 140% of Medicare to 210%. The increases for surgery also include all scheduled, non-emergency clinical lab and radiology services and outpatient physical, occupational, and speech therapy.

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

Category(s): Florida - 07/29/2024

Workers’ Comp Specialist Authorization for First Responders Signed into Law

SB 808, a bill requiring firefighters to receive medical treatment by a specialist for tuberculosis (TB), heart disease, or hypertension, was signed into law on May 29, 2024, by Governor DeSantis. It takes effect on October 1, 2024. In order to treat with a medical specialist (defined as a medical or osteopathic doctor with certain board certification) for TB, heart disease or hypertension, the bill requires the first responder to notify their workers’ comp carrier, self-insurer, or TPA of the specialist they want to treat with.

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

Category(s): Georgia - 07/29/2024

1-Year Lawsuit Limitation Clause in Homeowner’s Insurance Policy Enforceable Over Fire Endorsement’s 2-Year Lawsuit Limitation Clause

The Georgia Court of Appeals recently held in Reeves v. Allstate Ins. Co., (Case No. A24A0286, April 30, 2024) that a homeowner’s insurance policy’s clause limiting the time within which the insured could sue the insurer under such policy to one year after the inception of loss or damage applied even though the policy’s fire endorsement stated that “[n]o suit or action on this policy for the recovery of any claim shall be sustainable in any court of law or equity unless all the requirements of this policy shall have been complied with, and unless commenced within two years next after inception of the loss.” The insured’s loss did not result from a fire; therefore, the fire endorsement’s two-year lawsuit limitation did not apply.

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

Category(s): Georgia - 07/29/2024

Auto Dealer’s Insurance Policy Did Not Cover Auto’s Total Loss After Customer’s Purchase

In a recent decision of the Georgia Court of Appeals, General Security Indemnity Co. of AZ v. Gerald Jones Ford, (Case No. A24A0477, June 18, 2024), the court reversed the trial court’s grant of summary judgement finding that General Security’s auto physical damage insurance policy issued to the auto dealer, which provided coverage for the dealer’s inventory until the autos were sold or leased, did not provide coverage for a vehicle damaged after its sale by the auto dealer. The policy contained a “spot-delivery” extension, which covered autos after their sale to the extent of the dealer’s financial interest in an auto for which the buyer has not fully paid the dealer if the buyer provided to the dealer evidence of the buyer’s own auto insurance policy which later turned out to be “invalid” at the time of loss to a covered vehicle. Here, Gerald Jones Ford, the auto dealer, sold a car to Jerquavius Berry, who presented evidence of his Falls Lake Insurance Company auto policy to the auto dealer at the time of the sale, but three days later totaled the auto while fleeing police in it, after which Mr. Berry ceased making payments on his car note causing the auto dealer to become the lender on then note. Falls Lake denied coverage for the auto dealer’s claim under Mr. Berry’s auto insurance policy based on its exclusion for fleeing a law enforcement agency. General Security denied the auto dealer’s claim under its policy on the basis that the Falls Lake policy was “invalid” when Mr. Berry’s auto crashed. The court of appeals held that Falls Lake policy’s exclusion did not render the policy invalid as it was in full force and effect when the loss occurred.

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

Category(s): Georgia - 07/29/2024

Bulletin 24-EX-7: Unauthorized Fees

On July 23, 2024, Commissioner John F. King issued Bulletin 24-EX-7 to replace Directive 22-EX-4. The purpose of this Bulletin is to remind surplus line insurers and brokers that it is unlawful to charge customers added fees in conjunction with the sale of a surplus line insurance policy.
With specific exceptions, a surplus line insurer or broker may not collect any sum in excess of the premiums and charges for insurance specified by the insurer in the insurance policy. 
Specifically, the instances in which reasonable fees may be charged are: 
•	The surplus lines producer includes the fee as a line item on the policy’s declaration page; 
•	The fee is reported as premium for the purposes of taxation; and 
•	The fee is included in the calculation of surplus lines premium tax. 
The Department considers the collection of fees outside of the above instances to be an unfair method of competition and unfair and deceptive act or practice in the business of insurance.

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

Category(s): Georgia - 07/29/2024

Commercial General Liability Insurance Policy Did Not Cover Insured’s Auto

The Georgia Court of Appeals recently held in Frey v. Nationwide Mutual Ins. Co., (Case No. A24A0284, May 15, 2024) that a commercial general liability insurance policy’s auto exclusion did not provide coverage for an auto accident fatality caused by the insured. William Frey died when the motorcycle he was driving collided with a pickup truck driven by Michael Jesperson, who was allegedly intoxicated at the time. As part of the settlement of a wrongful death case that Mr. Frey’s estate brought against Mr. Jesperson in which a jury found him liable, he assigned to the estate his rights under the commercial general liability insurance policy that Nationwide had issued to him. That policy excluded from coverage “bodily injury” or “property damage” arising out of the ‘ownership, maintenance, use or entrustment to others of any aircraft, “auto” or watercraft owned or operated by or rented or loaned to any insured. Use includes operation.” Frey’s estate argued that the auto exclusion was ambiguous and could reasonably be construed as excluding coverage only when the insured’s auto is used by or entrusted to someone other than the insured; specifically, that the absence of a comma following the word “use” could mean that the policy excluded coverage only when the insured’s automobile is used by or entrusted to someone else. The court affirmed the trial court’s grant of judgement on the pleadings in favor of Nationwide, finding that “[t]he absence of a serial comma in a series carries little weight where, as here, the interpretation that is advanced otherwise conflicts with well-recognized rules of grammar and with standard English usage.”

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

Category(s): Georgia - 07/29/2024

DIRECTIVE 24-EX-3: Special Fraud Assessment Calculations

On June 27, 2024, Commissioner John F. King issued Directive 24-EX-3 to inform insurers that the Special Fraud Unit assessments have been updated. All insurers subject to O.C.G.A. § 33-1-17 should refer to Directive 24-EX-3  for additional details.

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

Category(s): Georgia - 07/29/2024

Georgia Insurance Commissioner’s Bulletin 24-EX-8 (Extension of Reinsurance Program Claims)

On May 21, 2024, the Georgia Insurance Commissioner issued a new bulletin extending the deadline for filing health reinsurance program claims for the 2023 plan year until June 17, 2024, as a result of the cyber security attack experienced by Change Healthcare, one of the country’s largest health claims payment processors, in February 2024.

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

Category(s): Georgia - 07/29/2024

Georgia Insurance Commissioner’s Directive 24-EX-4 (Data Call for Tort Reform)

On July 1, 2024, the Georgia Insurance Commissioner issued a new directive implementing House Bill 1114, which the Georgia Legislature passed during its recent session and adds the Data Analysis for Tort Reform Act as the new Chapter 66 to the Georgia Insurance Code which will automatically become repealed on January 1, 2030. The Data Analysis for Tort Reform Act requires the Commissioner to request data from January 1, 2019, and after from insurers, licensed rating organizations and other state agencies, no later than July 1, 2024, and as often as he shall deem necessary though July 1, 2029, to enable him to make two reports to the Governor and the Legislature about the impact of tort lawsuits and assessment of tort risks. The requested data must include shall include but is not limited to: (1) the number of tort lawsuits filed against the insured of an insurer; (2) the total attorneys' fees and court costs for such tort lawsuits and (3) the total value of the incurred claims from any tort lawsuits. The first report, which is due no later than November 1, 2024, will assess tort related risks faced by insurers, including (a) the degree to which tort related risk is reflected in insurance premiums; (b) the specific aspects of tort related risks that have the largest monetary impact on insurance premiums; and (c) the potential impact of any changes to tort law on the portion of insurance premiums that reflect tort related risk. The second report, which is due no later than November 1, 2029, will include, but not be limited to, (i) historic and predictive trends based on submitted data; (ii) the effects of any enacted tort reform legislation and (iii) any further determinations or recommendations for legislative action.

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

Category(s): Illinois - 07/29/2024

Various Rulemaking

The ILDOI adopted amendments to Derivative Instruments (50 IAC 806); Credit for Reinsurance Ceded (50 IAC 1104); Illinois Health Insurance Portability and Accountability Standards (50 IAC 2025); Health Maintenance Organization (50 IAC 4521); amendments to Parts 806 and 1104 update an incorporation by reference of a National Association of Insurance Commissioners (NAIC) document; and, Part 2025 and 4521 rulemakings to remove obsolete requirements related to the Illinois Comprehensive Health Insurance Plan, which no longer exists.

Steve W. Kinion, Esq. - ZACK STAMP, LTD, (217) 525-0700 x108 , skinion@601w.com

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