After fast start with workers' comp, Albany sputters

Key legislation stalls as newcomer Gov. Spitzer, veteran Senate Leader Bruno clash

Despite the state having a new governor, The New York Legislature continues with its old ways favoring political paralysis over action.

The Assembly, which is controlled by Democrats and Speaker Sheldon Silver, and the Senate, where Senate Leader Joseph Bruno and his Republicans hold a slight edge, adjourned June 22 in Albany leaving key issues unresolved.

With the exceptions of an early and major victory on workers' compensation reform and passage of some minor rating bills, the insurance industry like others saw little to cheer about in this session.

The failure of Democrats and Republicans to come together on major issues also marked Albany politics while Republican George Pataki was governor. Only now it's Democratic Gov. Eliot Spitzer and Republican Bruno whose sparring is getting in the way of legislating.

Bruno and Spitzer have differences over several issues, including a plan to put up tolls in New York City to reduce traffic and pollution and a campaign finance reform pushed by Spitzer but opposed by Bruno. They have also locked horns over a pay raise for judges and lawmakers and a $1 billion capital construction fund.

"There's been bad blood for a while," Doug Muzzio, professor of public affairs at Baruch College told The Associated Press. "It has now turned into a full frontal assault on Joe Bruno."

Muzzio said Spitzer has more motivation now to "put it into high gear. ... He got mixed results (in the session) and everything didn't change on day one, or month one or session one."

Spitzer appears to agree. He said he will continue touring the state, pointing out the Legislature's failure to enact important bills.

"I will be traveling, probably pretty broadly over the next couple of months, making the point I've been making: That there is a failure to act to do the people's business. And I will ask the citizens to inquire of their senators, 'How did you vote on this issue? Where were you on June 22? Were you at work in the Capitol passing bills that could have changed our life?'"

Bruno, who has just a 33-29 majority over Democrats in the Senate, says he isn't worried.

"Let him do whatever he wants," Bruno told The Associated Press after he ended the Senate's regular session. "Our members can take care of themselves."

Bruno said Spitzer "has to transition from spoiling for a fight to negotiating in good faith to get results. If you're spoiling for a fight, you'll get one."

The Assembly has had its own reasons for moving slowly, especially on insurance bills -- its insurance committee lacked leadership.

"The Assembly Insurance Committee spent most of the year without a chairperson which made the political climate very challenging for insurers, notes Paul Magaril, regional manager and counsel for PCI.

Magaril said the industry hopes that the recent appointment of Assemblyman Joe Morelle to lead the committee, while it came too late to break the logjam of insurance related legislation, means the future will be brighter.

Assembly Speaker Sheldon Silver also takes an optimistic view. "I am confident cooler heads will prevail and real negotiations will take place once we are out of the lime light of the legislative session," Silver said.

Fast start
The 2007 legislative session was disappointing given it got off to a fast and promising start with agreement on budget reform, lobbying reforms, civil confinement of sex offenders and long-sought workers' compensation reform.

The workers' compensation reform passed in February promises to save employers $1 billion over several years by eliminating costly lifetime payments for "permanent partial disabilities." The reform will also save employers 10 percent to 15 percent or more in premiums and is expected to make New York more inviting to companies.

But lawmakers stalled on an industry-priority legislation regarding flex rating for personal lines insurance.

Lawmakers were able to pass legislation to preserve a series of rating laws that were scheduled to expire at the end of the month. They also extended the New York Property Insurance Underwriting Association, the state's property insurance market of last resort.

At least one bill opposed by insurers made it through both houses. The prejudicial notice and declaratory judgment bill (S.6303) prohibits insurers from denying coverage based on the insured's failure to give timely notice of a claim unless the insurer can demonstrate that it has suffered "material prejudice" as a result of the delayed notice; and, permits a party bringing an action against another to also commence a declaratory judgment action to determine questions of insurance coverage.

Magaril said PCI and others in the industry would urge Spitzer to veto the measure.

Spitzer is expected to sign legislation aimed at increasing the penalties for individuals who cause accidents under the influence of drugs or alcohol. The bill (A.8791-A), sponsored by Assemblyman Harvey Weisenberg, would add the crimes of aggravated vehicular assault and aggravated vehicular homicide to the felony crimes of driving while intoxicated.

Some material from The Associated Press was used in this report.

Virginia cameras scan for hot cars and stolen license plates

Virginia State Police are using digital cameras that can scan highways and parking lots for hot cars and stolen license plates.

Using the digital images, police can compare the plates against any database of license plates: those associated with fugitives, stolen cars, plates that have been stolen, and so on.

State police began using the $16,000 readers several months ago around the state. Their models take 25 photos per second, said Carl Fisher, a special agent with the Help Eliminate Auto Theft, or HEAT, a program of the State Police.

Officers only have to turn the system on, and if it gets a hit, an alarm sounds. A computer checks the plates against the latest FBI "hot sheet" of stolen autos. The equipment can scan plates day or night.

Hampton police have the readers, but will not discuss their use. Other departments are testing them.

Police in Richmond police scanned 88,000 vehicles and recovered 30 stolen vehicles and 28 sets of stolen plates during a several weeks long operation, Fisher said. He stopped a man driving a stolen car who turned out to be wanted in two states.

The readers are only one tool that officials are using to thwart vehicle theft. Thieves have been facing a growing array of security devices that make vehicles harder to steal: alarms, kill switches, smart keys, tracking devices.

Virginia's auto theft rate has dropped 38 percent since 1991, according to a 2005 report by HEAT. Other parts of the United States have also seen declines.

Police in Norfolk, Virginia Beach, Newport News and Hampton, as well as State Police are using "bait cars" as another tactic. Bait cars have hidden cameras and microphones and are left in high-theft areas. When sensors are activated in the car, an alert is sent to the 911 call center. The vehicle is tracked electronically and officers are dispatched. Officers can ask the dispatcher to kill the engine and lock the doors once the vehicle is located.

Many of those nabbed wind up pleading guilty, said Norfolk Detective E.L. Flax.

In R.I., Beacon Mutual controversy rekindled over Labor nomination

Fallout from the management scandal at Rhode Island workers' compensation insurer Beacon Mutual Insurance Co. was stirred anew last month when Gov. Donald L. Carcieri withdrew the renomination of Adelita Orefice as director of the Department of Labor and Training that had been scheduled for a Senate committee vote last month.

Carcieri said he withdrew Orefice's nomination after receiving word that a union leader with ties to former Beacon Mutual management had convinced Senate leaders to vote against her.

Carcieri accused the Senate of planning to reject Orefice's nomination in retaliation for her decision in 2006 to disclose the result of a damning internal audit at Beacon Mutual Insurance Co. That revelation led to a number of investigations and the expulsion of several union leaders, including George Nee, from the insurer's board of directors. Beacon Board members, including Nee, were paid $20,000 per year.

The state labor chief has a seat on the Beacon Mutual board.

The governor vowed that he would not allow union leaders and their Senate allies to exact "political retaliation" against Orefice for blowing the whistle on the illegal activities at Beacon Mutual.

He said his staff learned that her nomination was "doomed to failure" and he blamed former company director Nee. "Elected representatives should not be taking orders from labor bosses. Senators should not be attacking a good public servant in order to pay off their union allies," he said.

The governor said Orefice will continue to serve as a holdover until she is reconfirmed or another nominee takes her place. "I am hopeful that, over the course of the next six months, cooler heads prevail and the Senate will decide to give her a fair hearing next session," Carcieri added.

Meanwhile, the Beacon Mutual Insurance Co. board of directors unveiled a slightly revamped board that includes H. Robert Bacon, a new member, and John F. Treanor, who was named by Carcieri.

Bacon is vice president of operations for the Gregg's Restaurant group.

Treanor is the president and chief operating officer of The Washington Trust Co. and also serves on the board of Meeting Street School and as vice chairman of Hospice Care of Rhode Island. Treanor replaces Col. Brendan Doherty, who left in April after being named superintendant of the state police.

Policyholder appointees Richard J. DeRienzo, board chairman and a managing principal of Providence-based accounting firm Lefkowitz, Garfinkel, Champi & DeRienzo PC, and Carol Saccucci, vice president of Saccucci Honda Lincoln Mercury in Middletown, were re-elected to four-year terms.

Beacon's other board members are James V. Rosati, president and CEO; Sister M. Therese Antone, president of Salve Regina University; Raymond Coia, a coordinator with New England Laborers' Tri-Funds; Adelita S. Orefice, the director of the R.I. Department of Labor and Training; and Michael Ruggeri, president of the Rhode Island Building & Construction Trades Council.

Oregon's Ario tapped to be Pennsylvania commissioner

Pennsylvania Gov. Edward G. Rendell has nominated Joel Scott Ario, the chief insurance regulator for the state of Oregon and a former consumer advocate, to serve as Pennsylvania's insurance commissioner.

As the insurance administrator with the Oregon Department of Consumer & Business Services since 1994, Ario has promoted new consumer protections involving credit scoring and other risk-rating practices; advanced health reforms that give small businesses better pooling options; built a coalition between employers, insurers and providers to create greater transparency in health care pricing by insurers and hospitals; and streamlined producer licensing and the review process for new insurance products.

Earlier in his career, Ario was executive director of the Oregon State Public Interest Research Group, where he led legislative and ballot campaigns for pollution prevention, recycling and campaign finance reforms.

"I was a consumer advocate before I became a regulator in 1994," said Ario. "I approach issues from a consumer protection perspective, with the understanding that an innovative and vibrant insurance marketplace serves both consumer and business interests."

Pending confirmation by the Pennsylvania Senate, Ario will succeed Randy Rohrbaugh, who was named acting insurance commissioner when Diane Koken resigned in February. Koken served three governors and was the longest-serving insurance commissioner in the state's modern history.

Ario, 53, earned a degree from Harvard Law School in 1981. He also holds degrees from Harvard Divinity School and Saint Olaf College in Northfield, Minn. He has been with the Oregon DCBS since 1994 and has been administrator of the insurance division since 2000. He has served as vice president of the National Association of Insurance Commissioners and currently chairs the NAIC committee on health insurance.

"This is a great opportunity for Joel, but a significant loss for Oregon," said Cory Streisinger, director of DCBS.

According to Diane Childs of DCBS, the position in Pennsylvania is a "significant role for Joel in state government" in that the Pennsylvania insurance commissioner oversees all insurance regulatory issues.

In Oregon, the Insurance Division is part of the DCBS, so the director of DCBS serves as state's insurance commissioner, with the DCBS director overseeing the administrator position.

House bill renews federal terrorism reinsurance for 10 years

Congress officially has a new bill to reauthorize the federal terrorism reinsurance program. Two Democrats from Massachusetts -- U.S. Rep. Mike Capuano and the Chairman of the House Financial Services Committee Barney Frank -- have introduced HR 2761, the Terrorism Risk Insurance Revision and Extension Act of 2007 (TRIREA).

The bill extends the Terrorism Risk Insurance Act (TRIA) for 10 years and, its supporters contend, will spur the development of a private market for terrorism risk insurance.

The Terrorism Risk Insurance Revision and Extension Act of 2007 (TRIREA) includes provisions to: Extend TRIA for 10 years with current co-payments and deductibles for conventional terrorism acts; Expand TRIA's "make available" requirement to include nuclear biological chemical and radiological (NBCR) coverage; Change TRIA's definition of terrorism to include acts of domestic terrorism; Set the program trigger at $50 million; Add group life insurance to the lines of insurance for which terrorism coverage must be made available; Decrease deductibles and triggers for areas previously impacted by a significant terrorist attack; and, Continue to require studies of the development of a private market for terrorism risk insurance.

After the 9/11 terrorist attacks, many insurance companies excluded terrorism events from their insurance policies. As a result, Congress in 2002 passed TRIA, which created a federal backstop to protect against terrorism related losses. In 2005, the measure was extended for two years and currently is set to expire at the end of 2007.

"TRIA has helped make terrorism insurance available and affordable to businesses, particularly those in our major urban areas. Improving and extending the program will help stabilize the economy, as well as help protect American workers and our communities against possible terrorist attacks," stated Rep. Capuano.

"We need to keep in perspective that this bill is necessary for economic development and to protect property owners, building tenants, developers and people who work or live in high risk areas," Frank said.

While the TRIA program has been credited with keeping terrorism insurance affordable, the President's Working Group on Financial Markets last year concluded that a private market for terrorism insurance is not yet commercially viable, especially with regard to insurance against nuclear biological chemical and radiological (NBCR) acts of terrorism.

P/C insurers invest $320 billion in public projects

The insurance industry holds investments in municipal bonds worth more than $320 billion, investments that help fund construction of schools, roads, and hospitals, and support a variety of other public sector activities, according to a new industry study.

The report issued by the Insurance Research Council (IRC) found that nearly one-fourth of all of those investments by property/casualty insurers at the end of 2005 funded education-related activities and projects.

The report, "Municipal Bond Holdings of Property-Casualty Insurance Companies," analyzes the types of public projects funded through municipal bonds purchased by insurers.

The report reveals that municipal bonds for projects involving public utilities made up 15 percent of the total combined value of all municipal bonds held by P/C insurers. Transportation-related bonds accounted for 12 percent of insurers' municipal bond investments.

Insurance companies invest the premiums paid by policyholders to ensure that the money to pay claims is available when the need arises. Municipal bonds make up a large portion of the investment portfolios of many P/C insurers.

"Property/casualty insurers' impact on the economy goes beyond insurance," explained Elizabeth A. Sprinkel, senior vice president of the IRC. "Insurers also provide a major source of capital for the public sector."

The findings of the IRC report are based on data compiled by A.M. Best Co. IRC analyzed municipal bond data to determine the bonds' purpose and the state in which they were issued. Bonds held by insurers as of Dec. 31, 2005, were analyzed.

Supreme Court ruling limits investors' antitrust

Last month's U.S. Supreme Court's ruling that blocks investors from suing Wall Street investment banks under antitrust laws could save Wall Street firms a bundle by limiting investors to smaller recoveries.

In a case dating back to the dot-com bubble, the high court ruled Monday that antitrust suits would pose a "substantial risk" to the securities market. Damages in antitrust cases are tripled, in contrast to penalties under the securities laws.

The ruling struck down a lower court decision that would have allowed investors to go after Wall Street firms that they say engaged in anticompetitive practices by conspiring to drive up prices on about 900 newly issued stocks in the late 1990s.

Because the well-documented implosion of names like Enron Corp. swallowed any serious money that investors might hope to recover from that and other flame-outs, some investors have turned to the banks and other Wall Street regulars such as accounting firms that did work for such companies.

"The fact that these antitrust cases have been thrown out on these grounds I think will send a high profile message to would-be plaintiffs who were thinking of bringing antitrust claims in the securities context," said Wesley Powell, an antitrust lawyer with Hunton & Williams in New York.

Lawyers for investment banks say the difference between legal and illegal activity is a highly technical matter that must be left to highly trained securities regulators to decide, rather than to courtroom juries.

Powell noted that not only do those pressing claims under securities laws not have the triple damages awarded in antitrust cases, but such claims also have to meet a higher legal burden than claims made under antitrust laws.

Copyright 2007 Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed. AP writer Pete Yost contributed to this report.