ILL. DOI PUTS STATEWIDE INTO LIQUIDATION:
The Circuit Court of Cook County, Ill., has granted Illinois Director of Insurance J. Anthony Clark's request for the entry of an agreed order of liquidation with a finding of insolvency against Statewide Insurance Co. The liquidation was effective Jan. 6, 2004. Statewide, based in Waukegan, Ill., was incorporated in 1979 and was licensed in 26 states. The company was primarily engaged in the underwriting of commercial multiple peril, workers' compensation, commercial automobile and umbrella insurance policies and surety bonds. Statewide's policies were primarily marketed to small general contractors and artisans. The order of liquidation was based on the finding of the Illinois Department of Insurance that the company's policyholder surplus was impaired by an amount in excess of $21 million. Statewide's most recent financial statements reflect approximately $13.7 million in direct premium written during the first 10 months of 2003. The director has appointed Cathleen Travis as his special deputy to assist with the liquidation proceedings. The Office of the Special Deputy Receiver, 222 Merchandise Mart Plaza, Suite 1450, Chicago, Ill. 60654, (312) 836-9500, will be providing administrative services.
INDUSTRY, MO. REGULATORS AGREE COMP COSTS SHOULD FALL IN 2004:
State regulators and the insurance industry's principal workers' compensation trade group have called for a reduction in Missouri workers' compensation insurance rates, providing financial relief for the state's business community. The announcement follows an 18 percent reduction in workplace injuries over a two-year period. The National Council on Compensation Insurance (NCCI)—the private trade group—is advising companies that costs underlying workers' compensation rates should drop an average of 1.4 percent in 2004. Based on a consulting actuary's recommendation, the Missouri Department of Insurance (MDI) projects that companies could reduce rates up to 11.1 percent from current levels and still cover expenses and reasonable profit. Scott Lakin, MDI's director, said his agency's analysis indicates claims frequency has been falling 5.9 percent a year in Missouri since 1993 while the cost of claims, driven largely by medical expenses, has been rising at 2.3 percent annually. Compared to the eight surrounding states, Missouri has the second lowest claim frequency. According to the Missouri Division of Workers Compensation, workplace injury reports dropped from 174,726 in fiscal 2001 to 144,025 in 2003, or almost 18 percent. NCCI anticipates that average claim and adjustment costs for workers' compensation coverage statewide will drop from $2 to $1.97 for every $100 of payroll in 2004; MDI projects a reduction to $1.78. Insurers then add administrative expenses and profit margins for the final rate. The NCCI also recommended average costs for industry sectors in 2004, including reductions of 2.3 percent for manufacturing; 3.7 percent for goods and services; 0.8 percent for contracting; and 2.1 percent for "miscellaneous" workers. Office and clerical workers' underlying costs would increase, by 5.2 percent. Individual companies' rate change will differ from the average, based on their company's ratemaking practices, their own claims histories and the statewide experience for employees similar to their workforces. Insurers so far this year increased rates an average of 14.7 percent—which Lakin described as "well in excess" of projected losses. Lakin said NCCI, the state and insurers had not anticipated increases in medical and wage inflation would more than offset the decline in injuries from 2000 to 2002. Rates then became inadequate. But Lakin said insurers had overreacted to that shortfall and raised rates higher than either MDI's 2003 recommendation of 7.6 percent or NCCI's 13.8 percent. At the time, MDI's actuary indicated that the 7.6 percent should be a one-time adjustment to make up for inadequate rates, not a trend - and that projection appears correct. The return to stable or declining workers' compensation rates in Missouri was signaled this spring when rates were cut an average 0.4 percent for 5,400 businesses in the state pool, which provides coverage when firms cannot find regular commercial policies.
SHEPARD EXTENDS STATE AUTO OFFER UNTIL FEB. 13:
Gregory M. Shepard recently announced a second extension of the expiration date of the tender offer made by himself and his wholly owned subsidiary, STFC Acquisition Corp., for 8 million shares of Columbus, Ohio-based insurer State Auto Financial Corp. for $32.00 per share in cash. The tender offer made on Aug. 20, 2003 was to have expired at 5 p.m. EST on Friday, Oct. 17, 2003. On Oct. 20, 2003, Shepard extended the offer until Dec. 12, 2003. Shepard is now extending the offer until 5 p.m. EST on Friday, Feb. 13, 2004. Shepard has been advised by Mellon Investor Services LLC, the depositary for the tender offer, that as of the close of business on Dec. 12, 2003, approximately 3,723,000 shares of State Auto Financial Corp. common stock have been validly tendered and not withdrawn pursuant to the offer (including approximately 57,934 shares of State Auto Financial Corp. tendered pursuant to notice of guaranteed delivery). This additional extension of the tender offer is necessary to permit a State Auto stockholders' meeting to be called and held. Under Ohio Revised Code 1701.831, a stockholders' meeting is required to be called by State Auto so that stockholders may consider and approve the transaction. State Auto has not yet called the stockholders' meeting because it perceives Shepard's offer as illusory, notwithstanding Shepard's claims that he has provided a highly confident letter from a respected banker for up to $300 million in financing. One reason why State Auto perceives Shepard's offer to be illusory is because the financing requires State Auto Mutual, the parent of State Auto Financial Corp., to issue surplus notes.
MICH. SUPREME COURT COULD BE NEXT BATTLEGROUND FOR MEDICAL MONITORING CLAIMS:
A litigation association formed by insurers has filed a friend of the court brief with the Michigan Supreme Court, urging it to hear an appeal that may determine whether claimants in Michigan can recover damages based on the mere possibility of a future injury. The plaintiffs in Henry v. The Dow Chemical Corp. are alleging exposure to ground contamination and want Dow Chemical to pay damages equivalent to the cost of having their health monitored for any illnesses that may result from their alleged exposure. The group, the Coalition for Litigation Justice Inc., said claims for such medical monitoring or surveillance are novel and controversial, in part because they do away with the time-honored rule that liability should be imposed only when an individual has sustained a present injury. In recent years, the U.S. Supreme Court and several state supreme courts have reportedly rejected medical monitoring claims. In a 1997 asbestos case, the Supreme Court refused to recognize medical monitoring as a cause of action for railroad workers suing their railroad employers under the Federal Employers' Liability Act. Over the past two years, the supreme courts of Nevada, Alabama, and Kentucky all rejected medical monitoring claims related to a wide range of alleged exposures, from environmental tobacco smoke to groundwater pollution to prescription drugs. The Coalition was joined on its brief by the U.S. Chamber of Commerce, the American Tort Reform Association, the National Association of Manufacturers and the American Chemistry Council.
NAPSLO MID-YEAR SET FOR SCOTTSDALE:
The 2004 NAPSLO Mid-Year Educational Workshop is set for Feb. 5-8 at the Marriott Camelback Inn Resort in Scottsdale, Ariz. Workshop programs include an examination of Errors & Omissions coverage, a current review of the globalization of the industry, and a look at the market economy. In addition, the Derek Hughes/NAPSLO Educational Foundation has planned a golf outing on Feb. 6. Friday's programs will cover Errors & Omissions, utilizing a panel of experts to examine ways to limit future E&O claims. The panel will also look at the current state of E&O coverage and discuss how to find coverage. On Saturday, a panel will examine the impact of globalization on the insurance industry and the current status of the market. In addition, economist Don Reynolds will speak on current financial trends, the overall status of the economy, and what it means to the industry. For more information, visit http://www.napslo.org.
