STATE FUND'S TRIAL TEAM RECEIVES DECISION IN A&J LIQUOR CASE
Sheppard, Mullin, Richter & Hampton announced that after nearly seven years of litigation, in a seven-month trial, its trial team, headed by Gregory A. Long, and with Fred Puglisi, Phil Atkins-Pattenson, Jim Burgess, and Justine Casey, obtained a decision on behalf of the State Fund, in A&J Liquor Co. Inc., et al. v. State Compensation Insurance Fund, a 163,900 member class. The plaintiffs sought $1.1 billion plus interest and punitive damages, but will recover nothing. Judge John E. Munter of the San Francisco Superior Court stated in his decision, "The Court determines that the plaintiffs have failed to prove that there has been a breach of the implied covenant of good faith and fair dealing; or that there has been a breach of contract; or that there has been fraud or deceit; or that there has been violation of California's unfair competition law. Likewise, on each of these theories of recovery, plaintiffs also have failed to prove causation and damages. Plaintiffs shall recover nothing in this action. State Fund, by motion, may request an award of costs of suit." Long, lead trial attorney, commented, "This was a long and difficult case, with complex legal and factual issues. I am delighted that the Court's decision rejects what we believe to be unfounded allegations against our client." Puglisi, who second chaired the trial, said, "Defendants rarely try large class actions, particularly when the plaintiff seeks billions of dollars. We are thrilled that our client trusted us to try this lawsuit on its behalf, and we are pleased with the Court's decision. State Fund received justice." The plaintiffs filed this class action against State Fund in Feb. 1996 for (1) breach of the implied covenant of good faith and fair dealing, (2) breach of contract, (3) fraud and deceit, and (4) unfair business practices under Business and Professions Code 17200. The plaintiffs alleged that State Fund, acting in bad faith, "uniformly administered and centrally enforced" an unfair policy of reserving claims caused the Fund's 2000 adjusters to set unreasonably high reserves on every claim adjusted between July 1989 and Oct. 1995. The policy allegedly was concealed from policyholders and caused increased premiums and reduced policyholder dividends. The plaintiffs offered no reason why the State Fund's civil service employees who receive neither stock options nor performance-based compensation would adopt or support such conduct. The State Fund was created by statute and the California Constitution to insure that affordable workers' compensation insurance would be available to the State's employers. Unlike other workers' comp insurance companies doing business in California, the State Fund is a public enterprise fund and has no stockholders.
FARMERS FILES FOR LOWER RATES FOR NEV. HOMEOWNERS
Farmers Insurance Group announced it has filed for a rate reduction with the Nevada Department of Insurance on all homeowners business in the state of Nevada. If approved by the department, beginning with Sept. 16 renewals, many of Farmers' customers in Nevada will see a rate decrease that will average 1.8 percent. Actual savings will vary depending on location and value of the home. In addition to the proposed rate decrease, Farmers will also be increasing and expanding the home/auto discount. Improved loss results have allowed Farmers to increase its home/auto discount to up to 15 percent. "This gives us one of the highest home/auto discounts in the industry," said Susan Bithell, Farmers' Nevada State executive director. "Improved loss results on our packaged policies have allowed us to pass the savings on to the customer," added Bithell. Farmers will implement the rate reduction once approval is received by the Nevada Department of Insurance, which was expected to happen by the end of June.
CONNING SAYS AUTOMATING COMMERCIAL UNDERWRITING NOT AUTOMATICALLY PROFITABLE
The commercial property/casualty industry is on the threshold of an "adapt or perish" decision when it comes to underwriting automation, according to a study from Conning Research & Consulting, Inc. The study, "Executing Commercial Underwriting Automation—It's Only a Tool," finds that companies have spent considerable financial resources and time creating proprietary underwriting solutions in an attempt to differentiate their products, yet ultimately this "tech war" of proprietary front-end solutions will be short lived. A type of SEMCI (single-entry, multiple-company interface) will reportedly become a minimum standard for insurers and independent agents, minimizing the ability of insurers to use front-end data collection differences as an advantage. "Commercial insurers are spending lots of money trying to automate a system that for years has been dominated by trained underwriting professionals, and those ranks are thinning," said Michael Weinstein, director of Research at Conning. "While insurers do not identify a pending underwriter shortage as reason for pursuing automation, we expect that the current workforce of front-line underwriters will have a much smaller number of replacements when they retire or otherwise leave these positions." That said, commercial underwriting will reportedly continue to become more and more reliant on automation for the entire policy life-cycle, according to the study. Inevitably, an insurer's failure to respond to agents rapidly and reliably could soon disqualify it from the standard marketplace. "Agents are under tremendous pressures to streamline services to their commercial insurance customers," said Weinstein. "While the insurer has experienced early success with front-end underwriting software to create a competitive advantage, in the future they will really need to focus on the speed and quality of their automated response to standardize the underwriting process. "The move to SEMCI will force an 'averaging' of data requirements," added Weinstein. "Product differentiation will no longer live at the front-end of the process. Success will be dependent upon information gathering and back-end-supported analyses driving sophisticated pricing models." "Executing Commercial Underwriting Automation—It's Only a Tool" is available from Conning Research & Consulting Inc. by visiting the company's Web site at www.conningresearch.com.
INTERNATIONAL INSURANCE SOCIETY GLOBAL CONF. TO BE HELD IN NYC
The 39th annual seminar of the International Insurance Society (IIS), hosted by the Insurance Information Institute, is scheduled to be held July 13-16, at the Waldorf-Astoria in New York. Among the issues to be discussed by many of the world's leading insurance executives will be terrorism, global financial risks and changing the economics of insurance. Among those scheduled to address the conference, entitled "The New World of Insurance: Pursuing New Opportunities, Protecting Existing Markets," are: Brian Duperreault, chairman and CEO, ACE Limited, Bermuda; Gregory A. Maciag, president, CEO, ACORD, USA; Lord Colin Sharman, chairman, Aegis Corp., United Kingdom; Maurice Greenberg, chairman, American International Group, USA; Anton Van Rossum, CEO, Fortis, Belgium; Ewald Kist, chairman, ING, Netherlands; Edward Creasy, CEO, RJ Kiln & Company, United Kingdom; Dominic D'Alessandro, president and CEO, Manulife Financial, Canada; C. Robert Henrikson, MetLife, USA; Patrick Peugeot, La Mondiale, France; Kunio Ishihara, Tokio Marine & Fire, Japan; James J. Schiro, CEO, Zurich Financial Services, Switzerland "The program will also include discussions on such issues as managing financial risk, maintaining customer, shareholder and regulator confidence, and the uses of information technology to monitor risk and track information across borders," said the announcement. IIS president and CEO Patrick Kenny stated: "By bringing together key leaders in insurance from around the world, we are able to network and to discuss timely issues, providing real value to people who work in a global environment. We are pleased to have the Insurance Information Institute, a premiere U.S. insurance organization, hosting this year's event in New York." III president Gordon Stewart, who is also serving as chairman of the board of governors for the event, indicated: "It is vital that there be continuing progress toward global financial stability, improving market integrity and reducing financial risks. Through IIS' commitment to help connect the international insurance world, it provides members and interested parties, the opportunity to share ideas, create relationships, and gain knowledge from one another." Registration for the New York meeting can be obtained on the Society's Web site at: www.IISonline.org or the I.I.I.'s Web site at: www.insurance.info. For additional information interested persons may contact Linda Bock at the IIS - 212-815-9291; or Loretta Worters at the III - 212-346-5545.
