Spokane Roman Catholic Diocese settles claims with more insurers
The Roman Catholic Diocese of Spokane recently reached settlements totaling $4.25 million with two of its insurance carriers in a dispute over coverage of sex-abuse claims, according to Bishop William Skylstad.
It was the second time in less than a month that companies that issued policies to the diocese have agreed to settle, rather than go to trial. With a proposed $5.25 million settlement offer from the diocese's main insurer, more than $9.5 million is available for paying victims of sexual abuse by clergy, Skylstad said.
The offers must be approved by federal bankruptcy and district court judges.
"Today's announcement is a major step toward bringing the healing and reconciliation we so desperately need within the Catholic community in the Spokane diocese, healing and recognition for the victims of sexual abuse and also for the entire Catholic community," Skylstad said, reading from a prepared statement.
The diocese filed for Chapter 11 bankruptcy protection in 2004 because of sex abuse claims and has offered to settle the claims of 75 victims for $45.7 million. More than 100 other claims have been filed since.
The diocese is reviewing "claims of proof" filed by claimants not covered by the so-called "universal settlement," but no sum has been attached to their claims.
Under the latest settlement proposal, Indiana Insurance Co. will pay the diocese $2.75 million for policies issued between 1977-79 and Aetna Insurance Co. will pay $1.5 million to settle claims for a policy issued in 1981.
In March, the diocese reached a settlement with General Insurance Co. of America, a subsidiary of Seattle-based Safeco Insurance, for $5.25 million.
The diocese has claims pending against three other insurers, and a trial to resolve them is scheduled to begin in October, said attorney Greg Arpin, who represents the diocese in its bankruptcy case.
Diocese lawyers continue to negotiate with those insurers, Skylstad said.
Under terms of the proposed settlements, the insurance companies would be released from any further litigation, except for claims related to Morningstar Boys Ranch, which is operated by the diocese and has been the subject of abuse allegations.
Church officials said they thought insurance policies might provide about $15 million toward the abuse-claims settlement. In 2004, the diocese cited abuse claims of about $81.3 million against assets of $11 million.
Copyright 2006 Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.
International poll finds rising concern among 30 countries over global warming
A 30-country poll finds large majorities in all countries believe climate change is a serious problem. No country has more than one in five saying it is not a serious problem.
The poll of 33,237 people from all major regions of the world was conducted by GlobeScan Inc. between October 2005 and January 2006, and analyzed with WorldPublicOpinion.org. The margin of error per country was plus or minus 3 percent.
Across all countries, on average 90 percent say that "climate change or global warming, due to the greenhouse effect" is a serious problem.
Three countries have less than eight in 10 endorsing this view (the U.S., 76 percent; South Africa, 72 percent; and Kenya, 65 percent).
In no country does more than one in five say that climate change is not a serious problem. On average only 8 percent say it is not serious. The highest percentage was found in the U.S. (21 percent), followed by Kenya (19 percent), China (17 percent), and Nigeria (16 percent). In 23 countries a majority calls climate change a "very serious" problem. On average, 65 percent call it "very serious."
Concern appears to have grown sharply. Sixteen countries were polled in 2003 and 2005. On average, for all 16 countries the percentage calling the problem "very serious" increased from 49 percent to 61 percent.
Hurricanes impact perceptions
The hurricanes Katrina and Rita may have impacted Americans' perceptions of the role of human causes in extreme weather patterns. Asked in the fall of 2004 how they viewed "extreme weather patterns, including violent storms, flooding, and drought," 58 percent said they saw it as "part of a natural pattern." In the fall of 2005, when asked the same question, the percentage attributing it to natural causes dropped 19 points to 39 percent. Now 59 percent of Americans say they see these patterns as unusual.
These findings are from the 2006 GlobeScan Corporate Social Responsibility Monitor, a poll across 30 countries, was conducted Oct. 17, 2005 to Jan. 26, 2006. Each country's findings are considered accurate to within 3 percentage points, 19 times out of 20.
ACE settles bid-rigging case for $80 million
Attorney General Lisa Madigan, New York Attorney General Eliot Spitzer and Connecticut Attorney General Richard Blumenthal announced an $80 million settlement agreement with Bermuda-based holding company ACE Limited, and its U.S.-based insurance subsidiaries. The charges against the insurance giant were that it engaged in bid-rigging, steering of insurance business and accounting misconduct.
The agreement requires ACE to pay back $40 million to policyholders, including Illinois policyholders, who were the victims of ACE's scheme to rig bids on excess casualty insurance policies. The amount that Illinois policyholders will receive has not yet been determined. The company did not disclose to its policyholders that it was colluding with other insurers and brokers to rig bids for excess casualty insurance. Under the agreement, ACE also will pay $40 million in penalties and payments to the three states, including $8 million to Illinois.
Additionally, the agreement requires ACE to reform critical business practices. Under the agreement, ACE is required to sharply curtail its use of "contingent commissions," paying no contingent commissions on excess casualty insurance placements through 2008.
ACE also has agreed to support legislation banning contingent commissions and requiring greater disclosure of compensation to brokers and agents. Under the agreement, ACE has agreed to provide new disclosures about ranges of compensation paid to brokers and agents by insurance products on a special Web site later this year.
The Division of Insurance within the Illinois Department of Financial and Professional Regulation, along with the New York Insurance Department and the Connecticut Insurance Department, will monitor ACE's compliance with these new business reforms.
"Our investigation revealed that ACE secretly agreed with insurance brokers and other insurers to rig bids for insurance policies. Because of this illegal conduct, policyholders did not get the impartial recommendations they deserved to get and they ended up paying more for their insurance," Madigan said. "ACE also paid contingent commissions to brokers in exchange for the brokers steering business to ACE, again without the policyholders' knowledge or consent."
Madigan's investigation was conducted in cooperation with the IDFPR's investigation of ACE's conduct. IDFPR has primary responsibility under Illinois law for regulating the industry.
Proposed Calif. regulations would stress driving record over zip code in pricing auto insurance
California Insurance Commissioner John Garamendi has unveiled enhancements to his proposed regulations that he said follow through on the promise voters sought when they approved Proposition 103 in 1988 --TITLE: namely, that the price of auto insurance will depend more on how insureds drive than where they live.
He said the new enhancements will create a fairer system that complies with the intent of Prop. 103, while also considering the risk of loss for each given driver.
"I promised to make the spirit of Prop. 103 a reality," said Garamendi. "Good drivers deserve to be judged more according to how they drive, and not be arbitrarily penalized because of where they live."
The proposed regulations will require insurers to assign more importance to a person's driving safety record, miles driven and driving experience than to any other factors when setting premium rates.
Current weighting
Until now, a system put into place by former Commissioner Chuck Quackenbush allowed insurers to give greater weight to non-mandatory factors, such as marital status, gender and, most frequently, zip code.
Garamendi has revised the regulations introduced last year. Specifically, the changes will permit insurers to tie certain types of coverage that have a greater relationship to the risk of loss to other types of coverage that bear less of a relationship. For example, while driving record may be less important in evaluating comprehensive coverage, it is very important in considering a driver's collision coverage. Therefore the revisions permit comprehensive and collision coverage to be evaluated together.
Additionally, the changes provide insurers with the flexibility they will need to increase or decrease the importance of any rating factor in order to comply with the mandate of Proposition 103. Proponents say this flexibility will help insurers devise a system that allows rates to have the strongest relationship to the risk of loss possible, while at the same time ensuring that how one drives is a more important factor than where a driver lives.
The revised rules also give insurers two years to fully comply with the new standards, but require that they demonstrate significant progress toward meeting the goal during the first year after implementation of the regulations. This provision, as well as the relatively high level of profitability currently enjoyed by auto insurers, should allow implementation without considerable negative economic impact on policyholders regardless of where they live, according to Garamendi.
To view the current proposed regulations on the department's Web site, visit: http://www20. insurance.ca.gov/epubacc/REG/82309.htm.
Engineers working toward earthquake-proof structures
Sometime in the not-so-distant future, newly constructed buildings will be able to withstand earthquakes of the magnitude that destroyed San Francisco one century ago, scientists say.
Working with super-strong materials that can bend, stretch and compress without breaking, engineers say they are working toward the day when buildings will be able to survive earthquakes with little or no structural damage.
At Lehigh University in Bethlehem, Penn., home of one of the largest structural testing facilities in the United States, scientists have tested a next-generation "self-centering" system that uses gigantic steel bands to hold building columns and beams in place during an earthquake.
The rope-like steel bands, which are encased in plastic, are supposed to prevent a building frame from buckling during an earthquake by allowing the beams and columns to separate, rock and twist independently of one another. The system also uses friction plates that help dissipate the quake's energy. After the tremors subside, the steel bands pull the beams and columns back to their original positions.
Emerged unscathed
The system has shown promise in testing. In a lab just south of Bethlehem, gigantic hydraulic pistons subjected a building frame to about 50 percent more force than was generated by the 1906 San Francisco quake. Aside from some popped bolts, the frame emerged unscathed.
Civil engineer James Ricles, of Lehigh's Center for Advanced Technology for Large Structural Systems, said the self-centering system could be ready for commercial use in 10 to 15 years.
"The system allows you to minimize damage and it does it in a manner that's very economical, using existing materials but putting them together in an innovative fashion," Ricles said.
Copyright 2006 Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.
OSHA cites 14,000 employers for high worker injury rates
Approximately 14,000 employers have been notified that injury and illness rates at their worksites are higher than average and that assistance is available to help them fix safety and health hazards, the Occupational Safety and Health Administration (OSHA) announced.
In a letter last month to those employers, OSHA explained that the notification was a proactive step to encourage employers to take steps now to reduce those rates and improve the safety and health environment in their workplaces.
"This identification process is meant to raise awareness that injuries and illnesses are high at these facilities," said OSHA Administrator Edwin G. Foulke, Jr. "Injuries and illnesses are costly to employers in both personal and financial terms. Our goal is to identify workplaces where injury and illness rates are high, and to offer assistance to employers so they can address the hazards and reduce occupational injuries and illnesses."
Establishments with the nation's high workplace injury and illness rates were identified by OSHA through employer-reported data from a 2005 survey of 80,000 worksites (the survey consisted of data from calendar year 2004). The workplaces identified had 6.0 or more injuries or illnesses resulting in days away from work, restricted work activity, or job transfer (DART) for every 100 full-time workers. The national average during 2004 was 2.5 DART instances for every 100 workers.
Employers receiving the letters were also provided copies of their injury and illness data, along with a list of the most frequently violated OSHA standards for their specific industry.
The letter also offered the agency's assistance in helping turn the numbers around, suggesting, among other things, the use of free safety and health consultation services provided by OSHA through the states, state workers' compensation agencies, insurance carriers, or outside safety and health consultants.
The 14,000 sites are listed alphabetically, by state, on OSHA's Web site at: http://www.osha.gov/as/opa/foia/hot_12.html.
OSHA's data collection initiative is conducted each year.
Governor claims Calif. workers' comp changes 'huge success'
California Gov. Arnold Schwarzenegger declared the sweeping workers' compensation changes he pushed through the Legislature two years ago a "huge success," but critics called them a disaster for injured workers.
"Governor Schwarzenegger broke his promise to protect injured workers," said Mark Hayes, president of Voters Injured At Work, a group that represents employees who suffer job-related injuries. "He has not fixed workers' compensation, as he claims, but has made things worse for Californians injured on the job."
Schwarzenegger said when he took office in 2003 high workers' comp insurance rates were driving businesses out of the state and costing jobs.
"Our economy was going downhill because of it," he said.
He credited himself and legislative leaders for turning the system around and cutting insurance rates by 40 percent.
"This is a huge success because of the bold leadership of everyone coming together," he said at a news conference. "Because of that, we have new business coming back again to the state of California. ... We've created a positive business environment in California."
But the actual drop in employer costs may be less than the 40 percent cited by Schwarzenegger. State Insurance Commissioner John Garamendi said last November that workers' comp insurers had cut their rates 26.7 percent on average since mid-2003 despite a 46.2 percent drop in the cost of paying claims.
Nancy Axtell, director of safety and risk management for Pride Industries, a Roseville firm that hires the disabled, said her company's insurance claims costs had dropped 40 percent.
But other small employers report no changes in their rates or even increased costs.
Surveys by Union Bank of nearly 2,000 small businesses found 92 percent of those questioned in 2005 and 85 percent surveyed in 2006 reported their workers' comp insurance rates had either remained the same or increased.
"There's always exceptions to the rule, but the bottom line is there's been an average of 40 percent drop in workers' comp costs," Schwarzenegger said.
Critics said that much of the savings went into insurance company profits while injured workers have seen their benefits cut and treatment delayed.
Ignoring injured workers
Dr. Mark King, a Sacramento physician who spoke by telephone at a news conference organized by critics of the legislation, said the vast majority of his workers' comp patients are not receiving adequately or timely authorization for care.
"They are simply in general ignored, to be honest," he said.
In another criticism, the state Commission on Health and Safety and Workers' Compensation reported in February that regulations adopted to implement part of the bill had cut benefits for permanently disabled workers by 50 percent.
Schwarzenegger said the changes brought on by the 2004 legislation had resulted in more accurate diagnoses and prevented patients from exploiting the system.
Copyright 2006 Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.
U.S. Senate panel advises scrapping, then rebuilding, FEMA
The United States' disaster response agency should be abolished and rebuilt from scratch to avoid a repeat of government failures exposed by Hurricane Katrina, a Senate inquiry has concluded.
Crippled by years of poor leadership and inadequate funding, the Federal Emergency Management Agency cannot be fixed, a bipartisan investigation says in recommendations.
Though short on specifics, such as funding levels, the 86 proposed reforms suggest the United States is still woefully unprepared for a disaster of Katrina's magnitude.
The recommendations, obtained last month by The Associated Press, are the product of a seven-month investigation to be detailed in a Senate report to released last week. It follows similar inquiries by the House and White House and comes in an election year in which Democrats have seized on Katrina to attack the Bush administration.
"The United States was, and is, ill-prepared to respond to a catastrophic event of the magnitude of Hurricane Katrina," the recommendations warned. "Catastrophic events are, by their nature, difficult to imagine and to adequately plan for, and the existing plans and training proved inadequate in Katrina."
The inquiry urges yet another overhaul of the beleaguered Homeland Security Department -- FEMA's parent agency -- which was created three years ago and already has undergone major restructuring of duties and responsibilities.
It proposes creating a new agency, called the National Preparedness and Response Authority, that would plan and carry out relief missions for domestic disasters. Unlike now, the authority would have a direct line of communication with the president during major crises, and any dramatic cuts to its budget or staffing levels would have to be approved by Congress.
It would also oversee efforts to protect critical infrastructure such as buildings, roads and power systems, as well as Homeland Security's medical officer. But the inquiry calls for keeping the agency within Homeland Security, waning that making it an independent office would cut it off from resources the larger department could provide.
The proposal drew disdain from the Homeland Security Department and its critics, both sides questioning the need for another bureaucratic shuffling that wouldn't accomplish much.
"It's time to stop playing around with the organizational charts and to start focusing on government, at all levels, that are preparing for this storm season," said Homeland Security spokesman Russ Knocke.
Former FEMA director Michael Brown said the new agency would basically have the same mission as FEMA had a year ago, before its disaster planning responsibilities were taken away.
"It sounds like they're just re-creating the wheel and making it look like they're calling for change," Brown said.
Copyright 2006 Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed
Survey: Risk managers spent more on disaster preparedness, catastrophe management
Spending for loss control services increased or remained flat for a majority of organizations in the past year, and the greatest spending increases occurred in such areas as disaster preparedness and catastrophe management, according to the Internet-based 2006 Loss Control Spending Survey conducted by Chubb Group of Insurance Companies.
Survey results indicated that 52 percent of the 125-plus risk managers who responded to the survey said loss control spending remained the same in the past year, and 43 percent said spending increased, according to Steven D. Hernandez, senior vice president of Chubb & Son. Those figures are noteworthy because many organizations have tightened their budgets and are continuing to find ways to cut costs, he said.
"When you consider that inflation runs at about 3 percent and business spending is generally in line with inflation, a 7 percent increase in loss control spending is significant," Hernandez explained. "It appears that many organizations recognize the importance, function and benefit of effective risk management."
The threat of natural disasters was cited by 15 percent of the respondents as a reason for changing their loss control spending in the past year, and 5 percent cited terrorism. In contrast, in 2003, 24 percent cited the threat of terrorism as a factor. In 2006, legal/regulatory compliance also was a factor cited by 17 percent of survey respondents for changing spending in the past year. And 47 percent said increased spending related to corporate governance.
"The survey indicates that organizations' loss control spending tends to correlate with the dominant risks of the day. On the heels of an unprecedented number of hurricanes and other national disasters, corporate scandals and growth in Internet activity, loss control spending in the past year has shifted toward catastrophe management, disaster preparedness planning, legal and regulatory compliance and cyber security," Hernandez said.
The surveys bring attention to one of the challenges risk managers face: how to balance critical, time-sensitive issues with traditional risks such as workers' compensation and basic property, against emerging risks such as the threat of diseases and epidemics, Hernandez added.
"Risks are compounding and will increase in frequency and complexity. Risks just don't disappear," he said. Consequently, risk managers have to be careful not to be too reactionary and neglect traditional risk areas when it comes to loss control spending.
To aid in keeping loss control spending in check, the survey indicated that organizations rely on internal and external personnel. Of risk managers surveyed, 86 percent said they rely on internal staff, 74 percent said they rely on insurers, 46 percent rely on brokers/agents and 38 percent rely on independent loss control vendors.
Chubb's survey was conducted via the Internet in April 2006. Respondents were risk managers from both public and privately held companies, and from government institutions and nonprofits.
Actuaries to White House: Federal insurance backstop needed
The American Academy of Actuaries, in response to questions posed by the President's Working Group on Financial Markets, has submitted its terrorism risk insurance analysis, which concludes that a national framework for terrorism risk is necessary if terrorism coverage is to be widely and readily available.
"A large chemical, nuclear, biological or radiological (CNBR) terrorist attack on New York City could cause insured losses of $778 billion," said Michael McCarter, chairperson of the Terrorism Risk Insurance Act Subgroup. "Without a national framework for managing terrorism risk, insurers would be exposed to losses far greater than they could sustain -- significantly damaging their ability to provide the ongoing insurance coverage that is essential to the stability of the entire economy."
The actuaries were not able to identify any insurance, reinsurance or capital market solution that could finance such potential insured losses from a large CNBR event.
With their solvency threatened, insurers would be forced to limit their exposure to losses from a terrorist attack.
For workers' compensation and group life insurance, an insurer could only reduce its terrorism exposure by limiting the availability of the underlying coverages, the group said.
The president's working group is preparing a report about the long-term availability and affordability of terrorism insurance. The report is due to Congress by Sept. 30, 2006.
To view the analysis in its entirety, visit www.actuary.org.
Sound risk management, investment plus for insurers
U.S. property/casualty insurers managed to increase earnings and add to their capital base in 2005 despite record catastrophe losses, according to Insurance Services Office (ISO) and the Property Casualty Insurers Association of America (PCI).
Sound risk management and strong investment results lead to the insurance industry's rise in net income of 11.7 percent, or $4.5 billion, to $43 billion in 2005 from $38.5 billion in 2004. Reflecting the industry's income, its consolidated surplus, or statutory net worth, increased 9.2 percent, or $35.8 billion, to $427.1 billion at year-end 2005 from $391.3 billion at year-end 2004.
Net income and surplus increased even though direct insured property losses due to catastrophes rose in 2005 to a record $57.7 billion -- more than double the $27.5 billion in direct insured property losses due to catastrophes in 2004, according to ISO's Property Claim Services (PCS) unit.
"But countrywide data for all lines often masks significant problems in specific markets and locations," said Michael R. Murray, ISO. "For example, before reinsurance recoveries and excluding losses covered by residual market mechanisms, the hurricanes of 2005 caused $24.7 billion in insured losses to residential and commercial property in Louisiana -- $3.1 billion more than all the premiums insurers charged for property insurance in the state during the 23 years from 1982 to 2004.
"Similarly, in Mississippi, hurricanes caused $11.3 billion in insured damage to structures and their contents, exceeding all the premiums insurers charged for property insurance in the state during the 19 years from 1986 to 2004."
These consolidated industry results are estimates for all private property/casualty insurers based on reports accounting for at least 96 percent of all business written by private U.S. property/casualty insurers.
"The insurance industry's financial results for 2005 attest to insurers' risk management and, in particular, their use of reinsurance to spread risk globally. "ISO's analysis indicates foreign insurers and reinsurers will ultimately cover from $14 billion to $19 billion of the losses from last year's catastrophes," said ISO's Murray. "But the cost of reinsurance for U.S. property risks in catastrophe-prone areas is now rising sharply, making it more expensive for primary insurers to provide coverage."
Adjusting for losses covered by foreign reinsurers, residual market mechanisms and the Florida Hurricane Catastrophe Fund, ISO estimates that private insurers' financial results for 2005 included net catastrophe losses totaling $31 billion to $36 billion -- up from about $15 billion in 2004.
Reflecting higher net catastrophe losses, the industry suffered a $5.9 billion net loss on underwriting in 2005 -- a $10.2 billion adverse swing from the $4.3 billion net gain on underwriting in 2004.
Former Enron executive admits guilt, says complacency equally bad as committing fraud
The same week Enron Corp. founder Kenneth Lay told jurors that he did not intentionally deceive investors and analysts, another former Enron executive told the insurance and risk management community that Enron suffered corruption and complacency in the months before the company's collapse.
Speaking to attendees at the Risk and Insurance Management Society conference in Honolulu, Lynn Brewer, a former Enron executive and currently founding chairman of The Integrity Institute Inc., shared her experiences in discovering fraud at Enron and the dilemma she faced between choosing to become a whistleblower or listening to her supervisors.
"There are two equally destructive forces in every corporation: those who will commit fraud and those who will be complacent toward it," Brewer said.
According to Brewer, although former Enron Chief Executive Jeffrey Skilling never told company employees to "cook the books, he said, 'find me the revenue.'" That pressure, she said, led to unethical company decisions to hide accounting practices and poor business operations.
Brewer said when she initially noticed fraud at Enron, she was complacent because of fear. She eventually became comfortable with the payoff, making $2,000 on stock options. "Some days, I was making $20,000 or $30,000," she said, apologizing that by standing back, she was equally guilty as those who committed the fraud.
"There are really good people who do horrendous things simply to solve business problems," she said. "Right and wrong is not black and white. Often, the decisions that we make at the time seem like the lesser of two evils."
Many times, business decisions are made quickly, and risk managers are involved in decisions when it's too late, she said.
Enron is a good case study for risk managers and the insurance community, Brewer indicated.
"Misconduct can interfere with business continuity," she said. "These things hit like a tsunami, and then it's very difficult to regain shareholder value and trust."
Brewer said there were probably 20 to 40 people at Enron who actually committed fraud, but two-thirds sat back and watched it. "The risk is in the human beings that make up your companies," she said, advising the risk and insurance industry to listen to its employees.
In 2001, there were 6,400 whistleblowing reports made every month to the U.S. Securities and Exchange Commission. In 2004, after Enron's collapse, there are 40,000 reports made monthly, according to Brewer.
Her advice was for companies and risk managers to analyze their whistleblowing reports and to examine how many people are leaving the company. "That will tell you a story about what's going on beyond the bottom line," Brewer said.
