JUDGE SAYS "TAKE NOTHING" IN CALIF. STATE FUND, PALM MEDICAL CASE

San Francisco County Superior Court Judge Donald Mitchell has granted California State Compensation Insurance Fund's Motion for Judgment Notwithstanding the Verdict and has vacated the March 2, 2006, judgment for Palm Medical, and has entered judgment in favor of State Fund, according to the group.

Mitchell found that "There is no substantial evidence that SCIF's Preferred Provider Network possessed power so substantial over the market for the treatment of occupational injuries in the Fresno area in 2001-2003 that the failure to admit the plaintiff, Palm Medical Group Inc., to its preferred provider network significantly impaired the plaintiff's ability to practice occupational medicine in the Fresno area." Mitchell ordered Palm Medical Group take nothing and that SCIF recover its costs and disbursements incurred.

SCIF said it had previously prevailed on March 2 when the court denied Palm Medical's motion for a court order compelling State Fund to admit Palm Medical to its PPN and its medical provider network. Mitchell rejected Palm Medical's effort to obtain injunctive relief and found that Palm Medical had failed to present sufficient evidence that State Fund engaged in any unlawful conduct in handling Palm Medical's application to join State Fund's Medical Provider Network.

James C. Tudor, State Fund acting president, said, "We are extremely pleased with this verdict. "

To view the court order go to: http://www.sftc.org.

TITLE INSURANCE LAWSUIT NAMES NEW MEXICO INSURANCE SUPERINTENDENT SERNA

New Mexico's suspended Insurance Superintendent Eric Serna, under investigation over a bank contract, is named in a lawsuit that alleges title insurance firms sought to persuade him to raise rates by donating to a nonprofit foundation he helped found.

The lawsuit, filed in state district court, said the title insurance industry gave $21,750 in 2003 and $26,200 in 2004 to Con Alma Health Foundation.

Although tax documents filed by Con Alma do not list specific donors, the lawsuit said the 2003 donation lists the address of LandAmerica Albuquerque Title Co., a subsidiary of LandAmerica Financial Group Inc., parent company of three companies named as defendants. "A primary purpose of these contributions was to influence defendant Serna, in his capacity as superintendent of insurance, to set unreasonably high rates for title insurance, and to restrain competition as to the price and terms of title insurance in New Mexico," the lawsuit alleges.

Serna said he follows state law in setting rates, and called the allegations concerning Con Alma contributions "laughable."

"That's ridiculous," he said. "We have a transparent process."

Serna resigned earlier this month as president of Con Alma's board after questions arose about a possible conflict of interest between his dual roles on the board and as insurance superintendent.

Charles and Barbara Murphy of Cedar Crest and Haydock Miller Jr. of Santa Fe sued on behalf of themselves and thousands of New Mexicans who bought title insurance. Such insurance guarantees that homeowners are not financially liable if there's a problem with the property's title.

The trio alleges they were forced to pay "excessive and unreasonable prices"for title insurance to refinance their mortgages.

They also allege the defendants engaged in price fixing by not allowing companies to compete for business. The insurance superintendent sets uniform title insurance rates each year, which the lawsuit contends violates the state Constitution.

Defendants include the 10 largest title insurance companies in New Mexico, Serna, the state Public Regulation Commission and its Insurance Division.

Last month, former state Rep. Max Coll and his wife, Catherine Joyce-Coll, sued First American Title Co., the PRC, the Insurance Division and Serna, contending state law allows title insurance firms to charge excessive prices.

The attorney general's office has been investigating a contract Serna signed with a Santa Fe bank.

Con Alma received more than $124,000 from Century Bank, which has had a contract since 2003 to hold insurance company deposits required of firms doing business in the state.

The contract was amended in 2005 to allow a higher fee than state regulations permit. The fee was decreased once it was discovered to be too high.

Serna has denied doing anything illegal or improper.

He was placed on paid leave early this month, and last week the PRC extended that for an additional 30 days pending the investigation, which is being done at the PRC's request.

Commissioners, meanwhile, said the PRC is hiring its own investigators to prepare for possible personnel action. Serna said he was not told about a second investigation, but said he "welcomed any and all investigations, just so they don't last forever."

Commissioner David King said he has asked Serna to consider retiring.

The attorney general also has requested documents from Con Alma, including lists of donations and donors since 2003. An attorney general's spokeswoman said that request is separate from the investigation into the bank contract.

Copyright 2006 Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.

AGENTS HAIL PASSAGE OF TAX LEGISLATION

The Senate has passed a conference report on the bill, the Tax Increase Prevention and Reconciliation Act, last month on the heels of House passage a day earlier. The tax-cut bill, supported by independent insurance agents and brokers, will extend the $100,000 limit on small business expensing to $400,000 through 2009; extend capital-gains and dividend tax cuts through 2010; and create an alternative minimum tax (AMT) patch.

"The tax bill that both houses of Congress have passed is important to our members and business owners and employees throughout America," said Charles E. Symington Jr., Independent Insurance Agents & Brokers of America senior vice president for government affairs and federal relations. "Raising the alternative minimum tax exemption, allowing greater expense write-offs and decreasing taxes on capital gains will all help our members and their employees by shielding them from unanticipated or onerous federal taxation. We appreciate the action of members in both houses in passing these much-needed reforms."

"We applaud Congress for its work and for doing the right thing for main street businesses across the country," added Brendan Reilly, Big "I" assistant vice president for federal government affairs. "We are hopeful that President Bush will sign this important bill into law very soon, and we also look forward to working on making the individual tax cuts permanent, which is important for Subchapter S corporations, which include many main street independent agencies."

CHARTERED PROPERTY CASUALTY UNDERWRITERS TO SHARE TIPS ON BEING SUCCESSFUL

On Tuesday June 13, the Los Angeles Chapter of the Chartered Property Casualty Underwriters will host a meeting featuring motivational speaker Betsey Brewer, senior vice president of The Rule Co., speaking on "Supersize Your Borders."

Brewer is the CPCU Society's president-elect. She serves on the board for the Insurance Brokers and Agents of the West, the Los Angeles Girls Scout Council and is a Trustee of the CPCU-Loman Education Foundation.

Topics to be covered during her speech include:

• What it takes to be successful in the insurance industry;


• How to enhance your skills and adapt to a changing industry environment; and


• How to keep yourself motivated.

The event will be held June 13, 2006, at the Jonathan Club in downtown Los Angeles from 11:30 a..m to 1:45 p.m. Reservations can be made by calling the LA CPCU Chapter Office at (818) 349-5127. Fax: (818) 349-4019 or e-mail at lacpcuchapter@aol.com. For more information, visit www.cpcusociety.org.

POST SPITZER, MERGER ACTIVITY PICKING UP, SAYS MYSTIC CAPITAL

Last year wasn't the busiest year for mergers and acquisitions in the insurance agency and brokerage field, but as concerns over various probes of the insurance industry fade, activity is picking up.

Kevin Donoghue, of Mystic Capital Advisors Group, who specializes in mergers and acquisitions in the insurance industry, said there's been a lot of activity in the insurance industry since late 2005 right into this year.

"It's been a pretty exciting time period to be in the mergers and acquisitions field," said Donoghue in an exclusive interview in the Insurance Journal broadcast at http://www.insurance journal.com/broadcasts/player/ ?vid=1509.

Donoghue thinks the industry probes spearheaded by New York Attorney General Eliot Spitzer had a dampening effect on mergers, but that era is passing.

"I think some of the slowdown just related to the Spitzer investigations and how contingencies would be affected in the industry. That affects mergers and acquisitions pricing naturally, so a lot of money that was being readied to be deployed in the acquisition field pulled back. As those uncertainties seemed to go away toward late '05, the money came off the shelf and is currently being deployed into a number of different acquisition areas, both in the retail and on the managing general agent side of the business," he said.

Certain players continue to be driving forces in mergers and acquisitions. "It's still being driven by growth expectations of the publicly traded brokers. Without acquisitions, most of them aren't even growing organically," the Mystic Capital executive explained. "They're still very active in the marketplace, so there's that supply/demand imbalance with them as well. It's pretty aggressive out there, and the pricing we see is pretty aggressive as well."

He said some banks are still interested in buying insurance operations, although it very much depends on the bank's situation.

"Banks' interest has ebbed and flowed over the past few years," Donoghue said during the interview conducted at the recent Target Markets Program Administrators Association meeting in Baltimore.

"I think the consolidation in the banking industry itself has created opportunities for new bank parent companies to divest opportunities. There still are a number of banks that are interested in buying as well, so different bank holding companies have different opinions on the insurance platform,"he said.

It's a good time for sellers who have reasonable expectations of prices. "There's not a shortage of buyers in the industry, so certainly if there's an interested seller, it's a good time from a supply/demand perspective. There's always that effect, do buyers have reasonable pricing expectations? That's really what keeps deals from happening versus anything," according to the merger consultant.

MERCURY POSTS LOWER Q1

Los Angeles-based Mercury General Corp. reported slightly lower net income for the first quarter of 2006 TITLE: --TITLE: $58.6 million, or $1.07 per share (diluted), compared with $60.4 million, or $1.10 per share (diluted), in Q1 2005.

It noted the figure includes realized investment gains, net of tax, of $4.2 million, or $0.08 per share (diluted), in Q1 of 2006, compared with net realized investment gains, net of tax, of $2.7 million, or $0.05 per share (diluted), for Q1 in 2005.

Company-wide net premiums written were $774 million in the Q1 of 2006, a 6.1 percent increase over Q1 2005 net premiums written of $730 million. California net premiums written were $566 million in the quarter, an increase of 7.6 percent over 2005.

Mercury said its "combined ratio (GAAP basis) was 91.8 percent in 2006 Q1, compared with 92.6 percent in Q1 of 2005. Positive development on prior period loss reserves was approximately $10 million and $20 million, respectively, for the periods ended March 31, 2006 and March 31, 2005.

"Net investment income of $39.4 million (after tax $33.1 million) in Q1 2006 increased by 37 percent over the same period in 2005. The after-tax yield on investment income was 4.1 percent on average assets of $3.2 billion (fixed maturities and equities at cost) for Q1. That compares with an after-tax yield on investment income of 3.4 percent on average investments of $2.9 billion (fixed maturities and equities at cost) for the same period in 2005."

The report also referenced a previously reported income tax charge, "net of federal tax benefit, of approximately $15 million, or $0.27 per share (diluted), relating to Notices of Proposed Assessments upheld by the California State Board of Equalization ("SBE") for tax years 1993 through 1996 in which the Franchise Tax Board disallowed a portion of its expenses related to management services provided to its insurance company subsidiaries."

The bulletin noted Mercury "believes the deduction of these expenses is appropriate and intends to challenge the SBE decision in Superior Court."

The full earnings report is available on the company's website: http://investor.mercury insurance.com.

WHAT TO INCLUDE IN A DISASTER CONTINGENCY PLAN

While you may not be able to avoid Mother Nature, having a contingency plan can help a company to mitigate loss. A contingency plan should include steps before a loss occurs, emphasized Mel Bangs, director of risk management for Omni Hotels.

Based on her experiences, Bangs recommended companies create an internal team and appoint leaders who are in charge of responding to the loss. She recommended businesses establish a team of outside experts, including the insurance broker, accountants and outside legal counsel.

A contingency plan also should include maximum probable loss calculations. "Consider internal interdependencies and external contingencies," Bangs said. "And take steps to reduce the risk or new perils."

A schedule of property values and business interruption losses can be used to establish premiums, set sublimits and set deductibles, she noted.

Then immediately after a loss occurs, businesses should collect all insurance documents; consider additional insured coverages, placement files and broker files; take appropriate steps to protect and preserve property and to record loss; and take steps to preserve evidence.

There are things you can do to avoid second-guessing and assist in communication when processing the claim, Bangs said. She recommended risk managers:

• Immediately video or photograph the site to document the loss.


• Establish a system to document control and preservation, which anticipates completion of the claim, as well as the potential for later discovery requirements.


• Generate and preserve documents that evidence proof of the repair or replacement of property. Those documents should evidence what was done, when, where, by whom and at what cost.


• Document the decisional basis on which the decisions to repair or replace were made.


• Find and preserve witness memory through affidavits or other means.

Companies should preserve the confidentiality of internal communications and draft reports, recognizing that documents not privileged may be discoverable, she said.

Last but not least, a contingency plan should consider dispute resolution, Bangs said. "Develop an effective settlement strategy," she recommended. "If litigation is an option, determine where litigation could and should be brought," she said.

HOUSE OF LORDS ASBESTOS DECISION LIMITS DAMAGE LIABILITY

The U.K.'s House of Lords handed down judgments on May 3 in three major cases involving employers and their insurers' liability for damages to workers and their families resulting from asbestos related diseases.

The decision in the case of Barker v. Corus, and two related cases, limited the application of a previous case, Fairchild v. Glenhaven, decided in 2002, which had held that a worker "who had contracted mesothelioma after being exposed to asbestos dust at different times by more than one employer could successfully sue any of them in respect of his entire damage, notwithstanding that he could not prove which employer had actually caused his disease," in the words of a summary of the decision provided by the law firm of Lawrence Graham LLP.

The Corus decision found differences with the facts in Fairchild. For one, the complaint cited asbestosis, not mesothelioma as the malady in question; for another the plaintiff Barker had also been self-employed for a period of time. The court determined that none of the employers could be held entirely responsible for the full amount of damages. Each past employer was therefore liable to pay damages only in proportion to the time the employee had been exposed to asbestos fibers at each place he worked.

The Lords in effect rejected the notion of strictly applying the rules of joint and several liability in cases where the facts concerning the duration of employment and the amount of exposure to asbestos could be reasonably determined. They therefore sent the case back to the lower courts to make these determinations of fact.

The case is nonetheless seen as victory of sorts for the insurance industry and the remaining industrial concerns that are still solvent. Plaintiffs' attorneys roundly criticized the result as a miscarriage of justice.

ASSOCIATION GAINS EXCLUSIVE LICENSE FOR LONDON MARKET TEST

The American Association of Managing General Agents announced that it has an exclusive license with the Chartered Insurance Institute to offer the Lloyd's of London Market Insurance Test. Passing the test is required for all brokers doing business in London.

PXRE EDGES TOWARDS RUNOFF DESPITE $41.6 MILLION Q1 NET

Bermuda-based property reinsurer PXRE Group Ltd. announced that its net income before convertible preferred share dividends was $41.6 million for the first quarter of 2006, compared to $22.7 million in the first quarter of 2005.

The positive result, however, doesn't appear to significantly help the company out of its current financial difficulties. PXRE was severely impacted by last fall's hurricanes, and as a consequence lost its "A" rating and 65 percent of its business. The company is very close to going into runoff, unless a buyer comes forward with a rescue plan.

"We are continuing to actively explore potential strategic alternatives," said President and CEO Jeffrey L. Radke. "To date, our Board of Directors has not found an alternative that it believes would be in the best interests of our shareholders and reinsurance clients, but we are continuing the process."

Radke recognized that the first quarter results weren't sufficient to rescue PXRE. He indicated that although they were encouraging, "we do not expect to repeat this level of profitability in future quarters."