News Briefs

JURY REACHES PARTIAL VERDICT IN EXECUTIVE LIFE CASE: A jury reached a partial verdict in the case involving the illegal takeover of failed insurer Executive Life Insurance Company on May 9, according to the Associated Press. The jury reached seven of eight verdicts, U.S. District Court Judge A. Howard Matz said. The California Department of Insurance sued French investors six years ago. CDI said that the investors conspired to give Executive Life’s assets to Credit Lyonnais, a company owned by the French government. That would have broken insurance laws at the time. The lawsuit also accused Artemis SA of buying Executive Life’s insurance business to help Credit Lyonnais avoid a U.S. investigation. “Today is a promising day for policyholders of the former Executive Life Insurance Company,” said California Insurance Commissioner John Garamendi. “The jury, in our civil lawsuit against Artemis S.A., has returned a verdict that vindicates our longstanding position. It found that Artemis, Credit Lyonnais and others engaged in a conspiracy to fraudulently obtain assets from the Executive Life estate. It also fully rejected the defense’s argument that the Insurance Commissioner had knowledge of this scheme before it was uncovered. Its decision affirms the existence of the fraud that allowed the unlawful sale of Executive Life and its assets to the French group.”

IBA WEST SUBMITS TESTIMONY OPPOSING REVISED PROPOSED ‘BROKER FIDUCIARY DUTIES’ REGULATIONS: IBA West submitted written testimony expressing strong opposition to the revised “Broker Fiduciary Duties” regulations proposed by California Insurance Commissioner John Garamendi. “While these regulations are less onerous in their revised form, they are still nonetheless an attempt by the insurance commissioner to usurp the powers of the California Legislature to enact sweeping new rules of general application upon all licensees subject to his jurisdiction, and to escape judicial review of his 790.06 enforcement discretion,” wrote Steve Young, IBA West senior vice president and general counsel in a letter to the department. “If this regulation was actually adopted as drafted, there would be no need for the California Legislature ever to consider another piece of insurance legislation,” Young said. “Consequently, we believe the regulation as drafted not only lacks statutory authority, but is also unconstitutional on the ground that it violates the separation of powers distinguishing the Executive Branch of government from the Legislative and Judicial branches,” Young wrote. “The Commissioner has failed to justify any necessity whatsoever for these regulations; he mis-cites provisions of the California Insurance Code; he has no regulatory authority to create affirmative and radically new legal duties upon brokers and agents; and his revised regulations, as drafted, are unclear, ambiguous, and unconstitutional. For all these reasons, we respectfully urge the Commissioner not to adopt the proposed regulations.”

INSURERS SEEK AMENDMENT TO NEV. ‘BLACK BOX’ BILL: The Property Casualty Insurers Association of America said it is seeking an amendment to pending Nevada legislation that would provide insurance companies with post-accident access to information contained in “black boxes” installed on newer automobiles. “Access to this data is important because it would help insurers fight fraud while administering accident claims fairly and accurately,” said PCI Legislative Advocate Kate Diehl. The bill, AB 315, will be considered by the Senate Transportation Committee. The measure would require manufacturers to disclose the existence of the black boxes (called event data recorders) to buyers. The bill also fails to allow insurer access to the device’s information following an accident. “Objective data from these devices will allow insurers to better reconstruct the events surrounding an accident which will aid in the resolution of a claim,” Diehl told the committee in prepared testimony. “The PCI and its member companies also respect the proprietary interests of motor vehicle owners that have event data recorders installed in their cars. Nevertheless, to assure that crash claims are administered efficiently and fairly, property/casualty insurers should not be precluded from having access to EDR data when warranted,” Diehl said. She noted that the recording devices can benefit everyone, from drivers to traffic and safety-control officials, law enforcement agencies, vehicle manufacturers, repair shops and insurers. “EDR data can help quickly verify or disprove claimant or witness accounts and help determine whether alleged injuries are consistent with the nature of the collision,” Diehl said.

AUTHOR PULLS BILL MANDATING CALIF. INSURER COMMUNITY INVESTMENTS: The author of a California bill that would mandate insurer community development investments withdrew the bill from consideration for this legislative session. Assemblyman Mark Ridley-Thomas will not pursue AB 925 relating to insurer investments, making the bill a two-year bill, according to the Personal Insurance Federation of California. The bill was sponsored by Insurance Commissioner John Garamendi. The National Association of Mutual Insurance Companies and PIFC opposed the bill as being unnecessary, unreasonable and impractical. “The very concept of AB 925 is flawed from a public policy standpoint,” said NAMIC State Affairs Manager Christian John Rataj. “The bill is unnecessary since the insurance industry already invests a significant amount of money towards urban development and other areas throughout the state of California.” In 1999, NAMIC concluded that the federal Community Reinvestment Act should not be applied to insurers. NAMIC found that subjecting the industry to an unnecessary government mandate would raise policyholders’ premiums, weaken the insurance industry financially, undermine its competitive position and jeopardize its ability to pay customers’ claims, especially in catastrophic situations. AB 925 would have required that each insurer admitted to do business in California with a surplus of less than $500 million to invest not less than one percent of its California allocated surplus. Insurers with a surplus of $500 million or more would invest not less than one percent of California allocated invested assets. The bill called for community development investments-that have as their primary purpose community development benefiting California low income or moderate income individuals or communities-intended to create or retain jobs or create new or expanded business opportunities, in addition to developing affordable housing in various communities throughout the state.

PCI SAYS INSURERS SURVIVE COLORADO LEGISLATIVE SESSION: At the conclusion of Colorado’s recent legislative session, PCI said that the insurance industry successfully worked to preserve Colorado’s stable marketplace. Colorado’s insurance scoring law, which is based on the National Conference of Insurance Legislators model act, remained intact after three attempts to ban insurers’ use of credit information. Senate Bill 137, identity theft legislation that would allow a consumer to put a freeze on his or her credit information, morphed from being one of the nation’s worst bills on this subject from an insurance perspective to being one that excluded insurance from its provisions, according to PCI. Lawmakers also rejected three separate bills that would have prohibited the workers’ compensation guaranty fund from seeking reimbursement from large employers. Another workers’ comp bill, SB 134, requires that all expert testimony in a workers’ comp case be presented through deposition. PCI and others asked Gov. Owens to veto the bill. Gov. Owens vetoed legislation, SB 25, which would have put in place automatic inflation adjustments for the cap on non-economic damages. The bill would have increased the cap on non-economic damages from $366,000 to $440,000 next year and allowed for additional increases on an annual basis.

CALIF. ASSEMBLY INSURANCE COMMITTEE APPROVES CREDIT-BASED INSURANCE SCORING BILL: The American Insurance Association praised the California Assembly Insurance Committee May 5 for approving a measure implementing a modification of the national model law on the use of credit-based insurance scores developed by the National Conference of Insurance Legislators. AB 1454, authored by Assemblyman Ron Calderon (D) and sponsored by the Association of California Insurance Companies, was approved by a vote of 6 to 1. “This bill provides strong protections for consumers’ personal information,” said Janine Gibford, AIA assistant vice president, western region. “AB 1454 allows insurers to use an important tool which accurately assesses potential losses, therefore enabling companies to offer a broad range of policies while preventing consumers who properly manage their credit from subsidizing those who present a higher risk.” AB 1454 will now move to the floor for a vote by the full California Assembly.

WASH. GOV’T TAKES PRO-BUSINESS STEPS TOWARD REGULATORY MODERNIZATION: In what may become a significant step toward regulatory modernization of property/casualty insurance in Washington state, the governor has signed into law legislation sought by the Office of Insurance Commissioner that could help businesses more quickly access commercial insurance policies, according to PCI. The bill, HB 1197, includes a provision granting authority to the state’s Office of Insurance Commissioner to allow insurers to issue commercial insurance policies without prior review and approval from the Insurance Department. HB 1197 was enacted during the recently concluded legislative session and was signed into law by Gov. Christine Gregoire on April 28. Kenton Brine, PCI’s Olympia-based regional manager, said the legislation is narrowly drawn to impact commercial insurance policies only, and may be narrowed further by administrative rule to impact only those policies with premiums over $100,000, to mirror current statutes and regulations governing commercial insurance rate filings. But Brine congratulated the department, the Legislature and governor for moving the state closer to a more competitive market. Under HB 1197, the insurance commissioner may exempt certain commercial property/casualty forms from filing requirements. The law will be effective in July. But, the specifics of which forms may be exempted will be determined by the Office of Insurance Commissioner through the rulemaking process later this summer or fall.

STATES ADDRESS ABESTOS ISSUES AS CONGRESS STRUGGLES: While Congress continues to wrestle with legislation that would establish a federal trust fund to compensate individuals with asbestos-related diseases, legislatures in several key states have enacted laws that reduce frivolous lawsuits and ensure that truly ill victims are compensated fairly, according to a national insurer trade group. “State legislatures continue to make encouraging progress,” said Ernie Csiszar, president and CEO of PCI. “State legislatures are able to pass more targeted legislation that quickly and efficiently addresses the needs of consumers and businesses in their state. When several states take similar action on the same issue-such as asbestos-they can help set a national direction.” Over the past two years legislatures in Ohio, Georgia, and Florida have passed bills that establish well-defined medical criteria that must be met before individuals can sue for asbestos and silica-related illnesses. Bills have been signed into law in Ohio and Georgia. A bill is pending signature by the governor of Florida. A similar bill in Texas is scheduled for a vote in the state House of Representatives. The “medical criteria” approach reduces the number of asbestos lawsuits filed by individuals without any symptoms of illness, preserves the right of those exposed to asbestos to pursue legal action should they become sick, and ensures that the truly ill are compensated for their losses. Congress will consider the “medical criteria” approach later this year in a bill that has been recently introduced by Rep. Chris Cannon (R-Utah). However, Congress is also moving forward on the establishment of a trust fund, financed by businesses and the insurance industry, to compensate asbestos victims on a national basis.

Topics California Carriers Legislation Agencies Workers' Compensation Market Property Casualty Colorado