Judge Heard What Healh Care Law Did Not Say

It’s ironic that the ultimate fate of the nearly 3,000 page Patient Protection and Affordable Act (PPACA) may hinge on what was not included in the legislation.

Today’s ruling by a federal appellate court judge in Florida that the law’s individual mandate provision is unconstitutional is certainly important, but even more significant is that the judge also ruled that entire law must be struck down on the basis on non-severability. In other words, if a single provision does not pass constitutional muster, then it all gets thrown out.

This is particularly interesting because shortly after the passage of PPACA, it came to light that the law did not include a severability provision, which is a pretty standard clause for most comprehensive legislation. To this day no one really knows for sure the reason for this important omission, although the most likely theory is that it was drafting error made in the rush to pass the legislation.

Then-Speaker Nancy Pelosi famously said that we needed to pass the bill to know what’s in it. Apparently we also needed to pass the bill to know what was not in it.

I have written and commented about this small but important legislative detail frequently over the past year. On more than one occasion someone has challenged me that it is not realistic to think that the entre law could be thrown out even if specific provision were voided by the courts. Conventional wisdom misses the mark once again.

So it’s off to the Supreme Court we go and we’ll see if at least five justices hear what the health care law did not say.

Personal Umbrella Liability and Board Service

I am often questioned by a board of directors member who is concerned with their personal liability for their service on the board.



I hear it from board members of non-profit boards and the boards of corporations, alike.



The question goes like this:



"I have a personal umbrella policy that covers me for my actions on this board. Why do we need directors and officers liability?"



A variant is...



"Should I buy a personal umbrella policy in case the directors' and officers' insurance is inadequate?



First, a personal umbrella policy is designed to expand your personal liability insurance and your auto liability insurance by adding $1,000,000 (or more) of coverage.



If you have a $500,000 personal auto policy plus a $1,000,000 personal umbrella policy, you have a total of $1,500,000 of liability coverage for an auto accident.



Your home insurance policy provides personal liability. A $1,000,000 umbrella policy adds $1,000,000 of coverage above the basic policy.



Both the auto policy and the personal liability insurance on your home insurance pays for bodily injury and property damage. The umbrella policy also pays for bodily injury and property damage. The lawsuit must come from somebody being injured or property being damaged.



Directors' and officers' insurance is purchased to protect board members from lawsuits involving poor decisions:



-an employee sues for wrongful termination.



-an employee sues for harassment.



-a community member sues a non-profit for failure to deliver services.



-a stockholder of a for-profit company sues the directors for poor management that results in loss of investment.



D&O insurance excludes bodily injury and property damage - organizations buy general liability insurance for the exposure of bodily injury and property damage.



So, Mr. Board member, you might need a personal umbrella insurance policy. However, it will not protect you from the same things that directors and officers insurance will cover.

Hearing Thursday on transparency for health insurer rate increases

A state Senate committee will hold a hearing at 1:30 p.m. Thursday in Olympia on a couple of our key legislative requests.

The first -- and the less controversial -- is that we retain the authority to review health insurance rate hikes in the individual market (e.g. insurance you buy yourself, instead of get through an employer.) If this bill doesn't pass, our authority do review those rates on behalf of consumers will end at the end of the year -- and the feds will do it instead. This is Senate Bill 5398.

The more controversial bill -- at least among insurers -- is our proposal to make public all the information that health insurers send us when filing for a rate increase. As things stand now, much of that information is secret. Hundreds of consumers have told us that they feel they have a right to see it. And we agree.

We're arguing that consumers should have the right to see what they're paying for, and exactly what's driving the large premium hikes in recent years. Everyone's data would be released, making it a level playing field for all the companies. (The bill is SB 5120.)

We don't have to look far to see how this process would work, because Oregon is already doing it. What's more, that state's largest health insurer said it supports a transparent filing process.

Washington State Insurance Commissioner Mike Kreidler testified about the transparency proposal last week in front of a House committee. Here's an excerpt:

Seattle Times weighs in on health insurer surpluses

Speaking of our legislation involving large surpluses held by nonprofit health insurers, the Seattle Times just posted an editorial on the topic.

It recounts testimony at Thursday's hearing in a state House of Representatives committee:

The companies testified against any penalty for piling up surplus, raising the specter of earthquakes, epidemics and President Obama's health-care reform. The first two might bite into their holdings, and the third, they said, surely would. They said they need every cent they have.

"How much is enough?" asked Rep. Kevin Van De Wege, D-Sequim.

Their answer was a thing with no defined form — something about consumers needing "strong, muscular companies." Van De Wege asked his question again, and again received vapor.

Kreidler re: health insurer surpluses: "How much is enough?"

On Wednesday and Thursday, Insurance Commissioner Mike Kreidler testified in front of Senate and House committees about his proposal to limit further contributions to non-profit health insurers' already-large surpluses.

Here's an excerpt from the Senate hearing:

SJC seeks amicus briefs on MedPay question

The Supreme Judical Court of Massachusetts is seeking amicus briefs in Golchin v. Liberty Mut. Ins. Co., docket no. SJC-10794. According to the SJC's blurb,

This case presents important issues concerning the Commonwealth's coordination of benefits among health insurance, PIP and MedPay: whether the Commissioner of Insurance has properly mandated that insureds claiming MedPay must first make a demand on their health insurers, and may only make demand on MedPay after denial by health insurers, which denial must be provided to the MedPay insurer before any payment.

The seven biggest life insurance mistakes

Watch out for these life insurance mistakes.
1. Assuming life insurance is expensive
According to a recent report by Aviva, on average, 61% of families admit they don’t have basic life insurance, with 89% saying they are without critical illness cover, and 89% without income protection.

What’s more, 42% of families admit they’ve been seriously affected by illness and yet still don’t have any cover in place!

But if you care about your family’s well-being and you want to ensure your family won’t lose their home should something happen to you, make sure you have a life insurance policy in place.

If you think you can’t afford it – 19% of people in the survey said they didn’t have cover because they thought it was too expensive – think again. Life insurance can cost from as little as £5 a month, so there’s really no excuse.

2. Believing life insurance never pays out
The Aviva report also revealed that 5% of people believe life insurance never pays out. Again, this is untrue. According to Aviva, 99% of life insurance claims are paid out.

As long as you’ve provided accurate information, there should be no reason why your insurer won’t pay out.

3. Under-insuring your life
Of course, although your insurer should pay out, there's a chance the sum of money your family receives won't be large enough. Judging how much life cover you need can be tricky and what might sound like a lot of money now, may not work out to be much later down the line. As a result, it can be very easy to under-insure your life.

Many of us think we only need to cover our mortgage costs, but if you want to ensure your family would have a reasonable standard of living should the worst happen to you, you should also consider other debts such as household expenses.

For an easy way to work this out, check out this nifty calculator.

Jane Baker explains why life insurance should be your number one financial priority

4. Not updating your details
If your circumstances change – perhaps you’ve increased the size of your mortgage, or had a baby - you need to update your policy and apply for additional cover. If you don't do this, you risk being under-insured. Read Eleven reasons why you need more life insurance for more information.

The same goes for personal details such as your health - in some cases you could see your premiums come down as a result!

In fact, recent research from Sainsbury’s Finance has revealed that around 3.3 million ex-smokers in the UK are collectively paying £316m a year too much for their life insurance premiums because they haven’t told their policy provider they’ve quit.

So if you’ve given up smoking and haven’t used nicotine replacement products in the past 12 months, make sure you tell your provider as you should be classified as a non-smoker and this will lower your premiums.

5. Choosing the wrong type of policy
It’s also pretty easy to choose the wrong type of life insurance policy. Life insurance policies come in all shapes and sizes, leading to confusion.

The most widely used policy is level term assurance. If a claim is made during the term, this plan pays out a cash lump sum to your family (or any other beneficiary you choose). The sum you’re insured for stays the same for the duration of the term.

You could also consider increasing term assurance which provides cover that increases over time to combat the effects of inflation. Although this sounds good, be warned that the premiums will be higher than a level plan due to the cost of inflation-proofing. So you need to assess carefully whether this benefit is worth paying for.

If you’re really worried about money and you need to keep the cost of life insurance to a minimum, you could consider a decreasing term assurance policy instead. This is cheaper because the cover reduces over the term in line with your outstanding mortgage debt. So this type of cover will pay out just enough cash to cover your outstanding mortgage whenever you make the claim.

You can find out more about the different types of policies in Get the right life insurance for you.

It’s also worth noting that choosing a joint policy usually works out to be cheaper than buying two single policies, but isn’t necessarily the best option. A joint policy won’t give either of you as much cover as two single policies would because a joint policy will only pay out once – when one person dies.

Two policies, on the other hand, will pay out twice – when each of you dies – so you’re getting double the protection. And this is particularly important if you have children.

6. Not setting your policy up in trust
If you want to ensure the pay out from your life insurance goes to the right people when you die, make sure you put your policy in trust. Fail to do so and your policy will automatically become part of your estate. This means it will be subject to inheritance tax. However, if it is written in trust, it won’t form part of your estate and is more likely to be exempt from inheritance tax.


7. Failing to shop around
Although I've saved this one until last, one of the biggest mistakes when it comes to life insurance is not shopping around for the best policy. I’ve already explained why the cheapest policy might not be the most suitable, but it’s still important to shop around to ensure you’re getting a good deal. You can easily do this with the lovemoney.com life insurance centre.

Avoid buying a policy from your bank or other mortgage lender because these policies are likely to be more expensive.

As a final point, it’s also worth thinking about taking out critical illness cover as well as income protection insurance for additional protection. You can find out more in Three essential ways to protect your family.

Should You Sell Your Life Insurance Policy?

Selling a life insurance policy to generate current income has historically been a controversial practice. Investors who buy the policies do not make money until the selling policyholder dies, creating a death-watch dynamic that is morally repugnant to critics. The life settlements industry, as it's now called, accurately notes that such settlements have long been an acceptable estate planning tool. Now, with rising numbers of aging seniors, companies and brokers involved in life settlements are seeking acceptance of selling a life insurance policy as a mainstream retirement tool alongside annuities, long-term care, and other age-related financial products.

"A life settlement, in our view, is a legitimate transaction made in the financial interest of the policyholder," says Michael McRaith, the commissioner of insurance in Illinois and an active regulator in national life settlements issues. There can be valid estate considerations or a change in family circumstances that support the need to sell a life insurance policy, he notes. For example, he said, parents who have had life insurance policies for decades may no longer need or desire to leave death benefits to their grown children. "It might be better for the parents to have access to a cash settlement for that policy," he said.

"The most important concern for a consumer in any insurance transaction is that the consumer make an informed and educated decision," McRaith says. And that decision, he emphasizes, "should be in the best interests of their families and not necessarily in the best interest of the person [or firm] who is involved in the commercial aspect of a life insurance transaction."

Life settlements emerged from obscurity in the wake of the AIDS epidemic. Known then as the viatical settlements business, it layered a money-making objective with a compassionate twist for terminally ill AIDS victims, who could receive income before they died by selling life insurance policies. The investors who became the new beneficiaries of those policies would continue making any premium payments and then collect on the policy when the patient died.

Questions arose about the propriety of inducing AIDS victims to buy life insurance, and there were ghoulish odds posted on the correlation between a patient's blood cell counts and their expected time of death. Later, as improved drug therapies began commuting what had once been an AIDS death sentence, the viaticals business became less attractive to investors as life spans stretched from months into years, and then decades.

More recently, the image of life settlements was hurt by its association with what came to be called "stranger originated life insurance," or STOLI for short. In STOLI transactions, brokers often aggressively hustled older seniors into agreeing, for a fee, to have insurance on their lives purchased by third parties, who would pay the premiums and collect the death benefits. "These abusive STOLI practices essentially promote the wagering on human life, negating the good, social purpose upon which life insurance is based," the American Council of Life Insurers says in explaining its opposition to such "manufactured transaction."

In Illinois, McRaith recalled a full-page ad in The Chicago Tribune inviting people between the ages of 55 and 85 to meet a celebrity and learn about free insurance. Once in the meeting, they were encouraged to participate in a STOLI transaction. While the fee income was appealing to many seniors, McRaith said, there often were adverse financial consequences that were not disclosed, including income tax obligations and the loss of public benefits due to the extra income from their STOLI fees. Life insurers also object to selling policies with a 100-percent certainty of having to pay death benefits. Traditionally, many life insurance policies are dropped before the covered person dies, and life insurance premiums reflect these lapse rates.

Many states have adopted new rules to sharply limit if not end STOLI, McRaith says, including imposing a multi-year holding period before life insurance death benefits can be assigned to a third party. "Most states have some law that would prohibit stranger originated life insurance," he says. "If we knew of it happening in Illinois, it would be a violation of the law."

As the life settlements industry works to position itself as a mainstream option for seniors, the industry's largest and only publicly traded company, Life Partners Holdings, has been drawing unwelcome attention. The Wall Street Journal reported last month that Life Partners consistently understates the remaining life spans of the policyholders, whose policies are being sold to investors. If an investor experiences an extended wait to collect a death benefit, the costs of paying premiums and other expenses erode expected profits. The problem wouldn't affect consumers unless it reduced investor interest, which could reduce demand for policies and cut the prices that consumers receive for selling their policies into the life settlements market. The company reportedly confirmed this week that it is under investigation by the U.S. Securities and Exchange Commission, and the Journal reported that the investigation was linked to the issue of life expectancy calculations.

Beyond individual company business practices, by far the larger issue for life settlements has been the economy. "When the economic meltdown happened, everyone's lines of credit were cancelled, not just in our industry," recalls Scott Page, founder and head of The Lifeline Program, a life settlements company based in suburban Atlanta. "I think the industry is reinventing itself after a very tough 18 months."

Instead of relying on credit, Page says his company and others are using their own funds to purchase policies. "The industry just started recovering in 2010" and is not back to prerecession business levels. But Page says demographics are on his side. "Life settlements are just going to be one more option for seniors considering how they are going to survive in retirement."
For seniors considering selling their life insurance policy into the settlements market, Page offers this advice:

• These are complex transactions. Either use a financial adviser or work with the insurance agent who sold you the policy in the first place.

• You can work directly with a settlements company or through a broker. In either case, insist on total transparency and get several bids for what your policy might fetch. Payments can range from a few percent of a policy's face value to upwards of 30 percent. The key variables are your age and health, the kind of policy you have, the accumulated cash surrender value built up in the policy, and the ongoing premiums due on the policy.

• Transparency should apply to your considerations as well. Talk to all family members who might be affected by the decision. Make sure everyone understands and supports the decision. "We also require any of the current beneficiaries to sign notarized releases," says Page, attesting to their acceptance of a life settlements transaction.

• Understand, or make sure your adviser understands, your state's licensing rules for life settlements providers and how long the provider has been in business. Also, what is the source of funds being used to buy your policy, and who controls those funds? "It is not unreasonable to ask for proof of funds prior to signing an agreement," Page says.

• Policies ranging from $250,000 and higher in death benefits can be of interest to life settlements companies, but the more attractive policies to the industry are the larger ones. Universal life and other whole life policies are normally used. But Page says there is a growing "term to perm" effort to alert consumers that term policies that can be converted into whole life policies may be of interest to life settlements companies.

• A life settlements transaction should take several weeks, at least. Insurance and medical records must be obtained and verified. The process can take longer if a trust or estate is involved, if the consumer is involved in any divorce proceedings, or there are other legal considerations. Consumers' physicians must provide a "sound mind" statement that the consumer is mentally competent to enter into a life settlements transaction, which is especially relevant for older seniors.

• Payment for a life settlements sale should occur in a lump sum. "Be wary of companies that might want to offer you a payment stream," Page says. The gain on the sale—the difference between the payment and the total premiums paid on the policy—is taxed as ordinary income and should generate an IRS Form 1099.

"Amish Grace- A story of Forgiveness"

A typical Amish one-room schoolhouse,

I photographed traveling through Amish country in Ohio.

“Amish Grace”

Forgiveness in the Face of Utter Evil

Our family was greatly challenged by the video version of the Lifetime movie “Amish Grace.” It depicts the unexpected reaction of the Amish people to an incident that seems to me to be the very personification of evil itself.

On October 2, 2006, a gunman carried out a well-planned shooting at the one-room West Nickel Mines Schoolhouse, in an Amish community of Lancaster County, Pennsylvania. Charles Carl Roberts IV set the boys free and barricaded the door. He kept young girls hostage, bound them and lined them up. One set of sisters volunteered to be shot first, to help save the others and buy time. He shot ten girls execution style, in the back of the head. He then took his own life. Five of the youngsters died.

The disturbed shooter had left suicide notes for each child and for his wife. The one to his spouse laments the loss of a premature daughter years earlier:

"I don't know how you put up with me all those years. I am not worthy of you; you are the perfect wife you deserve so much better. We had so many good memories together as well as the tragedy with Elise. It changed my life forever I haven't been the same since it affected me in a way I never felt possible. I am filled with so much hate, hate toward myself hate towards God and unimaginable emptiness it seems like every time we do something fun I think about how Elise wasn't here to share it with us and I go right back to anger."

The response of the Amish community differed greatly from the reaction of most communities scarred by school shootings. The movie, through some fictional composite characters, tells the story.

On the very day of the shooting, a grandfather of one of the murdered Amish girls was heard saying, "We must not think evil of this man." It is said one Amish father explained that, “[the gunman] had a mother and a wife and a soul and now he's standing before a just God." Amish neighbors reportedly comforted the Roberts family and extended forgiveness to them just hours after the mass murder.

In time, the Amish visited Roberts' widow, parents and even his extended family. It is reported that the gunman’s own father cried on the shoulder of an Amish man for an hour. The Amish even raised money in charitable fund for the family of the Roberts. Astonishingly, dozens of Amish community attended the gunman’s funeral. The widow of the shooter, Marie Roberts, attended a funeral of one of the victims as well.

Following the tragedy, Marie Roberts wrote an open letter to the Amish stating:

“Your love for our family has helped to provide the healing we so desperately need. Gifts you've given have touched our hearts in a way no words can describe. Your compassion has reached beyond our family, beyond our community, and is changing our world, and for this we sincerely thank you."

The week following the shooting, the one-room schoolhouse was torn down, leaving only a pasture. Six months later, The New Hope School, intentionally built as "different" as possible from the original, was opened nearby.

The extreme forgiveness the Amish so promptly and completely gave has been, at best, difficult to comprehend. For others, it has actually been offensive. They have argued that forgiveness should only occur when remorse has been expressed. Some critics allege they are denying the evilness of the act with their forgiveness.

However, a story told to the children in the movie, prior to the shootings, may provide more Amish context for their forgiving actions. The story was about Dirk Willems. In 1569, he was able to make his escape from those who sought to take his life for teaching Anabaptist doctrines in violation of Roman Catholic orders. When a pursuer fell through the ice, however, he was recaptured upon turning back to save the life of his pursuer. They burned him at the stake. Today, he is one of the most celebrated martyrs among the Mennonites, the Brethren, and the Amish, all offshoots of the original Anabaptists.

What about us? Are there limits to our forgiveness? If you are like me, there truly are limits—clearly exceeded by these actions.

However, Scripture teaches us that Jesus’ forgiveness has no limitations. “Therefore, I tell you, her many sins have been forgiven—as her great love has shown. But whoever has been forgiven little loves little.” Luke 7:47(NIV).

The Lord’s forgiveness shocked the people of Jesus’ day, much like the forgiveness of he Amish might surprise us today. Indeed, I fear our natural lack of forgiveness stems from a lack of love. That shows just how far we have fallen from being made in the image of the One True God, Who is—after all--Love.

*Mr. Peel, a Christian Injury Lawyer, may be available to speak to your church or community group. He may be reached through www.PeelLawFirm.com. Other articles maybe found on his blog at www.insurance-coveragelaw.blogspot.com

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Self-Insurance Faces a Triple Regulatory Threat

SIIA has reported recently on a series of the meetings with DOL and HHS officials to discuss PPACA-mandated studies on self-insurance. Our assumption is that at a minimum there is ignorance among regulators, but more likely a negative bias pervades.

We are working to head off a DOL report that concludes smaller employers should not self-insure due to solvency concerns and a separate HHS report suggesting that self-insured health plans will negatively impact health insurance exchanges due to adverse selection concerns.

While the policy battle rages on these two fronts, self-insurance is now being targeted by a third team of regulators. The Treasury Department has recently developed a keen interest in stop-loss insurance of all things.

The hook for the IRS folks is that the new health care law limits the tax deduction companies that sell fully-insured health insurance products may take for the compensation they pay to their employees. In other words, if a company sells “health insurance,” the company is subject to this tax deduction limitation. And guess what, it looks like the IRS and Treasury officials are confusing stop-loss insurance with health insurance.

Consider the following excerpt from an IRS publication regarding this tax deduction limitation, requesting comments from the public on:

"the application of the deduction limitation for services performed for insurers who are captive or who provide reinsurance or stop loss insurance, and specifically with respect to stop loss insurance arrangements that effectively constitute a direct health insurance arrangement because the attachment point is so low." (See IRS Notice 2011-2).

So, not only are the Treasury officials asking insurance practitioners how they should treat, for example, stop-loss policies, Treasury is explicitly asking for comments on how they should treat these policies, especially policies with a low attachment point.

Interestingly, this was reported to be a hot subject of discussion at an American Bar Association meeting for tax practitioners last week in Florida. Can you picture a bunch of tax lawyers with no background in self-insurance trying to figure out stop-loss insurance? Yep, that’s a scary thought.

But back to the IRS. Should it conclude that stop-loss insurance can be defined as health insurance for even its limited tax treatment purposes, a troublesome precedent will be established. For more than two decades, SIIA has been largely successful in pushing back on state efforts to regulate stop-loss insurance like health insurance.

A contrary interpretation by the feds will likely embolden those who seek to impose new regulations on self-insured plans via their stop-loss insurers. That’s the last thing the industry needs.

So, with stop-loss insurance under a Treasury Department microscope, self-insurance now faces a true regulatory triple threat. Watch for additional updates on this important developing story.

Why gun insurance won't work

The New York Times published an interesting letter to the editor last week.

To the Editor:

In “How Many Deaths Are Enough?” (column, Jan. 18), Bob Herbert recommends stricter licensing and registration of guns, more vigorous background checks and a ban on assault weapons. I agree.

And I have another suggestion: gun insurance. Mandatory liability insurance for gun owners sounds to me like an idea whose time has come. With this approach, we can respect what many interpret as a constitutional right to bear arms, while at the same time making those who possess and use weapons pay for the risk that they pose to the rest of us.

Caroline Herzenberg
Chicago, Jan. 18, 2011

While it's an interesting idea, I can see a number of problems with mandatory insurance for gun-owners. First, you can't get insurance for intentional acts. That's because insurance insures against risk -- meaning accidents -- while intentional acts are not risks, they are certainties. The standard Massachusetts auto policy, for example, insures only against "accidents," which it defines as as "an unexpected, unintended event." Thus, the insurance will provide coverage if the insured driver skids on ice and injures a pedestrian, but it will not provide coverage if the driver purposefully aims for the pedestrian and runs him down.

Gun insurance might provide coverage for a hunting accident, but it wouldn't provide coverage for intentionally shooting someone.

Even if there could be gun insurance for intentional assaults, the administration of it would be quite difficult. Would the insurance be purchased annually, like car insurance, as long as the person owned the gun? What about the large percentage of gun crimes that are committed with stolen guns? Would the original owner -- or the gun store -- be responsible for insurance ad infinitum after the gun was stolen?

Thanks to my friend Nomi Herbstrom for bringing the letter to my attention.

OSHA Log Posting

Reminder!



OSHA 300A Summary logs must be posted February 1.



They must be up today and left up until April 30



Everything you'd want to know about OSHA - http://www.osha.gov/.

“Gun Control” is Misnamed Try: “Disarm the Victims”

“Gun Control” is Misnamed

Try: “Disarm the Victims”

Every time there is an insane person who shoots innocents, as in Tucson, we are all shocked and saddened. No one wants these acts to continue. People want to do something.

However, you know what they say about good intentions.

With the best of purposes, many misguided leaders have called for stiffer gun control in the wake of the shootings. This occurs each and every time there is newsworthy gun violence. They seldom decry the way the mentally ill are shuffled through the system, and multiple warning signs are ignored. But they often fixate on the instruments of the violence: the guns.

First off, let’s be clear that guns are not good or evil. They are inanimate objects. Contrary to some uninformed souls’ opinions, they never go off by themselves. Like money, they can be used for good or for evil. If an evil wife pays a hit man $5,000.00 to have her husband murdered, no one suggests we ban money. Money, guns, matches and automobiles are all items that can be used for good or evil.

Secondly, it is already illegal for people to use guns for illegal purposes. If the criminals were going to follow the laws, gun violence would not exist anyway. Additional laws further restricting firearms only serve to disarm law-abiding citizens. They are the ones that follow the laws to begin with. My understanding is that criminals, when asked, prefer unarmed victims.

Thirdly, the problem is not too many guns. One could argue that there are too few. How would that shooting have changed if several of the heroic victims had been armed? You know, common sense is about as rare now as fiscal conservatism in government. But, how many times have you heard of a police station being robbed? A donut shop? A hunting camp? A shooting range? What do these have in common? Trained, lawful citizens wearing guns at the ready. That is also why we have armed air marshals flying randomly on our flights, and armed security at many banks.

Oddly, Arizona has liberal gun laws, consistent with the Second Amendment. Many could have been carrying legally that day. Who would have thought that it would bee needed for an event hosted by a grocery store? If we have learned anything by Tucson, let us agree that more trained citizens wearing guns would have actually saved lives. As established, it deters violence on the whole. Further, the guns don’t cause crime anymore than matches cause arson.

If you do not wish to carry, that is fine. Don’t take the illogical position that the government should disarm all victims! If, God forbid, a criminal is ever holding you or your child hostage with a knife at the throat, I suspect you would want the police to come with more than mace and a nightstick to deal with him.

Mr. Peel may be available to address your church or community group. Contact his office through www.PeelLawFirm.com

Non-profit health insurer surpluses: Hearings scheduled for Weds and Thurs

The state House of Representatives and state Senate are holding hearings this week on some of our key bills.

We want to:

1. Limit the rate increases of nonprofit health insurers once they build up a large cash surplus.
2. Make health insurer rate filings public, like Oregon does. Much of the data is now considered a trade secret, meaning we can't release it.
3. Renew our authority -- now set to expire at the end of this year -- to review individual health insurance rates.

The first hearing only includes the surplus bill, HB 1301/SB 5247. It's at 8 a.m. on Wednesday in Hearing Room 4 of the J.A. Cherberg Building, on the capitol campus in Olympia.

The second hearing -- which includes all three bills mentioned above -- is at 10 a.m. on Thursday in Hearing Room B of the John L. O'Brien Building, which is also on the capitol campus in Olympia.

A Tale of Two Domiciles

This month brought interesting news from two neighboring captive domiciles that portend two different paths in the years ahead.

In Tennessee, Governor Bill Haslam appointed Julie McPeak as the new commerce and insurance commissioner. This is big news for the self-insurance world because not only does McPeak understand alternative risk transfer, she has been an advocate for self-insureds and captives in her capacity as an attorney over the past few years.

Before that, she was the chief insurance regulator for the state of Kentucky and directly contributed to the captive insurance industry taking hold in that state.

Several months ago, then candidate Haslam approached Ms. McPeak to solicit her opinion on how the insurance industry could contribute to economic development in that state. She talked-up captives among other initiatives and apparently her input made a positive impression on the soon-to-be governor.

Tennessee can best be described today as a “dormant” captive domicile because it has a captive insurance statute, but no energy or resources have been committed by either the private or public sector to encourage captive formations in that state.

Ms. McPeak’s appointment has the real potential to change this. Work is already underway to update the state’s captive law to make it one of the most progressive and competitive in the country,

With a favorable law (assuming it can be passed through the Legislature) combined with a regulator who is willing to champion alternative risk transfer solutions, the key ingredients are in place to transform this domicile from dormancy to vibrancy.

Now let’s compare and contrast Tennessee with the nearby domicile South Carolina.

As most industry observers know, South Carolina has seen a reversal of fortune over the last several years as a captive insurance domicile. Its rapid growth and success in the early years has been stalled for some time, largely due to the state’s insurance department, which has increasingly been at odds with the captive insurance industry.

Industry leaders pleaded with newly-elected Governor Nikki Haley to appoint a new insurance commissioner who could restore the state’s status as one of the world’s premiere captive domiciles.

Interestingly, Ms. McPeak’s name had been floated last year as a possible candidate who could rescue captives in South Carolina, but it was obviously not to be.

Instead, Government Haley last week named David Black, CEO of Liberty Life Insurance Company to the post.

Now, Mr. Black does have solid business credentials but he is clearly not an altenative market guy, which means there will be a learning curve about captives at a minimum and no guarantee that he will be an advocate.

This latter point is important because it’s not good enough to be just luke warm about captives. The reason for this is that in order for any captive insurance domicile to grow the bureaucracy must be constantly tamed and that takes top-down leadership imposing a vision of true public-private partnership and demanding results.

The bureaucracy inside the South Carolina Department of Insurance is particularly challenging with regard to the captive application and review process, so the leadership demands are particularly acute.

We will soon see if Mr. Black is up to his challenge. Ms. McPeak is certainly up to hers.

This tale of these two domiciles will continue.

Job opening: .NET application developer

We have a project job opening for a .NET application developer at our Tumwater office. The application period closes at 5 p.m. on Thursday.

This position will serve as a senior software developer for the agency, responsible for:

...analyzing system and business requirements, completing assigned coding and development assignments in accordance with defined project timelines and quality expectations, preparing user screen mockup and prototypes, preparing "developer" test cases and performing system testing and data verification. This position will perform this work using .NET programming skills including C#, ASP.NET, ADO.NET, MS SQL stored procedures and triggers.

The position, which is funded by a federal grant related to health care reform, is expected to last until Oct. 15, 2011.

For more, please see the full job listing.

Ordinance or Law Coverage

Sometimes I wake up at night thinking about articles for this blog. I'm surprised that this subject has not been included here yet!



After a loss to your building you may find that local laws and building ordinances increase the cost of reconstruction. Perhaps you will have to add a sprinkler system or add handicap access.



Ordinance or law coverage provides additional insurance to pay for the higher cost of reconstruction due to building codes, laws, or regulations.



The coverage actually has three parts:



Coverage A - Loss to the Undamaged Portion of the Building: Coverage is provided for the value of that part of the building that is undamaged but that must be demolished by order of a governmental authority due to a building code.



Coverage B - Demolition Cost to the Undamaged Portion of the Building: Pays the cost of demolishing and removing the undamaged portion of the building.



Coverage C - Increased Cost of Construction: Pays the increased cost of construction due to law or building codes.



Check with your insurance agent to see what limits you have for this coverage. If your building is over ten years old I would be surprised if there are not at least some building codes you would be affected by.

Washington state fines six Chubb subsidiaries $534,000 for violations

Washington State Insurance Commissioner Mike Kreidler has ordered six subsidiaries of Chubb & Son to pay a $534,000 fine for repeatedly violating state insurance laws.

Federal Insurance Co, Pacific Indemnity Co, Great Northern Insurance Co, Executive Risk Indemnity, Inc.; Vigilant Insurance Company and Northwestern Pacific Indemnity Co. agreed to pay the fine. An additional $534,000 fine was suspended, as long as the companies follow an agreed-to compliance plan that, among other conditions, requires semi-annual self-audits.

In November, Kreidler called for a $534,000 fine and a nine-month suspension of the six companies’ insurance certificates, which would have barred them from writing new coverage during that time period. Under the consent order, there will be no suspension as long as the companies commit no further violations for three years.
“The companies have assured me that compliance is a top priority,” said Kreidler, “and I’m hopeful that this approach will resolve these ongoing problems.”
A key issue was the companies’ repeated failure to properly document the reasons for charging higher or lower rates on certain policies. Exams and audits dating back to 1998 found the same problems cropping up repeatedly. Since 2000, Washington state insurance officials have repeatedly fined Chubb and Chubb subsidiaries, and urged them to fix the problems.

Nonetheless, repeated examinations and a series of company self-audits ordered by Kreidler since 2007 found hundreds of violations of state law, including numerous recent ones. In some cases, more than half the sample files checked had violations.

Fines imposed by the state insurance commissioner’s office do not go to the agency. The money is deposited in the state’s general fund to pay for other state services.

(And here's the link to search disciplinary orders by Washington state's insurance department.)

Locally Shot Movie Truly Moving

“The Grace Card”

I had the opportunity to attend a private preview of a Memphis movie that does not come out in theaters till February 25, 2011.

It is called THE GRACE CARD. It is the very first movie from Graceworks Pictures located right here in Shelby County. Graceworks is the vision of Memphis optometrist Dr. David Evans, who directed and also served as the executive producer of THE GRACE CARD. Calvary Pictures is a ministry of Calvary, a Church of the Nazarene, led by Pastor Lynn Holmes in Cordova.

The church-based moviemaking ministry that spawned Fireproof inspired Memphis' own Calvary Church to make this movie.

It is about two Memphis policemen who have very different backgrounds and beliefs. And they have one other difference—the color of their skin.

Set in present day Memphis, we first see a Caucasian father endure the tragedy of losing a child senselessly. It is clear, as we fast-forward about 17 years; this event shaped him almost exclusively. He is now a Memphis cop that reminded me a lot of the type of cop that the O.J. Simpson defense team made Mark Fuhrman out to be. Angry. Racist. Distant. Bitter.

Then, thanks to a supervisor (played by Shelby County Commissioner, Chris Thomas) this atheistic racist cop is paired with--of all people—an African American part time preacher.

While award-winning actor Louis Gossett, Jr. maybe the only face or name you will recognize in this moving drama, the acting by amateurs is still superb.

There is a transparency in the way the home life of these two men is portrayed that seems so real. It is like you are a fly on the wall of their homes. Troubles with a rebellious teen, struggles with money and the pressure of career plans all are laid bare, with a ring of truth. While the movie earned a PG-13 rating due to its police action, I still believe it to be a family movie suitable for kids several years younger.

But forgiveness and grace are not normal Hollywood commodities. The movies will not have a large release, but neither did similar movies like Facing the Giants and Fireproof. If you want to see if it is near you, see the website at www.TheGraceCardMovie.com.

If you don't see your town on the list, contact actionsquads@providentfilms.org to help bring the theater to your town.

Grace is not easy and it is not cheap, though desired by us all. Living here in Shelby County, we know how often the so-called “race card” is played…What about playing a “Grace Card?”

You won’t regret it.

Insurance Matters: Property Insurance Issues Part 1

My January column for CU Management:



You’d think that the coverage on your credit union’s buildings and business property would be pretty straightforward. It’s a place I see plenty of problems, though.



This and the next few installments of this column will focus on credit union property insurance, where I’ll pose the issues as questions you can put to your agent.



Do we have replacement cost coverage?



There are two ways most insurance policies value property:



1) Replacement cost is the cost to buy the lost item new. It’s the cost to rebuild the building with current cost of materials and the current cost of labor. It’s the cost to buy a new computer that is stolen.



2) Actual cash value is usually defined as replacement cost minus depreciation. It also can be thought of as the market value of an item. ACV is always less than replacement cost.



Whole Article Here

Noteworthy Email on Nursing Homes

Received this the other day and want to share:

Here's the way it really should be:

Let's put the seniors in jail and the criminals in nursing homes.

This would correct two things in one motion:

Seniors in jail would have access to showers, hobbies and walks.

They would receive unlimited free prescriptions, dental and medical

Treatment, wheel chairs, etc.

They would receive money instead of having to pay it out.

They would have constant video montering, so they would be helped

instantly... If they fell or needed assistance.

Bedding would be washed twice a week and all clothing would be ironed

and returned to them.

A guard would check on them every 20 minutes.

All meals and snacks would be brought to them.

They would have family visits in a suite built for that purpose.

They would have access to a library, weight/fitness room, spiritual

counseling, a pool and education...and free admission to in-house

concerts by nationally recognized entertainment artists.

Simple clothing - I.e.. Shoes, slippers, pj's - and legal aid would be

free, upon request.

There would be private, secure rooms provided for all with an outdoor

exercise yard complete with gardens.

Each senior would have a P.C., T.V., phone and radio in their room at no

cost.

They would receive daily phone calls.

There would be a board of directors to hear any complaints and the ACLU

would fight for their rights and protection.

The guards would have a code of conduct to be strictly adhered to, with

attorneys available, at no charge to protect the seniors and their

families from abuse or neglect.

As for the criminals in the nursing homes:

They would receive cold food.

They would be left alone and unsupervised.

They would receive showers once a week.

They would live in tiny rooms, for which they would have to pay $5,000

per month.

They would have no hope of ever getting out.

"Sounds like justice to me!"

Appeals Court holds arbitrator exceeded authority in ruling underinsurance claim premature until third-party claim resolved

In 2001 Dorcas Weiner was involved in two separate car accidents. She sought underinsured motorist coverage from Commerce for both accidents. Those claims were consolidated and went to arbitration as required by the standard Massachusetts automobile insurance policy.

The arbitrator held that the compensation Weiner received from the other driver in the first accident was sufficient to cover her losses from that accident. He held that arbitration was premature as to the second accident because the claim against the other driver in that accident had not been resolved.

Weiner and her husband won a motion in Superior Court to vacate the arbitration award, on the ground that the arbitrator had exceeded his authority in deciding that arbitration for the second accident was premature.

The case was arbitrated again with a new arbitrator. The second arbitrator awarded damages for both accidents, and that award was confirmed by the Superior Court. Commerce appealed, arguing that the first arbitration award should not have been vacated and that the matter should have been submitted for reconsideration to the first arbitrator.

In Weiner v. Commerce Ins. Co., 78 Mass. App. Ct. 563 (2011), the Appeals Court affirmed.

The court held that the first arbitrator plainly erred when he concluded that the claim for the second accident was premature, because it is well settled that an insurer must arbitrate an underinsurance claim regardless of the pendency of a third-party claim. The arbitrator made clear an intention to rely on the damages award in the third-party claim, but the policy required damages to be determined by the arbitrator. He thereby exceeded his authority.

The Appeals Court also held that the Superior Court judge was allowed by statute to appoint the second arbitrator to determine the claim.

Kreidler responds to health reform repeal efforts

On the eve of the first vote to repeal health reform, Commissioner Kreidler joined Gov. Chris Gregoire in a letter to the Washington delegation, touting the progress made to date and their willingness to enhance the Affordable Care Act where it falls short. They called out several new consumer protections already benefiting our family, friends and neighbors:

• Children with significant health care needs cannot be turned away by insurance plans.
  
• Young adults can stay on their parents' health plan until age 26.
  
• No more cost sharing for preventive service, including cancer screenings and immunizations.
  
• People with pre-existing conditions who've been uninsured for at least six months can get health insurance through the new federally-funded Pre-existing Condition Insurance Plan.
  
• Small businesses that offer their employees health insurance can qualify for tax credits.

In a news release issued by the Washington Public Interest Rearch Group yesterday, Kreidler said, “Putting politics aside, our current health insurance system is unsustainable. Washington families and businesses are hurting. They contact my office every day, calling for help, because they can’t find insurance or afford the coverage they have. The new reforms just starting to take effect will help, but we need the full reforms coming in 2014. Any effort to repeal health reform now is short-sighted and will only harm consumers.”

Both Kreidler and Gregoire admit in their letter to the delegation that the Affordable Care Act may not be perfect, but they make the argument that repealing it - and all of the work that has been done to date to implement the reforms - would be a giant step backwards for our state and nation.

State Claim Guidelines

Claims Magazine has compiled a list of state specific claims laws. Learn what your state requires your insurance company to do.



Go Here

Law School in Just Five Minutes!

Dave’s Five Minute Law School

If you are from my generation, or before, you are officially old enough to remember when Saturday Night Live was actually funny. Names come to mind like Dan Aykroyd, John Belushi, Gilda Radner, Chevy Chase, Jane Curtin, Laraine Newman, and Garrett Morris. There is one other character that comes to mind: Father Guido Sarducci. Comedian Don Novello played the unlikely chain-smoking priest with tinted eyeglasses, who always had a different take on things.

Father Sarducci’s most famous skit was the “Five Minute University.” As I recall, a study had come out back then and concluded that a four year degree, some five years following graduation, only results in the memory of about five minutes of information. He reasoned then, that he could just open a “Five Minute University.” It would only cost $20.00.

The Five Minute College curriculum was simple:

Spanish: “Como esta Usted. ““Muy bien.” (“How are you? ““Very good.”)

Theology: “God is everywhere.”

Business: “Buy it cheap, sell it for more.”

Spring Break: Sun lamp for 20 second and a glass of orange juice.

Economics: “Supply and demand.”

This famous skit (preserved for us all on YouTube.com) ends with the joke that he might open a Law School next door. “You got another minute?” he asks playfully.

So, carrying the torch, I will attempt to pick up where he left off:

Dave’s Five Minute Law School

Orientation: “Look at the persons to your right and left…one of you three will not be here at graduation.” (Yes, they really say that).

Contracts: “Offer + acceptance + consideration = a Contract.”

Torts: “A hurts B, B wants money. B must prove A’s breach of reasonable care was the proximate cause of B’s injuries.”

(It is desirable that A has a large insurance policy).

Civil Procedure: “’Jurisdiction’ tells what type of court hears what case, and ‘venue’ tells which one of those courthouses to pick.”

Criminal Law: “A Latin phrase ‘mens rea’ = ‘guilty mind.’ Most crimes require the act (‘actus reus’) be done intentionally, or at least knowingly.”

Property Law: “The best way to own property is outright, and that is called a ‘Fee Simple Absolute.’”

Constitutional Law: “The Supreme Court determines what is constitutional. Most people think they are right about half the time. Most people disagree on what half.”

Commercial Paper: “Yes, even if the sectional couch falls apart, you still have to pay the ‘Holder in Due Course’ all the monthly notes because the Furniture Store sold them your finance contract when you did that great ‘No payments for 12 months deal.’”

Decedents’ Estates: (Also known as “Gifts & Stiffs.”) There is something called the ‘Rule Against Perpetuities.’ Don’t violate it! Also, for the love of all that is good and Holy, get a Will done!” (Everyone dies.)

Ethics: “Avoid even the appearance of impropriety.”

Tax: “Pay your taxes.” (Hire a good CPA so you don’t screw it up.)

Environmental Law: “If your clients dump acid in a river, he gets fined, and sued in tort.”

Employment Law: “Make your clients have a good, non-discriminatory reason to fire their employees and make sure they document their file before termination.”

Business Law: “Bow when you meet your Chinese clients.”

Evidence: “Object when anything hurts you at trial, decrying it as ‘hearsay.’ Your fellow law school graduate can’t remember all 18 exceptions to that rule either.”

Family Law: “Either don’t get married, or don’t ever get divorced. Custody of children is to be determined by the so-called ’best interest of the child.’ Of course, the best interest of the child is actually served by being raised securely with mature, loving and selfless Mommies and Daddies who do not get drunk and have affairs, but this phenomenon provides no fodder for divorce lawyers.”

Congratulations on your graduation! Now, if Father Guido Sarducci was to summarize all we can now recall from grades 1-12, I fear it may not even equate to a Five Minute University. It may be a Drive Thru University.

Hey, now there's an idea!

___________________________

See more of Mr. Peel’s articles on insurance-coveragelaw.blogspot.com. Mr. Peel may be available to speak to your church or club. Contact PeelLawFirm.com.

New 2011 open-enrollment periods announced for kids

The individual health insurance market will have two special open-enrollment periods for children this year. Parents who want to add their children to their individual health plans or buy child-only plans can do so from March 15 to April 30, 2011 and from Sept. 15 to Oct. 31, 2011.

Commissioner Kreidler created the open-enrollment periods through a regulation filed today. The individual health insurance market is for people who do not have access to employer-sponsored health insurance.

New consumer protections under the federal Affordable Care Act prevent health insurers from denying coverage to children with pre-existing health conditions. However, special open-enrollment periods are allowed.

During open-enrollment times, children under age 19 cannot be denied health insurance because of a pre-existing condition. People looking for coverage for their children outside of the enrollment dates can apply either to the Washington State Health Insurance Pool (WSHIP), or if they qualify, to the new Pre-existing Condition Insurance Plan (PCIP-WA). To enroll in PCIP-WA, you must have been uninsured for at least six months and have a pre-existing medical condition.

Exceptions where parents can apply for individual coverage for their kids anytime include the birth or adoption of a child or if a child or the parent:

• Is no longer eligible for a state program.
• Loses coverage due to a divorce.
• Loses employer-sponsored coverage.
• Moves and their plan is not available where they live.

In 2014, when the full health reforms take effect, no one of any age can be denied insurance because of a pre-existing condition.

Anyone with questions about the individual health insurance market is encouraged to call our Insurance Consumer Hotline at 1-800-562-6900.

Insurers fined more than $580,000 in Washington in 2010

In 2010, we issued more than $580,000 in fines against insurers for a variety of violations, including illegal phone solicitation and overcharging customers.

The Doctor's Company, of Napa, Calif., for example, was fined $104,200 -- with $50,000 suspended -- for failing to file insurance rates with us prior to using those rates.

Metropolitan Casualty Insurance Co., of Warwick, R.I., and several related entities were fined $45,000 with $20,000 suspended after an examination found numerous problems with insurance documentation. Among the problems: $190,704 in overcharges to senior citizens. (The company also refunded the money to the affected policyholders.)

The point of the fines is to ensure that insurers follow the rules. This protects consumers and preserves a fair marketplace.

We should probably also point out that the money doesn't go to our agency. It's deposited in the state's general fund to pay for other state services. In 2009, fines totaled $407,600. A year earlier, the total was more than $1.2 million.

Here's a link to a list of our enforcement actions over the past six months.

And to search more than a decade's worth of past orders and fines -- including violations by agents and brokers -- check out this online lookup tool we built.

Superior court holds that insurer's mistaken belief that one policy period applies does not estop it from recovery under the correct policy period

Jacob Hanks suffered brain damage as a result of complications during his birth at UMass Medical Memorial Center, an affiliate of UMMHC. For some reason his parents filed three separate actions against UMMHC personnel in three different years. Those claims settled for $4.9 million. Defense costs totalled $1,034,140.

UMMHC had claims-made insurance policies. Its primary provider was CPAC, a captive insurer of UMMHC. UMHHC's excess policies were with other carriers.

In a claims made policy the policy providing coverage is the one in effect when the insurer was notified of the claim. (This is in contrast to an occurrence policy, in which the policy providing coverage is the one in effect when the underlying incident occurred.)

While the lawsuits were pending, UMMHC believed it had given notice of the claim to the excess insurers during the 2003-2004 policy period, when the CPAC policy had a limit of $5 million. It later came to light that the excess carriers may have been notified in the 2001-2002 policy period, when the policy limit was $2.5 million.

UMMHC then sued the excess carriers to recover the additional $2.5 million, the difference between the underlying limits of the two policy years.

In UMass Memorial Health Care, Inc. v. Lexington Ins. Co., 2010 WL 5071868 (Mass. Super.) the Massachusetts Superior Court ruled on the motion for summary judgment of excess carrier First Specialty.

First Specialty argued that UMMHC had suffered no loss within the meaning of the policies because between CPAC and the excess carriers it actually received more than the loss amount.

UMMHC responded that amounts paid by CPAC are not a recovery by UMMHC, because UMMHC funds CPAC itself and is essentially self-insured.

The court held that under the language of the policy, whether loss below the excess policy was paid by a captive insurer, self-insurance, or a regular insurer was irrelevant.

The court held, however, that indemnity under an underlying policy is not a recovery for the purposes of determining UMMHC's loss, because doing so would count the same amount twice -- first as the underlying policy limit and then as a recovery.

It also held that UMMHC did not "elect" to use the later policy period; it merely made a claim under the policy it believed applied. In fact, the earlier policy applied, and First Specialty's obligations needed to be determined under that policy.

Job opening: Staff attorney

We're trying to fill a staff attorney position in our Tumwater office. (We're the state agency that regulates the insurance industry in Washington state.)

The person will provide legal advice to agency staff, handle enforcement matters, and participate in the drafting of legislation and regulations, among other duties. Some travel is expected for witness interviews and to work with other insurance regulators.

The application period will be open until the position is filled. For more details, including salary, benefits, and qualifications, please see the full job listing.

Loss Control - Water, Hot Spots, Insects and Pests

I'm catching up on my reading... November issue of Best Review (AM Best Company) - article by Scott Spencer on the hidden problems that can lurk in buildings - problems that become evident over time, but by then it is way too late.



(Unfortunately the article is available to subscribers only. Bad on you AM Best!)



Spencer discusses electrical problems, water intrusion and infestation.



Hot spots in the electrical system develop as insulation deteriorates, nails penetrate electrical boxes, and screws loosen-up. Eventually there is a fire or a short.



Water intrusion comes from slow plumbing leaks and small roof leaks. Over time decay sets in and, perhaps mold.



Infestation can be from insects or rodents.



These are not issues I had spent much time thinking on. I should. You should too.



I'm calling a pest control company today and have asked my insurance agent if my insurance company offers risk control services for electrical and plumbing issues.

Why we're proposing legislation to limit the surpluses of non-profit health insurers

Among our legislative proposals this year: a bill to limit non-profit health insurers' rate hikes once the company's surplus funds grow above a certain level.

It would allow the insurers a substantial cushion of cash for unforeseen emergencies, but also help keep premiums from growing any more than absolutely necessary.

The background: Insurers, by the nature of their business, collect and invest substantial amounts of money. They need to do this, in order to pay out claims. They have to comply with solvency regulations designed to ensure that the company can make good on its promises to policyholders. If that's in doubt, we can take the company over and try to rehabilitate them so that policyholders and medical providers are protected.

But at this point, the state's three major non-profit health insurers (Regence, Premera, and Group Health) have large surpluses that have grown dramatically over the past 8 years. Together, they have more than $2 billion more than they expect to pay out in claims. At the same time -- this will come as news to no one -- health insurance rates have grown dramatically.

So we're seeking the explicit authority to consider surpluses -- and investment income -- when reviewing proposed rates.

Here's what those surpluses look like. (Capital and surplus means the balance of assets after making provisions for the payment of claims):

 

Our proposal would work like this: Once an insurer has enough to pay its expected claims plus an extra three months of average claims, we would not approve a rate that adds more to the surplus. (An exception could be granted, however, if the restriction would threaten an insurer's financial health.)

The three insurers listed above have surpluses equal to 4-5 months of claims each. They'd still have a substantial cash cushion in case of unforeseen costs, but we believe our proposal would also help keep premiums down.

The proposal would affect the lines of insurance over which we have the authority to review rates: individual and small group coverage.

The legislative session begins next week. Stay tuned.

Does Your Dog Bite?

In 2003 there were 17,000 dog bite claims submitted to insurers at an average cost of $19,000.



In 2009 claims were 16,600 at an average cost of almost $25,000.



Dog bites account for 1/3 of all homeowner insurance liability claims.



State Farm paid out over $90,000,000 in claims in 2009.



(From Best's Review Nov, 2010)



Can we say this another way? One third of the cost of personal liability insurance is due to dog bite claims. Is it really fair to charge everyone for the cost of these claims?



Why not a no-dog discount or a big-dog surcharge?

Threshold

Tyrell v. Bruce, [2010] O.J. No. 5245 (S.C.J.).

The defendants brought a motion alleging that the plaintiff failed to meet the threshold pursuant to section 267.5(5) of the Insurance Act.

The plaintiff was taken to hospital the night of the accident and released. He did not see his family doctor for 2 months. He continued taking courses at college and worked a telemarketing job and at a convenience store for a period of time. Over the years, he saw several health care providers and reported to them complaints of pain in his head, neck, shoulders, back, legs, knees and ankles. Various x-rays and MRIs showed no other evidence of injury other than soft tissue strain and sprain. The court held that most of the medical evidence relied on subjective reporting by the plaintiff, and the plaintiff was not a believable person. The plaintiff recorded four rap music videos which had been placed on YouTube which showed him able to walk and move about without difficulty. His explanation was that it was a good day for him.

The court found that the plaintiff claimed to be injured when it suited him; for example, when he was receiving Ontario Disability Support Program Benefits. On the other hand, when he ran into a legal problem with the criminal justice system he got a letter from the health care provider to say that he was financially independent and working.

The court held that the plaintiff had not proven on a balance of probabilities that he had a permanent, serious impairment of an important physical, mental or psychological function.

Credibility of the plaintiff is extremely important. Tyrell shows that presenting facts from a variety of sources, such as medical records, social services records, social networking and the internet can go a long way in assisting the defence.

Appellate Division holds that Medpay does not create a right to double recovery

Bernadette Lawton was in an automobile accident. Her auto insurer, Hanover, paid $2,000 in medical expenses under PIP. Her health insurer, Blue Cross, paid her remaining medical bills.

Lawton then sought $5,000 in medpay benefits from Hanover - as reimbursement for medical bills that had already been paid by Blue Cross.

In Lawton v. Hanover Ins. Co., 2010 WL 5238623 (Mass. App. Div.), the Massachusetts Appellate Division held that Lawton was not entitled to the medpay benefits: "Lawton's argument is inconsistent with both a rational construction of the standard automobile policy and the compensatory character of insurance proceeds."

2011 In ObamaCare

Here's a listing and commentary from Forbes on what's happening in ObamaCare this year.

Policy Renewal Decision Process

A few weeks ago I started playing around with a graphical representation of the policy expiration decision. I started with renew or bid as the options.



This weekend I had the "head-slapper" revelation - renew, bid, or broker selection.



Here is the latest version - subject to change as my thinking evolves. Comments encouraged.



I'm working on a paper that will explain in detail my thoughts on the process. More soon.

The Simmonds' Business Insurance Index™ For January, 2011

Here's my read of the current marketplace for upcoming business insurance renewals:



Renewal Premiums: -5%

Renewal Coverages: Liberal Terms

Buyer's Outlook: Long-Term: Prices Flat - Soft Market Continues



There is no change in sight for a move from the current insurance buyer's market. We have supply and demand to thank. Simple as that. The capital / capacity in the insurance business continues to exceed demand. The soft economy and investors have created an environment where there is too much insurance chasing the policies being purchased. Supply outstrips demand - prices drop. As an enticement to policy buyers, insurers continue to offer broad terms and coverage.



Yea for the insurance buyer!



I continue to see insureds who are saving 40% in bid situations where the insured has not bid their coverage in over 5 years - it happened three times in December. My 5% reduction in the index is an average for accounts that have been into the marketplace in the recent past.



I repeat...



--Bid your insurance every 3 years

--Work to make your business an exceptional risk

--Be sure you have a great insurance agent

--Negotiate your renewals for better pricing and better coverage





Go HERE for my comments from past months.