Insurance Litigation Law Blog | Regulatory Law | Bad Faith | California | Lawyer | Attorney | Barger & Wolen

By Michael L. Rosenfield and Suh Choi

The California Legislature has introduced Assembly Bill 2160. It would prohibit California domestic insurers from treating indirect Iran-related investments (as defined in the bill) as admitted assets. The bill was just introduced on February 23rd and may be heard in committee on March 25th.

Issues relating to Iran-related investments date back to efforts in 2009 by then Commissioner Steve Poizner to police insurance companies who had investments in firms doing business in Iran.  His efforts were challenged by a number of insurance trade associations and were eventually ruled an “underground regulation” by the California Office of Administrative Law. Poizner filed a lawsuit challenging the OAL determination.

Current Commissioner Dave Jones and a group of insurers recently settled the litigation. Under the terms of the settlement, Jones retains the power to independently review and publicize the names of insurers with Iran investments. The Commissioner also retains the power to make public a list of businesses directly engaged in the Iranian nuclear, military or energy sectors.  Under the settlement, however, insurers will no longer be required to file quarterly reports regarding their Iran-related investments. While the settlement prevents the Commissioner from declaring the Iran-related investments to be non-admitted assets, the proposed Legislation would.

For further information, please contact Michael Rosenfield (213-614-7321 or mrosenfield@bargerwolen.com) or Suh Choi (213-614-7374 or schoi@bargerwolen.com).

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by Michael Rosenfield & Dennis Quinn

The New York Department of Financial Services (“DFS”) will audit the accuracy of the data used by insurers and health maintenance organizations to request health insurance rate increases (see press release). 

In connection therewith, health insurers must submit their rate increase proposals to the DFS for “prior approval.” The DFS can approve, reduce or reject the requests.

The audits will, among other things, allow the regulators to:

1. ascertain if insurers are accurately allocating administrative costs and producer commissions;
2. ensure that insurers have proper controls and oversight in place to make certain that data is reliable and accurate; and
3. assist in identifying areas where action can be taken to help control costs.

The DFS will conduct on-site audits of health insurers and HMOs selling health insurance plans regulated by the state – employer, small group and individual policies.

The DFS has announced that:

[t]he audits will review selected rate requests that have already been filed. Insurers will not know beforehand whether their proposals will be the subject of an audit. Data regarding claims, insurer administrative expenses, premiums and claims reserves will be examined. The Department will hire a private accounting firm to assist DFS personnel in conducting the audits.”

For further information, please contact Michael Rosenfield at 213-614-7321 | mrosenfield@bargerwolen.com, or Dennis Quinn at 212-655-3878 | dquinn@bargerwolen.com.

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By Michael Rosenfield and Chris Burusco

Prior to the Dodd-Frank Act, California Insurance Code § 1011(c) required all California-admitted insurers to obtain prior approval from the California Department of Insurance for any reinsurance transaction that exceeded a 50% or 75% threshold.  

In other words, even if each insurer that was a party to the reinsurance agreement was only licensed in California and was domiciled elsewhere, § 1011(c) approval was nonetheless required.

On its face, the Dodd-Frank Act appears to preempt those California approval requirements as they pertain to reinsurance transactions involving only foreign insurers. 

The CDI appeared to acknowledge this preemptive effect in CDI Bulletin No. 2011-2 when the CDI stated that it:

will not exercise its discretion to conserve a non-domestic insurer for failure to obtain prior consent to such reinsurance transactions."

In the CDI’s view, however, assumption reinsurance transactions do not fall within the category of Dodd-Frank preempted reinsurance transactions. 

The CDI has confirmed to us that it does not view assumption reinsurance to be a true “reinsurance” transaction, but rather a “purchase” or “sale.” Moreover, assumption reinsurance transactions are expressly included within the definition of “sale” and “purchase” in California’s Reinsurance Oversight Regulations.

Accordingly, California-admitted insurers domiciled outside California appear, at least in the CDI’s view, to remain subject to the prior approval requirements of § 1011(c) with respect to any sale or purchase transaction (including a sale or purchase involving assumption reinsurance) that exceeds the regulatory specified thresholds.

For further information, please contact Michael Rosenfield at mrosenfield@bargerwolen.com | (213) 614-7321 or Chris Burusco at cburusco@bargerwolen.com | (213) 614-7332.

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by Michael Rosenfield & Dennis Quinn

Insurance regulators across the nation from time-to-time focus their efforts on pursuing the joint investigation of a legal issue (e.g., brokers’ fees or title insurance matters) that is perceived by the regulators as representing an industry-wide compliance problem that is common to all states.

The latest subject of such a multi-jurisdiction investigation targets life insurance settlements. Regulators are in the midst of an extensive investigation and prosecution of life insurers’ practices with respect to the payment and settlement of life benefits.

The California Department of Insurance has just announced that it has negotiated a $17 million multi-state Regulatory Settlement Agreement with Prudential Insurance Company of America.

The settlement relates to Prudential’s alleged failure to pay benefits “even though they had knowledge of policyholder deaths from the Death Master file.” 

The settlement stems from a joint examination of Prudential’s settlement practices that was undertaken by a number of jurisdictions, including California, Florida, Illinois, New Hampshire, New Jersey, North Dakota and Pennsylvania. 

State insurance regulators have taken the position that life insurers are required by law to monitor the United States Social Security Administration’s Death Master File and other databases on a regular basis to ensure that beneficiaries receive prompt payment of their contract benefits when the holder of a life insurance policy or annuity dies. It is our understanding that similar settlements are to follow from the Florida Office of Insurance Regulation. 

In connection with the settlement, Prudential is required, among other things, to:

• Revise its business practices to better utilize the Death Master File.
• Return monies promptly to beneficiaries when located through revised search efforts.
• Report funds to the Unclaimed Property Bureau of the appropriate state when a beneficiary cannot be located after a thorough search.
• Provide quarterly reports to regulators for the next three years.

We are advising a number of life insurers related to their efforts to revise their settlement practices to comply with these developments. That includes responding to regulatory inquiries, developing records review procedures, conducting records reviews and handling benefit settlements and payments strategies.

If you have any questions or require any additional information, please contact Michael Rosenfield at mrosenfield@bargerwolen.com | (213) 614-7321 or Dennis C. Quinn at dquinn@bargerwolen.com | (212) 553-8121.

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