Category: Insurance Law

Europeans Seeking Reinsurance Solvency again!

Solvency II is the updated set of regulatory requirements for insurance firms that operate in the European Union.

Based on this new European regime, Aon Benfield  reports in a press release [November 4, 2010]  that the formulas for calculating natural catastrophe capital requirements under the proposed Solvency II Standard Formula are outdated and ignore 15 years of evolution in the field of risk modeling. In response they are offering a suite of services to help re/insurers [game the system] make the most of the catastrophe requirements.

The basic calculation methodology being used under Solvency II overlooks these key aspects of risk and data modeling says Aon:

  • Location granularity (CRESTA zone data is insufficient)
  • No differentiation by occupancy (residential, commercial or industrial) or construction, age and height
  • Single damage function so no differentiation between buildings, contents and business interruption cover
  • No application of limits and deductibles

Unrelated to any of the above, it was released today [November 10. 2010] that:

Andrew Appel, chief operating officer of global broker Aon, will leave the company at year-end.

One should always endeavor to make the innocuous seem conspiratorial.  Of course one might argue that in the someone opaque world of global reinsurance the conspiratorial is at least mundane if not exactly innocuous.

A mind is like a parachute. If it doesn’t open, you’re f#@%*d!

If you’ve wondered why there are differing perspectives about the factual basis of litigation, find the cord to your parachute and open your mind to Harvard Law’s Project on Law and Mind Sciences and situationism.

Situationism is premised on the social scientific insight that the naïve psychology—that is, the highly simplified, affirming, and widely held model for understanding human thinking and behavior—on which our laws and institutions are based is largely wrong. Situationists (including critical realists, behavioral realists, and related neo-realists) seek first to establish a view of the human animal that is as realistic as possible before turning to legal theory or policy. To do so, situationists rely on the insights of scientific disciplines devoted to understanding how humans make sense of their world—including social psychology, social cognition, cognitive neuroscience, and related disciplines…

SLABBED reflects a situationist perspective and even touches on the subject in posts such as:

Recommended holiday (half-time) reading includes the blog post, On the Ethical Obligations of Lawyers: Are We Snakes? Are We Supposed to Be?, and the following readings from Continue reading “A mind is like a parachute. If it doesn’t open, you’re f#@%*d!”

$1.3 million reinsurance price fixing settlement announced

Attorney General Richard Blumenthal…announced a $1.3 million settlement with The Hartford Financial Services Group, Inc., resolving claims that it participated in several anticompetitive schemes that illegally inflated insurance and reinsurance costs nationwide. h/t Insurance and Law

The Hartford and Guy Carpenter have a different spin on the story.  Naturally.

A spokesman for The Hartford said in a statement by e-mail, “We are pleased to have come to an agreement with the attorney general’s office. The Hartford has been out of the property and casualty reinsurance business since 2003, and we agreed to this settlement to avoid ongoing expenses related to the case.

“We believe our participation in the reinsurance facilities was lawful. We settled to avoid the costs of litigating with the attorney general over a business that The Hartford exited years ago.”

In an e-mail response to the attorney general’s accusations a spokesperson for Guy Carpenter said, “Guy Carpenter shares the view expressed earlier today in a statement made by The Hartford that: participation in these reinsurance facilities was, and is, lawful.

“Guy Carpenter continues to believe that the Connecticut Attorney General’s complaint is unfounded. These facilities result in improved terms and pricing of reinsurance for small- and mid-sized clients.”

Back now to Attorney General Blumenthal’s release:

“The Hartford is making history by this first-in-the-nation settlement—and drawing back the cloak of secrecy of a series of illegal price-fixing conspiracies that inflated insurance costs by hundreds of millions of dollars nationwide at the expense of 170 insurance companies and their customers,” Mr. Blumenthal said. Continue reading “$1.3 million reinsurance price fixing settlement announced”

Companies that live in a glass house should not throw key performance indicators at glass shops.

First, the “glass house” – Insurance Agents and Brokers Fined for Accepting Kickbacks: Accused of Accepting Gifts to Steer Customers to Specific Auto Glass Shops:

Forty-three insurance agents and brokers have been fined a total of $42,650 for accepting kickbacks, or failing to supervise staff who accepted kickbacks, to steer customers to certain auto glass repair shops, New York Insurance Superintendent James Wrynn announced Friday.

The agents and brokers work at more than two dozen different insurance agencies in Western and Central New York. They are accused of accepting gift cards in return for recommending two specific glass shops to auto insurance customers who had filed claims to have their vehicles repaired.

State law prohibits insurance agents and brokers from accepting payments to steer their customers to specific auto repair shops…

…and, the moral of that story is…in Mississippi it would be a “federal crime”…just ask former Judge Bobby DeLaughter.

Lester said the investigation was begun when Bison Glass, which operates throughout Western New York, contacted the Insurance Department and said it was discontinuing the practice because it could no longer afford to make the payments. A second glass repairer, Pat’s Glass Inc., which had operated in Wyoming County, provided additional information after it went out of business.

The fines – ranging in amounts from $250 to $5,000 — followed an investigation by the New York State Insurance Department…

There are at least two ways to resolve the problem.  One comes at no cost.  Insurance companies could stop taking kick backs.  Duh! Likely, the cost of repairing glass would go down without the cost of kickbacks added.

The other solution would be to come up with some sort of program to cover up the lack of integrity in the industry.  Naturally, the good hand in a boxing glove would be the first out with such a program.

Allstate Insurance announced last week that it will begin recording and tracking a Continue reading “Companies that live in a glass house should not throw key performance indicators at glass shops.”

The Price We Pay For “Pro-Business” Courts

As I’ve said in prior posts, I firmly believe Americans can no longer claim we’re “a government of laws not of men” as John Adams, our 2nd US President once pronounced. Adams’ words came to epitomize the venerable “rule of law” in America. In his era, the critical debate was “rule of law” vs. “rule of man.” The prospect that America might become “a government of men not of laws,” is exactly what Adams and our founders feared most, and warned us to stay away from. In their day, “rule of man” referred to the British King George III, who . . . well, just take a look for yourself:

In 1776, the year of our Declaration of Independence, Thomas Paine anonymously wrote a pamphlet titled Common Sense which stated: “in America, the law is king. For as in absolute governments the King is law, so in free countries the law ought to be king; and there ought to be no other.” Adams, a contemporary of Paine, expounded on Paine’s Common Sense, and made sure the Massachusetts Constitution of 1780 included the words “a government of laws not of men.”

In Adams’ and Paine’s day, the King was law, and he served no one except himself. Today, billionaire monopolies are the “King makers.” By purchasing our legislatures, individual judges and elected officials, they bastardize “the rule of law.” Their aim is make America a government of men, not law. This is what happens every day in Latin America, and why we call them “third world.” If we acquiesce, and accept their bastardization of America’s founding premise, we’re right back where we started in 1776. Put another way:

we cannot let this ↓ Continue reading “The Price We Pay For “Pro-Business” Courts”

Chip Merlin asks Why is the property insurance industry against its own customers?

Many of my retail corporate clients and their general counsel have told me that if they advertised and then performed in the manner of their insurer, the federal and state trade commissions would be holding “bait and switch” hearings. But, this is exactly the type of treatment insurance executives are calling for when they support the propaganda against their own customers through spokespersons such as Hartwig.

I am not the only one to have noticed this…The editors of Slabbed were pretty blunt about what they think about Hartwig.

Chip linked two recent SLABBED posts –  Bam Bam’s The Push Back on Corban – “You’re gonna pay for this” and Sop’s Da Corban spin continues: AIA prefers denial while the National Underwriter carries III press release calling it news – and added his thoughts as he raised the question Why Is the Property Insurance Industry Against Its Own Customers?

The response by Robert Hartwig of the Insurance Information Institute to the landmark Corban decision typifies how executives at many insurance companies feel about their customers. If not, Hartwick would be out of a job. Here is his quote taken from Anita Lee’s article: Continue reading “Chip Merlin asks Why is the property insurance industry against its own customers?”

Judge Senter applies Corban, issues trio of Orders in Bossier v State Farm

Attention now turns to several dispositive motions filed by Plaintiff concerning [77] the issue of the anti-concurrent cause clause in the subject insurance policy; [79] the issue of windstorm; [82] the dwelling extension coverage; and [83] “accidental direct physical loss” suffered by Plaintiff.

At the time these motions were filed, some of the issues were the subjects of an appeal to the Mississippi Supreme Court, Corban v. United Services Automobile Assoc…; the Supreme Court issued an opinion on October 8, 2009, and rejected the principal conclusions reached by the United States Court of Appeals of the Fifth Circuit in Tuepker v. State Farm Fire & Casualty Co…and Leonard v. Nationwide Mutual Insurance Co… However, that does not mean that Plaintiff is entitled to the requested relief.

In addressing Bossier’s dispositive motions, one of the three Orders he issued in Bossier v State Farm last Friday, Judge Senter enters the conversation on the impact Corban will have on the remaining policyholder claims in litigation.

While the Mississippi Supreme Court did not agree with the Fifth Circuit’s interpretation of the anti-concurrent cause clause found in homeowner insurance policies, especially with respect to the “in any sequence” portion of the provision, the decision did not change the essence of this Court’s approach regarding the meaning and–for practical purposes–inapplicability of the anti-concurrent language.

The Mississippi Supreme Court expressly adopted this Court’s analysis in Dickinson v. Nationwide Mutual Fire Insurance Co…Now that the Mississippi Supreme Court has issued its decision, this Court sees no reason to delay trial, for the intention to follow Dickinson and the interpretation of the anti-concurrent cause language has been consistently clear and has merely been affirmed by Corban.

The Mississippi Supreme Court did not go as far as Continue reading “Judge Senter applies Corban, issues trio of Orders in Bossier v State Farm”

Da Corban spin continues: AIA prefers denial while the National Underwriter carries III press release calling it news

Robert Hartwig isn’t the only prostitute (I mean shill) who will say or do anything (and I mean anything) for the right amount of money. Not to be left out and preferring denial over Hartwiggian threats the AIA issued the following press release: (Nowdy isn’t it about time we got some more hits out of Montana on my post about former Bush Groupie Marc Racicot)

The decision issued yesterday in the case of Corban v. USAA by the Mississippi Supreme Court confirms that the water damage exclusion and anti-concurrent causation (ACC) clause – two key issues in Hurricane Katrina litigation — are valid provisions of the insurance contract and will continue to be important to insurers in adjusting wind versus water claims, says the American Insurance Association (AIA).

“First, and most importantly, the Corban decision reaffirms the longstanding flood exclusion provision found in most homeowners’ insurance policies, that expressly excludes coverage for hurricane driven water (or storm surge),” said James Whittle, AIA Assistant General Counsel. “The water damage or flood exclusion has now withstood every post-Katrina court challenge, and remains a part of regulator-approved insurance contracts throughout the country.” .

“Second, the court upheld the use of the ACC clause that was at issue before the court,” said Whittle. “With this ruling the court has provided meaningful guidance to consumers and insurers. Nothing in this decision changes the important role that insurers play in recovery by adjusting claims according to their contracts with policyholders.”

Meantime the National Underwriter has emerged from their months long Corban slumber carrying a III / AIA press release billed as a news story. While I don’t necessarily buy into James’ harsh critique of Anita Lee’s report on Corban it is worth pointing out Anita Continue reading “Da Corban spin continues: AIA prefers denial while the National Underwriter carries III press release calling it news”

Reaction to Corban Ripple Across the Media

Anita Lee’s story on Corban is here with commentary from head III shill Robert Hartwig himself (picture found here). The bottom line per Judy Guice:

“To me, this was always much more than just a business issue. This was a personal issue to me. Getting the law straight was really one of the critical parts of my recovery and I’m relieved that has now happened.

“The overwhelming feeling I have right now is relief that our children and grandchildren, and everybody else who had to suffer like we’ve all suffered since Hurricane Katrina, will not be stuck with the harsh law, the incorrect law that was previously created and has now been corrected by our Mississippi Supreme Court.”

Chip Merlin has written a series of 3 posts on Corban which address all the fine points of the decision. This is from Part 2:

This ruling confirms State Farm’s Wind/Water Protocol is the wrong test under Mississippi law because it improperly shifted the burden upon the policyholder to prove that the wind caused the damage rather than the insurer having to prove that the damage was excluded. Corban undermines the Fifth Circuit reversal of Judge Senter in Broussard vs. State Farm and as I suggested in Broussard’s Bad Faith Decision Impaired by the Mississippi Supreme Court.

There is one important mistake the Court did make in its decision when it held: Continue reading “Reaction to Corban Ripple Across the Media”

Empty handed on hand down Thursday – Corban v USAA

Another great Bam Bam post and once again I am thinking about our supremely slow Supremes, Corban v USAA and counting by the calendar again – empty handed for the 15th Thursday following Oral Arguments.Corban continued2