Week's Best Posts

STATE NONADMITTED AND REINSURANCE REFORM 2012 LEGISLATIVE UPDATE

March 20, 2012 by Carlton Fields

In connection with the Nonadmitted and Reinsurance Reform Act of 2010 of the Dodd-Frank Act (the “NRRA”), the legislatures of Wisconsin (SB 378), Colorado (HB 1215), Wyoming (HB 15), and Hawaii (SB 2168) have introduced bills to establish requirements that are consistent with the federal law for surplus lines insurers doing business in each of these states. Although California has not yet enacted similar legislation, the California Senate has introduced a bill (SB 716) declaring “the intent of the Legislature to reconcile California surplus lines and reinsurance law with the recent changes to federal law to minimize any possibly adverse effects of preemption” by the NRRA.

While Wisconsin’s and Colorado’s bills do not reference the surplus lines proposals approved by the National Conference of Insurance Legislators and National Association of Insurance Commissioners (SLIMPACT and NIMA, respectively), Hawaii’s bill is expressly modeled after SLIMPACT, stating the legislature’s intent to become the tenth state to enact SLIMPACT legislation. Upon passage of SLIMPACT by ten states, the compact would be effectuated for tax clearinghouse and rulemaking purposes. Additionally, Wyoming and Hawaii already participate in multi-state cooperatives under NIMA for the purpose of collecting surplus lines insurance premium taxes and fees and distributing those taxes and fees to the proper states.

On a related note, the Oklahoma House (HB 2458) and Senate (SB 1617) have introduced bills amending Oklahoma’s surplus lines legislation enacted last year to, among other things, specify that the insurance commissioner “is not compelled” to join NIMA or any other multistate premium-tax sharing agreement. We will report on whether these bills are passed into law in a later post.

This post written by Michael Wolgin.

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NINTH CIRCUIT CONCLUDES AT&T v. CONCEPCION PREEMPTS CALIFORNIA STATE LAW

March 19, 2012 by Carlton Fields

Plaintiffs brought a putative class action alleging violations of California’s Unfair Competition Law in connection with student loans. Each of the loan contracts contained an arbitration clause, which the district court declined to enforce. The Ninth Circuit granted review to consider whether the US Supreme Court’s recent decision in AT&T Mobility, Inc. v. Concepcion that the FAA preempts California’s state law rule prohibiting the arbitration of claims for broad injunctive relief. The District Court had denied the motion to compel arbitration largely in discretion to California’s policy prohibiting the arbitration of claims for public injunctive relief, despite the parties’ agreement to arbitrate. It is notable that the District Court’s decision was made nearly two years before the Supreme Court issued its Concepcion decision. The Ninth Circuit held that Concepcion does indeed preempt the California state law rule and that the arbitration clause in the parties’ contracts must be enforced because it was not unconscionable. The Ninth Circuit thus overruled the District Court’s denial of KeyBank’s motion to compel arbitration, vacated the judgment entered, and remanded to the District Court with instructions to stay the case and compel arbitration. Kilgore v. KeyBank, N.A., No. 09-16703 (9th Cir. Mar. 7, 2012).

This post written by John Black.

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NAIC REINSURANCE TASK FORCE PROCEEDS WITH IMPLEMENTATION OF REVISED CREDIT FOR REINSURANCE MODELS

March 19, 2012 by Carlton Fields

At the recent NAIC Spring Meeting, the E Committee’s Reinsurance Task Force exposed for comment drafts of two documents relating to the implementation of the recently revised credit for reinsurance Model Act and Model Regulation: (1) a memorandum discussing implementation issues; and (2) a discussion of changes to the accreditation criteria.

This post written by Rollie Goss.

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U.S. SUPREME COURT SENDS STERN MESSAGE ON ENFORCING CONCEPCION

March 12, 2012 by Carlton Fields

In a curt per curiam opinion, the U.S. Supreme Court sent a clear message to the Supreme Court of Appeals of West Virginia, vacating that Court’s decision that found state public policy superseded the Federal Arbitration Act, where personal injury claims against a nursing home were at issue. Pointing at the outset to the Supremacy Clause of the U.S. Constitution, the U.S. Supreme Court emphasized its holding in AT&T Mobility LLC v. Concepcion, 563 U.S. —- (2011) (slip op. at 6-7), that “[w]hen state law prohibits outright the arbitration of a particular type of claim, the analysis is straightforward: The conflicting rule is displaced by the FAA.” It vacated and remanded. Marmet Health Care Center, Inc. v. Brown, Nos. 11-391 and 11-394, 565 U.S. —- (Feb. 21, 2012).

This post written by John Pitblado.

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MISSISSIPPI SUPREME COURT ISSUES “TRUE-UP” DECISION IN KATRINA LITIGATION

March 6, 2012 by Carlton Fields

As a result of Hurricane Katrina, the Mississippi Windstorm Underwriting Association sustained losses well in excess of its reinsurance. The Association assessed its members to cover the loss based on their percentages of wind and hail insurance premiums written in the previous calendar year. Several companies then complained that the Association had incorrectly reported the previous year’s figures and were given a one-time opportunity to submit correct data (a true-up). Some members, most of whom did not submit corrected data, appealed the assessment following the true-up. The Mississippi Supreme Court reviewed the lower court’s grant of relief to the members. The Court affirmed the lower court’s decision on two issues: finding that grouping was permitted and that reinsurance was allocated properly. The Court, however, reversed and remanded on the following issues: whether MWUA had authority to set and enforce a true-up deadline, the mandatory nature of voluntary credits and farm-property exclusions, whether assessments are akin to privilege taxes, and the mobile-home reporting issue. Further, because the lower court lacked authority to order the Association to adopt new rules, the Court reversed and rendered that part of the judgment below. Mississippi Windstorm Underwriting Assoc. v. Union Nat’l Fire Ins. Co., No 10-00076 (Miss. Jan. 26, 2012).

This post written by John Black.

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