Archive for the ‘Regulatory Matters’ Category

New California Law Sets the Stage for Insurance Regulation of Uber, Lyft

Wednesday, October 8th, 2014

By Kara DiBiasio, Sedgwick San Francisco

The emergence and success of ridesharing companies has sparked questions and debates over the gaps in insurance coverage created when private drivers offer commercial driving services.  Ridesharing companies – such as Lyft, Uber, and Sidecar – allow private drivers to login to a mobile app and pick up passengers for a fee.  This innovative structure has changed the driver-for-hire climate in cities across America, including uncertainty about who will pay when one of these drivers gets into an accident.

Most personal automobile liability policies contain exclusions for commercial driving services, so anytime a driver is available for hire or driving a passenger, they likely are not covered by their personal auto policy.  Although a ridesharing company must provide commercial liability coverage, the overlap between the driver’s policy and the commercial coverage is often murky.  Seeking to clarify these potential gaps in coverage, the California Legislature passed AB 2293, which Governor Jerry Brown recently signed into law. 

The law has two primary effects on regulation of ridesharing companies.  First, it imposes disclosure requirements on the company.  Second, it sets minimum insurance coverage requirements for all ridesharing companies operating in California. 

For the disclosure requirements, each ridesharing company is required to disclose in writing to each driver the commercial coverage and limits of liability the company provides while the driver has the app enabled.  Drivers will also have to carry proof of the company’s commercial liability coverage when they have the mobile app enabled. 

The law also sets out insurance coverage requirements for each phase of the driver’s potential liability: when the driver is using the vehicle, but the app is not enabled; when the app is enabled, but the driver is not carrying a passenger; and when the driver is carrying a passenger.  During the first phase, the driver is just an ordinary private driver on the road; the law does not set any requirements for this phase.  During the second phase, the company must provide primary coverage for death and personal injury, as well as property damage.  In addition, the company must provide excess coverage of at least $200,000 to cover any liability of the company or the driver while the app is enabled.  After the driver picks up a passenger, the law requires the company to have primary coverage of at least $1 million for death, personal injury and property damage, as well as an additional $1 million in uninsured and underinsured motorist coverage.

The law also requires the commercial liability insurer to defend and indemnify any liability claim arising out of an accident, either while the app is enabled or while the driver is carrying a passenger.  The driver’s personal auto policy is neither primary nor excess coverage while the app is on or while the driver has a passenger, unless the policy expressly states that it affords such coverage.

Most of the provisions of the new law will take effect July 1, 2015.  Pennsylvania has begun working on similar regulations for ridesharing companies, and other states will likely follow suit in the near future.  Insurers should work with coverage counsel to make sure they are ready with policies that conform to these new regulatory requirements, in advance of the laws taking effect.

Is it a Car or A Street Legal Robot: Insurance Issues for Autonomous Vehicles

Monday, October 6th, 2014

In mid-September, Mercedes-Benz became the latest car company to get a license to test self-driving vehicles in California.  Earlier in the month, GM announced that they will offer a hands-free Cadillac with new cruise control technology to adjust speed, braking and steering.  Since 2005, Google has been test-driving their autonomous vehicles (AVs) on public roads, and last summer unveiled the first test prototype for a vehicle with no steering wheel or brake pedal.     

These autonomous or self-driving vehicles will pose new challenges for the insurance industry, as will the semi-autonomous vehicles that already are entering the market.  Hilary Rowen addressed some of the issues in an article entitled, “Expect tort potholes for self-driving cars,” published in the San Francisco Daily Journal on September 26.  The article can be downloaded here.

Offshore Professional Risk in 2014

Wednesday, April 16th, 2014

By Mark Chudleigh, Chen FoleyNick Miles, and Alex J. Potts, Sedgwick Bermuda

From the Cayman Islands to Hong Kong, there’s a lot going on in the world of offshore litigation and law reform. In this report, Sedgwick’s Offshore Professional Risks practice offers a global perspective on professional risk, with unique expertise and solutions valuable to providers and users of offshore services and insurance carriers operating in offshore jurisdictions, including Bermuda, the British Virgin Islands, the Cayman Islands, the Channel Islands, and the Isle of Man.

Learn more about new laws changing the future of this business, collective investment schemes, issues relating to cybercrime and cyberliability, and the dangers of being an offshore lawyer.

 Read the full news report here.

New Jersey Legislature Passes Superstorm Sandy Bill of Rights

Monday, March 31st, 2014

By Ryan Chapoteau, Sedgwick New York

We previously reported on the New Jersey legislature’s attempt to pass reform bills as a response to Superstorm Sandy.  Although New Jersey Assembly Bill A3710 died when referred to the Financial Institutions and Insurance Committee, the legislature recently passed Senate Bill S1804 (combined with S1306), which details how the state can distribute Superstorm Sandy federal aid relief, and established a Bill of Rights for Superstorm Sandy victims.

In relevant part, the Bill of Rights helps to ensure that victims of Superstorm Sandy can seek compensation from multiple recovery programs as well as through any applicable insurance.  If a victim is not wholly compensated through their insurance carrier, the Bill of Rights can apply to a governmental recovery program to aid in the victim’s effort to be made whole for any losses resulting from the storm.  According to this law, the State cannot deny applicants seeking aid merely because they have other applications pending for financial relief.  Now, victims have multiple avenues to be compensated for the damage occurred by Superstorm Sandy.

In June 2013, we reported on the 12 new insurance reform bills bassed by the New York State Assembly in response to Superstorm Sandy. 

California Senate Introduces Bills to Expand Abuse Claims

Tuesday, February 4th, 2014

By Alex Potente, Sedgwick San Francisco

For our readers who are involved in insuring public and private entities against sexual abuse claims, you may be interested to know that legislation to reform the civil and criminal statute of limitations for childhood sexual abuse claims was recently introduced in the California State Senate by Senator Jim Beall, D-San Jose, and Senator Ricardo Lara, D-Long Beach. The two legislative bills seek to prohibit childhood sex offenders from leveraging the statute of limitations to escape civil damages or criminal prosecution.

One of the new bills, SB 924, proposes to reform the statute of limitations for civil lawsuits by increasing the age for when victims of sexual abuse can sue private and public organizations that they allege failed to protect them from sexual abuse offenders. The bill would raise the age deadline from 26 to 40 years old. The bill would also increase the length of time for a person to file suit after he or she claims to have discovered that the molestation caused them psychological harm. Currently, a suit can be filed within three years of such a realization, even after the age-related statute of limitations is already expired. SB 924 would increase this standard to five years.

Additionally, the bill more specifically defines the term “discovery” than does current law, identifying it as the time in which a physician, psychologist or clinical psychologist first informs the victim of the link between their adult psychological injuries and the childhood sexual abuse.

The other bill, SB 926, would raise the age at which an adult survivor of childhood sexual abuse can seek criminal prosecution against his or her offender from 28 to 40 years old. The bill would affect sex crimes against children including lewd or lascivious acts, continuous sexual abuse of a child, and other offenses.

In an attempt to avoid the stumbling blocks of SB 131 – a similar bill that was vetoed by Governor Jerry Brown last fall – SB 924 will apply to both public and private entities and both bills will be applied prospectively on January 1, 2015, if passed and signed into law. However, there are some details that still need to be finalized. For one, it is uncertain as to whether the extension of time from three to five years which a victim has to file suit under SB 924 will be applied only to future discoveries of harm, or also to victims who already have been informed (but where the current three-year limitations period has not expired). Additionally, opponents criticize that SB 924 requires a mental health specialist’s opinion to trigger the date of discovery of harm. Bill opponents argue that victims often know that they have been harmed before they receive an opinion from a mental health specialist. Finally, despite the provision that the bills will be applied prospectively, opponents continue to raise the specter of retroactive application to invalidate the previous statute of limitations and concomitant due process issues.

We will monitor these bills as they work their way through the legislature and provide follow up reports.

 

California Allows Contractors Formed As LLCs To Access Surplus Lines Carriers

Tuesday, August 20th, 2013

By Dennis G. Rolstad, Sedgwick San Francisco

On August 16, 2013, California Governor Jerry Brown signed AB1236, a bill that allows contractors organized as limited liability companies to obtain liability insurance from non-admitted surplus lines carriers.  California Business & Professions Code § 7071.19 requires that limited liability companies carry liability insurance.  AB1236, sponsored by the Association of California Insurance Companies, amends Section 7071.19 to allow such insurance to be acquired from surplus lines carriers.

California has been amending its statutes to allow various forms of businesses to form as limited liability companies.  As of a 2010 statute, contractors may now obtain LLC status, but a licensed contractor must maintain liability insurance at specified dollar levels issued by a state licensed insurer.  Since January 1, 2011, hundreds of California contractors have been licensed as LLCs; however, over 68,000 other licensed contractors have general liability coverage obtained from surplus lines carriers that are not regulated by the California Department of Insurance.

Effective January 1, 2014, a contractor licensed as an LLC may obtain its liability policy from an eligible surplus line insurer, which is an insurer that has met certain standards including reserve requirements.  The requirements for a non-admitted insurer are found at California Insurance Code § 1765.1.  It is believed that AB1236 will increase access to insurance for contractor LLCs, have a positive effect on premium pricing, and increase the viability of LLC status for contractors.

A copy of the bill can be found here.

New York Assembly Presents Insurance Reform Overhaul in Wake of Superstorm Sandy

Tuesday, June 25th, 2013

By Ryan C. Chapoteau, Sedgwick New York

We previously reported on the New Jersey Legislature’s attempts to enact a bill that would allow policyholders to sue an insurer for bad faith in the wake of Superstorm Sandy.  New Jersey Assembly Bill A3710  is still pending.  On the other hand, New York’s Assembly has been very active after Superstorm Sandy and resoundingly passed 12 new bills on June 4, 2013, which would affect changes to the Insurance Law.  The State Senate is now holding debates for these bills, which provides insurers an opportunity to request the legislature to reject these proposed laws.

The American Insurance Association has attacked the new legislation, stating that it is “misguided, if well-intentioned” because the bills “would simply open the floodgates for even greater litigation after a catastrophe.”  Although policyholders already have considerable privileges under current law, the New York Assembly is attempting to rewrite insurance policies by rejecting basic contractual principles that allow parties to form the terms of their own agreements.  If passed, the insurance market may raise premiums to ensure they can pay the newly-mandated covered claims, and handle an increase in litigation costs.

The New York insurance reform legislative package includes the following bills:

• Investigation and Settlement Standards (Bill No. A01092, passed 121-23).  The Assembly is attempting to require insurers to investigate a claim and advise the claimant in writing within 15 days (with a potential additional 15 day extension) on whether the insurer has accepted or rejected the claim.  The insurer then must pay the claim within 3 days from the settlement date.

• Creating a Task-Force for Disasters (Bill No. A01093, passed 144-0).  This bill creates an 18-member task force, including officials from federal and state agencies, insurers and independent representatives who will examine and report on whether policyholders and communities have adequate insurance coverage for disasters.

• Discounts on Fire and Homeowner’s Insurance Upon Completing Residential Home Safety and Loss Prevention Course (Bill No. A01475, passed 141-3).  The Assembly is attempting to force insurers to provide discounts to homeowners for a three-year period upon completing a state-certified course that would teach insureds how to prevent losses triggered by weather-related events.  The bill does not comment on the amount of the discount, but requires the discount to be based on sound actuarial practices.

• A Homeowner’s Bill of Rights (Bill No. A02287, passed 118-26).  Legislators are attempting to educate homeowners who purchase property and casualty coverage by obligating insurers to provide them with a consumer guide written “in plain language in a clear and understandable format.”  This disclosure must provide information, such as how coverage is affected by different types of weather conditions and natural disasters as well as whether the property is located in a flood zone.  Additionally, the Department of Financial Services will be required to establish a “Consumer’s Guide on Insuring Against Catastrophic Loss” brochure.

• A Uniform Windstorm Deductible (Bill No. A02729, passed 144-0).  The Superintendent of Insurance will have the duty to institute a uniform and reasonable standard for hurricane windstorm deductibles.  Proponents of the bill claim it will help promote a better understanding of the applicability and amount of hurricane windstorm deductibles.

• Expediting State Disaster Emergency Insurance Claims (Bill No. A05570, passed 117-26).  This bill establishes an expedited procedure for claimants to advance any lawsuit against insurers that deny claims related to property damage sustained in counties where a State Disaster Emergency is declared by the Governor.

• Private Right of Action for Unfair Claim Settlement Practices (Bill No. A05780, passed 108-34).  The bill creates a private right of action for unfair claim settlement practices for claims relating to a loss or injury in an area under a declared disaster emergency.  If enacted, insurers will be liable for punitive damages if their claims practices are deemed willful.

• Limiting Insurers from Deciding Not to Renew Homeowners Policies (Bill No. A06913, passed 120-24).  The Assembly is trying to restrict insurers’ reduction of coverage by regulating notices of intention to not renew homeowner’s insurance policies.  If passed, insurance companies must file a plan with the Superintendent of Insurance if they intend to reduce by 20% the net number of these policies in New York, or if they plan to reduce the number of these policies by 500 within five years, whichever is greater.  Additionally, insurers must file a plan if they intend to not renew 4% or more of their total number of covered policies within New York.

• Coverage for Business Interruption Claims Arising From Excluded Perils (Bill No. A07452, passed 113-30).  This bill would force insurers to cover business interruption claims even if the loss directly or indirectly arose from or was caused by an excluded or uninsured peril.

• A Standard Set of Definitions (Bill No. A07453, passed 115-29).  This bill would force all New York insurance policies to adopt a standard set of definitions, as promulgated by the Superintendent of Insurance, for all commonly used terms and phrases.  The proposed legislation does not include a list of the terms and phrases it considers to be common, but provides that an insurer may use alternative definitions as long as they are not any less favorable to the policyholder.

• Providing a Copy of a Policy Prior to it Being Purchased (Bill No. A07454, passed 119-24).  The bill would require insurers to provide potential customers of personal and commercial lines of insurance a copy of the policy prior to the policy being purchased.  Legislators want customers to have sufficient time to review a policy before agreeing to buy it.

• Outlawing Anti-Concurrent Clauses (Bill No. A07455, passed 119-24).  The law would forbid insurers from denying a claim when a loss occurred from several causes, and one cause is covered while another cause is precluded from coverage.  If enacted, New York would be joining California,[1] North Dakota,[2] West Virginia,[3] and Washington[4] in eliminating anti-concurrent causation clauses.

The Assembly also passed Bill No. A07456 on June 10, 2013, by a vote of 125-14, which would require the Superintendent of Financial Services to prepare a report card on insurers’ responses to emergencies and disasters.  Insurers would be graded on: (1) the number of claims the insurer received and the status of those claims; (2) the number of independent adjusters the insurer has working in the field; (3) the number of policyholders who have hired public adjusters; (4) the average amount of time, in days, for the insurer to investigate a claim, make a payment, and close a claim; (5) the number of complaints the insurer has received from its insureds and the number of complaints the Department has received on each insurer; and (6) any other information the Superintendent deems necessary.  This report card must be published within 20 days of the declaration of a disaster or emergency and updated every week for at least 6 months or until the Superintendent determines that the report card is no longer necessary.

 

Bermuda Monetary Authority Announces Principles Underpinning Use of New Powers

Wednesday, January 23rd, 2013

By Nick Miles

The Bermuda Monetary Authority (the BMA) has published a new statement of practice (SoP).  It sets out factors to which it will have regard and procedures to be followed in deciding whether and in what manner to exercise powers granted under the following four statutes that regulate financial sectors in Bermuda:

• The Insurance Act 1978
• The Banks and Deposit Companies Act 1999
• The Investment Business Act 2003
• The Trusts (Regulation of Trust Business) Act 2001

A full analysis of the SoP and the BMA’s powers can be found in our Insurance News Flash published today.

Hydraulic Fracking – Recent Developments in CA, NY, NJ and PA

Thursday, December 20th, 2012

By Greg Lahr

For our readers who are keeping tabs on developments in the hydraulic fracturing (“fracking”) industry, we thought you would be interested in Sedgwick’s latest Hydraulic Fracturing News Flash regarding a recent proposal in California to regulate fracking, which can be viewed here.

Here are some recent developments that we are following in other states:

In New York, the Department of Environmental Conservation (“DEC”) has prepared a Revised Draft Supplemental Generic Environmental Impact Statement (“SGEIS”) on the Oil, Gas and Solution Mining Regulatory Program. The SGEIS pertains to issuing well permits for horizontal drilling and high-volume hydraulic fracturing for extracting oil and natural gas from the Marcellus Shale and other low-permeability gas reservoirs. Since making the SGEIS available for public review in September 2011, the DEC has drafted proposed regulations, which are available for comments from December 12, 2012 to January 11, 2013. At least until the regulations are finalized, it appears that the DEC’s moratorium on issuing well permits for horizontal drilling and fracking will continue.

In Pennsylvania, appellate review of the constitutionality of Act 13 of 2012 (“Act 13”), 58 Pa. C.S. §§ 2301 et seq. (signed into law on February 14, 2012), continues with the filing of appellate briefs to the Pennsylvania Supreme Court in September 2012. According to the General Assembly, Act 13 broadly reformed the laws that govern the development of oil and gas resources in Pennsylvania by establishing uniformity and promoting growth in the industry though the pre-emption of local ordinances that impose conditions or limitations on oil and gas operations. The General Assembly intended to allow oil and gas development as a permitted use in any zoning district, and mandate that restrictions placed on oil and gas development by municipalities be no greater than those placed on other industrial uses. A number of municipalities sought a declaratory judgment that Act 13 is unconstitutional, and requested that the Act be permanently enjoined. After the Pennsylvania Attorney General filed preliminary objections based primarily on standing and justiciability grounds, the municipalities filed a motion for summary judgment. On July 12, 2012, the Commonwealth Court issued a decision that granted in part and denied in part the summary judgment motion, and in part sustained the Attorney General’s objections. Significantly, the court declared a section of Act 13, which provides for uniformity of local ordinances, to be unconstitutional. Cross-appeals were filed by the municipalities and the Attorney General.

In New Jersey, a one-year moratorium on fracking signed by Governor Christie is set to expire in January 2013. However, a New Jersey assemblyman is currently sponsoring legislation that would extend the ban on fracking until the state Department of Environmental Protection reviews the federal Environmental Protection Agency’s study on the effects of fracking, which may not be out in final form until 2014.

Libor Fixing Probe – UBS Facing Potential $1 Billion Fine

Monday, December 17th, 2012

UBS, Switzerland’s largest bank, is set to become the second financial institution to enter into a settlement arising out of the Libor rate-fixing scandal.  The potential agreement would reportedly allow UBS to pay approximately $1 billion to settle allegations that it attempted to rig various interbank interest rates to increase trading profits.  The deal would resolve investigations conducted by certain U.S., British and Swiss regulators, including the U.S. Department of Justice, the U.S. Commodities Futures Trading Commission, and the U.K. Financial Services Authority.  UBS is expected to make the announcement next week, as early as Monday. 

Although UBS was granted leniency for cooperating with investigators, this fine is more than double the $450 million paid by Barclays earlier this year to settle its role in the Libor scandal. The Libor rate is used to set borrowing rates for over $350 trillion worth of lending contracts worldwide.  The Libor probe has involved approximately 20 of the biggest banks across three continents, involving regulators from the U.S., Canada, Europe, and Japan.  Recently, British prosecutors arrested several individuals as part of a criminal investigation into rate manipulation.  One of these individuals, Thomas Hayes, is a former UBS trader employed with the bank from 2006 to 2009.  UBS is also facing investigations from the Canadian Competition Bureau, the Attorneys General of Connecticut and New York, and the Monetary Authority of Singapore.  It was not immediately clear whether the Canadian Libor probe would be part of the imminent settlement.

The Libor settlement is just one of the problems encountered by UBS over the past year.  Earlier this year, a rogue UBS trader cost the company $377 million before being jailed, and UBS reportedly had some involvement in issues arising out of the Facebook IPO.  More recently, the company announced that it would lay off 10,000 employees as part of its efforts to wind down a significant part of the investment bank. (“UBS faces $1bn fine over Libor allegations,” CNN.com, December 14, 2012;  “UBS in Talks Over $1 Billion Penalty,” The Wall Street Journal, December 13, 2012“UBS faces $1 billion fine for Libor rigging,” Reuters, December 13, 2012).

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