News Briefs

MASSACHUSETTS

Marsh Clients Urged to Hold Off: Massachusetts insurance customers of insurance broker Marsh & McLennan are being urged to hold off on agreeing to the broker’s proposed settlement by the state’s attorney general. Attorney General Tom Reilly has mailed a letter to an estimated 300 policyholders suggesting they get more information before signing any agreement to settle damages relating to improper commissions and account placements.

Marsh & McLennan in January agreed to an $850 million fine to settle charges brought by New York Attorney General Eliot Spitzer. Marsh has since informed former clients they have until Sept. 20, 2005 to be part of this monetary agreement.

But Reilly’s insurance unit told policyholders they might want to think twice about joining in without first getting Marsh to review their individual cases. He also hinted that a multi-state investigation into Marsh by attorneys general could reveal further allegations between now and September. He also advised them that “there is no advantage” to responding to the Marsh deal any sooner than the Sept. 20 deadline.

Second Injury Fund Rebounds: Connecticut has eliminated the projected 20-year debt of its Second Injury Fund for workers’ compensation claimants in just six years by recently paying off the final $48 million, the state treasurer announced.

In the past six years, the program’s unfunded liabilities have been reduced by 44 percent, from $838 million in 1999 to $465 million currently. Treasurer Denise Nappier noted that the Treasury’s assessment audit program has played an important role. Some $50 million in underpaid assessments has been recovered.

Nappier said that the fund has also managed to reduce rates charged to businesses to the lowest levels in more than a decade. Rates for insurance companies that represent employers are dropping by 38.5 percent and self-insured employers by a 27.2 percent reduction, saving businesses $29 million annually. Effective July 1, rates for insurance companies dropped from 6.5 percent to 4.0 percent for regular policies and from 5.2 percent to 3.2 percent for assigned risk policies. Concurrently, the rate for self-insured employers will decrease from 11.6 percent to 8.4 percent.

Nappier and business leaders also worked with lawmakers to change state laws to ensure that businesses making a good-faith effort to comply with state law are not penalized unnecessarily.

RHODE ISLAND

DuPont Agrees to Lead Paint Settlement: The DuPont Co. has reached a multimillion dollar settlement in a landmark lawsuit brought by Rhode Island against makers of lead paint. According to the state attorney general, six other manufacturers remain as defendants in the lawsuit, which accuses the industry of creating a public health threat that poisons thousands of children a year.

The settlement will cost DuPont $10 million or more, depending on the cost of remediating lead hazards in 600 homes, Attorney General Patrick Lynch said. DuPont said it expects to pay up to $12.5 million. DuPont will pay several million dollars to the nonprofit group Children’s Health Forum to remove lead paint and educate the public in Rhode Island, Lynch said. It will also pay $1 million to Brown University Medical School for research into solutions to the problem, and will donate money to the Dana-Farber/Brigham and Women’s Cancer Center in Boston.

Rhode Island sued the industry in 1999 in the first attempt by a state to hold the industry responsible for the dangers of lead paint in old buildings. The industry has argued that the lawsuit was misdirected and that property owners who fail to maintain their properties should be held accountable. A trial ended in 2002 with a hung jury. A new trial is set for September.

Lynch said he had been negotiating with DuPont for more than a year. He said he remained open to talks with the other six companies, but no agreements were close. The other companies are Atlantic Richfield Co., Millennium Holdings LLC, NL Industries Inc., Sherwin Williams Co., American Cyanamid Co. and ConAgra Inc.

NEW HAMPSHIRE

Big Changes for Small Group Market: Gov. John Lynch signed into law a bill that promises to dramatically change the way health insurance companies set rates for small businesses in New Hampshire. The law takes effect Jan. 1, 2006. Under it, insurers can no longer set premiums based on a business’ location or the health of its workers. It limits premium increases to no more than 20 percent a year and sets up a pool that all companies contribute to for people with high medical costs. Insurers are still permitted to consider employees’ age and the type of industry when setting rates.

Lynch said he was satisfied the new law eliminates what he considered the most damaging aspects of the old insurance law. “It takes away the ability of insurance companies to discriminate against companies and small businesses based on health and geography, so that is a real significant assistance and help to our small businesses,” he said.

Critics said the compromise would push insurers out of the state and increase premiums. But state Sen. Maggie Hassan (D-Exeter), said the insurers that would leave only created competition for the healthiest, most low-risk groups. She acknowledged young and healthy groups whose insurance rates dropped under the old law likely would see their insurance costs rise.

Supporters of the old law argued it would eventually attract more insurers and lower rates through competition but that it needed more time to take root. Many small business owners and employees complained it caused rates to shoot up for employees with poor health and in northern and seacoast counties.

VERMONT

Firefighters Get Workers’ Comp: Vermont Gov. James Douglas has signed into law a bill to financially protect firefighters who suffer heart attacks in the line of duty. The measure, which took effect upon signing, ensures that firefighters who suffer work-related heart disease receive workers’ compensation-or their families receive death benefits should they die. Until now, firefighters who suffered a heart attack, stroke or other heart-related illness within 72 hours of answering an emergency call were forced to prove their illness was job related if insurance companies contested their claim. The new law gives firefighters the benefit of the doubt, and forces insurance companies to prove otherwise.

The new law, which does not cover volunteer firefighters, brings Vermont in step with 37 other states that recognize that stress associated with being a professional firefighter increases the risk of heart disease, firefighters said.

The law was prompted by the 2002 death of Whiting Fire Chief Clarence Birchmore, who suffered a heart attack while responding to a car accident. Insurance officials rejected his estate’s claim that answering the early morning call triggered the heart attack, and denied death benefits to Birchmore’s widow. The state eventually overturned the decision, but the case raised questions and prompted the law change, Douglas said.

NEW YORK

Comptroller Strikes Out Over Audits: A Manhattan judge quashed 10 subpoenas served by state Comptroller Alan Hevesi on the state insurance department and ruled that Hevesi has no authority to compel an audit of the department’s liquidation bureau.

Hevesi tried last year to do a routine public agency audit of the division, which is charged with protecting policyholders and claimants when an insurance company goes bankrupt. The bureau refused to submit to the review, so Hevesi went to court.

Hevesi argued that because the insurance superintendent is a state officer, any monies in his custody and control are subject to audit by the comptroller. Auditors from the state comptroller’s office had examined the liquidation bureau’s books five times since the 1970s, until they were rebuffed in February 2004. Then-State Insurance Superintendent Gregory Serio contended that the liquidation bureau controls private funds and is not subject to public agency audits.

State Supreme Court Justice Walter B. Tolub agreed with Serio. The judge said a liquidation order tells the superintendent to take possession of the bankrupt insurer’s property, dispose of it and distribute payments under oversight of the court. “Nothing in the language of the statute implies that the legislature granted authority over the disposition of assets of an insolvent insurer to the comptroller,” Tolub wrote. “As liquidator, the superintendent does not act for the general public, the superintendent acts on behalf of a private corporation, not one utilized by the state to discharge governmental duties,” he added. Hevesi’s lawyers said they intend to appeal.

Frontier Group Files for Chapter 11: Citing assets of between $50 million to $100 million and debts of more than $100 million, specialty insurer Frontier Insurance Group filed on July 5 for Chapter 11 protection from creditors in U.S. Bankruptcy Court in New York.

Most of Frontier’s insurance subsidiaries are in rehabilitation or liquidation. In 2001, the New York state insurance department took control of its largest subsidiary, Frontier Insurance Company in Rock Hill. There have been reports that the department is close to allowing this unit to be released from state control but that has not yet happened.

The company still operates a medical liability claims management company in Rock Hill. The company also has a suit pending against Ernst & Young, its former auditor, for $250 million for alleged malpractice.

Coded Plates Proposed for Drunk Drivers: The automobiles of repeat drunk drivers would carry special license plate numbers under a bill under consideration by lawmakers. The license numbers or letters-the specific code hasn’t been determined-would allow police to quickly identify motorists convicted of driving while intoxicated. Police could then stop the cars without further cause, said the bill’s sponsors, Republican Sens. Thomas Libous of Binghamton and Nicholas Spano of Westchester.

The New York proposal is less drastic than some other states including Ohio, where convicted drivers must have bright orange plates on their cars; and in Iowa, where in 1991 special plates were adopted that allowed police to stop the cars without further cause.

The bill would require license plates for anyone who was convicted three times in five years, or five times within 10 years. The plates, which would cost the automobile owner $100, would have to be used for two years.

PENNSYLVANIA

Med-Mal Capacity Insufficient: Pennsylvania Insurance Commissioner Diane Koken has issued a report concluding that there is not sufficient capacity to shift a greater proportion of medical malpractice coverage to the private market from the state Mcare Fund. The report focuses on the ability of the current marketplace to offer an additional $250,000 of coverage for health care providers in the state.

Health care providers in Pennsylvania are required to carry $1 million worth of medical malpractice insurance, the first 50 percent from a private insurance company and the remaining 50 percent from the state’s run Mcare Fund. Current law mandates that the limits be increased unless the insurance commissioner concludes that there is not adequate additional capacity.

The law proposes that, if the market could bear, the primary layer would increase and the Mcare layer would decrease. The law proposed that the next step would be 75 percent-or $750,000-of coverage would come from the private market and 25 percent-or $250,000-would be covered from the state fund. Eventually, if the market had the capacity, malpractice coverage would be provided entirely through the private market.

Koken said that an actuarial study by PricewaterhouseCoopers LLP shows there have been improvements in capacity but not enough to support a ‘step-up’ in basic insurance limits at this point.