News Briefs

Arkansas

Employment up in Ark.

A recent report from the Federal Deposit Insurance Corp. showed that employment in Ar-kansas is at a high point-1.1734million-but warned that hurricane refugees could strain state services.

FDIC’s Arkansas profile for Fall 2005 said growth in service industries helped push employment levels up, despite a weak manufacturing sector, which lost 1,600 jobs in the first half of the year.

According to the Associated Press, the report said an expanding economy led previously discouraged workers to re-enter the work force and that only Drew County reported a drop in its civilian labor force. Although the state is enjoying a $100 million budget surplus, which will likely benefit state government services, the report said the estimated 50,000 to 100,000 people who came to Arkansas after hurricanes Katrina and Rita could strain both government and private aid service providers.

Auto Coverage Cancellations Clarified

According to the Arkansas Insurance Department, Act 1194 of 2005 states that no insurer licensed to transact the business of motor vehicle liability insurance in Arkansas may cancel an insured’s policy, increase the premium, or negatively impact the insured’s risk rating solely because of an accident for which the insured is innocent of any negligent or intentional act that was the proximate cause of the accident, regardless of whether a claim is filed under any insurance policy.

The department defined ” A proximate cause” as one that in a natural and continuous sequence produces damage, and without which the damage would not have occurred. The department clarified that the Act only applies to commercial and personal motor vehicle liability insurance. It also interpreted “innocent” to mean not at fault with regard to any negligent or intentional act that was the proximate cause of any accident or injury, to be determined in accordance with policy language and state law.

If a carrier pays any portion of a claim, such payment is indication that the carrier has determined that the insured has some percentage of fault and is therefore not “innocent.” Cost of defense shall not be a factor in determining whether a person is “innocent.” Cost of defense may, however, be considered a “loss” under Ark. Code Ann. § 23-63-110.

For more information, contact Arkansas Insurance Department’s Legal Division at (501) 371-2820 or e-mail at insurance.legal@
arkansas.gov.

Louisiana

Melancon Co-Sponsors Retroactive Flood Insurance Bill

U.S. Rep. Charlie Melancon of Louisiana said he will co-sponsor Rep. Gene Taylor’s legislation allowing home and business owners without flood insurance when Hurricane Katrina struck to receive compensation retroactively through the National Flood Insurance Program.

Taylor, D-Miss., discussed the proposal at a town hall meeting in Gautier, Miss.

According to the Associated Press, Melancon said in a news release he would help push the legislation.

As explained by Melancon, the bill would allow property owners who did not live in floodplains but were devastated by the hurricanes to be covered under the National Flood Insurance Program. They would have to pay the equivalent of 10 years of NFIP premiums, with a 5 per cent penalty. Premiums would be set at a rate equal to the prevailing premium charged in the area prior to Hurricane Katrina.

The legislation also permits property owners to deduct premium payments and the penalty from the NFIP claim payment, Melancon said.

Bob Durrin, a NFIP specialist who has been on the Mississippi coast to provide claim statements for those who have flood insurance, said Taylor’s plan is “essentially retroactive coverage.”

Copyright 2005 Associated Press.

Damage to State Buildings at $1.3B

The cost of damage from Hurricane Katrina to state-owned buildings in Louisiana totals nearly $1.3 billion-a figure that is expected to grow as the full extent of the damage is determined, according to preliminary estimates.

The Associated Press reported that the state has $500 million of insurance coverage on the structures and a $25 million deductible. Louisiana is expecting FEMA cover the costs over and above the insurance coverage. Additional damage to state buildings from Hurricane Rita is still being assessed. Mold and asbestos problems, a lack of materials and a high demand for contractors for rebuilding projects are likely to complicate rebuilding process.

Oklahoma

Flood-Damaged Car Warning

Oklahoma Attorney General Drew Edmondson and Insurance Commissioner Kim Holland warned of yet another potential impact from the hurricanes that recently hit the Gulf Coast: Flood-damaged cars could soon be making their way to Oklahoma car lots.

“When a flood-damaged car is sold, by law, its title should note the damage,” Edmondson said. “A less-than-reputable car dealer can take a car that’s been totally submerged, clean it up and sell it as they would any other used car. It can mean huge profits for the car dealer, and a huge headache for the car’s new owner.”

Edmondson said car buyers can take steps to protect themselves when purchasing a used car, such as: Shop at a reputable dealership; Inspect the car’s interior for water stains; Don’t purchase a car that smells of mildew; Ask the dealer about the car’s history and the location of its previous owners; Look under the hood for signs of rust; and Have the car inspected by a trusted mechanic before making a purchase.

Holland encouraged consumers to check with their insurance agents before buying a vehicle they think may be flood-damaged. Most insurance companies have access to the National Insurance Crime Bureau registry of cars damaged by the recent hurricanes. The Web site, www.nicb.org, contains information about flood-damaged cars.

Texas

Perry Wants Full Reimbursement for Rita

Texas Gov. Rick Perry sent a letter to federal officials requesting that Texas get the same level of reimbursement for Hurricane Rita as for Hurricane Katrina. According to the governor’s press office, Perry joined with Houston Mayor Bill White and Harris County Judge Robert Eckels in announcing the formation of a task force to examine better ways to handle the evacuation of major metropolitan areas of Texas.

The Federal Emergency Management Agency (FEMA) notified Texas that it would approve 100 percent reimbursement of some costs for a 72-hour period related to Hurricane Rita but then would drop to 75 percent reimbursement. FEMA has approved 100 percent reimbursement to Texas on costs associated with assisting victims of Hurricane Katrina.

Perry noted that the shelter Texas provided for the evacuees of Hurricane Katrina affected every aspect of the Texas preparation, response and recovery for Hurricane Rita, which makes the argument for considering these consecutive hurricanes one tragedy.

The governor appointed a task force to immediately begin examining the process by which Texas evacuates major metropolitan areas in Texas.

“Because local officials gave evacuation notice early, despite the agonizing traffic that ensued, we got millions of people out of harm’s way in time,” Perry said. “But by no means did the plan work flawlessly. The purpose of this task force will be to learn from our most recent experience, and to better prepare for the future recognizing another hurricane or tropical storm could threaten Texas in the remaining two months of the hurricane season.”

Republic Says Losses From Hurricanes Within Expectations

Dallas-based Republic Companies Group Inc. reported that the effect on its financials of both Hurricane Katrina and Hurricane Rita should be within the loss expected from a major wind-related catastrophe covered by the company’s reinsurance treaties. During the third quarter, Republic purchased additional reinsurance coverage to protect against additional catastrophe weather events in 2005.

The after tax impact on Republic’s third quarter net income of Hurricane Rita (net of recoveries from catastrophe reinsurance treaties) and the cost of additional reinsurance coverage is estimated at $1.3 million. The remainder of the cost of the additional reinsurance coverage will be reflected in the company’s fourth quarter results.

Taking into account the previously reported impact of Hurricane Katrina, the total, after tax impact on its third quarter financials of the two hurricanes (net of reinsurance recoveries) and the related purchase of additional reinsurance, is approximately $4.6 million.

Republic Group companies provide insurance for windstorm damage and related risks to homes, automobiles and commercial businesses in Texas and Louisiana. Consistent with industry practice, Republic’s policy terms do not include losses related to flood damage, the company said. The losses related to Hurricane Rita are still being assessed.

But Republic expects the gross loss to be within the limits of its excess of loss reinsurance coverage.

For the full year 2005, Republic has decreased its return on average equity guidance from a range of 13 percent-15 percent to a range of 12 percent-14 percent.