News Briefs

California

Judge throws out $700 million jury award in Executive Life Suit

A federal judge has thrown out a $700 million (euro586 million) award for punitive damages won by the state of California in a lawsuit stemming from the takeover of failed insurer Executive Life by French investors.

U.S. District Court Judge A. Howard Matz concluded that the state’s Department of Insurance was not entitled to receive the $700 million (euro586 million) awarded by jurors in July as part of their judgment against French company Artemis SA, according to a summary of the order posted on the court’s Web site.

“This order addresses only the question of whether plaintiff (Insurance Commissioner) John Garamendi is entitled to the judgment he seeks, which would include the $700 million punitive damages award. He is not,” the order summary said. “The court will not include any punitive damages award in the ultimate judgment.”

Norman Williams, a spokesman for Garamendi, said the department’s lawyers had yet to review the complete ruling.

“Obviously, we’re disappointed that the judge has rejected the jury’s finding,” Williams said.

Matz was forced to rule on the jury’s award because the panel ordered only punitive and not compensatory damages, raising questions about whether the punitive award would stand.

Lawyers for Artemis argued U.S. Supreme Court precedent established punitive damages had to be based on compensatory damages.

Garamendi had expressed confidence the award would stand based on other precedents that allowed punitive damages comparable to a defendant’s “ill-begotten gains.”

The state argued that Artemis reaped $851 million from selling part of Executive Life’s junk bond portfolio.

Matz did not issue rulings on other questions pending in the case, including whether the state should receive any restitution.

The state took over the bankrupt Executive Life in 1991. A year later, Garamendi sold its junk bond portfolio for $3.25 billion to an investor group financed by French bank Credit Lyonnais.

The junk bonds later jumped in value and were worth billions of dollars more.

In 1999, the state Department of Insurance sued the French investors, claiming they had conspired to effectively give Credit Lyonnais control over all of Executive Life’s assets, thereby violating California law at the time, which prohibited foreign governments from owning insurers in the state.

Most of the original parties named as civil defendants, including Credit Lyonnais, reached a $600 million out-of-court settlement in February. The state gained another $110 million when Artemis settled criminal allegations.

In May, jurors cleared Artemis’s owner, billionaire Francois Pinault, of any wrongdoing but found his company conspired with a subsidiary of Credit Lyonnais and other investors to defraud California regulators.

The jury determined Artemis’ actions caused harm to Executive Life policyholders.

Copyright 2005 Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.

Schwarzenegger signs auto insurance, safety legislation

California Gov. Arnold Schwarzenegger has signed several bills dealing with automobile insurance and safety. SB 20 legislation will extend a low-cost auto insurance program through 2011. SB 150 requires insurance companies to provide consumers with a written specific reason for declining or cancelling insurance. And SB 608 provides consumers more representation before the state Public Utilities Commission.

SB 20, the low-cost auto insurance bill, extends the expiration date of the program for another four years and expands it to six other counties, including Alameda, Fresno, Orange, Riverside, San Bernardino and San Diego. The program was first established in 1999 in Los Angeles and San Francisco counties. On Jan. 1, 2006, the state Department of Motor Vehicles will require electronic proof of insurance from insurers. It also will begin suspending the registrations of vehicles with 45 days of advance notice when coverage lapses and is not replaced.

SB 150 requires insurance companies to provide a written reason for declining or cancelling an insurance policy. Samuel Sorich, president of the Association of California Insurance Companies, said his organization asked Schwarzenegger to veto the bill because the legislation will add extra paperwork for insurance companies and is not needed.

Meanwhile, ACIC has commended Gov. Arnold Schwarzenegger for signing into law two bills designed to improve highway safety.

AB 1325 addresses motor vehicle speed contests, and AB 1474 amends the state’s provisional licensing program. Both measures become effective Jan. 1. 2006.

AB 1325 by Assemblyman Juan Vargas, D-San Diego, increases the minimum imprisonment penalty for illegal street racing from one to 30 days. It also increases the maximum imprisonment penalty from 90 days to six months.

AB 1474 by Assemblyman Bill Maze, R-Visalia, makes two changes in California’s graduated, or provisional drivers license program-which places restrictions on licenses of beginning teen drivers.

The legislation extends from six months to one year the period when graduated drivers licensees are prohibited from transporting individuals under the age of 20. In addition, AB 1474 expands the restriction on driving between the hours of midnight and 5 a.m. to 11 p.m. and 5 a.m.

American Agents Alliance changes name to include brokers

The American Agents Alliance has changed its name to the Alliance of Insurance Agents and Brokers. The name change was unveiled Sept. 30, 2005, at the association’s annual convention in Indian Wells, Calif.

David Nielson, president of the Alliance of Insurance Agents and Brokers, said the new DBA better reflects the alliances the group has built and continues to foster. Then name change also comes at a time of great progress for the association, he said. “Over the past year, we have gone through a metamorphosis. The Alliance is more powerful than ever, fighting and winning numerous key legislative and regulatory battles. We have developed many tools for our members, such as the Alliance Privacy Manual and MVR Compliance Manual. These reference guides are exclusive for Alliance members and they are critical to their business. We continue to develop products and services that will benefit our member agents and brokers,” he said.

Policyholders of insolvent insurers receive $386 million

California Insurance Commissioner John Garamendi has announced that $386 million has been distributed this year to policyholders and claimants of insolvent (bankrupt) insurers liquidated through the state’s Conservation and Liquidation Office (CLO).

Through the CLO, a service organization responsible for the rehabilitation and/or liquidation of troubled California insurance companies, the Commissioner has distributed in excess of $1 billion since returning to the Insurance Commissioner’s post in 2003.

“The integrity of the insurance system depends upon the fair payment of claims made by policyholders, even if the company that sold the policy has endured financial problems,” Garamendi said. “Our work at the CLO will help protect these affected policyholders and ensure the integrity of the insurance system.”

This year’s pay out activity is a continuation of the Commissioner’s plan during the past two years to get relief to injured policyholders and claimants who have suffered financial losses and hardships due to major insurer insolvencies in the past decade. In 2003, the CLO distributed $587 million; in 2004 it distributed $496 million; and from 2003-2005 the CLO closed 27 liquidated companies and plans to close another five by the end of 2005.

A key beneficiary of these recent distributions is the California Guaranty Associa-tion that serves as a safety net for policyholders who are affected by insurance company failures.

To date in 2005, CIGA has received approximately $185 million from the CLO distributions, and should receive an additional $16 million this year.

Colorado

OSHA, Home Builders Association sign home safe partnership

A partnership between the Occupational Safety and Health Administration (OSHA) and the Home Builders Association (HBA) of Metro Denver will reportedly identify and abate home construction site hazards and prevent hazards by educating workers on proper safety procedures. A signing event was held in Arvada, Colo.

The “Home Safe Colorado Partner-ship” expands from one covering the seven-county area of Adams, Arapahoe, Boulder, Broomfield, Denver, Douglas and Jefferson Counties to projects throughout Colorado. HBA contractors have agreed to take responsibility for the safety and health of their subcontractors in the agreement.

Key to the new program is the “Home Safe Ten-Point List: A Guide to Safe Work Practices” booklet in both English and Spanish that will be used by all Home Safe partners to meet or exceed OSHA construction standards and protect their workers.

Home Safe Colorado follows on two previous partnerships in 1998 and 2002 and is designed to reduce accidents and workers’ compensation claims in the home building industry.

Washington

Most Wash. residents lack home inventory summary:

The aftermath of Hurricanes Katrina and Rita revealed horrible stories of property loss. However, according to a recent PEMCO Insurance poll, most Washingtonians have not taken a simple step that could prevent similar losses from happening: creating a home inventory.

“We might not have hurricanes in Washington, but we certainly have earthquakes and other unforeseen disasters,” said Jon Osterberg, PEMCO spokesman. “A personal video or photo inventory is a quick, easy way to protect your valuables, and provide your family with peace of mind in times of crisis.”

According to the poll, only four in 10 Washington homeowners take inventory of their possessions, and of those 75 percent update them regularly.

“After a major loss such as a fire, insurance companies want an inventory of lost items,” Osterberg said. “Without an inventory, chances are homeowners miss many things when creating a list from memory.”

Osterberg said even the most attentive homeowners forget what they own. “Take this simple test-identify a dresser drawer or kitchen cabinet, and create a list of what you think is in there. Then, open the drawer or cabinet and compare.”

“The fastest way to create an inventory is by using a still camera or a video camera,” Osterberg said. “A regularly updated set of pictures or a tape will make it very easy for you to recall your belongings.”

A personal video inventory can provide homeowners with a concrete inventory of all their items. Other benefits include: having photographic evidence of not just all belongings, but the home itself; being able to determine and verify missing items after a theft; recording serial numbers of electronics for warranty purposes; helping police and investigators track missing items and locate perpetrators; helping contractors and landlords repair structural damage; and verifying the contents of a home for applicable taxes.

PEMCO recommends the following steps to complete a home inventory:

1. Start your video by introducing yourself. Give the date, your address, and a brief history of your home including when it was built, when you purchased the property and any renovations or additions.

2. Shoot video in a standard sequence beginning with the doorway and continuing around the room to encompass all of the furniture and decorations on the wall, as well as any molding, paneling or floor coverings.

3. Next, do closeups of individual pieces-furniture, artwork, china and so on, in appropriate detail. As you do, name the item and describe it briefly. Give valuable pieces a monetary value, if known. Proceed in a logical room-by-room sequence.

4. Stop the camera and reposition items to show makers’ names orlabels, marks on the bottom, repairs, restorations or blemishes. Forsets of china, silver or glassware, arrange a place setting or display showing one of each item. Narrate onto the tape the number of complete sets in a collection.

5. Open every drawer, cabinet, closet and storage area and photograph the contents.

6. Photograph the serial number of every device (computer, TV, VCR, etc.) that has a serial number. If the number is too small to photograph, write the number down in large letters and then photograph that.

Osterberg said an inventory is only beneficial if it’s accessible. “Homeowners should not keep their inventory lists, tapes or pictures in the home,” he said. “They need to put them in a safe deposit box or with a friend or relative out of the area.”

Anyone wanting to compare their own answers with respondents to the PEMCO Northwest Insurance Poll can do so by visiting www.pemco.com.
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