Top 10 Midwest Insurance Journal Stories of 2021

December 30, 2021 by

News of an Ohio jury’s conclusion that major pharmacy chains helped fuel the opioid crisis and a 6th Circuit’s reversal of a finding that COVID orders caused direct physical loss topped the headlines of Insurance Journal’s Midwest region in 2021.

Stories about Illinois’ biometric privacy laws piqued readers’ interest, as did stories on Allstate’s agreement to sell most of its Illinois campus and Constellation Insurance’s $1 billion acquisition of Ohio National.

Midwest readers also gravitated towards a story about a lawsuit involving GEICO and STDs and another involving an Illinois mayor sentenced in an insurance procurement case.

Here are the Top 10 Midwest Insurance Journal news stories of 2021

Just before Thanksgiving a jury in Cleveland, Ohio decided that Walmart Inc., CVS Health Corp. and Walgreens Boots Alliance Inc. helped fuel the opioid crisis by failing to properly monitor opioid prescriptions. The jury ruled in favor of Ohio’s Trumbull and Lake Counties, who claimed the pharmacy chains failed to create legally mandated monitoring systems to detect illegitimate opioid prescriptions.

The two Ohio municipalities are seeking more than $1 billion each from the major pharmacy chains to replenish depleted budgets for drug treatment, social services and police. A judge will hear arguments in May about the counties’ compensation claims.

The Ohio verdict is the first in the four-year opioid litigation. Similar cases are playing out around the country.

Holly Froum, a Bloomberg Intelligence, said the drug industry faces about $50 billion in exposure from state and local government suits over the painkillers.

“The jury’s decision sounds a bell that should be heard by pharmacy companies around the country,” Mark Lanier, the Ohio counties’ lead lawyer, said after the verdict was announced. “Laws regarding proper monitoring of prescription drugs are be taken seriously and not ignored or downplayed.”

The companies all said they would appeal the verdict.

In late September, a panel of the 6th Circuit Court of Appeals reversed a rare policyholder win in a COVID-19 related business-interruption claim, arguing that government orders that restrict the use of a property do not constitute a “direct physical loss or damage” that requires coverage.

The case involved the owners of Henderson Road and several other restaurants based in Ohio, Michigan, Pennsylvania and Florida, who sued Zurich after the carrier denied their business interruption claims.

U.S. District Judge Dan Aaron Polster granted summary judgment in favor of the restaurants’ breach-of-contract claims, but dismissed a complaint that the carrier had acted in bad faith.

In a separate lawsuit, the Ohio Supreme Court has been asked to decide whether government shutdowns can cause a direct physical loss.

“Why the 6th Circuit didn’t wait for that decision (or certify to the Ohio Supreme Court the closely related question in Santo’s and Henderson) is a mystery,” wrote University of Pennsylvania Law professor Tom Baker, who tracks COVID-19 litigation.

Allstate Corp. is banking on the future of remote work.

In late November, Allstate announced it had reached an agreement to sell the property making up the majority of its campus in Northbrook, Illinois, to Dermody Properties for approximately $232 million.

The company said it is selling the property as employees have more choice about where they work and many are choosing to work from home. Allstate plans to keep a significant presence in the Chicago area, including its existing office space in downtown Chicago.

The sale is expected to close in 2022.

Allstate said the sale will also reduce real estate expenses and further advance its multi-year initiative to increase personal property/liability market share by building a low-cost insurer with broad distribution.

One of the region’s most popular features came from Insurance Journal’s former Midwest Editor Stephanie Jones, who profiled workers’ comp provider Omaha National. Since its launch in October 2017, the company has gone from $0 to $100 million of in-force premium and grown from a six-person operation to one with more than 150 employees.

“2020 ended up being a great year for us. We actually grew faster than we had originally planned, said Reagan Pufall, president and CEO of the managing general agent (MGA) / insurance carrier. We had great sales success. We started working with more and more broker partners and forming relationships in states with agencies that we enjoy working with. And at the same time, we’ve been able to maintain one of the most favorable loss ratios in the industry. Even though we’re a young startup company, our loss ratio is exceptionally low.”

Over the summer, the Omaha, Nebraska-based company had to move into a new office building “because we’ve run out of room where we are,” according to Pufall. “Five years from now, we expect to be well over $400 million in-force premium.”

Omaha National launched as an MGA with California as its initial target market and is now offering coverage in at least 14 states. The company had plans to continue to expand into other states, including New York later in 2021.

One big advantage Omaha National has going for it is that it develops its own operational software in-house.

“It will allow us to perform everything we do at a higher level of effectiveness and efficiency — from underwriting to policy management to claims management. Everything we do will be done in within a single application,” said Pufall. “And yes, at some point, our plan is to have outward facing aspects of that application that will foster great business working relationship and workflow between us and our broker partners.”

In one of the more quirky Midwest stories of 2021, a Missouri woman is suing GEICO after contracting a sexually transmitted disease in a car insured by the company.

In her lawsuit, the woman alleges that she had a sexual relationship with the insured, a man, in late 2017 including unprotected sex in the latter’s 2014 Hyundai Genesis. The woman says that had been previously diagnosed with anogenital human papillomavirus (HPV), but he did not tell her about his condition or take steps to prevent transmitting the virus.

The woman, who was diagnosed with anogenital HPV in 2018, sent a demand letter to GEICO seeking $1 million in February, triggering a declaratory judgment from the company. GEICO investigated the claim and found that the woman’s male partner told her “on three different occasions” that he had been diagnosed with HPV-positive throat cancer. The man also said that the two had sex in locations other than the insured car.

The man was covered by a Geico auto policy and an umbrella policy that only applies if the auto policy provides coverage.

In March, the woman and man entered into an agreement in Jackson County, Mo. Circuit Court awarding the woman $5.2m but limiting the partner’s liability to her, leaving the latter free to pursue recovery from GEICO.

GEICO said it was unaware of this agreement until afterwards and has filed motions to amend and vacate the $5.2m judgment, which it argues was the result of a “collusive and non-adversarial arbitration proceeding.” GEICO has moved for a new trial and appealed the judgment.

This spring, the Illinois Supreme Court sided with a policyholder seeking defense from its insurer for a lawsuit brought by a customer of a tanning salon alleging the insured unlawfully disclosed the customer’s biometric information to a third party.

In the written opinion delivered in West Bend Mutual Insurance Co. v. Krishna Schaumburg Tan Inc., Justice P. Scott Neville Jr. explained that Krishna Schaumburg Tan Inc. (Krishna), a tanning salon and franchisee of L.A. Tan, had been sued by customer Klaudia Sekura who claimed that Krishna had violated provisions of Illinois’ Biometric Information Privacy Act (Act), which “regulates the collection, retention, disclosure, and destruction of biometric identifiers and information.”

Krishna had collected Sekura’s and other customers’ fingerprints. Sekura’s suit alleged that Krishna violated the act by disclosing “biometric information containing her fingerprints ‘to an out-of-state third party vendor, SunLync,'” without her permission. Krishna filed a claim with its insurer, West Bend Mutual Insurance Co. (West Bend), requesting a defense. “West Bend filed a declaratory judgment action against Krishna and Sekura contending that it did not owe a duty to defend Krishna against Sekura’s lawsuit,” Neville wrote.

Krishna filed a cross-motion for summary judgement, which Sekura joined seeking “alternative relief.” Both the trial and appellate courts found that West Bend had a duty to defend Krishna. The insurer appealed to the Illinois Supreme Court, which supported the decisions of the lower courts.

Illinois enacted the law in 2008; it recognizes the uniqueness of biometric identifiers such as retina or iris scans, fingerprints, voiceprints, palm prints and face geometry. It requires private entities to publicly disclose their policies regarding biometric information and obtain consent from individuals for the use of such information. In January 2020, Facebook agreed to pay $550 million to Illinois users of the social media site that had alleged in a class action lawsuit that Facebook’s facial recognition feature violated their privacy under the Illinois law.

America’s digital privacy divide is on full display in Illinois, where there is requirement to some form of public disclosure or consent to biometric screening. Because Illinois’ law prohibits private sector companies and institutions from collecting biometric data from unsuspecting citizens in the state or online, no matter where the business is based, data cannot be sold, transferred or traded.

This has led to hundreds of David-and-Goliath legal battles against some of the world’s most powerful companies.

Cases are pending against internet giants Amazon.com Inc. Apple Inc. and Alphabet Inc.’s Google, as well as brick-and-mortar corporations such as McDonald’s Corp.

If a company is found to have violated Illinois law, citizens can collect civil penalties up to $5,000 per violation compounded by the number of people affected and days involved. No state regulatory agency is involved in enforcement.

In one of the most talked about Midwest acquisitions of the year, Canada’s Constellation Insurance Holdings, Inc. acquired Cincinnati-based life and disability insurer Ohio National Mutual Holdings, Inc. and its wholly owned subsidiary Ohio National Financial Services, Inc. for a total consideration of $1 billion.

The $1 billion figure includes both member consideration and new capital infused in the business, as part of its demutualization process. The transaction includes the conversion of ONMH to a stock company and the issuance of all of its newly issued stock to Constellation.

Established in 1909, Ohio National sells financial services in 49 states. As of December 31, 2020, its affiliated companies have US$41.2 billion in assets under management. Its products are issued by The Ohio National Life Insurance Co. and Ohio National Life Assurance Corp.

A former mayor of a southwest Illinois town became the second area mayor to plead guilty to lying to federal agents investigating a case involving commission payments related to the placement of casualty loss and workers’ compensation insurance for an Illinois municipality.

The U.S. District Court for the Southern District of Illinois charged Tim Lowry, an insurance agent and the former mayor of Red Bud, Illinois, with falsely testifying in April 2019 to an FBI agent and an officer with the federal Southern Illinois Public Corruption Task Force that he did not pay Kevin Hutchinson, the former mayor of Columbia, Illinois, part of a commission Lowry received for facilitating an insurance contract with the city of Columbia for casualty loss and workers’ comp coverage.

Lowry, who owned the Ackermann Agency in Red Bud, directed payment through a third party to Hutchinson in the amount of $15,854 for placement of the insurance contract with the city of Columbia, court documents state.

The Associated Press reported that before he resigned Hutchinson had been serving in his fourth term as mayor of Columbia, a community of about 11,000 located on the Mississippi River about 13 miles south of St. Louis.

Under Illinois law, as elected public officials both Lowry and Hutchinson were prohibited from having any direct or indirect personal financial interest in contracts with the municipalities they governed.

Although Lowry could face up to five years in prison, prosecutors are recommending a sentence of one year probation, a $1,000 fine and 40 hours of community service. Lowry has resigned as mayor of Red Bud, a small community also near St. Louis.

Lowry’s sentencing was scheduled for Nov. 22.

The December tornado that tore through Edwardsville, Illinois and caused the collapse of an Amazon.com Inc warehouse, killing six, is the focus of a U.S. Occupational Safety and Health Administration investigation.

OSHA) has six months to complete its investigation, issue citations, and propose monetary penalties if violations of workplace safety and/or health regulations are found.

Six workers were killed when the warehouse buckled under the force of a devastating storm, police said. A barrage of tornadoes ripped through six U.S. states, leaving a trail of death and destruction at homes and businesses stretching more than 200 miles.

Workers told Reuters that they had been directed by Amazon mangers to shelter in bathrooms after receiving emergency alerts on mobile phones from authorities. Some workers said they had mobile phones with them despite what they believed was an Amazon policy preventing them from having the phones in their possession while at work. Amazon said there was no policy preventing employees or contractors from having phones at work.

Amazon said employees were directed to shelter in place at a designated assembly area at the front of the building, which was near a restroom.

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