Louisiana Insurance Commissioner Donelon Elected President of the National Association Insurance Commissioner for 2013

James J. Donelon, Louisiana Commissioner of Insurance, has been elected to serve as President of the National Association of Insurance Commissioners for 2013.
The National Association of Insurance Commissioners (NAIC), the national insurance regulatory advisory organization made up of the chief state insurance regulators, has elected its slate of officers for 2013, including James J. "Jim" Donelon as President.

In addition to President of the NAIC, Donelon also serves on the NAIC Executive Committee and as chairman of the NAIC Surplus Lines Task Force.
A former member of the Louisiana House of Representatives, Donelon joined the staff of the Louisiana Department of Insurance in 2001, serving as Chief Deputy Commissioner and Executive Counsel. Donelon was appointed as Louisiana Commissioner of Insurance in 2006 to fulfill the unexpired term of the previous Commissioner. He was then re-elected as the Commissioner of Insurance in 2007 and again in 2011. In addition to his new position as President of the NAIC, Donelon also serves on the NAIC Executive Committee and as chairman of the NAIC Surplus Lines Task Force.[1]

Donelon and the other new NAIC officers assume their new duties on January 1, 2013.
Other NAIC officers elected for 2013 include North Dakota Insurance Commissioner Adam Hamm as President-Elect, Montana State Auditor and Commissioner of Securities and Insurance Monica J. Lindeen as Vice-President, and Pennsylvania Insurance Commissioner Michael F. Consedine as Secretary-Treasurer. Donelon and the other new NAIC officers assume their new duties on January 1, 2013.

One of Donelon's first duties as NAIC President will be heading up the search for the organization's next CEO because the current NAIC CEO, Terri Vaughan is preparing to depart.

Donelon indicated that finding the right person to serve as CEO of the NAIC is "vitally important" to preserving the state insurance regulation system, citing the increasing encroachment of the federal government into the traditionally state-based insurance regulatory scheme. Although Donelon supports federal insurance regulation with respect to international commerce, domestic insurance regulation is a different matter:
We support it as necessary on the international level but we don’t feel it is appropriate for the federal government to take over or even further encroach on the success of state regulation going back over 100 years now.[2]
Donelon is interested in international insurance matters from a state-based perspective, as well. He recently attended a conference of Latin American insurance supervisors to discuss emerging issues in the insurance world such as Europe's Solvency II initiative. Additionally, international reinsurance regulation is important to Donelon because Louisiana is a coastal state with property and casualty reinsurance issues fundamentally tied to the foreign-dominated reinsurance market.[3]

1James J. Donelon, Louisiana Commissioner of Insurance, Louisiana Department of Insurance, December 10, 2012.
2NAIC president: CEO to be selected to take NAIC to "next level", LifeHealthPro, Elizabeth D. Festa, November 19, 2012.
3NAIC president: CEO to be selected…, id.

Concurrent Causation of Loss and the Named Storm Deductible in the Wake of Hurricane Isaac

In the wake of Hurricane Isaac, many homeowners may find themselves dealing with a pair of important issues with their homeowners insurance policies: the "concurrent causation of loss" exception and the "named storm" deductible.

Concurrent Causation of Loss

While there are several different versions of concurrent causation provisions, all attempt to reduce or eliminate insurance coverage where two different perils, one covered by the policy and one excluded from coverage by the policy, act together, or concurrently, to cause damage or loss.

The term "peril" means an effect, action or force that causes damage or loss. The phrase "concurrent causation" generally refers to the combination of more than one peril that causes a specific damage or loss. The general rule is that, if damage is caused both by a peril that is covered by the policy, and a peril that is not covered by the policy, then the insurance coverage applies for the specific damage or loss.

However, insurance policies often include provisions or exclusions that attempt to modify or eliminate that general rule.

Certain provisions state that insurance coverage is only applicable when the predominate or superior peril causing the damage is covered by the policy. Thus, the homeowner would have to show that the damage he or she sustained was caused more by the covered peril than the uncovered peril.

Other provisions exclude all coverage when one of the two concurrent perils that cause loss or damage is not otherwise covered by the policy’s provisions.

Consider the following example:

Homeowners Insurance Policy "A" provides insurance coverage for damage to the insured property caused by wind, but excludes damage caused by flood.

Homeowners Insurance Policy "A" also includes a concurrent causation of loss provision stating that insurance is available under the policy only for loss caused by two or more different perils when the predominate peril producing loss is otherwise covered by the policy.

Assume a home insured by Homeowners Insurance Policy "A" suffers major damage by wind at the same time as minor damage by flood. In this case, the damage would be covered by the policy.

On the other hand, if the home suffers major damage by flood while only suffering minor damage by wind, then the entire loss would be excluded from coverage by the policy.

Another example:

Homeowners Insurance Policy "B" provides coverage for damage caused by wind, but excludes damage caused by flood.

Homeowners Insurance Policy "B" includes a concurrent causation of loss provision indicating that, when loss is caused by two or more different perils at the same time, if any peril causing damage is excluded under the policy, then the entire loss is excluded from coverage, even if the other perils would otherwise be covered by the policy.

If a home insured by Homeowners Insurance Policy "B" suffers any damage by flood concurrently with any damage by wind, then the loss or damage would be excluded from coverage under the policy.

Property owners should read their property insurance policies carefully to determine if their policy includes a concurrent causation of loss provision, and understand what effect, if any, the provision might have on an insurance claim.

Named Storm Deductible

Homeowners filing claims for damage caused by Hurricane Isaac may be in for a surprise: the so-called "named storm" deductible.

Louisiana state law allows insurance companies to include a special deductible that is specifically applicable to damage caused by named storms or hurricanes. This "named storm" deductible can be as much as four percent (4%) of the value of the insured property.

Consider the following example:

Homeowners Policy "C" has a general deductible of $1,500 on losses covered under the policy, but it also includes a named storm deductible of two percent (2%). Assume that the home covered by Homeowners Policy "C" in this example has an insured value of $150,000.

With respect to damage caused by Hurricane Isaac, the homeowner’s deductible would be $3,000, rather than the standard $1,500 deductible.

If the insured home suffers $10,000 of covered damage during the named storm, the insurance company would pay only $7,000 of that damage, rather than $8,500 under the general deductible.

While named storm deductibles in homeowners insurance policies are a relatively recent development in Louisiana, similar named storm deductibles have been included in commercial and other property insurance policies for some time, and commercial named storm deductibles can rise as high as ten percent (10%) or fifteen percent (15%) of the insured property value.

Significantly, Louisiana law expressly provides that any provision of a homeowners policy that would apply more than one deductible to damage from a single incident covered by the policy is void and not enforceable under the law.

Homeowners should read their policies, or check with their insurance agent or insurance company, to determine whether their homeowners policy has a named storm deductible, and prepare accordingly.

Louisiana Becomes the First Insurance Department to Share Info with FinCEN

The Louisiana Department of Insurance and the federal Financial Crimes Enforcement Network have agreed to share information in an effort to combat fraud and other financial crimes.
Louisiana has become the first state to agree to share information with the Financial Crimes Enforcement Network (FinCEN), a division of the U.S. Treasury Department, according to a recent press release by the Louisiana Department of Insurance (LDOI).

Louisiana Commissioner of Insurance, Jim Donelon, and the FinCEN Director, James H. Freis, Jr., signed a Memorandum of Understanding in late April that will allow the LDOI and FinCEN to "share important information enabling both parties to better protect the industry and consumers from criminal activity and fraud."[1]
The new [Memorandum of Understanding] will allow both parties to improve and enhance the level of [anti-money laundering] cooperation and seeks to efficiently maximize their combined resources in discharging their statutory obligations to defend against money laundering, fraud and other financial crime. The collective goal is to enhance communication and coordination between FinCEN and the Louisiana Department of Insurance to help Louisiana insurance companies better identify, deter and interdict financial crime and efficiently convey that information to FinCEN.[2]
Director Freis pointed out that Commissioner Donelon's "influential role as president-elect of the National Association of Insurance Commissioners will help set the standard for other states to follow" Donelon's lead in partnering with FinCEN to share information. Commissioner Donelon, for his part, indicated that the partnership with FinCEN was "a significant tool" that should enhance the LDOI's efforts to better protect Louisiana consumers from fraud and other criminal activity.[3]

Details on what types of information will be shared under the FinCEN agreements remains unclear.
Details on what types of information will be shared under the FinCEN agreements remains unclear, including whether individuals and companies regulated by the Louisiana Department of Insurance will have any notice or opportunity to object before information is shared with FinCEN.

Because FinCEN's regulatory activities are specifically targeted at financial crimes, the nonpublic and personally identifiable financial information of both entities regulated by the Louisiana Department of Insurance, and consumers that transact business with those entities, may be implicated by these information sharing agreements with FinCEN.

Summary of Insurance-Related Bills Pre-Filed for the 2012 Regular Session of the Louisiana State Legislature

—» UPDATED: The 2012 Regular Session of the Louisiana State Legislature convenes on March 12, 2012, but bills for consideration during the session have already begun to be pre-filed to meet the pre-filing deadline on February 29, 2012.

Below is a summary provided by Louisiana Insurance Regulatory Law of some of the pre-filed bills relating to insurance, insurance law and the insurance industry, culled from the digests of the bills in their pre-filed form:

Senate Bill No. 118
To revise LSA-R.S. 22:1189 to add independent review of benefit determinations to the authority of the Louisiana Commissioner of Insurance to promulgate regulations and marketing practices.

—» Senate Bill No. 139
The current law provides that a lessee of a commercial lease has the option of purchasing insurance from an insurance agent and/or an insurance company of his own selection, as long as such are licensed to transact business in the State of Louisiana and acceptable to the lessor. The proposed law creates an exception to this provision for a consumer lease between an employer and an employee for a motor vehicle.

—» Senate Bill No. 146
Provides that a public adjuster shall not also act as an appraiser or perform an appraisal function relating to a claim on which he is adjusting or investigating.

House Bill No. 82
Elimiates the current requirement that a health insurer obtain prior written consent from the insured before seeking reimbursement from an insurer that provides automobile medical payment coverage to the insured. Also revokes the current provision of the law that authorizes health insurers to seek reimbursement from a medical payments insurer for only the outstanding balance remaining under an automobile policy for medical coverage after a period of nine (9) months from the date of the accident.

House Bill No. 94
Amends certain sunset provisions such that the Louisiana Department of Insurance's current operational termination date of July 1, 2012 is extended until July 1, 2017.

House Bill No. 150
Clarifies that health maintenance organizations that do business in Louisiana must maintain capital and surplus in the amount of three million dollars ($3,000,000).

House Bill No. 154
Extends the time period which triggers an insured's refund to begin to accrue interest at a rate of 1.1% per month from 30 days to 60 days after the insured's letter of cancellation, elimination or reduction to the insurer or delivery of the request for such a refund. Also provides that if a refund of twenty-five dollars ($25) or less, including interest, is due an insured who continues to maintain a policy of insurance with the insurer or an affiliated insurer, that insurer may apply the refund to the insured's next premium in the form of a credit upon written notice to the insured.

House Bill No. 160
Adds vehicle mechanical breakdown insurers and property residual value insurers among those insurers assessed an annual financial regulation fee of one thousand dollars ($1,000).

House Bill No. 193
Provides relative to compensation of personnel employed by the Louisiana Commissioner of Insurance to conduct examinations of insurers by removing certain of the current provisions relative to the disposition of such compensation.

House Bill No. 201
Limits an injured third party's right of direct action against an insurer to certain exceptions, and provides that in the absence of these exceptions, the injured third party must take legal action against the insured party.

House Bill No. 229
Adds certain master limited partnerships to the certain limited partnerships or limited liability companies in which a Louisiana domestic insurer may invest or hold an interest.

House Bill No. 247
Extends the 25% rebate that automobile insurers offer to active military personnel to reservists and members of the Louisiana National Guard.

—» House Bill No. 257
Requires Louisiana Citizens Property Insurance Corporation to keep track of the refunds due as a result of assessments collected on homeowners' insurance policy premiums, and to send these refunds to insureds on its own initiative rather than requiring the insured to request the refund as currently provided. Also requires Citizens to report annually to the Commissioner of Insurance regarding the number of insureds who have paid the Citizens assessment, and the amount of refunds to be distributed.

—» House Bill No. 258
Requires that state-mandated discounts and credits available for homeowners' insurance must be disclosed to policyholders in an insert in the insurance policy. Also requires a disclosure of discounts and credits that the insurer voluntarily offers to policyholders. This disclosure is for informational purposes only, and shall not affect coverage provided in a policy.

—» House Bill No. 260
The current law prohibits a contracted healthcare provider from discount billing, dual billing and collecting or attempting to collect an amount in excess of the contracted reimbursement rate for covered health care services. The proposed law provides that this provision shall not prohibit a contracted health care provider from enforcing rights relative to privileges on payment pursuant to the present law.

—» House Bill No. 304
Reduces the Bail Bond Apprentice Program, whereby a licensed bail bond producer employs and trains an apprentice, from six (6) consecutive months to three (3) consecutive months.

—» House Bill No. 308
Provides that it is an unfair method of competition, as well as unfair and deceptive, for an automobile insurer to establish a contract or agreement with any individual or company to manage, subcontract, broker or arrange insurance repair for any glass repair or replacement on a motor vehicle. Additionally, repeals the present law declared to be unconstitutional in the case of Globe Glass & Mirror Co. v. Brown, 917 F.Supp. 447 (E.D. La., 1996) (the practice of limiting which company an insurer may contract with for repairs is unconstitutional because it is an impermissible violation of the dormant Commerce Clause).

This summary will be updated as more bills are pre-filed.

LDOI Issues Notice of Intent Regarding Regulation 100: Coverage of Prescription Drugs through a Drug Formulary

Proposed Regulation 100 drafted by the Louisiana Department of Insurance requires three different and distinct types of notice by health insurance plan issuers to enrollees with respect to coverage of prescription drugs through a drug formulary, and requires approval by the Department of certain modifications to prescription drug coverage.
The Louisiana Department of Insurance has released a Notice of Intent in the January edition of the Louisiana Register proposing Regulation 100 pertaining to the recently enacted Coverage of Prescription Drugs through a Drug Formulary Subpart of the Louisiana Insurance Code. Proposed Regulation 100 includes provisions intended to clarify and implement the Drug Formulary Subpart, which establishes certain restrictions and requirements for health insurance companies issuing health benefit plans that cover prescription drugs and that use one or more drug formularies to indicate the prescription drugs covered under such plans.[1]

Proposed Regulation 100 requires three different and distinct types of notice.
The Drug Formulary Subpart requires a notice in "plain language" to each enrollee of any affected health plan that the plan uses a drug formulary and certain other information. Proposed Regulation 100 uses this requirement as the basis for the first of "three different and distinct types of notice" that a health insurance plan issuer must provide to its enrollees.[2]

Under proposed Regulation 100, the first notice must include the following:
  • The fact that the health plan uses one or more drug formularies;
  • An explanation of how a drug formulary functions;
  • A description of how prescription drugs are designated for inclusion or exclusion in a drug formulary;
  • A statement of how often the drug formulary is reviewed;
  • A statement that an enrollee may contact the health insurer to determine whether a specific drug is included in a particular drug formulary;
  • A statement that the inclusion of a drug in a drug formulary does not guarantee that an enrollee's physician or other authorized prescriber will prescribe the drug in any particular instance.[3]
The form of this notice must be submitted to the Department for approval, and once it has been approved, the issuer may only use that form.

Plans must offer any drug previously covered under the plan at the same cost until the plan renewal date.
The Drug Formulary Subpart also requires that a health plan issuer offer any prescription drug approved or covered under the plan for a medical condition or illness, regardless of whether the drug is removed from the health plan drug formulary before the enrollee's plan renewal date, to each enrollee at the contracted benefit level until the plan renewal date.[4]

The second notice required by health plan issuers under proposed Regulation 100 provides enrollees with information regarding this provision of the Subpart. Plan issuers must maintain written records of enrollees who request confirmation of coverage, including the name of the enrollee, the specific drug, the date of the request and the date of the response by the plan issuer. Further, plan issuers must submit a copy of these written records to the Department with fifteen (15) days of a written request by the Department.[5]

Health plan issuers must notify all enrollees of any modification of drug benefit coverage.
The third notice promulgated under proposed Regulation 100 requires that health plan issuers inform enrollees, in both the individual and the small or large group markets, of the modification of benefit coverage or drug coverage of a particular product. This notice must be provided to all enrollees, including employers in the case of group coverage, at least sixty (60) days prior to the effective date of any such modification.[6]

Proposed Regulation 100 also defines what a "modification affecting drug coverage" means under the law:
  1. Removing a drug from a drug formulary;
  2. Adding a requirement that an enrollee receive prior authorization for a drug;
  3. Imposing or altering a quantity limit for a drug;
  4. Imposing a step-therapy restriction for a drug;
  5. Moving a drug to a higher cost-sharing tier, unless a generic alternative is available.[7]
Any such modification affecting drug coverage must be submitted to the Department for approval 120 days prior to the renewal date of the policy form for which it is intended. [8]

A health plan issuer may only modify its prescription drug coverage if the following conditions are met:
  1. The modification occurs at the time of coverage renewal;
  2. The modification is approved by the Department;
  3. The modification is consistent with state law;
  4. The modification is effective on a uniform basis; and
  5. The plan issuer notifies the enrollees (including the employer in the case of group coverage) at least sixty (60) days prior to the effective date of the modification.[9]
The Notice of Intent regarding Louisiana Department of Insurance Regulation 100 is available here.

1.  LSA-R.S. 22:1060.2.
2.  LSA-R.S. 22:1060.2; LAC 37:XIII.Chapter 141, §14109 A.
3.  LSA-R.S. 22:1060.3 A; LAC 37:XIII.Chapter 141, §14109 B.
4.  LSA-R.S. 22:1060.3 A.
5.  LAC 37:XIII.Chapter 141, §14109 C.
6.  LAC 37:XIII.Chapter 141, §14109 D; LSA-R.S. 22:1068 D; LSA-R.S. 22:1074 D.
7.  LAC 37:XIII.Chapter 141, §14111 A.
8.  LAC 37:XIII.Chapter 141, §14111 B.
9.  LAC 37:XIII.Chapter 141, §14115 A, §14117 A; LSA-R.S. 22:1068 D; LSA-R.S. 22:1074 D.

Nonprofit Health Services in Louisiana Expanding in Anticipation of Increase in Medicaid Patients

Nonprofit clinics and health services in Louisiana are preparing for the anticipated increase in patients expected to result from the expansion of Medicaid eligibility under the Patient Protection and Affordable Care Act, according to Proquest.
The Affordable Care Act will raise the eligibility of Medicaid to adults who make 133 percent of the federal poverty level compared with Louisiana's current standard of 12 percent. The change is expected to increase Medicaid enrollment in Louisiana to 500,000 people over a five-year period, according to the Kaiser/Urban Institute.
Even with the proposed expansions, however, many are concerned that there isn't a health infrastructure to support the surge of Medicaid patients on the horizon.

Read the full article:


Louisiana Urges Policyholders to Claim LA Citizens Assessment Rebate

The Louisiana Department of Insurance has issued a press release from Louisiana Insurance Commissioner Jim Donelon and Louisiana Department of Revenue Deputy Assistant Secretary Gary Matherne urging anyone who has had a property and casualty policy during the last four (4) years to claim the rebate for the Louisiana Citizens Property Corporation assessment charged on that policy.

An estimated $268 million of assessment rebate remains unclaimed.
More than $11 million of the LA Citizens assessment for 2007 has not been claimed, and the deadline to make claims for 2007 is December 31, 2011. Additionally, an estimated $268 million of the total rebate amount available for 2007 through 2011 remains unclaimed.[1]

Louisiana Citizens Property Insurance Corporation is a nonprofit corporation "created to provide insurance products for residential and commercial property applicants who are in good faith entitled, but unable, to procure insurance through the voluntary insurance marketplace."[2]

Rebates may be available to those who owned certain types of insurance policies in Louisiana between 2007 and 2011.
Individuals and business may have been assessed by LA Citizens if they procured or held insurance policies for one or more of the following lines of business in Louisiana: fire, homeowners' multiperil, allied lines, the property insurance portion of commercial multiperil policies, and the business interruption insurance portion of commercial multiperil policies, or such interruption insurance with respect to commercial properties on a monoline basis.[3]

Policyholders who paid the LA Citizens assessment as part of their insurance premiums are eligible to receive the rebate. Eligible policyholders can claim the rebate as soon as they pay the insurance premium including the assessment, or when filing the Louisiana State Tax Return due each May.[4]
Commissioner Donelon explained that claiming the rebate is simple:
Just fill out the Louisiana Department of Revenue tax form for the year in which you paid the Citizens Assessment and mail or fax it in with your insurance declaration page showing the assessment has been included in the insurance premium. The whole process doesn’t take more than ten minutes.[5]
More information is available from the Louisiana Department of Insurance: LA Citizens assessment rebate press release. The tax forms are also available from the Louisiana Department of Insurance: LA Citizens assessment rebate forms.

LDOI Continues Depopulation of Louisiana Citizens Property Insurance Corporation

With the latest round of annual depopulation completed, Louisiana Insurance Commissioner Jim Donelon has announced that the homeowners insurer of last resort, Louisiana Citizens Property Insurance Corporation, has moved an additional 10,890 homeowners policies into the private insurance market. This should decrease Citizens' market share from 5.3% at the end of 2010 to approximately 4.3%.

Access Home, Capitol Preferred, Centauri Specialty, Lighthouse and Occidental insurance companies all made successful bids to assume policies from Citizens. Since the Louisiana Department of Insurance began the Citizens Depopulation Program in 2008, more than 67,000 policies have been assumed by private insurers from Citizens. More information is available from the Louisiana Department of Insurance's website.

Court Refuses Injunction Against Louisiana State Health Insurance Contracts

The Insurance Journal is reporting that a Baton Rouge Judge has refused to issue an injunction to stop the State of Louisiana from entering into contracts with three private insurance companies to provide healthcare management services for Medicaid recipients, but a different judge has ordered that the proposals submitted by the companies bidding on the project must be made public.

Approximately 800,000 Louisiana Medicaid recipients would have their healthcare managed under the contracts.
The state contracts farm out the management of healthcare services for approximately 800,000 Medicaid recipients to the private companies. Aetna Better Health, Inc., filed a lawsuit against the state, alleging that there were errors in the state procurement process by which the contracts were bid. Aetna sought an injunction to block the execution of the contracts with the private companies, arguing that it would be irreparably harmed by the action.

Aetna, Coventry Health Care of Louisiana, AmeriGroup Louisiana, Inc., AmeriHealth Mercy of Louisiana, Inc., and Louisiana Healthcare Connections all submitted proposals for the various state contracts in the bid process and were all awarded contracts. Aetna and Coventry, however, were not chosen to participate with the other three private companies in one certain contract dealing with coordinated-care networks ("CCNs").

The Insurance Journal indicates that $2.2 billion of the state's $6.7 billion Medicaid program goes to CCNs.

A different court has found that, despite the objections of the private companies, the winning proposals must be made public. According to the Insurance Journal article:
In the related public records suit, Hernandez held a hearing last month and ruled Tuesday that the information does not fall within the exceptions contained in the Louisiana Public Records Act or state Constitution.
After the decision, the Jindal administration has indicated it plans to move forward with the state contracts and intends to start the new program early next year.

Read the full article:

Handicapping Huge Hurricanes, Catastrophe Claims Climbing

Weather-related catastrophe damages in the United States, thusfar in 2011, have risen as high as $35 billion according to the National Oceanic and Atmospheris Administration. This includes all insured and uninsured loss estimates from storms, tornadoes, flooding and heat waves, and it ties a record set in 2008, according to sources cited in a recent article by Dennis Wall.

This year has seen two to three times the number of weather disasters that the United States faces on average annually. Approximately 160 deaths from tornadoes in Missouri pushed the 2011 count of weather catastorphe deaths to 589.

Read the full article: