The majority of legislatures around the country have closed up shop for the year, and, for the most part, the property-casualty insurance industry fared pretty well. This year saw more than 1,000 new state legislators finding their ways around state capitols, and educating this influx of freshmen on insurance matters was paramount to the industry. Perhaps a benefit reaped from the change in state legislative landscape this year was that the property-casualty insurance industry celebrated some fairly significant victories on the issues of rate modernization, tort reform and underwriting freedom.
While budget deficits and social issues received much of the attention of statewide media, the biggest news coming out of the states this year for property-casualty insurers concerned the Dodd-Frank Wall Street Reform and Consumer Protection Act—and a section within it known as the Nonadmitted and Reinsurance Reform Act (NRRA).
As has been the case in the past, rate modernization, the keystone to reforming state regulation, was a high priority. While momentum for rate reform slowed in the aftermath of the financial crisis, the midterm elections brought renewed interest from lawmakers. Nine states saw some form of action on rate modernization in 2011. The biggest wins occurred in Tennessee, Connecticut and Florida.
In Oklahoma, four tort reform bills successfully made their way through the legislative process. The state now has a $350,000 cap on non-economic damages, which brings the state in line with 30 other states with similar caps. Most instances of joint and several liability have been eliminated, and awardees in personal injury or wrongful death lawsuits are now exempt from having to pay federal or state income tax on their award. Oklahoma also joins a growing list of states taking proactive steps to bolster fairness and provide incentive to reduce the number of uninsured motorists by prohibiting uninsured drivers from collecting non-economic damages when they sue after a motor vehicle accident. A similar "no pay/no play" law was enacted in Kansas.
In Wisconsin, first-term Gov. Scott Walker signed the Omnibus Tort Reform Act, which, among other things, limits punitive damages, raises standards for expert testimony, and toughens state rules relating to damages for frivolous claims. South Carolina’s governor also signed a bill that provides limits and certain procedures on awarding of punitive damages.
In the past year, another dozen states—Arkansas, Arizona, Connecticut, Hawaii, Iowa, Kansas, Massachusetts, Montana, Nebraska, New Mexico, Rhode Island and Virginia—have issued bulletins on this issue.
Rhode Island’s Bulletin Number 2011-1,1 issued on March 4, 2011, is typical of the language found in the bulletins. The bulletin begins by noting that some third parties may request insurance producers to issue certificates of insurance that evidence terms or conditions of coverage that may be inconsistent with the underlying insurance policy or contract. The bulletin continues by noting that misrepresenting policy terms or conditions violates state law and subjects the insurance producer to penalties that may include suspension or revocation of the producer’s license.