It’s no surprise that the top legislative issue for the property/casualty insurance industry in 2015 is ride-sharing or transportation network company (TNC) bills. The issue of the new and innovative activity raising insurance coverage concerns emerged during 2014 but legislative calendars allowed for only 10 states to consider bills and just three states—Colorado, California and Illinois—plus the District of Columbia to enact laws. Consequently, as industry representatives prepared for the 2015 session it was expected that many states would be taking up bills.
During the first six weeks of 2015, no less than 25 states began debating the issue, with bills in Georgia, Indiana, Mississippi, Ohio and Washington. NAMIC and other industry organizations are highly engaged in the effort—not to block innovation, but to ensure proper insurance requirements are part of the laws creating a framework for TNC operations. In our view, any bill that gets enacted should recognize that TNC services start when a driver logs on to the smartphone app and ends only when the ride has been completed and the driver has logged off the system. Additionally, bills should make clear that Personal Auto insurers have the ability to exclude commercial activity including TNC services and that specific coverage is necessary to protect drivers and riders.
Insurance advocates could have their hands full dealing only with TNC bills this year, but this issue only tops the list of what is proving to be a very active year for insurance. Other areas that NAMIC and partner advocates will focus on in 2015 include e-commerce, civil justice reform, financial regulation, as well as a smattering of property- and auto-related issues.
There is reason for the industry to be cautiously optimistic about the prospects for positive results in 2015. Historically, Republican legislators have embraced competitive markets more than the other side of the aisle. The tidal wave of red that spread across the country in November’s elections served as an encouraging sign for the insurance industry. As of today, there are 30 GOP-led state legislatures, where Republicans hold 68 of 99 state legislative chambers. Additionally, Republicans now occupy 31 governors’ offices. This shift, while encouraging, must not deter the notion that significant legislative challenges remain. The bottom line is there are hundreds of newly elected state legislators across the country who likely know very little about the property/casualty insurance industry. Building relationships with these newly elected policymakers is a top priority for the coming year.
Civil Justice Reform
Legislative party control probably has the most impact on tort reform or civil-justice-related issues, as the trial bar has traditionally found more allies among Democrats while Republicans tend to heed the concerns of the business community a bit more, but there are always exceptions. Several positive proposals have already been introduced in states such as Maryland, Nevada, New Jersey and New York.
West Virginia is a good example of a state making strides on tort reform. A bill to address trespasser lawsuits swiftly made it to the governor’s desk, while another bill that would abolish joint liability and allow fault to be allocated to non-parties was moving quickly through the Legislature in February.
Earlier this year, lawmakers there introduced an asbestos bill requiring the pre-trial filing of asbestos trust claims, similar to laws enacted in Ohio, Wisconsin and Oklahoma. The bill also requires proof of present physical impairment before an asbestos or silica claim could be brought. Additionally, it would ban punitive damages in asbestos and silica cases to preserve assets for claimants, ban consolidated trials in asbestos and silica cases unless all parties consent to consolidation, and codify the majority rule in cases such as the California Supreme Court’s decision in O’Neil v. Crane Co. The case concluded that a manufacturer is only liable for a product that it puts in the stream of commerce and has no duty to warn about hazards in products manufactured or sold by third-parties. This bill would be perhaps the best asbestos/silica bill in the country if enacted, improving the litigation environment for such claims in the state and providing momentum to help efforts elsewhere.
South Carolina has two comprehensive tort reform bills, one focusing on asbestos bankruptcy trust and seat belt admissibility. The other addresses trespass, punitive damages, innocent seller and noneconomic damages.
A notable development that has the potential to affect the chances for civil justice reform in New York is the removal of longtime Assembly Speaker Sheldon Silver due to corruption charges centering on alleged misdeeds involving asbestos litigation. Silver, who was actually employed by a personal injury law firm, has been known to be an unsurmountable obstacle to getting any tort reform bills passed in Albany. His replacement as speaker, Assemblyman Carl Heastie, also has at least one tie to the trial bar as one of his closest advisors has been retained to lobby for the trial bar for years; yet, tort reform advocates feel they may at least have a chance of long-languishing bills being considered.
Next page: Solvency, corporate governance, e-commerce and natural disaster issues
Solvency, Holding Company, Enterprise Risk Regulation and Corporate Governance
An area that may have less popular appeal than civil justice reform but is nevertheless extremely important to the insurance industry is the implementation of model bills governing financial regulation, developed by the National Association of Insurance Commissioners. These include amendments to the Model Holding Company Act, the model Own Risk and Solvency Assessment Act, and a newly approved Corporate Governance Act. NAMIC’s focus is on ensuring that states stay with the model language that has been vetted through the NAIC’s deliberative process, with special focus on confidentiality of information submitted to regulators.
Forty states have already enacted Holding Company Act changes that were finalized by the NAIC in 2010 as part of its response to risks identified by the financial crisis. We expect at least eight states to introduce bills this year. In addition, there is another set of revisions to the model that include a section on group-wide supervision. This piece will likely be considered in only a few states this year.
ORSA laws, requiring the annual filing of a detailed enterprise risk assessment, have been enacted in 22 states, and new bills are being introduced every day.
As of early February, three states—Iowa, Indiana and Vermont—had introduced or pre-filed bills to implement the corporate governance model, which will require insurers to file an annual disclosure describing various aspects of their corporate governance practices. Rhode Island is another state that is expected to see such a bill this year.
The insurance industry has enjoyed some success during the past two years in shepherding the adoption of legislation allowing for proof of insurance by use of an electronic device and allowing insurers to use electronic distribution or online posting to provide notices and policy forms to customers. States have produced a number of positive bills thus far, and we have seen bills filed in several states in 2015. NAMIC is currently working with other industry advocates to craft model legislation that will be introduced in other states.
Natural Disaster & Coastal Issues
So for this year, there has been little legislative activity on this front, but NAMIC advocates expect continued debate in Florida and other states related to private flood insurance. A big accomplishment last year was adoption of a statewide building code in Mississippi, and we hope to capitalize on this momentum in other states.
Joe Thesing serves as NAMIC’s vice president of state affairs, and Paul Tetrault in the association’s position of state and policy affairs counsel.