With the frantic pace and high volume of bills being introducedinto legislative sessions each year—along with steady promulgationof insurance rules and regulations—it may be easy to overlook yet another type of important regulatorymaterial.

Regardless of the name—be it “bulletin,” “circular letter,”“administrative letter,” “directive,” or “notice”—thecommunications you receive from departments of insurance typicallyconvey extremely time-sensitive information and require action byinsurers.

In the first half of 2011, we saw a number of importantcommunications. Have you been following them closely?

Weather: Always the Wild Card

Weather is one of the key variables that can greatly impact thenumber of communications issued by departments of insurance in agiven year. Unfortunately, this year has proven to be one marked bysevere weather events. Those circumstances have led to a number ofbulletins being issued to address claims and underwriting issues inmany states:

• Alabama's Bulletin of Apr. 28, 2011 addressedthe extension of grace period to May 27 to assist those impacted bythe line of tornados that crossed the state.
• Georgia's Directive 11-EX-5A focused on thetornados that touched down during that same time period and theDepartment of Insurance's expectations regarding leniency indealing with individuals impacted by those storms.
• Kentucky issued two “adjuster catastropheserials” in April and May, detailing steps that needed to be takenin conjunction with that state's severe weather outbreaks.
• Multiple orders and bulletins were issued after the widespreaddestruction in Missouri, with Executive Order11-12 providing that coverage for insureds in Jasper and Newtoncounties must continue under all insurance policies in effectimmediately preceding the severe storms occurring on May 22, 2011.That order remained in effect until June 20 and also detailedlicensed public adjuster requirements for services performed inthose two counties.
• North Carolina's Bulletin 11-B-3, inaddressing the tornados, severe storms, and flooding in April,directed insurers to account for an extended time period forinsureds to file a proof of loss and the option of deferringpremium or debt payments that are due during the time periodcovered by the disaster declaration.
• West Virginia issued five emergency orders forsevere weather events during the first half of this year.

Additionally, we've seen a number of states impacted by floodsthis year, which resulted in various bulletins advising insurers ofactions to be taken in light of the devastation.

Mississippi's Department of Insurance issued Bulletin 2011-5,directing a 60-day moratorium on the cancellation/non-renewal ofpolicies for the non-payment of premiums for Mississippiansresiding in flood-impacted areas. This moratorium applies tocommercial property, homeowners', dwelling fire and commercial andpersonal automobile policies.

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The Nebraska Department of Insurance issued anotice dated June 14, 2011 addressing that state's disaster areasrelated to the recent floods and the issues associated withevacuation zones. Commenting on the reasonableness of requiringinsureds to comply with neglect and/or preservation of propertyprovisions, the Department strongly encouraged insurers that anyproperty removed from its insureds' premises on or after May 25,2011 from areas flooded or in danger of flooding should be coveredat the same amount as if the property were located at the insuredpremises. However, after July 15, 2011, insurers are permitted tosubject the personal property to any applicable reduced coveragesas provided for in the policy for being located away from theinsured premises.

North Dakota's Bulletin 2011-1 alerted insurersto the declaration of a federal disaster for 42 counties. Labeledas a “guidance document,” this bulletin outlined expectationsregarding policyholder services.

South Dakota's Bulletin 11-05, issued inresponse to flooding, included the Division's directive that nonotice of cancellation or nonrenewal is valid between June 1, 2011,and Sept. 1, 2011, for any South Dakota insured who resides in acounty where a disaster has been declared and who has had theirability to timely act or respond to an insurer materially affectedby the flood.

Thankfully, emergency and/or unexpected communications arebalanced with routine bulletins and other guidance documents. These rangefrom legislative summaries to notices regarding reimbursements forworkers' compensation insurers. Of course, bulletins also announcesurveys, update risks eligible for exports lists, and provideclarification on recently enacted legislation and adoptedregulations.

As an example of the latter genre, Arizona'sBulletin B-5.29, issued in April, focused on delineating theDepartment's expectations as to “clear and specific” reasons thatmust be provided in its adverse underwriting notices.

While the insurer's notice must include a statement of reasonsthat is sufficiently clear and specific so that a person of averageintelligence can identify the basis for the insurer's decisionwithout making further inquiry, the insurer must also clearlydescribe or quote its underwriting rule, policy, or guideline thatit is using as the basis for the proposed adverse action.

To the extent a hearing officer ultimately reviews the adverseaction notice, the bulletin lists the additional informationalexpectations beyond the basic elements of clear and specificreasons and basis. The Department's hearing officer would expectthe following information to also be clearly identified in theadverse action notice:

• First and last name of the driver involved;
• Date of loss (if applicable);
• Description of the loss that resulted in claim payment;
• Total amount paid for the loss;
• Motor vehicle violation or conviction date (if applicable);and
• Description of the motor vehicle violation (as indicated in theconsumer report from which the information was obtained). And ifthe description includes the term “moving violation,” the insurershould have a definition of “moving violation” on file with theDivision of Insurance Rates and Forms Section.

The use of credit information is another issuethat routinely gets attention in the underwriting process.Connecticut's Bulletin PC-69 is aimed at detailingthe disclosure expectations regarding the use of credit required byPublic Act 10-7 by providing not only the specifics, but also the“Summary of Consumer Protections” notice.

Effective July 1, 2011, insurers are required to provide awritten disclosure of consumer protections regarding an insurer'suse of credit. In addition to the “Summary of Consumer Protections”disclosure, insurers are required to notify consumers of theinsurer's name, address, telephone number, and toll-free telephonenumber, as well as detailed information about how the insurer usescredit information to underwrite and rate such insurancepolicies.

Maryland has also focused on underwritingissues, in this case adding a prohibited reason. Effective Oct. 1,2011, as outlined in Bulletin 11-13, an insurer may not:

• Cancel, refuse to underwrite or renew, or refuse to issue apolicy of homeowner's insurance; or
• Increase a premium, add a surcharge, apply a rating factor,re-tier a policy, remove a discount, or take any other adverseunderwriting or rating action on a policy of homeowner's insurancebased solely on information about an individual's status as avictim of a crime of violence.

While insurers must comply with this revision as of theeffective date, they do have until Oct.1, 2012 to revise policyforms to conform to the new law.

And earlier in 2011, Arizona's Bulletin 2011-02 announced thisyear's revision to the private passenger automobile property damagethreshold that insurers may use to non-renew private passengerautomobile policies.

Product Filings

New product filing requirements and actuarial procedures arefeatured in Hawaii's Memorandum 2011-1R, issued inJune, which mandates all homeowners' insurers to submit new ratefilings within 120 days of the date of the memorandum. However,homeowners' insurers are encouraged to submit their filings within60 days of that date to facilitate the review process.

The Vermont Department of Banking, Insurance,Securities, and Health Care Administration issued Bulletin 160advising property and casualty insurers of the new rates and formsfiling procedures, which became effective on May 15, 2011. TheDepartment adopted Regulation I-2010-3, which replaced theDepartment's longstanding filing regulation, I-85-1. Among othernew requirements, filers now need to certify that the filingcomplies with all applicable Vermont laws and regulations, as wellas to state whether any of the filing's provisions have beenpreviously objected to in Vermont and to declare, on informationand belief, whether the filing contains any unusual orcontroversial provisions.

Policy Provisions

Oklahoma's Department of Insurance Bulletin No. PC 2011-01 andits Commissioner Order of March 22, 2011 present a dual opportunityto learn more about how the state regards defense expenses withinthe limits of certain liability policies. Defense expenses withinthe limits of liability will be allowed in certain insurancepolicies satisfying specific criteria and the insurance policy mustbe one of the following types:

• A professional liability insurance policy;
• A directors and officers liability insurance policy;
• An errors and omissions liability insurance policy;
• A fidelity or surety bond;
• A pollution liability policy; or
• An employees' practices liability insurance policy.

With all the statutes, rules, and regulations (including thosepromulgated on an emergency basis), one thing insurers can count onis that all communications from the departments of insuranceprovide helpful and much-needed information. They not only conveyimmediacy of actions needed, but also provide guidance and keyinformation that clarifies our ever-changing regulatoryenvironment.