New TRIA Bill Includes Group Life; Supreme Court Backs Insurers In Credit-Scoring Case; Marra Rises

In addition to extending and expanding TRIA, H.R. 2761 would require insurers to make coverage available to protect customers against chemical, biological, and radiological terrorist attacks, and the bill also would provide more support for insurers affected by such an attack than it would for insurers affected by a conventional attack.

The bill would add protection against acts of terrorism by U.S. citizens, and it calls for further study of the idea of developing a private terrorism insurance market.

The American Council of Life Insurers praised the lawmakers' decision to include group life in the new TRIA extension bill.

The U.S. Supreme Court unanimously backed the disclosure policies of two insurance companies when they don't give a consumer the best possible rate based on a credit report.

Insurers had argued for a flexible standard on such "adverse action notices." Had their position been rejected by the high court, the industry could have faced a new wave of class-action lawsuits from consumers who were not told they weren't getting the best possible rate based on a poor credit score.

The case involved a decision last January in the 9th U.S. Circuit Court of Appeals–Safeco Insurance Co. of America, et al, v. Burr, et al, No. 06-84–that insurer defendants acted "in willful disregard" of the Fair Credit Reporting Act in not disclosing that the best rate was not charged to a consumer, and as a result, the consumers involved have the right to recover damages.

In oral arguments in January on the issue, Maureen Mahoney of Latham & Watkins in Washington, DC–representing GEICO and Safeco, two of the defendants–told Justice Ruth Bader Ginsburg if the law was read as plaintiffs wanted it to be interpreted, insurers could be liable for "tens of billions of dollars" in claims.

Mahoney noted two class-action lawsuits already had been filed in the case, and under the law as proposed in the decision of the 9th U.S. Circuit Court of Appeals, consumers could be awarded $1,000 each if an adverse action notice was not sent in each case where an applicant for insurance was not given the lowest possible rate.

The Hartford Financial Services Group Inc. has named Thomas Marra, 48, who has been president of the life unit, to be president and chief operating officer of the company as a whole. These are new positions.

David Zwiener, 52, who has been president of The Hartford property/casualty operations, is leaving to become managing director of a new financial institutions group at the Carlyle Group.

Ramani Ayer, 60, the current head of The Hartford, will continue to be The Hartford's chairman and chief executive officer.

The Hartford's board created the president and COO positions as a part of succession planning efforts to give the company a multiyear period for working on enterprise leadership issues, the company said.

Marra began working for The Hartford in 1980 and running the life operations in 2000.

A large life insurer is moving ahead with efforts to integrate its own investment operations and the investment operations of a company it acquired a year ago.

Lincoln National Corp. said it has merged the Lincoln Variable Insurance Product Trusts and the Jefferson Pilot Variable Fund Trusts into a new 31-fund LVIP Trust family.

Lincoln acquired Jefferson-Pilot Corp. in April 2006.

Lincoln uses the trust investment funds, which manage a total of $12 billion in assets, in a variety of variable universal life, variable annuity, corporate-owned life insurance, and retirement plan products.

Mississippi Attorney General Jim Hood announced he is suing State Farm Fire and Casualty Company for breach of contract and bad faith over a failed January settlement agreement concerning coastal residents' Hurricane Katrina claims.

In response, the Bloomington, Ill.-based company called Hood's action a headline-making move that would not do much for policyholders and said a separate agreement to cover such claims that it arranged with the state insurance department is working well.

Hood's action, seeking compensatory and punitive damages, was filed in the Circuit Court of Hinds County.

"We filed this lawsuit in an effort to help the more than 30,000 Gulf Coast policyholders who have suffered for nearly two years because of State Farm's inaction," Hood said in a statement. "The State Farm reevaluation procedure through the Department of Insurance has resulted in only a little more than 300 new offers. That does not comply with the terms we have with them in black and white."

According to the attorney general, "We have a state court order they signed and then backed out on. If they will breach a clear agreement with a state, then this is further evidence they have breached their own policy provisions with their insured on the coast."

Fireman's Fund Insurance Company announced its chief executive officer, Joseph J. Beneducci, had resigned after less than six months on the job.

The carrier–a member of the Allianz Group–had named Beneducci to the post effective Jan. 1, when Charles "Chuck" Kavitsky was promoted to president of Allianz of America.

Kavitsky has been named Fireman's interim CEO, the company reported.

"Joe has been a significant part of Fireman's Fund's success, and I want to thank him for his many contributions," said Kavitsky. In the wake of Beneducci's departure, "our direction and strategy will continue as planned," said Kavitsky.

Kavitsky served as Fireman's Fund CEO from 2004 to the end of 2006.

The company said a successor to Beneducci "will be named in due course." It did not say whether Beneducci has revealed his employment plans.

The Insurance Information Institute reported in a new study total exposure to loss by state-run property insurers of last resort has exceeded an estimated $650 billion. The III warned the soaring growth of state-run operations ultimately may shift much long-term risk of hurricane-related losses to policyholders and taxpayers, even those who live nowhere near the coast.

According to III, the $650 billion number is an incomplete total for 2006, which compares with $54.7 billion in 1990. Total policies in force, III found, also have risen to more than two million.

Claire Wilkinson, III vice president for global issues, noted by the end of the first quarter in Florida, Citizens, the state's insurer of last resort, had a $430 billion exposure–up from $210.6 billion in 2005. "In over a year it has more than doubled," she said.

The American Insurance Association and the Center for Economic Justice both want to hear more about new model development rules from the National Association of Insurance Commissioners.

The AIA represents insurers, and the economic justice center speaks for consumers.

Representatives for both organizations were at the summer meeting of the NAIC and expressed concerns about recently adopted NAIC procedures that will give the NAIC's executive committee the authority to separate model development efforts with broad, deep support from other model efforts.

Measures that appear to have strong support from two-thirds of NAIC members will advance as models, and the other measures will advance as "guidelines" that simply represent "best practices" under the current rules.

The NAIC developed the changes in the procedural rules during closed meetings, and that indicates a failure by the NAIC to involve its stakeholders, according to Birny Birnbaum, an economic justice center representative who gets NAIC funding to represent consumer interests at NAIC meetings.

Florida insurance regulators and industry representatives continue to spar over credit-scoring rules aimed at quantifying the impact on groups based on race and income factors. The Office of Insurance Regulation issued a new set of rules requiring insurers to document the effect of credit scoring on groups based on "race, color, or national origin."

The industry succeeded in having similar rules overturned in January by a state administrative law judge and said the revised rules offer no improvement.

William Stander, Tallahassee-based regional manager for the Property Casualty Insurers Association of America, said, "The OIR is seeking to prohibit insurers from using credit information by making it virtually impossible to comply with the rules."

Stander said the rules require the industry to document the effects of insurance scoring with demographic information not collected by or available to insurers.

As interpreted by Insurance Commissioner Kevin McCarty, the January ruling favored the OIR on substantive matters, although it denoted some "vagueness in defining the terms 'disparate impact' and 'race, color, and national origin.'"

A day after American International Group's former chairman, Maurice Greenberg, filed papers accusing AIG's new management of costly blunders in a financial restatement, the company filed a $1 billion-plus lawsuit against him. Greenberg's charges were made Tuesday in defending against a New York business fraud suit filed by that state's attorney general. AIG's new action was filed in the Delaware Court of Chancery.

The AIG suit accused Greenberg and the company's former chief financial officer, Howard Smith, of improper moves that resulted in, among other things:

o The financial restatement.

o An "expensive" internal investigation.

o Payment of $800 million to settle a Securities and Exchange Commission civil action.

o $25 million to resolve U.S. Department of Justice claims.

o $100 million to settle claims by New York authorities.

According to AIG, Greenberg either caused AIG to enter into the transactions that led to misstatements and subsequent financial restatement "or knowingly participated in them."