What Are the States Doing?

As usual, the insurance field has been the subject of legislative changes by various states. The following represent just some of the new legislation.

Arkansas has revised its state code to provide that the term “property damage” means damage to the insured vehicle and a reasonable allowance for loss of use of the vehicle. This statute is scheduled to become effective on the ninety-first day after the May 13th adjournment date of the Arkansas legislature. Of course, the definition of property damage on both the business auto policy and the personal auto policy already includes loss of use, so is the legislation needed? Perhaps a subscriber from Arkansas can answer this question.

California and Connecticut have passed laws that pertain to same-sex couples. California law now provides that insurance coverage must be provided to a registered domestic partner that is equal to the coverage provided to a spouse. Connecticut authorizes same-sex couples to enter into civil unions and thus grants them the same benefits and protections under the law as is granted to spouses.

Mississippi has decided to raise the auto financial responsibility limits from 10/20/5 to 25/50/25. This is to be effective on January 1, 2006.

Montana, New Mexico, Rhode Island, and Washington have addressed the issue of using credit information in the rating or issuance of insurance policies. Montana requires a notice be sent to consumers of an insurer's use of credit information at the time application was made and when any adverse action based on the use of the credit information is taken. New Mexico requires notice to the consumer at least once (either at the time of application or upon first renewal) in writing of the insurer's use of credit information.

Rhode Island provides that the adjustment of rates resulting from a customer's credit report update must be done at renewal subject to established conditions. And, Rhode Island provides factors that insurers cannot use negatively in reviewing credit information for underwriting or rating purposes. Washington introduces new rules to provide better information to consumers about adverse action taken by insurers due to credit reports.

It is interesting that none of these states acted to prohibit the use of credit reports by insurers, although that is the object of some groups around the country.

Finally, Ohio attempts to affect amounts that are recoverable due to an auto accident. The state now declares that the failure of a person to wear all of the available elements of a properly adjusted occupant restraining device may be determined to have contributed to the harm alleged in a tort action resulting from an auto accident. This may lead to a diminishing of the recovery by injured persons of compensatory damages (that represent non-economic loss) if the persons are found to not be wearing seat belts at the time of the auto accident.

Uninsured Motorists Coverage and the Ohio Supreme Court

The Ohio Supreme Court, which has in the past issued some interesting opinions on the subject of uninsured motorists coverage, has recently tackled the issue again. The case is Estate of Nord v. Motorists Mutual Insurance Company, 105 Ohio St.3d 366 (Ohio 2005).

While he was being transported to a hospital in an ambulance owned and operated by the City of Cleveland , Nord had the misfortune of being struck in the eye by a syringe accidentally dropped by a paramedic. Nord later died, but from unrelated causes. The estate of Nord filed a lawsuit against Motorists Mutual Insurance Company based on the uninsured motorists (UM) coverage its auto policy provided to Nord. ( Cleveland was, by state law, not liable for the damages Nord suffered due to the syringe and so, the ambulance was considered an uninsured motor vehicle.) The trial court found that the injury was not caused by the ambulance and granted summary judgment to the insurer. The appeals court reversed and said that reasonable minds could conclude the Nord's injuries arose out of the ownership, maintenance, or use of the ambulance, an uninsured motor vehicle. The Supreme Court reversed the appeals court.

The court noted that many courts around the country accept a tripartite test when it comes to UM coverage: was the uninsured motor vehicle an active instrumentality in causing the injury; was the chain of events resulting in the accident unbroken by the intervention of any event unrelated to the use of the uninsured vehicle; and was the uninsured vehicle used for transportation purposes when the accident occurred? If the answers to these questions are in the affirmative, UM coverage applies. The court declined to adopt this tripartite test, but still decided to reverse the appeals court opinion.

The Ohio court held that UM coverage applies in Ohio only when an uninsured motor vehicle caused the accident. The determinative factor is the presence (or lack thereof) of a causal nexus between the injury and the uninsured motor vehicle. In this instance, the paramedic's use and dropping of a syringe were unrelated to the ownership, maintenance, or use of the ambulance. Indeed, the estate of Nord did not allege any causal link and did not present any evidence that the ambulance was negligently operated or that the movement of the ambulance affected the dropping of the syringe. And, the court held, an accident does not arise out of the ownership, maintenance, or use of an uninsured motor vehicle merely because it fortuitously occurs within an uninsured motor vehicle. A causation requirement is necessary, not a mere factual connectedness.

Car Talk

Part One: A recent study conducted by GMAC Insurance suggests that one in ten drivers on the road today would fail a state drivers test. The study involved under 5,000 drivers in all states between the ages pf sixteen and sixty-five. We should note at the outset that in 1999 there were approximately 190,625,000 licensed drivers in the United States , so basing a study on .002 percent of the licensed population might not have the validity the study might wish. Remember that a valid study would have to consider age, years of experience, place of residence, etc.

Drivers were given a written test containing twenty questions representative of those used when applying for a learners' permit or drivers' license.

The study indicates that Oregon drivers ranked highest; Rhode Island drivers the lowest. Among other findings: drivers in the Northeast and Mid-Atlantic were least knowledgeable in terms of the written test (one in five failed); one in five drivers do not know a pedestrian has the right of way in a crosswalk; Nebraska's drivers are least likely to speed. For a report on the study, go to http://www.insurancejournal.com/news/national/2005/05/2655472.htm.

Part Two: A joint study by Virginia Tech Transportation Institute and the National Highway Traffic Safety Administration highlighted the risks of talking on a cellphone while driving. In this study, as reported by Karen Lundegaard and Jesse Drucker in the June 15, 2005, Wall Street Journal, one hundred cars and their drivers were videotaped for a year for two million miles and 43,000 hours. The study found that drivers involved in crashes, near crashes, and incidents (defined as evasive maneuvers not as urgent as a near crash) were far more likely to be using a wireless device than involved in any other distracting activity. That is not to say that cellphones were the single culprit. Cellphones contributed to six crashes and 644 near-misses, while the majority of all crashes and near-misses (411) occurred because of passenger-related issues such as talking or dealing with children in rear seats.

Unfortunately for the hands-free proponents, research indicated that drivers did not like voice dialing, and resorted to manual dialing. Further, the act of talking itself tended to distract drivers.

So far, New York, New Jersey, Washington D.C., and Connecticut ban only hand-held devices.

Part Three: Speaking of distractions. State Senator John Sabini (D) of New York thinks spinner hubcaps are distracting, and has introduced S.B. 4740 to prohibit sale of the spinners and use of motor vehicles so equipped. ( New York ranked 45th in the GMAC study. But who knows if outlawing these hubcaps will move New York up in the ranking?) If passed, the bill would fine vehicle owners up to $750 for a third or subsequent violation, while selling the spinners can lead to a $150 fine for each violation.

Part Four: United Kingdom Transportation Secretary Alistair Darling proposes to install GPS tracking systems in all vehicles in Great Britain within the next five to six years. Some might be forgiven for thinking this has to do with vehicle or passenger safety (in event of a car-jacking, for example). But no. The reason is to collect taxes based on each road mile driven—up to £1.34 (or $2.44 as of June 20) with the hope of reducing traffic congestion. So far, many think this is a good idea, since fuel tax would be eliminated…

News from Florida

Florida lawmakers have enacted a new insurance law in time for the 2005 season. Among the provisions: homeowners who have sustained hurricane damage cannot be nonrenewed until at least ninety days following completion of repairs (this provision also applies to personal residential property damaged as a result of last year's hurricanes); insurers must offer ordinance or law coverage equal to at least 50 percent of the coverage A limit; claims must be paid on a replacement cost basis up front (provided the policy is written on a replacement cost basis) rather than the standard practice of paying actual cash value until repairs or replacement is completed; insurers must spell out how much a hurricane deductible could potentially cost a policyholder and disclose all available discounts (windstorm mitigation techniques, for example); and insurers must either pay a claim or contact insureds within fourteen days. Beginning on January 1, 2006, hurricane percentage deductibles for $100,000 or more of coverage A can be no greater than 10 percent (increased from 5 percent). In December, legislation was passed limiting hurricane deductibles to one per season. Many of these provisions, or variations thereof, also apply to commercial residential property.

Meanwhile, as the start of the 2005 season gears up, some 11,000 families still occupy temporary housing. Uprooted trees have yet to be cut up and hauled away. Debris is still piled up. Although most residential claims have been settled and repairs are gradually being completed, it is estimated that some commercial property will not be restored until 2007.

One subscriber recently asked if we thought the new Florida legislation will impact insurers in the state. Since many insurers already limit their exposure in the Sunshine State , it's a good guess that the legislation will make further restrictions probable. The down side to this is that Citizens Property Insurance Corp., the entity run by the state to fill the gap left when other insurers began to withdraw from Florida , is at a disadvantage when a hurricane does strike, since Citizens does not have access to adjusters in other parts of the country as do the private insurers.

Mold Still in the News

A recent award to a tenant was the highest ever in Michigan (Wayne County Circuit Court) for personal injury resulting from mold exposure. Here, the tenant's apartment developed toxic mold following faulty repair of a toilet. According to the suit, the landlord ignored complaints that there was continuous leakage and persistent mold on the walls and ceilings. The jury found that the apartment management had failed to follow industry guidelines for cleaning up the mold, and had never bothered to do more than rip out dry wall where the mold was most visible. FC&S readers know there's more to it than that—see Mold—An Overview. In this case, the landlord's negligence resulted in a $925,000 award for the plaintiff. As of yet the case has no citation; the resident is Esmeralda Mahaffy; the defendant, Maple Creek apartments.

More on Security Breaches

It's never-ending. A day does not pass, it seems, without another security breach. Here is the latest round:

First, to those of you with the latest hand-held devices (and you know who you are), research presented at a recent technology conference indicated that devices utilizing Bluetooth technology can be breached. For further information, see the article by Keith J. Winstein in the June 16th Wall Street Journal.

Second, a laptop belonging to an MCI financial analyst was stolen from the analyst's car while the car was parked in the analyst's garage. Although seemingly a simple case of theft, the laptop contained names and social security numbers of 16,500 current and past MCI employees.

Third, the credit card processing company CardSystems Solutions Inc. has acknowledged it should not have been keeping consumer records. This breach recently might have led to over 40 million compromised accounts. When a credit transaction occurs, the card information is transmitted through a kind of data clearing-house, if you will. There, the card number is matched with the customer's name, address, and other relevant information. In theory, the clearing-house should not keep the information, but pass it immediately to the card issuer. A corporate official said the company was storing the data for “research purposes.” Thanks for telling us. We certainly feel better now.

Fourth, can anything be done to stop this? Visa USA is initiating new technology that will alert fraudulent transactions at the check-out line. The system compares each transaction with others in the network, as well as with compromised accounts. Visa anticipates the system will prevent some $164 million in fraud losses over the next five years.