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2010-11 PIACT legislative wrap-up

Resource kit 06006

By Campbell H. Wallace, Esq.

On June 8, 2011, the Connecticut Legislature adjourned, following a session where legislators addressed a number of important insurance issues. Legislators considered a variety of auto, homeowners and property/casualty issues, and an unusually large number of health insurance-related proposals. PIACT was active this session, tracking a wide range of insurance-related bills, and advocating for the interests of producers across the state. As previously reported in the May 2011, PIACT Reporter, our legislative efforts culminated in a number of positive outcomes.

Legislative priorities
Loss history information. PIACT was successful in achieving passage of a bill (H.B.6508) that would increase the speed with which loss history information is provided to producers. The bill was signed by Gov. Malloy on July 8, 2011, and is now known as Public Act 11-138. The bill extends the reporting requirement to all types of commercial risk insurance, instead of just commercial auto or general liability and decreases the time frame for providing certain reports from 60 days to 30 days.

Health insurance exchange. PIACT also worked closely with a variety of stakeholder groups in attempting to ensure the fairness and acceptability of any health insurance exchange legislation in S.B. 921. The efforts of these groups led to the final bill, signed into law on July 1, 2011, as Public Act 11-53, which specifically authorizes producers to continue to sell health insurance policies, and requires the eventual licensure of any employee of an exchange who would sell insurance. PIACT is disappointed that the bill does not call for the immediate licensure of exchange employees who sell; another issue of concern is that producers do not have a representative on the exchange governance board. Both of these issues are key legislative priorities for PIACT going forward.

While these two bills were high-profile issues for PIACT, a host of other proposals received attention; many of these bills continued to be signed into law following the adjournment of the Legislature. The following is a brief compilation of legislation (that has been tracked on the PIACT Hot Lists) that may be of interest or importance to the Connecticut producer community. The following bills were either signed into law or were issues of specific interest to PIACT.

Auto
Minimum limits for auto insurance. S.B.674 would have increased the minimum limits for auto insurance from 20/40 to 50/100. The bill did not advance past the committee stage.

Police records available to those in accidents. One bill (H.B.6484) sets a 30-day deadline for the state police to make accident records available to people who were involved in an accident that is the subject of the record. The bill makes the records available to people involved in the accident after the warrant or summons is issued or 30 days after the accident, whichever is earlier. It allows the Department of Public Safety to deny access to the records for more than 30 days if such access would compromise an ongoing criminal investigation. This bill was signed into law on June 3, 2011, as Public Act 11-31.

Motorcycle discount. Another legislative item of interest to the Connecticut insurance community is the House passage of H.B.6581. In the bill, which addresses a number of sections of the state’s motor vehicle statutes, Section 48 states that an insurer shall offer a 10 percent premium discount on a motorcycle operator policy (excluding physical damage) to the principal operator of a motorcycle, if the operator submits proof of completing an approved novice or advanced motorcycle training course. The bill is was signed into law on July 13, 2011, as Public Act 11-213.

Notice for repair, remediation work. H.B.6233, signed into law as Public Act 11-106 on July 8, 2011, requires the written notice provided to an insured for repair or remediation work to be signed by the insured and the insurer to confirm that the insured received such notice prior to authorizing a direct payment to the person performing the repair or remediation work. The law takes effect Oct. 1, 2011.

Excess/surplus line
NRRA compliance for Connecticut. H.B. 6652, a measure to implement certain budgetary items as well as make sundry changes to the general body of law, contains important insurance-related provisions. Sections 33-36 contain language to conform Connecticut law to the requirements of the 2010 federal Nonadmitted and Reinsurance Reform Act, a part of The Wall Street Reform and Consumer Protection Act (Dodd-Frank Act). The federal law requires that states adopt, by July 21, 2011, uniform requirements and procedures related to allocating and collecting premium taxes on surplus-line insurance policies. The language at hand would repeal and replace Section 38a-277 of the Connecticut General Statutes entirely with conforming language. This language authorizes the commissioner to enter into agreements to provide for:

  1. recordkeeping requirements;
  2. audit procedures;
  3. exchange of information;
  4. collection of taxes not paid by licensees within the time required;
  5. disbursements of funds to other states that are parties to such agreement; and
  6. any additional provisions that will facilitate the administration of the agreement.

Of particular importance to the Connecticut producer community, the bill amends the current premium tax payment system. Under the current law, purchasers withhold 4 percent of the policy’s premium for taxes, file an annual tax return and pay the tax owed by March 1. Surplus-line brokers file quarterly tax returns, payable on the first day of February, May, August and November. The bill would require individuals and brokers alike to file quarterly tax returns and remit the tax to the Department of Revenue Services and the Connecticut Insurance Department, respectively, by the 15th day of these months.

Also of interest to the producer community is the bill’s “exempt commercial purchaser” provisions. The bill amends the existing affidavit and diligent search requirements for an “exempt commercial purchaser.” This term is defined in the law as a purchaser who employs or retains a qualified risk manager, has paid aggregate nationwide commercial property/casualty insurance premiums in excess of $100,000 in the immediately preceding 12 months, and meets at least one of the following criteria:

  1. has a net worth in excess of $20 million;
  2. generates annual revenue in excess of $50 million;
  3. employs more than 500 employees per insured or is a member of an affiliated group employing more than 1,000 employees;
  4. is a not-for-profit or public entity generating annual budgeted expenditures of at least $30 million; or
  5. is a municipality with a population in excess of 50,000 persons.

The bill exempts from the affidavit/diligent search requirement any insurance policy a licensed surplus-line broker procures for an “exempt commercial purchaser,” as defined in the NRRA, if:

  1. the broker procuring the insurance discloses to the purchaser that such insurance may or may not be available from an authorized insurer that may provide greater protection with more regulatory oversight; and
  2. the purchaser subsequently requests, in writing, that the broker procure the policy from a nonadmitted insurer.

For a complete Office of Legislative Research analysis of the bill, see here: www.pia.org/COMM/misc/Document17.pdf. This bill was signed by the governor on June 21, 2011, as Public Act 11-61.

Health
Health-insurance rate increases. S.B.11 was a controversial item of legislation, intended to offer consumers greater protections from what were characterized as unreasonable health insurance rate increases. The bill, according to the Office of Legislative Research, would have established a new rate-approval process for individual and small employer group health insurance companies, HMOs, and hospital and medical service corporations. The bill would have:

  • required small employer group health insurers to file risk classifications and premium rates with the insurance commissioner;
  • increased the amount of time required before a new rate can go into effect;
  • required the Connecticut Insurance Department to post rate filings on its website and provide a 30-day public comment period;
  • from Jan. 1, 2012, to Dec. 31, 2013, required a symposium on a proposed rate filing if specified criteria are met and the health-care advocate and attorney general request it;
  • required record retention requirements for rate filings; and
  • required the insurance commissioner to adopt regulations to prescribe standards to ensure that small employer group, HMO, and hospital and medical service corporation rates are not excessive, inadequate or discriminatory.

Critics of the bill claimed that the protections offered were duplicative of existing procedures and unnecessary. The bill was vetoed by the governor on July 1, 2011.

Paid-leave. On June 3, 2011, the Connecticut House of Representatives joined the Senate in passing S.B.913. This bill, passed by the Senate May 25, represents the controversial paid sick-leave bill that has been considered in various forms for the past four years. This year, the bill passed out of the relevant committees and was amended before reaching the Senate floor, where it was passed. The bill, in its current incarnation, would apply to businesses with 50 or more employees who are deemed “service workers.” It would require most employers that employ 50 or more people in the state to provide certain employees with paid sick leave, the leave to accrue at a rate of one hour per 40 hours worked. According to the bill’s official analysis, the bill would require, as a prerequisite for taking leave, that workers have worked for the employer for at least 680 hours and have worked an average of at least 10 hours a week for the employer in the most recent complete calendar quarter. The bill would allow these employees to take five paid sick leave days a year, sick days that can be carried over for one year. The bill states that employers that already give their employees “other paid leave” such as vacation are considered to comply if they offer at least five days. The bill does not require covered employers to provide paid sick leave to day or temporary workers or nonhourly employees such as salaried professionals. The bill was signed into law on July 1, 2011 as Public Act 11-52.

Mental health parity. S.B.314, signed into law on July 13, 2011, as Public Act 11-163, works to establish mental-health parity in Connecticut. The bill adds to the list of unfair insurance practices the refusal to insure, the refusal to continue to insure or a limitation of the amount, extent or kind of coverage available to an individual or the charge of a different rate for the same coverage because such individual has been diagnosed with a mental or nervous condition as set forth in Section 38a-488a of the General Statutes.

Connecticut Healthcare Partnership. H.B.6308 establishes the Connecticut Healthcare Partnership, and allows nonstate public employers, municipal-related employers, small employers and nonprofit employers to join the state employee health plan. The bill became law, as Public Act 11-58, on July 1, 2011.

Favored providers and hospitals. H.B.6471 was signed into law as Public Act 11-132 on July 8, 2011, and prohibits managed-care organizations and preferred-provider networks from including “most-favored-nation” clauses in contracts with health-care providers and hospitals.

Homeowners/dwelling
Actual cash value. H.B.6238, a measure to create a statutory definition of “actual cash value,” which which was signed into law July 13, 2011, as Public Act 11-196. The bill re-defines “actual cash value” with respect to a building insured under the policy as the amount it would cost to repair or replace the building with material of like kind and quality, minus reasonable depreciation. It defines “depreciation” as a decrease in real property’s value over time due to wear and tear. The law takes effect Jan. 1, 2012.

Miscellaneous
Flex rating. A bill to extend the sunset of Connecticut’s flex-rating law was signed into law July 13, 2011, as Public Act 11-253. H.B.6364 extends the sunset of the flex-rating law from July 1, 2011, to July 1, 2013. The flex-rating law allows insurers to file and use (without express approval by the commissioner) rate increases (for personal-risk policies: home, auto, marine, umbrella) of up to 6 percent. Multiple rate increase requests may be filed, as long as the cumulative rate increase is not more than 6 percent per year. An insurer can apply a rate increase within the 6 percent band only on or after a policy renewal and after notifying the insured. The bill also addresses title insurers—it permits them to purchase reinsurance from an accredited property/casualty reinsurer. This permission is predicated on the title insurer executing an affidavit showing that it was unable, after diligent effort, to obtain commercially appropriate reinsurance from another title company. The title insurer must include the affidavit and a copy of the proposed reinsurance treaty with the application.

Water use in fire emergencies.This bill (H.B.5068) allows water to be drawn for fire emergency purposes from a wetland or watercourse without obtaining an inland wetlands permit. It also allows a municipal fire department to install a dry hydrant in an inland wetland or watercourse if:

  1. the dry hydrant will be used for firefighting purposes only;
  2. there is no available alternative access to a public water supply; and
  3. installation will not involve the removal or deposition of material, alteration of water flow, or polluting the wetland or watercourse.

The bill was signed into law July 13, 2011, as Public Act 11-184 and takes effect Oct. 1, 2011. 10/11

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