Tort Reform Works for Docs

A mind-blowing stat: a member of the board of the American Medical Association claims that NY OB-GYN's pay around $180k for their malpractice insurance, while those in TX pay only $60k.

This in a letter following a WSJ article "Why Doctors are Heading for Texas," which says that the medical examiners' board is getting so many new applications to enter the state that it's facing a backlog of over 3,000. The reason? Tort reforms in 2003 and '05, wherein Texas has capped non-economic damages at $250,000, put all asbestos and silicosis cases in front of one judge pre-trial, and upped the burden of proof in emergency-room cases (to "willful and wanton" from simple negligence). This all lead to an increase of insurers willing to write medical malpractice there. The competition drove prices down. Pretty simple.

Marsh Hit for Failing to Procure Insurance: Appellate Court Upholds Big Verdict

The U.S. Circuit Court of Appeals for the Fifth Circuit just upheld a $7.8m verdict against Marsh wherein the broker was found liable by a trial court for failing to procure a design professional liability policy, as part of wrap-up coverage, for a Nevada steel engineering subcontractor working on the Aladdin Hotel. The case is here.

Waste Management Sues SAP, Alleging Misreps and Fraud in Software Sale

Waste Management is seeking over $100m from SAP for the money it spent trying to implement SAP software, plus punitive damages. Waste Management claims the billing, logistics, and mobile-computing software was a "complete failure" and was based on a fraud. The lawsuit was filed in Harris County, TX, and it comes after mediation and 20 months of negotiations failed.

Book Authors Sue to Block Movie Production

In a move that could make expectant J.R.R. Tolkien movie fans unhappy, the author's estate is suing over royalties from the Lord of the Rings movies. This potentially implicates insurance called Film Producers Indemnity coverage, and the issue will be whether the movie makers have all of the legal rights to make those movies. Interestingly, the lawsuit focuses on contracts made back in 1969 over the movie rights, and asks for $150m in damages.

MMO Pro and Spirit Team Up

Press Release: NYMAGIC, INC. Announces the Acquisition of a Book of Professional Liability Insurance Business Covering Insurance Agents, Brokers and Related Professionals.

Life Settlement Providers in the Hotseat?

Life settlements are a useful financial tool for people who hold life insurance policies and would like to cash them out before their intended expiration date (which, ghastly enough, would be their death), and get more than they would if they simply surrendered the policy back to the issuer. Those policy holders might want to cash these policies in early for a number of reasons: to get some quick cash, perhaps to invest some in the market, or for medical costs.



In any case, the brokers who help effectuate these transactions are known as life settlement brokers. They essentially look for life insurance policyholders who want to cash out their policies, and match them with life settlement "providers." Providers are those professionals who have investors desiring to use life settlements as a financial investment tool. Essentially, those investors are betting that the former policyholders are likely to die before the maturation of the policy, thus making a profit.



Lately, there have been a number of cases in which criminal activity has been alleged against life settlement providers. One life settlement provider is being held on $1M in bail for allegedly running a "Ponzi" scheme involving life settlements.

How to Avoid Claims

The current issue of Agent & Broker magazine has a great article: How to avoid being a target for E&O claims. They're preaching what everyone should learn, know, understand, implement: documentation is critical for good internal systems. Coherent, consistent documentation of important contact, decisions, changes, and issues will help you avoid problems, and make your case stronger if you do get into problems.

Streamlined Broker Licensing Coming?

The National Conference of Insurance Legislators' Executive Committee has come out in support of a National Insurance Producer Registry (NIPR--a non-profit affiliate of the National Association of Insurance Commissioners, aka the NAIC). Part of this will be an online, one-stop licensing resource for insurance agents and brokers nationwide. Here is the press release.

Lloyd's insures winemaker's nose

This is fun stuff: Ilja Gort, the Dutch owner of Chateau de la Garde in Bordeaux, will have his nose insured by Lloyd's. Why? Gort can allegedly tell millions of different scents apart and relies upon his nose for business.

It's not the first time. Lloyd's also insured the nose of Jimmy Durante.

NYS Presses Mortgage Lenders to Spin Off Appraisal Units

According to the NY Times, NYS A.G. Cuomo has gotten Fannie Mae and Freddie Mac to agree that independent or outside appraisal firms will be used on the mortgages they buy in the future.

This is a big deal for some mortgage brokers that have used their in-house appraisers to work on the loans they originated. It could force these firms, like Countrywide Financial, to spin off their appraisal units. Previously, many mortgage brokers used their own appraisers on deals. The National Association of Mortgage Brokers claims this development will hamper their competitiveness.

Alleged Contingent Commissions Lead to Lawsuit

Chicago. DOD Technologies Inc. sued Mesirow Insurance Services Inc., alleging breaches of fiduciary duty in connection with undisclosed contingent commissions to the insurance broker for insurance placed. An Illinois appellate court reinstated pleadings dismissed back in 2006, and the case heads back to the trial court regarding the allegations of steering quotes.

MetLife Agent Gets 21 Months

St. Louis, MO. A life insurance agent was sentenced to jail time for diverting $159k from life insurance premiums into her personal account. She plead guilty to a felony mail fraud charge.

Hear What the Plaintiff's Bar is Saying: Truck Accidents

A recent blog collected statements from a couple of sources regarding road accidents involving trucks. In them, plaintiffs' attorneys apparently give tips on dealing with accidents and insurance carriers. The blogger then goes on to suggest trucks have on-board computers that store GPS and other data, as a means of protecting themselves should lawsuits occur. It's interesting, and you can read it here.

Homeowners Sue Title Insurers

A group of New York homeowners has sued the major title insurers, alleging price fixing, claiming that title insurance rates are too high in NY state. They allege prices are 67% higher than the national average.

Cyber-liability and Cloud Computing

Many people are predicting that computing will move off your PC and onto the Net; this is also called "cloud computing." The idea being that you have your software and data residing out on the Internet. Google has provided these tools for free with it's Google Documents service. Amazon provides a paid service for storage and retrieval of data with its S3 service.

The problem from an insurance perspective is that companies that rely upon outsourced data storage services present a new twist for insurance: if the company does not handle it's own data integrity, who does, and is this fact considered when a cyber risk is underwritten? Does cloud computing actually make the data realm more safe, say, by putting data storage in the hands of "professionals"? Does it open up the possibilities of suits against the data storage companies for outages, notwithstanding their contract terms?

On Friday, Amazon's S3 service was disrupted for several hours. Clients include the NY Times and Twitter. A WSJ blog gives some details and discussion here.

11th Circuit Breathes Life into Insurer's Case for Recission of Policy

In a case based on Alabama law, the 11th Circuit Court of Appeals (in MEGA Life v. Pieniozek) overturned a lower court's decision to grant a summary judgment for the beneficiary of a life insurance policy. The carrier tried to rescind the policy because the decedent overstated her income on the application and swore to the application's veracity. The appeals court ruled that the lower court must look into whether the insurer would have, in good faith, issued the policy at that rate or limits if true facts had been known to the carrier at the time of the application(paraphrasing Alabama Code sec. 27-14-7(a)). It's an interesting case because the case seems to hinge on the carrier's internal rules of underwriting (i.e., would the policy limits have been as high for the correct income of the applicant), as opposed to an argument that misstating income on a life insurance policy application changes the risk involved.

Best is Reviewing AIG and Transatlantic

According to Business Insurance, Best announced that American International Group Inc's domestic operations and Transatlantic Holdings Inc's ratings of A+ are under review with negative implications, due to their February 11, 2008, SEC filing statements about their credit default swaps portfolios.

Subprime Litigation Increasing

Here's a WSJ blogpost about increasing litigation in the subprime area. Bottom line: 278 new federal suits were filed in 2007, with the pace doubling in the second quarter. And, "40% of the cases were filed by home-loan borrowers against lenders, mortgage brokers and many others, alleging discriminatory lending practices, improper charges or inadequate disclosures, among other issues." The source for the post info is here, from Navigant Consulting.

Insurance Agent Faces Up to 10 Years for Fraud and Theft

North Dakota insurance agent David A. Skjerven, head of Skjerven Financial Services, faces a lengthy jail sentence for selling unregistered securities (promissory notes) in a kind of Ponzi scheme, after his recent guilty plea. The plea requires restitution of $1.3m to 21 investors, as well as a $10,000 fine. He faces investigation in Minnesota as well.

Flood Insurance Info

The Massachusetts Department of Insurance is trying to educate people about flood insurance; mainly that they have to specially purchase, rather than assume they're covered. Their tips were featured on Boston's ABC affiliate today.

Life Settlements Law Should Become More Uniform

While not binding on any state, the National Conference on Insurance Regulators (NCOIL) has unanimously adopted the Life Settlements Model Act, which can be found here. This endorsement should help legislatures to enact either the model act, or something close to it.

Insurance agent's license revoked for pressuring the elderly

Broome County, NY. The NY State Insurance Superintendant suspended the license of an insurance agent who apparently pressured elderly people into buying a type of Medicare supplemental coverage. Tactics included door to door solicitations (which are not allowed for Medicare Advantage sales: prior appointments are required to prevent pressure sales) and offering $25 referral bonuses.

Toyota Pavilion roof collapse not covered

Scranton, PA. It's been revealed that the policy on the Toyota Pavilion at Montage Mountain and Montage Ski Resort had been canceled prior to last year's roof collapse. A blizzard caused the collapse last February. According to the Times-Tribune, the finger-pointing is beginning between insurance agents and officials.

Welcome to MMO Pro!

Welcome to the inaugural post of our blog. Watch this space for news items and interesting tidbits about professional liability insurance.