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  • Fed solicits comments on insurance supervision guidance

    On January 28, the Federal Reserve Board announced it is soliciting comments on proposed guidance, which would implement a framework for the supervision of certain insurance organizations overseen by the Board. According to the Fed, the proposed framework for depository institution holding companies significantly engaged in insurance activities would apply guidance and allocate supervisory resources based on the risk of a firm and would “formalize a supervisory rating system for these companies and describe how examiners work with state insurance regulators.” Comments are due 60 days after publication in the Federal Register.

    Bank Regulatory Federal Reserve Federal Register Agency Rule-Making & Guidance Supervision Insurance

  • NYDFS issues final guidance for insurers on climate change financial risks

    State Issues

    On November 15, NYDFS issued final guidance to New York regulated-domestic insurers on managing climate change-related financial risks. The final guidance reflects the agency’s consideration of stakeholder comments from proposed guidance issued in March, and was informed by NYDFS’s collaboration with the insurance industry and international regulators. Building on a 2020 insurance circular letter addressing climate change and financial risks, the final guidance outlines expectations that insurers begin “integrating the consideration of the financial risks from climate change into their governance frameworks, business strategies, risk management processes and scenario analysis, and developing their approach to climate-related financial disclosure.” Specifically, an insurer should (i) incorporate into its governance structure, at either “the group or insurer entity level,” climate-risk considerations; (ii) consider current and forward-looking climate-related implications on its operations through “time horizons” appropriately tailored to the insurer’s activities and decisions; (iii) incorporate in its current financial risk management framework analyses of the effect of climate risks on existing risk factors; (iv) employ scenario analysis to inform business strategy decisions, risk assessments, and identification; and (v) disclose its climate risks and engage with NYDFS’s Task Force on Climate-related Financial Disclosures when developing climate disclosure approaches. NYDFS will monitor insurers’ progress in implementing these expectations with respect to organizational structures, which insurers must have in place by August 15, 2022. The NYDFS noted it will provide further guidance on timing for implementing “the more complex expectations outlined in the guidance.”

    State Issues State Regulators NYDFS Insurance Climate-Related Financial Risks Risk Management Bank Regulatory

  • 10th Circuit affirms TCPA statutory damages as uninsurable

    Courts

    On November 2, the U.S. Court of Appeals for the 10th Circuit affirmed a district court’s decision that under Colorado law, an insurance company (plaintiff) had no duty to indemnify and defend its insured against TCPA claims seeking statutory damages and injunctive relief. According to the appellate opinion, the states of California, Illinois, North Carolina, and Ohio sued a satellite television company for telemarketing violations of the TCPA (TCPA lawsuit). The TCPA lawsuit sought statutory damages of up to $1,500 per alleged violation and injunctive relief. The satellite company submitted a claim to its insurer for defense and indemnity of the TCPA claims pursuant to existing policies. The plaintiff filed a complaint seeking a declaratory judgment that it need not defend or indemnify the satellite company in the TCPA lawsuit. The district court, relying on ACE American Insurance Co. v. DISH Network (covered by InfoBytes here), determined that, under ACE, the claim for statutory damages in the telemarketing complaint sought a penalty and therefore was “uninsurable as a matter of Colorado public policy,” and that the policies did not cover the complaint’s claim for injunctive relief because, as in ACE, they did not cover the costs of preventing future violations. Additionally, the district court determined that “the allegations did not potentially fall within the Policies’ definitions of ‘Bodily Injury’ or ‘Property Damage.’” The 10th Circuit affirmed the district court’s rulings, concluding that no coverage existed.

    Courts Appellate TCPA TSR Insurance FTC State Issues

  • NYDFS: Regulated insurers should expedite Ida-related claims

    State Issues

    On September 2, NYDFS advised regulated insurers to expedite Tropical Depression Ida-related insurance claims. Emphasizing the severity of damage experienced by homeowners and businesses, NYDFS urged insurers to work towards a fair and speedy resolution of claims. In addition to outlining expectations related to the claims process, NYDFS noted that it will also “expedite the issuance of temporary adjustor permits as necessary to qualified out-of-state independent insurance adjusters pursuant to New York Insurance Law” to increase the number of available adjusters to process claims. 

    State Issues State Regulators NYDFS Disaster Relief Insurance Bank Regulatory

  • Treasury seeks info on climate-related financial risks in the insurance sector

    Agency Rule-Making & Guidance

    On August 31, the U.S. Treasury Department announced a request for information (RFI) seeking public comments on the Federal Insurance Office’s (FIO) future work related to the insurance sector and climate-related financial risks. The RFI is in response to an executive order issued by President Biden in May, which instructed financial regulators to take steps to mitigate, among other things, climate-related risk related to the financial system (covered by InfoBytes here). Among other things, the FIO will focus on the following initial climate-related priorities: (i) “assessing climate-related issues or gaps in the supervision and regulation of insurers, including their potential impacts on U.S. financial stability”; (ii) “assessing the potential for major disruptions of private insurance coverage in U.S. markets that are particularly vulnerable to climate change impacts, as well as facilitating mitigation and resilience for disasters”; and (iii) “increasing FIO’s engagement on climate-related issues and leveraging the insurance sector’s ability to help achieve climate-related goals.” Responses will help FIO monitor and assess the implications of climate-related financial risks for the insurance sector, and help FIO better understand how to collect “high-quality, reliable, and consistent data” required to accomplish FIO’s objectives.

    Agency Rule-Making & Guidance Department of Treasury Climate-Related Financial Risks Risk Management Insurance

  • 11th Circuit: Insurance firm not required to pay broker’s $60 million TCPA judgment

    Courts

    On June 1, the U.S. Court of Appeals for the Eleventh Circuit held that an insurance firm is not required to pay a $60.4 million TCPA judgment arising out of a Florida-based insurance broker’s marketing campaign accused of sending unsolicited text messages and phone calls to consumers. The broker sought coverage against a class action which alleged, among other things, that “by sending the text messages at issue. . . , Defendant caused Plaintiffs and the other members of the Classes actual harm and cognizable legal injury [including] . . . invasions of privacy that result from the sending and receipt of such text messages.” In response, the insurance firm asserted that the policy did not cover invasion of privacy claims such as those brought in the class action against the broker. Subsequently, the broker settled the suit and assigned all of its rights against its insurer to the plaintiffs, who attempted to enforce the judgment against the insurance firm. The 11th Circuit found that the broker’s insurance policy excluded coverage of certain actions that would prompt a lawsuit, including claims of invasion of privacy. The appellate court also concluded that the TCPA class action arose out of an “invasion of privacy” because the class complaint specifically alleged that the broker “intentionally invaded the class members’ privacy and sought recovery for those invasions.”

    However, one of the judges dissented from the ruling, opining that the policy the insurance firm wrote to the broker is “ambiguous as to whether it refers to the common-law tort called ‘invasion of privacy,’” noting that “in other words, if it could reasonably be so interpreted—then we must interpret it to refer only to that tort.” The judge also noted that it is “unclear to me why any party to an insurance policy would ever allow coverage to be dictated by the conclusory terms and labels that a plaintiff might later choose to include in her complaint.”

    Courts Eleventh Circuit TCPA Appellate Insurance Class Action

  • NYDFS, insurance company reach $1.8 million cyber breach settlement

    State Issues

    On May 13, NYDFS announced a settlement with an insurance company to resolve allegations that the broker violated the state’s cybersecurity regulation (23 NYCRR Part 500) by failing to implement multi-factor authentication or reasonably equivalent or more secure access controls. Under Part 500.12(b), covered entities are required to implement such protocols (see FAQs here). NYDFS’s investigation also revealed that the insurance company falsely certified its compliance with the cybersecurity regulation for 2018. Under the terms of the consent order, the company will pay a $1.8 million civil monetary penalty and will undertake improvements to strengthen its existing cybersecurity program to ensure compliance with 23 NYCRR Part 500. NYDFS acknowledged the broker’s “commendable” cooperation throughout the examination and investigation and stated that the broker had demonstrated its commitment to remediation.

    State Issues NYDFS Enforcement 23 NYCRR Part 500 Privacy/Cyber Risk & Data Security Insurance Bank Regulatory

  • Industry group sues to stop Washington’s emergency rule banning credit scoring in insurance underwriting

    State Issues

    On April 8, the American Property Casualty Insurance Association (APCIA) filed a lawsuit in Washington Superior Court in an attempt to stop an emergency rule issued last month by the Washington Insurance Commissioner, which bans the use of credit-based insurance scores in the rating and underwriting of insurance for a three-year period. The rule specifically prohibits insurers from “us[ing] credit history to place insurance coverage with a particular affiliated insurer or insurer within an overall group of affiliated insurance companies” and applies to all new policies effective, and existing policies processed for renewal, on or after June 20, 2021.

    According to a press release issued by the Commissioner, the emergency rule is intended to prevent discriminatory pricing in private auto, renters, and homeowners insurance in anticipation of the end of the CARES Act, which will expire 120 days after President Biden declares an end to the national emergency caused by the Covid-19 pandemic. Under the CARES Act, Congress required furnishers of information to credit bureaus to modify credit reporting practices if and when they grant an “accommodation”—that is, an agreement to defer payments, modify a loan, or grant other relief—to borrowers impacted by the Covid-19 pandemic, irrespective of asset type to ensure that borrowers who sought and obtained forbearance or other relief were not credit reported as becoming delinquent or further delinquent as a result of the forbearance or other relief (see Buckley Special Alert), which the Commissioner believes has disrupted the credit reporting process and reportedly caused credit bureaus to collect inaccurate credit histories for some consumers. The Commissioner further contends that because “the predicative ability of current credit scoring models cannot be assumed,” scoring models used by insurers to set rates for policyholders have been degraded and will have a disparate impact on consumers with lower incomes and communities of color. Sources report that APCIA’s lawsuit—which seeks declaratory and injunctive relief (and asks the court to declare the Commissioner’s rule invalid and to enjoin its enforcement)—claims the Commissioner’s rule will harm insured consumers in the state who pay less for auto, homeowners, and renters insurance because of the use of credit-based insurance scores to predict risk and set rates.

    State Issues State Regulators Covid-19 Credit Scores Insurance Underwriting Courts CARES Act

  • Insurance company not obligated to indemnify retailer’s payment card claims following data breach

    Courts

    On February 8, the U.S. District Court for the District of Minnesota granted defendant’s motion for summary judgment, ruling that an insurance company is not obligated to indemnify a national retailer (plaintiff) for settlements paid to multiple banks to resolve claims over the costs of canceling and reissuing customers’ compromised credit and debit cards after a 2013 data breach. After the data breach, the banks sued the plaintiff for the costs associated with cancelling and reissuing the cards (payment card claims). The plaintiff notified the defendant of its potential liability for payment card costs associated with the data breach, claiming that the payment card claims were covered under the defendant’s commercial general liability policies. The defendant denied coverage under the policies, and the plaintiff filed a breach-of-contract action seeking both declaratory judgment that its liability for the payment-card claims was covered under the policies, as well as judgment against the defendant for the settlement payments related to the payment card claims. In granting the defendant’s motion for summary judgment, the court determined, among other things, that the plaintiff failed to “establish[] a connection between the damages incurred for settling claims related to replacing the payment cards and the value of the use of those cards, either to the payment-card holders or issuers.” As such, “the connection between the damages claimed and the loss of use of the payment cards is insufficiently direct and, therefore, the damages claimed are not loss-of-use damages covered under the policies,” the court stated, noting that the defendant’s policies only allowed for indemnification when the plaintiff had a legal obligation to pay damages because of a “loss of use” of “tangible property that is not physically injured.”

    Courts Insurance Indemnification Data Breach Privacy/Cyber Risk & Data Security

  • New Jersey stops accepting temporary insurance producer applications

    State Issues

    On January 21 the New Jersey Commissioner of Banking and Insurance issued Bulletin No. 21-02 declaring that the department will no longer accept temporary insurance producer applications after January 31 because remote producer examinations are now available. Temporary licenses previously issued will remain in force subject to certain conditions set forth in the bulletin.

    State Issues Covid-19 New Jersey Insurance Examination

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