Claims and Bad Faith Law Blog

GODSPEED, BOB HUNTER

After half a century of distinguished public service including positions as Director of Insurance at the Consumer Federation of America, and as a member of and contributor to the National Association of Insurance Commissioners, and as the Texas Insurance Commissioner, Mr. J. Robert "Bob" Hunter is retiring.

          I was not aware of all of his many accomplishments until now, when he is retiring.  Here's a brief look at the highlights of Bob's public service record:

1971:  United States Federal Insurance Administrator.  Bob would lead the Federal Insurance Administration first under President Carter, then under President Ford.

1980:  Bob founds the National Insurance Consumer Organization (NICO) and becomes its head in 1982.

1995:  Bob transitions into a post in which he would serve for the next 27 years:  Director of Insurance, Consumer Federation of America (CFA).

1980 through now:  Bob never asked for compensation over his more than 40 years of work with NICO and CFA.

Along the way, Bob served as Texas Insurance Commissioner.

          That is enough.  That is probably already more than Bob would want to have said about him, being a humble person.  This tribute will be short because he would want it that way.

          His professional career showed his enduring belief in the wisdom of insurer good faith.

          Godspeed, Bob Hunter.

Please read the disclaimer.  ©2022 Dennis J. Wall.  All rights reserved.

ASKING LIFE INSURANCE COMPANIES FOR GOOD FAITH IN A PANDEMIC.

(Image via Consumer Federation of America)

There is a reported contagion spreading throughout Europe.  It is not the coronavirus itself, but it is a phenomenon directly related to Covid.  It is the reported behavior of some life insurance companies delaying or denying people life insurance coverage based on their having contracted Covid or on being suspected in some way of having contracted Covid.

    In the United States, more than 25 million people have tested positive for the coronavirus as of this writing.   In the face of these developments, the Consumer Federation of America has not waited for the disease of denials to spread to the United States.

    The CFA has issued a letter to the National Association of Insurance Commissioners calling for a new model rule.  Faced with the contagion spreading from Europe in which life insurance companies have denied claims and applications from people with Covid-related issues, the CFA is urging reasonable behavior from life insurers in the United States.

    “We understand reasonable precautions are needed, but to harm COVID patients and their families again is unacceptable. State regulators need to step in and issue a rule to protect consumers from arbitrary insurance company practices. Transparency and reasonableness in underwriting must be the standard,” said J. Robert Hunter, CFA’s Director of Insurance and former Texas Insurance Commissioner, who is quoted by the CFA in its press release.   Press release, Recovered COVID-19 Patients Facing New Life Insurance Hurdles in Europe, Protections Needed for American Consumers /

CFA Urges the National Association of Insurance Commissioners to Adopt Model Rule for Life Underwriters Denying Coverage to Applicants Who Had COVID-19; Group Calls on Insurers to Take Voluntary Action (February 1, 2021), https://consumerfed.org/press_release/recovered-covid-19-patients-facing-new-life-insurance-hurdles-in-europe-protections-needed-for-american-consumers/.

     In issuing its request for a rule of reasonableness, the Consumer Federation of America is essentially asking that life insurance companies in the United States act in good faith.  Dealing fairly with applicants and policyholders is the essence of good faith -- and the surest way to avoid the dreaded extracontractual risk of lawsuits for "bad faith."

Please read the disclaimer.  ©2021 Dennis J. Wall.  All rights reserved.

NATIONAL ASSOCIATION OF INSURANCE COMMISSIONERS UNDERCOUNTS MODEL ACT ADOPTERS.

   The National Association of Insurance Commissioners seems to have misplaced two States.  The NAIC counts seven (7) jurisdictions including three (3) States among those jurisdictions which supposedly have not enacted the NAIC's Model Unfair Claims Settlement Practices Act.

   Two of the States on the NAIC's 'non-adopters' list actually adopted the Unfair Claims Settlement Practices Act, though:  Iowa (over 30 years ago) and Nevada.  The one State on the NAIC list which is listed accurately as a 'non-adopter' is Mississippi.

   The NAIC Unfair Claims Settlement Practices Acts originally proposed beginning in 1972 are totally addressed in 1 DENNIS J. WALL, LITIGATION AND PREVENTION OF INSURER BAD FAITH Section 3:28 (West Publishing Co. 3d Edition and 2014 Supplement); 2 id. Section 9:14.

Please Read The Disclaimer.  Copyright 2014 by Dennis J. Wall.  All rights reserved.  No claim to original U.S. Government works.

"The Sacred Bargain" of Life and Death Benefits: Institutional Bad Faith?

... Can There Be Such a Thing as "Institutional Bad Faith"?  See also the posts here on Sunday, May 22, 2011 and on Tuesday, May 3, 2011.

Calling Life Insurance "the sacred bargain," California State Controller John Chiang described the actions of one Life Insurance Company which sells both annuities and Life Insurance Policies this way:

"They have a business-based rationale for their practices instead of a consumer-based approach to fulfill their promises."

  Quoted by Marc Lifsher, "California Officials Grill MetLife Over Alleged Failure to Pay Death Benefits" (Los Angeles Times Online, Tuesday May 24, 2011).

   Some Life Insurance Companies sell annuities.  These are payments made by the Insurance Companies during the life of the purchaser of an annuity, in basic terms.  The Life Insurance Company checks the Social Security rolls to learn when the holder dies.  At that time, the Company stops paying the annuity.

   Some of the same Life Insurance Companies sell, well, Life Insurance Policies.  These are of course payments made by the Life Insurance Companies upon the death of the Policyholder.   The same person may hold an annuity and of course the Company knows of that person's death.  Moreover, the same Company that checks the Social Security rolls to learn when an annuity holder dies, also either knows or has the means readily at hand to know, when a Life Insurance Policyholder dies.

   However, when a Life Insurance Policyholder dies, the Life Insurance Companies do not make payment on the Life Insurance Policies to the beneficiaries.  Even though they know in some cases that the Policyholder has died and the beneficiaries are entitled to be paid.  Nonetheless, even with this knowledge, these Life Insurance Companies reportedly do not pay unless and until the beneficiaries also know that the Policyholder is dead and make a claim on the Life Insurance Policy proceeds.

   This dual-track way of handling annuity claims differently from Life Insurance Claims strikes State Insurance Commissioners as worth investigating.  The Florida Office of Insurance Regulation held a Hearing into the practice on May 19, 2011 and, in a coordinated effort, the California Insurance Commissioner held a similar Hearing on May 23, 2011, joined by the California State Controller Mr. John Chiang, quoted above.  (Unfortunately, these things were already publicly reported and so were public knowledge before the first Hearing was held.)  The net result is what I have just posted and, in addition, the National Association of Insurance Commissioners has convened a joint task force to also investigate the practice.  The Insurance Commissioners of both California and Florida are on the NAIC task force.  See generally Press Release of National Association of Insurance Commissioners, "Regulators to Review Life Insurance Payment Practices," May 17, 2011;  Marc Lifsher, "California Officials Grill MetLife Over Alleged Failure to Pay Death Benefits / State Controller John Chiang and Insurance Commissioner Dave Jones Ask Whether the Life Insurer is Boosting Profits by Delaying or Failing to Pay Death Benefits Quickly Enough to Hears or to Search Aggressively for the Beneficiaries" (Los Angeles Times Online, May 24, 2011).

   Time will tell what comes of these coordinated investigations.  And in particular, whether any Court will be moved by whatever further facts may be developed, to entertain future claims and causes of action based on alleged "institutional Bad Faith" by Life Insurance Companies which engage in these practices currently under investigation.

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National Association of Insurance Commissioners Offers Health "Media Availability," Florida ...

... Office of Insurance Regulation Offers Public Hearing to People Who Can Pay $12.00 a Day to Park at Gaylord Palms Resort in Orlando.

   A Press Conference or "media availability" will be held by unknown "officers" of the National Association of Insurance Commissioners at the wonderfully luxurious Gaylord Palms Resort in Orlando today, Thursday, October 21, 2010.  The availability will be with regard to what the NAIC may have decided about its recommended Health Insurance Regulations for the Federal Government.

   In addition, today the Florida Insurance Department or Office of Insurance Regulation will also offer a Public Hearing on Catastrophe Insurance availability against Hurricanes and other Catastrophic Damage here in Florida.  The availability of this Public Hearing is broadly made available by the State to those persons willing to pay $12.00 a day for parking, unless either the State Government or the ample Gaylord Palms waives the fees.

The author is Co-Chair of the American Bar Association Insurance Coverage Litigation Committee's Subcommittee on Health, Life, and Disability Insurance.  He is also the Co-Author of "CATClaims:  Insurance Coverage for Natural and Man-Made Disasters" (Thomson Reuters West, 2010 Supplements now in process).

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More Day 3 Original Reporting From the NAIC ...

... At Their Fall 2010 National Meeting at the overly posh Gaylord Palms Resort in Orlando, Florida.  Other events at the third day of the National Association of Insurance Commissioners' Fall 2010 National Meeting are reported on Insurance Claims and Issues Web Log, Tuesday, October 19, 2010.

   Access to the Commissioners' meeting rooms is controlled.  Today the State Insurance Commissioners assembled in executive session in their Executive Committee to consider what the Minimum Loss Ratio, sometimes called the Medical Loss Ratio, should be under the new Federal Patient Protection and Affordable Healthcare Act.

   In other words, the Commissioners were going to recommend what percentage of each Premium Dollar for Healthcare taken in by Health Insurance Companies would be required to be spent on Healthcare instead of on their overhead such as payments to their Directors and Officers.

   The Commissioners' Executive Committee deliberated behind closed doors.  The public was not allowed in, although it is the public that will pay the Premium Dollars and receive a percentage back that is actually used to pay for their Healthcare.  Reporters in the "News Media" were not allowed in because they would report who said what, and who was in favor of say paying Healthcare Insurance Company Board Members as a part of so-called "Medical Care Costs".

   Hmmm.  The National Association of Insurance Commissioners is an organization composed of State and Territorial and District Insurance Commissioners.  Their offices are funded by State and Territorial and District Funds.  Funds for States and Territories and Districts come from Taxpayers, in basic and simple terms.  Also in basic and straight-forward terms, Taxpayers are the Public.

   So how is it possible to bar the Public access to meetings which decide the Healthcare the Public will receive?  To rephrase slightly something Ronald Reagan famously said, "Mr. and Ms. Insurance Commissioners, I'm paying for this Healthcare!"

The author is Co-Chair of the Subcommittee on Health, Life and Disability Insurance of the Insurance Coverage Litigation Committee of the American Bar Association.

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Day 2 Original Reporting From the National Association of Insurance Commissioners ...

... At Their 2010 Fall Meeting in Orlando, Florida.

   The NAIC today deferred resolution on a proposal of the American Council of Life Insurers affecting Long-Term Commercial Mortgage Loans.  The ACLI representatives, who address State Insurance Commissioners by their first names and in turn are addressed by them by their first names, were in favor of the deferral.  Their proposal is undergoing "modeling" at this time, although what exactly is "modeling," is unclear at least to the uninitiated like me.

   The ACLI's website, www.acli.com, identifies the ACLI in the following terms:

ACLI is a Washington, D.C.-based trade association with more than 300 legal reserve life insurer and fraternal benefit society member companies operating in the United States. ACLI members represent more than 90 percent of the assets and premiums of the life insurance and annuity industry. In addition to life insurance and annuities, ACLI member companies offer pensions, 401(k) and other retirement plans, long-term care and disability income insurance, and reinsurance.

   An ACLI Derivatives Risk Management Proposal was handed out to onlookers.  It is written for accountants in accountants' jargon.  If it was written to obscure whatever it contains, it serves its purpose in that case.  However, it is obviously not meant to address nor even acknowledge proposals which have been suggested to abolish Derivatives or to regulate them, particularly Credit Default Swaps or CDS or CDS's, like other forms of Credit Insurance.

   The ACLI representative affirmed that the ACLI position on this proposal is that it is an accounting issue, if I heard the gentleman correctly.  The NAIC panel considering this proposal had considered it previously, and this time it voted unanimously to "expose it for adoption," joining the original proposal with a New York State-proposed amendment, for 30 days.  After that time, the panel will apparently meet via telephone conference call to consider whether Derivatives are useful forms of Risk Mitigation, as proposed and amended.

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NAIC Convening National Meeting in Orlando, Florida in October.

   The National Association of Insurance Commissioners has scheduled a National Meeting in Orlando, Florida.

   The NAIC will convene in Orlando in October, 2010.  The agenda is being finalized and so is unavailable at the time of this post.  When the NAIC makes its agenda available, it will be the subject of at least one post here.

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