WESTERN REGIONAL NEWS
The effects of a growing number of lawsuits alleging construction defects by contractors in California, Washington, Arizona, Nevada and other western states are being felt in the insurance industry. The Wall Street Journal reports that, because of the increased amount of expensive litigation, some insurers have either stopped writing policies to cover contractors, or have been forced to price the policies at rates up to 10 times higher than prior coverage.
According to Rita Nowak, assistant vice president of property/casualty, for the Alliance of American Insurers (AAI), "Courts have been struggling with the definition of what constitutes a construction defect and whether or not they fall within the coverage of commercial general liability (CGL) policies.
"We believe the CGL policies were not intended to be used as warranties," she said. "The market slowdown outlined in the article is the end result of litigation abuse. When housing markets start to collapse, it can't be rationalized as righteous punishment for shoddy construction."
AAI, industry coalitions, and building and manufacturing associations at the state and national levels are working together to create legislative reform aimed at resolving this growing problem before its impact is felt more severely in the economy.
Area news
State Farm raises rates
State Farm Mutual Automobile Insurance Company recently raised overall auto rates in Wyoming by 7.6% and Utah by 6.9%. For most Wyoming customers, premiums for bodily injury/property damage liability and medical payments coverages will increase, due primarily to rising medical costs. Collision coverage premiums will go up to a lesser extent. Many Utah customers will see premiums for personal injury protection coverage and liability coverage increase.
In California, State Farm General Insurance Company, which provides homeowners insurance, has announced an average, statewide rate increase of 6.9% for its policyholders. Homeowners rates are based on projected costs and reflect trends in the number of California homeowners claims and the cost to pay those claims.
Rate changes for individual customers will vary, depending on a variety of factors such as claim experience, location of the home and policy coverages.
Credit-scoring bills passed
The governors of Idaho and Utah have signed bills that will restrict the use of insurance scores. In Idaho, SB 1408 prohibits an insurer from charging a higher premium, canceling or nonrenewing a policy based primarily on a person's credit rating or credit report. In Utah, HB 110 allows insurers to use credit in initial underwriting in conjunction with other factors. After the initial underwriting, it can be used only for discounting or reductions.
In Washington, HB 2544 has been sent to the governor for signature. It prohibits insurers from canceling or nonrenewing policyholders in whole or in part on credit history or insurance scores, and allows insurers to deny personal insurance only in combination with other "substantive" underwriting factors.
California
Auto insurance premium comparison online
The California Department of Insurance (CDI) announced the latest edition of the Automobile Insurance Premium Comparison Survey on its Web site (www.insurance.ca.gov). The new survey provides a baseline of premium information and is another tool that consumers and policyholders can use when shopping for automobile insurance.
The survey consists of premium data available from 2001 insurer information and is just one of several Premium Comparison Surveys available on CDI's Web site. For consumers without Internet access, CDI's Consumer Services staff can facilitate CDI Web site functions via a toll-free call to the Consumer Hotline at (800) 927-HELP.
Nevada
State malpractice association formed
In March, Governor Kenny Guinn unveiled a plan to form the Nevada Essential Insurance Association (NEIA) after Insurance Commissioner Alice Molasky-Arman determined that a lack of available medical malpractice insurance coverage exists in the state. The NEIA is a type of joint underwriting association governed by a board of directors appointed by the commissioner. It will classify risks, establish rates and process claims.
If rates are set too low and the acquired premiums are not enough to cover claims, state law enables the association to impose assessments on all companies writing liability insurance. In turn, an insurer's assessments may be recouped through credits against premium taxes. Gov. Guinn acknowledges that this "is a short-term solution ... I'm prepared to work with the Nevada Legislature on reforms that will provide stable and reliable medical malpractice insurance well into the future."
Montana
IIAM to meet
The Independent Insurance Agents of Montana (IIAM) will hold its annual convention at the Billings Sheraton, July 21-23. For more information, contact IIAM at (800) 310-8418. *