NCOIL Executive Committee Adopts Resolution Urging the ALI to Change Proposed Liability Insurance Restatement

For Immediate Release
January 8, 2017
Contact: Paul Penna
(732) 201-4133

NCOIL EXECUTIVE COMMITTEE ADOPTS RESOLUTION URGING THE ALI TO CHANGE PROPOSED LIABILITY INSURANCE RESTATEMENT
Measure Held to Communicate with ALI, Without Success

Manasquan, NJ – The NCOIL Executive Committee met in public session via teleconference on January 5th to consider the Resolution Encouraging the American Law Institute to Materially Change the Proposed Restatement of the Law of Liability Insurance. The bipartisan Resolution, sponsored by NY Sens. Neil Breslin and James Seward, passed the NCOIL Property and Casualty Committee at the Annual Meeting in November but was held by the Executive Committee which directed Commissioner Tom Considine, NCOIL CEO, to communicate with the ALI. Based on the latest version, the ALI has not materially changed the proposed Restatement. The Executive Committee passed the Resolution unanimously.

“It is exceptionally disappointing that this has occurred” said AR Sen. Jason Rapert, NCOIL President.  “We have worked tirelessly and in good faith, but the ALI seems intent on its ‘NEWStatement,’ which misrepresents the law as written.”

“It is disappointing that, despite our repeated efforts, there continues to be little movement to make this a true ‘Restatement’ of existing majority law” said NCOIL CEO Commissioner Tom Considine.  “NCOIL legislators made clear during both the general session and the Property & Casualty Insurance Committee that they closely guard legislative prerogatives as their right. The letter cites more than 10 instances where the proposed Restatement goes beyond existing law. We appear to be at the point where NCOIL will take action to ensure that the proposed Restatement is not afforded recognition as an authoritative reference.”

After a General Session at the 2017 NCOIL Annual Meeting titled ‘A Restatement or NEWstatement? Examining the ALI’s Proposed Restatement of the Law of Liability Insurance’ with a panel consisting of the proposed Restatement’s Reporter Professor Tom Baker, and project participants Professor Peter Kochenburger, Laura Foggan, and Victor Schwartz, NCOIL expressed renewed concern that the proposed Restatement will proceed towards final adoption by the ALI Council without any meaningful changes.

NCOIL will transmit the adopted resolution to ALI leadership, with one final pause for ALI modification before transmitting it with other appropriate communications to State Chief Justices, State legislative leaders, members of the committees with jurisdiction over insurance public policy, as  well as to State insurance regulators. A full copy of the letter, ALI response and the Resolution are below.

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NCOIL is a legislative organization comprised principally of legislators serving on state insurance and financial institutions
committees around the nation. NCOIL writes Model Laws in insurance and financial services, works to both preserve the
state jurisdiction over insurance as established by the McCarran-Ferguson Act seventy years ago and to serve as an
educational forum for public policy makers and interested parties. Founded in 1969, NCOIL works to assert the
prerogative of legislators in making state policy when it comes to insurance and educate state legislators on current and
perennial insurance issues.

 

 

 

 

November 28, 2017

David F. Levi                                                                                                           Roberta Cooper Ramo
President                                                                                                                  Council Chair
American Law Institute                                                                                        American Law Institute
4025 Chestnut St. 4025 Chestnut St.
Philadelphia, PA, 19104 Philadelphia, PA, 19104

Dear President Levi and ALI Council Chair Ramo:

I write on behalf of the National Council of Insurance Legislators (NCOIL)1 to express NCOIL’s serious and continuing concern regarding the American Law Institute’s (ALI) proposed Restatement of the Law of Liability Insurance (the proposed Restatement).

NCOIL, as you may know, is a national legislative organization created by and comprised of State legislators, principally serving on State insurance and financial institutions committees around the nation. NCOIL develops model laws in insurance and financial services, works to preserve the State jurisdiction over insurance as established by the McCarran-Ferguson Act seventy years ago, and serves as an educational forum for public policy makers and interested parties. Founded in 1969, NCOIL works to assert the primacy of legislators in making State policy when it comes to insurance and educate State legislators on current and longstanding insurance issues. I ask that you share NCOIL’s concerns with the proposed Restatement’s Advisers, ALI Council, and others in its leadership.

On May 5, 2017, NCOIL wrote to Director Revesz and Deputy Director Middleton, with copies to the proposed Restatement’s Reporters Professors Tom Baker and Kyle Logue, about the need to ensure that all interested voices are truly heard, considered, and reflected in a work that is a Restatement of the Law, Liability Insurance, in substance as well as title. Our May 5, 2017 letters explained that several of the proposed Restatement’s provisions go beyond established insurance law and thus were of immediate concern because they appear to address matters which are properly within the legislative prerogative. We gave specific examples of these concerns, where the draft proposes significant changes to current common law. These included its departure from the plain meaning rule (Section 3), the forfeiture of coverage defenses for certain breaches of the duty to defend (Section 19), the breadth of damages to be payable by insurers for failure to settle (Section 27), and the imposition of one-way fee-shifting (Sections 48, 49(3) and 51(1)). As our May 5, 2017 letter stated, such matters are, in the first instance, the primary prerogative of the legislative branch of government, which consists of publicly elected and accountable individuals who must consider all relevant policy considerations such as the impact of proposed law changes on the availability and affordability of insurance. We note that the fact that state legislatures have not adopted provisions in these areas noted above, as well as others, does not mean they have not considered them.

NCOIL made clear that we would welcome representatives of the ALI to come to an NCOIL meeting to have a dialogue around the Restatement issues. After our letter was sent, the ALI leadership decided to defer the organization’s final consideration of the proposed Restatement, indicating that the project would benefit from another year of work. NCOIL applauded this recognition of the need for additional work on this project. Consistent with that decision, and to follow up on its concerns, NCOIL invited the proposed Restatement Reporters to speak during a general session at its Annual meeting earlier this month in Phoenix, AZ. During that general session on November 16, 2017, NCOIL heard Professor Tom Baker and project participants, Laura Foggan, Peter Kochenburger, and Victor Schwartz, speak about the Restatement project and its approach to liability insurance
law.

NCOIL members, who are State insurance legislators from across the country, then had the opportunity to ask questions about the Restatement; they expressed deep concerns about the project’s intrusion into making law – rather than restating or reporting the law of liability insurance. It was apparent from the general session at NCOIL’s Annual meeting earlier this month that the Reporters continue to adhere to the same approach in going beyond established law that NCOIL expressed concern about in our May 5 letter. Specifically, in multiple instances, the proposed Restatement engages in law-making by announcing new legal rules rather than articulating the law impartially according to existing precedents. The ALI Reporters should not be exercising the legislative power to make new laws through Restatement proposals. In fact, in the general session at its Annual meeting earlier this month, NCOIL learned that the Black-letter rules on the topics highlighted in our May 5 letter, as well as other Sections of concern, remain unchanged even as this ALI project apparently nears completion.

Following the general session described above, at the meeting of the NCOIL Property-Casualty Insurance Committee, the proposed Restatement was again a topic of discussion, and a Resolution was passed by unanimous voice vote by said Committee. On behalf of the NCOIL Executive Committee, I
am writing to share this Resolution with you, and to again urge the ALI to conform the Restatement to existing law, and to defer to legislative bodies better suited to make public policy determinations on  areas of new law.

Again, we would like to point out specific Sections of the proposed Restatement that impinge on the legislative prerogative, which include:

Section 3, which departs from the settled insurance law “plain meaning” rule. The alternative approach proposed in the Restatement is a departure from settled insurance law in approximately 40 states;

Section 8, which imposes a new “substantiality” requirement for determining whether an insured’s misrepresentation was material. This is at odds with existing statutory and common law governing misrepresentations and rescission. Existing law asks whether or not — but for the misrepresentation — a policy would have been issued on the same terms, not whether it would have been issued only on substantially different terms;

Section 12, which introduces new liability on insurers, for defense counsel’s malpractice, if defense counsel is an employee of the insurer and/or if the insurer “has undertaken a duty to select defense counsel [or] . . . to supervise defense counsel and the insurer breaches that duty.” This newly invented
rule creates tension with attorneys’ professional responsibilities to exercise independent professional judgment and would alter the relationship between defense counsel, their clients, and insurers;

Section 13(3), which forbids reliance on undisputed non-liability facts in determining the duty to defend, except in four cases. This alters the common law standards and would force a defense of uncovered claims, thereby increasing costs;

Section 18, which introduces a new rule that, with limited exceptions, the duty to defend terminates only on court adjudication that the insurer does not have a duty to defend the action. This requirement for court approval does not reflect existing law, and will increase costs and burdens on courts and the parties with unnecessary litigation;

Section 19, which imposes a forfeiture of coverage defense for certain breaches of the duty to defend. It is a punitive provision and does not adhere to the common law;

Section 27, which imposes responsibility for damages for insurer breach of settlement duties, including punitive damages awarded against the policyholder. This proposed rule disregards individual states’ public policy determinations concerning insurability of punitive damages and is
unsupported by any common law rulings;

Section 36, which would excuse late notice under a claims-made and reported policy if the claim is considered to be too close to the end of the policy term to permit reporting during the policy period and the policy does not contain an extended reporting period. This overrides insurance contract terms. Whether an extended reporting period should be required and/or a late notice defense should be permitted in this context is a legislative judgment;

Section 48, which ignores the important principle of mitigation of damages, although the common law provides that any party seeking recovery under a contract has a duty to mitigate its damages and cannot recover for loss it could have avoided without undue risk, burden or humiliation; and

Sections 48, 49(3) and 51(1), which introduce broad one-way fee-shifting and override legislative determinations concerning whether and when there should be any departure from the American Rule concerning who bears litigation fees.

NCOIL respectfully requests that the ALI carefully review what positions the Restatement should take, as well as when it should defer action to legislative determinations. This request is driven in no small part by the weight the ALI’s Restatements have historically been accorded by the bench and bar. Should there not be meaningful change in the proposed Restatement, NCOIL will be forced to oppose the proposed Restatement project as a misrepresentation of the law of liability insurance, and as a usurpation of lawmaking authority from State insurance legislators. Shortly, NCOIL’s Executive Committee will be determining what action to take in relation to the Property-Casualty Insurance Committee Resolution enclosed, including the role NCOIL will take alerting State Chief Justices, State legislative leaders and members of the committees with jurisdiction over insurance public policy, as well as State insurance regulators, about NCOIL’s concern that the Restatement is, in numerous places, a misstatement of the law, and does not afford proper respect to the expertise and jurisdiction of State insurance legislators and should not be afforded recognition as an authoritative reference.

Before taking any further action, NCOIL writes now to ensure that the ALI leadership has the opportunity to consider these concerns. We request the courtesy of a reply on or before December 18, 2017, addressing whether or not the ALI will make the type of substantive changes NCOIL has requested to avoid interference with the role of legislators in making State policy when it comes to insurance.

Very truly yours,
Thomas B. Considine
Chief Executive Officer – National Council of Insurance Legislators

 

 

National Council of Insurance Legislators (NCOIL)

Resolution Encouraging the American Law Institute to Materially Change the Proposed Restatement of the Law of Liability Insurance

Adopted by the NCOIL Property and Casualty Insurance Committee on November 16, 2017, and the NCOIL Executive Committee on January 5, 2018.
Sponsored by Sen. Neil Breslin (NY) and Sen. James Seward (NY)

WHEREAS, the American Law Institute (“ALI”) intends to publish a Restatement of the Law of Liability Insurance (the “proposed Restatement” or “Restatement”); and

WHEREAS, ALI Restatements have traditionally been held in high regard and relied upon by courts as authoritative references regarding established rules and principles of law; and

WHEREAS, such Restatements, in the ALI’s own words, are “primarily addressed to courts” and “aim at clear formulations of common law and its statutory elements of variations and reflect the law as it presently stands or might appropriately be stated by a court” (ALI Style Guide, 2015); and

WHEREAS, NCOIL members became aware of this proposed Restatement in the spring of 2017 and upon review of the draft, identified several areas which, contrary to the above-stated intent, are inconsistent with well-established law and purport to address matters which are properly within the
legislative prerogative; and

WHEREAS, NCOIL, through its Chief Executive Officer, Thomas B. Considine, addressed a letter dated May 4, 2017 (“the Considine letter”), to ALI leadership in an effort to identify particular concerns and effect reconsideration of and significant changes to the proposed Restatement; and

WHEREAS, NCOIL members were encouraged to learn that, after receipt of the Considine letter, ALI leadership made the decision to defer a final vote on the proposed Restatement until 2018, with the recognition that the Restatement would benefit from another year of work; and

WHEREAS, the subsequent drafts of the proposed Restatement have reflected only very minor changes to the insurance legal rules proposed and have no substantive changes in the rules proposed on the topics of particular concern identified in the Considine letter; and

WHEREAS, during its General Session on November 16, 2017, NCOIL hosted a panel presentation which included the proposed Restatement’s lead Reporter, and it was apparent from Reporter commentary that no or minimal substantive changes to the proposed Restatement are anticipated before it is submitted to the ALI Council and then the ALI membership for final approval;

NOW, THEREFORE, BE IT RESOLVED THAT NCOIL urges ALI leadership, members and Reporters to abide by ALI’s own acknowledgement that “[a]n unelected body like The American Law Institute has limited competence and no special authority to make major innovations in matters of
public policy,” and instead afford proper respect to the legislative prerogative, and the expertise and the jurisdiction of NCOIL members; and

BE IT FURTHER RESOLVED THAT NCOIL urges the ALI to effect meaningful change to the proposed Restatement so that it is consistent with well-established insurance law and respectful of the role of state legislators in establishing insurance legal standards and practice; and

BE IT FURTHER RESOLVED THAT, should such meaningful change not occur prior to its final approval, NCOIL urges that the Restatement of the Law of Liability Insurance should not be afforded recognition by courts as an authoritative reference regarding established rules and principles of
insurance law, as Restatements traditionally have been afforded; and

BE IT FURTHER RESOLVED THAT NCOIL urges state legislators across the country to adopt resolutions declaring that this Restatement should not be afforded such recognition by courts; and

BE IT FURTHER RESOLVED THAT NCOIL shall develop and promulgate, as appropriate, model legislation intended to maintain the viability, predictability and optimal functionality of the insurance market and its practices; and

BE IT FURTHER RESOLVED THAT, a copy of this Resolution shall be sent to ALI Leadership, the reporters of the Restatement of the Law of Liability Insurance, and further published in such a manner to reach and inform ALI members, and

BE IT FINALLY RESOLVED THAT a copy of this Resolution expressing NCOIL’s concern that the Restatement does not afford proper respect to the expertise and jurisdiction of state insurance legislators and that the Restatement of the Law of Liability Insurance should not be afforded
recognition as an authoritative reference, shall be sent to state chief justices, state legislative leaders and members of the committees with jurisdiction over insurance public policy, as well as to all state insurance regulators.

12/6/17 ALI Response:
http://ncoil.org/wp-content/uploads/2017/12/Considine-response-ltr-Dec6-2017.pdf

12/12/17 NCOIL response to letter:
http://ncoil.org/wp-content/uploads/2017/12/ALI-letter-12-12-17.pdf

NCOIL President Announces 2018 Committee Leadership

For Immediate Release
January 5, 2018
Contact: Paul Penna
(732) 201-4133

NCOIL PRESIDENT ANNOUNCES 2018 COMMITTEE LEADERSHIP
Strong Group of Insurance Legislators to Lead Committees

Manasquan, NJ – AR Senator Jason Rapert, NCOIL President, announced the lineup of Committee Chairs and Vice Chairs for 2018. “This is a geographically and politically diverse group of legislative leaders that will help NCOIL continue to examine and enact sound insurance public policy” said Rapert. “I am confident these legislators will do an admirable job leading these committees throughout the year at NCOIL meetings and interim committee calls.”

The NCOIL Chairs and Vice Chairs are:

Financial Services:                                                                                         Property & Casualty Insurance:
Chair: Sen. Bob Hackett, OH                                                                                  Chair: Rep. Richard Smith, GA
Vice Chair: Rep. Sam Kito, AK                                                                                Vice Chair: Rep. David Santiago, FL

Health, Long Term Care & Health                                                            State-Federal Relations:
Retirement Issues:                                                                                          Chair: Sen. Dan “Blade” Morrish, LA 
Chair: Asm. Kevin Cahill, NY                                                                                  Vice Chair: Rep. Glen Mulready, OK
Vice Chair: Rep. Tom Oliverson, M.D., TX

International Insurance Issues:                                                                Workers’ Compensation Insurance:
Chair: Sen. Jerry Klein, ND                                                                                     Chair: Rep. Marguerite Quinn, PA
Vice Chair: Sen. Roger Picard, RI                                                                           Vice Chair: Asw. Maggie Carlton, NV

Life Insurance & Financial Planning:                                                     Articles of Incorporation/Bylaws:
Chair: Rep Deborah Ferguson, AR                                                                        Chair: Rep. Joe Fischer, KY
Vice Chair: Rep. Joe Hoppe, MN                                                                           Vice Chair: Rep. Martin Carbaugh, IN

NCOIL-NAIC Dialogue:                                                                                 Audit Committee: 
Chair: Rep. Bill Botzow, VT                                                                                     Chair: Rep. Bill Botzow, VT
Vice Chair: Sen. Jim Seward, NY                                                                            Vice Chair: Asm. Ken Cooley, CA

Budget Committee:                                                                                         Business Planning:
Chair: Rep. Matt Lehman, IN                                                                                  Chair: Sen. Jason Rapert, AR
Vice Chair: Rep. Lois Delmore, ND                                                                        Vice Chair: Rep. Bill Botzow, VT

Nominating:
Chair: Rep. Steve Riggs, KY*
Vice Chair: Sen. Travis Holdman, IN

The NCOIL Spring Meeting will be in Atlanta, GA from March 2 – 4 at the Buckhead Whitley.

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NCOIL is a legislative organization comprised principally of legislators serving on state insurance and financial
institutions committees around the nation. NCOIL writes Model Laws in insurance and financial services, works to
both preserve the state jurisdiction over insurance as established by the McCarran-Ferguson Act seventy years ago
and to serve as an educational forum for public policy makers and interested parties. Founded in 1969, NCOIL works
to assert the prerogative of legislators in making state policy when it comes to insurance and educate state legislators
on current and perennial insurance issues.

NCOIL Adopts Model Act Requiring Competition Among Rating Agencies to Improve State Regulation of Insurance

For Immediate Release
December 15, 2017
Contact: Paul Penna
(732) 201-4133

NCOIL ADOPTS MODEL ACT REQUIRING COMPETITION AMONG RATING AGENCIES TO IMPROVE STATE REGULATION OF INSURANCE
Promotes Competition, Strives to Correct Past Oversight of Listing a Single, Exclusive Insurer Rating Requirement in Statutes, Regulation, Bulletins or Other Public Materials

Manasquan, NJ – At the 2017 NCOIL Annual Meeting in Phoenix, AZ, the NCOIL Financial Services Committee adopted a Model Act to Support State Regulation of Insurance by Requiring Competition Among Rating Agencies sponsored by KY Rep. Steve Riggs and OH Sen. Bob Hackett. The NCOIL
Executive Committee adopted an amended version.

“Legislators or regulators should not be in the business of requiring one rating agency when there are several competent rating agencies to choose from. However, almost all of the state are doing this” said KY Rep. Steve Riggs, NCOIL’s then-President. “This stems from a time long ago when there was only one rating agency that rated insurance companies.”

The purpose of the Act is to require competition in insurer ratings to benefit consumers, duly licensed insurance companies, producers, and other third-party stakeholders by promulgating and embracing insurer rating requirements in laws and regulations that incorporate the enumeration of multiple, competent insurer rating organizations.

“NCOIL has discussed promoting competition among rating agencies for several years, which led to adopting a Resolution on that issue in 2015” said OH Sen Bob Hackett, a co-sponsor of the measure. “The Model Act represents NCOIL’s commitment to the issue and belief in its importance.”

“NCOIL works to ensure that there is competition where available” said Commissioner Tom Considine, NCOIL CEO. “Regulated competition in the insurance sector protects consumers in the long run.”

There was robust debate about the measure, which resulted in changes clarifying the definition of “competent rating agency” that were finalized at the Executive Committee. There are still concerns among some rating agencies about the Model, and comments made after the Model’s adoption are
included at the end of this release.

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NCOIL is a legislative organization comprised principally of legislators serving on state insurance and financial institutions
committees around the nation. NCOIL writes Model Laws in insurance and financial services, works to both preserve the
state jurisdiction over insurance as established by the McCarran-Ferguson Act seventy years ago and to serve as an
educational forum for public policy makers and interested parties. Founded in 1969, NCOIL works to assert the
prerogative of legislators in making state policy when it comes to insurance and educate state legislators on current and
perennial insurance issues.

 

 

NATIONAL COUNCIL OF INSURANCE LEGISLATORS (NCOIL)

Model Act to Support State Regulation of Insurance by Requiring Competition Among Rating
Agencies

Adopted by the NCOIL Financial Services Committee on November 16, 2017
Adopted with amendments by the NCOIL Executive Committee on November 19, 2017
Sponsored by Rep. Steve Riggs (KY) and Sen. Bob Hackett (OH)

Section 1. Short Title

Model Act to Support State Regulation of Insurance by Requiring Competition among Insurance Rating Agencies

Section 2. Findings and Purpose

The Legislature finds that:

1) Protecting consumers and ensuring the safety and soundness of insurance companies in the United States have been the prime objectives of state insurance regulation for over 150 years.
2) The states have sole authority for the regulation of the business of insurance as provided under the McCarren-Ferguson Act.
3) State insurance regulation has been successful and effective.
4) State insurance regulation has in place on-going substantive procedures, processes, and protocols to license, regulate and supervise insurers.
5) There is no requirement that duly licensed insurance companies be rated and that among those that are, companies make choices about rating organizations based on management’s evaluation of the perceived strengths of each rating organization as it relates to their markets and business models.
6) The test of insurer ratings is whether in the long run the company performs as expected, and in that regard each of these rating organizations on the whole have a consistent record of accurately gauging the ability of the companies to pay claims and service their customers.
7) An unintended yet direct consequence of designating a single, exclusive insurer rating requirement in laws, statutes, bulletins or other public material is the diminution of “public regulation by public authority” and an implication of private regulation of insurance.
8) A response to this threat to public regulation is necessary.
9) Multiple, competent insurer rating organizations exist.

It is the purpose of this Act to:

To require competition in insurer ratings to benefit consumers, duly licensed insurance companies, producers, and other third-party stakeholders by promulgating and embracing insurer rating requirements in laws and regulations that incorporate the enumeration of multiple, competent insurer rating organizations.

Section 3. Definitions

As used in this Act:

1) “Competent Rating Agency” means A.M. Best Rating Services, Inc. Company; Demotech, Inc.; Fitch Group; Moody’s Investor Service; Kroll Bond Rating Agency; Standard and Poor’s Financial Services LLC or another rating agency certified or approved by a national entity that engages in such a process. The process shall include, but not necessarily be limited to, the following requirements:

a. A requirement for the rating agency to register and provide an annual updated filing;
b. Record retention requirements;
c. Financial reporting requirements;
d. Policies for the prevention of misuse of material nonpublic information;
e. Management of conflicts of interest, including prohibited conflicts;
f. Prohibited acts practices;
g. Disclosure requirements;
h. Required policies, practices, and internal controls;
i. Standards of training, experience and competence for credit analysts.

2) “Public Entity” means any department, agency, special purpose district, or other instrumentality of this State and county or local government in this State.

Section 4. Requirements

No public entity shall bar any competent rating agency in designating the use of insurer rating requirements in laws, statutes, regulations, rules, bulletins, or other public materials.

Section 5. Effective Date

This Act shall take effect immediately.

 

A.M. Best Comment Letter

Matthew C. Mosher, FCAS, MAAA, CERA
Executive Vice President & Chief Operating Officer – Rating Services
Ambest Road, Oldwick, NJ, 08858, USA
Tel: +1 (908) 439-2200 ext.5708 1 Mobile: +1 (908) 268-0552 Email:
Matthew.Mosher@ambest.com

December 6, 2017

Thomas B. Considine
National Council of Insurance Legislators
Atlantic Corporate Center
2317 Route 34, Suite 2B
Manasquan, NJ 08736

Dear Commissioner Considine,

A.M. Best would like to reiterate our concerns with the Model Act to Support State Regulation of Insurance by Requiring Competition Among Rating Agencies which was approved by the NCOIL Executive Committee at the recent NCOIL Annual Meeting.

While the basis for the Model Act is sound and A.M. Best supports the Findings and Purpose of the Model Act, we contend that the final outcome of the process was a Model Act that does not reflect current legislative and regulatory standards and was not provided the appropriate time to be properly vetted. As a result, there are several contradictions in the Model Act as it currently stands:

1) Listing Specific Credit Rating Agencies – The Findings and Purpose section finds there should not be a single insurer rating requirement in laws, statutes, bulletins, or other public material. To correct this in the Definitions section, the Model Act lists six different rating agencies as “Competent Rating Agencies”, but leaves out five other rating agencies that are Nationally Recognized Statistical Rating Organizations (NRSRO) who are registered with the Securities and Exchange Commission (SEC) and meeting the requirements of Dodd Frank listed in the Definition section. While we applaud the removal of any one organization being listed or recommended in laws and statutes, by listing only certain rating agencies in the Model
Act and not all properly vetted rating agencies, NCOIL has merely changed the problem, not addressed it.

2) Including the requirements for an NRSRO from Dodd Frank, without applying them — The amendment to the Definitions section of the proposed Model Act included the list of requirements from Dodd Frank, to which all NRSRO registered rating agencies are held. This list of requirements shall be part of the process for any public agency’s “approval” of a rating agency to meet the standard for a “Competent Rating Agency”. A.M. Best suggested this change and applauds the inclusion of standards for rating agencies to be considered a “Competent Rating Agency”. However, the Model Act, as approved, left in the list of rating agencies considered “Competent Rating Agencies”. Five of the six rating agencies listed in the Model Act, and six other rating agencies not included in the Model Act, submit themselves to rigorous regulatory requirements and regulatory scrutiny to officially demonstrate they meet the requirements listed in the Model Act. One rating agency, Demotech, is included on the list in the Model Act, with no evidence of any regulatory authority reviewing this rating agency to ensure they have met the standards added to the Model Act to be considered a “Competent Rating Agency”. If the Model Act lists standards, there should be no need to name specific rating agencies. However, if there is a strong desire to list specific rating agencies, that list should only include rating agencies that can demonstrate a regulatory authority holds them to the standards listed.

One additional point of clarification A.M. Best would like to make sure NCOIL and its members are aware of relates to a point made in testimony at the Financial Services Committee related to the role of the NRSRO registration. The NRSRO process is not solely focused on the ratings of debt securities. The SEC, in its final rules, explicitly separates the rating of Insurance Companies and ratings of Corporate securities into two distinct classifications that an NRSRO can register. There are five classes of credit ratings for which a credit rating agency can register as an NRSRO:

1) Financial institutions, brokers, dealers
2) Insurance companies
3) Corporate issuers
4) Asset-backed securities
5) Issuers of government securities, municipal securities, or foreign government securities

The NAIC in their use of the NRSRO as their standard for acceptable rating agencies for certified reinsurer purposes, only accepts rating agencies who are registered with the SEC to issue ratings on Insurance Companies.

As stated in the SEC’s final rules, “In implementing the mandate [of Dodd Frank], the amendments and new rules being adopted today are designed to further enhance the governance of NRSROs in their roles as ‘gatekeepers’ and increase the transparency of the credit rating process as a whole.” The NRSRO registration process is about standards for rating agencies. A.M. Best continues to urge NCOIL to adopt current standards already in place at state and federal levels.

NCOIL plays a very important role in the development of Model Acts. For that reason, A.M. Best is surprised by the rush to approve this Model Act. At the first public reading in the Financial Services Committee meeting, it was agreed that amendments were needed. Additionally, there were concerns raised as to the appropriateness of the list of “Competent Rating Agencies”. Rather than amend the Act, and re-present it to the Financial Services
Committee for further discussion, the committee approved the Act with the understanding changes would be made and allowed the Model Act to move forward to the Executive meeting without seeing the re-draft.

A.M. Best believes the Findings and Purpose of the Model Act are appropriate, but are not well served by the Definition section of the Model Act. Had more time been provided for the discussion and understanding of the current standards applied to most rating agencies, a better Model Act would have resulted.

A.M. Best looks forward to working with you and your members in the future and continuing to discuss ways to improve the Model Act.

Sincerely Yours,
Matthew C. Mosher, FCAS, MAAA, CERA
Executive Vice President & Chief Operating Officer
A.M. Best — Rating Services
(908) 439-2200 Ext. 5708

 

Cc: Senator Jason Rapert, President, NCOIL

NCOIL Applauds Committee Passage of H.R. 4537

For Immediate Release
December 14, 2017
Contact: Paul Penna
(732) 201-4133

NCOIL APPLAUDS COMMITTEE PASSAGE OF H.R. 4537
Bill Preserves the State-Based System of Insurance Regulation and Improves
International Insurance Standard Setting Processes

Manasquan, NJ: – The National Council of Insurance Legislators (NCOIL) applauded the passage of H.R. 4537, The International Insurance Standards Act of 2017, in the House Financial Services Committee yesterday. The bill now heads to the House for consideration.

“NCOIL supports this legislation and will continue to support legislation that preserves the proven state-based system of insurance regulation” said AR Sen. Jason Rapert, NCOIL President. “Our state-based system should be held up as a model to be supported by U.S. negotiators in international forums. This bill will ensure that U.S. negotiators do so, and provide greater oversight and transparency on international insurance standards setting – things that were sorely lacking throughout the negotiations of the Covered Agreement. We at NCOIL urge the full House to pass this legislation,” concluded Rapert.

During the annual NCOIL D.C. Education Fly-In this past September, NCOIL legislators participated in more than 50 meetings with Senators, Congressman, and committee and congressional staff to stress the importance of protecting the state-based system of insurance regulation.

“This shows that NCOIL legislators have been effective when communicating support for the state-based system of insurance regulation” said Commissioner Tom Considine, NCOIL CEO. “The process surrounding negotiations of the Covered Agreement was fundamentally flawed. I am pleased that members of Congress have realized that and have taken steps to improve the overall process of international insurance discussions.”

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NCOIL is a legislative organization comprised principally of legislators serving on state
insurance and financial institutions committees around the nation. NCOIL writes Model Laws in
insurance and financial services, works to both preserve the state jurisdiction over insurance as
established by the McCarran-Ferguson Act seventy years ago and to serve as an
educational forum for public policy makers and interested parties. Founded in 1969, NCOIL
works to assert the prerogative of legislators in making state policy when it comes to insurance
and educate state legislators on current and longstanding insurance issues.

NCOIL Adopts Model Act on Out-of-Network Balance Billing Transparency Model

 

For Immediate Release

December 4, 2017

Contact: Paul Penna

(732) 201-4133

NCOIL ADOPTS MODEL ACT ON OUT-OF-NETWORK

BALANCE BILLING TRANSPARENCY MODEL

Manasquan, NJ – The NCOIL Health, Long-Term Care and Health Retirement Issues Committee voted to adopt the Out-of-Network Balance Billing Transparency Model Act sponsored by NY Senator James Seward. The measure was affirmed by the NCOIL Executive Committee at the conclusion of the 2017 Annual Meeting in Phoenix, AZ.

“This has been a long and complicated path to come to this point of completion. We worked diligently, listening to all interested parties to fashion a model act that is balanced, transparent and fair” said Sen. Seward. “Improving disclosure and the independent dispute resolution process works to the benefit of both the consumer and industry.”

The purpose of the act is to protect consumers from unexpected medical bills that result from their receiving care from out-of-network providers. Improved disclosures by health benefit plans, providers, and facilities, and a procedure for appealing out-of-network referral denials, as well as an alternative, independent dispute resolution process, will help consumers better navigate the insurance complex insurance world and reduce the incidence of costly, surprise bills.

“NCOIL legislators and interested parties know that we are serious about moving diligently to complete model laws for consideration by the states” said Commissioner Tom Considine, NCOIL CEO. “Even complicated models can advance by continuing the dialogue between meetings. I applaud Sen. Seward for his leadership in completing this legislation, which truly is a model for the nation in every sense of the word. The baseball style arbitration provision of ADR really is innovative, and should be a significant game changer.”

Among the highlights of the bill:

Definition of “Usual, customary, and reasonable (UCR) rate” – The Model defines the UCR rate as the eightieth percentile of all charges for the particular health care service performed by a provider in the same or similar specialty and provided in the same geographical area as reported in a benchmarking database maintained by a nonprofit organization specified by the

commissioner. The nonprofit organization shall not be financially affiliated with an insurance carrier.

Network Adequacy – A health benefit plan that contracts with a network of health care providers shall ensure that the network is adequate to meet the health needs of insureds and provide an appropriate choice of providers at in each in-network health care facility sufficient to render the services covered by the health benefit plan. The State Insurance Commissioner shall review the network of health care providers for adequacy at the time of the commissioner’s initial approval of a health insurance policy or contract; at least every three years thereafter; and upon application for expansion of any service area associated with the policy or contract.

Coverage Option Mandate – A carrier that issues a comprehensive group health benefit plan that covers services provided by out-of-network providers shall make available and, if requested by the policyholder or contract holder, provide at least one option for coverage for at least eighty percent of the usual and customary cost of each service provided by an out-of-network provider after imposition of a deductible or any permissible benefit maximum.

Emergency Services Provided by Out-of-Network Provider – The health benefit plan will ensure enrollees shall incur no greater out-of-pocket costs for emergency services than the enrollee would have incurred with an in-network provider.

Health Benefit Plan Notice to Enrollees –Where applicable, and through its website, the health benefit plan must give to an enrollee: notice that the enrollee may obtain a referral or preauthorization for services from an out-of-network provider and the procedure for requesting and obtaining such referral or preauthorization; notice that the enrollee shall have direct access to primary and preventive obstetric and gynecologic services; a listing of providers in the health plan network; a clear description of the methodology used by the carrier to determine reimbursement for out-of-network health care services; a description of the amount that the carrier will reimburse under the methodology for out-of-network health care services set forth as a percentage of the UCR rate for out-of-network health care services; examples of anticipated out-of-pocket costs for frequently billed out-of- network health care services; and information that reasonably permits an enrollee to estimate the anticipated out-of-pocket cost for out-of-network health care services in a geographical area or zip code based upon the difference between what the health benefit plan will reimburse for out-of-network health care services and the UCR rate for out-of-network health care services.

Additionally, within 48 hours after the enrollee has been pre-certified to receive non-emergency services at a facility, a health benefit plan shall provide by electronic or written correspondence, information on: whether the enrollee’s provider is a participating provider in the health benefit

plan network; whether proposed non-emergency medical care is covered by the health benefit plan; what the insured’s personal responsibility will be for payment of applicable copayment or deductible amounts; and if applicable, coinsurance amounts owed based on the provider’s contracted rate for in-network services or the insurer’s UCRrate for out-of-network services.

Provider Notice to Enrollees – Verbally at the time an appointment is scheduled and in writing or through a website prior to providing services, a health care provider or the provider’s representative shall disclose to the enrollee in writing or through an internet website, the health benefit plans in which the provider participates and the hospitals with which the provider is affiliated. If a provider does not participate in the enrollee’s health benefit plan network, the provider shall, prior to providing services, inform the enrollee that the amount or estimated amount the provider will bill the enrollee for health care services is available upon request, and, upon request, provide the enrollee with a written amount or estimated amount the provider anticipates billing the enrollee for planned services absent unforeseen medical circumstances that might arise when the services are provided.

Furthermore, when services rendered in a provider’s office require referral to, or coordination with, an anesthesiologist, laboratory, pathologist, radiologist, and/or assistant surgeon, the provider or provider’s representative initiating the referral or coordination shall give to the enrollee, the following information in writing about the aforementioned who will be providing services to the enrollee: (1) name, practice name, mailing address, telephone number, and (2) how to determine in which health benefit plan networks each participates. The information shall be provided to the enrollee at the time of the referral or commencement of the coordination of services.

Health Care Facility Notice to Enrollees – A health care facility shall establish, update and make public through posting on its website, to the extent required by federal guidelines, a list of the facility’s standard charges for items and services provided by the facility, including for diagnosis-related groups established under section 1886(d)(4) of the federal Social Security Act. A health care facility must also post on its website: a statement that if an enrollee in a health benefit plan receives services in the facility that is in that health benefit plan’s network, but receives those services from a provider who is not in that network, the enrollee may be billed for the amount between what the provider charges and what the enrollee’s health benefit plan pays that provider, including any co-pays, co-insurance, and/or deductibles that are the enrollee’s responsibility; and, as applicable, the name, mailing address and telephone number of the facility-based providers and facility-based provider groups that the facility has employed or contracted with to provide services including anesthesiology, pathology, and/or radiology, and instructions about how to determine in which health benefit plan networks each participates.

Independent Dispute Resolution – A program of Independent Dispute Resolution (“IDR”) for disputed out-of-network charges, including balanced bills, shall be established and administered by the Department of Insurance. A health carrier, nonparticipating provider, or enrollee, may initiate an independent dispute resolution process to determine reimbursement for health care services provided by a nonparticipating provider. The Model envisions the IDR system being “baseball style”, that is, each party to the IDR shall submit a “binding award amount” and the independent reviewer must choose one party’s or the other’s “binding award amount” based on which amount the independent reviewer determines to be closest to the reasonable charge for services provided in accordance with certain factors, with no deviation. The decision of the independent reviewer is final and shall be binding on the parties. The prevailing party may seek enforcement of the independent reviewer’s decision in any court of competent jurisdiction.

Balance Billing – If an out-of-network provider bills an enrollee for non-emergency medical care, requesting payment on the balance of the provider’s charge that is not related to co-pays, coinsurance payments, or deductible payments and is not covered by the health benefits plan, the billing statement from that provider must contain, among other things: an itemized listing of the non-emergency medical care provided along with the dates the services and supplies were provided; a conspicuous, plain-language explanation that the provider is not within the health plan network; the health benefit plan has paid a rate, as determined by the health benefit plan, which is below the facility-based provider’s billed amount; and notice that the enrollee may initiate an IDR proceeding to dispute the billing statement.

Out-of-Network Referral Denials – An out-of-network referral denial does not constitute an adverse determination. The notice of an out-of-network referral denial provided to an enrollee shall include information regarding how the enrollee can appeal the denial, including but not limited to what information must be submitted with the appeal.

Prior Authorization – A health benefit plan shall make a utilization review determination involving health care services which require pre-authorization and provide notice of that determination to the enrollee or enrollee’s designee and the enrollee’s health care provider by telephone and in writing within three business days of receipt of the information necessary to make the determination. To the extent practicable, such written notification to the enrollee and the enrollee’s health care provider shall be transmitted electronically, in a manner and in a form agreed upon by the parties. The notification shall identify: whether the services are considered in-network or out-of-network; whether the enrollee will be responsible for any payment, other than any applicable co-payment, co-insurance or deductible; as applicable, the dollar amount the health benefit plan will pay if the service is out-of-network; and, as applicable, information explaining how an enrollee can determine the anticipated out-of-pocket cost for out-of-network

health care services in a geographical area or zip code based upon the difference between what the health benefit plan will reimburse for out-of-network health care services and the UCR rate for out-of-network health care services.

Provider Directories – A carrier shall provide a provider directory on both the carrier’s website and in print format. The carrier shall annually audit at least a reasonable sample size of its provider directories for accuracy and retain documentation of such an audit to be made available to the insurance commissioner upon request. Regarding the directory posted online, the carrier shall update the provider directory at least monthly and ensure that the public is able to view all of the current providers for a plan through a clearly identifiable link or tab and without creating or accessing an account or entering a policy or contract number. Regarding the provider directory in print format, the carrier shall include a disclosure that the directory is accurate as of the date of printing and that enrollees and prospective enrollees should consult the carrier’s electronic provider directory on its website or call [insert appropriate customer service phone number] to obtain current provider directory information.

“This model is a direct result of countless hours of hard work by Senator Seward and interested parties” said Commissioner Tom Considine, NCOIL CEO. “I believe it reflects the best of NCOIL where all sides have the ability to make their case and a compromise is fashioned where everyone gets a little and gives a little so both consumers are protected and industry can thrive.”

A full copy of the model act is below.

Section 1. Title

This Act shall be known as the Out-of-Network Balance Billing Transparency Act.

Section 2. Purpose

The purpose of this Act is to protect consumers from unexpected medical bills that result from their receiving care from out-of-network providers. Improved disclosures by health benefit plans, providers, and facilities, and a procedure for appealing out-of-network referral denials will help consumers better navigate the insurance processes and reduce the incidence of costly, surprise bills.

Section 3. Applicability

A. Except as provided in subsection B, this Act applies to any health benefit plan, provider, and health care facility as defined in Section 4.

B. This Act does not apply to:

1. Medicaid managed care programs operated under [Insert Applicable State Statute];

2. Medicaid programs operated under [Insert Applicable State Statute];

3. the state child health plan operated under [Insert Applicable State Statute];

4. Medicare;

5. or

6. “excepted benefit” products as defined under 42 U.S.C. 300gg-91(c).

Section 4. Definitions

A. “Balance billing” means the practice by a provider, who does not participate in an enrollee’s health benefit plan network, of charging the enrollee the difference between the provider’s fee and the sum of what the enrollee’s health benefit plan pays and what the enrollee is required to pay in applicable deductibles, co-payments, coinsurance or other cost-sharing amounts required by the health benefit plan.

B. “Carrier” or “health carrier” means an entity subject to the insurance laws and regulations of this state, or subject to the jurisdiction of the commissioner, that contracts or offers to contract, or enters into an agreement to provide, deliver, arrange for, pay for or reimburse any of the costs of health care services. Carriers include a health insurance company, HMO, a hospital and health service corporation, or any other entity providing a plan of health insurance, health benefits or health care services.

C. “Emergency services” includes any health care service provided in a health care facility after the sudden onset of a medical condition that manifests itself by symptoms of sufficient severity, including severe pain, that the absence of immediate medical attention could reasonably be expected by a prudent layperson, who possesses an average knowledge of health and medicine, to result in:

1. placing the patient’s health in serious jeopardy;

2. serious impairment to bodily functions; or

3. serious dysfunction of any bodily organ or part.

D. “Enrollee” means an individual who is eligible to receive medical care through a health benefit plan.

E. “Facility-based provider” means an individual or group of health care providers:

1. to whom the health care facility has granted clinical privileges; and

2. who provides services to patients treated at the health care facility under those clinical privileges.

F. “Health benefit plan” means a policy, contract, certificate or agreement entered into, offered or issued by a health carrier to provide, deliver, arrange for, pay for, or reimburse any of the costs of [physical, mental, and/or behavioral] health care services.

G. “Health care facility” means a hospital, emergency clinic, outpatient clinic, birthing center, ambulatory surgical center, or other facility providing medical care, and which is licensed by [Insert appropriate state agency].

Drafting Note: States may wish to consider including a specific number of beds that a “health care facility” must have to be included within this definition in order to account for varying geographical settings

H. “Network” means the providers and health care facilities who have contracted to provide health care services to the enrollees of a health benefit plan. This includes a network operated by or that contracts with a health maintenance organization, a preferred provider organization, or another entity (including an insurance company) that issues a health benefit plan.

I. “Network plan” means a health benefit plan that uses a network to provide services to enrollees.

J. “Out-of-network facility” means a health care facility that has not contracted with a carrier to provide services to enrollees of a health benefit plan.

K. “Out-of-network provider” means a health care provider who has not contracted with a carrier to provide services to enrollees of a health benefit plan.

L. “Out-of-network referral denial” means a denial by a health benefit plan of a request for an authorization or referral to an out-of-network provider on the basis that the health benefit plan has an in-network provider with appropriate training and experience to meet the particular health care needs of the enrollee and who is able to provide the requested health service.

M. “Provider” means an individual who is licensed to provide and provides medical care.

N. “Usual, customary, and reasonable (UCR) rate” shall mean the eightieth percentile of all charges for the particular health care service performed by a provider in the same or similar specialty and provided in the same geographical area as reported in a benchmarking database maintained by a nonprofit organization specified by the commissioner. The nonprofit organization shall not be financially affiliated with an insurance carrier.

Section 5. Determination of Network Adequacy

A. A health benefit plan that contracts with a network of health care providers shall ensure that the network is adequate to meet the health needs of insureds and provide an appropriate choice of providers at each in-network health care facility sufficient to render the services covered by the health benefit plan.

B. The commissioner of [insert applicable state agency] shall review the network of health care providers for adequacy at the time of the commissioner’s initial approval of a health insurance policy or contract; at least every three years thereafter; and upon application for expansion of any service area associated with the policy or contract.

C. To the extent that the network has been determined by the commissioner to meet the standards set forth in [insert applicable section law], such network shall be deemed adequate by the commissioner.

D. Nothing in this subsection shall limit the commissioner’s authority to establish minimum standards for the form, content, and sale of health benefit plans, to require additional coverage options for out-of-network services, or to provide for standardization and simplification of coverage.

Section 6 Coverage Option Mandate

A. A carrier that issues a comprehensive group health benefit plan that covers services provided by out-of-network providers shall make available and, if requested by the policyholder or contract holder, provide at least one option for coverage for at least eighty percent of the UCR rate of each service provided by an out-of-network provider after imposition of a deductible or any permissible benefit maximum.

B. If there is no coverage available pursuant to subparagraph (A) of this section in a rating region, then the commissioner may require a carrier issuing a comprehensive group health benefit plan in the rating region, to make available and, if requested by the policyholder or contract holder, provide at least one option for coverage of eighty percent of the UCR rate of each service provided by an out-of-network provider after imposition of any permissible

deductible or benefit maximum. The commissioner may, after considering the public interest, permit a carrier to satisfy the requirements of this paragraph on behalf of another carrier, corporation, or health maintenance organization within the same holding company system. The commissioner may, upon written request, waive the requirement for coverage of services provided by out-of-network providers to be made available pursuant to this subsection if the commissioner determines that it would pose an undue hardship upon a carrier.

C. This section shall not apply to emergency care services in health care facilities or prehospital emergency medical services as defined by [insert applicable section of state law].

D. Nothing in this subsection shall limit the commissioner’s authority to establish minimum standards for the form, content, and sale of health benefit plans and subscriber contracts, to require additional coverage options for services provided by out-of-network providers, or to provide for standardization and simplification of coverage.

Section 7. Emergency Services Provided by Out-of-Network Provider

A. When an enrollee in a health benefit plan that covers emergency services receives the services from an out-of-network provider, the health benefit plan shall ensure that the enrollee shall incur no greater out-of-pocket costs for the emergency services than the enrollee would have incurred with an in-network provider.

Section 8. Health Benefit Plan Notice to Enrollees

A. Where applicable, and through its website, a health benefit plan must give to an enrollee:

1. notice

a. that the enrollee may obtain a referral or preauthorization for services from an out-of-network provider when the health benefit plan does not have in its network a provider who is geographically accessible to the enrollee and has the appropriate training and experience to meet the particular health care needs of the enrollee; and

b. the procedure for requesting and obtaining such referral or preauthorization;

2. notice

a. that the enrollee with a condition which requires ongoing care from a specialist may request a standing referral to such a specialist and

b. the procedure for requesting and obtaining such a standing referral;

3. notice

a. that the enrollee with a life-threatening condition or disease, or a degenerative and disabling condition or disease, either of which requires specialized medical care over a prolonged period of time may request a specialist responsible for providing or coordinating the enrollee’s medical care; and

b. the procedure for requesting and obtaining such a specialist;

4. notice

a. that the enrollee with a life-threatening condition or disease, or a degenerative and disabling condition or disease, either of which requires specialized medical care over a prolonged period of time may request access to a specialty care center; and

b. the procedure for requesting and obtaining such access may be obtained;

5. notice that an enrollee shall have direct access to primary and preventive obstetric and gynecologic services, including annual examinations, care resulting from such annual examinations, and treatment of acute gynecologic conditions, from a qualified provider of such services of her choice from within the plan or for any care related to a pregnancy.

6. a listing of providers in the health plan network, pursuant to Section 14.

7. with respect to out-of-network coverage:

a. a clear description of the methodology used by the carrier to determine reimbursement for out-of-network health care services;

b. a description of the amount that the carrier will reimburse under the methodology for out-of-network health care services set forth as a percentage of the UCR rate for out-of-network health care services; and

c. examples of anticipated out-of-pocket costs for frequently billed out-of- network health care services; and

d. information that reasonably permits an enrollee to estimate the anticipated out-of-pocket cost for out-of-network health care services in a geographical area or zip code based upon the difference between what the health benefit plan will reimburse for out-of-network health care services and the UCR rate for out-of-network health care services

B. Upon request of an enrollee and no later than 48 hours after the enrollee has been precertified to receive non-emergency services at a facility, a health benefit plan shall provide by electronic or written correspondence, information on:

1. whether the enrollee’s provider is a participating provider in the health benefit plan network;

2. whether proposed non-emergency medical care is covered by the health benefit plan;

3. what the insured’s personal responsibility will be for payment of applicable copayment or deductible amounts; and

4. if applicable, coinsurance amounts owed based on the provider’s contracted rate for in-network services or the insurer’s UCR rate for out-of-network services.

Section 9. Provider Notice to Enrollees

A. This section applies to the provision of non-emergency services only.

B. Verbally at the time an appointment is scheduled and in writing or through a website prior to providing services, a health care provider or the provider’s representative shall disclose to the enrollee in writing or through an internet website, the health benefit plans in which the provider participates and the hospitals with which the provider is affiliated.

C. If a provider does not participate in the enrollee’s health benefit plan network, the provider shall:

1. prior to providing services, inform the enrollee that the amount or estimated amount the provider will bill the enrollee for health care services is available upon request; and

2. Upon request, provide the enrollee with a written amount or estimated amount the provider anticipates billing the enrollee for planned services absent unforeseen medical circumstances that might arise when the services are provided.

3. Nothing in subsection (C) shall apply to emergent or unforeseen conditions or circumstances discovered during a procedure.

D. When services rendered in a provider’s office require referral to, or coordination with, an anesthesiologist, laboratory, pathologist, radiologist, and/or assistant surgeon, the provider or provider’s representative initiating the referral or coordination shall give to the enrollee, the following information in writing about the aforementioned who will be providing services to the enrollee: (1) name, practice name, mailing address, telephone number, and (2) how to determine

in which health benefit plan networks each participates. The information shall be provided to the enrollee at the time of the referral or commencement of the coordination of services.

E. At the time a provider or the provider’s representative is scheduling an enrollee to receive services at a health care facility, that provider or provider’s representative shall give to the enrollee, the following information in writing about any anesthesiologist, laboratory, pathologist, radiologist and/or assistant surgeon who will also be providing services to the enrollee: (1) name, practice name, mailing address, telephone number, and (2) how to determine in which health benefit plan networks each participates.

Section 10. Health Care Facility Notice to Enrollees

A. This section applies to the provision of non-emergency services only.

B. A health care facility shall establish, update and make public through posting on its website, to the extent required by federal guidelines, a list of the facility’s standard charges for items and services provided by the facility, including for diagnosis-related groups established under section 1886(d)(4) of the federal Social Security Act.

C. A health care facility shall post on its website:

1. the networks in which the health care facility is a participating provider;

2. a statement that:

a. provider services provided in the health care facility are not included in the facility’s charges;

b. providers who provide services in the facility may or may not participate with the same health benefit plans as the facility;

c. if an enrollee in a health benefit plan receives services in the facility that is in that health benefit plan’s network, but receives those services from a provider who is not in that network, the enrollee may be billed for the amount between what the provider charges and what the enrollee’s health benefit plan pays that provider, including any co-pays, co-insurance, and/or deductibles that are the enrollee’s responsibility; and

d. the enrollee should check with the provider arranging for the enrollee to receive services in the facility to determine whether that provider participates in the enrollee’s health benefit plans network.

3. as applicable, the name, mailing address and telephone number of the facility-based providers and facility-based provider groups that the facility has employed or contracted with to provide services including anesthesiology, pathology, and/or radiology, and instructions about how to determine in which health benefit plan networks each participates.

D. In registration or admission materials provided in advance of non-emergency services, a health care facility shall:

1. advise the enrollee to check with the provider arranging for the services to determine the name, practice name, mailing address and telephone number of any other provider who is reasonably anticipated to be providing services to the enrollee while in the health care facility, including but not limited to providers employed by or contracting with the health care facility; and

2. inform the enrollee about how to timely determine in which health benefit plan networks the providers referenced in Section 10 C 3 participate.

E. Upon request, a facility shall provide the enrollee with a written amount or estimated amount that the facility anticipates billing the enrollee for planned services absent unforeseen medical circumstances that might arise when the services are provided.

Section 11. Independent Dispute Resolution

(A) A program of Independent Dispute Resolution (“IDR”) for disputed out-ofnetwork charges, including balanced bills, shall be established and administered by the Department of Insurance (“DOI”).

(1) The DOI shall promulgate rules, forms and procedures for the implementation and administration of the IDR program.

(2) The DOI may charge the parties participating in the IDR program such fees as necessary to cover its costs of implementation and administration.

(3) The DOI shall maintain a list of qualified reviewers.

(B) The sole issue to be considered and determined in a IDR proceeding is the reasonable charge for the medical services provided to the individual. The basis for this determination shall include, but not be limited to:

(1) whether there is a gross disparity between the fee charged by the health care facility or provider for services rendered as compared to:

(a) fees paid to the involved health care facility or provider for the same services rendered by the health care facility or provider to other patients in health care plans in which the health care facility or provider is not participating, and

(b) in the case of a dispute involving a health care plan, fees paid by the health care plan to reimburse similarly qualified providers for the same services in the same region who are not participating with the health care plan;

(2) the level of training, education and experience of the provider;

(3) the health care facility or provider’s s usual charge for comparable services with regard to patients in health care plans in which the health care facility or provider is not participating;

(4) the circumstances and complexity of the particular case, including time and place of the service;

(5) individual patient characteristics; and

(6) the usual, customary and reasonable rate of the service.

Section 12. Independent Dispute Resolution Procedures.

(A) A health carrier or nonparticipating provider may initiate an independent dispute resolution process to determine reimbursement for health care services provided by a nonparticipating provider. Failure to respond within fifteen days to the initiation of the independent dispute resolution process constitute acceptance of the initiating party’s submission.

(B) The insurance commissioner shall establish an application process and fee schedule for independent reviewers.

(C) If the parties have not designated an independent reviewer by mutual agreement within 30 days of the request for IDR, the insurance commissioner shall select an independent reviewer from its list of qualified reviewers.

(D) To be eligible to serve as an independent reviewer, an individual must be knowledgeable and experienced in applicable principles of contract and insurance law and the healthcare industry generally.

(1) In approving an individual as an independent reviewer, the insurance commissioner shall ensure that the individual does not have a conflict of interest that would adversely impact the individual’s independence and impartiality in rendering a decision in an independent dispute resolution procedure. A conflict of interest includes but is not limited to current or recent ownership or employment of either the individual or a close family member in a health plan, or a health care provider that may be involved in an independent dispute resolution procedure.

(2) The insurance commissioner shall immediately terminate the approval of an independent reviewer who no longer meets the requirements to serve as an independent reviewer.

(E) Either party to a IDR proceeding may request an oral hearing.

(1) If no oral hearing is requested, the independent reviewer shall set a date for the submission of all information to be considered by the independent reviewer.

(2) Each party to the IDR shall submit a “binding award amount”; the independent reviewer must choose one party’s or the other’s “binding award amount” based on which amount the independent reviewer determines to be closest to the reasonable charge for services provided in accordance with Section 11(B), with no deviation.

(3) If an oral hearing is requested, the independent reviewer may make procedural rulings.

(4) There shall be no discovery in IDR proceedings.

(5) The independent reviewer shall issue his or her written decision within ten (10) days of submission or hearing.

(F) Unless otherwise agreed by the parties, each party shall:

(1) Bear its own attorney fees and costs, and

(2) Equally bear all fees and costs of the independent reviewer.

(G) The decision of the independent reviewer is final and shall be binding on the parties. The prevailing party may seek enforcement of the independent reviewer’s decision in any court of competent jurisdiction.

Section 13. Balance Billing

A. If an out-of-network provider bills an enrollee for non-emergency medical care, requesting payment on the balance of the provider’s charge that is not related to copays, coinsurance payments, or deductible payments and is not covered by the health benefits plan, the billing statement from that provider must contain:

1. an itemized listing of the non-emergency medical care provided along with the dates the services and supplies were provided;

2. a conspicuous, plain-language explanation that:

a. the provider is not within the health plan network; and

b. the health benefit plan has paid a rate, as determined by the health benefit plan, which is below the facility-based provider’s billed amount;

3. a telephone number to call to discuss the statement, provide an explanation of any acronyms, abbreviations, and numbers used on the statement, or discuss any payment issues;

4. a statement that the enrollee may call to discuss alternative payment arrangements;

5. a notice that:

a. the enrollee may file complaints with the [Insert State Medical Board] and includes the [Insert State Medical Board] mailing address and complaint telephone number; and

b. the enrollee may initiate an IDR proceeding to dispute the billing statement in the same manner as a health carrier or non-participating provider pursuant to Section 12. The notice shall include the contact information at the DOI for such initiation, including the mailing address and telephone number.

6. a notice that if an enrollee owes more than $200 to the provider (over any applicable co-payments, co-insurance, or deductibles and insurance payments) and the enrollee agrees to a payment plan:

a. the provider will not furnish adverse information to a consumer reporting agency if the enrollee substantially complies with the terms of the payment plan (1) within six months of having received the medical services or (2) within 30 days of receiving the first billing statement that reflects all insurance payments and the final amount owed by the enrollee; and

b. a patient may be considered by the provider to be out of substantial compliance with the payment plan agreement if payments in compliance with the agreement have not been made for a period of 45 days.

Section 14. Out-of-Network Referral Denials

A. An out-of-network referral denial under this subsection does not constitute an adverse determination.

B. The notice of an out-of-network referral denial provided to an enrollee shall include information regarding how the enrollee can appeal the denial, including but not limited to what information must be submitted with the appeal.

C. Appeals

1. An enrollee or enrollee’s designee may appeal an out-of-network referral denial by submitting a written statement from the enrollee’s attending physician, who must be a licensed, board certified or board eligible physician qualified to practice in the specialty appropriate to treat the enrollee for the health service sought, provided that:

a. the in-network provider or providers recommended by the health benefit plan do not have the appropriate training and experience to meet the particular health care needs of the enrollee for the health service; and

b. the attending physician recommends an out-of-network provider with the appropriate training and experience to meet the particular health care needs of the enrollee, and who is able to provide the requested health service.

2. If an out-of-network referral denial has been upheld by the health benefit plan’s internal appeals process and the enrollee wishes to pursue an external appeal, the external appeal agent shall

a. review the utilization review agent’s health benefit plan’s final adverse determination; and

b. make a determination as to whether the out-of-network referral shall be covered by the health benefit plan, provided that such determination shall:

i. be conducted only by one or a greater odd number of clinical peer reviewers;

ii. based upon review of the (1) training and experience of the in-network health care provider or providers proposed by the plan, (2) the training and experience of the requested out-of-network provider, (3) the clinical standards of the plan, (4) the information provided concerning the insured, (5) the attending physician’s recommendation, (6) the insured’s medical record, and (7) any other pertinent information; and

iii. be subject to the terms and conditions generally applicable to benefits under the evidence of coverage under the health care plan;

iv. be binding on the plan and the insured; and

v. be admissible in any court proceeding.

c. Upon reaching its decision, the external appeals agent shall submit to the enrollee and the health benefit plan, a written statement that:

i. the out-of-network referral shall be covered by the health care plan either when the reviewer or a majority of the panel of reviewers determines that (1) the health plan does not have a provider with the appropriate training and experience to meet the particular health care needs of an insured who is able to provide the requested health service, and (2) that the out-of-network provider has the appropriate training and experience to meet the particular health care needs of an insured, is able to provide the requested health service and is likely to produce a more clinically beneficial outcome; or

ii. the external appeal agent is upholding the health plan’s denial of coverage.

Section 15. Prior Authorization

A. A health benefit plan shall make a utilization review determination involving health care services which require pre-authorization and provide notice of that determination to the enrollee

or enrollee’s designee and the enrollee’s health care provider by telephone and in writing within three business days of receipt of the information necessary to make the determination. To the extent practicable, such written notification to the enrollee and the enrollee’s health care provider shall be transmitted electronically, in a manner and in a form agreed upon by the parties. The notification shall identify:

1. whether the services are considered in-network or out-of-network;

2. whether the enrollee will be responsible for any payment, other than any applicable co-payment, co-insurance or deductible;

3. as applicable, the dollar amount the health benefit plan will pay if the service is out-of-network; and

4. as applicable, information explaining how an enrollee can determine the anticipated out-of-pocket cost for out-of-network health care services in a geographical area or zip code based upon the difference between what the health benefit plan will reimburse for out-of-network health care services and the UCR rate for out-of-network health care services

Section 16. Provider Directories

A. A carrier shall provide a provider directory on both the carrier’s website and in print format.

1. The carrier shall annually audit at least a reasonable sample size of its provider directories for accuracy and retain documentation of such an audit to be made available to the insurance commissioner upon request.

2. The directory on the carrier’s website and in print format shall contain the following general information in plain language for each network plan:

a. a description of the criteria the carrier has used to build its network;

b. if applicable, a description of the criteria the carrier has used to tier providers;

c. if applicable, how the carrier designates the different provider tiers or levels in the network and identifies for each specific provider, hospital or other type of facility in the network which tier each is placed, for example by name, symbols or grouping, in order for a covered person or a prospective covered person to be able to identify the provider tier;

d. if applicable, a statement that authorization or referral may be required to access some providers;

e. what provider directory applies to which network plan, such as including the specific name of the network plan as marketed and issued in this state;

f. a customer service email address and telephone number or electronic link that enrollees or the public may use to notify the carrier of inaccurate provider directory information.

B. Regarding the directory posted online, the carrier shall

1. update the provider directory at least monthly;

2. ensure that the public is able to view all of the current providers for a plan through a clearly identifiable link or tab and without creating or accessing an account or entering a policy or contract number;

3. make available in a searchable format the following information for each network plan:

a. For health care professionals: name; gender; participating office location(s); specialty, if applicable; medical group affiliations, if applicable; facility affiliations; if applicable; participating facility affiliations, if applicable; languages spoken other than English, if applicable; and whether the provider is accepting new patients.

b. For hospitals: hospital name; hospital type (i.e., acute, rehabilitation, children’s, cancer); participating hospital location; and hospital accreditation status; and c. For facilities, other than hospitals, by type: facility name; facility type; types of services performed; and participating facility location(s).

4. make available the following information in addition to the information available under Subsection B 3:

a. for health care professionals: contact information; board certification(s); and languages spoken other than English by clinical staff, if applicable;

b. for hospitals: telephone number; and

c. for facilities other than hospitals: telephone number.

C. Regarding the provider directory in print format, the carrier shall include a disclosure that the directory is accurate as of the date of printing and that enrollees and prospective enrollees should consult the carrier’s electronic provider directory on its website or call [insert appropriate customer service phone number] to obtain current provider directory information.

D. Upon request of an enrollee or a prospective enrollee, the carrier shall make available in print format, the following provider directory information for the applicable network plan:

a. for health care professionals: name; contact information; participating office location(s); specialty, if applicable; languages spoken other than English, if applicable; and whether the provider is accepting new patients;

b. for hospitals: hospital name; hospital type (i.e., acute, rehabilitation, children’s, cancer); and participating hospital location and telephone number; and

c. for facilities, other than hospitals, by type: facility name; facility type; types of services performed; and participating facility location(s) and telephone number.

Section 17. Effective Date

This Act shall take effect on [insert months] following enactment.

NCOIL is a legislative organization comprised principally of legislators serving on state insurance and financial institutions committees around the nation. NCOIL writes Model Laws in insurance and financial services, works to both preserve the state jurisdiction over insurance as established by the McCarran-Ferguson Act seventy years ago and to serve as an educational forum for public policy makers and interested parties. Founded in 1969, NCOIL works to assert the prerogative of legislators in making state policy when it comes to insurance and educate state legislators on current and perennial insurance issues.

NCOIL Expresses Renewed Concerns About Ali Restatement of the Law of Liability Insurance

For Immediate Release

December 1, 2017

Contact: Paul Penna

(732) 201-4133

NCOIL EXPRESSES RENEWED CONCERNS ABOUT ALI RESTATEMENT OF THE LAW OF LIABILITY INSURANCE

Restatement Continues to Conflict with Existing State Statutory Law; Does Not Afford Proper Respect to the Expertise and Jurisdiction of State Insurance Legislators

Manasquan, NJ – Following a General Session at the 2017 NCOIL Annual Meeting titled ‘A Restatement or NEWstatement? Examining the ALI’s Proposed Restatement of the Law of Liability Insurance’ with a panel consisting of the proposed Restatement’s Reporter Professor Tom Baker, and project participants Professor Peter Kochenburger, Laura Foggan, and Victor Schwartz, NCOIL expressed renewed concern that the proposed Restatement will proceed towards final adoption by the ALI Council without any meaningful changes.

During the session, Professor Baker provided background on the proposed Restatement and the ALI in general, and stated that every rule of insurance law adopted in the proposed Restatement is grounded in existing case law. However, Laura Foggan cited several instances where the proposed Restatement conflicts directly with existing State statutory law.

After the discussions during the general session made it clear that there are unlikely to be any meaningful changes to the proposed Restatement, NCOIL Past Presidents NY Sen. Neil Breslin and NY Sen. James Seward introduced a Resolution “Encouraging the American Law Institute to Materially Change the Proposed Restatement of the Law of Liability Insurance”, during the Property & Casualty Insurance Committee and asked that, if adopted, the Executive Committee table the Resolution’s final adoption so NCOIL could send its concerns by way of a letter to the ALI, enclosing a copy of the Resolution. The Property & Casualty Insurance Committee adopted the Resolution without objection.

“It is disappointing that there has been little movement to make this a true ‘restatement’ of existing majority law” said NCOIL CEO Commissioner Tom Considine. “NCOIL legislators made clear during both the general session and the Property & Casualty Insurance Committee that they closely guard legislative prerogatives as their right. The letter cites more than 10 instances where the proposed Restatement goes beyond existing law. As the letter and Resolution note, if changes are not made to the proposed Statement, NCOIL will take action to ensure that the proposed Restatement is not afforded recognition as an authoritative reference.”

From the letter to the ALI:

Should there not be meaningful change in the proposed Restatement, NCOIL will be forced to oppose the proposed Restatement project as a misrepresentation of the law of liability insurance, and as a usurpation of lawmaking authority from State insurance legislators. Shortly, NCOIL’s Executive Committee will be determining what action to take in relation to the Property-Casualty Insurance Committee Resolution enclosed, including the role NCOIL will take alerting State Chief Justices, State legislative leaders and members of the committees with jurisdiction over insurance public policy, as well as State insurance regulators, about NCOIL’s concern that the Restatement is, in numerous places, a misstatement of the law, and does not afford proper respect to the expertise and jurisdiction of State insurance legislators and should not be afforded recognition as an authoritative reference.

From the Resolution:

WHEREAS, such Restatements, in the ALI’s own words, are “primarily addressed to courts” and “aim at clear formulations of common law and its statutory elements of variations and reflect the law as it presently stands or might appropriately be stated by a court” (ALI Style Guide, 2015); and

WHEREAS, NCOIL members became aware of this proposed Restatement in the spring of 2017 and upon review of the draft, identified several areas which, contrary to the above-stated intent, are inconsistent with well-established law and purport to address matters which are properly within the legislative prerogative; and

WHEREAS, NCOIL, through its Chief Executive Officer, Thomas B. Considine, addressed a letter dated May 4, 2017 (“the Considine letter”), to ALI leadership in an effort to identify particular concerns and effect reconsideration of and significant changes to the proposed Restatement; and

WHEREAS, NCOIL members were encouraged to learn that, after receipt of the Considine letter, ALI leadership made the decision to defer a final vote on the proposed Restatement until 2018, with the recognition that the Restatement would benefit from another year of work; and

WHEREAS, the subsequent drafts of the proposed Restatement have reflected only very minor changes to the insurance legal rules proposed and have no substantive changes in the rules proposed on the topics of particular concern identified in the Considine letter; ….

A full copy of the letter and the Resolution are below.

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November 28, 2017

David F. Levi Roberta Cooper Ramo

President Council Chair

American Law Institute American Law Institute

4025 Chestnut St. 4025 Chestnut St.

Philadelphia, PA, 19104 Philadelphia, PA, 19104

Dear President Levi and ALI Council Chair Ramo:

I write on behalf of the National Council of Insurance Legislators (NCOIL)1 to express NCOIL’s serious and continuing concern regarding the American Law Institute’s (ALI) proposed Restatement of the Law of Liability Insurance (the proposed Restatement). NCOIL, as you may know, is a national legislative organization created by and comprised of State legislators, principally serving on State insurance and financial institutions committees around the nation. NCOIL develops model laws in insurance and financial services, works to preserve the State jurisdiction over insurance as established by the McCarran-Ferguson Act seventy years ago, and serves as an educational forum for public policy makers and interested parties. Founded in 1969, NCOIL works to assert the primacy of legislators in making State policy when it comes to insurance and educate State legislators on current and longstanding insurance issues. I ask that you share NCOIL’s concerns with the proposed Restatement’s Advisers, ALI Council, and others in its leadership.

1 On November 19, 2017 NCOIL approved revisions to its Bylaws and Articles of Organization changing its name to the National Council of Insurance Legislators.

On May 5, 2017, NCOIL wrote to Director Revesz and Deputy Director Middleton, with copies to the proposed Restatement’s Reporters Professors Tom Baker and Kyle Logue, about the need to ensure that all interested voices are truly heard, considered, and reflected in a work that is a Restatement of the Law, Liability Insurance, in substance as well as title. Our May 5, 2017 letters explained that several of the proposed Restatement’s provisions go beyond established insurance law and thus were of immediate concern because they appear to address matters which are properly within the legislative prerogative. We gave specific examples of these concerns, where the draft proposes significant changes to current common law. These included its departure from the plain meaning rule (Section 3), the forfeiture of coverage defenses for certain breaches of the duty to defend (Section 19), the breadth of damages to be payable by insurers for failure to settle (Section 27), and the imposition of one-way fee-shifting (Sections 48, 49(3) and 51(1)). As our May 5, 2017 letter stated, such matters are, in the first instance, the primary prerogative of the legislative branch of government, which consists of publicly elected and accountable individuals who must consider all relevant policy considerations such as the impact of proposed law changes on the availability and affordability of insurance. We note that the fact that state legislatures have not adopted provisions in these areas noted above, as well as others, does not mean they have not considered them.

NCOIL made clear that we would welcome representatives of the ALI to come to an NCOIL meeting to have a dialogue around the Restatement issues. After our letter was sent, the ALI leadership decided to defer the organization’s final consideration of the proposed Restatement, indicating that the project would benefit from another year of work. NCOIL applauded this recognition of the need for additional work on this project. Consistent with that decision, and to follow up on its concerns,

NCOIL invited the proposed Restatement Reporters to speak during a general session at its Annual meeting earlier this month in Phoenix, AZ. During that general session on November 16, 2017, NCOIL heard Professor Tom Baker and project participants, Laura Foggan, Peter Kochenburger, and Victor Schwartz, speak about the Restatement project and its approach to liability insurance law. NCOIL members, who are State insurance legislators from across the country, then had the opportunity to ask questions about the Restatement; they expressed deep concerns about the project’s intrusion into making law – rather than restating or reporting the law of liability insurance.

It was apparent from the general session at NCOIL’s Annual meeting earlier this month that the Reporters continue to adhere to the same approach in going beyond established law that NCOIL expressed concern about in our May 5 letter. Specifically, in multiple instances, the proposed Restatement engages in law-making by announcing new legal rules rather than articulating the law impartially according to existing precedents. The ALI Reporters should not be exercising the legislative power to make new laws through Restatement proposals. In fact, in the general session at its Annual meeting earlier this month, NCOIL learned that the Black-letter rules on the topics highlighted in our May 5 letter, as well as other Sections of concern, remain unchanged even as this ALI project apparently nears completion.

Following the general session described above, at the meeting of the NCOIL Property-Casualty Insurance Committee, the proposed Restatement was again a topic of discussion, and a Resolution was passed by unanimous voice vote by said Committee. On behalf of the NCOIL Executive Committee, I am writing to share this Resolution with you, and to again urge the ALI to conform the Restatement to existing law, and to defer to legislative bodies better suited to make public policy determinations on areas of new law2. Again, we would like to point out specific Sections of the proposed Restatement that impinge on the legislative prerogative, which include:

2 For areas of the law where the ALI believes existing law should change, NCOIL leaves it to the ALI as to whether it wishes to supplement the Restatement of Law with the Principles Statement that originally was intended.

Section 3, which departs from the settled insurance law “plain meaning” rule. The alternative approach proposed in the Restatement is a departure from settled insurance law in approximately 40 states;

Section 8, which imposes a new “substantiality” requirement for determining whether an insured’s misrepresentation was material. This is at odds with existing statutory and common law governing misrepresentations and rescission. Existing law asks whether or not — but for the misrepresentation — a policy would have been issued on the same terms, not whether it would have been issued only on substantially different terms;

Section 12, which introduces new liability on insurers, for defense counsel’s malpractice, if defense counsel is an employee of the insurer and/or if the insurer “has undertaken a duty to select defense counsel [or] . . . to supervise defense counsel and the insurer breaches that duty.” This newly invented rule creates tension with attorneys’ professional responsibilities to exercise independent professional judgment and would alter the relationship between defense counsel, their clients, and insurers;

Section 13(3), which forbids reliance on undisputed non-liability facts in determining the duty to defend, except in four cases. This alters the common law standards and would force a defense of uncovered claims, thereby increasing costs;

Section 18, which introduces a new rule that, with limited exceptions, the duty to defend terminates only on court adjudication that the insurer does not have a duty to defend the action. This requirement for court approval does not reflect existing law, and will increase costs and burdens on courts and the parties with unnecessary litigation;

Section 19, which imposes a forfeiture of coverage defense for certain breaches of the duty to defend. It is a punitive provision and does not adhere to the common law;

Section 27, which imposes responsibility for damages for insurer breach of settlement duties, including punitive damages awarded against the policyholder. This proposed rule disregards individual states’ public policy determinations concerning insurability of punitive damages and is unsupported by any common law rulings;

Section 36, which would excuse late notice under a claims-made and reported policy if the claim is considered to be too close to the end of the policy term to permit reporting during the policy period and the policy does not contain an extended reporting period. This overrides insurance contract terms. Whether an extended reporting period should be required and/or a late notice defense should be permitted in this context is a legislative judgment;

Section 48, which ignores the important principle of mitigation of damages, although the common law provides that any party seeking recovery under a contract has a duty to mitigate its damages and cannot recover for loss it could have avoided without undue risk, burden or humiliation; and

Sections 48, 49(3) and 51(1), which introduce broad one-way fee-shifting and override legislative determinations concerning whether and when there should be any departure from the American Rule concerning who bears litigation fees.

NCOIL respectfully requests that the ALI carefully review what positions the Restatement should take, as well as when it should defer action to legislative determinations. This request is driven in no small part by the weight the ALI’s Restatements have historically been accorded by the bench and bar.

Should there not be meaningful change in the proposed Restatement, NCOIL will be forced to oppose the proposed Restatement project as a misrepresentation of the law of liability insurance, and as a usurpation of lawmaking authority from State insurance legislators. Shortly, NCOIL’s Executive Committee will be determining what action to take in relation to the Property-Casualty Insurance Committee Resolution enclosed, including the role NCOIL will take alerting State Chief Justices, State legislative leaders and members of the committees with jurisdiction over insurance public policy, as well as State insurance regulators, about NCOIL’s concern that the Restatement is, in numerous places, a misstatement of the law, and does not afford proper respect to the expertise and jurisdiction of State insurance legislators and should not be afforded recognition as an authoritative reference.

Before taking any further action, NCOIL writes now to ensure that the ALI leadership has the opportunity to consider these concerns. We request the courtesy of a reply on or before December 18, 2017, addressing whether or not the ALI will make the type of substantive changes NCOIL has

requested to avoid interference with the role of legislators in making State policy when it comes to insurance.

Very truly yours,

Thomas B. Considine

Chief Executive Officer

National Council of Insurance Legislators

National Council of Insurance Legislators (NCOIL)

Resolution Encouraging the American Law Institute to Materially Change the Proposed Restatement of the Law of Liability Insurance

Adopted by the NCOIL Property and Casualty Insurance Committee on November 16, 2017

Sponsored by Sen. Neil Breslin (NY) and Sen. James Seward (NY)

WHEREAS, the American Law Institute (“ALI”) intends to publish a Restatement of the Law of Liability Insurance (the “proposed Restatement” or “Restatement”); and

WHEREAS, ALI Restatements have traditionally been held in high regard and relied upon by courts as authoritative references regarding established rules and principles of law; and

WHEREAS, such Restatements, in the ALI’s own words, are “primarily addressed to courts” and “aim at clear formulations of common law and its statutory elements of variations and reflect the law as it presently stands or might appropriately be stated by a court” (ALI Style Guide, 2015); and

WHEREAS, NCOIL members became aware of this proposed Restatement in the spring of 2017 and upon review of the draft, identified several areas which, contrary to the above-stated intent, are inconsistent with well-established law and purport to address matters which are properly within the legislative prerogative; and

WHEREAS, NCOIL, through its Chief Executive Officer, Thomas B. Considine, addressed a letter dated May 4, 2017 (“the Considine letter”), to ALI leadership in an effort to identify particular concerns and effect reconsideration of and significant changes to the proposed Restatement; and

WHEREAS, NCOIL members were encouraged to learn that, after receipt of the Considine letter, ALI leadership made the decision to defer a final vote on the proposed Restatement until 2018, with the recognition that the Restatement would benefit from another year of work; and

WHEREAS, the subsequent drafts of the proposed Restatement have reflected only very minor changes to the insurance legal rules proposed and have no substantive changes in the rules proposed on the topics of particular concern identified in the Considine letter; and

WHEREAS, during its General Session on November 16, 2017, NCOIL hosted a panel

presentation which included the proposed Restatement’s lead Reporter, and it was apparent from Reporter commentary that no or minimal substantive changes to the proposed Restatement are anticipated before it is submitted to the ALI Council and then the ALI membership for final approval;

NOW, THEREFORE, BE IT RESOLVED THAT NCOIL urges ALI leadership, members and Reporters to abide by ALI’s own acknowledgement that “[a]n unelected body like The American Law Institute has limited competence and no special authority to make major innovations in matters of public policy,” and instead afford proper respect to the legislative prerogative, and the expertise and the jurisdiction of NCOIL members; and

BE IT FURTHER RESOLVED THAT NCOIL urges the ALI to effect meaningful change to the proposed Restatement so that it is consistent with well-established insurance law and respectful of the role of state legislators in establishing insurance legal standards and practice; and

BE IT FURTHER RESOLVED THAT, should such meaningful change not occur prior to its final approval, NCOIL urges that the Restatement of the Law of Liability Insurance should not be afforded recognition by courts as an authoritative reference regarding established rules and principles of insurance law, as Restatements traditionally have been afforded; and

BE IT FURTHER RESOLVED THAT NCOIL urges state legislators across the country to adopt resolutions declaring that this Restatement should not be afforded such recognition by courts; and

BE IT FURTHER RESOLVED THAT NCOIL shall develop and promulgate, as appropriate, model legislation intended to maintain the viability, predictability and optimal functionality of the insurance market and its practices; and

BE IT FURTHER RESOLVED THAT, a copy of this Resolution shall be sent to ALI

Leadership, the reporters of the Restatement of the Law of Liability Insurance, and further published in such a manner to reach and inform ALI members, and

BE IT FINALLY RESOLVED THAT a copy of this Resolution expressing NCOIL’s concern that the Restatement does not afford proper respect to the expertise and jurisdiction of state insurance legislators and that the Restatement of the Law of Liability Insurance should not be afforded recognition as an authoritative reference, shall be sent to state chief justices, state legislative leaders and members of the committees with jurisdiction over insurance public policy, as well as to all state insurance regulators.

NCOIL is a legislative organization comprised principally of legislators serving on state insurance and financial institutions committees around the nation. NCOIL writes Model Laws in insurance and financial services, works to both preserve the state jurisdiction over insurance as established by the McCarran-Ferguson Act seventy years ago and to serve as an educational forum for public policy makers and interested parties. Founded in 1969, NCOIL works to assert the prerogative of legislators in making state policy when it comes to insurance and educate state legislators on current and perennial insurance issues.

 

Rapert Assumes NCOIL Presidency

For Immediate Release

November 29, 2017

Contact: Paul Penna

(732) 201-4133

RAPERT ASSUMES NCOIL PRESIDENCY

Arkansas Senator Has Been a Leader and Long Time NCOIL Participant

MANASQUAN, NJ – The National Council of Insurance Legislators (NCOIL) Nominating Committee selected Arkansas Senator Jason Rapert to serve as President during the Annual Meeting held in Phoenix, AZ from November 16th – 19th. The report of the Nominating Committee was affirmed by the Executive Committee.

“I am excited to assume the NCOIL Presidency and look forward to continuing to increase state legislator participation around the nation. Our organization has been a leader in educating policymakers to make informed insurance policy decisions that protect consumers and ensure a vibrant insurance marketplace in every state” Senator Rapert said.

“Rep. Riggs has done an outstanding job as President and I look forward to his counsel as Immediate Past President.”

Senator Rapert has had a successful career in the financial services and insurance industry, has been a member of NCOIL since November of 2011, chairs the Arkansas Senate Insurance & Commerce Committee, serves on the IIPRC and was recently named co-Legislator of the year by the National Association of Mutual Insurance Companies. He assumes the Presidency after serving in all the NCOIL officer steps beginning in 2015 – Treasurer, Secretary and Vice-President. As an officer he has chaired the Audit Committee, the Budget Committee and the NCOIL – NAIC Dialogue.

“I look forward to working with Sen. Rapert as he assumes the NCOIL presidency” said Rep. Riggs. “During my term I worked diligently to formalize a recruitment process that has proven to be successful in increasing participation among insurance legislators and new states.”

Among Rapert’s priorities for the upcoming year include:

• Continue to work to ensure that the state based regulation of insurance continues and work to stave of international encroachment.

• Work with the Department of Labor as they delay the implementation of the Fiduciary Rule to ensure it is better for the states and consumers.

Continue to engage with states and legislators that do not actively participate with NCOIL.

• Ensure NCOIL continues to educate legislators on emerging and longstanding insurance issues and serve as the only insurance legislative organization that enacts model laws in a timely fashion so they can be considered in state legislatures.

“NCOIL leadership continues to be geographically and politically diverse” said Commissioner Tom Considine, NCOIL CEO. “Bipartisan and bicameral perspectives create better models and resolutions. Sen. Rapert’s drive and enthusiasm will continue to move NCOIL forward, and I look forward to working closely with him in his new role.”

Vermont Rep. Bill Botzow will serve as Vice-President, Indiana Rep. Matt Lehman will remain as Treasurer and California Assemblyman Kenneth Cooley was elected to serve as Secretary. Kentucky Rep. Steve Riggs and Indiana Sen. Travis Holdman will serve as Immediate Past Presidents.

Rapert will announce committee chairs and vice chairs in the coming weeks.

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NCOIL is a legislative organization comprised principally of legislators serving on state insurance and financial institutions committees around the nation. NCOIL writes Model Laws in insurance, works to both preserve the state jurisdiction over insurance as established by the McCarran-Ferguson Act seventy years ago and to serve as an educational forum for public policy makers and interested parties. Founded in 1969, NCOIL works to assert the prerogative of legislators in making state policy when it comes to insurance and educate state legislators on current and perennial insurance issues.

Successful 2017 NCOIL Annual Meeting in Phoenix Concludes

For Immediate Release

November 20, 2017

Contact: Paul Penna

(732) 201-4133

SUCCESSFUL 2017 NCOIL ANNUAL MEETING IN PHOENIX CONCLUDES

Organization Changes Name but Not Acronym, Sen. Rapert Assumes Presidency, Congressman David Schweikert Delivered Keynote Address, and all Policy Committees Met and Discussed a Variety of Issues and Adopted or re-adopted Model Laws and Resolutions

Manasquan, NJ – The 2017 NCOIL Annual Meeting at the Phoenix Grand Sheraton met from November 16th to 19th. There were 278 registrants, 55 legislators from 24 states, including 10 first time legislators, and 8 total Insurance Departments represented. This represents a continued growth among participants.

The Nominating Committee met and selected the officer slate for 2017-2018 of Arkansas Sen. Jason Rapert to serve as President, Vermont Rep. Bill Botzow as Vice-President, Indiana Rep. Matt Lehman will remain as Treasurer and California Asm. Kenneth Cooley was elected to serve as Secretary. Kentucky Rep. Steve Riggs and Indiana Sen. Travis Holdman will serve as Immediate Past Presidents.

“It has been an honor to serve as NCOIL’s President for the past year and I look forward to working with Sen. Rapert as he assumes the NCOIL presidency” said Rep. Riggs. “During my term I worked diligently to formalize a recruitment process that has proven to be successful in increasing participation among insurance legislators and new states. For nearly 50 years NCOIL has been the only insurance legislators’ organization that educates our colleagues and writes insurance model laws and I am proud of the part I played to continue that.”

“I am excited to assume the NCOIL Presidency and look forward to continuing to increase state legislator participation around the nation. Our organization has been a leader in educating policymakers to make informed insurance policy decisions that protect consumers and ensure a vibrant insurance marketplace in every state” said Sen. Rapert. “Rep. Riggs has done an outstanding job as President and I look forward to his counsel as Immediate Past President.”

Rep. Riggs made a recommendation to the Articles of Organization and Bylaws Committee to replace “Conference” with “Council” believing it more accurately reflected the 50 member states of NCOIL. It passed unanimously, with a number of members noting that the organization will still commonly be known as NCOIL.

“NCOIL continues to educate legislators and policymakers about emerging and continual insurance matters to increasing numbers of legislators and participants” said Commissioner Tom Considine, NCOIL CEO. “The leadership has been encouraging in ensuring policy matters are handled in a timely fashion so we can discuss the ever changing insurance policy environment.”

Congressman David Schweikert delivered a fascinating keynote address about tax and regulatory reform efforts. As a member of the Ways & Means Committee, he has been an instrumental player in these efforts. He also discussed his efforts with the Blockchain Caucus to protect data so all aspects of it can be electronic and portable.

The Financial Services Committee re-adopted the Credit Default Insurance Model Legislation; adopted a Model Act to Support State Regulation of Insurance by Requiring Competition Among Insurance Rating Agencies; adopted a Model Act Prohibiting Consumer Reporting Agencies from Charging Fees Related to Security Freezes; amended the NCOIL Credit Report Protection for Minors Model Act; and adopted a Resolution Encouraging the Adoption of Voluntary Data Call Principles.

The Joint State-Federal Relations and International Insurance Issues Committee re-adopted the Exhaustion of Administrative Remedies Model Legislation and Producer Compensation Disclosure Model Amendment to the Producer Licensing Model Act

The Health, Long-Term Care & Health Retirement Issues Committee adopted the NCOIL Out-of-Network Balance Billing Transparency Model Act and the Model Act Regarding Air Ambulance Insurance Claims

Other highlights of the NCOIL Annual Meeting included:

• An overview of the NAIC accreditation process by NAIC General Counsel Kay Noonan

• Recap of the 2017 NCOIL DC Education Fly-In

• Resolutions honoring the lives of the late NH Rep. Don Flanders and AR Sen. Greg Standridge

• General Session titled “A Restatement or NEWstatement? – Examining the ALI’s Proposed Restatement of the Law on Liability Insurance”

• General Session on the risks facing the long term care insurance industry

• General Session examining cybersecurity in the wake of the Equifax breach

• The Life Insurance and Financial Planning Committee examined innovative trends shaping the life insurance industry; received an update about Interstate Insurance Product Regulation Commission (IIPRC) developments; and discussed the recently promulgated New York regulations concerning notification requirements before an adverse change in non-guaranteed elements of existing policies.

The Property & Casualty Insurance Committee discussed adoption of a Model Towing Act and amendments to the NCOIL Model State Uniform Building Code. The committee will continue discussion on those topics at the NCOIL Spring Meeting. The committee also discussed flood insurance market developments including the impact of the recent hurricanes on insurers and policyholders.

• The Joint State-Federal Relations and International Insurance Issues Committee discussed the road ahead for the U.S. insurance system in light of the Covered Agreement; the future of SIFI designations; Federal insurance fraud prevention efforts; and Congressman Sean Duffy’s legislation (H.R. 3762, H.R. 3746, H.R. 3861) that aims to reassert the state based system of insurance regulation.

• The NCOIL – NAIC Dialogue discussed the NAIC Insurance Data Security Model Law; the NAIC & Stanford University Cybersecurity Forum; NAIC group capital calculation activities; NAIC InsureU Usage Based Insurance (UBI) activities; President Trump’s Healthcare Executive Order; and the cancellation of Cost Sharing Reduction (CSR) payments.

• The Workers’ Compensation Insurance Committee discussed the impact of direct dispense programs on state workers’ compensation systems, and the prevalence of compound medications in the workers’ compensation insurance industry.

• The Health, Long-Term Care and Health Retirement Issues Committee discussed President Trump’s Executive Order on healthcare and what its impact on State healthcare markets will be. Additionally, the Committee passed two significant new reform bills: a Model Act Regarding Air Ambulance Insurance Claims, and an Out-of-Network Balance Billing Transparency Model Act

• Uber hosted autonomous car rides in Scottsdale for legislators and other participants. More than 40 people participated in the 20 minute ride around the streets of Scottsdale in an autonomous vehicle.

• Arizona Representative David Livingston hosted a state capitol tour for 19 legislators and attendees.

The 2018 NCOIL Spring Meeting will be held in Atlanta, GA from March 2nd -4th at the Whitley in Buckhead. Registration and sponsorship information will be available at ncoil.org in December.

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NCOIL is a legislative organization comprised principally of legislators serving on state insurance and financial institutions committees around the nation. NCOIL writes Model Laws in insurance, works to both preserve the state jurisdiction over insurance as established by the McCarran-Ferguson Act seventy years ago and to serve as an educational forum for public policy makers and interested parties. Founded in 1969, NCOIL works to assert the prerogative of legislators in making state policy when it comes to insurance and educate state legislators on current and perennial insurance issues.

NCOIL President Applauds House Passage of National Flood Insurance Program

For Immediate Release

November 15, 2017

Contact: Paul Penna

(732) 201-4133

NCOIL PRESIDENT APPLAUDS HOUSE PASSAGE OF NATIONAL FLOOD INSURANCE PROGRAM

Urges Senate to Follow Suit; 5 Year Reauthorization Creates Market Stability

Manasquan, N.J. – KY Rep Steve Riggs, NCOIL President offered the following comments upon the passage of HR 2874, the 21st Century Flood Reform Act by a bi-partisan vote of 237-189. Reforms to the program include introducing private market competition.

“NCOIL has long discussed the need for a long-term reauthorization to provide market stability and allowing private insurance to participate in the flood marketplace” said Riggs. “We are please the House has passed this and urge the Senate to do the same to create stability and competition. Many of our states have serious flood issues and count on us to be strong advocates for this important program in order to assist their residents in times of disaster.”

During the NCOIL annual D.C. Education fly-in this past September, legislators urged members of the House and Senate for a long-term reauthorization where 12 legislators and staff members had more than 50 meetings and the NFIP reauthorization was among the topics discussed.

The NFIP reauthorization has been a frequent agenda topic for discussion at NCOIL meetings.

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NCOIL is a legislative organization comprised principally of legislators serving on state insurance and financial institutions committees around the nation. NCOIL writes Model Laws in insurance, works to both preserve the state jurisdiction over insurance as established by the McCarran-Ferguson Act seventy years ago and to serve as an educational forum for public policy makers and interested parties. Founded in 1969, NCOIL works to assert the prerogative of legislators in making state policy when it comes to insurance and educate state legislators on current and perennial insurance issues.