California OLA rules settlement agreement are not precedential

NAPSLO officials say they support a decision by the State of California Office of Administrative Law that a settlement agreement involving the California Department of Insurance and an insurance company cannot be viewed as a precedential decision and thereby used as the basis for penalties in other cases.

“We believe this is a positive decision for the brokerage industry as it does not add another level of regulation,” said NAPSLO President William H. Newton [Mr. Newton is also President of Lemac Associates of Los Angeles]. “Allowing such settlement agreements to be used as a precedent that would result in underground regulation, which circumvents the rulemaking process, and the OLA agreed.”

The decision follows a suit filed by the Independent Brokers and Agents of the West, which NAPSLO supported with written objections, to the Department’s contention that a settlement in a 2006 case with American Reliable Insurance Company could be used as the basis for fines in other cases.

The settlement agreement included language concluding that a broker was a producer for a company and it included a fine for the company. The department apparently intended to fine other companies over the conduct of a broker, based on this settlement agreement with American Reliable.

In the review, the Office of Administrative Law agreed that a settlement agreement could not become a precedential decision because the decision had not been adjudicated and the state's Administrative Procedure Act (APA) had not been followed. State Agencies are prohibited from issuing rules unless the rules comply with the APA.

Stamping Offices report 7.1% increase in reported premium volume in 2006

Stamping offices reported that premium volume reported increased by 7.1% in 2006, according to a recent report by the Surplus Lines Stamping Office of Texas.

The Stamping Office compiled the premiums reported and also the number of items written in 2006 from the 15 stamping offices and compared the results to 2005. Overall premiums were up 7.1%, increasing from $21.9 billion to $23.5 billion while number of policies were up 2.8%, going from 3.44 million to 3.54 million.

Pennslyvania (39.8%), Mississippi (31.4%), Florida (27.5%) and Nevada (20.1%) reported premium volume increases of more than 20% while New York (-19.2%), Illinois (-9.6%) and Washington (-7.4%) reported significant decreases in premium volume.

Arizona reported a slight decline (-1.2%) in premium despite a 25.5% increase in policies. Florida's premium increase came despite a -1.0% drop in the number of items written.

Complete details are available by downloading the report.

Utah: Courtesy filing fee not part of surplus lines premium

The Utah Insurance Commissioner has proposed a rule change requiring that a courtesy filing fee should not be included as surplus lines premium for the purpose of computing taxes and stamping fees paid to the Surplus Lines Association of Utah.

Comments on the proposed change are due May 1 and the rule may become effective May 8.

A courtesy filing is defined as a surplus lines policy filing done by a resident surplus lines producer on behalf of a resident or non-resident producer whose licensure does not include a surplus lines line of authority. The "Courtesy filing fee" is defined as a fee charged by the resident surplus lines producer for doing the courtesy filing.

Surplus lines premium tax for Utah is 4.25% of gross surplus lines premiums, less 4.25% of return premiums paid to insureds by reason of policy cancellations or premium reductions. The surplus lines stamping fee is 0.25% of the policy premium payable.

Missouri transfers tax collection to Revenue Department

By Executive Order, Missouri Governor Matt Blunt has ordered the process of collecting surplus lines taxes be transferred from the Missouri Department of Insurance, Financial Institutions and Professional Registration to the Missouri Department of Revenue, effective August 28, 2007.

The Missouri Department of Revenue currently collects premium taxes remitted by insurance companies and also is the state's tax collection agency.

The Missouri State Government Review Commission had recommended this transfer in its November 2005 Report and Gov. Blunt had stated that the transfer of the collection of surplus lines taxes was a component of the Governor's Executive Branch Reorganization Plan of 2007.

Convention Off-Site function date changes

Planning is underway for the 2007 NAPSLO Annual Convention, October 3-6 in New Orleans at the New Orleans Marriott and Sheraton New Orleans and there has been a change in the day off-site functions will be allowed.

On- and Off-Site hospitality functions and receptions will be allowed on Friday. On Thursday, all functions and meetings scheduled during the day and in the evening are to be held On-Site at the convention hotels.

This is a change from previous years in which On- and Off-Site hospitality functions and receptions were allowed on Thursday and only On-site functions were allowed Friday.

Firms who have previously contracted an off-site event on Thursday do not need to change dates but need to contact Debbie Hill at debbie@napslo.org to make NAPSLO aware of the off-site event.

Interstate Compact, legislative issues reviewed

Current legislative issues were reviewed by Steve Stephan, NAPSLO’s Director of Government Relations, at the recent Surplus Lines Association of Washington’s conference in late March in Seattle, Washington.

Stephan was a luncheon speaker at the meeting and discussed the Nonadmitted and Reinsurance Act of 2007 currently pending in both houses of congress; Medical Malpractice data reporting; attempts by states to reconcile surplus lines taxes; and the proposed interstate compact for multistate compliance on remittance of surplus lines taxes.

Mr. Stephan said that NAPSLO has been working with other industry groups to draft a compact and plans on working with the NAIC and NCOIL and the various state legislatures to get the compact approved.