Insurance Regulatory Reform Passes Ohio Senate
Senate Bill 140 introduced by Sen. Kevin Bacon (R-Columbus) was passed by the Ohio Senate on Wednesday by a 31-0 vote.
Senate Bill 140 incorporates numerous changes to the Ohio insurance laws dealing with insurance company investments, the model holding company act, the electronic delivery of certain insurance documents, credit for reinsurance, Own Risk and Solvency Assessment (ORSA), life Valuation Manual model, RBC trend test and standard non-forfeiture updates, and protections for companies that provide a discretionary policy summary.
Among the few changes made to the bill in the Senate this past week was one requested by the OII which modified Section 3901.33(B)(7) to read as follows:
“Statements that the insurer's or its ultimate controlling person’s board of directors oversees corporate governance and internal controls and that the insurer's or its ultimate controlling person’s officers or senior management have approved, implemented, and continue to maintain and monitor corporate governance and internal control procedures;”
The intent of this proposed change is to acknowledge the role of ultimate controlling persons, as already adopted in the Model Audit Rule and in the enterprise risk report.
The bill has been placed on the agenda for the House Insurance Committee this coming Tuesday and marked for a vote. It appears the bill could move out of the House and to the Governor’s desk by the end of next week. The House Insurance Committee has already had hearings on House Bill 313 which is almost identical to Senate Bill 140.
Over the past two years there has been extensive review of the various drafts of this legislation by the OII and other interested parties and it appears all of the concerns have been addressed. There has been no voiced opposition to Senate Bill 140.
Unless we receive any objections by Monday the OII intends to join the Ohio Department of Insurance in urging the House to pass Senate Bill 140.
Salvage Market Competition Legislation passed by Ohio House
The House Insurance Committee met on May 7 and passed House Bill 468 introduced by Rep. Barb Sears (R-Sylvania) to slightly open Ohio’s salvage vehicle market to some modest competition. Albeit one year late the bill represents House Speaker Bill Batchelder’s effort to make good on a promise to make salvage market competition legislation a priority “…very early in 2013.” The bill is very similar to legislation passed by the Ohio Senate in 2012 (Senate Bill 273) but was ultimately killed in the House.
Rep. John Patrick Carney (D-Columbus) objected to House Bill 468 as being too limited. He said the bill falls well short of open competition noting that there are 40 states with wide-open salvage market competition.
Rep. Carney is the co-sponsor of House Bill 128 with Rep. Jay Hottinger (R-Newark) which would make Ohio the 41st state with wide-open competition in the salvage vehicle market. House Insurance Committee Chairman Bob Hackett (R-London) has not held a single hearing on House Bill 128.
Republican Rep. Mark Romanchuk (R-Ontario) was the only Republican on the House Insurance Committee to actively oppose the bill. His campaign committee chairman is Karl Milliron, owner of a large auto salvage facility in Mansfield.
The OII objected to language in House Bill 468 which would prohibit insurers from denying the claim of an insured that unknowingly purchases a vehicle which turns out to be stolen and is subsequently confiscated by law enforcement. This language was added to Senate Bill 273 in 2012 in response to the misleading claim that an open market would somehow increase the threat of someone buying a stolen car. This language is now also part of House Bill 468 and unfortunately House Insurance Committee Chairman Hackett would not allow any amendments to the bill in committee. While the OII was at least successful in adding some fraud protections to this language the OII will continue to seek its removal from the bill.
On Tuesday the House passed House Bill 468 by a 61 to 28 vote. Before passing the bill House Republicans tabled an amendment offered by Rep. Carney which would have removed more restrictions to competition in the salvage vehicle market and move Ohio closer to the 40 other states with wide-open competition.
Here we go again – for the fourth time in the past 10 years a bill proposing to open Ohio’s salvage vehicle market to competition has passed one chamber of the Ohio General Assembly right before a summer recess and election. The legislature is expected to adjourn by May 28 and then not return until after the November election.
Chicago-based LKQ which is the largest auto recycler in the world continues to spend thousands of dollars each month in retaining several well-connected independent Ohio lobbyists who also act as political consultants to the respective Ohio House and Ohio Senate Republican caucuses. We presume LKQ will continue to fight to maintain their near-monopolistic position in Ohio with regard to the purchase and dismantling of Ohio total-loss vehicles.
House Insurance Committee hears bill to prohibit auto insurance direct repair programs
This past Tuesday the House Insurance Committee heard from the sponsors of House Bill 526, which would prohibit auto insurers from requiring, recommending, or suggesting that a claimant have a vehicle repaired at a particular repair shop unless the claimant requests a recommendation or suggestion.
Co-sponsors Rep. Matt Lynch (R- Bainbridge Township) and Rep. Robert Hagan (D-Youngstown) said that auto insurance companies will often steer a policy claimant to a "preferred" auto repair shop that has signed agreements with the insurance companies to meet certain repair price limits. Both said they were concerned that in order to meet those price limits, repair shops will turn to aftermarket and salvage yard parts, often without the knowledge of the consumer.
Rep. Hagan said not only does this practice cost these shops business but consumers are misled as they are under the impression they must choose one of the preferred shops as designated by the insurer.
Rep. Lynch said the bill would prevent the potential for the policy holder to feel pressured by the insurer and allow the flexibility to take their business to a garage or mechanic of their choice.
Rep. Barb Sears (R-Sylvania) suggested the bill could lead to an elimination of choice on the cost of an individual's auto insurance policy and added that consumers have the ultimate responsibility to determine what is best for them and at what price. She said her ultimate trust lies with her local agent who will recommend a carrier based on knowledge of the industry and experiences with carriers.
Rep. Mike Henne (R-Clayton) asked if the sponsors realized that the legislation would likely lead to higher auto insurance costs for consumers.
Other members of the committee asked additional questions which identified their reservations with the proposal.
This bill received a lot of media attention partly because it was highly touted in auto collision publications and partly due to the fact that the sponsors of the bill are viewed as political opposites. However the reality is the sponsors are more similar that different – they are both desperate politicians seeking attention. Lynch was recently defeated by Congressman Bob Joyce in the primary election and Hagan has announced he is running for the United States Senate.
It appears unlikely there will be any further hearings on House Bill 526.
Towing Reform Legislation
The Senate State Government and Oversight Committee held its second hearing on Senate Bill 274 introduced by Senator Jim Hughes (R-Columbus) which would authorize towing companies to obtain title to unclaimed vehicles, require towing companies to use and display certain identifying information, and require consumers to be provided invoices prior to certain tows.
Yours truly testified in support of the bill on behalf of the Ohio Insurance Institute (see attached). The OII requested the bill be amended to eliminate the current requirement that a written request for the transfer of certificate of title be on the insurance company’s letterhead.
The OII has been advised that some insurance companies designate the owner of the storage facility to act on their behalf with regard to seeking the certificate of title and thus the request for title transfer is not coming directly from the insurer and the insurer is not able to hand over its letterhead for use by a third party.
The OII asked that the statute be amended to require at least a 30-day time period for any vehicle to remain unclaimed before a title can be obtained by the storage facility. Current law provides for a 15-day period for tow truck storage facilities and 10-days before a title can be transferred for vehicles in the possession of law enforcement officers.
The OII identified a concern with language related to invoices, and is requesting that the bill be clarified to limit the exemption for when an invoice is not required prior to a tow at an accident scene to only those situations where law enforcement is ordering a tow for safety and traffic flow purposes.
The OII also requested removal of language in the bill that could act as a loophole for tow truck entities to avoid providing an invoice because a vehicle is merely insured.
The OII asked for the committee to strengthen regulations on towing invoices in Senate Bill 274 and highlighted the importance of House Bill 382 introduced by Rep. Mike Duffey (R-Columbus) and Rep. Heather Bishoff (D-Gahanna) which is also pending in the Senate State Government and Oversight Committee. The OII said House Bill 382 and Senate Bill 274 are both important to safety and consumer protection and should either be adopted simultaneously or combined into one bill.
Jeff McNealey testified on behalf of the Institute of Scrap Recycling Industries and he asked the committee to amend the bill to protect scrap metal dealers from being held liable when a fraudulent title was issued on a vehicle prior to coming into the possession of the scrap metal dealer.
Proponent testimony was also provided by representatives of the Ohio Independent Automobile Dealers Association and Vaughn Goebel, president of the Towing and Recovery Association of Ohio. Mr. Goebel also urged the committee to combine House Bill 382 with Senate Bill 274.
Underground Storage Tanks Claims Denials
On May 7 the Senate Civil Justice Committee held its second hearing on Senate Bill 296 introduced by Senator Cliff Hite (R-Findlay) to ensure that fuel retailers cannot be held liable for customers that misuse fuel. The bill would create a qualified immunity from liability for the dispensing of incompatible motor fuel when the retail dealer is not involved in the motor fuel selection.
The bill also proposes to prohibit an insurer from denying a claim on the basis that an underground storage tank is not compatible with a motor fuel if the State Fire Marshal has determined that the underground storage tank and motor fuel are compatible.
Jack Irvin representing the Ohio Corn & Wheat Growers Association testified in support of the bill as did independent fueling station owner Glen Badenhop.
Also supporting the bill were representatives of the Ohio Petroleum Marketers & Convenience Store Association, Anderson's Inc.'s Ethanol Group and Three Rivers Energy, LLC.
Sen. Mike Skindell (D-Lakewood) said “…the language is so broadly written you’re basically saying the retailer can’t be sued.” The chairman of the committee advised Sen. Skindell to work with the sponsor of the bill.
Senate Bill 296 was sent to the OII Legal Subcommittee on April 23, 2014 for comment and thus far no concerns have been raised by OII members with this legislation.
Storage facility limited lines insurance license
This past Tuesday the House Insurance Committee held its third hearing on House Bill 430 introduced by Rep. Stephanie Kunze (R-Hilliard) to provide for a limited-lines insurance license for operators of storage facilities.
Jeff Smith representing the Professional Independent Agents Association of Ohio (PIAA) testified as an interested party and said limited lines licenses offer a pathway for consumers to purchase limited insurance coverage through a relaxed licensing system. He said that with the addition of self-service storage facilities, Ohio would now be granting seven limited lines licenses.
Mr. Smith said the PIAA recommends that the law should specify that self-service storage insurance shall be primary coverage when there is a claim. He added that insurers who offer this coverage could make it primary or supplemental if the statute allows either option and added that this distinction would ensure that self-service storage insurance is primary to any other duplicative or similar coverage.
The PIAA also recommended that House Bill 430 be amended to require self-service storage facilities to provide brochures or written materials to prospective customers with a summary of coverage and identifies the insurer, supervising entity, amount of deductible, benefits of coverage, etc.
The PIAA further recommended that the bill be amended to explicitly require the self-service storage facility offering coverage to separately disclose the itemized cost of the coverage for the customer. As currently drafted, Mr. Smith pointed out that the bill allows for the charge of the coverage to be included in the purchase or lease of a self-service storage facility.
Mr. Smith also asked the committee to amend the legislation to require the supervising entity to maintain a registry of endorsees at each self-storage facility that have received the appropriate training and education and who are currently eligible to sell or offer self-service storage insurance. He added that this list of endorsees should be made available to the superintendent of insurance upon request.
There were no other witnesses on House Bill 430.
NEW LEGISLATION
The following bills have recently been added to the OII’s bill watch list. Please let us know if you have any comments or concerns with any of these bills. Note the OII is already opposing House Bill 526.
Senate Bill 326 introduced by Sen. John Eklund (R-Chardon) relative to the set-off of collateral recoveries against damages awarded in certain civil actions against state universities or colleges.
House Bill 526 introduced by Rep. Matt Lynch (R- Bainbridge Township) and Rep. Robert Hagan (D-Youngstown) to prohibit auto insurers from requiring, recommending, or suggesting that a claimant on a policy have the claimant’s vehicle repaired at a particular repair shop or by a particular person unless the claimant requests a recommendation or suggestion.
House Bill 539 introduced by Rep. Mike Henne (R-Clayton) to defer the charging of workers' compensation claims to an employer's experience when a third party may be liable for the claim and to create the Subrogation Suspense Account within the State Insurance Fund to which any such deferral will be charged.
Senate Bill 335 introduced by Sen. Bill Seitz (R-Cincinnati) to provide that a toll project may include the substantial reconstruction or replacement of an existing toll-free highway, bridge, or tunnel, to amend the law governing public-private agreements relative to transportation facilities, and to provide for the collection of user fees on toll projects by toll project operators.
House Bill 533 introduced by Rep. Ross McGregor (R-Springfield) to provide that a toll project may include the substantial reconstruction or replacement of an existing toll-free highway, bridge, or tunnel, to amend the law governing public-private agreements relative to transportation facilities, and to provide for the collection of user fees on toll projects by toll project operators.