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Tuesday, March 31, 2009

Texas Senate Approves Anti-DWI Bills

March 31, 2009

The Texas Senate has approved two measures aimed at reducing drunk-driving fatalities in Texas. According to data from the National Highway Traffic Safety Administration, Texas was second only to California in 2007 in traffic fatalities as a result of alcohol. Under the bills, police officers would have more tools to catch drunk drivers.

The first, SB 261, would expand the circumstances under which a driver can be compelled to give a blood or breath sample. Under current law, a person can only be required to take a breathalyzer or blood test without a court order if they are involved in an accident that results in death or serious injury. The bill by Greenville Senator Bob Deuell would add four more situations that would require a person to take a breath or blood test.

A person could not refuse a test if they cause an accident that leads to a person being taken to a hospital, if they are driving with a child in the car, or if they have a prior intoxication felony conviction or two DWI convictions.

"Senate Bill 261 does not require a breath or blood specimen from a first or second time DWI offender, focusing only on chronic repeat offenders and those offenders who endanger the lives of children," said Deuell.

The second measure, one that would allow sobriety checkpoints, received tentative approval from the Senate. SB 298, by Dallas Senator John Carona, would allow the use of checkpoints to randomly stop drivers in an effort to find drunk drivers.

Carona said his bill has a number of important safe guards built in, to address concerns about racial profiling or police harassment. Checkpoints would be limited to counties with populations greater than 250,000 or cities greater than 500,000, Carona said, to ensure the manpower and resources are available to ensure the proper operation and administration.

Checkpoint locations would be restricted to areas with a where drunk driving regularly occurs, and cannot be placed based on racial or socio-economic factors. All stops must be video and audio taped, with the records kept for two years. A certain location can only be covered by a checkpoint once a year, for four hours at a time, and stops cannot take longer than 3 minutes. Only upon suspicion of DWI would a driver be asked to provide a driver's license and insurance card. Finally, all checkpoints must be conducted according to a written plan, and notice of the checkpoint must be published in a newspaper or on the Internet.

Carona said his bill is not about catching drunk drivers, it's about stopping people from driving drunk in the first place.

"The most significant reason that checkpoints have been successful in other states isn't because of the ability to stop people," he said. "It's because when people know that there are sobriety checkpoints, they begin to change their behavior." The bill will likely come up for a final vote later this week.

Source: Texas Senate,

Friday, March 20, 2009

Cutting insurance can leave you exposed

Cash-strapped families might be tempted to let insurance policies lapse or, at the very least, reduce auto, home and life insurance coverage. "Even a very, very high deductible -- even higher than $2,000 -- is better than having inadequate insurance, because you're in some way capping your loss," says Jeanne Salvatore, senior vice president of the Insurance Information Institute. *Consider dropping collision and/or comprehensive coverage if you've had your car for four or more years.

Recent AM BEST story on Hartford

OLDWICK, N.J.-- (BUSINESS WIRE) -- A.M. Best Co. has downgraded the
financial strength ratings (FSR) to A (Excellent) from A+ (Superior) and
the issuer credit ratings (ICR) to “a+” from “aa-” of the key
life/health (Hartford Life) insurance subsidiaries of The Hartford Financial Services
Group, Inc. (The Hartford) (Hartford, CT) [NYSE: HIG]. Concurrently, A.M.
Best has downgraded the ICR to “bbb+” from “a-” of Hartford Life, Inc.
The outlook for these ratings is negative.

A.M. Best also has downgraded the FSR to A (Excellent) from A+ (Superior)
and the ICR to “a+” from “aa-” of the key property/casualty (Hartford
Insurance Pool) insurance subsidiaries of The Hartford. The outlook for the
FSR is stable, while the outlook for the ICR is negative.

Concurrently, A.M. Best has downgraded the ICR to “bbb+” from “a-” of
The Hartford. The outlook for these ratings is negative. (Please see link below
for a detailed listing of all companies and ratings.)

The rating actions for Hartford Life reflect the recent performance of its
general account investment portfolio and retail variable annuity businesses
in light of the current economic environment. The rating actions also
reflect the potential for a material decline in the company’s risk-based
capital position should the current economic climate—particularly the
equity markets—continue to deteriorate. While operating and realized
capital losses in 2008 were offset by contributions from the holding
company, Hartford Life’s investment portfolio remains in a significant
unrealized loss position. A.M. Best believes that the company is exposed to
statutory reserve increases associated with its variable annuity lines,
particularly in light of the first quarter-to-date equity market
deterioration. In addition, A.M. Best remains concerned regarding future
deferred acquisition charge (DAC) unlocks in light of current market

A.M. Best also remains concerned over the future performance of Hartford
Life’s commercial mortgage investments—both whole loans and structured
securities—as it expects rising defaults in response to the deepening
recession. In general, A.M. Best is most cautious on retail, hotel and
office properties within close proximity to distressed housing markets
and/or labor markets where unemployment is high. While A.M. Best recognizes
that Hartford Life continues to actively monitor its investment exposures
utilizing credit protection and stress-testing them across a variety of
economic scenarios, the persistently negative economic climate suggests the
potential for additional asset impairments. A.M. Best notes that the
company’s earnings remain heavily correlated to the equity
markets—particularly within its retail variable annuity businesses—which
likely to cause further erosion in operating earnings.

Hartford Life’s ratings reflect its strong risk-based capital position at
year-end, as well as an increased level of liquidity at the operating
companies. The ratings also recognize Hartford Life’s significant market
position in several life insurance and retirement savings businesses (most
notably variable annuities), its diversified sources of revenues and
earnings and its broad multi-channel distribution platform. Additionally,
the ratings also incorporate the fact that The Hartford currently maintains
nearly $1.5 billion of liquid assets at the holding company to support its
debt service needs, as well as the near-term capital needs of its operating
companies. A.M. Best notes that The Hartford’s financial leverage
(including accumulated other comprehensive income [AOCI]) and coverage
ratios remain within A.M. Best’s guidelines for the current ratings,
despite a recent decline in fixed charge coverage driven by lower operating

The rating actions on Hartford Insurance Pool reflect the strain placed on
the overall enterprise from Hartford Life (these rating concerns are
indicated above) as well as the reduced financial flexibility of the
holding company. The Hartford Insurance Pool’s ratings recognize its
continued supportive risk-adjusted capitalization, strong underwriting
fundamentals and solid business position within the property/casualty
industry. These strengths are somewhat offset by the significant realized
and unrealized capital losses reported in 2008, $2.15 billion of dividends
taken out of the property/casualty companies, including $1.0 billion to
support the life/health operations, and continued softening throughout most
commercial lines. In addition, uncertainties exist regarding the potential
for continued investment losses due to volatile capital markets and the
further strain that this may place on risk-adjusted capitalization.
Further, A.M. Best remains concerned regarding the potential for additional
dividends out of the property/casualty companies should extraordinary
additional capital be provided to the life/health operations.

Nevertheless, the stable outlook on the Hartford Insurance Pool’s FSR
reflects A.M. Best’s view that it is well positioned to manage challenging
property/casualty market dynamics such as reduced pricing and increased
competition, due to its significant depth and breadth of operations,
generally conservative underwriting practices, effective utilization of
multiple distribution channels and supportive risk-adjusted capitalization.

For a complete listing of The Hartford Financial Services Group, Inc.’s
FSRs, ICRs and debt ratings, please visit

The principal methodologies used in determining these ratings, including
any additional methodologies and factors, which may have been considered,
can be found at

Founded in 1899, A.M. Best Company is a global full-service credit rating
organization dedicated to serving the financial and health care service
industries, including insurance companies, banks, hospitals and health care
system providers. For more information, visit

Tuesday, March 17, 2009

The Paradox of Flood Insurance Coverage

Texas / South Central News

The Paradox of Flood Insurance Coverage
By Robert Redfearn, Jr.
March 17, 2009

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Whether you are an attorney, an insurance agent, adjuster or broker, or an individual insured, when dealing with claims under flood insurance policies, you may be surprised to discover that many things you think you know are wrong, and, particularly for insureds, many things you think you don't know, you are deemed to know. This is a paradox of flood insurance coverage.

In this litigious day and age, lawsuits alleging breach of the insurance policies, bad faith, unfair claims handling, unfair settlement practices or negligence by an insurance agent are so common that they are not considered particularly unique or as requiring specialized knowledge by most attorneys practicing in the area of insurance defense. But, until recently, the amount of litigation involving claims under flood insurance policies was fairly insignificant, particularly compared to litigation involving general liability and non-flood related property insurance.

However, the widespread flooding recently experienced in the United States beginning with Hurricane Katrina in 2005 through Hurricane Ike in 2008 led to a relative explosion of litigation in which recovery under flood insurance policies or the alleged negligence of insurance agents in procuring or failing to procure flood insurance was a central issue. As a result, attorneys, insurers, insureds and the courts have confronted issues unique and peculiar to flood insurance claims which had not been fully addressed in the past or which were not widely understood.

Two of the more significant issues addressed in the flood insurance related litigation are whether all claims related to recovery under flood insurance policies - including claims against insurance agents - are preempted by federal law or whether they are otherwise subject to limitations imposed by federal law. The number of opinions issued since 2005 addressing these two issues illustrates the uncertainty in the answer to these questions. While the judicial decisions have since begun to reach a consensus, the application of that consensus to individual cases still requires some fleshing out.

Government as Primary Insurer

What makes a flood insurance policy unique from homeowners or commercial property insurance policies is that flood insurance is underwritten by the federal government. In 1968, Congress enacted the National Flood Insurance Act (NFIA) as a means to provide affordable flood insurance to the general public because premiums charged by private insurers had risen dramatically following significant flood losses from hurricanes and other catastrophes. As a result of the NFIA, the U.S. government became the primary insurer against damage from flooding.

The U.S. flood insurance program is administered by the Federal Emergency Management Association (FEMA). As administrator of the program, FEMA promulgated the Standard Flood Insurance Policy (SFIP) through regulations published in the Code of Federal Regulations. FEMA regulations also set the terms of the SFIP, its rate structure and premium costs.

The SFIPs are issued to the public either directly by FEMA or through private insurers operating as "Write Your Own" (WYO) companies. WYO companies issue the SFIPs in their own names and handle the adjustment, settlement, payment and defense of all claims arising under the flood insurance policies, but the policies remain underwritten by the U.S. government and claims are paid out of the U.S. Treasury.

Preemption of Flood Insurance Claims

Following Hurricanes Katrina and Rita, many of the thousands of lawsuits filed by insureds included claims asserting various state law causes of action for bad faith claims handling and adjustment of flood insurance claims, and also claims for misrepresentation or negligence by insurance agents in connection with the procurement or failure to procure flood insurance. Accordingly, a predicate issue which the courts had to decide was whether these state law claims were preempted by federal law.

Because Louisiana, Mississippi and Texas incurred some of the most significant flooding due to hurricanes in the past few years, the Federal Fifth Circuit Court of Appeals and the Federal District Courts within that circuit have issued a number of opinions addressing the issue of federal preemption. In the 1993 case of Spence v. Omaha Indemnity Insurance Co., the Fifth Circuit held that federal common law governed claims under flood insurance policies, but state law provided the statute of limitations for misrepresentation claims brought against the WYO companies that issued SFIPs. [Spence v. Omaha Indemnity Ins. Co., 996 F.2d 793, 796 (5th Cir. 1993)]

Subsequent courts interpreted Spence as holding that the SFIP and FEMA regulations did not preempt state law tort claims against WYO companies.

However, effective Dec. 31, 2000, FEMA amended the SFIP to provide that "all disputes arising from the handling of any claim under the [flood insurance] policy are governed exclusively by the flood insurance regulations issued by FEMA, the National Flood Insurance Act of 1968 as amended (42 U.S.C. §4001, et seq.) and Federal Common Law." [44 C.F.R. Pt. 61, App. A(1) art. 9 (2001)]

Subsequently, the Fifth Circuit issued an opinion clarifying that Spence did not hold that none of the available state law claims against WYO companies were preempted by federal law, but only that extracontractual state law claims against WYO companies were not preempted. But, for cases filed after the Dec. 31, 2000, effective date of FEMA's amendment to the SFIP, the Fifth Circuit held that all state law tort claims, including extracontractual claims, arising out of claims handling by a WYO company under a flood insurance policy were preempted by federal law. [Richmond Printing, L.L.C. v. Director Federal Emergency Management Agency, 72 Fed. App. X. 92 (5th Cir. 2003); Gallup v. Omaha Property & Casualty Ins. Co., 434 F.3d 341 (5th Fir. 2005).]

Since these pronouncements by the Fifth Circuit, courts have drawn a distinction between state law causes of action arising from claims handling of flood insurance and those arising out of procurement of flood insurance coverage, holding that the latter are preempted but the former are not.

One court has noted that "procurement" cases, which are not preempted, "include claims that the insurance agent failed to procure coverage having been asked to do so, or where the agent failed to increase the coverage over time, where the agent failed to recommend flood coverage, and where the coverage had lapsed and the agent had failed to inform the plaintiff of the loss of coverage." [Valerie v. Fidelity & Deposit Co. of Maryland, 2007 WL 2446100, n. 4 (W.D. La. 2007)]

What the Right Hand Giveth, the Left Hand Taketh Away

Although these rulings permit state law causes of action to be brought against insurance agents or WYO companies in connection with their procurement of or failure to procure flood insurance policies, at the same time, many courts have issued rulings suggesting that it will be impossible to prevail on most procurement related causes of action.

Specifically, most procurement claims allege misrepresentations by the insurance agent or the WYO company about an insured's need for flood insurance or the amount of flood insurance coverage available. The Fifth Circuit has held that insureds have a duty to read and understand the terms of their SFIP, and, even if they do not have a copy of the SFIP, they are charged with constructive knowledge of the terms of the SFIP because it is published in the Code of Federal Regulations. This knowledge is imputed to the insured "regardless of actual knowledge of what is in the regulations or of the hardship resulting from innocent ignorant." [Richmond Printing, L.L.C. v. Director of Federal Emergency Management Agency, 72 Fed. App. X. 92 (5th Cir. 2003)]

As a result, numerous district courts in the Fifth Circuit have concluded that even if an insurance agent or WYO company makes a representation that is contrary to the provisions of the SFIP as contained in the Code of Federal Regulations, it is unreasonable as a matter of law for the insured to rely on such representation, notwithstanding that the insured may look to the insurance agent as an expert or how confusing the regulations may be.

At least one district court outside of the Fifth Circuit has suggested that while constructive knowledge of the SFIP may prevent an insured from asserting misrepresentation as the basis of a contract or estoppel claim against the U.S. government, it should not apply in the context of whether an insured's reliance on the misrepresentation was reasonable for purposes of a misrepresentation claim against the insurance agent or WYO company themselves. [Padalino v. Standard Fire Ins. Co., 2008 WL 4630585 (E.D. Pa. 2008)]

However, thus far, courts in the Fifth Circuit do not appear inclined to follow this view.

Robert Redfearn, Jr. ( is a partner in Simon, Peragine, Smith & Redfearn, a regional law firm with offices in New Orleans, La., and Mississippi.

Editor's Note: The above is an edited version of an article that originally appeared in the Feb. 23, 2009, edition of Insurance Journal - South Central Region.

Thursday, March 12, 2009

Texans need to protect their personally identifying information

Texans need to protect their personally identifying information, watch for
signs of fraud.

According to the Federal Trade Commission, Texas ranks second in the nation
for identity theft complaints, so Texans should carefully guard their
identities and credit ratings. In 2008, nearly 32,000 Texans were identity
theft victims and as a result, lost thousands of dollars and hours of time
attempting to correct their credit ratings and personal financial history.

Identity theft is a crime that occurs when a criminal illegally uses
someone else’s personal information – whether it’s another’s name, address,
driver’s license number, Social Security number, credit card number – to
commit fraud or other crimes. Sometimes identity theft is detected quickly,
but other times it may take years before it surfaces. As a result, a victim
may not recognize the theft until his or her credit has been destroyed. No
one, including children, is immune to this crime.

The average victim loss runs into hundreds of dollars, with victims forced
to spend hours cleaning up the damage. But the worst cases can cost
thousands of dollars and take years to fully repair. To help prevent
identity theft, the OAG conducts public education efforts and pursues
vendors that fail to protect their customers’ personal information.

Identity thieves obtain their victims’ personal information in several
ways. Here are just a few:

• Dumpster diving. Thieves retrieve bills and other documents out of the
trash. Although Texas law prohibits vendors from simply throwing away
documents that contain their customers’ sensitive information, when a store
or office makes a mistake, identity thieves can recover large caches of
personal information from publicly accessible dumpsters. To prevent thieves
from obtaining usable personal information from the trash, Texans should
use a cross-cut shredder to destroy financial documents and paperwork with
personal information.
• Skimming. Some identity thieves use an economical storage device to copy
credit/debit card numbers when credit cards are processed by vendors.
Texans can avoid falling victim to this tactic by keeping an eye on their
credit card statements.
• Phishing. Thieves pretending to be financial institutions or online
retailers often send official-looking e-mails in an attempt to trick
Internet users into revealing their personal information. Texans can avoid
falling victim to this tactic by refusing to provide their passwords or
sensitive information (personal or account details) through e-mail or in
response to unsolicited phone calls.
• Pretexting. Like phishing, this scheme employs false pretenses to obtain
personal information from financial institutions, telephone companies, and
other sources. Texans can avoid falling victim to this tactic by refusing
to provide their passwords or sensitive information (personal or account
details) through e-mail or in response to unsolicited phone calls.
• Phony job offers. Identity thieves place fake employment ads and ask
respondents to fill out applications that include their personal
information. Texans can avoid falling victim to this tactic by researching
a company before providing any personal information. Job applicants should
only apply at a reputable business’s known physical location or Web site.
• Change of address. Identity thieves use change of address forms to divert
a consumer’s mail to another location by completing a change-of-address
form. The U.S. Postal Service now sends a “Move Validation Letter” to both
an old and new address when a change of address is filed. If Texans receive
one of these letters but did not apply for a change of address, they should
call their post office immediately.
• Regular stealing. By stealing items like wallets, PDAs, laptops, purses,
new checks, tax information or personnel records, identity thieves can have
access to the personal information they need to commit identity theft.
Texans can avoid falling victim to identity theft by guarding these
sensitive records with care, and only carrying those records that they
need. If records are lost or stolen, Texans should cancel the lost or
stolen credit cards and alert their banks.
• Shoulder surfing. By literally looking over a victim’s shoulder, identity
thieves can obtain personal information, such as at an ATM, for example.
Texans can avoid to this tactic by being aware of their surroundings and
carefully concealing personal information and PIN numbers.
• Hacking. Hackers gain information by breaking into computer systems.
Texans can avoid hackers by using anti-virus software, firewalls and other
methods to keep your computer secure. Texans should keep all such software
updated to ensure they receive the latest protections.
• Working in your home. Residential contractors or other workers may misuse
personal information they find in plain view. Texans can avoid this tactic
by keeping sensitive documents in a secure place and limit unsupervised
unknown workers in their homes.

Thursday, March 5, 2009

Farmers Insurance by David Lorms Donates to LuLu M Stevens Elementary School

David Lorms, Farmers Insurance Agent, donated $500 to LuLu M. Stevens Elementary School to fund a Perfect Attendance program. Students with perfect attendance will be entered into a drawing for prizes to be awarded at the end of the semester. This is the 2nd year Mr. Lorms has funded this project. Pictured are Ashley Dusek, 2nd Grade Teacher, David Lorms, Farmers Insurance, and Lucy Anderson, Principal.

For more information, you can visit or call 713-688-8669.

Tuesday, March 3, 2009

World's Most Admired Companies by Fortune

Most Admired
Company Industry Overall score
1 Berkshire Hathaway 7.78
2 Travelers Cos. 6.49
3 Munich Re Group 6.44
4 Swiss Reinsurance 6.21
5 Allianz 6.20
6 Zurich Financial Services 6.13
7 State Farm Insurance 5.95
8 Liberty Mutual Insurance Group 5.93

Company Industry Overall score
9 Allstate 5.91
10 Mitsui Sumitomo Insurance 5.71
11 Mapfre Group 5.40
12 Millea Holdings 5.38
13 Hartford Financial Services 5.31
14 Nationwide 5.30
15 Groupama 5.03
From the March 16, 2009 issue