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September 2006

State: New York

Area of Interest: St. Paul Travelers Settles Bid-Rigging Probe

Agreement is Part of Ongoing Effort to Restore Competition in Insurance Industry

Attorney General Eliot Spitzer and State Insurance Department Superintendent Howard Mills today announced an agreement with one of the country’s largest property casualty insurance companies to resolve charges of customer steering, bid-rigging and improper finite reinsurance transactions.

Under the agreement, St. Paul Travelers, a major provider of automobile and homeowners insurance for individuals and commercial insurance for small businesses, will pay $77 million in restitution and penalties and adopt a series of reforms. In addition, St. Paul Travelers has issued an apology acknowledging its improper conduct.

As described in the Assurance of Discontinuance settling this case, the investigation found that St. Paul Travelers made undisclosed payments to insurance brokers and agents in exchange for business referrals, and participated in a scheme to fix insurance prices in the excess casualty area.

The assurance also details St. Paul’s use of improper "finite reinsurance" to bolster both its own financial results and those of its clients. For example, in the years 1999 through 2002, St. Paul entered into aggregate excess of loss reinsurance contracts with an insurer in Barbados, despite a side agreement that any losses suffered by the insurer would be made up by St. Paul.

Under the agreement, $37 million will be paid to St. Paul Travelers policyholders harmed by the company’s bid-rigging activities. In addition, St. Paul Travelers will pay penalties of $24 million to New York and $8 million each to Connecticut and Illinois.

In the fall of 2004, the New York Attorney General's office and the New York Insurance Department announced a joint probe of misconduct in the insurance industry. This investigation has resulted to date in guilty pleas from 20 insurance company executives and officers, and the recovery of approximately $3 billion for consumers and workers compensation plans.

Source: State of New York

State: Florida

Area of Interest: Office of Insurance Regulation Announces Multi-State Settlement Totaling $70 Million to Benefit Military Personnel

Florida Insurance Commissioner Kevin McCarty announced today a multi-state settlement concerning the improper sale of insurance and investment products to U.S. military personnel. The American-Amicable Life Insurance Company of Waco, Texas, and its affiliates will be required to provide immediate cash refunds and increased policy benefits totaling $70 million under the settlement agreement.

As a result of the investigation, approximately 57,000 current and former service members will receive refunds and modifications to their existing insurance policies, and an additional 13,000 service members and 22,000 civilians will receive increased cash surrender benefits.

In addition to the penalties, the companies are banned from military bases for five years, and are prohibited from any military personnel membership listings for sales or solicitation purposes, as well as other restrictions on sales and contracts with military personnel.

The settlement alleges that the American-Amicable companies violated insurance and consumer protection statutes in the sale and marketing of certain life insurance products to U.S. service members. The term life policies, marketed as “Wealth Builder” or “Horizon Life,” were sold primarily to military personnel and were often represented as investment products.

Under the settlement, the companies will be required to:

To make cash payments to former and current service members who were issued a “Horizon Life” policy from January 1, 2000, through July 28, 2006. Approximately 57,000 service members, including 5,000 in Florida, are eligible to receive this relief.

To increase the cash surrender value for all in-force “Horizon Life” and “Wealth Builder” policies regardless of when the policy was issued or military status. Approximately 53,000 current policyholders will receive this benefit.

Cease soliciting or selling any insurance product on any military installation for five years. Additionally the companies are prohibited from transacting insurance with any active duty military personnel for two years within the state of Florida.

Immediately terminate any agent discovered selling company products on a military installation.

Not accept any insurance applications for Army enlisted personnel with the rank of E-1 through E-3 without proof the applicant has been counseled by a superior officer.

Not offer any gift with a value greater than $5.00 to any individual who has direct command authority over service members who rank between E-1 and E-4.

Not participate in or assist with any class, seminar, or other training for service members who rank between E-1 and E-4.

Not participate in or assist with any class, seminar, or other training for service members regarding personal finance when such class, seminar, or other training occurs on a military base, installation, or reservation

Source: State of Florida

State: New York

Area of Interest: .S. Labor Department Secures Payment and Reinstatement for Brooklyn, N.Y., Worker Fired for Filing OSHA Complaint

A Brooklyn, N.Y., book wholesaler must offer reinstatement and pay more than $18,000 to an employee who was fired for filing a safety complaint with the U.S. Department of Labor's (DOL) Occupational Safety and Health Administration (OSHA).

An OSHA whistleblower investigation found that Books for Less LLC, 101 Steuben St., had fired the employee on March 3, two days after an OSHA inspection occurred that was prompted by the employee's complaint. OSHA ordered the company to reinstate the worker. DOL attorneys then filed a complaint in the U.S. District Court for the Eastern District of New York that resulted in a consent judgment signed July 19 by U.S. District Judge Sandra L.Townes.

The judgment orders Books for Less LLC and Michael Shmuely, its owner and president, to offer to reinstate the employee to his former, or a substantially equivalent position, pay $18,365 in back wages, health-care benefits and pre-judgment interest, and restore to the worker all employee benefits he would have earned had his employment not been interrupted.

Source: Occupational Safety and Health Administration

State: New Jersey

Area of Interest: OSHA Fines Newark, N.J., Contractor for Fall Hazards and Failing to Report Worker Death at Flushing, N.Y., Job Site

The U.S. Department of Labor's Occupational Safety and Health Administration (OSHA) has cited a Newark, N.J., roofing contractor for alleged fall hazards and failing to report the death of a worker who suffered a fatal fall at a Flushing, N.Y., work site.

Employees of Jose Construction Corp. were working on the roof at 51-30 Roosevelt Ave. on March 27, when a worker fell 20 feet from a ladder. He died of his injuries on April 1. OSHA began its investigation on April 26, after learning of the fatality from a third party.

OSHA's inspection found that the 20-foot extension ladder that workers used to access the roof did not extend 3 feet above the roof's edge, as required. The ladder lacked a grasping device to aid workers in safely mounting and dismounting. In addition, employees were carrying bags of tools while climbing the ladder, and they were not trained in how to properly set up and use the ladder.

Jose Construction Corp. was issued three serious citations with proposed fines of $4,500 for these conditions. OSHA issues a serious citation when death or serious physical harm are likely to result from a hazard about which the employer knew or should have known.

The company was also issued an other-than-serious citation with a $1,500 fine for not informing OSHA of the employee's death. An other-than-serious violation is a condition that would probably not cause death or serious physical harm, but would have a direct and immediate relationship to the safety and health of employees.

Source: Occupational Safety and Health Administration

State: New York

Area of Interest: OSHA Certifies the New York State Plan for Public Employees

The Occupational Safety and Health Administration (OSHA) today announced that it will approve plan amendments and certify the state of New York's occupational safety and health plan for its public employees. This certification reflects OSHA's determination that all developmental commitments have been met and that the state's plan is structurally complete.

OSHA's certification indicates that the state plan contains all the necessary structural elements (standards, statutory and regulatory authorities, and procedures) to operate a program for its public employees which is "at least as effective" as the federal program. Absent a state plan, state and local government employees are not covered by the Occupational Safety and Health Act.

New York's state plan is administered by the New York Department of Labor, Division of Occupational Safety and Health, Public Employee Safety and Health (PESH) program and covers nearly 1.3 million state and local government employees.

OSHA encourages states to develop and operate their own safety and health programs. While most state plans cover both private sector and public sector employees, New York is one of four jurisdictions that cover only public sector employees; the others are Connecticut, New Jersey and the Virgin Islands. Private sector enforcement authority in the state of New York remains the responsibility of federal OSHA.

Source: Occupational Safety and Health Administration

Area of Interest: OSHA Offers New Publication on Fire Service

The Occupational Safety and Health Administration (OSHA) is offering a new publication, Fire Service Features of Buildings and Fire Protection Systems, that will help increase the safety of building occupants and emergency responders by streamlining fire service interaction with building features and fire protection systems.

Fire service operations take place in stressful and time sensitive environments. Decisions are often made in unfamiliar settings and without vital information, such as what is burning, where the fire is spreading, or the location of occupants. Poorly located fire hydrants, inaccessible fire department connections, confusing zone information, unmarked valves, or improperly designed standpipes are examples of features that can slow fire service operations. Delays, however brief, can dramatically affect an operation and its outcome.

OSHA’s new manual explains how fire service operations can be influenced by different building features and offers considerations for design professionals that can help facilitate these operations. The manual includes chapters and narratives on building and site design, sprinkler systems, standpipe systems, fire department connections, fire alarm and communications systems, as well as various firefighting systems.

The material in Fire Service Features of Building and Fire Protection Systems is appropriate for all fire service organizations, including fire brigades and fire departments. Many of the discussions can help during responses for other emergencies such as hazardous material releases, emergency medical care, non-fire rescues and terrorist events.

Source: Occupational Safety and Health Administration

State: Florida

Area of Interest: Proposed Workers’ Compensation Insurance Rates Would Drop for Fourth Consecutive Year

Florida Insurance Commissioner Kevin McCarty today announced he has received the latest rate filing for workers’ compensation insurance rates due to become effective next year. The filing calls for an overall average rate decrease of 13.3 percent statewide, which would produce a savings of over $400 million for Florida employers.

If approved, the rate decrease would be the fourth consecutive drop since Gov. Bush and the Legislature passed sweeping reforms to the state’s workers’ compensation system in 2003. The cumulative overall statewide average rate decrease for the period would total -38.9 percent.

The National Council on Compensation Insurance, which produces and files rates for insurers in many states, said the rate decline was primarily due to a significant drop in claims frequency and a reduction in the costs of claims.

A rate hearing on the filing will be scheduled by the Office of Insurance Regulation in September or October, and the rate change would be effective for new and renewal business as of January 1, 2007.

Florida’s Workers’ Compensation system had been weighed down with high liability coverage costs for employers and low benefits for injured employees. Workers’ compensation rate changes in Florida following the reforms were:

Source: State of Florida

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