Bulletins - Year 2001


DATE: December 26, 2001
RE: Voluntary Expedited Filing Procedures for Exclusions Related to Acts of Terrorism
TO: All Property and Casualty Insurers Writing Commercial Lines Insurance Products

Background

There has been much uncertainty in the markets for commercial lines property and casualty insurance coverage in light of the substantial losses experienced by the industry on September 11, 2001. Soon after the events, many reinsurers announced that they did not intend to provide coverage for acts of terrorism in future reinsurance contracts. This led to a concerted effort on behalf of all interested parties to seek a temporary federal backstop to calm market fears over future terrorists attacks and the ability of the insurance industry to allocate capital to provide coverage for these unpredictable and potentially catastrophic events. Unfortunately, Congress has been unable to reach agreement on the terms of a temporary federal solution. As a result, insurance regulators find themselves having to consider approval of certain coverage exclusions for acts of terrorism or risk possible serious solvency concerns in the insurance industry.

The intent of this bulletin is to inform you of the decision in this state to approve certain limited exclusions for acts of terrorism and to provide a voluntary procedure for insurers to use to expedite the filing and timely review of these limited exclusions. As Commissioner I was involved in recent discussions at the National Association of Insurance Commissioners (NAIC) related to this issue. In a recent conference call the members of the NAIC adopted a motion that "if the Congress adjourns without enacting federal terrorism legislation, the states should grant conditional approval to commercial lines endorsements that exclude coverage for acts of terrorism consistent with the exclusion framework developed by ISO. To the extent permitted by state law, such approvals would sunset or be withdrawn 15 business days after the President signs into law a federal backstop to address insurance losses attributed to acts of terrorism, or be subject to other conditions on the approval consistent with state law." By this bulletin, I am informing you of my intent to act in a manner consistent with the recommendation from the NAIC membership. I believe this to be the best course of action as it balances the need of insurers to have some certainty related to solvency concerns with the business consumer’s concerns that their businesses not be subject to uninsured events.

To date many unacceptable exclusions have been filed by insurers to be attached to commercial lines insurance products. These endorsements will be disapproved for use in this state as inconsistent with the interests of public policy in accordance with the prior approval requirement set forth in Sections 27-14-8 and 27-14-9, Code of Alabama 1975.

Instead of approving the very broad total exclusions of coverage for acts of terrorism, this state intends to grant approval to exclusions that are substantially similar to the series of optional endorsements developed by the Insurance Services Office, Inc. (ISO). These endorsements include the following:

COMMERCIAL PROPERTY INTERLINE ENDORSEMENT: IL 09 41 01 02 (N/A to Standard Fire Policy States)
COMMERCIAL PROPERTY INTERLINE ENDORSEMENT: IL 09 40 01 02 (Applies in Standard Fire Policy States)
COMMERCIAL PROPERTY INTERLINE ENDORSEMENT: IL 09 42 01 02 (Applies in Standard Fire Policy States)
COMMERCIAL GENERAL LIABILITY ENDORSEMENT: CG 21 69 0102
COMMERCIAL GENERAL LIABILITY ENDORSEMENT: CG 31 42 01 02
COMMERCIAL GENERAL LIABILITY ENDORSEMENT: CG 31 43 01 02
COMMERCIAL LIABILITY UMBRELLA ENDORSEMENT: CU 21 29 01 02
BUSINESSOWNERS ENDORSEMENT: BP 05 11 01 02 (N/A to Standard Fire Policy States)
BUSINESSOWNERS ENDORSEMENT: BP 05 12 02 (Applies in Standard Fire Policy States)
BUSINESSOWNERS ENDORSEMENT: BP 05 13 01 02
FARM LIABILITY ENDORSEMENT: FL 10 30 01 02

In an unprecedented move in recognition of the seriousness of the situation, ISO has indicated that it will permit the use of its copyrighted language by any insurer, including one that is not a current licensee of ISO for policy forms. Insurers that are current licensees of ISO for policy forms can use the new language pursuant to their current ISO agreements and approval by this state of its forms. If you are properly affiliated with ISO, and have given them authorization to file on your behalf, no further action is needed on your part.

Any insurer that does not have a license agreement in effect with ISO for policy forms is required to execute a short, limited license agreement that authorizes the use of the new language. ISO has indicated that there will be no fee for this limited license. You may contact ISO’s Customer Service department directly for more information at 1-800-888-4ISO (4476) using option 2. You may also contact ISO at info@ISO.com. You will be responsible for assuring compliance with this state’s filing requirements, however, you may find that the expedited approval process outlined in this bulletin to be helpful in receiving prompt [approval/acknowledgement] of your filing.

Explanation and Instructions for Expedited Review

The policy exclusions filed by ISO and approved by this state have some significant limitations that provide coverage for acts of terrorism under certain circumstances. For policies providing property insurance coverage the following limitations apply:

  • Exclusion for acts of terrorism only apply if the acts of terrorism result in industry-wide insured losses that exceed $25,000,000 for related incidents that occur within a 72 hour period;
  • Exclusions for acts of terrorism are not subject to limitations above if:
    • The act involves the use, release or escape of nuclear materials, or that directly or indirectly results in nuclear reaction or radiation or radioactive contamination;
    • The act is carried out by means of the dispersal or application of pathogenic or poisonous biological or chemical materials; or
    • Pathogenic or poisonous biological or chemical materials are released, and it appears that one purpose of the terrorism was to release such materials.

For policies providing liability insurance coverage the following limitations apply:

  • Exclusion for acts of terrorism only apply if the acts of terrorism result in industry-wide insured losses that exceed $25,000,000 for related incidents that occur within a 72 hour period; or
  • Fifty or more persons sustain death or serious physical injury. For purposes of this provision serious physical injury means:
    • Physical injury that involves a substantial risk of death;
    • Protracted and obvious physical disfigurement; or
    • Protracted loss of or impairment of the function of a bodily member or organ.
  • Exclusions for acts of terrorism are not subject to limitations above if;
    • The act involves the use, release or escape of nuclear materials, or that directly or indirectly results in nuclear reaction or radiation or radioactive contamination;
    • The act is carried out by means of the dispersal or application of pathogenic or poisonous biological or chemical materials; or
    • Pathogenic or poisonous biological or chemical materials are released, and it appears that one purpose of the terrorism was to release such materials.

This state will accept the following definition of acts of terrorism or definitions that are more liberal to policyholders:

Terrorism means activities against persons, organizations or property of any nature:

  • That involve the following or preparation for the following:
    • Use or threat of force or violence; or
    • Commission or threat of a dangerous act; or
    • Commission or threat of an act that interferes with or disrupts an electronic, communication, information, or mechanical system; and
  • When one or both of the following applies:
    • The effect is to intimidate or coerce a government or the civilian population or any segment thereof, or to disrupt any segment of the economy; or
    • It appears that the intent is to intimidate or coerce a government, or to further political, ideological, religious, social or economic objectives or to express (or to express opposition to) a philosophy or ideology.

For an insurer to receive expedited approval of its exclusions for commercial lines insurance coverages, the exclusionary endorsements must comply with the terms and conditions set forth in this bulletin and be submitted in accordance with the instructions specified below. Further, you must certify that you are either using the ISO endorsements or using an endorsement that provides coverage at least as broad as the approved ISO endorsements.

Forms with Instructions

Attached to this bulletin is a uniform filing transmittal form that has been agreed upon by this state and other states. An insurer wishing to receive expedited treatment of its filing for approval pursuant to Section 27-14-8, Code of Alabama 1975, shall complete the EXPEDITED FILING - TERRORIST EXCLUSIONS APPLICATION Form Filing Transmittal as directed. In addition, the insurer(s) submitting this filing must certify that it is either using one or more of the ISO endorsements or has developed its own exclusionary language that provides coverage at least as broad as the approved ISO endorsement with respect to coverage granted to policyholders. Further, the insurer(s) must certify that the reason for seeking approval of these endorsements is that it is unable to obtain reinsurance coverage for acts of terrorism. Certification is made by signing the appropriate blank on the transmittal form.

To be complete, a form filing must include the following:

  • A completed, certified Form Filing Transmittal Header for each insurer.
  • One copy of each endorsement, unless you have given ISO authorization to file them on your behalf.
  • The appropriate filing fees [$40 Per Form].
  • A postage-paid, self-addressed envelope large enough to accommodate the return. Note that a comparable filing transmittal form is available in SERFF.

If this filing is for multiple companies, please provide a copy of the transmittal header for each company and an extra copy for return to the company. (i.e. 7 companies = 8 copies)

Effective Date

This bulletin shall take immediate effect and shall expire on March 1, 2002.



DATE: December 20, 2001
RE: Producer Authority to Collect Fees from Consumers Beginning January 1, 2002


Until January 1, 2002, the Alabama Trade Practices Law prohibited agents from collecting any charge for insurance other than as specified in the policy and in accordance with the rating filed with the Insurance Commissioner by the insurer. An insurance broker, who may also be licensed as an insurance agent, is permitted to be compensated directly by the consumer for the broker’s services in placing the consumer’s insurance, but when acting as a broker the broker cannot share in the placing agent’s commission.

Beginning January 1, 2002, the new Producer Licensing Law merges the licenses of agents and brokers into a new license called an insurance producer license. As such, insurance producers will be permitted to charge a fee to consumers for their services as an insurance producer, but not in violation of the Trade Practices Law as mentioned above. There was also a change to the Trade Practices Law, effective January 1, 2002, which will nevertheless permit producers to charge and collect certain administrative fees as approved by the Commissioner of Insurance for the processing of property and casualty insurance applications.

Thus, pursuant to the authority set forth in Section 27-12-17, Code of Alabama 1975, effective January 1, 2002, insurance producers may collect administrative fees not in excess of the following schedule when processing applications for property and casualty insurance:

  • Any one of the following:
    • New application: $25
    • Rewrite canceled or lapsed application: $25
    • Reinstatement fee: $10
  • Plus any and all of the following as applicable:
    • Home re-inspection: $25
    • Photo of Auto or Home: $5
    • Cash payments received in agency: $5
    • Motor Vehicle Reports: Actual Cost

These administrative fees are separate and distinct from the insurance company’s premium and must be disclosed to consumers as a separate charge by the producer.

Other than as set forth in this bulletin or as may be hereafter approved by the Commissioner, producers will be considered to act in violation of the Trade Practices Law (Section 27-12-17) for charging an additional fee for services that are customarily associated with the solicitation, negotiation or servicing of insurance policies.

It should be noted that certain producers may also engage in the practice of providing financial planning advice. To avoid potential confusion in this area, it is recommended that insurance producers providing financial planning advice first enter into a written agreement with the consumer disclosing that he or she is also a licensed insurance producer and that if an insurance product is purchased from the producer a commission for the sale of an insurance product will be received in addition to a fee for financial planning, if this is the case.



DATE: October 11, 2001
RE: Executive Order Blocking Property and Prohibiting Transactions with Persons who Permit, Threaten to Commit, or Support Terrorism


NOTE: This bulletin was only addressed to Alabama-domiciled Insurers.

In response to the terrorist attacks in New York, Pennsylvania, and the Pentagon committed on September 11, 2001, President Bush issued an Executive Order, effective September 24, 2001, which provides that property and interests in property of those persons and entities listed in the Annex to the Executive Order (a copy of the list is attached to this Bulletin) that are either in the United States or come into the United States are blocked. This includes the making or receiving of any contribution of funds, goods, or services to or for the benefit of those persons or entities listed in the Annex to the Order or otherwise determined to be subject to the Order.

The purpose of this Bulletin is to advise all insurers and licensees to become familiar with their obligations under the Executive Order. All insurers and licensees should review their records for any information that may be relevant to the Executive Order. Insurers and licensees should also review the United States Department of the Treasury, Office of Foreign Assets Control, website, www.treas.gov/ofac, which will provide additional updated information regarding these requirements. Questions regarding the Executive Order should be directed to the Office of Foreign Assets Control. Entities found to have violated this Executive Order may be subject to sanction.

Insurers and licensees reporting information to federal authorities should also notify the Alabama Department of Insurance, Attention: Michael A. Bownes, General Counsel, at P.O. Box 303351, Montgomery, Alabama 36130-3351.

ALL INSURERS MUST INFORM THEIR AGENTS OF THE INFORMATION CONTAINED IN THIS BULLETIN.

Annex to Executive Order

Al Qaida/Islamic Army
Abu Sayyaf Group
Armed Islamic Group (GIA)
Harakat ul-Mujahidin (HUM)
Al-Jihad (Egyptian Islamic Jihad)
Islamic Movement of Uzbekistan (IMU)
Asbat al-Ansar
Salafist Group for Call and Combat (GSPC)
Libyan Islamic Fighting Group
Al-Itihaad al-Islamiya (AIAI)
Islamic Army of Aden
Usama bin Laden
Muhammad Atif (aka, Subhi Abu Sitta, Abu Hafs Al Masri)
Sayf al-Adl
Shaykh Sai'id (aka, Mustafa Muhammad Ahmad)
Abu Hafs the Mauritanian (aka, Mahfouz Ould al-Walid, Khalid Al-Shanqiti)
Ibn Al-Shaykh al-Libi
Abu Zubaydah (aka, Zayn al-Abidin Muhammad Husayn, Tariq)
Abd al-Hadi al-Iraqi (aka, Abu Abdallah)
Ayman al-Zawahiri
Thirwat Salah Shihata
Tariq Anwar al-Sayyid Ahmad (aka, Fathi, Amr al-Fatih)
Muhammad Salah (aka, Nasr Fahmi Nasr Hasanayn)
Makhtab Al-Khidamat/Al Kifah
Wafa Humanitarian Organization
Al Rashid Trust
Mamoun Darkazanli Import-Export Company



DATE: October 10, 2001
RE: Privacy Policy


NOTE: This bulletin was only addressed to Alabama Insurance Guaranty Association, Alabama Life and Disability Insurance Guaranty Association, Alabama Health Maintenance Organization Guaranty Association, Alabama Insurance Underwriting Association.

Please take note that the Alabama Insurance Guaranty Association, established in Chapter 42, Title 27, Code of Alabama 1975, the Alabama Life and Disability Insurance Guaranty Association, established in Chapter 44, Title 27, Code of Alabama 1975, the Alabama Health Maintenance Organization Guaranty Association, established pursuant to Section 27-21A-12(i), Code of Alabama 1975, in Alabama Insurance Regulations 82 and 83, and the Alabama Insurance Underwriting Association, established in Alabama Insurance Regulation 52, hereinafter collectively referred to as the "associations", are all subject to the authority of the Alabama Commissioner of Insurance. None of these associations are subject to Title V of the Gramm-Leach-Bliley Act (15 U.S.C. §§ 6801-6827), nor are they subject to Alabama Insurance Regulation 122.

The undersigned hereby adopts the following privacy policy for the above mentioned associations:

Except for the protection of the individual policyowners, insurers, beneficiaries, annuitants, payees, and assignees of insurance policies, annuity contracts, and supplemental contracts against the results of insurer insolvency or potential insurer inability to meet contractual obligations, the associations shall not disclose the nonpublic personal information of such individuals. Although the associations may notify any person or entity of this privacy policy, the associations are not obligated to provide any such notification.



DATE: October 1, 2001
RE: Telephone Inquiries to Agents Licensing Division


Effective immediately, this Department is implementing a new procedure for handling telephone inquiries to the Agents Licensing Division.

In the Agents Licensing Division, the mutual goal of the Department and industry is the issuance of licenses and appointments in a timely manner. It is the Department's desire to provide sufficient staff to handle the ever-increasing calls, but with the State's current budgetary constraints, it is not possible to hire additional personnel at this time. For that reason, the Department is seeking better ways of time management using its current employees.

In the past it has not been unusual for an agent, the agent's manager and a company representative to call the Division inquiring about the same information. This is very time-consuming for the staff and disruptive to the issuance of licenses and appointments. In an attempt to allow the limited staff in this Division an opportunity to process applications for licenses and appointments in a timely manner, it is imperative that telephone calls relating to the approximately 46,000 agents handled by this Division be limited to those that are truly necessary.

It is, therefore, necessary for the Department to limit calls regarding agent appointments and agent testing to those of company representatives. Companies should instruct their agents to contact them for assistance and the company representative should make the inquiry to the Department if necessary.

The processing time for new applications, renewal licenses and appointments is 3-4 weeks. Please allow 4 weeks to receive confirmation in the mail. We do not mail appointment confirmation notices to agents or companies. This information can now be found on our web site ( www.aldoi.gov). Registration packets are mailed to those to be tested within 3-4 weeks and notice is posted on the web site.

The Agent Licensing Division will accept calls only between the hours of 9:00 AM and 4:00 PM (Central Time). The telephone number for the Agents Licensing Division is (334) 241-4126.

Agents are responsible for renewal of their licenses. They should be the only ones contacting the Department in this regard. Calls from individuals other than the agent will not be accepted. The web site should be used before calling the Department ( www.aldoi.gov). We appreciate your cooperation in these efforts.

ALL INSURERS MUST INFORM THEIR AGENTS OF THE INFORMATION CONTAINED IN THIS BULLETIN.

This bulletin supercedes and replaces the bulletin in this regard dated January 9, 1995.



DATE: July 12, 2001
RE: The Alabama Title Insurance Act-Ala. Act No. 2001-496


Please be advised the referenced act applies to all title insurers and title insurance agents engaged in the business of title insurance in this state upon its effective date of October 1, 2001. All title insurers should become familiar with the new law and take steps now to be in compliance on the effective date. You may access a copy of the law via the web site of the Alabama Department of Insurance at www.aldoi.gov.

Two items in this act requiring immediate attention by title insurers are as follows:

  • Title Agent Licensing: The act requires all title insurance policies insuring an interest in real property in this state to be issued by an agent domiciled in this state. The act further requires all title insurers to first obtain a certificate of authority for each agent utilized in this state. These requirements do not apply to the officers and employees of title insurers. To ensure there is no interruption in processing of title insurance policies, this office will accept applications for title insurance agent certificates of authority immediately to be issued with an effective date of October 1, 2001. The attached forms should be used in making this application, which includes additional information regarding the licensing process and applicable fees to be paid. The application can be used for an unlimited number of Title Agents. Form AL-T-1 must be used as a form, but Form AL-T-2 is actually a format. When using Form AL-T-2, Title Insurers should be careful to sequentially number all Title Agent applicants included with each application.
  • Upon receipt of a properly completed application for title agent licensing, this Department will attempt to issue the certificates of authority as quickly as possible. Nevertheless, please allow at least three weeks for processing. To download a "PDF" copy of the application, please click below:

  • Title Rate Approval: The act requires all title insurers to file for approval by this department a schedule of premium rates and every modification of premium rates the insurer proposes to use in this state. To ensure there is no interruption in processing of title insurance policies, this office will accept filings for approval of title insurance rates immediately, to be processed with an effective date of October 1, 2001. No particular form is required for this filing, but it should include sufficient statistical data for our rate analysts to determine the fairness and justness of the filing. A rate filing examination fee of $55 is due with each such filing, which should be addressed to:
    Alabama Department of Insurance
    Title Rate Filing
    PO Box 303351
    Montgomery, AL 36130-3351

    Please include the E-Mail address of a contact person should additional information be needed by the Department in the review process.

    Likewise, upon receipt of a title rate filing, this department will attempt to review the filing promptly. Nevertheless, please allow at least three weeks for processing. The Department anticipates issuing a "tentative" approval of title insurance rates, thus allowing title insurers to use approved rates on October 1, 2001. The Department will continue to collect statistical data and other information from title insurers over the next 12 to 24 months, after which the Department hopes to be in a position to issue "final" approval of all title rates on file.

    It is the opinion of this Department that the application of the rate filing and approval provisions of the act should be prospective only. Thus, the rate filing provisions of the act do not apply to either of the following:

    1. Transactions in which title insurers or their agents have quoted a premium rate AND issued a commitment for title insurance prior to October 1, 2001, but which close after October 1, 2001.
    2. Policies issued in connection with transactions which closed prior to October 1, 2001, in which the policy is issued after October 1, 2001.

    Therefore, each transaction in which a policy of title insurance is issued after October 1, 2001 to which either (1) or (2) above is applicable shall be considered exempt from the rate filing and approval provisions of the act.



DATE: July 5, 2001
RE: Privacy Compliance Survey


NOTE: This bulletin was only addressed to Alabama-domiciled Insurers.

As part of this state's efforts to determine general compliance with the new privacy protections mandated by 15 U.S.C. Sections 6801, et seq., being Title V of Public Law 106-102, commonly known as the "Gramm-Leach-Bliley Act", this state is participating in a coordinated privacy compliance survey with other states. This approach is being utilized as an alternative to each state developing its own survey and distributing a state specific survey to each company operating within its jurisdiction. Because this effort is being centrally facilitated through the National Association of Insurance Commissioners, you must access the survey through the NAIC web site. The survey is posted under the "What's New" section on the upper right side of the NAIC home page. Pursuant to this state's examination authority, this survey must be completed in an electronic format via the Internet by Friday, July 27, 2001.

Please note the following items as you complete the survey:

  1. The survey can only be completed once per company. Multiple responses cannot be submitted to this state or other states.
  2. If a group holding company is adopting and implementing a common privacy compliance strategy for all companies within a group, a group holding company may respond on behalf of all or some of its member companies regardless of where the member companies are domiciled. The group holding company must identify, by name and NAIC company code, the companies within the group holding company to which a response applies.
  3. Because this survey is being used by multiple states, the survey questions are general in nature and do not reference any state specific privacy statute/regulation.
  4. The purpose of the survey is to obtain a general status report regarding your company's compliance plan in your state of domicile as an indicator of your overall privacy compliance in multiple jurisdictions.

Based upon the survey results, this state will identify and prioritize what companies should be contacted for further regulatory review to ensure compliance with the privacy protections. Because of this, it is very important that the survey be accurately completed in a timely manner.

A copy of this bulletin was also transmitted via electronic mail to all Alabama-domiciled insurers with an E-Mail address on file. In some cases, this may result in insurers receiving more than one notice. All insurers are urged to take steps necessary within their organization to verify that only one response is filed for each insurer.

If you have questions, please contact Reyn Norman at Reyn.Norman@insurance.alabama.gov or (334) 241-4119 or Tim Mullen [NAIC staff support for the Market Conduct and Consumer Affairs (D) Committee] at TMullen@naic.org or (816)783-8260.



DATE: June 29, 2001
RE: Mental Health Parity Cost Report


Pursuant to Section 27-54-6 of the Code of Alabama (1975), enclosed please find the pro forma form promulgated by the Department of Insurance to obtain cost data in respect of mental health benefits provided under group health benefit plans issued in Alabama. This report is to be completed and provided to the Department of Insurance at the address indicated below by April 30th following the calendar year for which the report is made. The first report is required to be filed by April 30, 2002, and will contain information relative to calendar year 2001.

The report is to be completed in respect to Alabama business only. Copies of the report format should be made and retained by the company since annual mailings of the pro forma form will not be made. If there are any questions on the information requested or the content of the report, please contact Robert Turner at the Alabama Department of Insurance by phone at (334) 241-4190 or e-mail at Robert.Turner@insurance.alabama.gov.

Please return the completed form by April 30, 2002, to:

Mrs. Judy Halse
Alabama Department of Insurance
201 Monroe Street, Suite 502
Montgomery, AL 36130-3351.


DATE: March 30, 2001
RE: Rate Manual Filing Requirements


In accordance with the authority set forth in Chapter 13 of Title 27, Code of Alabama 1975, property, casualty and surety insurers are required to file with this Department a copy of any and all insurance rules and rate manuals, etc., prior to using them in this state. These filings are deemed approved as filed if not disapproved by this Department within thirty (30) days of our receipt of the filing.

When a rule and rate manual is being amended, insurers are required to file the proposed revisions, along with an explanatory memorandum. It will no longer be necessary to file a new, complete rule and rate manual with this office with each rule and rate amendment.

This bulletin replaces the bulletin in this regard issued June 28, 2000.

It is anticipated that a new regulation will be promulgated setting forth the procedures to be followed in making rate and form filings. Upon the effective date of such regulation, the effect of this bulletin will automatically expire.

Questions on this matter can be directed to the Property and Casualty Division, Alabama Department of Insurance Department, 334-241-4174 or E-mail to Myra.Frick@insurance.alabama.gov.