Monday, November 8, 2010

Kreidler calls for $534k fine against insurer, issues order to suspend six subsidiaries from writing new coverage for 9 months

Washington State Insurance Commissioner Mike Kreidler on Monday issued an order that would suspend the insurance certificates of six companies, effective Nov. 18. The move – which does not affect existing policies or renewals – would bar the companies from writing new coverage for 9 months.

Kreidler is also proposing a $534,000 fine, contingent on a hearing, against the parent company, Chubb & Son.

The suspension order includes Federal Insurance Company, Pacific Indemnity Company, Great Northern Insurance Company, Executive Risk Indemnity, Inc., Vigilant Insurance Company, and Northwestern Pacific Indemnity Company. All are property and casualty insurers. All are wholly owned subsidiaries of Chubb & Son. The policies affected are all commercial policies.

“It’s highly unusual for us to suspend a company’s certificate to sell insurance. But we’ve repeatedly tried to work with Chubb and its subsidiaries to fix a number of ongoing violations of state law,” Kreidler said in a press release. “Some of the problems that triggered this decision have been recurring for a decade.”

A key issue is Chubb’s repeated failure since 1998 to properly document the reasons for charging higher or lower rates on certain policies.

Repeated examinations and a series of company self-audits ordered by Kreidler since 2007 found hundreds of violations of state law, including numerous recent ones. In some cases, more than half the sample files checked had violations. The $534,000 fine amount was based on 534 violations of state insurance law, at $1,000 per violation.

Chubb can appeal the suspension. The suspension order does not affect the companies’ obligation to honor policies issued prior to the effective date of the suspension. Nor does it affect their authority to renew existing policies. But it would prohibit them from selling new policies during the nine-month period of the suspension.

Note: We'll add a link to the press release shortly. Done. And we added a link up above to the hearing notice re: the fine.

Update: Chubb has demanded a hearing on both the fine and the suspension. See our post re: that here.

Another update: In the end, Chubb's subsidiaries were fined, but there was no suspension. See here for details of the order.

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