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Detroit Business and Insurance Law Blog

PIP rate-setting: work with experienced attorney to reduce potential liability

For insurance companies, determining insurance rates is a important, though potentially tricky, matter. On the one hand, insurance companies need to charge rates that ensure they cover costs and reap some profit. On the other hand, there is also the importance of maintaining one’s customer base, and also complying with state law.

When it comes to setting insurance rates, Michigan’s no-fault insurance system has been characterized as a “file and use” system. Under this system, insurance companies file their proposed rates with the Department of Insurance and Financial Services. The Michigan Insurance Commissioner then has the opportunity to object to “excessive” rates. If no such objection is made, the insurance company can go ahead and charge those rates to consumers. 

Michigan businesses: work with experienced legal counsel to meet fiduciary duties under ERISA

We’ve been looking in recent posts at the fiduciary duty retirement plan administrators owe employees with respect to monitoring appointed investment advisors for 401(k) plans. As we noted last time, the duty does not entail constant, direct monitoring of investment advisers, but enough attention to detail that the employer is able to take corrective action as necessary.

According to the Michigan Chamber of Commerce, employers should establish monitoring policy which allows for corrective action when certain events take place. Such events include: significant changes in the investment market; amendments in the plan or investment policy; changes in law; receipt of significant news concerning an investment adviser or an investment; and when there are concerns about an investment advisor’s work or the type or location of the investment. 

ERISA and the fiduciary duty to monitor appointed investment advisers, P.2

In our last post, we looked briefly at some general points of law under the Employee Retirement Income Security Act of 1974 (ERISA): first, that 401(k) plan fiduciaries can be held liable for mismanaging retirement plans; and second, that federal law exempts 401(k) plan trustees from liability for the acts and omissions of investment managers appointed by plan fiduciaries.

Both of these aspects of the law came up in a recent federal case involving a dispute between the Department of Labor (DOL) and a former employee. At the heart of the case was the fiduciary duty to monitor appointed investment advisers. The DOL had argued in the case that because the retirement plan fiduciaries were not named as trustees in retirement plan documents, they were not able to take advantage of the protections granted to trustees under the law. 

ERISA and the fiduciary duty to monitor appointed investment advisers, P.1

For employers, one important aspect of doing business is ensuring the business is in compliance with the requirements of the Employee Retirement Income Security Act of 1974 (ERISA), the federal law which lays out the rules and regulations for setting up and administering employee health and retirement plans. Of particular importance under ERISA are the fiduciary duties associated with management of retirement plan investments.

Fiduciaries associated with employee retirement accounts are required to administer the plan for the sole benefit of plan participants and beneficiaries. Part of what this entails is prudent management of retirement investments, including diversification to minimize risk of significant losses. Fiduciaries who fail to act prudently in managing investments can be held personally liable for plan losses.  

Three points to understand about assignment of no-fault benefits in Michigan

In our previous post, we looked at a recent Michigan Supreme Court decision holding that hospitals, clinics and other medical providers do not have the right to sue insurance companies for payment of bills of patients using no-fault insurance. As we noted, the decision could have a number of potential effects, including an increase in the assignment of no-fault benefits to providers.

Assignment of benefits agreements allow medical providers to collect benefits under an insurance policy that would ordinarily be payable to the insured. Different states have different laws when it comes to the assignment of the right to insurance benefits. There are a couple important points to understand about Michigan law. 

Court decision likely to bring changes for patients, medical providers and no-fault insurers

No-fault insurance is a requirement here in Michigan, and every driver is required to carry minimum coverage amounts. Drivers may, of course, purchase higher coverage amounts and additional options for coverage. An essential aspect of any no-fault policy, though, is personal injury protection, which obligates insurance companies to pay all of their insured’s medical costs.

Under Michigan law, automobile insurers have the obligation to pay valid claims and medical bills within 30 days or they face penalty interest payments. Accidents victims who aren’t covered properly have the right to sue their insurance company for no-fault benefits under the terms of their policy. Often, though, it is medical providers who file these lawsuits. 

Work with experienced attorney when forming captive insurance company

Previously, we began looking at the potential benefits for businesses of forming a captive insurance company. As we noted last time, the timing of a captive insurance company’s formation is important to consider when forming a captive insurance company.

Before insurance coverage can begin, all the proper documentation must be drawn up and submitted to the state, the corporate entity must actually be formed and capitalized, and the captive must be licensed. The earlier in the fiscal year a business forms a captive insurance company, the more the business can to benefit in that particular year. 

What is captive insurance and why is it beneficial for businesses?

For businesses, managing risks is critical to ensuring the financial success of the company. There are a variety of ways business can address risks, and insurance coverage is an important one. While ordinary commercial plays an important role, business can often benefit from alternative insurance options, such as captive insurance.

Captive insurance is coverage provided by an insurance company completely owned and controlled by the insured business. The purpose of a captive insurance company is to address risks that aren’t adequately covered with ordinary insurance coverage, but an added benefit is that businesses that form captive insurance companies are able to keep the rights and investment income on capital used to fund insurance. 

Work with experienced legal counsel to ensure compliance with insurance industry regulations

In our previous post, we briefly discussed the widespread concern at present in the insurance industry—specifically, among large insurance companies—over the nearing departure of the man who represents the insurance industry on the Financial Stability Oversight Council. As we noted, the presence of an insurance expert on the council is seen as important to represent the industry and help ensure that fair decisions are made with respect to insurance industry regulation.

Although regulation of the insurance industry at the federal has increased over the years, insurance companies are still mostly regulated at the state level. Compliance with state regulatory requirements is an important task for insurance companies, not only to protect themselves from legal liabilities, but also to earn a strong reputation for fair business dealings with consumers. 

Large insurance companies fear lack of industry expertise on federal council

Large insurance companies are reportedly fretting about the upcoming departure of an important figure on the Financial Stability Oversight Council, the federal body responsible for monitoring the stability of the national financial system. For readers who are not aware, the Council was established under the Dodd-Frank Wall Street Reform and Consumer Protection Act, and has the aim of identifying and responding to risks to financial stability at a national level.

To this end, the Council relies on the expertise of federal and state financial regulators, as well as an independent insurance expert appointed by the President. Roy Woodall, the man who is currently serving as the independent voting member on the Council with expertise in the insurance industry, is set to leave when his term ends this September, and this has larger insurers concerned.

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