Brian Casey

The legal line between what is a warranty versus insurance can be difficult to draw, and the consequences on each side of that line are profoundly different. A warranty can typically be issued by a business without a governmental license. But, the issuance of an insurance policy requires a state insurance department-issued certificate of authority, and unlicensed insurance conduct can result in divestiture of profits, civil penalties and criminal sanctions. Although some warranties are subject… Show more

The legal line between what is a warranty versus insurance can be difficult to draw, and the consequences on each side of that line are profoundly different. A warranty can typically be issued by a business without a governmental license. But, the issuance of an insurance policy requires a state insurance department-issued certificate of authority, and unlicensed insurance conduct can result in divestiture of profits, civil penalties and criminal sanctions. Although some warranties are subject to general state deceptive trade practices laws, Article 2 of the Uniform Commercial Code, and the federal Magnuson-Moss Warranty Act, such substantive requirements pale in comparison to the extensive regulations imposed by all 51 U.S. jurisdictions on the sale of an insurance product. With this backdrop in mind, a West Virginia federal court recently imposed its own stamp on the warranty-versus-insurance divide in Bare v. Innovative Aftermarket Systems LP, 2017 U.S. Dist. LEXIS 68746 (S.D.W.V. May 5, 2017). This decision continues a slowly developing trend that a product can be a warranty — and not insurance — even though the product’s benefit payment is indirectly triggered upon the occurrence of what is otherwise a traditional insurance peril.[1] Show less

Legal experts say New York-registered service contract providers must take immediate action to comply with the state's new Cybersecurity Regulation before the looming deadline at the end of next month, and before the state's regulators levy heavy fines and penalties to send a message to the industry.

The following are summaries some of the key legislative bills that the Georgia General Assembly adopted in its 2017 legislative regular session that affect the insurance industry. The 2017 legislative session, which ended on March 30, 2017, was the first year of the state's two year regular legislative session, and thus bills that did not pass will be carried over to next year's session. Unless a passed bill has a specific effective date, passed bills become effective on July 1, 2017.

Legislation has been introduced in the U.S. House of Representatives the intent of which, if ultimately passed, would (i) eliminate the requirement that, in computing the amount of taxable gain recognized on the secondary and tertiary market sale of a life insurance policy by its owner, the selling policy owner’s tax basis in the life insurance policy must be reduced by the cost of insurance paid in premiums for the life insurance policy; (ii) adjust the transfer for value exception for… Show more

Legislation has been introduced in the U.S. House of Representatives the intent of which, if ultimately passed, would (i) eliminate the requirement that, in computing the amount of taxable gain recognized on the secondary and tertiary market sale of a life insurance policy by its owner, the selling policy owner’s tax basis in the life insurance policy must be reduced by the cost of insurance paid in premiums for the life insurance policy; (ii) adjust the transfer for value exception for transfers of a life insurance policy to a partnership, trust or other entity of which the insured is an employee, director, officer, 5 percent owner or independent contractor and more than 50 percent of the gross value of the assets of such entity consist of life insurance contracts; and (iii) impose certain reporting requirements in connection with the sale of a life insurance policy and the payment of death benefits by a life insurance company. Show less

Life settlement providers and life settlement brokers licensed by the New York Department of Financial Services must take action immediately to meet the Sept. 1, 2017, compliance date of the new NYDFS cybersecurity regulation, which became effective March 1, 2017. The new regulation (Part 500 of Title 23 of the Official Compilation of Codes, Rules and Regulations of the State of New York) imposes new requirements on New York licensed life settlement providers, and life settlement brokers (among… Show more

Life settlement providers and life settlement brokers licensed by the New York Department of Financial Services must take action immediately to meet the Sept. 1, 2017, compliance date of the new NYDFS cybersecurity regulation, which became effective March 1, 2017. The new regulation (Part 500 of Title 23 of the Official Compilation of Codes, Rules and Regulations of the State of New York) imposes new requirements on New York licensed life settlement providers, and life settlement brokers (among others regulated under the New York banking, insurance or financial services laws). Although the regulation provides certain limited exceptions, even exempt individuals and entities must act now to achieve compliance by Sept. 1. Show less

While 2016 was a relatively quiet year on the regulatory front for the life settlements industry, which is regulated in 43 states, there were a number of important court cases decided and new lawsuits filed, significantly impacting the industry. In addition, 2016 saw several large portfolio trades in the tertiary life settlements market, and the industry faced cost of insurance increases by several major life insurance companies.

Tucked away in
the proposed arbitration rule of the Consumer Financial Protection Bureau
[1] is the addition of a new consumer financial product and service deemed
to be within the purview of the CFPB. The arbitration rule, which would
prohibit the inclusion of class action waivers in arbitration provisions for
consumer products regulated by the CFPB, was subject to a comment period
that ended several months ago but has still not been published as a final
rule. Under the… Show more

Tucked away in
the proposed arbitration rule of the Consumer Financial Protection Bureau
[1] is the addition of a new consumer financial product and service deemed
to be within the purview of the CFPB. The arbitration rule, which would
prohibit the inclusion of class action waivers in arbitration provisions for
consumer products regulated by the CFPB, was subject to a comment period
that ended several months ago but has still not been published as a final
rule. Under the arbitration rule, mobile phone carriers that engage in thirdparty
billing services will soon be considered to be providing a CFPB covered
product, and will become covered persons within the CFPB’s jurisdiction in
respect of their provision of such services. This would be the twelfth
consumer product subject to the CFPB’s regulation, and the second such
product the CFPB has established by regulation.[2] Show less

During last few years, approximately 23 states passed seemingly favorable, pro e-commerce insurance laws, primarily at the behest of the personal lines property and casualty insurance industry, namely new state insurance code statutes that allow an insurer to deliver an insurance policy to a policyholder simply by posting an electronic version of the policy’s content on the insurer’s website as well as delivery by email (insurance code policy e-delivery laws).[1] While these new laws seek to… Show more

During last few years, approximately 23 states passed seemingly favorable, pro e-commerce insurance laws, primarily at the behest of the personal lines property and casualty insurance industry, namely new state insurance code statutes that allow an insurer to deliver an insurance policy to a policyholder simply by posting an electronic version of the policy’s content on the insurer’s website as well as delivery by email (insurance code policy e-delivery laws).[1] While these new laws seek to establish further improvement toward moving away from paper-based insurance company operations, and the anachronistic clinging to paper for an intangible product or service, adoption of many of these new laws may not have fully considered the impact of, or their relationship to, existing federal and state-based electronic signature and transaction laws which provide the foundation for electronic delivery of documents required to be provided in writing, such as insurance policies. Essentially, some of these new laws by and large bypassed the fundamental electronic signature and transaction laws, raising questions about the effects of their interplay with the insurance code policy e-delivery laws. Show less

On May 5, 2016, the Consumer Financial Protection Bureau published its 377 page anticipated proposed regulation, which would create new Part 1040 in Chapter Ten of Title 12 of the Code of Federal Regulations, regarding the use of mandatory predispute arbitration clauses in contracts for certain types of consumer financial products and services within the CFPB’s jurisdiction.[1] The proposed regulation, which is subject to a 90 day comment period, would ban the use of class action arbitration… Show more

On May 5, 2016, the Consumer Financial Protection Bureau published its 377 page anticipated proposed regulation, which would create new Part 1040 in Chapter Ten of Title 12 of the Code of Federal Regulations, regarding the use of mandatory predispute arbitration clauses in contracts for certain types of consumer financial products and services within the CFPB’s jurisdiction.[1] The proposed regulation, which is subject to a 90 day comment period, would ban the use of class action arbitration waivers, likely chilling the use of arbitration clauses in their entirety for these covered products and services and result in a bright new day for the plaintiffs bar. This move by the CFPB pushes these consumer financial products and services towards parity with personal lines insurance products regarding the permissibility of their inclusion of a mandatory predispute arbitration clause and may call into question the continued use of a mandatory predispute arbitration clause in quasi-insurance contracts like service contracts (also known as extended warranties), guaranteed asset protection products (GAP waivers) and ancillary vehicle protection products (such as appearance care, paintless dent removal and tire and wheel protection products) which are often sold by auto dealers and financed by consumer auto purchase loans. Show less

Service contract providers, already entangled by a web of state and federal insurance laws, ‎must now navigate the ramifications of new privacy regulations. But if they call themselves ‎financial institutions and follow some other rules, they could also free themselves of the need ‎to send out annual privacy notices to their customers.‎

Is the financing of service contracts an extension of consumer ‘credit’? The answer lies in the details.

The new law modernizes the options for compliance with the Magnuson-Moss Warranty Act and should also facilitate the e-delivery of service contracts. But other e-commerce laws state that parties must first agree to the use of electronic documents. The FTC must now write regulations that address these and other issues.

On Aug. 25, 2015, the Financial Crimes Enforcement Network, a bureau of the U.S. Treasury Department, issued for public comment proposed rules requiring investment advisers registered with the U.S. Securities and Exchange Commission to establish anti-money laundering programs and impose reporting obligations with respect to suspicious activity under the Bank Secrecy Act.

In the April 28, 2015 issue of Bloomberg BNA Banking Daily, Locke Lord Partner Brian T. Casey and Counsel John Costello discuss what is consumer “credit.” As with most legal issues, the answer is that it depends, Casey and Costello state in the article’s introduction.

The U.S. Department of Health and Human Services issued its final omnibus, revised privacy and security regulations under the Health Insurance Portability and Accountability Act, the Health Information Technology for Economic and Clinical Health Act, and the Genetic Information Nondiscrimination Act, which significantly affect the health care industry. The new rule, like its predecessor, does not apply to participants in the life settlement industry (life settlement brokers and providers, life… Show more

The U.S. Department of Health and Human Services issued its final omnibus, revised privacy and security regulations under the Health Insurance Portability and Accountability Act, the Health Information Technology for Economic and Clinical Health Act, and the Genetic Information Nondiscrimination Act, which significantly affect the health care industry. The new rule, like its predecessor, does not apply to participants in the life settlement industry (life settlement brokers and providers, life expectancy companies and investors) because they are not “covered entities” (health care providers, health plans or health care clearinghouses) or “business associates” of covered entities. Show less

Vol. 24 Edition 4 - Winter 2013