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					                                       Memorandum

To:            IIABA State Association Executives and Lobbyists

From:          Wesley Bissett
               Vice President, State Relations & State Government Affairs

Date:          March 26, 2003

Subject:       NAIC Update


The purpose of this memorandum is to quickly update all of you on events that took place during
and immediately following the recent Spring Meeting of the National Association of Insurance
Commissioners (NAIC). Some of the issues addressed below are referenced quickly, but you
should feel free to contact me at your convenience about these or any other items that may be
of interest.

Overview of the Recent Meeting

The NAIC’s Spring Quarterly Meeting was most noteworthy due to the number of new insurance
commissioners and for the lack of substantive activity that occurred. There has been
considerable turnover in the commissioner ranks in recent months, and nearly half of these
senior regulators are new to their positions. These new commissioners face an enormous
learning curve, and the large number of new faces clearly had an effect on the most recent
meeting. The next quarterly meeting of the NAIC is in June, and it will be interesting to see
whether the NAIC is able to resume the momentum that it had achieved prior to this abrupt
change in personalities.

The leadership of the NAIC was also affected by the changeover. In December, the NAIC
elected Illinois Director Nat Shapo to the position of Vice President, but the NAIC was forced to
elect new officers when Director Shapo was replaced several weeks later. The current slate of
officers is comprised of NAIC President and Arkansas Commissioner Mike Pickens, Vice
President and South Carolina Director Ernst Csiszar, and Secretary-Treasurer and Oregon
Insurance Administrator Joel Ario.

Finally, and of special note, I wanted to make you all aware of the recent appointment of Linda
Hall to the position of Commissioner of Insurance for the State of Alaska. Many of you will recall
that Linda was an active member of our association and most recently served for several years
as State National Director from Alaska.
Agent and Broker Licensing

The licensing provisions contained in the Gramm-Leach-Bliley Act required that 29 or more
states adopt uniform or reciprocal licensing statutes by November 2002 in order to prevent the
establishment of a new quasi-federal licensing agency. The states successfully cleared this
hurdle, and, with Pennsylvania’s recent certification, the NAIC has declared that 39 states are in
technical compliance with the GLBA provisions. Due to this success, there is some concern
that the NAIC and state regulators will view producer licensing issues as being adequately
addressed and will place these issues on the backburner. This concern only gained momentum
at the most recent meeting of the Producer Licensing Working Group, a committee now under
new leadership and in need of a substantive agenda and work plan. In the weeks to come,
IIABA will be developing recommendations for this committee, and we would welcome any
suggestions that state associations may have. If there are issues related to producer licensing
that you feel need to be addressed by the NAIC, please forward your comments and ideas to
me as soon as possible.

One issue that was discussed briefly by the Producer Licensing Working Group was the issue of
agent and broker background checks. Although only a handful of states require background
checks and the associated fingerprinting process today, the NAIC has made the expansion of
such requirements a priority. One barrier to this expansion has been the inability of the NAIC to
gain access to federal and state criminal databases. In order to gain access to these databases
and facilitate the completion of background checks, the committee is being asked to consider a
draft model law that would provide state insurance regulators with the necessary authority. This
draft, which I am happy to provide to anyone upon request, was released for the first time at the
meeting, and IIABA will be submitting comments soon.

A separate working group of the NAIC also discussed the merits of establishing a multi-state
surplus lines bond that would be effective in each state that retains a surplus lines bond
requirement today. Some have urged the NAIC to take this step in the name of uniformity, but
others would prefer to see states eliminate these requirements altogether. Perhaps because of
the lack of consensus, there appears to be little enthusiasm for this approach among the
regulators. Nevertheless, IIABA will continue to monitor the consideration of this issue.

Use of Credit Information by the Insurance Industry

The NAIC’s Credit Scoring Working Group met during the recent quarterly meeting and focused
most of its discussion on the question of whether and how to conduct a study examining the
impact of insurance industry’s use of credit information on protected classes. The committee
discussed whether there was a need for such a study, the purpose of such a study, the relevant
legal standard in reviewing the results from such a study (e.g. disparate impact, disproportionate
impact, or unfair discrimination), how a study of this type would be conducted and funded, and
other related questions. Consumer advocates continued to call for such a study, while insurer
representatives observed that other rating factors – such as good driver discounts, drunk driving
arrests, etc. – could also be considered to have a “disproportionate impact” on protected
classes. No decision was made about whether to move forward with a study, but it appears the
NAIC would need the insurer community to fund the study and make the necessary data
available if it were to ultimately take place. The issue will be discussed again in June, and the
NAIC staff has been asked to review the question of the appropriate legal standard in the
meantime.
The committee also spent several minutes discussing the findings from a recently released
University of Texas study that examined the correlation between credit history and insurance
losses in automobile insurance. The study was commissioned by the state’s lieutenant
governor and ultimately found a “statistically significant" relationship between a person's credit
history and the tendency to incur losses on an auto policy. The study determined, in general,
that “lower credit scores were associated with larger incurred losses." The study can be
accessed at www.utexas.edu/depts/bbr/bbr_creditstudy.pdf.

The NAIC previously adopted a model consumer brochure and a regulatory options paper for
policymakers considering action on the credit scoring issue, and I am happy to provide either
document to anyone upon request.

Asbestos Litigation Reform

The Property and Casualty Committee began work on a resolution that recognizes the problems
associated with the asbestos litigation explosion. The resolution, which has not yet been
approved by the committee, will likely call on regulators to monitor the growth of asbestos
claims, study the corresponding adverse impact, and work in support of federal and state
legislative efforts to address the problems. IIABA is working with several insurer organizations
to add more specific references to the types of legislative responses that would be productive.
The committee received comments from IIABA and other interested parties during a conference
call on March 25 and is expected to take action on this issue in the near future.

Crop Insurance

The NAIC’s Crop Insurance Working Group met during the recent quarterly meeting, and IIABA
testified during the session to express our association’s concerns with the so-called Premium
Discount Plan, a pilot program recently authorized by the Federal Crop Insurance Corporation.
IIABA argued that the plan violated several categories of state statutes – including licensing,
rebating, and cooperative laws – and urged state regulators to make the examination of the
program a priority. No formal action was taken by the committee, but we will continue to press
our concerns before the NAIC, just as we have done on other fronts.

New Committees

During the Spring Quarterly Meeting, three new NAIC committees met for the first time, and
each of these new groups is described below:

   •   USA PATRIOT Act Ad Hoc Task Force – The USA PATRIOT Act, which was adopted in
       the weeks immediately following the terrorist attacks of September 11, 2001, contains a
       series of anti-money laundering provisions, and the Treasury Department recently met
       with representatives of the NAIC concerning the enforcement of these provisions. There
       is apparently some confusion about whether the Act authorizes any agency or regulator
       to oversee the compliance of insurance entities, although there is some reason to
       believe that the Internal Revenue Service is the “fallback regulator” in this instance.
       Treasury would apparently like to see the state insurance regulators fill this role, and the
       NAIC appears eager to do so for both practical and political reasons. This new
       committee will be working with Treasury on these issues, determining whether the states
       have the necessary authority to enforce the requirements, and examining how the
       compliance effort might be handled. The Treasury Department has previously stated
          that agents and brokers are not subject to the Act’s anti-money laundering requirements,
          but IIABA intends to continue to monitor the activities of this new task force.

      •   Class Action Working Group – This committee will be examining the explosion of class
          action litigation and focusing especially on the manner in which such litigation can
          undermine the authority of state insurance regulators.

      •   Government Affairs Committee – This newly established committee replaces the
          Financial Services Task Force and will serve a communication and coordinating function
          for the NAIC, as opposed to policymaking. The committee’s initial meeting was closed
          to the public, but it appears this group will operate much like the government affairs
          committee of any association. Among other issues, the new group will apparently focus
          on the development of the NAIC’s ASSURE program (which will be discussed in detail at
          the upcoming IIABA Lobbyist Meeting), communicate NAIC successes to Congress and
          the public, combat the push for federal regulation of insurance, and oversee efforts to
          pass the NAIC’s interstate compact proposal at the state level. In addition, this
          committee will work with other regulatory entities and with state policymaker
          organizations such as the National Conference of Insurance Legislators (NCOIL) and the
          National Conference of State Legislatures (NCSL).

Market Availability and Affordability

The Market Conditions Working Group held a public hearing on medical malpractice insurance
availability and affordability, which featured representatives from the American Trial Lawyers
Association, the American Medical Association, and the Doctor’s Company, a medical
malpractice insurer. The working group is expected to continue its examination of the medical
malpractice market, and a new subgroup has also been established to explore the homeowners’
insurance marketplace.

Association Health Plans

There was a minor controversy that arose among the regulators concerning the NAIC’s official
position on association health plans. A deputy director from the Arkansas Insurance
Department was invited to testify on Capitol Hill on the issue and provided testimony contrary to
the stated position of the NAIC. The regulator’s testimony became an issue primarily because
the current President of the NAIC, Mike Pickens, is from Arkansas and because some felt the
deputy director was testifying as to the NAIC’s position.




cc:       IIABA Executive Committee
          IIABA Government Affairs Committee
                                    Medical Malpractice Laws and Pending Legislation
                                                             (March 2003)


Summary of Current Laws:                                                        OK, OR, PA, RI, SC, TN, TX, UT, VT, VA, WA,
                                                                                WV, WI, and WY).
  •   There are 24 states (AK, CA, CO, FL, HI, ID, IN,                      •   Of those 43 states 7 (CO, FL, IN, MO, MT, VA,
      KS, LA, ME, MD, MA, MI, MS, MT, NM, ND, SD,                               and WA) have passed legislation through their
      TX, UT, VA, WV, and WI) that limit compensatory                           chamber of origin.
      damages in some form or another.                                      •   Three states (AR, ID, and NJ) have passed a bill
  •   There are 23 states (AZ, CA, CT, DE, FL, HI, IL,                          through both chambers. AR HB 1038 adds limits
      IN, IA, ME, MD, MA, MI, NE, NH, NJ, NY, OK, TN,                           on punitive damages and abolishes joint liability,
      UT, WA, WI, and WY) that limit an attorney’s                              while amending periodic payment of damages. ID
      contingency fee, either by statute, request, or                           HB 92 amends non-economic damage limits while
      judgment.                                                                 adding limits on punitive damages. NJ AB 50
  •   There are 30 states (AL, AK, AZ, CA, CO, CT, DE,                          adds limits on non-economic damages and allows
      FL, ID, IL, IN, IA, ME, MA, MI, MN, MT, NE, NV,                           for the periodic payment of damages.
      NY, NY, ND, OR, PA, RI, SD, TN, UT, WA, and                           •   Two states (OH and WV) have signed bills into
      WI) that allow evidence to be introduced showing                          law. OH SB 281 adds non-economic damage
      future or received payments, as well as reduced                           limits, contingency fee limits, collateral source
      judgments, based on collateral sources.                                   reforms, and periodic payment of damages into
  •   There are 35 states (AK, AZ, CA, CO, FL, GA, ID,                          law. WV HB 2122 amends non-economic damage
      IN, IA, KS, KY, LA, MI, MN, MS, MO, MT, NE, NV,                           limits and joint liability, while adding collateral
      NH, NJ, NM, NY, ND, OH, OK, OR, SD, TN, TX,                               source rules into law.
      UT, WA, WV, WI, and WY) that have either
      abolished joint liability or where liability is limited.         Chart:

Summary of 2003 Legislation:                                           The following chart briefly summarizes medical
                                                                       malpractice laws and current legislation that has either
  •   Medical malpractice reform bills have been                       passed its chamber of origin or has been signed into law.
      introduced in 43 states (AL, AZ, AR, CO, CT, FL,                 Information obtained from The American Tort Reform
      GA, HI, ID, IL, IN, IA, KS, KY, ME, MD, MA, MN,                  Association was used in the development of this chart.
      MS, MO, MT, NE, NV, NH, NJ, NM, NY, NC, ND,



                                                                 -1-
      ST          COMPENSATORY                     cONTENGENCY                    cOLLATERAL                  pUNITIVE DAMAGES                  Periodic Payment OF             Joint & several Liability
                  DAMAGES LIMITS                     fEE lIMITS                   SOURCE RULE                       LIMITS                          DAMAGES
AL                        None1                          None                Evidence that a claimant’s    Limits the award of punitive                 None2                Joint liability applies.
Law                                                                          medical or hospital           damages in most non-physical
                                                                             expenses have been or will    injury cases to the greater of                                    However, joint liability has
                                                                             be paid is admissible.        three times the award of                                          been abolished in actions for
                                                                                                           compensatory damages or                                           punitive damages, except for
                                                                             Ala. Code § 6-5-545           $500,000. Limits the award of                                     wrongful death actions, actions
                                                                                                           punitive damages in non-                                          for intentional infliction of
                                                                                                           physical injury cases against                                     physical injury, and class
                                                                                                           businesses with a net worth of                                    actions.
                                                                                                           less than $2 million to the
                                                                                                           greater of $50,000 or 10% of                                      Ala. Code § 6-11-21
                                                                                                           the business’s net worth up to
                                                                                                           $200,000. Limits the award of
                                                                                                           punitive damages in physical
                                                                                                           injury cases to the greater of
                                                                                                           three times the award of
                                                                                                           compensatory damages or $1.5
                                                                                                           million. The limit on punitive
                                                                                                           damages will be adjusted on
                                                                                                           January 1, 2003 and increased
                                                                                                           at three-year intervals in
                                                                                                           accordance with the Consumer
                                                                                                           Price Index.

                                                                                                           Ala. Code § 6-11-21
AK             Non-economic damages may        There is no statutory limit   Courts must reduce            Punitive damages are limited to   The court may, at the request   Joint liability has been
Law            not exceed the greater of       on contingency fees, but      judgments by the amount       the greater of three times        of the plaintiff, enter an      abolished.
               $400,000 or the injured         such fees must be             a claimant has received       compensatory damages or           order requiring future
               person’s life expectancy in     calculated exclusive of       from a collateral source,     $500,000. In cases involving      damages to be paid in           AK Statute § 9.17.080
               years times $8,000. If severe   punitive damages.             less any amount paid by       actual malice, punitive           periodic payments.
               permanent impairment or                                       the claimant to secure the    damages are limited to the
               disfigurement is involved,      AK Statutes § 9.60.080        benefit (e.g., insurance      greater of four times             AK Statutes § 9.17.040(d)
               damages may not exceed $1                                     premiums.)                    compensatory damages or four
               million or the person’s life                                                                times aggregate amount of
               expectancy in years times                                     AK Statute § 9.17.070         financial gain that the
               $25,000.                                                                                    defendant received as a result
                                                                                                           of its conduct or $7 million.
               AK Statute § 9.17.010
                                                                                                           AK Statute § 9.17.020(f) –(h)



           1
             Alabama enacted a $250,000 limit on non-economic damages awards and a $1 million total limit on medical malpractice awards, but these statures were declared unconstitutional in
           Moore v. Mobile Infirmary Association, 592 So. 2d 156 (Ala. 1991) and Smith v. Schulte, 671 So. 2d 1334 (Ala. 1996), cert. denied, 517 U.S. 1220.
           2
             The Alabama Supreme Court held that periodic payments are unconstitutional in Clark and Halliburton Industrial Services Division v. Container Corp. of America, 589 So. 2d 184
           (Ala. 1991).
                                                                                                     -2-
      ST       COMPENSATORY                cONTENGENCY                    cOLLATERAL                   pUNITIVE DAMAGES                   Periodic Payment OF              Joint & several Liability
               DAMAGES LIMITS                fEE lIMITS                   SOURCE RULE                        LIMITS                           DAMAGES
AZ                     None            The court may, at the         The defendant may                           None                  Either party may elect to        Joint liability has been
Law                                    request of a party,           introduce evidence that                                           have future damages paid         abolished.
                                       determine the                 the plaintiff has received                                        periodically; the court shall
                                       reasonableness of the         or will receive payment                                           grant the request unless the     AZ stat. § 12-2506
                                       attorney’s fee, taking into   from a collateral source.                                         opposing party can show
                                       account factors such as       The plaintiff may                                                 good cause why payments
                                       “the time and labor           introduce evidence of                                             should not be made
                                       required, the novelty and     amounts expended in                                               periodically.
                                       difficulty of the questions   order to secure the benefit.
                                       involved, and the skill                                                                         AZ rev. stat. §§ 12-582, 12-
                                       requisite to perform the      AZ rev. stat. § 12-565                                            592
                                       legal skills properly.”

                                       AZ rev. stat. § 12-568
AR                     None                       None                          None                             None                  If future damages exceed         Joint liability applies.
Law                                                                                                                                    $100,000, the court may, at
                                                                                                                                       the request of either party,
                                                                                                                                       order periodic payment of
                                                                                                                                       future damages.

                                                                                                                                       AR stat. Ann. § 16-114-208
AR                     N/A                        N/A                           N/A                 Punitive damages would be          Would amend § 16-114-208         Joint liability would be
HB 1038                                                                                             limited to no more than the        to include “in order to          abolished.
                                                                                                    greater of $250,000 or three       protect the plaintiff’s rights
Sent to                                                                                             times the amount of                to future payments.”
Governor:                                                                                           compensatory damages
3/20/03                                                                                             awarded, not to exceed $1
                                                                                                    million. Limits to be adjusted
                                                                                                    as of January 1, 2006 and at
                                                                                                    three-year intervals thereafter,
                                                                                                    in accordance with the
                                                                                                    Consumer Price Index. These
                                                                                                    limits do not apply in the event
                                                                                                    of actual malice.
CA          Non-economic damages are   Limited to 40% of the first   A defendant may                              None                 A court shall, at the request    Joint liability has been
Law         limited to $250,000.       $50,000 recovered, 33.3%      introduce evidence that a                                         of either party, order that      abolished for non-economic
                                       of the next $50,000, 25%      plaintiff has received                                            future damages in excess of      damages.
            CA Civil Code § 333.2      of the next $400,000 and      compensation from a                                               $50,000 be paid in periodic
                                       15% of any amount             collateral source. Where a                                        payments.                        CA Civil Code
                                       exceeding $600,000.           defendant so elects, the                                                                           § 1431.2
                                                                     plaintiff may introduce                                           CA Civil Code
                                       CA Bus. & Prof. Code §        evidence of amounts paid                                          § 667.7
                                       6146(a)                       to secure the benefit.

                                                                     CA Civil Code
                                                                     § 3333.1

                                                                                              -3-
      ST      COMPENSATORY                      cONTENGENCY                   cOLLATERAL                   pUNITIVE DAMAGES         Periodic Payment OF             Joint & several Liability
              DAMAGES LIMITS                      fEE lIMITS                  SOURCE RULE                        LIMITS                 DAMAGES
CO         Non-economic damages are                   None               Courts may reduce              Damages may not exceed   Judges shall order periodic     Joint liability has been
Law        limited to $250,000, but the                                  judgments by the amount        compensatory damages.    payment of future damages,      abolished.
           court may, in its discretion,                                 a claimant has received                                 if the present value of the
           award damages in excess of                                    from a collateral source,      CO Rev. Statute          future damages exceeds          CO Rev. Statute
           the limit for future earnings                                 less any amount paid by        § 13-21-102(1)(a)        $150,000.                       § 13-21-111.5
           or future medical and                                         the claimant to secure the
           healthcare costs. Total                                       benefit.                                                CO Rev. Statute
           damages are limited to $1                                                                                             § 13-64-203
           million.                                                      CO Rev. Statute
                                                                         § 13-21-111.6
           CO Rev. Statute
           § 13-64-302
CO         Clarifies § 13-64-302                       N/A                          N/A                              N/A                     N/A                                N/A
HB 1007    definition of “derivative non-
           economic loss or injury.”
Passed
House:
1/27/03
CT                     None                 Contingency fees shall not   Courts must reduce                         None         If damages exceed $200,000,     Joint liability applies.
Law                                         exceed: 33.3% of the first   economic damages by                                     the parties are instructed to
                                            $300,000 recovered, 25%      payments received from                                  negotiate and consent to an
                                            of the next $300,000, 20%    collateral sources, less any                            agreement for the lump-sum
                                            of the next $300,000, 15%    amount paid by the                                      or periodic payment of the
                                            of the next $300,000, and    claimant to secure the                                  damages. If the parties do
                                            10% of any amount            benefit.                                                not agree, the court will
                                            exceeding $1.2 million.                                                              order the lump-sum
                                                                         CT Gen. Statute Ann. §                                  payment.
                                            CT Gen. Statute Ann.         52-255a
                                            § 52-251c                                                                            CT Gen. Statute Ann.
                                                                                                                                 § 52-225d
DE                     None                 Attorney fees are limited    Defendants may introduce                   None         A court may, after deducting    Joint liability applies.
Law                                         to: 35% of the first         evidence of collateral                                  expenses for attorney’s fees
                                            $100,000 recovered, 24%      source benefits or                                      and costs, past health care,
                                            of the next $100,000, and    compensation due to the                                 and pain and suffering, order
                                            10% of the balance.          claimant.                                               the remainder of the award
                                                                                                                                 to be paid in periodic
                                            DE Code Ann.                 DE Code Ann.                                            payments.
                                            Title 18 § 6865              Title 18 § 6862
                                                                                                                                 DE Code Ann.
                                                                                                                                 Title 18 § 6864
DC                     None                           None                          None                            None                     None                Joint liability applies.




                                                                                                 -4-
      ST      COMPENSATORY                       cONTENGENCY                    cOLLATERAL                 pUNITIVE DAMAGES                  Periodic Payment OF             Joint & several Liability
              DAMAGES LIMITS                       fEE lIMITS                   SOURCE RULE                      LIMITS                          DAMAGES
FL         If neither party demands          In cases that settle before    Courts are instructed to    Punitive damages are limited to   The court may, at the request   If plaintiff is at fault, joint
Law        binding arbitration, or if the    filing an answer or            reduce damages in the       the greater of three times        of either party, order future   liability is abolished for: (a)
           defendant refuses to              appointing an arbitrator,      amount of compensation      compensatory damages or           economic damages in excess      any defendant found 10% or
           arbitrate, there is no limit on   fees are limited to 33.3%      received from collateral    $500,000; if the trier of fact    of $250,000 to be paid in       less at fault; (b) economic
           damages. If the plaintiff         up to $1 million, 30% of       sources, less any money     finds the defendant’s conduct     whole or in part by periodic    damages in excess of $200,000
           refuses to arbitrate, non-        any recovery between $1-       paid by the claimant to     was “motivated solely by          payments.                       for any defendant found to be
           economic damages are              2 million and 20% of any       secure the benefit.         unreasonable financial gain”                                      more than 10% but less than
           limited to $350,000. Non-         amount over $2 million.                                    punitive damages may be           FL Statute                      25% at fault; (c) economic
           economic damages in               For cases that do not settle   FL Statute                  awarded up to the greater of      § 768.78                        damages in excess of
           arbitration are limited to        before an answer is filed,     § 768.76                    four times compensatory                                           %500,000 for any defendant
           $250,000.                         fees are limited to 40% of                                 damages or $2 million; no cap                                     found at least 25% but no more
                                             any recovery up to $1                                      applies if the defendant had a                                    than 50% at fault; (d) economic
           FL Statute                        million, 30% of any                                        “specific intent to harm the                                      damages in excess of $1
           §§ 766.207, 766.209               recovery between $1-2                                      claimant.” Punitive Damages                                       million for any defendant found
                                             million, and 20% of any                                    may not be awarded more than                                      more than 50% at fault. If
                                             amount over $2 million.                                    once for a single act or course                                   plaintiff is not at fault, joint
                                             If liability is admitted and                               of conduct unless the court                                       liability abolished for: (a) any
                                             only damages are                                           finds by clear and convincing                                     defendant found to be less than
                                             contested, fees are limited                                evidence that the prior award                                     10% at fault; (b) economic
                                             to 33.3% of any recovery                                   was insufficient to punish the                                    damages for any defendant
                                             up to $1 million, 20% of                                   defendant.                                                        found at least 10% but less than
                                             any recovery between $1-                                                                                                     25% at fault; (c) economic
                                             2 million, and 15% of any                                  FL Statute                                                        damages in excess of
                                             recovery over $2 million.                                  § 768.73                                                          %500,000 for any defendant
                                             In cases that are appealed,                                                                                                  found at least 25% but not
                                             fees may be an extra 5%                                                                                                      more than 50% at fault; (d)
                                             over what is otherwise                                                                                                       economic damages in excess of
                                             allowed.                                                                                                                     $1 million for any defendant
                                                                                                                                                                          found at least 25% but not
                                             FL Atty. Conduct Reg. §                                                                                                      more than 50% at fault; and (d)
                                             4-1.5(f)(4)(B)                                                                                                               economic damages in excess of
                                                                                                                                                                          $2 million for any defendant
                                                                                                                                                                          found more than 50% at fault.
                                                                                                                                                                          Joint liability does not apply to
                                                                                                                                                                          any defendant who is found to
                                                                                                                                                                          be less at fault than the
                                                                                                                                                                          plaintiff.

                                                                                                                                                                          FL Statute
                                                                                                                                                                          § 768.81




                                                                                                  -5-
      ST          COMPENSATORY                       cONTENGENCY                 cOLLATERAL                 pUNITIVE DAMAGES                 Periodic Payment OF            Joint & several Liability
                  DAMAGES LIMITS                       fEE lIMITS                SOURCE RULE                      LIMITS                         DAMAGES
FL             Non-economic damages are                    N/A                         N/A                            N/A                  Allows for period payment     Abolishes joint liability.
HB 1713        limited to $250,000.                                                                                                        of future damages,
                                                                                                                                           terminating upon death.
Passed
House:
3/21/03
GA                         None                            None                       None3              Punitive damages are limited to              None               Joint liability applies, but can
Law                                                                                                      $250,000 unless the plaintiff                                   be disregarded in certain cases
                                                                                                         demonstrated that the                                           where the plaintiff is partially
                                                                                                         defendant acted with a specific                                 at fault.
                                                                                                         intent to harm.
                                                                                                                                                                         GA Code § 51-12-33
                                                                                                         GA Code § 51-12-5.1(f)(g)
HI             Non-economic damages are          Attorney fees are limited             None                         None                              None               Joint liability applies.
Law            limited to $375,000, subject      to a “reasonable amount,”
               to exceptions, including          as determined by the
               actions for intentional torts.    court.

               HI Rev. Statutes                  HI Rev. Statute
               §§ 663-8.7, 663-10.9(2)           § 607-15.5
ID             Non-economic damages are                     None             Judgments may only be                    None                 Periodic payments may be      Joint liability has been
Law            limited to $400,000, subject                                  entered for amounts which                                     ordered for future payments   abolished.
               to a cost of living adjustment                                exceed recovery from                                          exceeding $100,000, except
               which began in 1988. The                                      collateral sources.                                           in cases involving an         ID Code § 6-803
               cap does not apply to actions                                                                                               intentional tort, fraud,
               arising out of willful or                                     ID Code § 6-1606                                              dishonesty, malice,
               reckless misconduct or                                                                                                      willfulness, or gross
               actions which the trier of fact                                                                                             negligence.
               finds would constitute a
               felony.                                                                                                                     ID Code § 6-1602

               ID Code § 6-1603




           3
               A Georgia law allowing defendants to introduce evidence of collateral source payments was held unconstitutional in Denton v. Con-Way Southern Express, Inc. (Ga. 1991).
                                                                                                  -6-
      ST           COMPENSATORY                       cONTENGENCY                  cOLLATERAL                  pUNITIVE DAMAGES                    Periodic Payment OF              Joint & several Liability
                   DAMAGES LIMITS                       fEE lIMITS                 SOURCE RULE                       LIMITS                            DAMAGES
ID              Would amend § 6-1603 to                      N/A                          N/A               Would amend § 6-1604 to read:                   N/A                  Amended, but does not affect
HB 92           read: Non-economic                                                                          Punitive damages are limited to                                      medical malpractice. Joint and
                damages shall not exceed                                                                    the greater of $250,000, or an                                       several liability are only at
Sent to         $250,000, however, the                                                                      amount which is three times the                                      issue in cases of intentional
Governor:       amount will increase or                                                                     compensatory damages.                                                torts.
3/20/03         decrease in accordance with
                the percentage amount of
                increase or decrease by
                which the Idaho industrial
                commission adjusts the
                average annual wage,
                beginning on July 1, 2004
                and each July 1 thereafter.
                The cap does not apply to
                actions arising out of willful
                or reckless misconduct or
                actions which the trier of fact
                finds would constitute a
                felony.
IL                           None4                Attorney fees are limited    The judgment shall be                     None                  Either party may elect            Joint liability applies
Law                                               to 33.3% of the first        offset in an amount equal                                       periodic payment of future
                                                  $150,000 recovered; 25%      to 50% of lost wages and                                        damages in excess of
                                                  of the next $850,000, and    100% of medical benefits                                        $250,000. If the defendant
                                                  20% of any amount            received from other                                             makes the election, it must
                                                  recovered over $1 million.   sources, provided that the                                      demonstrate that security for
                                                                               judgment may not be                                             the lesser of past and future
                                                  735 IL Comp. Statute         decreased by more than                                          damages or $500,000 can be
                                                  Ann. § 5/2-1114              50%.                                                            provided.

                                                                               735 IL Comp. Statute                                            735 IL Comp. Statute Ann. §
                                                                               Ann. § 5/21205                                                  5/2-1705




            4
             An Illinois law limiting non-economic damages to $500,000 and abolishing joint liability in medical malpractice actions was held unconstitutional in Best v. Taylor Machine Works (Ill.
            1997), in which the court struck down a broad tort reform bill in its entirety.
                                                                                                      -7-
      ST      COMPENSATORY                     cONTENGENCY                 cOLLATERAL                  pUNITIVE DAMAGES                  Periodic Payment OF          Joint & several Liability
              DAMAGES LIMITS                     fEE lIMITS                SOURCE RULE                       LIMITS                          DAMAGES
IN         The total amount recoverable    Attorney fees may not      Defendants may introduce      Punitive damages are limited to   Periodic payments are        Joint liability has been
Law        is limited to $750,000 for      exceed 15% of the          evidence of collateral        the greater of three times        allowed, but not required.   abolished.
           malpractice that occurs         recovery that comes from   payments from sources         compensatory damages or
           before July 1, 1999, and        the Patient’s              other than life insurance,    $50,000.                          IN Code § 34-18-14-4         IN Code § 34-51-2-12
           $1,250,000 for an act of        Compensation Fund.         other insurance for which
           malpractice after July 1,       Otherwise, there is no     the plaintiff or members of   IN Code § 34-51-3-4
           1999. Any amount in excess      limit.                     the plaintiff’s family have
           of these limits is to be paid                              paid directly, or payments
           from the Patient’s              IN Code § 34-18-18-1       made by the United States
           Compensation Fund.                                         or any of its agencies or
                                                                      subdivisions.
           IN Code § 34-18-14-3
                                                                      IN Code § 34-44-1-2
IN                     N/A                           N/A                        N/A                              N/A                              N/A              The jury shall determine fault
HB 1479                                                                                                                                                            of claimant, defendant and of
                                                                                                                                                                   any person who is a non-party.
Passed                                                                                                                                                             If the claimants fault is greater
House:                                                                                                                                                             than 50%, the jury shall return
2/13/03                                                                                                                                                            a verdict of the defendant. If
                                                                                                                                                                   the claimants fault is less than
                                                                                                                                                                   50%, the jury shall determine
                                                                                                                                                                   the damages the claimant
                                                                                                                                                                   would be entitled to recover.
                                                                                                                                                                   Defendants will be liable for
                                                                                                                                                                   their percentage of fault.




                                                                                             -8-
      ST          COMPENSATORY                     cONTENGENCY                  cOLLATERAL                  pUNITIVE DAMAGES                   Periodic Payment OF              Joint & several Liability
                  DAMAGES LIMITS                     fEE lIMITS                 SOURCE RULE                       LIMITS                           DAMAGES
IA                        None                The court “shall              Damages in a malpractice                  None                  Any party may petition the       Joint liability has been
Law                                           determine” the                action must be reduced by                                       court to order periodic          abolished for non-economic
                                              reasonableness of the         the amount that the                                             payments, but the petition       damages. Joint liability has
                                              contingency fee.              plaintiff received from                                         shall not be granted where it    been abolished for economic
                                                                            collateral sources.                                             would be inequitable or there    damages for defendants less
                                              IA Code § 147.138                                                                             are insufficient guarantees of   than 50% at fault.
                                                                            IA Code § 147.136                                               future collectability.
                                                                                                                                                                             IA Code § 668.4
                                                                                                                                            IA Code § 668.3(7)
KS             Non-economic damages are                  None                         None5              Punitive damages are limited to    A judge may order a              Joint liability has been
Law            limited to $250,000.                                                                      the lesser of $5 million or the    judgment against any health      abolished.
                                                                                                         defendant’s annual gross           care provider to be paid in
               KA Statutes §§ 60-1902, 60-                                                               income. If the court finds that    periodic payments.               Brown v. Keill (Kan. 1978).
               1903                                                                                      the profitability of the conduct
                                                                                                         exceeds the amount of the          KS Statute § 60-2609
                                                                                                         general limitation, the court
                                                                                                         may award an amount equal to
                                                                                                         1 ½ times the amount of the
                                                                                                         profit which the defendant
                                                                                                         gained or is expected to gain as
                                                                                                         a result of the conduct.

                                                                                                         KS Statute § 60-3701
KY                        None                           None                         None6                           None                              None                 Joint liability has been
Law                                                                                                                                                                          abolished.

                                                                                                                                                                             Prudential Life Ins. Co. v.
                                                                                                                                                                             Moody (Ky. 1985).
LA             Total damages are capped at               None                         None               No punitive damage awards.         Awards to claimants for          Joint liability has been
Law            $500,000, excluding future                                                                                                   future medical expenses are      abolished.
               medical care.                                                                                                                paid out of a patient
                                                                                                                                            compensation fund.               LA Civil Code arts.
               LA Rev. Statute                                                                                                                                               1804, 2323, 2324
               § 40:1299.42                                                                                                                 LA Rev. Statute
                                                                                                                                            § 40:1299.44




           5
               A KS law that allowed introduction of collateral source benefits for damages in excess of $150,000 was held unconstitutional in Thompson v. KFB Ins. Co. (Kan. 1993).
           6
               A KY law that allowed the introduction of collateral source payments evidence was held unconstitutional in O’Bryan v. Hedgespeth (Ky. 1995).
                                                                                                  -9-
      ST      COMPENSATORY                     cONTENGENCY                      cOLLATERAL                    pUNITIVE DAMAGES              Periodic Payment OF               Joint & several Liability
              DAMAGES LIMITS                     fEE lIMITS                     SOURCE RULE                         LIMITS                      DAMAGES
ME         Non-economic damages            In an action for                The court shall reduce the                  None              Where an award exceeds            Joint liability applies.
Law        against a carrier of a health   professional negligence,        judgment by the amount a                                      $250,000, the court shall
           plan are limited to $400,000.   contingency fees are            claimant has received or                                      order, at the request of either
                                           limited to 33.3 % of the        will receive from                                             party, that future damages be
           ME Rev. Statutes                first $100,000 recovered,       collateral sources.                                           paid in periodic payments.
           Title 24-A § 4313               25% of the next $100,000,
                                           and 20% of any amount           ME Rev. Statute                                               ME Rev. Statute
                                           over $2 million, but the        Title 24 § 2961                                               Title 24 § 2951
                                           judge may allow fees in
                                           excess of these amounts in
                                           special circumstances.

                                           ME Rev. Statutes
                                           Title 24 § 2961
MD         Non-economic damages are        If a legal fee is in dispute,              None                             None              A court or arbitration panel      Joint liability applies.
Law        limited to $500,000. If a       an arbitration panel or a                                                                     may order future damages to
           wrongful death action has       court will determine if the                                                                   be paid in periodic
           two or more claimants or        fee is reasonable.                                                                            payments, so long as the
           beneficiaries, the award may                                                                                                  defendant can provide
           be up to 150% of the limit.     MD Cts. & Jud. Pro.                                                                           adequate security.
                                           § 3-2A-07
           MD Cts. & Jud. Pro                                                                                                            MD Cts. & Jud. Pro.
           § 11-108                                                                                                                      § 11-109
MA         Non-economic damages are        Attorney fees are limited       A judge shall reduce the        No punitive damages awards.   Juries are required to state in   Each defendant is liable to the
Law        limited to $500,000, unless     to 40% of the first             award by the amount the                                       the verdict what portion of       extent of that defendant’s
           the claimant can show “a        $150,000 recovered,             claimant has received or                                      the award is for future           proportionate share of the
           substantial or permanent loss   33.3% of the next               will receive from                                             damages, but the stature does     entire common liability. Thus,
           or impairment of a bodily       $150,000, 30% of the next       collateral sources, less any                                  not provide for periodic          in a two-defendant case, a
           function or substantial         $200,000, and 25% of any        premiums paid by the                                          payments.                         defendant found 1% negligent
           disfigurement.”                 amount recovered over           claimant to secure those                                                                        can be compelled to pay 50%
                                           $500,000.                       benefits.                                                     MA Gen Laws                       of the judgment.
           MA Gen Laws                                                                                                                   Ch. 231 § 60-F
           Ch. 231 § 60-H                  MA Gen Laws                     MA Gen Laws                                                                                     MA Gen Laws
                                           Ch. 231 § 60-I                  Ch. 231 § 60-G                                                                                  Ch. 231B §§ 1-2




                                                                                                  - 10 -
      ST        COMPENSATORY                      cONTENGENCY                    cOLLATERAL                    pUNITIVE DAMAGES              Periodic Payment OF             Joint & several Liability
                DAMAGES LIMITS                      fEE lIMITS                   SOURCE RULE                         LIMITS                      DAMAGES
MI           Non-economic damages are         Attorney’s fees for           Courts are to reduce a          No punitive damages awards.   Damages in excess of            Joint liability has been
Law          limited to $280,000, adjusted    personal injury or death      claimant’s damages by                                         $250,000 are to be satisfied    abolished.
             annually for inflation, unless   are limited to 33.3% of the   amounts received from                                         by the purchase of an
             the claimant has suffered        amount recovered.             collateral sources, less any                                  annuity contract.               MI Comp. Laws
             brain damage, spinal cord                                      premiums paid to obtain                                                                       § 600.6304(4)
             damage, damage to the            MI Ct. R. 8.121               the benefit.                                                  MI Comp. Laws
             reproductive system which                                                                                                    § 600.6307
             prevents procreation, or                                       MI Comp. Laws
             injury to cognitive ability                                    § 600.6303
             that leaves the plaintiff
             unable to live alone, in
             which case the limit is
             $500,000.

             MI Comp. Laws
             § 600.1483
MN                      None                  No overall limits, but        Upon a party’s request,                     None              Courts have the discretion to   A defendant whose fault is
Law                                           contingency fees must be      the court shall determine                                     order periodic payments for     15% or less is only liable up to
                                              based on the award            amount of collateral                                          awards over $100,000 after a    four times that defendant’s
                                              adjusted for collateral       source payments received                                      hearing to consider what is     percentage fault.
                                              source benefits.              and reduce the award by                                       in the best interests of the
                                                                            that amount.                                                  claimant.                       MN Statute § 604.02
                                              MN Statute § 548.36
                                                                            MN Statute § 548.36                                           MN Statute § 549.25
MS           Non-economic damages                       None                         None                               None                         None                 Joint liability is abolished for
Law          limited to $500,000 to July                                                                                                                                  non-economic damages. For
             1, 2011, $750,000 from July                                                                                                                                  economic damages, any
HB 2, 2002   1, 2011 until July 1, 2017,                                                                                                                                  defendant whose fault is
Special      and $1 million after July 1,                                                                                                                                 determined to be less than 30%,
Session      2017, not adjusted for                                                                                                                                       liability shall be several only
             inflation.                                                                                                                                                   and for any defendant whose
Signed by                                                                                                                                                                 fault is determined to be 30%
Governor:                                                                                                                                                                 or more, liability shall be joint
10/8/02                                                                                                                                                                   and several only to the extent
                                                                                                                                                                          necessary for the person
                                                                                                                                                                          suffering injury, death or loss
                                                                                                                                                                          to recover 50% of his
                                                                                                                                                                          recoverable damages

                                                                                                                                                                          MS Code § 85-5-7(8)




                                                                                                   - 11 -
      ST      COMPENSATORY                     cONTENGENCY                    cOLLATERAL                    pUNITIVE DAMAGES                  Periodic Payment OF               Joint & several Liability
              DAMAGES LIMITS                     fEE lIMITS                   SOURCE RULE                         LIMITS                          DAMAGES
MO         Non-economic damages                       None                          None                              None                 If an award for future            If the plaintiff was at fault,
Law        were limited to $350,000 in                                                                                                     damages exceeds $100,000,         joint liability is limited to two
           1986, to be increased or                                                                                                        at a party’s request, the court   times the defendant’s
           decreased on an annual basis                                                                                                    may require future damages        percentage of fault.
           in accordance with inflation.                                                                                                   to be paid in periodic
           Current limit is $547,000                                                                                                       installments.                     MO Statute § 537.067
           (2002).
                                                                                                                                           MO Statute § 538.220
           MO Statute § 537.219
MO                    N/A                  Contingency fees are                     N/A                  Punitive damages shall not                     N/A                  Amends § 537.067: A
HB 273                                     limited to 33% of the first                                   exceed the greater of $500,000,                                     defendant shall not be jointly or
                                           $500,000 recovered, 28%                                       or five times the net amount of                                     severally liable for more than
Passed                                     of the next $500,000 and                                      the judgment.                                                       the percentage of fault as
House:                                     15% of all damages                                                                                                                determined by the trier of fact.
2/27/03                                    recovered in excess of $1
                                           million. The attorney can
                                           collect more with the
                                           court’s prior approval.
MO         Non-economic damages                        N/A                          N/A                               N/A                               N/A                  Amends § 537.067: If a
SB 280     limited to $350,000, to be                                                                                                                                        defendant is found to be more
           increased or decreased in                                                                                                                                         than 10% at fault then the
Passed     accordance with inflation,                                                                                                                                        defendant shall be liable for the
Senate:    beginning August 28, 2003.                                                                                                                                        percentage of fault as
3/19/03                                                                                                                                                                      determined by the trier of fact.
MT         Non-economic damages are                   None               For awards over $50,000,                     None                 If $50,000 or more is             Joint liability has been
Law        limited to $250,000.                                          the claimant’s damages                                            awarded as future damages,        abolished for defendants less
                                                                         will be reduced by                                                periodic payments may be          than 50% at fault.
           MT Code § 25-9-411                                            payments from collateral                                          ordered upon request of any
                                                                         sources that do not involve                                       party.                            MT Code § 27-1-705
                                                                         rights of subrogation.
                                                                                                                                           MT Code § 25-9-412
                                                                         MT Code § 27-1-308
MT                     N/A                            N/A                         N/A                    Would amend § 27-1-220 to                      N/A                                 N/A
SB 363                                                                                                   read: Punitive damages may
                                                                                                         not exceed $10 million or 3%
Passed                                                                                                   of a defendants net worth,
Senate:                                                                                                  whichever is less.
2/24/03
NE                     None                The court may review the      Evidence of non-                No punitive damages awards.                   None                  Joint liability has been
Law                                        attorney’s fee in cases       returnable medical                                                                                  abolished for non-economic
                                           against a health care         reimbursement insurance                                                                             damages.
                                           provider for malpractice      is not admissible, but may
                                           or professional               be taken as a credit against                                                                        NE Rev. Statute
                                           negligence.                   any judgment rendered.                                                                              § 25-21,185.10

                                           NE Statute § 44-2834          NE Statute § 44-2819

                                                                                                - 12 -
      ST       COMPENSATORY                    cONTENGENCY                   cOLLATERAL                   pUNITIVE DAMAGES                  Periodic Payment OF          Joint & several Liability
               DAMAGES LIMITS                    fEE lIMITS                  SOURCE RULE                        LIMITS                          DAMAGES
NV                     None                          None               Damages must be reduced        Punitive damages are limited to   Future economic damages       Joint liability has been
Law                                                                     by the amount of any prior     three times compensatory          may be periodically paid at   abolished for defendants less at
                                                                        payment by defendant           damages if the amount of          the claimant’s election.      fault than the plaintiff.
                                                                        health care provider. If       compensatory damages is
                                                                        benefits have been or will     $100,000 or more; and             NV Rev. Statute               NV Rev. Statute
                                                                        be received by a collateral    $300,000 if the amount of         § 42.-020                     § 41.141
                                                                        source, the award shall be     compensatory damages is less
                                                                        reduced by that amount.        than $100,000. Limits do not
                                                                                                       apply to an insurer who acts in
                                                                        NV Rev. Statute                bad faith regarding its
                                                                        § 42.020                       obligations to provide
                                                                                                       insurance coverage or in
                                                                                                       product liability actions.

                                                                                                       NV Rev. Statute
                                                                                                       § 42-005
NH                     None7              Court approval is                       None8                No punitive damages awards.       The court may, in its         Joint liability has been
Law                                       necessary if the attorney’s                                                                    discretion, order periodic    abolished for defendants less
                                          fee is over $200,000.                                                                          payments.                     than 50% at fault.

                                          NH Rev. Statute                                                                                NH Rev. Statutes              NH Rev. Statute
                                          § 508:4-e                                                                                      § 524:6-a                     § 507:7-e
NJ                     None               Contingency fees are          Mandatory deduction of         Punitive damages are limited to             None                Joint liability has been
Law                                       limited pursuant to a         all benefits other than        greater of five times                                           abolished for defendants less
                                          sliding scale provided in     workers compensation and       compensatory damages or                                         than 60% at fault.
                                          the New Jersey Court          life insurance proceeds.       $350,000.
                                          Rules.                                                                                                                       NJ Statute § 2A:15-5.3
                                                                        NJ Statute § 2A:15-92          NJ Statute § 2A:15-5.14
                                          NJ Ct. R. § 1:21-7




           7
             A NH Law setting a $250,000 cap on non-economic damages in medical malpractice cases was held unconstitutional in Carson v. Maurer (N.H. 1980). A $875,000 cap was held
           unconstitutional in Brannigan v. Usitalso (N.H. 1991).
           8
             A NH statute abolishing the collateral source rule was deemed unconstitutional in Carson v. Maurer (N.H. 1980).
                                                                                              - 13 -
      ST      COMPENSATORY                        cONTENGENCY                  cOLLATERAL                   pUNITIVE DAMAGES                  Periodic Payment OF              Joint & several Liability
              DAMAGES LIMITS                        fEE lIMITS                 SOURCE RULE                        LIMITS                          DAMAGES
NJ         An insurer that complies                      N/A                          N/A                             N/A                  Unless otherwise agreed to                      N/A
AB 50      with the requirements of this                                                                                                   by the parties, any judgment
           bill shall not be liable for any                                                                                                in which non-economic
Passed     additional amounts for non-                                                                                                     damages are less than or
Senate:    economic damages in excess                                                                                                      equal to $1 million, the court
3/20/03    of $300,000, if the insurer                                                                                                     shall order that all monies be
           has not exercised bad faith in                                                                                                  paid immediately. In any
           the course of administering                                                                                                     judgment in which non-
           the claim.                                                                                                                      economic damages exceed
                                                                                                                                           $1 million, 50% shall be paid
                                                                                                                                           immediately, the remaining
                                                                                                                                           50% shall be paid over 60
                                                                                                                                           months in the form of a
                                                                                                                                           structured payment
                                                                                                                                           agreement. In the event of a
                                                                                                                                           judgment creditor’s death
                                                                                                                                           any amounts due shall be
                                                                                                                                           paid to the judgment
                                                                                                                                           creditor’s estate.
NM         Total damages are limited to                 None                          None                            None                 Juries are given a special       Joint liability has been
Law        $600,000, except for                                                                                                            interrogatory asking if          abolished, except in strict
           punitive damages, medical                                                                                                       damages are for future           liability cases.
           care and related benefits.                                                                                                      medical care. If so, the
                                                                                                                                           patient must be furnished        NM Statute § 41.3A-1
           NM Statute § 41-5-6, 41-5-7                                                                                                     with medical care as
                                                                                                                                           necessary.

                                                                                                                                           NM Statute § 41-5-7
NY                      None                  Attorney fees are limited   Collateral source evidence                  None                 Periodic payments are            Joint liability has been
Law                                           on a sliding scale.         is admissible.                                                   mandatory where the future       abolished for non-economic
                                                                                                                                           damages awarded exceeds          damages for defendants less
                                              NY Jud. Law                 NY CPLR                                                          $250,000.                        than 50% at fault.
                                              § 474-a                     § 4545(a)
                                                                                                                                           NY CPLR                          NY CPLR
                                                                                                                                           § 5031                           §§ 1601-1602
NC                      None                            None                          None               Punitive damages are limited to               None                 Joint liability applies.
Law                                                                                                      the greater of three times
                                                                                                         compensatory damages or
                                                                                                         $250,000.

                                                                                                         NC Statute § 1D-2D




                                                                                                - 14 -
      ST          COMPENSATORY                   cONTENGENCY                   cOLLATERAL                    pUNITIVE DAMAGES                  Periodic Payment OF              Joint & several Liability
                  DAMAGES LIMITS                   fEE lIMITS                  SOURCE RULE                         LIMITS                          DAMAGES
ND             Non-economic damages may                None               A party required to pay         Punitive damages are limited to   Future economic damages          Joint liability has been
Law            not exceed $500,000,                                       economic damages is             the greater of two times          for institutional or custodial   abolished.
               regardless of the number of                                entitled to a reduction to      compensatory damages or           care exceeding two years,
               defendants or claims.                                      the extent that losses are      $250,000.                         may, at a party’s request, be    ND Code § 32-03.2-02
               ND Code § 32-42-02                                         covered by a collateral                                           separated from future
                                                                          source.                         ND Code § 32.03-11(4)             damages and paid in periodic
               Upon request of either party,                                                                                                payments. The defendant
               economic damages in excess                                 ND Code § 32-03.2-06                                              must show adequate security,
               of $250,000 before reduction                                                                                                 and periodic payments
               for contributory fault and                                                                                                   terminate upon the death of
               collateral source payments                                                                                                   the injured party.
               are subject to review by the
               court for reasonableness.                                                                                                    ND Code § 32-03.2-09

               ND Code § 32-03.2-08
OH                       None9                         None                          None                              None                            None10                Joint liability has been
Law                                                                                                                                                                          abolished for non-economic
                                                                                                                                                                             damages, but only if the
                                                                                                                                                                             plaintiff was contributorily
                                                                                                                                                                             negligent or impliedly assumed
                                                                                                                                                                             the risk that caused the harm.

                                                                                                                                                                             OH Code § 2315.19




           9
             An OH statute limiting non-economic damages awards, along with other malpractice reforms, was declared unconstitutional in State ex rel. Ohio Academy of Trial Lawyers v.
           Sheward (Ohio 1999).
           10
              An OH statute providing that a court could order future damages exceeding $200,000 to be paid in periodic payments was held unconstitutional in Galayda v. Lake Hospital Systems
           Inc. (Ohio 1994).
                                                                                                 - 15 -
      ST       COMPENSATORY                     cONTENGENCY                     cOLLATERAL                pUNITIVE DAMAGES      Periodic Payment OF             Joint & several Liability
               DAMAGES LIMITS                     fEE lIMITS                    SOURCE RULE                     LIMITS              DAMAGES
OH          Non-economic damages may        If the attorney fees exceed    Defendants may introduce             N/A          If $50,000 or more is                        N/A
Law         not exceed the greater of       the total amount of non-       collateral source                                 awarded in future damages
            $250,000, or an amount that     economic loss damages,         payments, except if the                           then the court shall
SB 281      is equal to three times the     the attorney must submit       source of collateral                              determine, in its discretion, if
            plaintiff’s economic loss, to   an application in the          benefits has a mandatory                          the payments should be
Signed by   a maximum of $350,000 for       probate court of the           self-effectuating federal                         received in periodic
Governor:   each plaintiff or a maximum     county in which the action     right of subrogation, a                           payments or a lump sum. In
1/10/03     of $500,000 for each            was commenced, or in           contractual right of                              the event of a plaintiff’s
            occurrence. The amount of       which the settlement was       subrogation, or a statutory                       death any amounts due shall
            non-economic damages for        entered. The attorney’s        right of subrogation.                             be paid to the plaintiffs heirs.
            plaintiffs that a) have         fees shall be subject to the
            permanent and substantial       approval of the probate
            physical deformity, loss of     court.
            use of a limb, or loss of a
            bodily organ system; or b)
            have a permanent physical
            functional injury that
            prevents the injured person
            from being able to
            independently care for self
            and perform life sustaining
            activities shall not exceed
            $500,000 for each plaintiff,
            or $1 million for each
            occurrence.




                                                                                                 - 16 -
      ST          COMPENSATORY                     cONTENGENCY                    cOLLATERAL                    pUNITIVE DAMAGES                    Periodic Payment OF           Joint & several Liability
                  DAMAGES LIMITS                     fEE lIMITS                   SOURCE RULE                         LIMITS                            DAMAGES
OK                         None                Attorney fees are limited                None                 Punitive damages may not                       None               Joint liability has been
Law                                            to 50% of the plaintiff’s                                     exceed the greater of $100,000                                    abolished if the plaintiff is at
                                               recovery.                                                     or compensatory damages.                                          fault.
                                                                                                             Where the jury finds by clear
                                               OK Statute                                                    and convincing evidence that                                      Anderson v. O’Donohue (Okla.
                                               Title 5, § 7                                                  the defendant acted with malice                                   1983).
                                                                                                             or an insurer intentionally acted
                                                                                                             in bad faith, punitive damages                                    Laubach v. Morgan
                                                                                                             may not exceed the greater of                                     (Okla. 1978).
                                                                                                             $500,000 or two times
                                                                                                             compensatory damages or the
                                                                                                             amount of the increased
                                                                                                             financial gain to the defendant.

                                                                                                             OK Statute
                                                                                                             Title 23 § 23, § 9.1
OR                        None11                          None               Court’s are permitted to                      None                             None               Joint liability has been
Law                                                                          reduce awards for                                                                                 abolished.
                                                                             collateral source
                                                                             payments, excluding life                                                                          OR Rev. Statute
                                                                             insurance and other death                                                                         § 18.485
                                                                             benefits, benefits for
                                                                             which plaintiff have paid
                                                                             premiums, retirement
                                                                             benefits, disability
                                                                             benefits, pension plan
                                                                             benefits, and federal social
                                                                             security benefits.

                                                                             OR Rev. Statute
                                                                             § 18.580
PA                         None                           None               Awards are reduced by                         None                  The court may order, upon     Joint liability applies.
Law                                                                          any public collateral                                               motion of any party, that
                                                                             source benefit or                                                   future damages be paid on a
                                                                             compensation.                                                       periodic basis. All parties
                                                                                                                                                 must agree to the terms of
                                                                             PA Cons. Statute                                                    payment.
                                                                             § 1301.602
                                                                                                                                                 PA Cons. Statute
                                                                                                                                                 § 1301.832-A




           11
                OR’s $500,000 cap on non-economic damages in civil actions “arising out of bodily injury” was declared unconstitutional in Lakin v. Senco Products, Inc. (Or. 1999).
                                                                                                    - 17 -
      ST      COMPENSATORY               cONTENGENCY                  cOLLATERAL                 pUNITIVE DAMAGES      Periodic Payment OF             Joint & several Liability
              DAMAGES LIMITS               fEE lIMITS                 SOURCE RULE                      LIMITS              DAMAGES
RI                    None                     None              Permits the admissibility             None         If damages exceed $150,000      Joint liability applies.
Law                                                              of evidence collateral                             in actions arising from
                                                                 source payments from                               personal injury or wrongful
                                                                 “state income disability or                        death, the parties “shall
                                                                 workers’ compensation,                             consider the use of periodic
                                                                 any health, sickness or                            payments as a means of
                                                                 income disability policy,                          settlement.”
                                                                 or other contracts” for
                                                                 reimbursement. Requires                            RI Gen Laws
                                                                 a jury to reduce damages                           § 9-21-13
                                                                 awards by the amount paid
                                                                 by collateral sources, if
                                                                 such evidence is
                                                                 introduced.

                                                                 RI Gen Laws
                                                                 § 9-19-34.1
SC                    None                     None                         None                       None                     None                Joint liability apples.
Law
SD         Non-economic damages                None              Permits the admissibility             None         Allows any party to elect the   Joint liability is limited to two
Law        cannot exceed $500,000.                               of evidence of collateral                          periodic payment of future      times the percentage of fault of
                                                                 source payments when the                           damages exceeding               any defendant found to be less
           SD Code § 21-3-11                                     claimant alleges special                           $200,000 within 120 days of     than 50% at fault.
                                                                 damages that are, or will                          service of the complaint.
                                                                 be paid by insurance, are                                                          SD Code § 15-8-15.1
                                                                 not subject to subrogation,                        SD Code § 21-3A-2
                                                                 and are not purchased
                                                                 privately or by
                                                                 government programs.

                                                                 SD Code § 21-3-12
TN                    None           Requires a judge to award   Economic damages are                  None                     None                Joint liability has been
Law                                  attorney fees in medical    offset in medical liability                                                        abolished.
                                     liability cases not to      cases by collateral
                                     exceed 33.3%.               sources, except for sources                                                        McIntyre v. Balentine
                                                                 including the assets of the                                                        (Tenn. 1992).
                                     TN Code § 29-26-120         plaintiff and the
                                                                 immediate family, or
                                                                 insurance purchased by
                                                                 the plaintiff in whole or in
                                                                 part.

                                                                 TN Code § 29-26-119




                                                                                        - 18 -
      ST      COMPENSATORY                    cONTENGENCY                     cOLLATERAL                   pUNITIVE DAMAGES                  Periodic Payment OF             Joint & several Liability
              DAMAGES LIMITS                    fEE lIMITS                    SOURCE RULE                        LIMITS                          DAMAGES
TX         Damages in wrongful death                 None                           None                Punitive damages are limited to               None                Joint liability has been
Law        actions are limited to                                                                       the greater of $200,000 or two                                    abolished for defendant’s fount
           $500,000.                                                                                    times the award of economic                                       to be less than 51% at fault.
                                                                                                        damages plus non-economic
           TX Rev. Civil Statute                                                                        damages up to $750,000.                                           TX Civil Prac. & Rem. Code
           Art. 45901i § 11.02                                                                                                                                            § 33.013
                                                                                                        TX Civil Prac. & Rem. Code
                                                                                                        § 41.008
UT         Non-economic damages are       Contingency fees are           Awards are offset by                        None                 The court shall order, at the   Joint liability has been
Law        limited to $250,000.           limited to 33.3% of the        collateral source                                                request of either party,        abolished.
                                          amount recovered.              payments, excluding any                                          periodic payments of
           UT Code § 78-14-7.1                                           source for which a                                               damages exceeding               UT Code § 78-27-40
                                          UT Code § 78-14-7.5            subrogation right exists                                         $100,000.
                                                                         and any amount paid by
                                                                         plaintiff or the immediate                                       UT Code § 78-14-9.5
                                                                         family to secure the
                                                                         benefit.

                                                                         UT Code § 78-14-4.5
VT                    None                           None                         None                               None                             None                Joint liability applies.
Law
VA         Limits total damages in                   None                           None                Punitive damages may not                      None                Joint liability applies.
Law        medical liability cases to                                                                   exceed $350,000.
           $1.5 million for acts
           occurring on or after August                                                                 VA Code § 8.01-38.1
           1, 1999, with additional
           annual adjustments of
           $50,000 on July 1, 2000, and
           each July 1 thereafter, with
           final annual increases of
           $75,000 on July 1, 2007, and
           July 1, 2008.

           VA Code § 8.01-581-15
VA                    N/A                 Contingency fees are                      N/A                              N/A                               N/A                               N/A
HB 2520                                   limited to 33.3% of the
                                          first $150,000 recovered,
Passed                                    15% of the next $150,000
House:                                    and 10% of any amount
1/31/03                                   over $950,000 recovered.
                                          An attorney can apply
                                          with the court to adjust the
                                          compensation.




                                                                                               - 19 -
      ST           COMPENSATORY                    cONTENGENCY                   cOLLATERAL                   pUNITIVE DAMAGES                Periodic Payment OF             Joint & several Liability
                   DAMAGES LIMITS                    fEE lIMITS                  SOURCE RULE                        LIMITS                        DAMAGES
VA           Limits awards for medical                    N/A                          N/A                             N/A                              N/A                               N/A
SB 1184      malpractice against
             physicians to $50,000 where
Passed       injury or death results from
Senate:      ordinary negligence in the
1/29/03      provision of emergency
             medical assistance
             necessitated by a traumatic
             injury demanding immediate
             medical attention.
WA                       None12                In an action against a       Permits the admissibility      No punitive damage awards.      Allows a court to order the     Joint liability has been
Law                                            health care provider, the    of evidence of collateral                                      periodic payment of future      abolished if the plaintiff is
                                               reasonableness of the        source payments in                                             damages exceeding               found to be at fault.
                                               attorney’s fee is            medical liability cases,                                       $100,000. Provides that a
                                               determined by the court.     except if the source is an                                     lump-sum payment will be        WA Code § 4.22.070
                                                                            insurance policy that the                                      due if the defendant fails to
                                               WA Code § 7.70.070           plaintiff or a member of                                       provide adequate security
                                                                            the immediate family                                           within 30 days.
                                                                            purchased with his or her
                                                                            assets.                                                        WA Code § 4.56.260

                                                                            WA Code § 7.70.080
WA           Non-economic damages are                     N/A               Collateral source                          N/A                 Allows a court to order the                    N/A
SB 5628      limited to $350,000. Since                                     payments are admissible.                                       periodic payment of future
             this would be a constitutional                                                                                                damages exceeding $50,000.
Passed       change, it requires 2/3 vote
Senate:      from both Houses and a
3/14/03      majority vote of the people.
WV           Non-economic damages are                     None                         None                            None                            None                Joint liability has been
Law          capped at $1 million.                                                                                                                                         abolished for defendants found
                                                                                                                                                                           to be less than 25% at fault.
             WV Code § 55-7B-8
                                                                                                                                                                           WV Code § 55-7B-9
WV           Would amend § 55-7B-8:                       N/A               Collateral source                          N/A                              N/A                Would amend § 55-7B-9: The
HB 2122      Non-economic damages are                                       payments are admissible                                                                        court may not enter joint
             limited to $250,000 and shall                                  in court.                                                                                      liability against any defendant.
Signed by    then increase every year
Governor:    according to the Consumer
3/11/03      Price Index beginning on
             January 1, 2004.




            12
                 A WA Statute setting a variable limit on non-economic damage awards was held unconstitutional in Sofie v. Fibreboard Corp. (Wash. 1989).
                                                                                                  - 20 -
      ST      COMPENSATORY                 cONTENGENCY                    cOLLATERAL                 pUNITIVE DAMAGES      Periodic Payment OF             Joint & several Liability
              DAMAGES LIMITS                 fEE lIMITS                   SOURCE RULE                      LIMITS              DAMAGES
WI         Non-economic damages are    Attorney fees are limited      The defendant may                    None         Future damages in excess of     Joint liability has been
Law        capped at $350,000, to be   to 33.3% of the first $1       introduce “evidence of                            $100,000 are paid into a fund   abolished for defendants found
           adjusted annually for       million recovered, 25% of      any compensation for                              and then distributed            to be less than 51% at fault.
           inflation. Damages in a     the first $1 million           bodily injury received                            periodically to claimants.
           wrongful death case are     recovered if liability is      from sources other than                                                           WI Statute § 895.045
           limited to $500,000 for a   stipulated within 180 days     the defendant to                                  WI Statute § 655.015
           minor and $350,000 for an   of filing of the original      compensate the claimant.”
           adult.                      complaint and not within
                                       60 days of first day of        WI statute § 893.55
           WI Statute                  trial, and 20% for amounts
           §§ 893.55, 895.04           exceeding $1 million
                                       recovered. A judge may
                                       allow a fee that exceeds
                                       these amounts in
                                       exceptional circumstances.

                                       WI Statute § 655.013
WY                    None             Attorney fees are limited                None                       None                    None                 Joint liability has been
Law                                    to 33.3% of the recovery,                                                                                        abolished.
                                       if the claim settles within
                                       60 days of the filing of the                                                                                     WY Statute § 1-1-109(e)
                                       lawsuit 40% of the
                                       recovery, if the claim is
                                       settled after 60 days or a
                                       judgment is entered upon
                                       a verdict, and 30% of any
                                       recovery exceeding $1
                                       million.

                                       WY CT. Rules
                                       Contingency Fee R. 5




                                                                                            - 21 -
                                                         Use of Credit Reports and Credit Scoring
                                                         By the Insurance Industry (March 2003)

 State                                          Existing Rules and Previous Action                                                         Recent Legislative or Regulatory Activity

Alabama      In early August 2002, the Department of Insurance issued a consumer alert entitled “Credit Scoring: How              The Alabama Department of Insurance has developed a
             Does It Affect You?” The alert, which can be accessed at www.aldoi.org/currentrelease.asp?Headline=282,              comprehensive draft regulation that will be vetted and considered
             suggested the department would promulgate a regulation in this area in 2002, but no action has been taken.           during a public hearing in May 2003.
 Alaska      Several bills were proposed during the 2002 legislative session, including two which would have prevented            The Alaska Insurance Division issued a report entitled “Insurance
             an insurer or underwriter from “bas[ing] a standard, rate, or rating plan, in whole or in part, directly or          Credit Scoring in Alaska” in February 2003, and legislation will be
             indirectly, upon a person’s credit rating or credit scoring.” While several hearings were held on these and          considered this year. The department report can be accessed at:
             related proposals, nothing was adopted in 2002. The legislature is likely to again consider the issue in 2003,       www.dced.state.ak.us/insurance/pub/FINAL_credit_score_report.
             and the Alaska Division of Insurance is expected to conduct an investigation in the interim.                         pdf.

                                                                                                                                  Two legislative proposals to ban the use of credit information by
                                                                                                                                  the insurance industry are expected to receive a committee
                                                                                                                                  hearing before the end of March,.
Arizona      In 2002, HB 2386 was adopted by the House and Senate and signed into law on May 22, 2002. The new
             law, which is now effective, does the following:
                •     Defines “adverse underwriting decision” and requires the written disclosure of certain information
                      when such an action is taken. Among other provisions, the disclosure must include the specific
                      reasons for the adverse underwriting decision.
                •     Establishes rules concerning the correction or deletion of certain kinds of “personal information.”
                •     Grants consumers the right to request that an insurer reconsider an underwriting decision in certain
                      instances.
Arkansas     Among other provisions, Arkansas Code Ann. §23-66-317 provides that:                                                 On March 24, the Arkansas Senate adopted Senate Bill 846,
             • No insurer shall refuse to issue or renew coverage or limit the amount of coverage on a risk based solely          which is nearly identical to the NCOIL model law. The bill was
                upon the insurer’s knowledge of the insured’s or applicant’s consumer report (as defined), unless:                adopted in the Senate without a single dissenting vote.
                   (1) the report can be shown to identify characteristics that substantially increase the risk of loss at or
                   after policy issuance or renewal; and
                   (2) the insurer or its agent sends a notice of cancellation, refusal to renew, or declination to the insured
                   or applicant which contains a statement which advises that the cancellation, non-renewal, or declination
                   is based on information contained in a consumer report.
             • If the insurer relies solely upon a credit scoring system or model in reaching its underwriting decision, the
                insurer must:
                   (1) file the credit scoring system with the commissioner; and
                   (2) provide the applicant or insured with a clear, concise explanation of the factors taken into
                   consideration in reaching its decision.
             • If used for rating, the guidelines on the use of consumer reports or consumer report scoring system or
                model must be filed with the commissioner.
             • No insurer may condition the issuance of an insurance policy upon the fact that an applicant or insured
                does not possess a credit card.
California   California has no express prohibition against an insurer using credit information. However, Proposition 103
             (enacted in 1988) does not authorize the use of credit information as an "optional" auto rating factor. Prop
             103 requires that auto insurance rates must be determined by the following factors in decreasing order of
             importance: (1) The insured's driving safety record; (2) The number of miles driven annually; and (3) The
             number of years of driving experience.

             In addition to these three factors, Prop 103 also authorizes the Commissioner, by regulation, to adopt
             optional factors that have a substantial relationship to the risk of loss. The Commissioner has not adopted
             credit information as an optional rating factor. Thus, this information cannot be used in determining auto
             insurance rates.
  State                                          Existing Rules and Previous Action                                                       Recent Legislative or Regulatory Activity

              This aspect of Prop 103 only applies to auto insurance, and since there is no express prohibition on the use
              of credit information, it can be used in other lines such as homeowners insurance. However, the California
              Department has taken an increasingly hostile attitude to the use of credit information, and some companies
              have reported the Department has rejected rate filings in part because of how credit information was used.
 Colorado     Pursuant to C.R.S. 12-14.3-103(c)(III) and Division of Insurance Bulletin 11-00, insurers using credit scores      House Bill 1273 has been adopted unanimously by both
              or credit reports in the underwriting or rating process are to disclose this fact. Specifically, the consumer      chambers of the Colorado General Assembly. The bill requires
              must receive written notification, or notification in the same medium as the application for insurance, that a     insurers to disclose to applicants or policyholders that credit
              credit report may be requested in connection with his/her application for insurance, and that credit scoring       information will be used for underwriting or rating and allows
              information may be used to determine either the consumer's eligibility for insurance or the premium to be          consumers to receive an explanation of the “significant
              charged.                                                                                                           characteristics of the credit information that impact the
                                                                                                                                 policyholder’s insurance score.”
              Regulation 5-1-16 became effective July 1, 2002. A copy of the new regulation can be accessed at
              http://www.dora.state.co.us/insurance/regs/5-1-16.pdf. Among other provisions, the regulation:

                   •     Prohibits the use of credit history or insurance scoring as the sole basis for refusing to insure
                         applicants, canceling or non-renewing existing insureds, rating policies, placing consumers in tiers,
                         or reducing coverage.
                   •     Requires insurers to establish and comply with objective and verifiable guidelines.
                   •     Prohibits an insurer from treating credit inquiries not initiated by the consumer and collections
                         accounts that are identified with a medical industry code as negative factors.
                   •     Requires that consumers over 65 with no credit history and consumers whose credit information is
                         adversely impacted by a dissolution of marriage or by the credit information of a former spouse be
                         treated as though they had a neutral credit history or insurance score.
                   •     Requires an insurer to use a consumer’s current credit information whenever credit information is
                         used in the underwriting or rating process.
                   •     Requires insurers to disclose certain information about its use of credit information upon the
                         request of the insurance department.
                   •     Mandates the disclosure of certain information to consumers concerning the use of consumer
                         reports or insurance scores.
                   •     Reaffirms the FCRA obligations that insurers face.
                   •     Provides for a policyholder appeal and error correction process.
Connecticut   The rules in place in Connecticut come in the form of guidelines issued by the Insurance Department –
              Guidelines for the Examination of Financial History Measurement Programs for Personal Risk Insurance
              Underwriting and Rating Plans (March 2, 2001). According to the state, the guidelines are supported by
              authority granted under Chapters 701 & 705. Among other provisions, the guidelines require the following:

                (1) Such programs that are used to underwrite or rate risks must be filed with the Department. Among
              other things, the filing must identify the characteristics used in the program from which a measurement is
              derived.
                (2) Such programs may be used only for new business and must not penalize an insured for no credit
              history.
                (3) Documentation must be submitted to demonstrate the correlation between the measurement program
              and the expected risk of loss.
                (4) Financial History Measurement Programs may not use the following characteristics – number of credit
              inquiries, a consumer’s total available line of credit, disputed credit information, and other characteristics.
                (5) Company rules must provide that a policy may not be declined, canceled, or non-renewed solely due to
              an adverse credit score or measurement.
                (6) There are a series of requirements that are initiated in the event of an adverse action. An adverse
              action includes the consumer who is denied coverage, charged a higher rate, assigned to a higher tier or
              higher priced company within an insurer group, not given a reduced discount, etc.
                (7) Companies are required to a report after a program has been in place for two years, and they must also
              comply with department requests for a set of test examples reflecting various financial history characteristics.
 State                                         Existing Rules and Previous Action                                                           Recent Legislative or Regulatory Activity


           The guidelines can be downloaded at http://www.state.ct.us/cid/letterfh.pdf .
Delaware   Both chambers of the Delaware General Assembly adopted resolutions that address the industry’s use of                   In late 2002, the Delaware Insurance Department released its
           credit information during the 2002 legislative session. The resolutions, House Resolution 85 and Senate                 draft of Proposed Regulation 87, which would regulate insurer
           Concurrent Resolution 35, were passed by their respective chambers just prior to the legislature’s                      use of credit information. The department conducted a series of
           adjournment – and the two resolutions are very similar. They both call on the Department of Insurance to                public hearings across the state in January and received
           promptly promulgate regulations in this area, and the Senate versions asks the department to report its                 numerous comments on the proposal, but nothing has been
           recommendations to the General Assembly by January 15, 2003. The resolutions also note that the                         finalized to date. Another public hearing has been scheduled for
           “Delaware Insurance Commissioner has required that insurers and credit score vendors using credit scoring               April 22, 2003. More information about the proposed regulation
           models meet with the members of the Commissioner’s office to fully explain the manner in which such                     can be accessed at www.state.de.us/inscom/CreditScore.htm.
           models are being used in either or both the underwriting or rating of insurance policies.”
 Florida   Florida’s insurance code has a number of general consumer protection provisions that provided the Florida               Florida Insurance Commissioner Tom Gallagher established a
           Department with the authority to promulgate a regulation in this area.                                                  task force in 2001 to examine the use of credit data and scoring
                                                                                                                                   models in the insurance industry. This task force has issued a
           The regulation (4-125.004, 1996) provides that any insurer that requests or utilizes credit reports in the              detailed report, which can be accessed at:
           review of personal lines auto or homeowners insurance applications shall maintain and adhere to written                 www.doi.state.fl.us/consumers/crtf/CRTF_Final_Report.pdf.
           procedures established by the insurer. These procedures must specify the following, among other items:
            (1) the circumstances under which credit reports will or may be requested and the reports will or may be
           used in underwriting decisions;
            (2) that the insurer shall notify the applicant in writing prior to such request that a credit report will or may be
           requested [if the notification is given on the application, it must be initialed by the applicant]; and
            (3) that any applicant affected by an adverse underwriting decision shall be advised of the means by which
           the applicant can obtain a copy of the credit report.

           Any insurer that requests or utilizes credit reports in the consideration of personal lines auto or homeowners
           applications must maintain evidence of its compliance with these written procedures, and this evidence must
           be available for examination by the Dept. When an insurer under this rule denies an application based on
           info from a credit report, the insurer must indicate the means by which an applicant may obtain a copy of
           their credit report and by which the applicant may identify the specific items in the report which resulted in
           the denial.
Georgia    The issue is addressed by Regulation 120-2-65 (1997), which can be accessed online at                                   On March 24, the Georgia of Representatives adopted House Bill
           www.ganet.org/rules/index.cgi?base=120/2/65. The use of credit is prohibited under the regulations for                  215, which is effectively to the NCOIL model with several minor
           private passenger auto insurance. However, the regulations contain an exception to the general prohibition              revisions. The bill, which would go into effect July 1, passed the
           which allows use of credit in underwriting if the use of credit is actuarially supported or relevant to the risk.       House with only four opposition votes.

           There is no explicit requirement that insurers receive the department’s approval prior to implementing
           underwriting guidelines which contain provisions for credit histories. However, a company using such
           guidelines without specific approval could be subject to penalties if the department determines that the use
           of credit is not actuarially supported or relevant to the risk.

           During 2002, Commissioner Oxendine announced he would support legislation to prohibit the use of credit
           scoring in auto insurance underwriting – see www.inscomm.state.ga.us/ANNOUNCEMENTS/020802.pdf.
           The commissioner’s announcement followed two days of hearings in late 2001. Hearing transcripts and
           other information can be found at www.inscomm.state.ga.us/CONSUMER/CreditScoringHearings.asp.
 Hawaii    State law essentially prohibits the use of credit information in the underwriting of auto insurance.
           Specifically, §431:10C-207 provides: "No insurer shall base any standard or rating plan, in whole or in part,
           directly or indirectly, upon a person's race, creed, ethnic extraction, age, sex, length of driving experience,
           credit bureau rating, marital status, or physical handicap.”

           As described in the April 3, 2002 edition of the Honolulu Advertiser, seven auto insurers recently agreed to
           pay more than $115,000 in fines fro illegally using criteria (including credit histories) barred under state law.
           The announcement followed a department investigation that began in August 2001. The companies fined
           represent nearly 2/3 of the auto market, and the fines ranged from $5500 to $40,000. Fines against four
State                                         Existing Rules and Previous Action                                                        Recent Legislative or Regulatory Activity

           additional companies are still pending resolution, and the department has suggested that it might seek fines
           for each policy violation if insurers dispute the initial fines.
Idaho      Senate Bill 1408 (2002) was adopted overwhelmingly by the Idaho Legislature and took effect on January 1,
           2003. The new law adds the following section to Idaho code.

           41-1843 INSURANCE RATES AND CREDIT RATING.
            (1) No insurer regulated pursuant to this title shall charge a higher premium than would otherwise be
           charged, or cancel, nonrenew or decline to issue a property or casualty policy or coverage based primarily
           upon an individual's credit rating or credit history.

            (2) As used in this section, "based primarily" means that the weight given by the insurer to an individual's
           credit rating or credit history exceeds the weight given by the insurer to all other criteria considered in
           making the decision to charge a higher premium or to cancel, nonrenew or decline to issue an insurance
           policy.

            (3) This section shall apply only to [P&C] insurance, as defined in chapter 5, title 41, Idaho Code, to be
           used primarily for personal, family or household purposes.

           The use of the phrase “based primarily” has been a source of controversy and concern, and many in the
           industry feel the term is subjective and likely to result in unnecessary litigation. The department of insurance
           has initiated its rulemaking process and is working on developing its rules on implementation of the new law.
Illinois   Illinois passed a law during the 2001 session – PA 92-480 (HB 2419). Under the law, a company may not               On March 19, the Illinois House unanimously approved House
           refuse to issue or renew a policy of insurance solely on the basis of a credit report for the lines of insurance    Bill 1640, which is nearly identical to the NCOIL model law. It is
           covered. In addition, If a credit report is used in conjunction with other criteria to refuse to issue or renew a   now under consideration in the Senate.
           policy of insurance, the insurer shall provide the applicant or policyholder with a notice of the underwriting
           action taken. For purposes of that provision, compliance with the notification requirements of the FCRA shall
           constitute compliance with the state requirement.

           In late February, the Insurance Department released the results from its survey on insurer use of credit
           information, and those findings can be found online at www.state.il.us/ins/General/insurers_credit_report.pdf.
           The department has also developed an informational piece for consumers that can be accessed at
           www.state.il.us/ins/General/how_insurers_use_credit.htm.
Indiana    The only mention of the use of credit information in underwriting in the Indiana Code today is in IC 27-1-22-       Bulletin 111 (see http://www.ai.org/idoi/bulletin111.pdf ) was
           25, which deals only w ith private passenger automobile insurance. It states that an insurer may not charge a       issued July 1, 2002.
           higher rate for a private passenger automobile policy to an individual who has filed for bankruptcy.

           Please note the law only states that an insurer may not charge a higher rate. It is silent about an insurer
           rejecting a potential insured based on a bankruptcy. Other than the bankruptcy language, the Indiana code
           and Indiana Department of Insurance rules are silent on the use of credit information.
 Iowa      The Iowa Insurance Division recently adopted a rule (191—20.12, effective July 1, 2001) that addresses the
           use of credit history in underwriting and making of rates for personal and homeowners policies. Among
           other provisions, the rule, which applies to personal lines insurance, requires the following:

           •    An insurer must disclose at the time an application is taken that it may or will gather credit information,
                and an insurer must notify a consumer when an adverse action is taken, following the requirements of
                the FCRA §624(b).
           •    An insurer is also prohibited from canceling a policy, refusing to renew a policy, or rejecting an
                application based solely on information contained in a credit report or credit scores, and an insurer may
                not take these same actions based on information it knows is inaccurate or incomplete.
           •    An insurer is also required to have specific, written criteria on how credit information is utilized in
                underwriting and tier placement. The commissioner may also require an insurer to file (1) the
                characteristics or factors from a credit report that are used as credit criteria or used in determining a
                credit score; (2) in the case of credit scoring, the algorithm, computer program, model, or other process
                that is used in determining a credit score (along with the underlying support, including statistical
 State                                        Existing Rules and Previous Action                                                       Recent Legislative or Regulatory Activity

                 that is used in determining a credit score (along with the underlying support, including statistical
                 validation, for the development of the algorithm, computer program, model, or other process that is
                 used in determining a credit score); and (3) any underwriting guidelines relating to the use of the credit
                 criteria or credit scores, along with appropriate supporting material for the use of the guidelines.
            •    At the request of the commissioner, an interested party (such as an scoring modeler) shall file or
                 discuss under confidentiality protection with the commissioner the algorithm, computer program, model,
                 or other process that is used in determining a credit score (along with the underlying support, including
                 statistical validation, for the development of the algorithm, computer program, model, or other process
                 that is used in determining a credit score).
            •    Filings made by insurers or interested parties shall be considered confidential records and are protected
                 as trade secrets in accordance with state law.
Kansas      With only one dissenting vote, Senate Concurrent Resolution 1623 was adopted by the Kansas Legislature            A substitute version of Senate Bill 144 has been approved by the
            in 2002. The resolution authorized the creation of a private and public sector task force to study “the           Kansas Senate. The initial proposal was developed and
            desirability of regulation of insurance scoring practices for the benefit of Kansas consumers" and to report      recommended by the insurance commissioner, and the revised
            back to the legislature before the start of the 2003 session.                                                     version – which is very similar to the NCOIL model law – was
                                                                                                                              drafted following hearings on the issues. The bill also includes
                                                                                                                              the following provisions:

                                                                                                                              •    Its provisions also apply to “individually underwritten polices
                                                                                                                                   of farm owners.”
                                                                                                                              •    When an insurer reexamines an insured’s credit report or
                                                                                                                                   score at the request of that consumer at annual renewal, the
                                                                                                                                   insurer may not increase insurance rates because of the
                                                                                                                                   current report or score.
                                                                                                                              •    Insurers taking adverse actions against consumers “shall
                                                                                                                                   provide a procedure whereby a consumer may review an
                                                                                                                                   adverse action based on credit information”, and insurers
                                                                                                                                   and their agents are provided with immunity from any action
                                                                                                                                   arising from information provided through this process.
Kentucky    KRS 304.20-040 and KRS 304.20-042, adopted in 1998 and revised in 2000, say insurers cannot decline,
            refuse to renew , or cancel auto or property and casualty insurance covering personal risks based solely on
            credit history or lack of credit.

            HB 564 was introduced in 2002 but not adopted. Under the proposal, “no insurer may base any rates, in
            whole or in part, upon the use of an insurance risk score unless the method for calculating the insurance risk
            score is filed in support of a rate filing with the commissioner and the commissioner determines the
            insurance risk score has a substantial relationship to the risk of loss.”
Louisiana   The insurance code’s unfair trade practices provisions address this issue. Specifically, §22:1214(7)(i) states    Legislative action is expected in Louisiana once the legislature
            that the following acts are swept within unfair trade practices acts of the state:                                convenes in late March.

               “With regard to automobile liability insurance, terminating or modifying coverage, or refusing to issue or
               refusing to renew any policy solely because the applicant or insured filed for bankruptcy. This
               Subparagraph shall not apply where the refusal to continue to insure is based upon nonpayment of
               premium.”

            The Louisiana Department of Insurance held a pubic hearing on the industry’s use of credit information on
            May 1, 2002, and a department report on the issue was expected to be released. The Department was also
            considering developing a new regulation or issuing a bulletin on the issue by the end of the year.
 Maine      The Maine Department of Professional & Financial Regulation has posted “P&C Tier Placement Guidelines”
            on its website, and these can be viewed at http://www.state.me.us/pfr/ins/tier.htm. The guidelines say the
            following about using credit reports in the auto insurance context:
    State                                          Existing Rules and Previous Action                                                Recent Legislative or Regulatory Activity

                    May be used in conjunction with other underwriting criteria in determining tier placement. Company
                    should be prepared to substantiate the relationship to insurance risk and provide notification information
                    to insureds as required under the Fair Credit Reporting Act, Title 10 MRSA, Chapter 210, §1311-1329.
                    Company, or a vendor on the company's behalf, should file all factors that are considered including any
                    scoring algorithm.

                The guidelines say the following about using credit reports in the auto context:

                   “May not be used as sole underwriting criteria or as the reason for rejecting a risk. Company must prove
                   the relationship to insurance risk and provide notification information to insureds as required under Fair
                   Credit Reporting Act. Do not allow ‘black box’ scoring. Company needs to file all factors that are
                   considered and the scoring algorithm. For more details, please see article in the October 1997 Bureau
                   Newsletter.”
  Maryland      HB 521/Chapter 580 was adopted overwhelmingly by both chambers of the General Assembly in the closing
                minutes of the 2002 session and signed into law. A summary of the law follows:

                •    In the homeowners context, an insurer may not “refuse to underwrite, cancel, or refuse to renew a risk
                     based, in whole or in part, on the credit history of an applicant or insured; rate a risk based, in whole or
                     in part, on the credit history of an applicant or insured in any manner . . .; or require a particular
                     payment plan based, in whole or in part, on the credit history of the insured or applicant.”
                •    In the auto context, an insurer may not “refuse to underwrite, cancel, refuse to renew, or increase the
                     renewal premium based, in whole or in part, on the credit history of an insured or applicant; or require a
                     particular payment plan based, in whole or in part, on the credit history of the insured or applicant.”
                •    An insurer may use the credit history of an applicant to rate a new auto policy, but there are restrictions.
                     The insurer may not use “a factor on the credit history of the applicant that occurred more than 5 years
                     prior to the issuance of the new policy” and must advise the applicant that his/her credit history is used.
                     At the request of the applicant, the insurer must also “provide a premium quotation that separately
                     identifies the portion of the premium attributable to the applicant’s credit history.”
                •    In the rating of a new auto policy, insurers may not use the absence of credit history (or the inability to
                     determine the applicant’s credit history) or the number of credit inquiries on a person’s history.
                •    Every two years or at the request of the insured, auto insurers must review the credit history of an
                     insured who was adversely impacted by the use of credit history at the initial rating and make the
                     appropriate premium adjustments. Insurers must disclose these review options to applicants at the
                     time of issuance of the policy.
                •    “With respect to private passenger motor vehicle insurance, an insurer that rates a new policy based, in
                     whole or in part, on the credit history of the applicant may, if actuarially justified, provide a discount of
                     up to 40% or impose a surcharge of up to 40%.
                •    The MD Insurance Commissioner is also directed to conduct a study on whether the use of credit
                     scoring has “an adverse impact on any demographic group defined by race or socio-economic status.”
                     These and other findings are required to be submitted to the General Assembly by January 1, 2004.

                The Maryland Insurance Division issued a bulletin (Bulletin 02-14) that is intended assist insurers with their
                compliance obligations under the new law. The July 2002 bulletin, which is essentially a section-by-section
                Q&A, can be downloaded at www.mdinsurance.state.md.us/documents/BulletinP&C02-14.pdf. The
                department shortly thereafter issued a supplementary bulletin (Bulletin 02-16), which can be downloaded at
                www.mdinsurance.state.md.us/documents/BulletinP&C02-16.pdf.
Massachusetts   Legislation on this subject is expected at some point in the future. In addition, Julianne Bow ler, the
                commissioner of insurance, addressed the use of credit information in a April 8, 2002 interview that
                appeared in BestWire. She said: “Credit scoring is prohibited in Massachusetts, in all lines of business. It's
                tied into our fair trade practices act. All the insurance companies have that information on the checklists
                when they submit for rate or form approval so they know up front they can't use it.”
 State                                        Existing Rules and Previous Action                                                       Recent Legislative or Regulatory Activity

Michigan    The Michigan Office of Financial and Insurance Services held a series of six public hearings on the use of        On February 14, 2003, outgoing Commissioner Frank Fitzgerald
            credit information between June 4 and July 18, 2002, and the Commissioner issued a report on his findings         issued Order No. 03-005-M and Bulletin No. 2003-01-INS, which
            in December 2002. The issuance of the report was followed in February by the development of a new                 require insurers using credit information to take certain
            bulletin – Bulletin No. 2003-01-INS – concerning the use of credit information. For copies of the testimony       compliance actions. The key requirements are outlined below:
            provided at the hearings, a copy of the Commissioner’s report, and other information, see
            www.michigan.gov/cis/0,1607,7-154-10555_12902_15784---,00.html.                                                   •    Companies must file the specific credit classification factors
                                                                                                                                   used to calculate insurance scores and any credit-related
            In July 2002, then-State Attorney General and current Governor Jennifer Granholm issued a Consumer Alert               formulas used to apply discounts with the department by
            entitled “Home and Auto Insurance – Get the Credit You Deserve!” That alert can be found at                            July 1, 2003, and they must also file an actuarial certification
            www.ag.state.mi.us/cp/alerts/c_alerts/consumer_alert67.htm. The then-Attorney General also issued a                    justifying the discount levels and tiers being used. [The
            press release related to the consumer alert in which she was quoted as saying: “Though not illegal, the                bulletin also makes clear that rating materials filed with the
            practice of ‘insurance credit scoring’ should certainly give every consumer pause, especially in light of the          agency are accessible to inspection by the public.]
            fact that Consumer Reports has found that 70 percent of credit reports have an error and 29 percent have a
            major error. How fair is it to penalize consumers for a score that could very well be erroneous?” See             •    Insurers using insurance scoring discounts must recalculate
            www.ag.state.mi.us/press_release/pr10332.htm. She has also stated that she would support efforts to ban                and then apply an insured’s score at least once annually,
            credit scoring, something she called “a terrible practice.”                                                            and carriers must recalculate these scores and apply the
                                                                                                                                   appropriate discounts whenever a person successfully
                                                                                                                                   disputes information contained in one’s credit history.

                                                                                                                              •    Insurers using credit scoring must inform auto and
                                                                                                                                   homeowners policyholders and applicants that credit
                                                                                                                                   information is used and disclose the tier in which the person
                                                                                                                                   is placed.

                                                                                                                              The report issued by the department in December also included
                                                                                                                              several recommendations for legislative action. Although no
                                                                                                                              formal legislative action has taken place to date, the House
                                                                                                                              Insurance and Financial Services Committee has established a
                                                                                                                              subcommittee to study the issue.
Minnesota   Minn. Stat. §72A.499, subdivision 1, addresses insurer obligations when adverse underwriting decisions are        SF2363, w hich is now in effect, unanimously passed the
            made. These provisions are listed below:                                                                          Minnesota Legislature and was signed into law in 2002. In
                                                                                                                              summary, the law provides the f ollowing:
            “Subdivision 1. Notice and information. (a) In the event of an adverse underwriting decision, the insurer or        (a.) An insurer may not reject, cancel or non-renew an auto or
            insurance agent responsible for the decision shall provide in writing to the applicant, policyholder, or          homeowners policy in whole or in part on the basis of credit
            individual proposed for coverage:                                                                                 information without consideration of other underwriting factors.
                                                                                                                                (b) If credit information or scoring is used in underwriting, the
                  (1) the specific reason or reasons for the adverse underwriting decision, a summary of the person's         insurer must disclose that credit information will be obtained and
                  rights under sections 72A.497 and 72A.498, and that upon request the person may receive the specific        used as part of the insurance underwriting process.
                  items of personal information that support those reasons and the specific sources of the information; or      (c) Insurance inquiries and non-consumer initiated inquiries may
                                                                                                                              not be used as part of the scoring process.
                  (2) the specific reason or reasons for the adverse underwriting decision, the specific items of personal      (d) If a credit information or score relating to a consumer is
                  and privileged information that support those reasons, the names and addresses of the sources that          adversely impacted or cannot be generated because of the lack
                  supplied the specific items of information specified, and a summary of the rights established under         of a credit history, the insurer must exclude the use of credit as a
                  sections 72A.497 and 72A.498.                                                                               factor in underwriting.
                                                                                                                                (e) Insurers must provide reasonable credit exemptions based
            (b) In addition to the requirements of paragraph (a), if the adverse underwriting decision is either solely or    upon prior credit histories for persons whose credit information is
            partially based upon a report of creditworthiness, credit standing, or credit capacity that an insurer receives   unduly influenced by extraordinary life events, such as a
            from a consumer reporting agency, the insurer or insurance agent responsible for the decision shall provide       catastrophic injury or the death of a spouse.
            in writing the primary reason or reasons for the credit score or other credit based information used by the         (f) A scoring methodology may not be used by an insurer if the
            insurer in the insurer's adverse underwriting decision.”                                                          methodology incorporates the gender, race, nationality, or
                                                                                                                              religion of an insured or applicant.
            The MN Department of Commerce’s viewpoint on the relevant issues can be found in a consumer tip sheet               (g) Insurers who employ a credit scoring or insurance scoring
            that has been posted at www.commerce.state.mn.us/pages/ConsumerTips/ConTip-CreditScore.htm.                       system in underwriting must have on file with the commissioner
  State                                          Existing Rules and Previous Action                                                         Recent Legislative or Regulatory Activity

                                                                                                                                   (1) the insurer’s scoring methodology, and (2) information that
                                                                                                                                   supports the insurer’s use of a credit score or insurance score.
                                                                                                                                   Information provided by an insurer to the commissioner under
                                                                                                                                   these provisions is trade secret information.
Mississippi
 Missouri     The Missouri Department of Insurance recently posted an FAQ on industry use of credit information to its
              website, and this can be found online at www.insurance.state.mo.us/consumer/faq/creditScoring.htm.

              Missouri Governor Bob Holden called for credit-related legislation in early 2002 and made the issue part of
              his legislative package. A substitute compromise bill –House Bill 1502 – was ultimately adopted in place of
              the two proposals originally put forth. Among other provisions, the law does the following:

              •    Prohibits insurers from taking adverse actions against consumers based on a credit report or insurance
                   credit score without consideration of another noncredit related underwriting factor.
              •    Requires that insurers disclose at time of application or on the application itself that credit reports or
                   insurance scores are utilized.
              •    Prohibits an insurer from taking an adverse action based on information in a credit report that is the
                   subject of a written dispute until such dispute has reached a final determination in accordance with the
                   FCRA.
              •    Imposes certain disclosure requirements on insurers that take adverse actions based on a credit report
                   or insurance score and provides those subject to an adverse action with the ability to request a
                   reevaluation.
              •    Permits insurers to obtain a current credit report or insurance score at the time of renewal underwriting,
                   but prohibit adverse actions based on scores or credit reports that are more than three years old.
              •    Prohibits the number of consumer insurance inquiries from being utilized as a negative factor in scoring
                   formulas.
              •    Prevents entities that create, compile, or provide insurance scores from selling or otherwise providing
                   certain types of information – including the estimated expiration date of insurance policies – in certain
                   instances. See §12.

              The law applies to all contracts entered into on of after July 1, 2003.
 Montana      There is a statute and bulletin in place. Among other provisions, state law (see §33-18-210(11)) provides            Two separate bills are moving through the Montana Legislature.
              that:                                                                                                                The first, Senate Bill 349, is based on the NCOIL model law and
                                                                                                                                   was adopted 47-3 by the Senate on February 28. The second,
              “An insurer writing automobile or homeowner insurance may not refuse to insure, refuse to continue to                House Bill 184, is supported by the insurance commissioner and
              insure, charge higher rates, or limit the scope or amount of coverage or benefits available to an individual         was approved 87-11 by the House on February 12.
              based solely on the insurer’s knowledge of the individual’s credit history unless (i) the insurer possesses
              substantial documentation that credit history is significantly correlated with the types of risks insured or to be
              insured; (ii) the insurer sends written communication to the individual disclosing that the insurance coverage
              was declined, not renewed, or limited in scope or amount of coverage or benefits because of credit
              information relating to the applicant or the insured; and (iii) upon subsequent request of the individual, mailed
              within 10 days of receipt of the denial, nonrenewal, or limitation, the insurer provides the individual with a
              copy of the credit report at issue or the name and address of a third party from whom the individual may
              obtain a copy of the credit report, within 10 days of receipt of the request.”

              The department issued an “advisory bulletin” on September 7, 2001, that addresses Montana law concerning
              adverse actions. See http://www.state.mt.us/sao/Other/csmemorandum.htm.
Nebraska      There is no written law, regulation, bulletin, or other provision in place regulating/restricting use of             The unicameral legislature is currently considering LB 487, and
              information in underwriting. The Department's "public position" is that credit history cannot be used as sole        the proposal passed the Banking, Commerce, and Insurance
              underwriting criterion – but consumer complaints have not been very successful.                                      Committee on February 26. The bill is nearly identical to the
                                                                                                                                   NCOIL model law.
    State                                           Existing Rules and Previous Action                                                        Recent Legislative or Regulatory Activity

                However, the 2001 Legislature passed LB 444, which instituted two relatively simple disclosure requirements
                that apply to private passenger auto insurance. The applicable section of the law states:

                     "On and after July 1, 2002, no private passenger automobile liability policy shall be delivered, issued for
                     delivery, or renewed with respect to any motor vehicle licensed in this state unless accompanied by a
                     disclosure showing . . . if any credit-based rating was used to determine the rate charged."

                As described by the department, this disclosure requirement covers only those situations where an individual
                insurer has two or more rate levels available to a policyholder and credit scoring or some other use of credit
                history is a factor used in determining which rate applies. In these situations, the insurer must make a clear
                affirmative statement to the policyholder that it has used credit history or credit scoring as a factor in
                determining the rate being charged. Please note that it will not suffice to merely include a blanket statement
                that credit scoring might have affected the rate – the disclosure should be an affirmative statement made
                only when credit scoring or credit history is used by the individual insurer in its pricing calculations.
   Nevada       In 2002, the Nevada Division of Insurance convened a meeting with a group of industry representatives,
                consumer advocates, and credit agencies t to discuss the use of credit scores in setting insurance rates.
                The division is concerned about whether the practice unfairly discriminates against certain segments of the
                population, and they are investigating the issue.
New Hampshire   On March 4, 2002, New Hampshire adopted a new regulation in this area (INS 3300), which is effective
                September 1. A copy of the new regulation can be accessed online at
                http://www.state.nh.us/insurance/Regs/ins3300adopted%203-4-02.pdf. A summary of the regulation follows:

                •   The regulation applies to auto and homeowners insurers that use insurance scores (as that term is
                    defined) for underwriting and rating purposes. Insurers must develop written standards for the use of
                    such scores, and these scores may not be based on race, sex, religion, national origin, place of
                    residence, blindness, physical disabilities, or other articulated factors.
                •   Insurers must submit their underwriting models and rates with the department “for approval.” The
                    characteristics, factors, and criteria associated used in the underwriting or rating must be filed. In
                    addition, insurers must also separately submit their insurance scoring models, and such models must be
                    approved prior to their use. As part of this latter filing, insurers must include statistical validation
                    supporting the use of insurance scores in the rating process.
                •   Insurers that use an insurance score at the time of original application must provide a notice of this fact to
                    the consumer, and a similar notice must be provided if such scores at used upon renewal. The notice
                    must be provided by the same method that the application is submitted.
                •   The regulation defines “adverse action” and sets out a set of rules for when such actions are taken by an
                    insurer. In these instances, insurers must notify the consumer, provide the contact information of the
                    consumer reporting agency that furnished the information to the insurer, and provide notice of the
                    consumer’s rights. If requested, insurers must also provide consumers with the two primary reasons why
                    the consumer was assigned the insurance score.
 New Jersey
 New Mexico     A March 4, 2002 Insurance Chronicle story reported on Superintendent Serna and the insurance division’s              The Superintendent established a task force in 2002 to examine
                position on the use of credit information, and the article suggested the division has some concerns with the         the issue, conduct public hearings, and develop policy
                correlation between risk and credit history and the impact of using credit histories in New Mexico. Bulletin         recommendations. The task force provided its recommendations
                No. 2002-001, located at http://www.nmprc.state.nm.us/insbul22001.pdf, also states that all insurers using           to the Superintendent in late 2002, but no new regulations have
                credit scoring in any phase of their underwriting or ratemaking process must submit all portions of their            yet been promulgated as a result of the group’s actions.
                programs related to credit scoring to the Insurance Division.                                                        Superintendent Serna remains concerned about the implications
                                                                                                                                     that the use of credit scoring may have on minorities, and he has
                                                                                                                                     asked the University of New Mexico to conduct a study of the
                                                                                                                                     issue (expected to be completed by the Summer of 2003).

                                                                                                                                     Two bills to ban the use of credit information by the insurance
                                                                                                                                     industry were introduced in 2003, but both failed to pass before
                                                                                                                                     the close of the legislative session.
    State                                            Existing Rules and Previous Action                                                           Recent Legislative or Regulatory Activity

  New York       The NY Department has some in-house guidelines regarding the use of credit information. It is an informal
                 Department opinion, which also covers the use of credit information for moving consumers among tiers in
                 multi-tier plans. It is allowable to use credit history as one of the underwriting criteria, but not the sole
                 criteria.
North Carolina                                                                                                                           Legislation in this area could be introduced and considered
                                                                                                                                         during the 2003 session.
North Dakota     A story in the February 24, 2002 edition of the Argus Leader reported that “Commissioner Jim Poolman . . .              The North Dakota House and Senate both overwhelmingly
                 wants to find our how widespread the practice of credit scoring is and what problems is might be creating.”             passed House Bill 1260, which is nearly identical to the NCOIL
                 The article reported that the commissioner was particularly interested on the impact on farmers who suffer              model law. The most recent action on the bill, the Senate’s
                 periodic financial problems, people with no credit history, and individuals who use cash for purchases.                 passage, took place on March 24, 2003.

                 Commissioner Poolman scheduled a public hearing to “solicit opinions on the use of credit information in
                 pricing and underwriting of insurance.” The hearing, held on April 2, 2002, was attended by numerous
                 legislators and several company representatives. The Commissioner and the legislature are now expected
                 to consider whether regulation or legislation is needed.
    Ohio         House Bill 519 was introduced in February 2002, which would:

                 •     Prohibit an insurer from refusing to “write or renew motor vehicle insurance solely on the basis of an
                       applicant's or insured's credit score or credit report.”
                 •     Prohibit an insurer from considering “a credit score or credit report in underwriting motor vehicle
                       insurance unless the credit score was determined or the credit report issued within the prior year.”
                 •     Require that insurers annually obtain new credit scores and credit reports for each of its motor vehicle
                       insurance insureds and utilize that information in determining its insureds' premiums. [“If spouses are
                       covered under the same policy of motor vehicle insurance, an insurer shall obtain credit scores or credit
                       reports on both spouses, and the better credit score or credit report shall be used in determining the
                       premium for the policy.”]
                 •     Require that insurers notify an applicant in writing prior to the issuance of a policy if credit information is
                       considered to determine rates.
                 •     Prohibit an insurer from increasing an applicant's or insured's premium as a result of a request for
                       information on the insurer's use of credit scores and credit reports.”
                 •     Require that a person’s lack of credit history be treated as a neutral factor.
                 •     Compel the Department of Insurance to study and issue a report on the use of credit information by the
                       insurance industry.
  Oklahoma       In a June 30, 2000 bulletin, Commissioner Fisher informed the industry that the OK Board for P&C Rates                  In late February, the Oklahoma House passed House Bill 1751
                 had recently established guidelines to be used “for credit reports/scores in underwriting and rate                      by a vote of 99-1, and the proposal has been forwarded to the
                 determinations for insurance in the State of Oklahoma.                                                                  Senate for its consideration. The proposal is very similar to the
                                                                                                                                         model law that was adopted by NCOIL in November 2002.
                 The Commissioner also made clear that “agents and consumers [should] not bear the expense of obtaining
                 credit reports/scores.” He also expressed concern with the liability exposure for agents when companies use
                 a consumer’s credit information, and he urged companies to “limit the information that goes to the agent as
                 to eliminate any sort of liability the agent might incur.”

                 The Commissioner also said: “If you choose to apply credit reports/scores to your current book of business,
                 please allow an additional 90 days notice to the standard renewal offer. This should give consumers time to
                 verify the accuracy of their information.”

                 The formal procedures address these issues in greater detail, and some of the key provisions summarized
                 below:

                 •    Insurers are required to notify insureds of “any adverse action taken as a result of the insured’s credit
                      history or credit score, which includes an increase in premium due to a change in tier or company
                      placement.”
   State                                          Existing Rules and Previous Action                                                       Recent Legislative or Regulatory Activity

               •    Insurers are prohibited from refusing to “insure, cancel, or nonrenew based solely on an insured’s credit
                    history or credit score.”
               •    Insurers are prohibited from penalizing an insured for having no credit history.
               •    The procedures contain a correction of premiums provisions that requires a refund of back to the last 12
                    months of coverage.
               •    An insurer is required to have “specific written criteria on how credit information affects underwriting and
                    rate determinations,” and certain information must be filed with the Board if requested.

               The Oklahoma Department of Insurance website also discusses the rules in place in Oklahoma –
               http://www.oid.s tate.ok.us/AskCarrollFisher/110101CreditRatesAuto.htm.

               In September 2001, the Oklahoma Board for P&C Rates revised its earlier guidelines, and in November
               2001, the insurance commissioner issued Bulletin No. PC 2001-07 detailing the new rules. The new bulletin
               can be downloaded online at http://www.oid.state.ok.us/080301P&Crevised/112601P&CBulletinPC2001-
               07.pdf. The revised rules loosen the “rechecking” requirements and provide insurers with an alternative for
               satisfying the filing requirements.
  Oregon       The Oregon Insurance Division adopted a rule addressing insurer use of credit information in December               Several bills have been introduced during the 2003 legislative
               2002, and the new regulations are to take effect beginning June 1, 2003. The rules primarily impose new             session, but none has been the subject of any formal committee
               requirements concerning the disclosures that must be made to consumers in the event that credit information         consideration or vote.
               is to be used and after an adverse action is taken. A copy of the new rule can be accessed at
               www.cbs.state.or.us/external/ins/docs/rules/recent_adopt/id25-2002_rule.pdf.

               Joel Ario, Oregon’s Insurance Administrator, is also Co-Chairman of the NAIC’s Credit Scoring Working
               Group – along with Washington State Commissioner Mike Kreidler
Pennsylvania    Senate Bill 1456 (2002) was introduced late during that legislative session. The proposal says that an
               insurer “shall not deny, cancel or refuse to renew personal insurance due in whole or in part to an insured’s
               credit history.” However, the bill permits the use of credit histories in combination “with other objective
               criteria,” but the maximum premium differential based on credit history shall be no more than 20%.
Rhode Island   Under Rhode Island law (§§6-13.1-20 – 6-13.1-23): A credit report in connection with a consumer’s                   Senate Bill 137 and House Bill 5362 have been introduced in the
               application for credit, employment, or insurance cannot be requested unless a consumer is first informed that       Rhode Island General Assembly, and both bills would incorporate
               a credit report may be requested in connection with such application. Whenever credit or insurance for              Sections 5(H) and 11 of the NCOIL model law to the reform
               personal, family, or household purposes involving a consumer is denied or the charge for such credit or             statute adopted in 2002.
               insurance is increased either wholly or partly because of information contained in a credit report from a credit
               bureau, the user of the credit report shall advise the consumer against whom such adverse action has been
               taken and supply the name and address of the credit bureau making the report. Any consumer who
               requests disclosure of his or her credit file from a credit bureau shall be entitled to have mailed to the
               consumer a copy of the information in the files of the credit bureau that pertains to the consumer at the time
               of the consumer’s request for disclosure within four working days of such request. The credit bureau may
               impose a reasonable charge for said report. The law provides for a disputed credit report resolution, setting
               time limits during which the credit bureau must reinvestigate the current status of the information provided
               and allow the consumer to file brief statements setting forth the nature of the dispute. Whenever a statement
               of dispute is filed, any subsequent consumer report containing the information in question must clearly note
               that it is disputed by the consumer. Following any deletion or correction of information which is found to be
               inaccurate, the credit bureau must furnish a copy of the corrected credit report to the consumer at no charge
               and at the request of the consumer, furnish a copy of the corrected report to any persons specifically
               designated by the consumer.

               The legislature recently adopted HB 8027, which becomes effective at the start of 2003, and the proposal
               has become effective without the governor’s signature. The legislative intent section of the new law states
               that “[s]tudies of the issue have revealed a strong body of evidence which clearly and convincingly shows
               that a credit score is a strong predictor of future loss,” but it also says that “a series of safeguards” and
               “reasonable requirements” are necessary.
    State                                            Existing Rules and Previous Action                                                 Recent Legislative or Regulatory Activity

                 In addition to other provisions, the new law only permits an insurer to use insurance scoring for rating and
                 underwriting of homeowners’ or auto insurance if:

                 •    The insurer “demonstrates the predictive nature of their insurance score to the insurance division.”
                 •    If requested by an existing customer, an insurer must “obtain an updated insurance score for the
                      consumer.” If the score has improved, the insurer must provide whatever rating decrease is
                      appropriate, but the insurer’s ability to increase rates based solely on the revised score is limited.
                 •    An insurer “shall not decline insurance for a new customer based solely on an insurance score, or
                      absence of insurance score” – and an insurer shall not cancel, nonrenew, or increase rates based
                      solely on the worsening of a consumer’s score except under limited circumstances.

                 The new law also provides a definition for “insurance score” and mandates that “agents shall be held
                 harmless by insurers for all acts, efforts and disclosures in obtaining an insurance score on the insurer’s
                 behalf.” Again, the law takes effect January 1, 2003.
South Carolina   SC Code §38-73-740 (Act 181 of 1993) provides: “All information, including investigative and credit reports
                 used in determining the classification or premium rates of any person applying for automobile insurance,
                 must be kept on file by the insurer for at least 3 years from the date the application was made. Upon request
                 of the applicant, the applicant, the contents of the file must be made available for inspection by the applicant
                 and copies of the documents must be furnished [to] the applicant if he pays for the cost of reproducing
                 copies.”

                 Bulletin 98-2 (issued 8/1998) included the following Q&A:

                      (9) Can any insurer utilize credit reports or credit scores in determining the rate level tier within which to
                     place an applicant or renewing insured? Yes. State law currently recognizes the use of credit reports
                     and credit scores in the premium calculation process within §38-73-740. However, if a credit report or
                     credit score is utilized to determine a risk’s classification or premium rate, then the credit report or credit
                     score must be retained by the insurer for 3 years from the date the application and, upon request and
                     upon the payment of reasonable copying costs, must be provided to the applicant or renewing insured by
                     the insurer or, through the insurer, by the 3rd party scoring vendor. It is important to note that §38-73-740
                     imposes a requirement upon insurers not upon 3rd party scoring vendors.

                      [. . . ] If an insurer places an insured in a higher than the lowest rate level tier available for that
                     underwriting insurer or available within the group of which that underwriting insurer is a member as a
                     result of a credit report or credit score and if the credit report or credit score is detailed as the §38-77-126
                     disclosure reason for the higher rate level tier, then the insured must be given notice of the credit report’s
                     or the credit score’s availability pursuant to §38-73-740.

                 In 2002, the legislature adjourned without any bill being adopted, but the Department of Insurance addressed
                 the issue by issuing Bulletin Number 2002-04 on May 24, 2002. That bulletin, which is effective on January
                 1, 2003, can be accessed at http://www.state.sc.us/doi/Bulletin2002-04.pdf.
South Dakota     A department hearing on the issue was held March 26, 2002. Almost two dozen companies and the relevant
                 trade associations were in attendance, and it is expected the debate will lead to some form of action in the
                 coming months. A second meeting on the issue was held in mid-May 2002. The department is weighing its
                 options at this point, and it is expected that they will either develop and issue a regulation or prepare a
                 legislative proposal for 2003. The department is thought to have the authority to issue a regulation or bulletin
                 in this area, so the first option is perhaps the more likely scenario.
 Tennessee       The Tennessee Insurance Department’s Review Requirements Checklist states that credit scoring plans
                 must be filed with the department for certain lines of insurance. For personal auto, farm, dwelling fire, and
                 homeowners insurance, the checklist states that (1) justification for using credit scoring must be provided; (2)
                 the credit scoring system cannot be the sole basis for determining rates/tiers; (3) the credit scoring program
                 must specify the credit reporting company(ies) used, the characteristics used, the points assigned to the
                 various credit characteristics, and the formula used to obtain the final point, and (4) the point ranges for
                 determining the applicable rates/tiers must be filed. The checklist can be accessed at
  State                                        Existing Rules and Previous Action                                                       Recent Legislative or Regulatory Activity

             determining the applicable rates/tiers must be filed. The checklist can be accessed at
             http://www.state.tn.us/commerce/fspmkt.pdf.
  Texas      Texas does not have a law that regulates the use of credit information for underwriting purposes. However,         Numerous bills addressing the issue have been introduced, but
             the Texas Insurance Code does prohibit discriminatory practices.                                                   little formal action has taken place as of this date.

                                                                                                                                In addition, a study released from the Bureau of Business
                                                                                                                                Research at the University of Texas found a "statistically
                                                                                                                                significant" relationship between a person's credit history and
                                                                                                                                tendency to incur losses on an auto insurance policy. The study
                                                                                                                                was commissioned by Lt. Governor William Ratliff in June 2002
                                                                                                                                to examine the relationship between credit scores and incurred
                                                                                                                                losses. The study determined, in general, that “lower credit
                                                                                                                                scores were associated with larger incurred losses." The study
                                                                                                                                can be found at: www.utexas.edu/depts/bbr/bbr_creditstudy.pdf.
  Utah       During the 2002 session, the legislature passed and the governor signed HB110. The new law, which
             applies only to “motor vehicle related insurance,” prohibits the use of “credit information” in most instances.
             However, credit information is expressly permitted if used to (1) “determine[e] initial underwriting” “if risk
             related factors other than credit information are considered” and (2) provide insureds with “a reduction in
             rates” or “any other discount similar to [a] reduction of rates . . .”
 Vermont
 Virginia    On June 17, 2002, Commissioner Gross issued Administrative Letter 2002-6, which requires scoring models            Senate Bill 1284 (Chapter 553) was signed into law by Governor
             to be filed with the Bureau of Insurance. Specifically, the letter states the following:                           Warner on March 24. The new law is similar to the NCOIL model
                                                                                                                                law and other state statutes, and some of the elements of the
                 “It has recently come to the attention of the State Corporation Commission Bureau of Insurance that it is      proposal are highlighted below:
                 possible to change the mathematical components/formulae of a credit scoring model used for
                 calculating rate levels, thereby changing the final rate charged to an insured. Section 38.2-1906 of the       •   The bill applies to motor vehicle insurance and policies
                 Code of Virginia requires that all rates and supplementary rate information be filed prior to their use.           written to insure owner-occupied buildings or the personal
                                                                                                                                    property of a tenant’s residential property risk.
                 Effective immediately, any insurer that intends to use credit scoring models in rating or tiering must file    •   The proposal includes initial notification, adverse action, and
                 the models prior to their use. Insurers currently using credit scoring models in rating or tiering must file       re-check, and error correction requirements similar to those
                 their models no later than September 1, 2002.                                                                      in the NCOIL model law.
                                                                                                                                •   The bill prohibits the use of the following factors for
                 The models will be considered part of the rate filing and will be open to public inspection according to §         underwriting, tier placement, or rating purposes –
                 38.2-1907.”                                                                                                        information identified as disputed by the consumer reporting
                                                                                                                                    agency, insurance or non-consumer initiated inquiries,
                                                                                                                                    collection accounts with a medical industry code, certain
                                                                                                                                    lender inquires made within 30 days on one another, and a
                                                                                                                                    person’s total available line of credit.
                                                                                                                                •   “An insurer may, upon request, provide reasonable
                                                                                                                                    exceptions for an individual whose credit information is
                                                                                                                                    directly and adversely impacted by a catastrophic event, as
                                                                                                                                    determined by the insurer, including, but not limited to,
                                                                                                                                    catastrophic illness or injury or the death of a spouse or
                                                                                                                                    member of the same household. The insurer may require
                                                                                                                                    reasonable documentation of the event prior to granting an
                                                                                                                                    exception.”
                                                                                                                                •   These provisions would apply to all new policies not later
                                                                                                                                    than January 1, 2004, and to all renewal policies not later
                                                                                                                                    than April 1, 2004.
Washington   House Bill 2544 (2002) was enacted last year, and some of the statute’s major provisions are outlined below.

             •   Insurers taking adverse actions (as defined under the act) “based in whole or in part on credit history or
                 insurance score shall provide written notice” to those affected. Such notice “must state the significant
   State                                          Existing Rules and Previous Action                                                       Recent Legislative or Regulatory Activity

                    insurance score shall provide written notice” to those affected. Such notice “must state the significant
                    factors … that resulted in the adverse action.”
                •   Insurers are prohibited from canceling or nonrenewing personal insurance based in whole or in part on
                    credit history or insurance score.
                •   Insurers “may use credit history to deny personal insurance coverage only in combination with other
                    substantive underwriting factors.”
                •   Insurers are prohibited from denying personal insurance or setting rates based on one’s absence of
                    credit history, the number of credit inquiries, and a series of other factors (based in part on guidelines
                    developed last year in Connecticut).
                •   Insurers must file insurance scoring models with the commissioner, and this information will be kept
                    confidential.
                •   The commissioner is required to prepare a report on the use of credit history for the legislature.

                On September 6, the Office of the Insurance Commissioner (OIC) issued its rules related to enforcement of
                the new law. A copy of these rules, which contain a Q&A, can be found online at
                www.insurance.wa.gov/tableofcontents/newrules/2001-11103.pdf.
West Virginia   West Virginia’s statutes provide that no insurer may decline to issue or terminate a policy of insurance if the
                declination is based solely on adverse credit reports or scores. The citations are §33-6B-3 (j) (1990) for auto
                insurance and 33-17A-6(h) (1990) for property insurance.

                The Insurance Commission released Informational Letter No. 142 in July 2002. The letter permits the use of
                credit-related information, lifts the moratorium that had been in place, and outlines the rules that must be
                followed when credit information is utilized. See www.state.wv.us/insurance/Info%20142.htm.
 Wisconsin      In June 1997, the Office of the Commissioner of Insurance (OCI) issued a bulletin entitled “The Use of Credit
                Reports in Underwriting Personal Auto and Homeowner’s Policies.” This bulletin can be viewed online at
                http://oci.wi.gov/bulletin/61697bul.htm.

                The bulletin says “insurers should not use credit information, whether they use credit reports or scoring
                mechanisms , as the sole reason to refuse an application, cancel a new insurance policy in its first 60 days of
                coverage, or nonrenew an existing policy.” The bulletin also suggests that insurers could face violations of
                the unfair marketing practices statute if they do not implement the following procedures:
                 (1) Develop written criteria (including quantifiable underwriting standards) on how credit information affects
                the underwriting decision.
                 (2) Disclose to applicants and insureds the items which resulted in the underwriting decision.
                 (3) Consider information from applicants and insureds concerning the accuracy of a credit report.
                 (4) Disclose to consumers that it may/will gather credit information and outline the circumstances when a
                credit report will be used. [The bulletin cites other procedures also.]

                In 2001, the OCI surveyed auto and homeowner’s insurers in the state to determine how they utilize credit
                information in the underwriting and rating process. The results from this inquiry can be found online at
                http://oci.wi.gov/creduse.pdf.
  Wyoming                                                                                                                         Senate File 81 (2003) has been approved by both the Wyoming
                                                                                                                                  Legislature and was signed into law on March 3. The new law
                                                                                                                                  provides the insurance commissioner with rulemaking authority to
                                                                                                                                  issue regulations concerning the use of credit scoring in the
                                                                                                                                  underwriting of personal lines insurance policies. The law
                                                                                                                                  requires that the regulations prohibit the use of credit information
                                                                                                                                  as the sole basis to underwrite and require that consumers
                                                                                                                                  receive an initial disclosure that credit information will be used.

				
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