Insurance Expert Witness On Excess Of Loss Coverage Part 1

What areas may insurance expert witnesses consult on? They may write reports, give deposition and testify on insurance regulations, insurance fraud, reinsurance, and more. In Excess Of Loss Coverage For Self Insurers: Is It Insurance Or Reinsurance?, attorney, mediator, and insurance expert witness Robert M. Hall writes:

I. Introduction
Self-insurance entities often purchase excess of loss coverage from conventional insurers and reinsurers in order to meet the solvency standards of the self-insurers’ supervising authorities. Often it is unclear whether this capacity must take the form of excess insurance or may take the form of reinsurance. The companies that provide this coverage sometimes structure it as reinsurance in order to be free of market conduct and rate and form regulation as well as premium taxes, guaranty fund assessments and other charges involved in direct insurance. However, the manner in which the coverage is styled may not be determinative when problems arise. The purpose of this article is to present selected case law as to whether this insurance or reinsurance is treated in several different self-insurance contexts.

II. Rate and Form Filings and Assessments
Commissioner of Insurance v. American Nat. Ins. Co., 410 S.W.3d 843 (Tex. 2012) involved stop loss coverage provided to qualified, self-funded employee benefit plans sponsored by various governmental and private entities. It is not clear from the opinion whether the relevant coverage documents were styled as policies or reinsurance contracts. However for financial statement purposes, the insurer treated the premiums it received as resulting from reinsurance assumed. During a routine audit, the Texas Insurance Department discovered this practice and alleged that the coverage was insurance rather than reinsurance and that the insurer should have paid premium taxes and complied with other regulatory strictures applicable to insurance.

After a detailed examination of Texas statutes, the court found the insurance code ambiguous on point but decided to defer to the position of the Insurance Department that the coverage was insurance and not reinsurance:

The Department has therefore concluded that stop-loss insurance purchased by a plan does not involve two insurers and is therefore not reinsurance. It is instead direct insurance in the nature of health insurance because stop-loss policies are purchased by the plans ultimately to cover claims associated with their health-care expenses. The Department’s construction is reasonable, was formally promulgated, and is not expressly contradicted by the Insurance Code. We accordingly agree with the Department’s construction and hold that stop-loss insurance sold to a self-funded employee health-benefit plan is not reinsurance, but rather direct insurance subject to regulation under the Insurance Code.

Mr. Hall is an attorney, a former law firm partner, a former insurance and reinsurance executive and acts as an insurance consultant as well as an arbitrator and mediator of insurance and reinsurance disputes and as an expert witness. Copyright by the author 2015. Mr. Hall has authored over 100 articles and they may be viewed at his website: robertmhall.com.