CNA TAKES MAJOR POSITION IN SYNTHETIC GIC MARKET

CHICAGO-CNA Financial Corp. has acquired the synthetic guaranteed investment contract business of Provident Life & Accident Insurance Co. for an undisclosed amount.

The book of business, which has assets of more than $2 billion, gives CNA an estimated 5% market share in the highly fragmented synthetic GIC business and makes it one of the largest insurers in the business, said Jeff Mohrenweiser, assistant vp of pension markets at CNA. The insurance company has been seeking to enter this market for the past 18months, he said. The acquisition involves 75 pension plans, most representing Fortune 500 employers.

CNA already is a major factor in the traditional GIC market. Synthetic GICs allow pension plans to retain ownership of the underlying assets while participating in asset performance.

A spokesman for Chattanooga, Tenn.-based Provident said the insurer's sale of its synthetic GIC business to CNA is in line with a 1994 strategic decision to get out of the group pension business and to focus instead on its group and individual disability and its non-medical employee benefit business, including group life. It is now in the process of running off its traditional GIC business, which had just over $3 billion in assets under management at year-end 1996, the spokesman said.

Sexual harassment suit settled

MINNEAPOLIS-The settlement of a sexual harassment lawsuit filed by the Equal Employment Opportunity Commission against a nationwide executive recruitment firm will stand as an example of cooperative resolution of such complaints, an attorney says.

Cleveland-based Management Recruiters International Inc. agreed to pay $1.3 million to 17 female workers after the women, employees of MRI's Edina, Minn., office, accused a sales manager of inappropriate physical contact, verbal propositions and other lewd remarks over about 13 years. The sales manager was fired last year. The EEOC said this is the largest settlement it has reached in a sexual harassment suit.

MRI also agreed not to rehire the manager, to explicitly state why he was fired and to conduct sexual harassment awareness training for managers, which the EEOC is entitled to monitor. The company also agreed to maintain and post policies concerning sexual harassment.

The case stands out for MRI's willingness to own up to the behavior of a senior employee in one of its locations, said Lloyd Zimmerman, EEOC senior trial attorney.

"Ultimately the company apologized for what happened," he said. "Most employers have a reflex action to fight, to scream, to deny."

In an MRI prepared statement, the company denied liability for the manager's misdeeds, but said a friendly resolution with the EEOC was better than "spending years in expensive and protracted litigation."

Also last week, a federal judge assigned class-action status to a sexual discrimination suit involving Northlake, Ill.-based Dominick's Finer Foods Inc. The suit alleges that some 15,000 female Dominick's grocery workers have been subject to discrimination in job advancement since 1993. It accuses the 83-store chain of promoting male employees faster and giving poor work assignments and inadequate training to women.

Dominick's President Robert A. Mariano, in a statement to employees, said none of the allegations has been proven and that every employee can advance "by choosing departments and jobs that best suit personal schedules, professional growth and financial goals."

Hyde calls for tort reform

WASHINGTON-House Judiciary Committee Chairman Henry Hyde, R-Ill., is renewing his call for comprehensive civil justice reform.

In his opening statement during a hearing on product liability reform last week, he said the list of legal areas that need reform "goes on and on."

In addition to product liability, Rep. Hyde said, "We need to address reforms in the areas of non-profit organizations and their volunteers, automobile insurance litigation, medical malpractice litigation, procedures for class-action litigation and punitive damage awards."

Neither a product liability reform bill nor a broader-based tort reform measure has been introduced in the House this session. The House passed a wide-ranging tort reform bill in 1995, but ultimately it was scaled back and merged into the Senate's product liability bill.

Although the compromise bill passed both houses of Congress, it fell victim to President Clinton's veto pen in May 1996. A bill identical to the one vetoed by the president has been introduced in the Senate by that chamber's Republican leadership. The measure is, however, considered to be a "place holder" bill that could undergo significant revision before it comes to a vote.

Meanwhile, Sen. John Ashcroft, R-Mo., introduced a bill last week designed to protect volunteers and charitable organizations from frivolous lawsuits. S.514, the Liability Reform for Volunteer Services Act, would cap the amount of punitive damages a plaintiff could recover from a covered volunteer or organization to the lesser of $250,000 or two times economic and non-economic damages; institute proportional rather than joint and several liability for such cases; and require a higher standard of evidence for awards in such cases.

Labor still reviewing stock plan

WASHINGTON-A decision by the U.S. Department of Labor on a request by Travelers Group for approval on its plan to contribute stock options to its 401(k) plan for all eligible employees is not imminent, a department official says.

"There is a lot of information to digest," said the official, who could not say when a decision would be reached.

In recent weeks, employee benefit consultants had been saying Labor Department approval of the trailblazing arrangement was all but certain and was expected by the end of March. Those predictions now appear to have been premature.

As proposed, Travelers would contribute stock options equal to 10% of an employee's compensation, up to $40,000 of compensation. The options would give employees the right to buy Travelers common stock at the closing price on the day before the option is granted. Unlike conventional stock option plans in which employees are taxed when they exercise the options, under the Travelers 401(k)-linked stock option plan, employees would not be taxed when they exercise the options or when they sold the shares, as long as the proceeds remained in the 401(k) plan (BI, March 31).

Benefits parity bill passes

DENVER-Insurers in Colorado must provide coverage for six neurobiologically based mental illnesses equivalent to what they would provide for any other physical condition.

The benefit mandate signed April 1 by Gov. Roy Romer expands coverage, beginning Jan. 1, 1998, for schizophrenia, schizoaffective disorder, bipolar affective disorder, major depressive disorder, specific obsessive-compulsive disorder and panic disorder.

The law is a narrower version of legislation introduced last year that would have expanded health care coverage to all types of mental illness, according to Rep. Marcy Morrison, who sponsored both pieces of legislation.

"I don't think we had as many insurers oppose this as the previous bill, which was not as narrowly focused," she said.

The biggest opponent of H.B. 97-1192 was the Colorado Assn. of Industry, a statewide employer group.

The Colorado law brings to six the number of states with benefit mandates for mental health care. The other states with similar laws are Maryland, Minnesota, Rhode Island, Maine and New Hampshire.

Managed care profits to slow

NEW YORK-Managed care companies' profitability over the intermediate term will be slow in comparison with the early 1990s, and long-term profitability may be constrained by medical costs associated with aging enrollees, Moody's Investors Service Inc. says in a special report.

The 10-page report on the industry also notes that competition is increasing as "companies attempt to grow larger, and more players, including providers, seek to capture control of the premium dollar."

In the near term, large plans that can sustain market leverage and either manage or pass risk on to the provider will be in a better position to withstand premium pressures and utilization increases, says the report. Moody's also predicts that the "recent onslaught of 'anti-HMO' sentiment has and will likely continue to result in regulatory requirements" for health maintenance organizations.

Dow Corning seeks dismissal

BAY CITY, Mich.-Dow Corning Corp. has asked a federal bankruptcy judge to dismiss silicone breast implant claims for disease but to allow claims for localized injuries, such as ruptures and deformities, to go forward.

The Midland, Mich.-based company said its motion, filed April 7 in U.S. Bankruptcy Court in Bay City, Mich., follows recent court decisions that have allowed breast implant complications and rupture claims to move forward while finding evidence insufficient to support claims that silicone implants cause disease.

Dow Corning, a joint venture of Dow Chemical Co. and Corning Inc., also asked U.S. Bankruptcy Court Judge Arthur J. Spector to order that one mega-trial be held to decide whether the devices cause immune system illness. This request also was included in the company's bankruptcy reorganization plan (BI, Dec. 9, 1996).

Clinical studies so far have failed to show any definitive cause-and-effect relationship between implants and disease. However, a recent Mayo Clinic study found that nearly one in four women with implants had serious enough local complications to require one or more re-operations within five years of implant surgery.

Briefly noted

The Massachusetts Insurance Division, Electric Mutual Liability Insurance Co. and General Electric Co. are jointly recommending court appointment of Robert Steadman, a retired state superior court judge, as special master to review EMLICO claim settlements under a settlement agreement among the division, EMLICO and GE. . . .NYLCare Health Plans Inc., the health benefits subsidiary of New York Life Insurance Co., said it will begin marketing next month to small employers high-deductible indemnity plans linked to tax-favored medical savings accounts. NYLCare is one of the largest plans to date to enter the MSA market. . . .The Senate Labor and Human Resources Committee unanimously recommended last week that Alexis Herman be confirmed as U.S. Labor Secretary. . . .A federal judge in New York has reinstated a shareholder suit against Philip Morris Cos. The suit alleges the company's stock price was artificially high due to the company withholding information on the health risks of tobacco. Reinstatement came after plaintiffs submitted new documents concerning the addictive effects of nicotine. . . .Foundation Health Systems Inc. said it has acquired Clackamas, Ore.-based PACC, a 116,000-member health plan, for an undisclosed amount, an acquisition it says will make FHS the largest for-profit plan in Oregon. PACC has health plan operations including a health maintenance organization and a preferred provider organization in Oregon and Washington, with a heavy concentration in the Portland area. . . .The nearly 200 Chicago businesses involved in a class-action lawsuit against Great Lakes Dredge & Dock Co. are weighing a proposed $22 million settlement of claims stemming from the city's 1992 underground flood. Bridge-piling work done by Oak Brook, Ill.-based Great Lakes that breached an antiquated freight tunnel system running under the Chicago River was blamed for the subsequent flooding throughout Chicago's Loop business district. In March, Great Lakes settled with the city for up to $26 million, including $3 million cash and rights to collect the remainder from the company's insurers at Lloyd's of London. . . .John Feldtmose, president of benefit consultant A. Foster Higgins & Co. Inc. in New York, has resigned. Foster Higgins is a unit of Johnson & Higgins, which was acquired by Marsh & McLennan Cos. Inc. last month. . . .The Fair Political Practices Commission has approved the $50,000 fine negotiated by California Insurance Commissioner Chuck Quackenbush for campaign reporting violations (BI, April 7). . . .Frank G. Zarb, former chief executive officer of Alexander & Alexander Services Inc. and current president and CEO of the National Assn. of Securities Dealers Inc. in New York, was named the first executive chairman of the association last week.