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Coverage denial

approved by court

BOSTON-A workers compensation insurer has no duty to defend in cases where a policyholders brings a suit rather than files a workers comp claim, the Massachusetts Supreme Judicial Court has ruled.

The case arose when an employee sued Boston-based HDH Corp., claiming wrongful discharge. After HDH lost in arbitration and paid $145,000, the company sued its workers comp insurer, Atlantic Charter Insurance Co., to recover the amount paid and defense costs.

Reversing an appeals court ruling, Massachusetts' highest court found in favor of the insurer and dismissed HDH's suit.

"Requiring workers compensation insurers to defend civil actions outside the workers compensation system would represent an unwarranted expansion of coverage historically understood as provided under this mandatory form of insurance, a result which would increase insurance costs for employers and could gut the legislative scheme for workers compensation," the court stated in its July 14 opinion.

Insurer groups that filed briefs in support of Boston-based Atlantic Charter hailed the decision.

"With this decision, Massachusetts workers compensation law and practice remains in the mainstream and costs remain stable," Suzanne Bump, assistant vp and attorney with the American Insurance Assn. in Boston, said in a statement. "Had the appeals court been upheld, Massachusetts would have been the only state to recognize a legally wrong and absurd rule."

Auto renters to get

insurance rebates

AUSTIN, Texas-Seven car rental companies and insurers that worked with them are refunding millions of dollars to renters in a settlement with Texas insurance regulators who charge the car companies illegally sold liability coverage in the state.

The Hertz Corp. and Philadelphia-based Reliance Insurance Co. are paying about $4.2 million to more than 312,000 customers, and Avis Inc. and Continental Casualty Co. are paying about $1.7 million to about 150,000 renters, according to figures provided by the Texas Department of Insurance.

Shortly after Hertz and Avis settled the complaints, five other rental car companies and insurers writing the coverage announced similar settlements. They are:

Alamo Rent A Car Inc. and National Union Fire Insurance Co. of Pittsburgh, Pa. Refunds total $2.2 million to 130,000 customers.

Thrifty Rent-A-Car System Inc. and Philadelphia Indemnity Insurance Co. Refunds total $325,000 to 25,000 customers.

Dollar Rent A Car Systems Inc. and Empire Fire & Marine Insurance Co. Refunds total $500,000 for 48,000 customers.

National Car Rental System Inc. and Philadelphia Indemnity. Refunds total $900,000 for 70,000 customers.

Budget Rent A Car Corp. and Philadelphia Indemnity. Refunds total $1.4 million for 110,000 customers.

Regulators alleged in consent orders that the rental companies engaged in the unauthorized sale of insurance by offering renters third-party coverage for bodily injury and damage claims. The order said the rental companies illegally acted as both agent of the insurer and insurer, sharing commissions without authority and making misrepresentations regarding insurance.

In addition to refunds, the rental companies and insurers agreed to together pay $50,000 per consent order to the department for reimbursement of investigative costs and administrative fees.

In settling, the rental companies and insurers denied the allegations in the consent order and said they offered renters enrollment in an insurance plan commonly offered to customers by all rental companies.

A public hearing is scheduled Aug. 11 in Austin during which the department plans to present evidence it says will show Enterprise Rent-A-Car Co. sold third-party liability coverage without authority. The department says Enterprise paid losses related to the coverage and indemnified itself through an excess liability policy with an unnamed insurer.

A state law that becomes effective Sept. 1 sets up a method for rental car companies to become licensed and sell insurance related to rentals.

California utility fined

for '94 mountain fire

NEVADA CITY, Calif.-Pacific Gas & Electric Co. was fined nearly $2 million by Superior Court Judge Carlos Baker after a jury last month found the utility guilty of causing a 1994 mountain fire by failing to trim trees and brush from its high-voltage lines.

Each of the 738 counts in the guilty verdict represents a separate tree limb, said a PG&E spokesman, who noted the utility has not yet decided whether to appeal the fine.

The fine levied July 18 by Judge Baker reflects a $1.6 million fine for causing the fire plus $359,500 in restitution fines, which could be increased depending upon the outcome of a hearing set for November.

The spokesman refused to say how PG&E would pay the fine.

American Eagle

agrees to conservation

DALLAS-American Eagle Insurance Co. is operating in conservatorship after the proposed acquisition of its aviation book of business by American Financial Group Inc. fell through.

The insurer, a Dallas-based subsidiary of American Eagle Group Inc., agreed to a Texas Department of Insurance request that regulators appoint a conservator.

American Eagle announced earlier this year that it would sell its general aviation business to American Financial, the holding company parent of Cincinnati-based Great American Insurance Co. American Eagle was to receive 30% of about $30 million in unearned premiums transferred to the buyer, commissions on direct written premiums of renewal business, the value of furniture and equipment and other considerations.

The insurer said in April it had entered into an agreement under which Great American would reinsure all policies in force as of March 31 and any written or renewed by American Eagle after that date.

American Eagle said at the time that it would stop writing coverage when the transaction closed and the company would be placed in runoff.

The insurer was eager to find a buyer for the aviation business after A.M. Best Co. downgraded its rating to D from B based on the insurer's decision in 1996 to discontinue some property/casualty operations. The Texas Insurance Department said American Eagle ended the year with $141.8 million in assets, $3 million in capital and surplus of $22.6 million.

Great American would not comment on why the acquisition was canceled.

NCCI challenges

new Aon business

NASHVILLE, Tenn.-The National Council on Compensation Insurance Inc. is protesting the selection of Aon Group Inc. to administer the Tennessee Workers Compensation Assigned Risk Plan.

The NCCI, which has had a long tenure as administrator of the plan, filed an appeal last month with the Tennessee Department of Commerce and Insurance, alleging Aon responded improperly to a request for proposal to administer the fund.

The protest claims, among other things, that Aon did not list all services and charges it would provide.

It also alleges that the RFP would require a change in law, which under the RFP's own guidelines would result in rejection of the proposal. The protest says Aon's proposal does not "equitably distribute or apportion residual market risks among all voluntary market insurers" as required by law. It also gives the state's insurance commissioner powers not granted by law, the NCCI charged.

A spokeswoman for Aon declined to comment while the matter is under appeal but said Aon is confident its appointment to administer the fund will be upheld.

An Insurance Department spokes-woman said regulators are uncertain when a decision will be reached.

Information in brief

The Pension Benefit Guaranty Corp. is taking over and terminating two underfunded pension plans sponsored by financially troubled Edgewater Steel Co. of Oakmont, Pa., which is operating under Chapter 11. The two plans are underfunded by about $22 million

and have about 1,000 participants

. . . .The federal Equal Employment Opportunity Commission sued Fort Worth, Texas-based electronics retailing company Tandy Corp., alleging racial discrimination in its now-defunct 17-store Incredible Universe chain. The suit was filed in federal district court in Dallas and accuses Tandy of not promoting two employees of the Arlington, Texas, Incredible Universe store because they are black.