Tuesday, January 27, 2015

AODA in Brief

By Christopher G. Graham

The Accessibility for Ontarians with Disabilities Act, 2005 (“AODA”) which serves as the framework for the Accessibility Standards for Customer Service (the “Customer Service Standard”) and the Integrated Accessibility Standards (such standards, together, the “Standards”), exists to promote accessibility for Ontarians with disabilities with respect to goods, services, facilities, accommodation, employment, buildings, structures and premises. Each of the Standards apply to every organization with at least one employee in Ontario that provides goods or services to members of the public or other third parties. As such, both franchisors and franchisees are caught by the AODA and the Standards. The Customer Service Standard requires that certain policies and practices are prepared and implemented in the provision of goods and services to persons with disabilities, and requires training for employees.

The Integrated Accessibility Standards covers information and communications, employment, transportation and the design of public spaces. This Standard requires, among other things, certain policies to be implemented, training for employees and implements technical standards for websites. Most provisions under this Standard will apply to organizations with at least fifty employees by December 31st, 2014. Compliance with the provisions by organizations with fewer than fifty employees and other elements of the Standard in respect of employers with at least fifty employees will be phased in over the next several years. Amendments to the Ontario Building Code also take effect January 1st, 2015.

Organizations with at least twenty employees were required to file an accessibility compliance report on December 31st, 2012. A second accessibility compliance report is due from employers with at least 20 employees by December 31st, 2014. Thereafter, reports are due every three years.

For more information contact Dickinson Wright’s Franchise & Distribution Practice Group, here.

Tuesday, January 13, 2015

Auto Body Antitrust Action Continues to Expand in Florida

By James M. Burns

On December 12, the Judicial Panel on Multidistrict Litigation issued an order transferring State of Louisiana v. State Farm Fire and Casualty Insurance to the Middle District of Florida, making the case the latest addition to the multidistrict litigation entitled In re Auto Body Shop Antitrust Litigation. With the addition of the Louisiana case, the MDL proceeding now includes actions initially filed in Florida, Indiana, Mississippi, Tennessee, Utah, Alabama, Michigan, California, Washington, Illinois, Virginia, New Jersey, Oregon and Missouri.

The Louisiana case, like each of the previously transferred actions, centers upon a claim that more than thirty five auto insurers conspired to suppress reimbursement rates to repair shops for collision repairs. The first case, A&E Auto Body v. 21st Century Centennial Insurance, et. al, was filed in the Middle District of Florida in February of 2014, and it was to that court, and the Judge before whom that case was originally pending (Judge Gregory Presnell), that all of the subsequently-filed cases have been sent by the MDL Panel.

The Louisiana case, however, was somewhat unique – or at least different from – the other previously transferred cases in several respects. First, the Louisiana case was originally filed in state court, and subsequently transferred to federal court – improperly, in the view of the State. However, the Panel was not concerned by this, noting that jurisdictional issues do not present an impediment to transfer, because the plaintiff can present its arguments about why a case might properly be remanded to the transferee judge. See In re Prudential Insurance Sales Practices Litigation, 170bF.Supp.2d 1346 (J.P.M.L. 2001). In addition, Louisiana’s contention that its case, which it characterized as an “enforcement action,” was materially different in character than the private party actions currently before the transferee court, and thus the Louisiana case should not be transferred for this reason, was also rejected by the Panel. Calling Louisiana’s contention “unconvincing,” the Panel states that it “often has transferred state enforcement actions to MDLs that involved cases brought by private litigants.” See, e.g., In re Countryside Fin. Corp. Mortgage Marketing and Sales Practices Litigation, 582 F.Supp.2d (J.P.M.L. 2008).

With the addition of the newly-transferred actions, In re Auto Body Shop Antitrust Litigation begins the new year with even greater significance. Judge Presnell has granted the newly-added parties until January to appear in the MDL proceeding, and will likely begin issuing rulings in the matter shortly thereafter. Given the issues in the cases and the large number of insurers now involved in the proceeding, the matter is unquestionably “one to watch” for 2015. Stay tuned.

Tuesday, January 6, 2015

Several Large Insurance Industry Mergers Announced as 2014 Comes to a Close

By James M. Burns

As 2014 came to a close, several significant insurance industry transactions were announced that, if completed, will likely reshape several segments of the insurance industry in 2015. Each of them, of course, will require antitrust approval before they can be consummated.

The first, and largest, of these transactions was the late November announcement by RenaissanceRe Holdings that it had reached an agreement to acquire fellow Bermuda-based reinsurer Platinum Underwriters. The deal is valued at $1.9 billion. Analysts commenting on the transaction have stated that RenaissanceRe is interested in enlarging its casualty insurance reinsurance business, and that casualty reinsurance represents over half of Platinum Underwriters book of business.

Subsequently, in mid-December, Progressive Insurance announced its intention to acquire a controlling position in ARX Holding Corp., the parent company of American Strategic Insurance. American Strategic currently offers homeowners and property-casualty insurance to consumers in approximately 25 states. In announcing the transaction, Progressive stated that the transaction would support its strategy to service more customers who seek bundled homeowners/auto policies. The deal is valued at $875 million.

Finally, on December 18, ACE Limited announced that it was acquiring Fireman’s Fund’s high net worth personal lines insurance business from Allianz Group. The deal is valued at $365 million, and would supplement ACE’s current high net worth personal lines business conducted through ACE Private Risk Services. The acquisition by ACE, coupled with Alianz’s planned integration of the remainder of Fireman’s Fund’s commercial insurance business into Allianz Global Corporate & Specialty Insurance, will mean the end for the Fireman’s Fund brand name, which has been in existence for over 150 years.

Notably, despite the insurance industry’s antitrust exemption – the McCarran-Ferguson Act – the parties to these proposed transactions must obtain regulatory antitrust approval from the FTC/DOJ Antitrust Division before the transactions can be completed. This was made clear by the Supreme Court in SEC v. National Securities, Inc., 393 U.S. 453 (1969), in which the Court expressly held that insurance industry mergers are not “the business of insurance” for McCarran purposes (and thus are not exempt). See also In re American General Insurance Co., 81 F.T.C. 1052 (1972) (insurance company mergers are not the “business of insurance”). In addition, most states also regulate insurance industry mergers under their versions of the NAIC Insurance Company Holding Act, which typically require notice and approval of any “change in control.” Accordingly, while none of the announced transactions appear to present any significant antitrust issues, and thus approval is not unlikely, the transactions are not expected to close until the first quarter of 2015, or later.

Friday, December 19, 2014

IRA “Charitable Rollover” Retroactively Extended Through 2014

By Eric Gregory

Background

As a part of the so-called “Cromnibus” bill, Congress has extended dozens of expired “temporary” tax breaks for 2014. Included in that group is a rule that allows for tax-free treatment of certain “qualified charitable distributions” from IRAs where the distributions are donated to charity. The bill only extends this tax break until December 31, 2014.

“Qualified Charitable Distribution”

Specifically, a taxpayer may exclude from gross income the aggregate amount of his or her “qualified charitable distributions” that do not exceed $100,000 in a tax year. A “qualified charitable distribution” is any otherwise taxable distribution from an IRA that is:

1. Made directly by the IRA trustee to a public charity (not a private foundation or donor advised fund at a public charity); and

2. Made on or after the date on which the IRA owner has attained age 70 1/2.

An IRA owner who makes an IRA qualified charitable distribution in an amount equal to his or her required minimum distributions (“RMDs”) is considered to have satisfied his or her minimum distribution requirement for that year, even though a charitable entity (and not the IRA owner) receives the distribution.

The rule may be applied to IRA distributions made after December 31, 2013 and until December 31, 2014.

Short Window of Opportunity

Taxpayers must contact IRA administrators as soon as possible if they intend to take advantage of the tax-free distribution by year-end. IRA administrators may require several weeks to process rollovers.

It is currently unclear whether Congress will extend this provision to 2015 or beyond. If recent history is a reliable indicator, however, it is likely that a decision on that may not come until well into the next year.

Monday, November 17, 2014

Health Insurer Antitrust Claim Against Drug Company Remanded to State Court

By James M. Burns

Over the last several years, several health insurers have brought antitrust claims against drug companies, contending that they were overcharged for drugs as a result of agreements reached by the drug companies in the settlement of patent infringement lawsuits between branded and generic drug makers. Specifically, the purchasers of these drugs (including but not limited to insurers), have claimed that the terms of these patent infringement lawsuits, which typically resulted in a payment by the patent holding manufacturer to the generic drug maker (which was the alleged infringer), in return for the generic agreeing not to continue making the generic drug for a period of years, were anticompetitive. Because it was the allegedly infringing generic manufacturer (the defendant in the patent infringement suit) that received the payment in the settlement, these settlements have been referred to as “reverse payment” settlements. The FTC has been quite concerned about “reverse payment” patent infringement settlements for several years, contending that a delay in the introduction of generic alternatives to branded drugs has slowed the reduction in price for the branded drug that increased competition typically brings. After a series of lawsuits by the FTC over this practice resulted in conflicting rulings on the issue of whether these settlements could constitute an antitrust violation, the Supreme Court weighed in on the issue in 2013, ruling in FTC v. Actavis that, in some circumstances, such settlements could be found to be anticompetitive.

In light of the Actavis decision, purchaser challenges to these settlements have continued all across the country, typically in federal court. However, in a bit of a departure from common practice, earlier this year Time Insurance (doing business as Assurant Health), commenced such an action in state court, not federal court, asserting claims under state antitrust laws. By filing its action – Time Insurance v. AstraZeneca – in the Philadelphia Court of Common Pleas, Time sought to avoid consolidation of its case with a series of similar federal cases that had already been consolidated before the District Court in Massachusetts (In re Nexium Antitrust Litigation).

AstraZeneca removed the case to federal court, arguing that the matter necessarily raised a federal issue under patent law, and thus was required to be heard in federal court (and then consolidated into the Massachusetts proceeding). However, Eastern District of Pennsylvania District Court Judge Gerald McHugh Jr. disagreed. Instead, Judge McHugh held that Time’s antitrust claim would not necessarily require Time to litigate the validity of the patent, and thus the case did not raise a federal issue. Accordingly, Judge McHugh remanded the case to state court. The decision, if followed by other state courts across the country, has the potential to greatly increase the number of courts grappling with these “reverse payment” claims. And, given that even the small number of federal courts that have interpreted the Supreme Court’s ruling in Actavis have been unable to reach agreement on the circumstances in which such conduct raises antitrust concerns, increasing the number of courts considering such issues will only add to the confusion. As such, it would not be surprising if the Supreme Court is forced before long to revisit its decision in Actavis, and if it does, insurers, being among the largest purchasers of prescription drugs, will be watching with interest.

Thursday, November 6, 2014

More Change to Canada’s Intellectual Property Laws on the Way

By Eric D. Lavers

On October 23, 2014, as part of the fall budget bill, the federal Government quietly tabled the second in a series of substantial reform packages to Canada’s existing intellectual property regime. Following the introduction of new trademark laws earlier this year, a similar update of Canada’s industrial design and patent laws will take effect when the bill is passed.

The patent reform appears designed to harmonize Canada’s existing framework with that of its key trading partners, while at the same time making the system friendlier and more accessible to applicants. For example, a number of new provisions will simplify the process of filing and maintaining applications in effect. Unintentional abandonments of rights will also now have no impact on the validity of otherwise properly issued patents.

While not as extensive as the patent law reforms, the bill also includes many significant updates to Canada’s industrial design laws. Industrial designs offer a relatively simple and inexpensive mechanism for protecting the ornamental appearance (as opposed to function) of a product or article. Most significantly, the new laws will pave the way for Canada’s adoption of the Hague Agreement on Industrial Designs, which allows for design protection around the world through a single application.

By addressing notable deficiencies in the current system, these legislative reforms are both a welcome development and long overdue.

Tuesday, October 14, 2014

Tennessee Legislature Passes Legislation Changing Requirements for Coverage of Sinkhole Losses

By John E. Anderson, Sr.

The Tennessee Legislature recently reformed the law of sinkhole coverage and sinkhole losses in the State of Tennessee with legislation which became effective July 1, 2014. Under the prior Tennessee law, every insurer offering homeowners’ property insurance in the State of Tennessee was required to make available coverage for insurable sinkhole losses on any dwelling, including contents of personal property contained in the dwelling, to the extent provided in the policy to which the sinkhole coverage attached. The interpretation of the term “make available” was subject to differing opinions. Some took the position that the insurers were required to offer sinkhole coverage to their insureds, while others took the position that the law required them to offer coverage if desired. The new legislation was intended to clarify any confusion.

The new legislation provides that every insurer offering homeowner property in the State of Tennessee shall make coverage available for insurable sinkhole losses, including contents of personal property contained in the dwelling. Julie Mix McPeak, Commissioner of the Tennessee Department of Commerce and Insurance, issued a June 12, 2014 Bulletin to clarify any concerns – “The purpose of this Bulletin is to clarify that the Department interprets the ‘make available’ provision in 56-7-130 to mean that companies may limit the availability of coverage for insurable sinkhole losses to the inception of a policy…The Department interprets the statute to apply that availability to the initial purchase of a policy AND upon the request of a consumer thereafter.” (Emphasis added). Clearly, sinkhole coverage is not a mandatory requirement of insurers.

One of the bill’s sponsors, Jim Tracy (R-Shelbyville) explained that the new legislation was designed to impose objective standards to verify the cause of the alleged loss due to the existence of fraudulent claims, the impact of this legislation on the ability of homeowners to find affordable insurance coverage, and the need for this new legislation.

The bill sets forth specific investigation requirements upon receipt of a sinkhole claim. The new law requires an inspection of the insured’s premises to determine if there has been structural damage to the covered structure. If the insurer concludes that the structural damage to a covered building is not consistent with sinkhole activity, prior to denying the claim, the insurer must obtain a written certification from a professional engineer, a professional geologist or other qualified individual stating that the sinkhole activity did not cause the alleged structural damage.

Also, the insurer may limit its total claims payout for damages to the covered building. Under the new law, the insurer may limit payment to the actual cash value of the sinkhole loss to the covered building, excluding costs associated with building stabilization or foundation repair, until the policyholder enters into a contract for the performance of building stabilization or foundation repairs in accordance with the recommendations of the engineer retained or approved for the insurer.

Additionally, to be eligible to receive payment for building stabilization or foundation repairs, or any other loss to the covered building in excess of the actual cash value of the sinkhole loss to the covered building, the insured must repair such damage or loss in accordance with the plan of repair approved by the insurer. The new statute provides a detailed procedure for payment of claims.

Finally, the new law provides that an insurer may cancel, decline to renew or decline to issue any homeowner policy insurance on a structure that has been subject to a sinkhole loss claim if the structure:

1. Has not been repaired in accordance with a plan of repair approved by the insurer and within their time constraints set forth therein; or

2. Is subject to the risk of future sinkhole damage because of unstable land.

The new legislation is designed to impose objective standards to assist in the reporting and processing of sinkhole claims. It is a positive step toward accomplishing these goals.