Hiring of Non-Admitted Insurance Multi-State Agreement (NIMA) Clearinghouse Employees Disputed During Florida Surplus Lines Service Office (FSLSO) Meeting

 

A routine meeting of the Florida Surplus Lines Service Office (“FSLSO”) National Clearinghouse Committee (“Committee”) yesterday, November 8, 2011, turned into an awkward exchange punctuated by long silences when one Committee member disputed the hiring of new employees to run the proposed Non-Admitted Insurance Multi-State Agreement (“NIMA”) Clearinghouse and asked that the FSLSO Board of Governors (“Board”) review the issue at an emergency meeting.

Committee member Dan O’Leary’s motion to call the special meeting died for lack of a second. 

FSLSO Executive Director Gary Pullen told Mr. O’Leary to make the request in writing and he would submit it to the Board chairman for consideration.  Mr. O’Leary, who is also a member of the Board, assured Mr. Pullen he would submit such a letter. 

The disagreement over hiring came just over a month after the Board’s September 29, 2011 meeting, during which it allocated $750,000 to cover 2011 start-up costs associated with the NIMA Clearinghouse operations and approved nearly $2 million to cover the same costs for 2012, including five new employees.  

The dispute occurred when Mr. O’Leary recollected his understanding from the last Board meeting that no new staff would be hired for the Clearinghouse until the Board met to decide how it would be set up. 

“I am not sure we share that understanding,” replied Mr. Pullen.  Mr. O’Leary asked for clarification and then disagreed with the explanation he received.

“You approved a budget, it included positions.  That budget was approved by OIR, that approval has been provided,” Mr. Pullen stated. 

“I disagree, I think we need to talk about this,” Mr. O’Leary said. 

Mr. Pullen replied, “How do you expect this work to be done with no people?” 

His query was met by a long silence, followed by the failed motion from Mr. O’Leary to call the special meeting.

The FSLSO is under a tight deadline to ramp up Clearinghouse operations by January 1, 2012 in order to allow the collection and processing of First Quarter 2012 premium tax filings and payments, which would be due May 15, 2012 pursuant to NIMA’s current terms. 

Mr. Pullen again asked Mr. O’Leary how he expected any work to be done with no people and his query was again met by another lengthy silence.  As previously recounted, Mr. O’Leary eventually stated that he would send Mr. Pullen his written request in a letter. 

Mr. Pullen pointed out that an FSLSO budget with five new Clearinghouse positions has already been approved by both the Board and the Florida Office of Insurance Regulation (“OIR”). 

OIR Senior Attorney Bruce Culpepper concurred with Mr. Pullen about the budget and new positions.

“You mentioned in the budget there was a spot for five full-time employees and that is what I reviewed on behalf of the office and that budget was approved,” Mr. Culpepper stated. 

A week ago, Committee members also approved $520,000 in start-up costs to cover work that must be performed in November and December to have the Clearinghouse infrastructure in place by January 1, 2012.

 However, no contract for Clearinghouse operations has yet been signed with the NIMA member states, which are still reviewing it, and a software licensing agreement.  During a November 4, 2011 meeting of NIMA member states sponsored by the National Association of Insurance Commissioners (“NAIC”), Mr. Pullen had stressed the urgency to get these contracts signed.

Mr. O’Leary has previously voiced concern about spending money on Clearinghouse operations before a contract for services is signed. 

“If there wasn’t an agreement, we could just lose the $260,000 to $500,000?”  Mr. O’Leary asked at the November 1, 2011 meeting when the $520,000 was allocated.  Mr. Pullen told him they could.

During today’s Committee meeting, Mr. O’Leary said he thought there would have been a “more positive result coming from the (November 4) NAIC meeting” with the NIMA member states.

Mr. Culpepper said the response at that meeting was positive.

“Everybody is very encouraged.  We are pressing on.  I assure you there is a very positive response and vibe among NIMA states,” Mr. Culpepper said.

In fact, Florida, Mississippi and South Dakota are working to make sure all the needed elements come together, he said.

The NIMA operations agreement will likely be returned to the FSLSO with few changes, but the software licensing agreement still needs some attention, Mr. Culpepper said.  The contracts will be distributed to regulators so they can be discussed on November 18, 2011, and ultimately returned to the FSLSO sometime Thanksgiving week, he said, adding that everything should be done by the first week of December.

Mr. O’Leary wondered how they could meet a January 1, 2012 start-up deadline if it could take as long as 90 days to become operational once the contracts are signed. 

Mr. Pullen explained that submissions to the Clearinghouse might not actually begin on January 1, 2012, but rather shortly after, depending on when the contracts are signed, but filings would still include policies with January 1 effective dates or renewal dates. 

Mr. Pullen reported the following highlights from the November 4, 2011 meeting of NIMA member states: 

• NIMA states must finalize the contracts for Clearinghouse operations and software licensing as soon as possible.
• A banking institution for the receipt of tax payments must be identified.
• Contact information for liaisons from each state must be submitted.
• A logo, a color scheme and a website identifying the surplus lines Clearinghouse have been created.
• A toll-free phone number for Clearinghouse operations has been placed in service.

With no further business before the Committee, the meeting was adjourned.

 

Should you have any questions or comments, please contact Colodny Fass.

 

 

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