Jan. 8, 2002 – Lloyd's Underwriters filed a complaint in Territorial Court Monday against Lt. Gov. Gerard Luz James II in his capacity as commissioner of Insurance. The company also has asked for a temporary restraining order to prevent James from enforcing an order he executed in December that said insurance companies in the territory could not cancel or non-renew insurance policies unless they were facing bankruptcy and unless they had his explicit approval. (See "Lt. gov.: Insurance firms can't cancel policies".)
Lloyd's attorneys Henry Feurezeig and Simone R.D. Francis said the lieutenant governor's action ignored constitutional law and is and unfounded under Virgin Islands law.
On Dec. 20, James selectively notified the media of a meeting in the rotunda of the Lieutenant Governor's Office on St. Thomas to announce his order. He later issued a press release about the order to some of the media. However, according to the complaint — and members of the insurance industry who were contacted at the time — it wasn't until after announcing his order to the media that James told the Lloyd's representatives or anyone else in the industry about his directive.
In fact, the complaint states the Lloyd's representatives did not receive the order until Dec. 31.
James's order was to go into effect retroactive to Dec. 1 and demanded that insurers who had canceled or non-renewed policies after Dec. 1 reinstate them.
A memorandum in support of the restraining order says the retroactive nature of the order is a violation of the due process clause of the U.S. Constitution.
James claimed his action was taken to protect the public from what he suggested were inordinately high insurance premiums. The memorandum says his action will have the opposite effect by "substantially decreasing the number of carriers willing to write homeowner windstorm policies in the territory.
"It is not difficult to ascertain that unfounded and unlawful action by the commissioner … strongly deters new insurers from coming to the territory and provides enormous incentive for insurers who are writing business in the territory presently to leave in search of friendlier venues in which a reasonable return would be possible."
The memorandum also says James's order fails to mention the losses some Lloyd's underwriters have experienced in the last 12 years of doing business in the territory. It states that since 1988 underwriters at Lloyd's have paid out more than $412 million in claims while collecting just over $286 million in premiums.
Further, the memorandum says, what James seeks is not within his authority, and even if it were, he failed to adhere to the legal procedural requirements of an executive order — which include filing it with the lieutenant governor, obtaining approval from the governor, submitting it to the Legislature, and publishing it in the V.I. Rules and Regulations and in at least one newspaper.
The Lloyd's attorneys pointed out the V.I. Code allows any insurer to non-renew any insurance policy with 30 days' notice. "The commissioner's order refers to no statute or case law in the Virgin Islands that authorizes him … to abrogate the right of insurers … to non-renew at the end of the policy term," they said.
At the time of his notice to the media of his order, James said he would hold a "hearing" on Jan. 29 in his office during which he would invite insurance companies to show cause why his order shouldn't remain in effect.
In addition to the temporary restraining order, Lloyd's has asked the court for a preliminary injunction to stop James from enforcing his order until the insurance company is "afforded a hearing." The company charges James with "putting the proverbial cart before the horse by failing to undertake his investigation first." And this, it says, "is in direct contravention of the spirit and intent of [the law], which plainly contemplates hearings first, then orders, not the reverse."
It is anticipated that the court will act on the request shortly.
