Insurance Industry Practice

Charles S. Johnson, III has practiced extensively in the areas of regulatory and administrative law, antitrust and commercial litigation. Much of his administrative practice has involved the regulation of insurance, and much of his litigation practice has involved insurance issues.

Insurance Regulation

Mr. Johnson has served as Chair of the American Bar Association Committee on Insurance Regulation. His insurance regulation practice has included extensive representation of numerous insurance clients. This practice has included numerous formal hearings before the Georgia Insurance Department, appeals from such hearings, and informal conflict resolution. Examples include the following:

Workers Compensation Examination. The Georgia Insurance Department performed a Workers Compensation Examination regarding an insurance client, in which the examiner noted difficulties in obtaining information from the company. Many of the documents which were requested by the Department’s examiner related to workers’ compensation coverages in Georgia which represented incidental exposures on the Company in other states. Because of the manner in which these documents were dispersed throughout the company, it was difficult to retrieve some of these files prior to the examiner’s submission of his report to the commissioner. Based on the examiner’s report, the Department tentatively concluded that the client had refused to cooperate with the examiner. Mr. Johnson contested this conclusion and requested a hearing before an impartial hearing examiner. He met and talked with Department representatives on numerous occasions to explain the Company’s efforts to cooperate with the examiner. He explained the understanding that, after the examiner’s report had been submitted, the Company had been led to believe that the Department’s examination had been completed, and that it was under no further obligation to produce further documents after that time. Following these meetings, the Company promised that, when an examiner asks for information, the Company will provide it. Thereafter, the Department deleted all references in the examination report to violations of Georgia law and further indicated its intention to take no further enforcement action against the Company.

Rate Examination. Several member companies of a client’s insurance group filed with the Georgia Insurance Department a proposed rate modification to their private passenger automobile insurance policies which would produce an aggregate rate increase in excess of ten percent within any twelve month period. The Commissioner ordered an examination of these filings to ascertain, among other things, the accuracy of the data offered in support of the rate increase proposal. The report of examination did not suggest that the proposed rates were excessive or inadequate or that a reasonable degree of competition was absent in the effected areas and classifications. The Department indicated that it was unable to accept the filing as proposed and requested that the filing be withdrawn and refiled as required under Senate Bill 110, which had recently passed both houses of the General Assembly but not yet been signed by the Governor. When the client requested clarification of the Department’s findings, the Department indicated that it intended to hold a hearing on the filings. The Notice of Hearing inaccurately indicated that the hearing had been requested by the insurer. Mr. Johnson prepared the insurer’s response to the Notice of Hearing, which initiated a demand for full pre-hearing discovery and challenged the substance of the Notice of Hearing. The Commissioner issued a directive ordering that all motor vehicle insurers comply with Senate Bill 110, and the Commissioner further notified the client that failure to withdraw and refile would be treated as willful noncompliance. Mr. Johnson gave notice that the client was withdrawing its rate filing and intended to refile it. Thereafter, the Department’s file was closed.

Market Conduct Examination. An insurance company client filed its homeowners insurance rates as part of a composite filing for several companies within its combined insurance group. The complexity of the composite filing, together with a number of erroneous cross-references, led the Insurance Department to conclude that the client had, in essence, not filed its rates. A hearing was scheduled on the filings. Prior to any hearing taking place, Mr. Johnson met with various members of the Department’s staff and explained the filing to them, showed that the client’s rates had been filed in a manner which could be understood, argued that the Department’s objection was untimely, and further argued that the Commissioner was not authorized to require a penalty or refund of premiums for a rate which (although filed) is imperfect. At the Department’s request, the client subsequently submitted corrections to its exhibit books with explanations, confirmed that some of the confusion had been eliminated, forwarded an independent review of the filing, forwarded a rollback impact statement, and argued the adequacy of the client’s filing. The Department’ Report of Examination was subsequently revised to show that, although there was difficulty in finding the rates, the rates nevertheless had been filed. The client thereafter withdrew its request for a hearing and negotiated a Consent Order regarding the trend errors disclosed in the report. Mr. Johnson provided an analysis of the Department’s proposed fines, which enabled the company to make a decision as to the level of fines which it considered to be acceptable.

Other Matters

Mr. Johnson participated in the successful defense of a Georgia domestic insurer against the Department’s proposed revocation of its certificate of authority arising out of questions concerning the adequacy of the company’s “home office” staff and operations.

Mr. Johnson participated in the representation of a major Connecticut-based property and casualty company in connection with its efforts to withdraw or wind down its personal lines business in Georgia.

Mr. Johnson represented a major national funeral service and cemetery company and its wholly-owned insurance company in efforts to obtain insurance Department approval for its life insurance-funded pre-need funeral arrangements. This representation involved extensive hearings within the department, followed by an appeal to the Superior Court of Fulton County.

Mr. Johnson successfully obtained a Georgia certificate of authority and other regulatory clearances for a major international company's variable life product line.

Mr. Johnson successfully obtained Georgia certificates of authority and other regulatory clearances for a third-party administrator and for a preferred provider organization .

Mr. Johnson represented numerous agents with respect to licensing issues.

Mr. Johnson represented a group of companies whose practices were the subject of a major investigation of insurance fraud by the Permanent Investigations Subcommittee of the U.S. Senate Government Operations Committee.

Insurance-Related Litigation

Mr. Johnson has represented a major insurance group in connection with claims seeking to recover additional premium owed by insureds as the result of audits of their residual market assigned-risk workers compensation and truckers insurance coverage.

Mr. Johnson served as antitrust counsel a major insurance rating agency in the defense of antitrust counterclaims arising from a civil RICO lawsuit by the agency and various servicing carriers alleging premium and underwriting fraud by an employee leasing company. This representation included the preparation of an extensive summary judgment package, involving a survey of the regulatory environments of four New England States, seeking rulings with respect to the state action, McCarran, and Noerr defenses.

Mr. Johnson successfully represented ten companies, against whom the Georgia Insurance Department had obtained an injunction prohibiting their conducting any business, in setting aside the injunction.

Mr. Johnson represented the purchasers of a computer software company in the arbitration against a major insurer in connection with the insurer’s alleged breach of warranties and representations in the acquisition agreement.

Mr. Johnson represented numerous insurers and agents in connection with claims asserted by and against the Commissioner in his capacity as receiver for various insolvent insurance companies.

Mr. Johnson represented the Ohio owner of an insolvent Georgia insurer in asserting its claims against the receiver and defending the receiver’s RICO claims.

Mr. Johnson represented a New Jersey agent who, following the insolvency of a Georgia insurer, secured a new insurer to provide coverage, and transmitted to the new insurer premiums which were earned prior to the insolvency. This dispute involved arbitration proceedings against the receiver, proceedings to confirm the arbitration award, and a federal interpleader proceeding involving the Georgia receiver and the substitute carrier.

Mr. Johnson has litigated issues arising under life insurance policies, including “death before contract” issues.

Tax Increment Financing - Learning from the Georgia Experience

Originally published 1st Quarter 2004

The gradual decline of federal involvement in economic redevelopment has led local governments to search for methods of funding commercial and residential projects with sources other than block grants or general revenue sharing. One such method that has become increasingly popular is tax increment financing (TIF). This mechanism is now one of a few tools that local governments can use to stimulate economic development in their communities.

TIF financing allows a local government to capture tax revenues attributable to increases in property values within a prescribed development area (the TIF District) and use those revenues for neighborhood renewal projects for a defined period of time. These new revenues - also called "increment" - arise from new development within the TIF District or from general increases in the value of existing properties, resulting in higher tax revenues.

In some situations, bonds are sold by the local government at the outset of the project so that funds are available for front-end costs such as land acquisition or initial infrastructure. The bonds are then fully or partially paid with tax increment revenues as they are collected. Alternatively, improvements may be financed on a "pay-as-you-go" basis under which, for example, the development costs initially may be paid from cash on hand or other sources and then reimbursed if and when tax increment revenues are generated. Because it helps the local government pay for part of a project without state or federal funds and without payments out of its general fund budget, TIF financing has been referred to as a "self-financing" development incentive.

The National Association of Counties (NACo) has noted a number of benefits from TIF financing. These benefits include the ability to expand the local government’s tax base without imposing new taxes or special assessments while helping to overcome obstacles that may prevent development by the private sector acting alone. TIF financing helps to close the gap between the costs of redeveloping an established urban area and the typically lower costs of developing an area with little pre-existing development.

TIF financing is now authorized in most states and in the District of Columbia, and its use is widespread. Among counties responding to NACo’s 1999 Operations Survey, 25 percent had used TIF to finance their economic development efforts. Eleven percent of the responding counties utilized TIF to finance capital projects. Of those counties that had helped finance the construction of sports facilities, ten percent had used TIF as part of the funding of such facilities.

As of 2001, the state of Minnesota reportedly had 2,166 different TIF districts that were maintained by 440 different authorities. As of that same year, the city of Chicago reportedly had 101 different TIF districts that, in the preceding ten years, had generated $473 million in tax increment revenues (although $308 million had come from a single TIF district for the Central Loop). Twenty-one of those districts had been the subject of a bond issue or some other form of financed front-funding.

Examples of relatively large TIF-funded projects include:

• the renovation of historic theaters in Chicago

• the construction of a rapid transit station in Fremont, California

• the financing of a shopping mall and aircraft maintenance center in Indianapolis

• the renovation of a library and convention center in Los Angeles

• the financing of a sports arena in Minneapolis

• the financing of a library and convention center in San Jose

• the financing of a museum, hotel and entertainment center in Washington, D.C.

In Georgia, TIF financing is governed by a 1985 amendment to the state constitution, along with an enabling act (commonly referred to as the Redevelopment Powers Law). In enacting this statute, the General Assembly noted that economically and socially depressed areas exist within counties and municipalities in Georgia; that these areas limit the tax resources of counties and municipalities while at the same time creating a greater demand for public services; that these areas have a deleterious effect upon the public health, safety, morals and welfare; and that the improvement of these areas is in the public interest. The stated purpose of the statute, therefore, is to confer additional powers upon counties and municipalities to enable them to partner more effectively with private enterprise in order to redevelop these areas.

The Georgia Redevelopment Powers Law is not self-executing. Instead, it creates a framework within which certain enumerated powers may separately be conferred upon an individual local government in two ways:

(1) the passage of a separately-adopted local act of the General Assembly

(2) the ratification of the local act by a majority of the qualified voters voting in a special election in each political subdivision directly affected

Even after a local act has been adopted authorizing a particular community (such as a city or county) to engage in TIF financing, the portion of the tax increment attributable to other entities with concurrent taxing authority (such as a school district) may only be utilized with the consent of those entities.

Since the passage of the Redevelopment Powers Law, local legislation has been adopted for eighteen cities and eight counties. Successful referenda were held to ratify these local acts in fifteen of these cities and six of these counties. Each of these cities and counties acquired the power to create TIF districts, which are referred to as tax allocation districts (TADs) under the Georgia law. This power has been used to create 13 TADs, including one in Macon and 12 in the metropolitan Atlanta area.

The city of Atlanta has created five TADs. The first of these, Techwood Park, began in 1992 as an effort by the city to create an economic development legacy from the Centennial Olympic Games in the area immediately west of the central business district. The initial district failed to generate much in the way of incremental tax revenues, largely because anticipated new investment was slow to materialize and because the state established a large park in the middle of the district which effectively removed approximately 25 percent of the tax district. After expanding the initial district, however, the city was able in 2002 to issue $14,995,000 in tax allocation bonds to finance public improvements to support a number of private redevelopment projects within the district.

Atlanta’s second TAD was designed to transform the 138-acre Atlantic Steel Brownfields site just north of Georgia Tech into a mixed use development featuring 2,000 to 3,000 residential units, 4 to 6 million square feet of commercial office space, 1,000 to 2,000 hotel rooms, and 1 to 2 million square feet of retail space. In 2002, the city of Atlanta issued $76,505,000 in tax allocation bonds to finance development costs related to the initial phase of the project.

In 2002, the city of Atlanta created two TADs: one for the Perry/Bolton area of Northwest Atlanta and another for the Princeton Lakes community in Southwest Atlanta. The Perry/Bolton TAD supports the Atlanta Housing Authority’s partnership with private developers to transform 343 barren acres – including the former site of a large housing project – into a $340 million golf course community intended to draw residents and businesses into an underdeveloped corner of the city. The Princeton Lakes TAD is a developer-driven effort to finance infrastructure improvements supporting a projected $366 million mixed-use development, and it is the first TAD to be supported solely from city and county tax revenues but without school tax revenues. In 2003, Atlanta created the Eastside TAD, which – in a manner similar to the Westside TAD before it – is a city-driven effort to unlock an estimated $1.51 billion in private and public/private developments on more than a dozen projects in an area immediately east of the central business district.

Outside of Atlanta’s corporate limits, TADs have begun to proliferate in nearby communities, despite an initial abortive effort in the city of Macon – where subsequent property tax reassessments invalidated the initial assumptions about the amount of the anticipated tax increment. In 2001, the city of East Point, located just south of Atlanta, created the Camp Creek TAD in an area that had long remained undeveloped, largely because of its difficult topography and its lack of infrastructure. In 2002, East Point issued $22 million in tax allocation bonds to finance the construction of infrastructure in the area. Lured by the prospect of this infrastructure financing, one developer has broken ground on a major business park, and another developer has opened the first major retail center to open in South Fulton in the last 50 years.

In 2003, TADs were created just north of Atlanta in the unincorporated community of Sandy Springs; just south of Atlanta in the community of Ellenwood; and just west of Atlanta in the cities of Marietta, Acworth and Smyrna. These TADs were created with the following purposes in mind:

• The Sandy Springs TAD is designed to finance infrastructure for the purpose of attracting large-tract developers who have previously shunned the area.

• Proponents of the Ellenwood TAD seek to finance infrastructure to support residential and retail development in an area of rocky terrain that would otherwise not be developed.

• The Marietta TAD includes a former public housing development and a city-owned hotel, and it is designed to finance public improvements supporting a mix of retail stores, condominiums and lofts.

• The Acworth TAD is intended to pay the cost of stabilizing and recapping a landfill site so that it can be redeveloped into a shopping center.

• The Smyrna TAD is intended to pay for curb and street improvements and landscaping, all in hopes of stimulating the expansion of Smyrna’s village concept and the creation of a mixed income community.

Although TIF financing has been used by some jurisdictions for half a century, its use in Georgia is a relatively recent phenomenon. The statute enabling this type of financing in Georgia has been on the books for less than 20 years, and TADs have only been used in Georgia for just over a decade. Nevertheless, there is much to be learned from this limited experience.

The initial experience with Atlanta’s first TAD at Techwood Park illustrates the importance of securing projects that will cause an increase in property tax revenues and avoiding projects that will cause a reduction in such revenues. Obviously, a TAD is more likely to generate quick revenue in a situation such as Camp Creek or Atlantic Steel, where capable developers are willing to place significant assets at risk in advance of the actual creation of the district. Because school districts frequently levy the largest share of property taxes in a given community, the Princeton Lakes experience illustrates the importance of maximizing the financial benefit of a TAD by designing a project that includes sufficient educational benefit to elicit the school board support.

The content of this article does not constitute legal advice and should not be relied on in that way. Specific advice should be sought about your specific circumstances.

Specific Questions relating to this article should be addressed directly to the author. For more information on the Redevelopment Powers Law as it existed as of the time this article was written, click here.

School Systems Practice

Charles S. Johnson has provided assistance to the Atlanta Board of Education across a wide variety of specialized litigation and public policy issues, including the following:

Tax Allocation District Counsel.  Mr. Johnson negotiated an intergovernmental agreement with a major city and its development agency regarding the Beltline Tax Allocation (TIF) District, resulting in over $160,000,000 in cash for the Atlanta Public Schools; land to be developed for APS for recreational purposes; priority participation by APS employees in an Affordable Housing Trust Fund; and priority access to BeltLine transit facilities for Atlanta Public Schools students. He has since counseled and litigated on behalf of the Atlanta Public Schools in connection with the school system's involvement with all of the City of Atlanta's tax allocation districts
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Atlanta-in-Dekalb Tax Litigation. Mr. Johnson obtained a declaratory judgment in favor of the Atlanta Public Schools against the City of Atlanta, setting aside a City ordinance which purportedly required the Atlanta Public Schools to rebate certain ad valorem taxes collected within that portion of the City of Atlanta situated in Dekalb County. Atlanta Independent School District v. City of Atlanta, Superior Court of Fulton County, No. 2000-CV-25044.
 

Olympic Vending Litigation. Mr. Johnson secured the dismissal of a third-party complaint seeking to hold APS liable for losses incurred by vendors who participated in the vending program associated with the 1996 Centennial Olympic Games. Myers v. Event Management and Marketing Associates, Superior Court of Fulton County, No. E-50116.

Cheney Stadium Lights. Mr. Johnson secured an agreement regarding the use of Olympic legacy (lighting) facilities at Cheney Stadium.
 

Private School Voucher Litigation. Mr. Johnson successfully obtained the dismissal of a class action which sought to require APS to fund private school tuition vouchers. Lowe v. State, 267 Ga. 754, 482 S.E.2d 344 (1997) (see briefs at 1996 WL 33482481, 33482482, 33482487, 33482491) .

School Closing Litigation. Mr. Johnson secured the dismissal of litigation seeking to enjoin the closure of several schools.

Franchise Litigation Practice

Charles S. Johnson, III, has practiced extensively in the areas of regulatory and administrative law, antitrust and commercial litigation. Much of his litigation practice has involved dealer terminations and relationships between franchisors and franchisees.

Automobile Industry

Mr. Johnson’s practice has included extensive representation of a leading automobile manufacturer in defending a number of claims brought by dealers under the Sherman Act and the Automobile Dealer Day in Court Act. Some of these claims have arisen from suits originally brought by the dealers, and some of them have arisen in the context of counterclaims brought by dealers, following the initiation of collection actions by related floor-plan lenders.

Chrysler Credit Corporation v. Rogers-Farmer Metro Chrysler-Plymouth, U.S.D.C., N.D. Ga. Mr. Johnson participated in the successful defense of the fraud, contract, antitrust and Dealer Day in Court counterclaims, including a trial before the late Judge Newell Edenfield.

Joe Westbrook v. Chrysler Motors Corporation, U.S.D.C., N.D. Ga. Mr. Johnson participated in the defense of the dealer’s shareholder derivative, contract, antitrust and Dealer Day in Court claims. Following the grant of a partial summary judgment (419 F. Supp. 824 (1976)), the case was successfully tried before Judge Charles Moye.

Lenox Dodge and Hayes Chrysler-Plymouth Litigation, U.S.D.C., N.D. Ga. Mr. Johnson successfully litigated a number of antitrust/Dealer Day in Court cases involving troubled dealership locations in Roswell, Georgia and in the Buckhead section of Atlanta.

Perez v. Dodge World of Roswell, U.S.D.C., N.D. Ga. Mr. Johnson secured a summary judgment in favor of the auto manufacturer in this antitrust/Dealer Day in Court action involving a dealership in Roswell, Georgia.

Restaurant Industry

Mr. Johnson has represented a national quick-service restaurant chain in connection with the termination of several of its franchisees. He has also served as counsel to a number of restaurant franchisees.

Petroleum Industry

In Grady Roberts v. Chevron USA, Inc., U.S.D.C., N.D. Ga., an oil company declined to renew its agreements with a dealer in Dallas, Georgia. The non-renewed dealer sued, claiming that the oil company had violated a provision of the Petroleum Marketing Practices Act (“PMPA”) which requires the oil company to give the non-renewed retailer an opportunity to purchase the dealership premises. Mr. Johnson successfully defended against the dealer’s motion for summary judgment, securing what was probably the first decision by any court in the Eleventh Circuit holding that the nation’s environmental policy must be considered in construing the provisions of the PMPA. As the dealership premises were potentially contaminated, the court determined that the oil company was not required to sell the property and thereby expose itself to liability to subsequent owners and others arising from that contamination.

Higher Education Practice

Charles S. Johnson has for many years led a team of lawyers who have served as a principal outside law firm for an Atlanta-based single-gender historically black college. This representation has included the following:

• served as the College's Interim General Counsel from 1999-2001

• served as the College's Interim General Counsel from 2004-2005

• represented the College in connection with its Revenue Bonds, Series 2000

• represented the College in connection with its Student Housing Bonds, Series 2002

• represented the College in the defense of internal administrative proceedings and litigation relating to student discipline and dismissal

• represented the College in the defense of employment litigation involving claims of religious and nationality discrimination

• represented the College in the defense of claims of disability discrimination initiated with the U.S. Department of Education, Office of Civil Rights

• obtained a Special Use Permit for the on-campus interment of the remains of a leading figure in the College's history

• counseled the College in connection with reductions in force and staff realignments

• counseled the College in loss-prevention issues related to student-on-student assault and on-campus violence

• counseled the College with respect to the management of diversity, the management of gender-preference differences, and the development of civility codes, campus harassment policies and training aids

• counseled the College with respect to institutional research and intellectual property policies

• counseled the College with respect to the confidentiality of reports of internal investigations

• counseled the College with respect to the organization of its in-house law department and the interface between its personnel and other College personnel

• counseled the College with respect to a multi-institution policy on reciprocal tuition waivers

• represented the College in connection with the division of property previously held by multi-college consortium

• conducted employment practices training for the College's faculty and staff

• counseled the College with respect to compliance with the Polygraph Protection Act

• negotiated and developed investment management contracts for the management of the College's endowment

• negotiated and developed a contract for the management of the College's mailroom

• counseled the College in the development of a Hazardous Materials Policy and a Mold Policy

• counseled the College with respect to air quality disclosure

• counseled the College in connection with its formal relations with other institutions of higher learning

• counseled with the College in connection with the maintenance of its deferred compensation plans, tuition reduction plan and other employee benefit plans

• counseled the College with respect to the acquisition of a major archival collection

• represented the College in the housing and maintenance of its archival material

• represented the College in with respect to the use by third parties of images from its archival collection

• counseled the College with respect to the exhibition of its archival material by third-party institutions

• counseled the College with respect to its assumption of the assets of a predecessor trust

• represented the College with respected to the lease of property not owned by the College

• represented the College in the defense of an ERISA claim, vendor claim, and an off-campus drowning claim