Bill Text: MI HB5143 | 2015-2016 | 98th Legislature | Introduced

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Bill Title: Insurance; no-fault; short-term policies; require to include certain charges in premium and to make those charges nonrefundable. Amends secs. 3020 & 3104 of 1956 PA 218 (MCL 500.3020 & 500.3104) & adds sec. 2111f.

Spectrum: Moderate Partisan Bill (Republican 10-3)

Status: (Introduced - Dead) 2015-12-15 - Printed Bill Filed 12/11/2015 [HB5143 Detail]

Download: Michigan-2015-HB5143-Introduced.html

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HOUSE BILL No. 5143

 

December 10, 2015, Introduced by Reps. McCready, Bumstead, Graves, Canfield, Kelly, Heise, Aaron Miller, LaVoy, Cochran, Liberati, Callton, McBroom and Lucido and referred to the Committee on Insurance.

 

     A bill to amend 1956 PA 218, entitled

 

"The insurance code of 1956,"

 

by amending sections 3020 and 3104 (MCL 500.3020 and 500.3104),

 

section 3020 as amended by 2006 PA 106 and section 3104 as amended

 

by 2002 PA 662, and by adding section 2111f.

 

THE PEOPLE OF THE STATE OF MICHIGAN ENACT:

 

     Sec. 2111f. (1) For an automobile policy that provides the

 

security required under section 3101(1) that has a term of less

 

than 6 months, the premium must be structured so that the full

 

annual amount that reflects the premium charged members as required

 

to be included in rates under section 3104 and the full amount for

 

personal protection insurance benefits as required under chapter 31

 

are included in the initial premium.

 

     (2) An insurer that issues a policy described in this section

 

shall charge and collect from the insured with the initial premium

 

payment on the policy the full annual amount that reflects the

 

premium charged members as required to be included in rates under

 

section 3104 and the full amount for personal protection insurance

 

benefits as required under chapter 31.

 

     (3) Subject to subsection (4), if a policy described in this

 

section is canceled, the insurer shall not refund to the insured

 

the portion of the initial premium payment on the policy that

 

comprises the full annual amount that reflects the premium charged

 

members as required to be included in rates under section 3104 and

 

the full amount for personal protection insurance benefits as

 

required under chapter 31.

 

     (4) Subsection (3) does not apply if the policy is canceled

 

for 1 or more of the reasons enumerated in section 3020(2)(c).

 

     Sec. 3020. (1) A An authorized insurer shall not issue or

 

deliver in this state a policy of casualty insurance, except

 

worker's compensation and mortgage guaranty insurance, including

 

all classes of motor vehicle coverage, shall not be issued or

 

delivered in this state by an insurer authorized to do business in

 

this state for which a premium or advance assessment is charged,

 

unless the policy contains the following provisions:

 

     (a) That the policy may be canceled at any time at the request

 

of the insured, in which case the insurer shall refund the excess

 

of paid premium or assessment above the pro rata rates for the

 

expired time, except as otherwise provided in subsections (2) ,

 

(3), and (4).to (5).

 

     (b) Except as otherwise provided in subdivision (d), that the

 

policy may be canceled at any time by the insurer by mailing to the

 

insured at the insured's address last known to the insurer or an

 

authorized agent of the insurer, with postage fully prepaid, a not

 

less than 10 days' written notice of cancellation with or without

 

tender of the excess of paid premium or assessment above the pro

 

rata premium for the expired time.

 

     (c) That the minimum earned premium on any policy canceled

 

pursuant to under this subsection, other than automobile insurance

 

as defined in section 2102(2)(a) and or (b), shall will not be less

 

than the pro rata premium for the expired time or $25.00, whichever

 

is greater.

 

     (d) That an insurer may refuse to renew a malpractice

 

insurance policy only by mailing to the insured at the insured's

 

address last known to the insurer or an authorized agent of the

 

insurer, with postage fully prepaid, a not less than 60 days'

 

written notice of refusal to renew. As used in this subdivision,

 

"malpractice insurance" means malpractice insurance as described in

 

section 624(1)(h).

 

     (2) An insurer may file a rule with the commissioner director

 

providing for a minimum retention of premium for automobile

 

insurance as defined in section 2102(2)(a) and or (b). The rule

 

shall must describe the circumstances under which the retention is

 

applied and shall must set forth the amount to be retained, which

 

is subject to the approval of the commissioner. director. The rule

 

shall must include, but need not be limited to, the following

 

provisions:

 

     (a) That a minimum retention shall will be applied only when

 

the amount exceeds the amount that would have been retained had the

 

policy been canceled on a pro rata basis.

 

     (b) That a minimum retention does not apply to renewal

 

policies.

 

     (c) That a minimum retention does not apply when a policy is

 

canceled for the following reasons:

 

     (i) The insured is no longer required to maintain security

 

pursuant to under section 3101(1).

 

     (ii) The insured has replaced the automobile insurance policy

 

being canceled with an automobile insurance policy from another

 

insurer and provides proof of the replacement coverage to the

 

canceling insurer.

 

     (3) Notwithstanding subsection (1), an insurer may issue a

 

noncancelable, nonrefundable, 6-month prepaid automobile insurance

 

policy in order for an insured to meet the registration

 

requirements of section 227a of the Michigan vehicle code, 1949 PA

 

300, MCL 257.227a.

 

     (4) An insurer may provide for a short rate premium for

 

insurance on a motorcycle, watercraft, off-road vehicle, or

 

snowmobile. As used in this subsection:

 

     (a) "Motorcycle" means that term as defined in section 3101.

 

     (b) "Off-road vehicle" means an ORV as defined in section

 

81101 of the natural resources and environmental protection act,

 

1994 PA 451, MCL 324.81101.

 

     (c) "Snowmobile" means that term as defined in section 82101

 

of the natural resources and environmental protection act, 1994 PA

 

451, MCL 324.82101.

 

     (d) "Watercraft" means that term as defined in section 80301

 

of the natural resources and environmental protection act, 1994 PA

 

451, MCL 324.80301.

 

     (5) If the policy canceled is a policy that provides the

 

security required under section 3101(1) and the policy has a term

 

of less than 6 months, unless the policy is canceled for 1 or more

 

of the reasons enumerated in subsection (2)(c), the insurer shall

 

not refund the portion of the premium that comprises the annual

 

amount that reflects the premiums charged members as required to be

 

included in rates under section 3104 and the full amount that is

 

for personal protection insurance benefits as required under

 

chapter 31.

 

     (6) (5) Cancellation as prescribed in this section is without

 

prejudice to any claim originating before the cancellation. The

 

mailing of notice is prima facie proof of notice. Delivery of

 

written notice is equivalent to mailing.

 

     (7) (6) A notice of cancellation, including a cancellation

 

notice under section 3224, shall must be accompanied by a statement

 

that the insured shall not operate or permit the operation of the

 

vehicle to which notice of cancellation is applicable, or operate

 

any other vehicle, unless the vehicle is insured as required by

 

law.

 

     (8) (7) An insurer who wishes to provide for a short rate

 

premium under subsection (4) shall file with the commissioner

 

pursuant to director under chapter 24 or 26 a rule establishing a

 

short rate premium. The rule shall must describe the circumstances

 

under which the short rate is applied and shall set forth the

 

amount or percentage to be retained.

 

     Sec. 3104. (1) An The catastrophic claims association is

 

created as an unincorporated, nonprofit association. to be known as

 

the catastrophic claims association, hereinafter referred to as the

 

association, is created. Each insurer engaged in writing insurance

 

coverages that provide the security required by section 3101(1)

 

within in this state, as a condition of its authority to transact

 

insurance in this state, shall be a member of the association and

 

shall be is bound by the plan of operation of the association. Each

 

An insurer engaged in writing insurance coverages that provide the

 

security required by section 3103(1) within in this state, as a

 

condition of its authority to transact insurance in this state,

 

shall be is considered to be a member of the association, but only

 

for purposes of premiums under subsection (7)(d). Except as

 

expressly provided in this section, the association is not subject

 

to any laws of this state with respect to insurers, but in all

 

other respects the association is subject to the laws of this state

 

to the extent that the association would be if it were an insurer

 

organized and subsisting under chapter 50.

 

     (2) The association shall provide and each member shall accept

 

indemnification for 100% of the amount of ultimate loss sustained

 

under personal protection insurance coverages in excess of the

 

following amounts in each loss occurrence:

 

     (a) For a motor vehicle accident policy issued or renewed

 

before July 1, 2002, $250,000.00.

 

     (b) For a motor vehicle accident policy issued or renewed

 

during the period July 1, 2002 to June 30, 2003, $300,000.00.

 

     (c) For a motor vehicle accident policy issued or renewed

 

during the period July 1, 2003 to June 30, 2004, $325,000.00.

 

     (d) For a motor vehicle accident policy issued or renewed

 

during the period July 1, 2004 to June 30, 2005, $350,000.00.

 

     (e) For a motor vehicle accident policy issued or renewed

 

during the period July 1, 2005 to June 30, 2006, $375,000.00.

 

     (f) For a motor vehicle accident policy issued or renewed

 

during the period July 1, 2006 to June 30, 2007, $400,000.00.

 

     (g) For a motor vehicle accident policy issued or renewed

 

during the period July 1, 2007 to June 30, 2008, $420,000.00.

 

     (h) For a motor vehicle accident policy issued or renewed

 

during the period July 1, 2008 to June 30, 2009, $440,000.00.

 

     (i) For a motor vehicle accident policy issued or renewed

 

during the period July 1, 2009 to June 30, 2010, $460,000.00.

 

     (j) For a motor vehicle accident policy issued or renewed

 

during the period July 1, 2010 to June 30, 2011, $480,000.00.

 

     (k) For a motor vehicle accident policy issued or renewed

 

during the period July 1, 2011 to June 30, 2013, $500,000.00.

 

     (l) For a motor vehicle accident policy issued or renewed

 

during the period July 1, 2013 to June 30, 2015, $530,000.00.

 

     (m) For a motor vehicle accident policy issued or renewed

 

during the period July 1, 2015 to June 30, 2017, $545,000.00.

 

Beginning July 1, 2013, 2017, this $500,000.00 $545,000.00 amount

 

shall must be increased biennially on July 1 of each odd-numbered

 

year, for policies issued or renewed before July 1 of the following

 

odd-numbered year, by the lesser of 6% or the consumer price index,

 

and rounded to the nearest $5,000.00. This The association shall

 

calculate the biennial adjustment shall be calculated by the

 

association by January 1 of the year of its July 1 effective date.

 

     (3) An insurer may withdraw from the association only upon on

 

ceasing to write insurance that provides the security required by

 

section 3101(1) in this state.

 

     (4) An insurer whose membership in the association has been

 

terminated by withdrawal shall continue continues to be bound by

 

the plan of operation, and upon on withdrawal, all unpaid premiums

 

that have been charged to the withdrawing member are payable as of

 

the effective date of the withdrawal.

 

     (5) An unsatisfied net liability to the association of an

 

insolvent member shall be assumed by and apportioned among the

 

remaining members of the association as provided in the plan of

 

operation. The association has all rights allowed by law on behalf

 

of the remaining members against the estate or funds of the

 

insolvent member for sums money due the association.

 

     (6) If a member has been merged or consolidated into another

 

insurer or another insurer has reinsured a member's entire business

 

that provides the security required by section 3101(1) in this

 

state, the member and successors in interest of the member remain

 

liable for the member's obligations.

 

     (7) The association shall do all of the following on behalf of

 

the members of the association:

 

     (a) Assume 100% of all liability as provided in subsection

 

(2).

 

     (b) Establish procedures by which members shall promptly

 

report to the association each claim that, on the basis of the

 

injuries or damages sustained, may reasonably be anticipated to

 

involve the association if the member is ultimately held legally

 

liable for the injuries or damages. Solely for the purpose of

 

reporting claims, the member shall in all instances consider itself

 

legally liable for the injuries or damages. The member shall also

 

advise the association of subsequent developments likely to

 

materially affect the interest of the association in the claim.

 

     (c) Maintain relevant loss and expense data relative to all

 

liabilities of the association and require each member to furnish

 

statistics, in connection with liabilities of the association, at

 

the times and in the form and detail as may be required by the plan

 

of operation.

 

     (d) In a manner provided for in the plan of operation,

 

calculate and charge to members of the association a total premium

 

sufficient to cover the expected losses and expenses of the

 

association that the association will likely incur during the

 

period for which the premium is applicable. The premium shall must

 

include an amount to cover incurred but not reported losses for the

 

period and may be adjusted for any excess or deficient premiums

 

from previous periods. Excesses or deficiencies from previous

 

periods may be fully adjusted in a single period or may be adjusted

 

over several periods in a manner provided for in the plan of

 

operation. Each member shall must be charged an amount equal to

 

that member's total written car years of insurance providing the

 

security required by section 3101(1) or 3103(1), or both, written

 

in this state during the period to which the premium applies,

 

multiplied by the average premium per car. The average premium per

 

car shall be is the total premium calculated divided by the total

 

written car years of insurance providing the security required by

 

section 3101(1) or 3103(1) written in this state of all members

 

during the period to which the premium applies. A member shall must

 

be charged a premium for a historic vehicle that is insured with

 

the member of 20% of the premium charged for a car insured with the

 

member. As used in this subdivision:

 

     (i) "Car" includes a motorcycle but does not include a

 

historic vehicle.

 

     (ii) "Historic vehicle" means a vehicle that is a registered

 

historic vehicle under section 803a or 803p of the Michigan vehicle

 

code, 1949 PA 300, MCL 257.803a and 257.803p.

 

     (e) Require and accept the payment of premiums from members of

 

the association as provided for in the plan of operation. The

 

association shall do either of the following:

 

     (i) Require payment of the premium in full within 45 days

 

after the premium charge.

 

     (ii) Require payment of the premiums to be made periodically

 

to cover the actual cash obligations of the association.

 

     (f) Receive and distribute all sums money required by the

 

operation of the association.

 

     (g) Establish procedures for reviewing claims procedures and

 

practices of members of the association. If the claims procedures

 

or practices of a member are considered inadequate to properly

 

service the liabilities of the association, the association may

 

undertake or may contract with another person, including another

 

member, to adjust or assist in the adjustment of claims for the

 

member on claims that create a potential liability to the

 

association and may charge the cost of the adjustment to the

 

member.

 

     (8) In addition to other powers granted to it by this section,

 

the association may do all of the following:

 

     (a) Sue and be sued in the name of the association. A judgment

 

against the association shall does not create any direct liability

 

against the individual members of the association. The association

 

may provide for the indemnification of its members, members of the

 

board of directors of the association, and officers, employees, and

 

other persons lawfully acting on behalf of the association.

 

     (b) Reinsure all or any portion of its potential liability

 

with reinsurers licensed to transact insurance in this state or

 

approved by the commissioner.director of the department.

 

     (c) Provide for appropriate housing, equipment, and personnel

 

as may be necessary to assure the efficient operation of the

 

association.

 

     (d) Pursuant to the plan of operation, adopt reasonable rules

 

for the administration of the association, enforce those rules, and

 

delegate authority, as the board considers necessary to assure the

 

proper administration and operation of the association consistent

 

with the plan of operation.

 

     (e) Contract for goods and services, including independent

 

claims management, actuarial, investment, and legal services, from

 

others within in or without outside of this state to assure the

 

efficient operation of the association.

 

     (f) Hear and determine complaints of a company or other

 

interested party concerning the operation of the association.

 

     (g) Perform other acts not specifically enumerated in this

 

section that are necessary or proper to accomplish the purposes of

 

the association and that are not inconsistent with this section or

 

the plan of operation.

 

     (9) A board of directors is created , hereinafter referred to

 

as the board, which shall be responsible for the operation of and

 

shall operate the association consistent with the plan of operation

 

and this section.

 

     (10) The plan of operation shall must provide for all of the

 

following:

 

     (a) The establishment of necessary facilities.

 

     (b) The management and operation of the association.

 

     (c) Procedures to be utilized in charging premiums, including

 

adjustments from excess or deficient premiums from prior periods.

 

     (d) Procedures governing the actual payment of premiums to the

 

association.

 

     (e) Reimbursement of each member of the board by the

 

association for actual and necessary expenses incurred on

 

association business.

 

     (f) The investment policy of the association.

 

     (g) Any other matters required by or necessary to effectively

 

implement this section.

 

     (11) Each The board shall must include members that would

 

contribute a total of not less than 40% of the total premium

 

calculated pursuant to under subsection (7)(d). Each director shall

 

be is entitled to 1 vote. The initial term of office of a director

 

shall be is 2 years.

 

     (12) As part of the plan of operation, the board shall adopt

 

rules providing for the composition and term of successor boards to

 

the initial board, consistent with the membership composition

 

requirements in subsections (11) and (13). Terms of the directors

 

shall must be staggered so that the terms of all the directors do

 

not expire at the same time and so that a director does not serve a

 

term of more than 4 years.

 

     (13) The board shall must consist of 5 directors , and the

 

commissioner director of the department, who shall be serve as an

 

ex officio member of the board without vote.

 

     (14) Each director shall be appointed by the commissioner and

 

The director of the department shall appoint the directors. A

 

director shall serve until that member's his or her successor is

 

selected and qualified. The chairperson of the board shall be

 

elected by the board. A elect a chairperson. The director of the

 

department shall fill any vacancy on the board shall be filled by

 

the commissioner consistent with as provided in the plan of

 

operation.

 

     (15) After the board is appointed, the The board shall meet as

 

often as the chairperson, the commissioner, director of the

 

department, or the plan of operation shall require, requires, or at

 

the request of any 3 members of the board. The chairperson shall

 

retain the right to may vote on all issues. Four members of the

 

board constitute a quorum.

 

     (16) An annual report of the operations of the association in

 

a form and detail as may be determined by the board shall must be

 

furnished to each member.

 

     (17) Not more than 60 days after the initial organizational

 

meeting of the board, the board shall submit to the commissioner

 

for approval a proposed plan of operation consistent with the

 

objectives and provisions of this section, which shall provide for

 

the economical, fair, and nondiscriminatory administration of the

 

association and for the prompt and efficient provision of

 

indemnity. If a plan is not submitted within this 60-day period,

 

then the commissioner, after consultation with the board, shall

 

formulate and place into effect a plan consistent with this

 

section.

 

     (18) The plan of operation, unless approved sooner in writing,

 

shall be considered to meet the requirements of this section if it

 

is not disapproved by written order of the commissioner within 30

 

days after the date of its submission. Before disapproval of all or

 

any part of the proposed plan of operation, the commissioner shall

 

notify the board in what respect the plan of operation fails to

 

meet the requirements and objectives of this section. If the board

 

fails to submit a revised plan of operation that meets the

 

requirements and objectives of this section within the 30-day

 

period, the commissioner shall enter an order accordingly and shall

 

immediately formulate and place into effect a plan consistent with

 

the requirements and objectives of this section.

 

     (17) (19) The proposed plan of operation or Any amendments to

 

the plan of operation of the association are subject to majority

 

approval by the board, ratified ratification by a majority of the

 

membership having a vote, with voting rights being apportioned

 

according to the premiums charged in subsection (7)(d), and are

 

subject to approval by the commissioner.director of the department.

 

     (18) (20) Upon approval by the commissioner and ratification

 

by the members of the plan submitted, or upon the promulgation of a

 

plan by the commissioner, each An insurer authorized to write

 

insurance providing the security required by section 3101(1) in

 

this state, as provided in this section, is bound by and shall

 

formally subscribe to and participate in the plan approved of

 

operation as a condition of maintaining its authority to transact

 

insurance in this state.

 

     (19) (21) The association is subject to all the reporting,

 

loss reserve, and investment requirements of the commissioner

 

director of the department to the same extent as would a member are

 

the members of the association.

 

     (20) (22) Premiums charged members by the association shall

 

must be recognized in the rate-making procedures for insurance

 

rates in the same manner that expenses and premium taxes are

 

recognized. Rates established under this subsection must be

 

structured so that, for policies with a term of less than 6 months,

 

the full annual amount that reflects the premiums charged members

 

is included in the initial premium charged to the policy holder.

 

     (21) (23) The commissioner director of the department or an

 

authorized representative of the commissioner director of the

 

department may visit the association at any time and examine any

 

and all of the association's affairs.

 

     (22) (24) The association does not have liability for losses

 

occurring before July 1, 1978.

 

     (23) (25) As used in this section:

 

     (a) "Association" means the catastrophic claims association

 

created in subsection (1).

 

     (b) "Board" means the board of directors of the association

 

created in subsection (9).

 

     (c) (a) "Consumer price index" means the percentage of change

 

in the consumer price index for all urban consumers in the United

 

States city average for all items for the 24 months prior to before

 

October 1 of the year prior to before the July 1 effective date of

 

the biennial adjustment under subsection (2)(k) as reported by the

 

United States department Department of labor, bureau Labor, Bureau

 

of labor statistics, Labor Statistics, and as certified by the

 

commissioner.director.

 

     (d) (b) "Motor vehicle accident policy" means a policy

 

providing the coverages required under section 3101(1).

 

     (e) (c) "Ultimate loss" means the actual loss amounts that a

 

member is obligated to pay and that are paid or payable by the

 

member, and do not include claim expenses. An ultimate loss is

 

incurred by the association on the date that the loss occurs.

 

     Enacting section 1. This amendatory act takes effect 90 days

 

after the date it is enacted into law.