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