Bill Text: MI SB0240 | 2017-2018 | 99th Legislature | Introduced

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Bill Title: Insurance; no-fault; catastrophic claims association; revise membership, require annual audit, make subject to open meetings act and freedom of information act, and provide for other general amendments. Amends secs. 134 & 3104 of 1956 PA 218 (MCL 500.134 & 500.3104). TIE BAR WITH: SB 0241'17

Spectrum: Partisan Bill (Democrat 1-0)

Status: (Introduced - Dead) 2017-03-15 - Referred To Committee On Insurance [SB0240 Detail]

Download: Michigan-2017-SB0240-Introduced.html

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SENATE BILL No. 240

 

 

March 15, 2017, Introduced by Senators BIEDA, YOUNG, JOHNSON, GREGORY, HERTEL, CONYERS, HOOD, ANANICH and ROCCA and referred to the Committee on Insurance.

 

 

     A bill to amend 1956 PA 218, entitled

 

"The insurance code of 1956,"

 

by amending sections 134 and 3104 (MCL 500.134 and 500.3104),

 

section 134 as amended by 1990 PA 256 and section 3104 as amended

 

by 2002 PA 662.

 

 

THE PEOPLE OF THE STATE OF MICHIGAN ENACT:

 

     Sec. 134. (1) Every certificate of authority or license in

 

force immediately prior to before January 1, 1957 and existing

 

under any act repealed by this act is valid until its original

 

expiration date, unless earlier terminated in accordance with this

 

act.

 

     (2) Any plan of operation adopted by an association or

 

facility, and any premium or assessment levied against an insurer

 

member of that association or facility, is hereby validated valid

retroactively to the date of its original adoption or levy and

 

shall continue continues in force and effect according to the terms

 

of the plan of operation, premium, or assessment until otherwise

 

changed by the commissioner director or the board of directors of

 

the association or facility pursuant to this act.

 

     (3) An association or facility or the board of directors of

 

the association or facility is not a state agency and the money of

 

an association or facility is not state money.

 

     (4) A Except as otherwise provided in section 3104, a record

 

of an association or facility shall be exempted is exempt from

 

disclosure pursuant to under section 13 of the freedom of

 

information act, Act No. 442 of the Public Acts of 1976, being

 

section 15.243 of the Michigan Compiled Laws 1976 PA 442, MCL

 

15.243.

 

     (5) Any premium or assessment levied by an association or

 

facility, or any premium or assessment of a similar association or

 

facility formed under a law in force outside this state, is not a

 

burden or special burden for purposes of a calculation under

 

section 476a, and any premium or assessment paid to an association

 

or facility shall not be included in determining the aggregate

 

amount a foreign insurer pays to the commissioner department of

 

treasury under section 476a.

 

     (6) As used in this section, "association or facility" means

 

an association of insurers created under this act and any other

 

association or facility formed under this act as a nonprofit

 

organization of insurer members, including, but not limited to, the

 

following:

     (a) The Michigan worker's compensation placement facility

 

created under chapter 23.

 

     (b) The Michigan basic property insurance association created

 

under section chapter 29.

 

     (c) The catastrophic claims association created under chapter

 

31.

 

     (d) The Michigan automobile insurance placement facility

 

created under chapter 33.

 

     (e) The Michigan life and health insurance guaranty

 

association created under chapter 77.

 

     (f) The property and casualty guaranty association created

 

under chapter 79.

 

     (g) The assigned claims facility created under section 3171.

 

     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 this 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 must 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 must 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, and

 

subject to the director of the department's approval, 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 director of the department may

 

disapprove any total premium amount that the director of the

 

department considers to be excessive. 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 subsection (7)(d) and 1 member representing

 

the general public, appointed as provided in subsection (14). 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 and the terms of board members, 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 6 directors , and the

 

commissioner director of the department, who shall be an ex officio

 

act as a voting member of the board. without vote.

     (14) Each director The director of the department shall be

 

appointed by the commissioner and appoint the directors. The

 

director of the department shall appoint the first public member to

 

the board within 3 months after the effective date of the

 

amendatory act that added this sentence. A director shall serve

 

until that member's his or her successor is selected and qualified.

 

The board shall elect the chairperson of the board. shall be

 

elected by the board. A 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 The board shall furnish to each member an annual

 

report of the operations of the association in a form and detail as

 

may be determined by the board. shall 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.

 

     (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) The board shall conduct its business at a public meeting

 

of the board held in compliance with the open meetings act, 1976 PA

 

267, MCL 15.261 to 15.275.

 

     (24) A writing prepared, owned, used, in the possession of, or

 

retained by the board in the performance of an official function is

 

subject to disclosure under the freedom of information act, 1976 PA

 

442, MCL 15.231 to 15.246, as if the board were a public body

 

subject to that act.

 

     (25) An independent certified public accountant appointed by

 

the director of the department shall annually conduct and deliver

 

to the director of the department and the senate and house of

 

representatives standing committees on insurance issues an audit of

the association. In conducting the audit, the appointed certified

 

public accountant must be given access to all records of the

 

association. Each audit required by this subsection must include a

 

determination of whether the association is likely to be able to

 

continue to meet its obligations.

 

     (26) (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) (2)(m) 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 of the department.

 

     (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 does not take effect

 

unless Senate Bill No. ____ or House Bill No. ____ (request no.

 

02279'17 a) of the 99th Legislature is enacted into law.