SENATE BILL No. 209

 

 

February 25, 2003, Introduced by Senators SCHAUER, BASHAM, EMERSON and CHERRY and referred to the Committee on Banking and Financial Institutions.

 

 

        

                                                                                

                                                                                

                                                                                

                                                                                

                                                                                

                                                                                

                                                                                

                                                                                

                                                                                

                                                                                

                                                                                

                                                                                

                                                                                

                                                                                

                                                                                

                                                                                

                                                                                

                                                                                

                                                                                

                                                                                

                                                                                

                                                                                

                                                                                

                                                                                 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:                      

                                                                                

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

                                                                                

2   force immediately prior to January 1, 1957 and existing under any           

                                                                                

3   act repealed by this act is valid until its original expiration             

                                                                                

4   date, unless earlier terminated in accordance with this act.                

                                                                                

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

                                                                                

6   facility, and any premium or assessment levied against an insurer           

                                                                                

7   member of that association or facility, is hereby validated                 

                                                                                

8   retroactively to the date of its original adoption or levy and              

                                                                                

9   shall continue  continues in force and effect according to the             

                                                                                


                                                                                

1   terms of the plan of operation, premium, or assessment until                

                                                                                

2   otherwise changed by the commissioner or the board of directors             

                                                                                

3   of the association or facility pursuant to this act.                        

                                                                                

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

                                                                                

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

                                                                                

6   of an association or facility is not state money.                           

                                                                                

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

                                                                                

8   record of an association or facility  shall be exempted  is                 

                                                                                

9   exempt from disclosure pursuant to section 13 of the freedom of             

                                                                                

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

                                                                                

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

                                                                                

12  15.243.                                                                     

                                                                                

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

                                                                                

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

                                                                                

15  or facility formed under a law in force outside this state, is              

                                                                                

16  not a burden or special burden for purposes of a calculation                

                                                                                

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

                                                                                

18  association or facility shall not be included in determining the            

                                                                                

19  aggregate amount a foreign insurer pays to the commissioner under           

                                                                                

20  section 476a.                                                               

                                                                                

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

                                                                                

22  an association of insurers created under this act and any other             

                                                                                

23  association or facility formed under this act as a nonprofit                

                                                                                

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

                                                                                

25  the following:                                                              

                                                                                

26      (a) The Michigan worker's compensation placement facility                   

                                                                                

27  created under chapter 23.                                                   

                                                                                


                                                                                

1       (b) The Michigan basic property insurance association created               

                                                                                

2   under  section  chapter 29.                                                 

                                                                                

3       (c) The catastrophic claims association created under                       

                                                                                

4   chapter 31.                                                                 

                                                                                

5       (d) The Michigan automobile insurance placement facility                    

                                                                                

6   created under chapter 33.                                                   

                                                                                

7       (e) The Michigan life and health insurance guaranty                         

                                                                                

8   association created under chapter 77.                                       

                                                                                

9       (f) The property and casualty guaranty association created                  

                                                                                

10  under chapter 79.                                                           

                                                                                

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

                                                                                

12      Sec. 3104.  (1) An unincorporated, nonprofit association to                 

                                                                                

13  be known as the catastrophic claims association, hereinafter                

                                                                                

14  referred to as the association, is created.  Each insurer engaged           

                                                                                

15  in writing insurance coverages that provide the security required           

                                                                                

16  by section 3101(1) within this state, as a condition of its                 

                                                                                

17  authority to transact insurance in this state, shall be a member            

                                                                                

18  of the association and shall be bound by the plan of operation of           

                                                                                

19  the association.  Each insurer engaged in writing insurance                 

                                                                                

20  coverages that provide the security required by section 3103(1)             

                                                                                

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

                                                                                

22  insurance in this state, shall be considered a member of the                

                                                                                

23  association, but only for purposes of premiums under subsection             

                                                                                

24  (7)(d).  Except as expressly provided in this section, the                  

                                                                                

25  association is not subject to any laws of this state with respect           

                                                                                

26  to insurers, but in all other respects the association is subject           

                                                                                

27  to the laws of this state to the extent that the association                

                                                                                


                                                                                

1   would be if it were an insurer organized and subsisting under               

                                                                                

2   chapter 50.                                                                 

                                                                                

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

                                                                                

4   accept indemnification for 100% of the amount of ultimate loss              

                                                                                

5   sustained under personal protection insurance coverages in excess           

                                                                                

6   of the following amounts in each loss occurrence:                           

                                                                                

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

                                                                                

8   before July 1, 2002, $250,000.00.                                           

                                                                                

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

                                                                                

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

                                                                                

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

                                                                                

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

                                                                                

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

                                                                                

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

                                                                                

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

                                                                                

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

                                                                                

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

                                                                                

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

                                                                                

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

                                                                                

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

                                                                                

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

                                                                                

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

                                                                                

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

                                                                                

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

                                                                                

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

                                                                                

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

                                                                                

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

                                                                                


                                                                                

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

                                                                                

2   Beginning July 1, 2013, this $500,000.00 amount shall be                    

                                                                                

3   increased biennially on July 1 of each odd-numbered year, for               

                                                                                

4   policies issued or renewed before July 1 of the following                   

                                                                                

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

                                                                                

6   index, and rounded to the nearest $5,000.00.  This biennial                 

                                                                                

7   adjustment shall be calculated by the association by January 1 of           

                                                                                

8   the year of its July 1 effective date.                                      

                                                                                

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

                                                                                

10  ceasing to write insurance that provides the security required by           

                                                                                

11  section 3101(1) in this state.                                              

                                                                                

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

                                                                                

13  terminated by withdrawal shall continue to be bound by the plan             

                                                                                

14  of operation, and upon withdrawal, all unpaid premiums that have            

                                                                                

15  been charged to the withdrawing member are payable as of the                

                                                                                

16  effective date of the withdrawal.                                           

                                                                                

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

                                                                                

18  insolvent member shall be assumed by and apportioned among the              

                                                                                

19  remaining members of the association as provided in the plan of             

                                                                                

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

                                                                                

21  behalf of the remaining members against the estate or funds of              

                                                                                

22  the insolvent member for sums due the association.                          

                                                                                

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

                                                                                

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

                                                                                

25  business that provides the security required by section 3101(1)             

                                                                                

26  in this state, the member and successors in interest of the                 

                                                                                

27  member remain liable for the member's obligations.                          

                                                                                


                                                                                

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

                                                                                

2   of the members of the association:                                          

                                                                                

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

                                                                                

4   (2).                                                                        

                                                                                

5       (b) Establish procedures by which members shall promptly                    

                                                                                

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

                                                                                

7   injuries or damages sustained, may reasonably be anticipated to             

                                                                                

8   involve the association if the member is ultimately held legally            

                                                                                

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

                                                                                

10  reporting claims, the member shall in all instances consider                

                                                                                

11  itself legally liable for the injuries or damages.  The member              

                                                                                

12  shall also advise the association of subsequent developments                

                                                                                

13  likely to materially affect the interest of the association in              

                                                                                

14  the claim.                                                                  

                                                                                

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

                                                                                

16  liabilities of the association and require each member to furnish           

                                                                                

17  statistics, in connection with liabilities of the association, at           

                                                                                

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

                                                                                

19  plan of operation.                                                          

                                                                                

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

                                                                                

21  calculate and charge to members of the association a total                  

                                                                                

22  premium sufficient to cover the expected losses and expenses of             

                                                                                

23  the association that the association will likely incur during the           

                                                                                

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

                                                                                

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

                                                                                

26  the period and may be adjusted for any excess or deficient                  

                                                                                

27  premiums from previous periods.  Excesses or deficiencies from              

                                                                                


                                                                                

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

                                                                                

2   be adjusted over several periods in a manner provided for in the            

                                                                                

3   plan of operation.  Each member shall be charged an amount equal            

                                                                                

4   to that member's total written car years of insurance providing             

                                                                                

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

                                                                                

6   written in this state during the period to which the premium                

                                                                                

7   applies, multiplied by the average premium per car.  The average            

                                                                                

8   premium per car shall be the total premium calculated divided by            

                                                                                

9   the total written car years of insurance providing the security             

                                                                                

10  required by section 3101(1) or 3103(1) written in this state of             

                                                                                

11  all members during the period to which the premium applies.  A              

                                                                                

12  member shall be charged a premium for a historic vehicle that is            

                                                                                

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

                                                                                

14  insured with the member.  As used in this subdivision:                      

                                                                                

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

                                                                                

16  historic vehicle.                                                           

                                                                                

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

                                                                                

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

                                                                                

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

                                                                                

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

                                                                                

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

                                                                                

22  association shall do either of the following:                               

                                                                                

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

                                                                                

24  after the premium charge.                                                   

                                                                                

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

                                                                                

26  to cover the actual cash obligations of the association.                    

                                                                                

27      (f) Receive and distribute all sums required by the operation               

                                                                                


                                                                                

1   of the association.                                                         

                                                                                

2       (g) Establish procedures for reviewing claims procedures and                

                                                                                

3   practices of members of the association.  If the claims                     

                                                                                

4   procedures or practices of a member are considered inadequate to            

                                                                                

5   properly service the liabilities of the association, the                    

                                                                                

6   association may undertake or may contract with another person,              

                                                                                

7   including another member, to adjust or assist in the adjustment             

                                                                                

8   of claims for the member on claims that create a potential                  

                                                                                

9   liability to the association and may charge the cost of the                 

                                                                                

10  adjustment to the member.                                                   

                                                                                

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

                                                                                

12  section, the association may do all of the following:                       

                                                                                

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

                                                                                

14  judgment against the association shall not create any direct                

                                                                                

15  liability against the individual members of the association.  The           

                                                                                

16  association may provide for the indemnification of its members,             

                                                                                

17  members of the board of directors of the association, and                   

                                                                                

18  officers, employees, and other persons lawfully acting on behalf            

                                                                                

19  of the association.                                                         

                                                                                

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

                                                                                

21  with reinsurers licensed to transact insurance in this state or             

                                                                                

22  approved by the commissioner.                                               

                                                                                

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

                                                                                

24  as may be necessary to assure the efficient operation of the                

                                                                                

25  association.                                                                

                                                                                

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

                                                                                

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

                                                                                


                                                                                

1   and delegate authority, as the board considers necessary to                 

                                                                                

2   assure the proper administration and operation of the association           

                                                                                

3   consistent with the plan of operation.                                      

                                                                                

4       (e) Contract for goods and services, including independent                  

                                                                                

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

                                                                                

6   from others within or without this state to assure the efficient            

                                                                                

7   operation of the association.                                               

                                                                                

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

                                                                                

9   interested party concerning the operation of the association.               

                                                                                

10      (g) Perform other acts not specifically enumerated in this                  

                                                                                

11  section that are necessary or proper to accomplish the purposes             

                                                                                

12  of the association and that are not inconsistent with this                  

                                                                                

13  section or the plan of operation.                                           

                                                                                

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

                                                                                

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

                                                                                

16  association consistent with the plan of operation and this                  

                                                                                

17  section.                                                                    

                                                                                

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

                                                                                

19  following:                                                                  

                                                                                

20      (a) The establishment of necessary facilities.                              

                                                                                

21      (b) The management and operation of the association.                        

                                                                                

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

                                                                                

23  adjustments from excess or deficient premiums from prior                    

                                                                                

24  periods.                                                                    

                                                                                

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

                                                                                

26  the association.                                                            

                                                                                

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

                                                                                


                                                                                

1   association for actual and necessary expenses incurred on                   

                                                                                

2   association business.                                                       

                                                                                

3       (f) The investment policy of the association.                               

                                                                                

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

                                                                                

5   implement this section.                                                     

                                                                                

6       (11) Each board shall include members that would contribute a               

                                                                                

7   total of not less than 40% of the total premium calculated                  

                                                                                

8   pursuant to subsection (7)(d).  Each director shall be entitled             

                                                                                

9   to 1 vote.  The initial term of office of a director shall be 2             

                                                                                

10  years.                                                                      

                                                                                

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

                                                                                

12  rules providing for the composition and term of successor boards            

                                                                                

13  to the initial board, consistent with the membership composition            

                                                                                

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

                                                                                

15  directors shall be staggered so that the terms of all the                   

                                                                                

16  directors do not expire at the same time and so that a director             

                                                                                

17  does not serve a term of more than 4 years.                                 

                                                                                

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

                                                                                

19  commissioner shall be an ex officio member of the board without             

                                                                                

20  vote.                                                                       

                                                                                

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

                                                                                

22  shall serve until that member's successor is selected and                   

                                                                                

23  qualified.  The chairperson of the board shall be elected by the            

                                                                                

24  board.  A vacancy on the board shall be filled by the                       

                                                                                

25  commissioner consistent with the plan of operation.                         

                                                                                

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

                                                                                

27  often as the chairperson, the commissioner, or the plan of                  

                                                                                


                                                                                

1   operation shall require, or at the request of any 3 members of              

                                                                                

2   the board.  The chairperson shall retain the right to vote on all           

                                                                                

3   issues.  Four members of the board constitute a quorum.                     

                                                                                

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

                                                                                

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

                                                                                

6   furnished to each member.                                                   

                                                                                

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

                                                                                

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

                                                                                

9   for approval a proposed plan of operation consistent with the               

                                                                                

10  objectives and provisions of this section, which shall provide              

                                                                                

11  for the economical, fair, and nondiscriminatory administration of           

                                                                                

12  the association and for the prompt and efficient provision of               

                                                                                

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

                                                                                

14  then the commissioner, after consultation with the board, shall             

                                                                                

15  formulate and place into effect a plan consistent with this                 

                                                                                

16  section.                                                                    

                                                                                

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

                                                                                

18  writing, shall be considered to meet the requirements of this               

                                                                                

19  section if it is not disapproved by written order of the                    

                                                                                

20  commissioner within 30 days after the date of its submission.               

                                                                                

21  Before disapproval of all or any part of the proposed plan of               

                                                                                

22  operation, the commissioner shall notify the board in what                  

                                                                                

23  respect the plan of operation fails to meet the requirements and            

                                                                                

24  objectives of this section.  If the board fails to submit a                 

                                                                                

25  revised plan of operation that meets the requirements and                   

                                                                                

26  objectives of this section within the 30-day period, the                    

                                                                                

27  commissioner shall enter an order accordingly and shall                     

                                                                                


                                                                                

1   immediately formulate and place into effect a plan consistent               

                                                                                

2   with the requirements and objectives of this section.                       

                                                                                

3       (19) The proposed plan of operation or amendments to the plan               

                                                                                

4   of operation are subject to majority approval by the board,                 

                                                                                

5   ratified by a majority of the membership having a vote, with                

                                                                                

6   voting rights being apportioned according to the premiums charged           

                                                                                

7   in subsection (7)(d) and are subject to approval by the                     

                                                                                

8   commissioner.                                                               

                                                                                

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

                                                                                

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

                                                                                

11  plan by the commissioner, each insurer authorized to write                  

                                                                                

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

                                                                                

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

                                                                                

14  formally subscribe to and participate in the plan approved as a             

                                                                                

15  condition of maintaining its authority to transact insurance in             

                                                                                

16  this state.                                                                 

                                                                                

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

                                                                                

18  reserve, and investment requirements of the commissioner to the             

                                                                                

19  same extent as would a member of the association.                           

                                                                                

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

                                                                                

21  recognized in the rate-making procedures for insurance rates in             

                                                                                

22  the same manner that expenses and premium taxes are recognized.             

                                                                                

23      (23) The commissioner or an authorized representative of the                

                                                                                

24  commissioner may visit the association at any time and examine              

                                                                                

25  any and all the association's affairs.                                      

                                                                                

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

                                                                                

27  occurring before July 1, 1978.                                              

                                                                                


                                                                                

1       (25) The business that the board may perform shall be                       

                                                                                

2   conducted at a public meeting of the board held in compliance               

                                                                                

3   with the open meetings act, 1976 PA 267, MCL 15.261 to 15.275.              

                                                                                

4       (26) A writing prepared, owned, used, in the possession of,                 

                                                                                

5   or retained by the board in the performance of an official                  

                                                                                

6   function is subject to the freedom of information act, 1976                 

                                                                                

7   PA 442, MCL 15.231 to 15.246.                                               

                                                                                

8       (27)  (25)  As used in this section:                                        

                                                                                

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

                                                                                

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

                                                                                

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

                                                                                

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

                                                                                

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

                                                                                

14  United States department of labor, bureau of labor statistics,              

                                                                                

15  and as certified by the commissioner.                                       

                                                                                

16      (b) "Motor vehicle accident policy" means a policy providing                

                                                                                

17  the coverages required under section 3101(1).                               

                                                                                

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

                                                                                

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

                                                                                

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

                                                                                

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

                                                                                

22      Enacting section 1.  This amendatory act does not take effect               

                                                                                

23  unless Senate Bill No.  210                                                 

                                                                                

24                  of the 92nd Legislature is enacted into law.