2nd Engrossment - 83rd Legislature (2003 - 2004) Posted on 12/15/2009 12:00am
1.1 A bill for an act 1.2 relating to insurance; regulating the insurance 1.3 guaranty association; regulating the collection and 1.4 use of certain insurance information; amending 1.5 Minnesota Statutes 2002, sections 60C.02, subdivision 1.6 1; 60C.03, subdivisions 5, 9; 60C.05, subdivision 1; 1.7 60C.07, subdivision 2; 60C.09; 60C.11, subdivision 7; 1.8 60C.16; 60C.18, subdivision 1; 72A.501, subdivision 2; 1.9 repealing Minnesota Statutes 2002, section 60C.18, 1.10 subdivision 2. 1.11 BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF MINNESOTA: 1.12 Section 1. Minnesota Statutes 2002, section 60C.02, 1.13 subdivision 1, is amended to read: 1.14 Subdivision 1. [SCOPE.] This chapter applies to all kinds 1.15 of direct insurance, except: 1.16 (1) life; 1.17 (2) annuity; 1.18 (3) title; 1.19 (4) accident and sickness; 1.20 (5) credit; 1.21 (6) vendor's single interest or collateral protection or 1.22 any similar insurance protecting the interests of a creditor 1.23 arising out of a creditor debtor transaction; 1.24 (7) mortgage guaranty; 1.25 (8) financial guaranty or other forms of insurance offering 1.26 protection against investment risks; 1.27 (9) ocean marine; 1.28 (10) a transaction or combination of transactions between a 2.1 person, including affiliates of the person, and an insurer, 2.2 including affiliates of the insurer, that involves the transfer 2.3 of investment or credit risk unaccompanied by transfer
orof 2.4 insurance risk; or2.5 (11) insurance provided by or guaranteed by government; or 2.6 (12) insurance of warranties or service contracts, 2.7 including insurance that provides for the repair, replacement, 2.8 or services of goods or property, or indemnification for repair, 2.9 replacement or service, for the operation or structural failure 2.10 of the goods or property due to a defect in materials, 2.11 workmanship or normal wear and tear, or provides reimbursement 2.12 for the liability insured by the user of agreement or service 2.13 contracts that provide these benefits. 2.14 Sec. 2. Minnesota Statutes 2002, section 60C.03, 2.15 subdivision 5, is amended to read: 2.16 Subd. 5. [PERSON.] "Person" means any individual, 2.17 corporation, partnership, association, or voluntary 2.18 organization, and includes governmental entities. 2.19 Sec. 3. Minnesota Statutes 2002, section 60C.03, 2.20 subdivision 9, is amended to read: 2.21 Subd. 9. [AFFILIATE.] "Affiliate" means a person other 2.22 than a natural person who directly, or indirectly, through one 2.23 or more intermediaries, controls, is controlled by, or is under 2.24 common control with an insolvent insurer on December 31 of the2.25 year preceding the date the insurer becomes an insolvent insurer2.26 another person. 2.27 Sec. 4. Minnesota Statutes 2002, section 60C.05, 2.28 subdivision 1, is amended to read: 2.29 Subdivision 1. The association shall: 2.30 (a) Be deemed the insurer to the extent of its obligation 2.31 on the covered claims and have the right to pursue and retain 2.32 salvage and subrogation recoverables on covered claim 2.33 obligations to the extent paid or acknowledged in writing as an 2.34 obligation by the association. The claims found by the board of2.35 directors to be covered shall be paid out of available funds2.36 after they have been approved or settled under sections 60B.45,3.1 subdivision 2, and 60B.58, subdivision 2, or the corresponding3.2 laws of another jurisdiction, subject to the board's power to3.3 reduce the amount of or reject the award under section 60C.10.3.4 The association shall not be deemed the insolvent insurer 3.5 for any purpose relating to the issue of whether the association 3.6 is amenable to the personal jurisdiction of the courts of any 3.7 state. 3.8 (b) Allocate claims paid and expenses incurred among the 3.9 five accounts and assess member insurers separately for each 3.10 account the amounts necessary to pay the obligations of the 3.11 association under clause (a), the expenses of handling claims, 3.12 the cost of examinations under section 60C.15, and other 3.13 expenses authorized by this chapter. 3.14 (c) Notify claimants in this state as considered necessary 3.15 by the commissioner, to the extent records are available to the 3.16 association. If sufficient information for notification by mail 3.17 is not available, notice by publication in a newspaper of 3.18 general circulation is sufficient. 3.19 (d) Handle claims through its employees or through one or 3.20 more insurers or other persons designated as servicing 3.21 facilities. Designation of a servicing facility is subject to 3.22 the approval of the commissioner, but the designation may be 3.23 declined. 3.24 (e) Reimburse each servicing facility for obligations of 3.25 the association paid by the facility and for expenses incurred 3.26 by the facility while handling claims on behalf of the 3.27 association and shall pay the other expenses of the association 3.28 authorized by this chapter. 3.29 (f) Notify each member insurer of its assessment not later 3.30 than 30 days before it is due. 3.31 (g) Issue to each insurer paying an assessment under this 3.32 chapter a certificate of contribution, in a form prescribed by 3.33 the commissioner, for the amount so paid. All outstanding 3.34 certificates shall be of equal dignity and priority without 3.35 reference to amounts or dates of issue. A certificate of 3.36 contribution may be shown by the insurer in its financial 4.1 statement as an asset in the form and for the amount, if any, 4.2 and period of time the commissioner approves. 4.3 (h) Have the right to appoint or substitute and to direct 4.4 legal counsel retained under liabilityinsurance policies for 4.5 the defense of covered claims. 4.6 Sec. 5. Minnesota Statutes 2002, section 60C.07, 4.7 subdivision 2, is amended to read: 4.8 Subd. 2. The plan of operation shall: 4.9 (a) Establish the procedures whereby all the powers and 4.10 duties of the association under section 60C.05 will be performed. 4.11 (b) Establish procedures for handling assets of the 4.12 association. 4.13 (c) Establish the amount and method of reimbursement of 4.14 members of the board of directors under section 60C.08, 4.15 subdivision 3. 4.16 (d) Establish procedures by which claims may be filed with 4.17 the association. 4.18 (e) Establish regular places and times for meetings for the 4.19 board of directors. 4.20 (f) Establish procedures for records to be kept of all 4.21 financial transactions of the association, its agents, and the 4.22 board of directors. 4.23 (g) Provide that any member insurer aggrieved by any final 4.24 action or decision of the association may appeal to the 4.25 commissioner within 30 days after the action or decision. 4.26 (h) Establish the procedures whereby selections for the 4.27 board of directors will be submitted to the commissioner. 4.28 (i) Contain additional provisions necessary or proper for 4.29 the execution of the powers and duties of the association. 4.30 (j) Establish procedures for the disposition of liquidating 4.31 dividends or other money received from the estate of the4.32 insolvent insurerinsurers. 4.33 Sec. 6. Minnesota Statutes 2002, section 60C.09, is 4.34 amended to read: 4.35 60C.09 [COVERED CLAIMS.] 4.36 Subdivision 1. [DEFINITION.] A covered claim is any unpaid 5.1 claim, including one for unearned premium, which: 5.2 (a) (1)arises out of and is within the coverage of an 5.3 insurance policy issued by a member insurer if the insurer 5.4 becomes an insolvent insurer after April 30, 1979; or5.5 (2) would be within the coverage of an extended reporting5.6 endorsement to a claims-made insurance policy if insolvency had5.7 not prevented the member insurer from fulfilling its obligation5.8 to issue the endorsement, if:5.9 (i) the claims-made policy contained a provision affording5.10 the insured the right to purchase a reporting endorsement;5.11 (ii) coverage will be no greater than if a reporting5.12 endorsement had been issued;5.13 (iii) the insured has not purchased other insurance which5.14 applies to the claim; and5.15 (iv) the insured's deductible under the policy is increased5.16 by an amount equal to the premium for the reporting endorsement,5.17 as provided in the insured's claims-made policy, or if not so5.18 provided, then as established by a rate service organization;5.19 (b) arises out of a class of business which is not excepted 5.20 from the scope of this chapter by section 60C.02; and 5.21 (c) is made by: 5.22 (i) a policyholder, or an insured beneficiary under a 5.23 policy, who, at the time of the insured event, was a resident of 5.24 this state; or 5.25 (ii) a person designated in the policy as having an 5.26 insurable interest in or related to property situated in this 5.27 state at the time of the insured event; or 5.28 (iii) an obligee or creditor under any surety bond, who, at 5.29 the time of default by the principal debtor or obligor, was a 5.30 resident of this state; or 5.31 (iv) a third party claimant under a liability policy or 5.32 surety bond, if: (a) the insured or the third party claimant 5.33 was a resident of this state at the time of the insured event; 5.34 (b) the claim is for bodily or personal injuries suffered in 5.35 this state by a person who when injured was a resident of this 5.36 state; or (c) the claim is for damages to real property situated 6.1 in this state at the time of damage; or 6.2 (v) A direct or indirectan assignee of a person who except 6.3 for the assignment might have claimed under item (i), (ii), or 6.4 (iii). 6.5 For purposes of paragraph (c), item (ii), unit owners of 6.6 units in a common interest community are considered as having an 6.7 insurable interest. 6.8 A covered claim also includes any unpaid claim which arises 6.9 or exists within 30 days after the time of entry of a final 6.10 order of liquidation with a finding of insolvency by a court of 6.11 competent jurisdiction unless prior thereto the insured replaces 6.12 the policy or causes its cancellation or the policy expires on 6.13 its expiration date. A covered claim does not include claims 6.14 filed with the guaranty fund after the final date set by the 6.15 court for the filing of claims except for workers' compensation 6.16 claims that have met the time limitations and other requirements 6.17 of chapter 176 and excused late filings permitted under section6.18 60B.37. 6.19 Subd. 2. [FURTHER DEFINITION.] In addition to subdivision 6.20 1, a covered claim does not include: 6.21 (1) claims by an affiliate of the insurer; 6.22 (2) claims due a reinsurer, insurer, insurance pool, or 6.23 underwriting association, as subrogation recoveries, reinsurance 6.24 recoveries, contribution, indemnification, or otherwise. This 6.25 clause does not prevent a person from presenting the excluded 6.26 claim to the insolvent insurer or its liquidator, but the claims 6.27 shall not be asserted against another person, including the 6.28 person to whom the benefits were paid or the insured of the 6.29 insolvent insurer, except to the extent that the claim is 6.30 outside the coverage of the policy issued by the insolvent 6.31 insurer; and 6.32 (3) any first-partyclaims, resulting from insolvencies 6.33 which occur after July 31, 1996, by an insured whose net worth 6.34 exceeds $25,000,000 on December 31 of the year prior to the year 6.35 in which the insurer becomes an insolvent insurer; provided that 6.36 an insured's net worth on that date shall be deemed to include 7.1 the aggregate net worth of the insured and all of its 7.2 subsidiaries and affiliates as calculated on a consolidated 7.3 basis; 7.4 (4) any claims under a policy written by an insolvent 7.5 insurer with a deductible or self-insured retention of $300,000 7.6 or more, nor that portion of a claim that is within an insured's 7.7 deductible or self-insured retention; 7.8 (5) claims that are a fine, penalty, interest, or punitive 7.9 or exemplary damages. 7.10 Subd. 3. [LIMITATION OF AMOUNT.] Payment of a covered 7.11 claim, whether upon a single policy or multiple policies of 7.12 insurance, is limited to no more than $300,000. In the case of 7.13 claim for unearned premium by a single claimant, the entire 7.14 claim up to $300,000 shall be allowed excluding retrospective 7.15 or, experience-rated insurance plans or premiums subject to 7.16 adjustment after termination of the policy. The limitation on 7.17 the amount of payment for a covered claim does not apply to 7.18 claims for workers' compensation insurance. In no event is the 7.19 association obligated to the policyholder or claimant in an 7.20 amount in excess of the obligation of the insurer under the 7.21 policy from which the claim arises. For insolvencies occurring 7.22 on or after October 1, 1985, no deductible applies to claims 7.23 eligible for payment under the assigned claims plan under 7.24 sections 65B.63 to 65B.65. 7.25 Subd. 4. [AGGREGATE LIMITATION.] Except in the case of a 7.26 claim for benefits under workers' compensation coverage, any 7.27 obligation of the association to or on behalf of an insured and 7.28 its affiliates on covered claims ceases when $10,000,000 has 7.29 been paid in the aggregate by the association and any one or 7.30 more associations similar to the association of any other state 7.31 or states, to or on behalf of that insured, its affiliates, and 7.32 additional insureds on covered claims or allowed claims arising 7.33 under the policy or policies of any one insolvent insurer. 7.34 Sec. 7. Minnesota Statutes 2002, section 60C.11, 7.35 subdivision 7, is amended to read: 7.36 Subd. 7. The association may recover the amount of any 8.1 covered claim including claim handling expenses paid, resulting 8.2 from insolvencies which occur after July 31, 1996, on behalf of 8.3 an insured who has a net worth of $25,000,000 as provided in 8.4 section 60C.09, subdivision 2, clause (3), on December 31 of the 8.5 year immediately preceding the date the insurer becomes an 8.6 insolvent insurer and whose liability obligations to other 8.7 persons are satisfied in whole or in part by payments made under 8.8 this chapter. 8.9 Sec. 8. Minnesota Statutes 2002, section 60C.16, is 8.10 amended to read: 8.11 60C.16 [EXAMINATION OF THE ASSOCIATION.] 8.12 The association is subject to examination and regulation by 8.13 the commissioner. The board of directors shall submit , not8.14 later than March 30 ofeach year, a financial report for the 8.15 preceding calendar year in a form approved by the commissioner. 8.16 Sec. 9. Minnesota Statutes 2002, section 60C.18, 8.17 subdivision 1, is amended to read: 8.18 Subdivision 1. The rates and premiums charged for 8.19 insurance policies and fidelity and surety bonds to which this 8.20 chapter applies mustmay include amounts sufficient to recoup a 8.21 sum equal to the amounts paid to the association by the member 8.22 insurer less any amounts returned to the member insurer by the 8.23 association. The rates shall not be deemed excessive because 8.24 they contain an amount reasonably calculated to recoup 8.25 assessments paid by the member insurer. 8.26 Sec. 10. Minnesota Statutes 2002, section 72A.501, 8.27 subdivision 2, is amended to read: 8.28 Subd. 2. [APPLICATION.] (a) If the authorization is signed 8.29 to collect information in connection with an application for a 8.30 property and casualty insurance policy, a policy reinstatement, 8.31 or a request for a change in benefits, the authorization must 8.32 not remain valid for longer than one year from the date the 8.33 authorization is signed or the date the insurer grants or denies 8.34 coverage, reinstatement, or change in benefits, whichever is 8.35 sooner. 8.36 (b) If the authorization is signed to collect information 9.1 in connection with an application for a life, disability, and 9.2 health insurance policy or contract, reinstatement, or request 9.3 for change in benefits, the authorization may not remain valid 9.4 for longer than 26 months from the date the authorization is 9.5 signed. 9.6 (c) This section and section 72A.502, subdivisions 1 and 9.7 12, do not apply to the collection and use of a numeric product 9.8 referred to as an insurance score or credit score that is used 9.9 by a licensed insurance agent exclusively for the purpose of 9.10 underwriting or rating an insurance policy, if the agent informs 9.11 the policyholder or prospective policyholder requesting the 9.12 insurance coverage that an insurance score or credit score will 9.13 be obtained for the purpose of underwriting or rating the policy. 9.14 Sec. 11. [REPEALER.] 9.15 Minnesota Statutes 2002, section 60C.18, subdivision 2, is 9.16 repealed. 9.17 Sec. 12. [EFFECTIVE DATE.] 9.18 Sections 1 to 8 and 11 are effective the day following 9.19 final enactment and apply to unpaid covered claims pending on, 9.20 and unpaid covered claims arising on or after, that date. 9.21 Section 10 is effective the day following final enactment.