Minnesota Legislature
HF 837
1st Engrossment - 81st Legislature (1999 - 2000) Posted on 12/15/2009 12:00am
KEY: stricken = removed, old language.
underscored = added, new language.
1.1 A bill for an act 1.2 relating to insurance; regulating insurers, agents, 1.3 and coverages; modifying reporting requirements; 1.4 regulating the rehabilitation and liquidation of 1.5 insurers; modifying certain notice and disclosure 1.6 provisions; modifying certain definitions; making 1.7 technical changes; amending Minnesota Statutes 1998, 1.8 sections 60A.02, by adding a subdivision; 60A.052, 1.9 subdivision 2, and by adding a subdivision; 60A.06, 1.10 subdivisions 1 and 2; 60A.075, by adding a 1.11 subdivision; 60A.092, subdivisions 6 and 11; 60A.10, 1.12 subdivision 1; 60A.111, subdivision 1; 60A.13, 1.13 subdivision 1; 60A.16, subdivisions 2, 3, and 4; 1.14 60A.19, subdivision 1; 60A.32; 60B.21, subdivision 2; 1.15 60B.25; 60B.26, subdivision 1; 60B.39, subdivision 2; 1.16 60B.44, subdivisions 4, 6, and by adding subdivisions; 1.17 60D.20, subdivision 2; 60K.02, subdivision 1; 60K.03, 1.18 subdivisions 2 and 3; 60K.19, subdivisions 7 and 8; 1.19 61A.60, subdivision 1; 61B.19, subdivision 3; 62A.04, 1.20 subdivision 3; 62A.135, subdivision 5; 62A.50, 1.21 subdivision 3; 62A.61; 62A.65, subdivision 5; 62B.04, 1.22 subdivision 2; 62E.02, subdivision 1; 62E.05, 1.23 subdivision 1; 62E.09; 62E.13, subdivisions 6 and 8; 1.24 62E.14, subdivision 2; 62E.15, subdivision 2; 62L.02, 1.25 subdivision 24; 62L.03, subdivision 5; 62L.05, 1.26 subdivision 5; 62L.14, subdivision 7; 62Q.185; 62S.01, 1.27 subdivision 14; 62S.05, subdivision 2; 65A.01, 1.28 subdivision 1; 65A.27, subdivision 4; 65A.29, 1.29 subdivision 4; 65B.02, subdivision 2; 65B.44, 1.30 subdivision 1; 65B.48, subdivision 5; 72A.125, 1.31 subdivision 3; 72A.20, subdivision 29; 72B.04, 1.32 subdivision 10; 79A.01, subdivision 10, and by adding 1.33 a subdivision; 79A.02, subdivisions 1 and 4; 79A.03, 1.34 subdivisions 6, 7, 9, 10, and by adding a subdivision; 1.35 79A.21, subdivision 2; 79A.23, subdivisions 1 and 2; 1.36 and 256B.0644; proposing coding for new law in 1.37 Minnesota Statutes, chapter 60B; repealing Minnesota 1.38 Statutes 1998, sections 60A.11, subdivision 24a; 1.39 60B.36; 60B.44, subdivision 3; 65A.29, subdivision 12; 1.40 and 79A.04, subdivision 8; Minnesota Rules, part 1.41 2780.0500, item C. 1.42 BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF MINNESOTA: 1.43 Section 1. Minnesota Statutes 1998, section 60A.02, is 2.1 amended by adding a subdivision to read: 2.2 Subd. 2b. [FILED.] In cases where a law requires documents 2.3 to be filed with the commissioner, the documents will be 2.4 considered filed when they are received by the department of 2.5 commerce. 2.6 Sec. 2. Minnesota Statutes 1998, section 60A.052, 2.7 subdivision 2, is amended to read: 2.8 Subd. 2. [SUSPENSION OR REVOCATION OF AUTHORITY OR 2.9 CENSURE.] If the commissioner determines that one of the 2.10 conditions listed in subdivision 1 exists, the commissioner may 2.11 issue an order requiring the insurance company to show cause why 2.12 any or all of the following should not occur: (1) revocation or 2.13 suspension of any or all certificates of authority granted to 2.14 the foreign or domestic insurance company or its agent; (2) 2.15 censuring of the insurance company;or(3) cancellation of all 2.16 or some of the company's insurance contracts then in force in 2.17 this state; or (4) the imposition of a civil penalty. The order 2.18 shall be calculated to give reasonable notice of the time and 2.19 place for hearing thereon, and shall state the reasons for the 2.20 entry of the order. All hearings shall be conducted in 2.21 accordance with chapter 14. The insurer may waive its right to 2.22 the hearing. If the insurer is under the supervision or control 2.23 of the insurance department of the insurer's state of domicile, 2.24 that insurance department, acting on behalf of the insurer, may 2.25 waive the insurer's right to the hearing. After the hearing, 2.26 the commissioner shall enter an order disposing of the matter as 2.27 the facts require. If the insurance company fails to appear at 2.28 a hearing after having been duly notified of it, the company 2.29 shall be considered in default, and the proceeding may be 2.30 determined against the company upon consideration of the order 2.31 to show cause, the allegations of which may be considered to be 2.32 true. 2.33 Sec. 3. Minnesota Statutes 1998, section 60A.052, is 2.34 amended by adding a subdivision to read: 2.35 Subd. 4a. [WITHDRAWAL OF INSURER FROM STATE.] No insurer 2.36 shall withdraw from this state until its direct liability to its 3.1 policyholders and obligees under all its insurance contracts 3.2 then in force in this state have been assumed by another 3.3 licensed insurer according to section 60A.09, subdivision 4a. 3.4 Sec. 4. Minnesota Statutes 1998, section 60A.06, 3.5 subdivision 1, is amended to read: 3.6 Subdivision 1. [STATUTORY LINES.] Insurance corporations 3.7 may be authorized to transact in any state or territory in the 3.8 United States, in the Dominion of Canada, and in foreign 3.9 countries, when specified in their charters or certificates of 3.10 incorporation, either as originally granted or as thereafter 3.11 amended, any of the following kinds of business, upon the stock 3.12 plan, or upon the mutual plan when the formation of such mutual 3.13 companies is otherwise authorized by law; and business trusts as 3.14 authorized by law of this state shall only be authorized to 3.15 transact in this state the following kind of business 3.16 hereinafter specified in clause (7) hereof when specified in 3.17 their "declaration of trust": 3.18 (1) To insure against loss or damage to property on land 3.19 and against loss of rents and rental values, leaseholds of 3.20 buildings, use and occupancy and direct or consequential loss or 3.21 damage caused by fire, smoke or smudge, water or other fluid or 3.22 substance, lightning, windstorm, tornado, cyclone, earthquake, 3.23 collapse and slippage, rain, hail, frost, snow, freeze, change 3.24 of temperature, weather or climatic conditions, excess or 3.25 deficiency of moisture, floods, the rising of waters, oceans, 3.26 lakes, rivers or their tributaries, bombardment, invasion, 3.27 insurrection, riot, civil war or commotion, military or usurped 3.28 power, electrical power interruption or electrical breakdown 3.29 from any cause, railroad equipment, motor vehicles or aircraft, 3.30 accidental injury to sprinklers, pumps, conduits or containers 3.31 or other apparatus erected for extinguishing fires, explosion, 3.32 whether fire ensues or not, except explosions on risks specified 3.33 in clause (3); provided, however, that there may be insured 3.34 hereunder the following: (a) explosion of any kind originating 3.35 outside the insured building or outside of the building 3.36 containing the property insured, (b) explosion of pressure 4.1 vessels which do not contain steam or which are not operated 4.2 with steam coils or steam jackets; and (c) risks under home 4.3 owners multiple peril policies; 4.4 (2)(a) To insure vessels, freight, goods, wares, 4.5 merchandise, specie, bullion, jewels, profits, commissions, bank 4.6 notes, bills of exchange, and other evidences of debt, bottomry 4.7 and respondentia interest, and every insurance appertaining to 4.8 or connected with risks of transportation and navigation on and 4.9 under water, on land or in the air; 4.10 (b) To insure all personal property floater risks; 4.11 (3) To insure against any loss from either direct or 4.12 indirect damage to any property or interest of the assured or of 4.13 another, resulting from the explosion of or injury to (a) any 4.14 boiler, heater or other fired pressure vessel; (b) any unfired 4.15 pressure vessel; (c) pipes or containers connected with any of 4.16 said boilers or vessels; (d) any engine, turbine, compressor, 4.17 pump or wheel; (e) any apparatus generating, transmitting or 4.18 using electricity; (f) any other machinery or apparatus 4.19 connected with or operated by any of the previously named 4.20 boilers, vessels or machines; and including the incidental power 4.21 to make inspections of and to issue certificates of inspection 4.22 upon, any such boilers, apparatus, and machinery, whether 4.23 insured or otherwise; 4.24 (4) To make contracts of life and endowment insurance, to 4.25 grant, purchase, or dispose of annuities or endowments of any 4.26 kind; and, in such contracts, or in contracts supplemental 4.27 thereto to provide for additional benefits in event of death of 4.28 the insured by accidental means, total permanent disability of 4.29 the insured, or specific dismemberment or disablement suffered 4.30 by the insured, or acceleration of life or endowment or annuity 4.31 benefits in advance of the time they would otherwise be payable; 4.32 (5)(a) To insure against loss or damage by the sickness, 4.33 bodily injury or death by accident of the assured or dependents, 4.34 or those for whom the assured has assumed a portion of the 4.35 liability for the loss or damage, including liability for 4.36 payment of medical care costs or for provisions of medical care; 5.1 (b) To insure against the legal liability, whether imposed 5.2 by common law or by statute or assumed by contract, of employers 5.3 for the death or disablement of, or injury to, employees; 5.4 (6) To guarantee the fidelity of persons in fiduciary 5.5 positions, public or private, or to act as surety on official 5.6 and other bonds, and for the performance of official or other 5.7 obligations; 5.8 (7) To insure owners and others interested in real estate 5.9 against loss or damage, by reason of defective titles, 5.10 encumbrances, or otherwise; 5.11 (8) To insure against loss or damage by breakage of glass, 5.12 located or in transit; 5.13 (9)(a) To insure against loss by burglary, theft, or 5.14 forgery; 5.15 (b) To insure against loss of or damage to moneys, coins, 5.16 bullion, securities, notes, drafts, acceptance or any other 5.17 valuable paper or document, resulting from any cause, except 5.18 while in the custody or possession of and being transported by 5.19 any carrier for hire or in the mail; 5.20 (c) To insure individuals by means of an all risk type of 5.21 policy commonly known as the "personal property floater" against 5.22 any kind and all kinds of loss of or damage to, or loss of use 5.23 of, any personal property other than merchandise; 5.24 (d) To insure against loss or damage by water or other 5.25 fluid or substance; 5.26 (10) To insure against loss from death of domestic animals 5.27 and to furnish veterinary service; 5.28 (11) To guarantee merchants and those engaged in business, 5.29 and giving credit, from loss by reason of giving credit to those 5.30 dealing with them; this shall be known as credit insurance; 5.31 (12) To insure against loss or damage to automobiles or 5.32 other vehicles or aircraft and their contents, by collision, 5.33 fire, burglary, or theft, and other perils of operation, and 5.34 against liability for damage to persons, or property of others, 5.35 by collision with such vehicles or aircraft, and to insure 5.36 against any loss or hazard incident to the ownership, operation, 6.1 or use of motor or other vehicles or aircraft; 6.2 (13) To insure against liability for loss or damage to the 6.3 property or person of another caused by the insured or by those 6.4 for whom the insured is responsible, including insurance of 6.5 medical, hospital, surgical, funeral or other related expense of 6.6 the insured or other person injured, irrespective of legal 6.7 liability of the insured, when issued with or supplemental to 6.8 policies of liability insurance; 6.9 (14) To insure against loss of or damage to any property of 6.10 the insured, resulting from the ownership, maintenance or use of 6.11 elevators, except loss or damage by fire; 6.12 (15) To insure against attorneys fees, court costs, witness 6.13 fees and incidental expenses incurred in connection with the use 6.14 of the professional services of attorneys at law. 6.15 Sec. 5. Minnesota Statutes 1998, section 60A.06, 6.16 subdivision 2, is amended to read: 6.17 Subd. 2. [OTHER LINES.] Any insurance corporation or 6.18 association heretofore or hereafter licensed to transact within 6.19 the state any of the kinds or classes of insurance specifically 6.20 authorized under the laws of this state may, when authorized by 6.21 its charter, transact within and without the state any lines of 6.22 insurance germane to its charter powers and not specifically 6.23 provided for under the laws of this state when these lines, or 6.24 combinations of lines, of insurance are not in violation of the 6.25 constitution or the laws of the state and, in the opinion of the 6.26 commissioner, not contrary to public policy, provided the 6.27 company or association shall first obtain authority of the 6.28 commissioner and meetsuch requirements as tocapital or 6.29 surplus, or both,and other solvency and policy form 6.30 requirements as the commissioner shall prescribe. These 6.31 additional hazards may be insured against by attachment to, or 6.32 in extension of, any policy which the company may be authorized 6.33 to issue under the laws of this state. This subdivision shall 6.34 apply to companies operating upon the stock or mutual plan, 6.35 reciprocal or interinsurance exchanges. 6.36 Sec. 6. Minnesota Statutes 1998, section 60A.075, is 7.1 amended by adding a subdivision to read: 7.2 Subd. 18. [POSTCONVERSION ACQUISITION.] Prior to and for a 7.3 period of five years following the date when the distribution of 7.4 consideration to the eligible members in exchange for their 7.5 membership interests is completed under a plan of conversion 7.6 according to this section, no person other than the reorganized 7.7 company shall directly or indirectly acquire or offer to acquire 7.8 in any manner ownership or beneficial ownership of ten percent 7.9 or more of any class of voting security of the reorganized 7.10 company, or of any affiliate of the reorganized company which 7.11 controls, directly or indirectly, a majority of the voting power 7.12 of the reorganized company, without the prior approval of the 7.13 commissioner. For the purposes of this subdivision, the terms 7.14 "affiliate" and "person" have the meanings given in section 7.15 60D.15, and the term "reorganized company" includes any 7.16 successor of the reorganized company. 7.17 Sec. 7. Minnesota Statutes 1998, section 60A.092, 7.18 subdivision 6, is amended to read: 7.19 Subd. 6. [SINGLE ASSUMING INSURER; TRUST FUND 7.20 REQUIREMENTS.] In the case of a single assuming insurer, the 7.21 trust shall consist of a trusteed account representing the 7.22 assuming insurer's liabilities attributable to business written 7.23 in the United States and, in addition,the assuming insurer7.24shall maintaina trusteed surplus of not less than $20,000,000 7.25 or an additional amount as the commissioner considers necessary. 7.26 The assuming insurer shall maintainaits surplus as regards 7.27 policyholders in an amount not less than $50,000,000 for 7.28 long-tail casualty reinsurers as provided under subdivision 3, 7.29 paragraph (a), clause (5). 7.30 Sec. 8. Minnesota Statutes 1998, section 60A.092, 7.31 subdivision 11, is amended to read: 7.32 Subd. 11. [REINSURANCE AGREEMENT REQUIREMENTS.] (a) If the 7.33 assuming insurer is not licensed or accredited to transact 7.34 insurance or reinsurance in this state, the credit authorized 7.35 under subdivisions 4 and 5 shall not be allowed unless the 7.36 assuming insurer agrees in the reinsurance agreements: 8.1 (1) that in the event of the failure of the assuming 8.2 insurer to perform its obligations under the terms of the 8.3 reinsurance agreement, the assuming insurer shall submit to the 8.4 jurisdiction of any court of competent jurisdiction in any state 8.5 of the United States, comply with all requirements necessary to 8.6 give the court jurisdiction, and abide by the final decision of 8.7 the court or of any appellate court in the event of an appeal; 8.8 and 8.9 (2) to designate the commissioner or a designated attorney 8.10 as its true and lawful attorney upon whom may be served any 8.11 lawful process in any action, suit, or proceeding instituted by 8.12 or on behalf of the ceding company. 8.13 (b) Paragraph (a) is not intended to conflict with or 8.14 override the obligation of the parties to a reinsurance 8.15 agreement to arbitrate their disputes, if an obligation to do so 8.16 is created in the agreement. 8.17 (c) Credit will not be granted, nor an asset or a reduction 8.18 from liability allowed, to a ceding insurer for reinsurance 8.19 effected with assuming insurers meeting the requirements of 8.20 subdivision 2, 3, 4, 5, 6, or 7, unless the reinsurance contract 8.21 provides that in the event of the insolvency of the ceding 8.22 insurer, the reinsurance will be payable under the contract 8.23 without diminution because of that insolvency. 8.24 Payments by the reinsurer must be made directly to the 8.25 ceding insurer or its receiver, except where the contract of 8.26 insurance or reinsurance specifically provides for another payee 8.27 for the reinsurance in the event of insolvency of the ceding 8.28 insurer according to the applicable requirements of statutes, 8.29 rules, or orders of the domiciliary state of the ceding insurer. 8.30 Sec. 9. Minnesota Statutes 1998, section 60A.10, 8.31 subdivision 1, is amended to read: 8.32 Subdivision 1. [DOMESTIC COMPANIES.] (1) [DEPOSIT AS 8.33 SECURITY FOR ALL POLICYHOLDERS REQUIRED.] No company in this 8.34 state, other than farmers' mutual, or real estate title 8.35 insurance companies, shall do business in this state unless it 8.36 has on deposit with the commissioner, for the protection of both 9.1 its resident and nonresident policyholders, securities to an 9.2 amount, the actual market value of which, exclusive of interest, 9.3 shall never be less than$200,000 until July 1, 1986, $300,0009.4until July 1, 1987, $400,000 until July 1, 1988, and$500,000on9.5and after July 1, 1988or one-half the applicable financial 9.6 requirement set forth in section 60A.07, whichever is less. The 9.7 securities shall be retained under the control of the 9.8 commissioner as long as any policies of the depositing company 9.9 remain in force. 9.10 (2) [SECURITIES DEFINED.] For the purpose of this 9.11 subdivision, the word "securities" means bonds or other 9.12 obligations of, or bonds or other obligations insured or 9.13 guaranteed by, the United States, any state of the United 9.14 States, any municipality of this state, or any agency or 9.15 instrumentality of the foregoing. 9.16 (3) [PROTECTION OF DEPOSIT FROM LEVY.] No judgment 9.17 creditor or other claimant may levy upon any securities held on 9.18 deposit with, or for the account of, the commissioner. Upon the 9.19 entry of an order by a court of competent jurisdiction for the 9.20 rehabilitation, liquidation or conservation of any depositing 9.21 company as provided in chapter 60B, that company's deposit 9.22 together with any accrued income thereon shall be transferred to 9.23 the commissioner as rehabilitator, liquidator, or conservator. 9.24 Sec. 10. Minnesota Statutes 1998, section 60A.111, 9.25 subdivision 1, is amended to read: 9.26 Subdivision 1. [REPORT.] Annually, or more frequently if 9.27 determined by the commissioner to be necessary for the 9.28 protection of policyholders, each foreign, alienand domestic 9.29 insurance company other than a life insurance company shall 9.30 report to the commissioner the ratio of its qualified assets to 9.31 its required liabilities. 9.32 Sec. 11. Minnesota Statutes 1998, section 60A.13, 9.33 subdivision 1, is amended to read: 9.34 Subdivision 1. [ANNUAL STATEMENTS REQUIRED.] Every 9.35 insurance company, including fraternal benefit societies, and 9.36 reciprocal exchanges, doing business in this state, shall 10.1transmit tofile with the commissioner, annually, on or before 10.2 March 1, the appropriate verified National Association of 10.3 Insurance Commissioners' annual statement blank, prepared in 10.4 accordance with the association's instructions handbook and 10.5 following those accounting procedures and practices prescribed 10.6 by the association's accounting practices and procedures manual, 10.7 unless the commissioner requires or finds another method of 10.8 valuation reasonable under the circumstances. Another method of 10.9 valuation permitted by the commissioner must be at least as 10.10 conservative as those prescribed in the association's manual. 10.11 All companies required to file an annual statement under this 10.12 subdivisionmustmay also be required to file with the 10.13 commissioner and the National Association of Insurance 10.14 Commissioners a copy of their annual statementon computer10.15diskettein an electronic form prescribed by the commissioner. 10.16 All Minnesota domestic insurers required to file annual 10.17 statements under this subdivision must also file quarterly 10.18 statements with the commissioner for the first, second, and 10.19 third calendar quarter on or before 45 days after the end of the 10.20 applicable quarter, prepared in accordance with the 10.21 association's instruction handbook. All companies required to 10.22 file quarterly statements under this subdivisionmust also file10.23a copy of their quarterly statement on computer diskettemay 10.24 also be required to file with the commissioner and the National 10.25 Association of Insurance Commissioners in an electronic form 10.26 prescribed by the commissioner. In addition, the commissioner 10.27 may require the filing of any other information determined to be 10.28 reasonably necessary for the continual enforcement of these 10.29 laws. The statement may be limited to the insurer's business 10.30 and condition in the United States unless the commissioner finds 10.31 that the business conducted outside the United States may 10.32 detrimentally affect the interests of policyholders in this 10.33 state. The statements shall also contain a verified schedule 10.34 showing all details required by law for assessment and 10.35 taxation. The statement or schedules shall be in the form and 10.36 shall contain all matters the commissioner may prescribe, and it 11.1 may be varied as to different types of insurers so as to elicit 11.2 a true exhibit of the condition of each insurer. 11.3 Sec. 12. Minnesota Statutes 1998, section 60A.16, 11.4 subdivision 2, is amended to read: 11.5 Subd. 2. [PROCEDURE TO BE FOLLOWED.] (1) [AGREEMENTPLAN 11.6 OF MERGER.] The merger or consolidation of insurance 11.7 corporations can be effected only as a result of ajoint11.8agreement entered intoplan of merger adopted, approved, and 11.9 filed as follows: 11.10 (a)The board of directors of each of such insurance11.11corporations as desire to merge or consolidate may, by majority11.12vote, enter into a joint agreement signed by such directors and11.13prescribingA resolution containing the plan of merger shall be 11.14 approved by the affirmative vote of a majority of the directors 11.15 of the board of each constituent corporation. The plan of 11.16 merger shall prescribe the terms and conditions of merger or 11.17 consolidation, and the mode of carrying the same into effect, 11.18 with such other details and provisions as are deemed necessary. 11.19 In the case of merging or consolidating stock insurance 11.20 corporations or stock and mutual insurance corporations, 11.21 suchjoint agreementplan of merger may prescribe that stock of 11.22 one or more of such corporations shall be converted, in whole or 11.23 in part, into stock or other securities of a corporation which 11.24 is not a merging or consolidating corporation or into cash. 11.25 (b) Theagreementplan of merger, or a summary of the plan 11.26 approved by the commissioner, shall be submitted to the 11.27 respective shareholders or members, as the case may be, of 11.28 eachof the merging or consolidating insurance11.29corporationsconstituent corporation, for consideration at a 11.30 regular meeting or at a special meeting duly called for the 11.31 purpose of considering and acting upon theagreement, and11.32ifplan. Written notice of the meeting, which shall state that 11.33 the purpose of the meeting is to consider the proposed plan of 11.34 merger, shall be given to each shareholder or member entitled to 11.35 vote upon the plan of merger not less than 30 nor more 60 days 11.36 before the meeting. The plan of merger must be approved by the 12.1 affirmative vote of the holders of two-thirds of the voting 12.2 power of the shareholders or members present or represented at 12.3 the meeting of eachsuch insuranceconstituent corporationshall12.4vote for the adoption of the agreement, then that fact shall be12.5certified on the agreement by the secretary of each insurance12.6corporation, and the agreement so adopted and certified shall be12.7signed and acknowledged by the president and secretary of each12.8of said insurance corporations; provided, however, that in the 12.9 case of a merger, except onewherebyin which any shares of the 12.10 surviving insurance corporation are to be converted into shares 12.11 or other securities of another corporation or into cash, the 12.12 agreement need not be submitted to the shareholders or members 12.13 of that one of the insurance corporations into which it has been 12.14 agreed the others shall be merged, but the agreement may be12.15signed and acknowledged by the president and secretary of such12.16insurance corporation at the direction of the board of12.17directors. Upon receiving the approval of the shareholders or 12.18 members of each constituent corporation, articles of merger 12.19 shall be prepared that contain the plan of merger and a 12.20 statement that the plan has been approved by each corporation 12.21 under this section. 12.22 (c) Theagreement so adopted, certified and acknowledged12.23 articles of merger shall be delivered to the commissioner of 12.24 commerce, who, if theagreementplan of merger is reasonable and 12.25 if the provisions thereof providing for any transfer of assets 12.26 and assumption of liabilities are fair and equitable to the 12.27 claimants and policyholders, shall place a certificate of 12.28 approval on theagreementarticles of merger and shall file 12.29 theagreementarticles in the commissioner's office, anda copy12.30 copies of theagreementarticles, certified by the commissioner 12.31 of commerce, shall be filed for record in the office of the 12.32 secretary of state andin the offices of the county recorders of12.33the counties in this state in which any of the corporate parties12.34to the agreement have their home or principal offices, and of12.35any counties in which any of the corporate parties have land,12.36title to which will be transferred as a result of the merger or13.1consolidationdelivered to the surviving corporation or its 13.2 legal representative. 13.3 (2) [ARTICLES OF INCORPORATION OF NEW COMPANY.] (a) If the 13.4joint agreementplan of merger is for a consolidation into a new 13.5 insurance corporation to be formed under any law or laws of this 13.6 state, articles of incorporation for such new insurance 13.7 corporation shall be prepared and delivered to the commissioner 13.8 of commerce together with theagreementarticles of merger as 13.9 provided in clause (1) hereof. 13.10 (b) Such articles shall be prepared, executed, approved, 13.11 filed and recorded in the form and manner prescribed in, or 13.12 applicable to, the particular law or laws under which the new 13.13 insurance corporation is to be formed. 13.14 (3) [ABANDONMENT.] A proposed merger or consolidation may 13.15 be abandoned at any time prior to approval by the commissioner 13.16 under the provision for abandonment, if any, set forth in the 13.17 plan of merger. 13.18 (4) [MUTUAL INSURANCE HOLDING COMPANIES.] In the case of a 13.19 merger of two mutual insurance holding companies under section 13.20 60A.077, subdivision 2, paragraph (c), the procedures set forth 13.21 in this subdivision and subdivisions 1, 3, 4, and 6 shall apply, 13.22 subject to the following: 13.23 (a) the plan of merger must be fair and reasonable to the 13.24 members of each constituent corporation; 13.25 (b) no member of either constituent corporation on the 13.26 effective date of the merger shall lose membership solely on 13.27 account of the merger; 13.28 (c) membership and voting rights in each respective 13.29 constituent corporation for purposes of the meeting of the 13.30 members held to consider the plan of merger shall be determined 13.31 in accordance with the articles and bylaws of that constituent 13.32 corporation as of a record date established in the plan of 13.33 merger; and 13.34 (d) the commissioner may require changes to the plan or 13.35 require certain undertakings from the surviving corporation to 13.36 assure compliance with this clause (4). 14.1 Sec. 13. Minnesota Statutes 1998, section 60A.16, 14.2 subdivision 3, is amended to read: 14.3 Subd. 3. [CONSUMMATION OF MERGER.] (1) A merger of one or 14.4 more insurance corporations into a domestic insurance 14.5 corporation shall be effective when thejoint agreement has14.6 articles of merger have been approved and filed in the office of 14.7 the commissioner of commerce, or at a later date specified in 14.8 the articles of merger. 14.9 (2) A consolidation of insurance corporations into a new 14.10 domestic insurance corporation shall be effective when thejoint14.11agreementarticles of merger and the new articles of 14.12 incorporation have been approved and filed in the office of the 14.13 commissioner of commerce, or at a later date specified in the 14.14 plan of merger. 14.15 (3) A merger or consolidation of one or more domestic 14.16 insurance corporations into a foreign insurance corporation 14.17 shall be effective according to the provisions of law of the 14.18 jurisdiction in whichsuchthe foreign insurance corporation was 14.19 formed, but not until thejoint agreement has been adopted,14.20certified and acknowledged, and copies thereof approved and14.21 articles of merger have been filed in accordance with 14.22 subdivision 2, clause (1). 14.23 Sec. 14. Minnesota Statutes 1998, section 60A.16, 14.24 subdivision 4, is amended to read: 14.25 Subd. 4. [EFFECT OF MERGER OR CONSOLIDATION.] Upon the 14.26 consummation of the merger or consolidation as provided in 14.27 subdivision 3, the effect ofsuchthe merger or consolidation 14.28 shall be: 14.29 (1) That the several corporate parties to thejoint14.30agreementplan of merger shall be one insurance corporation, 14.31 which shall be 14.32 (a) in the case of a merger, that one of the constituent 14.33 insurance corporations into which it has been agreed the others 14.34 shall be merged and which shall survive the merger for that 14.35 purpose, or 14.36 (b) in the case of a consolidation, the new insurance 15.1 corporation into which it has been agreed the others shall be 15.2 consolidated; 15.3 (2) The separate existence of the constituent insurance 15.4 corporations shall cease, except that of the surviving insurance 15.5 corporation in the case of a merger; 15.6 (3) The surviving or new insurance corporation, as the case 15.7 may be, shall possess all the rights, privileges and franchises 15.8 possessed by each of the former insurance corporations so merged 15.9 or consolidated except that such surviving or new corporation 15.10 shall not thereby acquire authority to engage in any insurance 15.11 business or exercise any right which an insurance corporation 15.12 may not be formed under the laws of this state to engage in or 15.13 exercise; 15.14 (4) All the property, real, personal and mixed, of each of 15.15 the constituent insurance corporations, and all debts due on 15.16 whatever account to any of them, including without limitation 15.17 subscriptions for shares, premiums on existing policies, and 15.18 other choses in action belonging to any of them, shall be taken 15.19 and be deemed to be transferred to and invested in such 15.20 surviving or new insurance corporation, as the case may be, 15.21 without further act or deed; 15.22 (5) The surviving or new insurance corporation shall be 15.23 responsible for all the liabilities and obligations of each of 15.24 the insurance corporations merged or consolidated, in accordance 15.25 with the terms of the agreement for merger or consolidation; but 15.26 the rights of the creditors of the constituent insurance 15.27 corporations, or of any persons dealing with such insurance 15.28 corporations shall not be impaired by such merger or 15.29 consolidation, and any claim existing or action or proceeding 15.30 pending by or against any of the constituent insurance 15.31 corporations may be prosecuted to judgment as if the merger or 15.32 consolidation had not taken place, or the surviving or new 15.33 insurance corporation may be proceeded against or substituted in 15.34 its place. 15.35 Sec. 15. Minnesota Statutes 1998, section 60A.19, 15.36 subdivision 1, is amended to read: 16.1 Subdivision 1. [REQUIREMENTS.] Any insurance company of 16.2 another state, upon compliance with all laws governing such 16.3 corporations in general and with the foregoing provisions so far 16.4 as applicable and the following requirements, shall be admitted 16.5 to do business in this state: 16.6 (1) It shall deposit with the commissioner a certified copy 16.7 of its charter or certificate of incorporation and its bylaws, 16.8 and a statement showing its financial condition and business, 16.9 verified by its president and secretary or other proper 16.10 officers; 16.11 (2) It shall furnish the commissioner satisfactory evidence 16.12 of its legal organization and authority to transact the proposed 16.13 business and that its capital, assets, deposits with the proper 16.14 official of its own state, amount insured, number of risks, 16.15 reserve and other securities, and guaranties for protection of 16.16 policyholders, creditors, and the public, comply with those 16.17 required of like domestic companies; 16.18 (3) By a duly executed instrument filed in the office of 16.19 the commissioner, it shall appoint the commissioner and 16.20 successors in office its lawful attorneys in fact and therein 16.21 irrevocably agree that legal process in any action or proceeding 16.22 against it may be served upon them with the same force and 16.23 effect as if personally served upon it, so long as any of its 16.24 liability exists in this state; 16.25 (4) It shall appoint, as its agents in this state, 16.26 residents thereof, and obtain from the commissioner a license to 16.27 transact business; 16.28 (5) Regardless of what lines of business an insurer of 16.29 another state is seeking to write in this state, the lines of 16.30 business it is licensed to write in its state of incorporation 16.31 shall be the basis for establishing the financial requirements 16.32 it must meet for admission in this state or for continuance of 16.33 its authority to write business in this state; 16.34 (6) No insurer of another state shall be admitted to do 16.35 business in this state for a line of business that it is not 16.36 authorized to write in its state of incorporation, unless the 17.1 statutes of that state prohibit all insurers from writing that 17.2 line of business. 17.3 Sec. 16. Minnesota Statutes 1998, section 60A.32, is 17.4 amended to read: 17.5 60A.32 [RATE FILING FOR CROP HAIL INSURANCE.] 17.6 An insurer issuing policies of insurance against crop 17.7 damage by hail in this state shall file its insurance rates with 17.8 the commissioner. The insurance rates must be filed before 17.9March 1February 1 of the year in which a policy is issued. 17.10 Sec. 17. Minnesota Statutes 1998, section 60B.21, 17.11 subdivision 2, is amended to read: 17.12 Subd. 2. [FIXING OF RIGHTS.] Upon issuance of the order, 17.13 the rights and liabilities of any such insurer and of its 17.14 creditors, policyholders, shareholders, members, and all other 17.15 persons interested in its estate are fixed as of the date of 17.16 filing of the petition for liquidation, except as provided in 17.17 sections 60B.22, 60B.25, clause (22), and 60B.39. 17.18 Sec. 18. Minnesota Statutes 1998, section 60B.25, is 17.19 amended to read: 17.20 60B.25 [POWERS OF LIQUIDATOR.] 17.21 The liquidator shall report to the court monthly, or at 17.22 other intervals specified by the court, on the progress of the 17.23 liquidation in whatever detail the court orders. The liquidator 17.24 shall coordinate activities with those of each guaranty 17.25 association having an interest in the liquidation and shall 17.26 submit a report detailing how coordination will be achieved to 17.27 the court for its approval within 30 days following appointment, 17.28 or within the time which the court, in its discretion, may 17.29 establish. Subject to the court's control, the liquidator may: 17.30 (1) Appoint a special deputy to act under sections 60B.01 17.31 to 60B.61 and determine the deputy's compensation. The special 17.32 deputy shall have all powers of the liquidator granted by this 17.33 section. The special deputy shall serve at the pleasure of the 17.34 liquidator. 17.35 (2) Appoint or engage employees and agents, actuaries, 17.36 accountants, appraisers, consultants, and other personnel deemed 18.1 necessary to assist in the liquidation without regard to chapter 18.2 14. 18.3 (3) Fix the compensation of persons under clause (2), 18.4 subject to the control of the court. 18.5 (4) Defray all expenses of taking possession of, 18.6 conserving, conducting, liquidating, disposing of, or otherwise 18.7 dealing with the business and property of the insurer. If the 18.8 property of the insurer does not contain sufficient cash or 18.9 liquid assets to defray the costs incurred, the liquidator may 18.10 advance the costs so incurred out of the appropriation made to 18.11 the department of commerce. Any amounts so paid shall be deemed 18.12 expense of administration and shall be repaid for the credit of 18.13 the department of commerce out of the first available money of 18.14 the insurer. 18.15 (5) Hold hearings, subpoena witnesses and compel their 18.16 attendance, administer oaths, examine any person under oath and 18.17 compel any person to subscribe to testimony after it has been 18.18 correctly reduced to writing, and in connection therewith 18.19 require the production of any books, papers, records, or other 18.20 documents which the liquidator deems relevant to the inquiry. 18.21 (6) Collect all debts and money due and claims belonging to 18.22 the insurer, wherever located, and for this purpose institute 18.23 timely action in other jurisdictions, in order to forestall 18.24 garnishment and attachment proceedings against such debts; do 18.25 such other acts as are necessary or expedient to collect, 18.26 conserve, or protect its assets or property, including sell, 18.27 compound, compromise, or assign for purposes of collection, upon 18.28 such terms and conditions as the liquidator deems best, any bad 18.29 or doubtful debts; and pursue any creditor's remedies available 18.30 to enforce claims. 18.31 (7) Conduct public and private sales of the property of the 18.32 insurer in a manner prescribed by the court. 18.33 (8) Use assets of the estate to transfer coverage 18.34 obligations to a solvent assuming insurer, if the transfer can 18.35 be arranged without prejudice to applicable priorities under 18.36 section 60B.44. 19.1 (9) Acquire, hypothecate, encumber, lease, improve, sell, 19.2 transfer, abandon, or otherwise dispose of or deal with any 19.3 property of the insurer at its market value or upon such terms 19.4 and conditions as are fair and reasonable, except that no 19.5 transaction involving property the market value of which exceeds 19.6 $10,000 shall be concluded without express permission of the 19.7 court. The liquidator may also execute, acknowledge, and 19.8 deliver any deeds, assignments, releases, and other instruments 19.9 necessary or proper to effectuate any sale of property or other 19.10 transaction in connection with the liquidation. In cases where 19.11 real property sold by the liquidator is located other than in 19.12 the county where the liquidation is pending, the liquidator 19.13 shall cause to be filed with the county recorder for the county 19.14 in which the property is located a certified copy of the order 19.15 of appointment. 19.16 (10) Borrow money on the security of the insurer's assets 19.17 or without security and execute and deliver all documents 19.18 necessary to that transaction for the purpose of facilitating 19.19 the liquidation. 19.20 (11) Enter into such contracts as are necessary to carry 19.21 out the order to liquidate, and affirm or disavow any contracts 19.22 to which the insurer is a party. 19.23 (12) Continue to prosecute and institute in the name of the 19.24 insurer or in the liquidator's own name any suits and other 19.25 legal proceedings, in this state or elsewhere, and abandon the 19.26 prosecution of claims the liquidator deems unprofitable to 19.27 pursue further. If the insurer is dissolved under section 19.28 60B.23, the liquidator may apply to any court in this state or 19.29 elsewhere for leave to be substituted for the insurer as 19.30 plaintiff. 19.31 (13) Prosecute any action which may exist in behalf of the 19.32 creditors, members, policyholders, or shareholders of the 19.33 insurer against any officer of the insurer, or any other person. 19.34 (14) Remove any records and property of the insurer to the 19.35 offices of the commissioner or to such other place as is 19.36 convenient for the purposes of efficient and orderly execution 20.1 of the liquidation. 20.2 (15) Deposit in one or more banks in this state such sums 20.3 as are required for meeting current administration expenses and 20.4 dividend distributions. 20.5 (16) Deposit with the state board of investment for 20.6 investment pursuant to section 11A.24, all sums not currently 20.7 needed, unless the court orders otherwise. 20.8 (17) File any necessary documents for record in the office 20.9 of any county recorder or record office in this state or 20.10 elsewhere where property of the insurer is located. 20.11 (18) Assert all defenses available to the insurer as 20.12 against third persons, including statutes of limitations, 20.13 statutes of frauds, and the defense of usury. A waiver of any 20.14 defense by the insurer after a petition for liquidation has been 20.15 filed shall not bind the liquidator. 20.16 (19) Exercise and enforce all the rights, remedies, and 20.17 powers of any creditor, shareholder, policyholder, or member, 20.18 including any power to avoid any transfer or lien that may be 20.19 given by law and that is not included within sections 60B.30 and 20.20 60B.32. 20.21 (20) Intervene in any proceeding wherever instituted that 20.22 might lead to the appointment of a receiver or trustee, and act 20.23 as the receiver or trustee whenever the appointment is offered. 20.24 (21) Enter into agreements with any receiver or 20.25 commissioner of any other state relating to the rehabilitation, 20.26 liquidation, conservation, or dissolution of an insurer doing 20.27 business in both states. 20.28 (22) Collect from an insured any unpaid earned premium or 20.29 retrospectively rated premium due the insurer based on the 20.30 termination of coverage under section 60B.22. Premium on surety 20.31 business is considered earned at inception if no policy term can 20.32 be determined. All other premium will be considered earned and 20.33 will be prorated over the determined policy term, regardless of 20.34 any provision in the bond, guaranty, contract, or other 20.35 agreement. 20.36(22)(23) Exercise all powers now held or hereafter 21.1 conferred upon receivers by the laws of this state not 21.2 inconsistent with sections 60B.01 to 60B.61. 21.3(23)(24) The enumeration in this section of the powers and 21.4 authority of the liquidator is not a limitation, nor does it 21.5 exclude the right to do such other acts not herein specifically 21.6 enumerated or otherwise provided for as are necessary or 21.7 expedient for the accomplishment of or in aid of the purpose of 21.8 liquidation. 21.9(24)(25) The power of the liquidator of a health 21.10 maintenance organization includes the power to transfer coverage 21.11 obligations to a solvent and voluntary health maintenance 21.12 organization, insurer, or nonprofit health service plan, and to 21.13 assign provider contracts of the insolvent health maintenance 21.14 organization to an assuming health maintenance organization, 21.15 insurer, or nonprofit health service plan permitted to enter 21.16 into such agreements. The liquidator is not required to meet 21.17 the notice requirements of section 62D.121. Transferees of 21.18 coverage obligations or provider contracts shall have no 21.19 liability to creditors or obligees of the health maintenance 21.20 organization except those liabilities expressly assumed. 21.21 Sec. 19. Minnesota Statutes 1998, section 60B.26, 21.22 subdivision 1, is amended to read: 21.23 Subdivision 1. [NOTICE REQUIRED.] (a) The liquidator shall 21.24 give notice of the liquidation order as soon as possible by 21.25 first class mail and either by telegram or telephone to the 21.26 commissioner of commerce of each jurisdiction in which the 21.27 insurer is licensed to do business, by first class mail and by 21.28 telephone to the department of labor and industry of this state 21.29 if the insurer is or has been an insurer of workers' 21.30 compensation, by first class mail within this state and by 21.31 airmail outside this state to all agents of the insurer having a 21.32 duty undersection 60B.27this chapter, by first class mail, if 21.33 the insurer is a surety company to every district court judge 21.34 exercising probate jurisdiction and the court administrator of 21.35 all courts of record in this state and upon receipt of such 21.36 notice it shall be the duty of those judges and court 22.1 administrators to notify and require every executor, 22.2 administrator, guardian, trustee, or other fiduciary having 22.3 filed a bond on which such company is surety, to forthwith file 22.4 a new bond with new sureties, and by first class mail within 22.5 this state and by airmail outside this state at the last known 22.6 address to all persons known or reasonably expected to have 22.7 claims against the insurer, including all policyholders. The 22.8 liquidator also shall publish a notice three consecutive times 22.9 in a newspaper of general circulation in the county in which the 22.10 liquidation is pending or in Ramsey county, the last publication 22.11 to be not less than three months before the earliest deadline 22.12 specified in the notice under subdivision 2. 22.13 (b) Notice to agents shall inform them of their duties 22.14 undersection 60B.27this chapter and inform them what 22.15 information they must communicate to policyholders. Notice to 22.16 policyholders shall include notice of impairment and termination 22.17 of coverage under section 60B.22. When it is applicable, notice 22.18 to policyholders shall include (1) notice of withdrawal of the 22.19 insurer from the defense of any case in which the policyholder 22.20 is interested, and (2) notice of the right to file a claim under 22.21 section 60B.40, subdivision 2, and (3) information about the22.22existence of section 79.28, relating to certain unpaid workers'22.23compensation awards. 22.24 (c) Within 15 days of the date of entry of the order, the 22.25 liquidator shall report to the court what notice has been 22.26 given. The court may order such additional notice as it deems 22.27 appropriate. 22.28 Sec. 20. [60B.365] [REINSURER'S LIABILITY.] 22.29 Subdivision 1. [GENERALLY.] The amount recoverable by the 22.30 liquidator from reinsurers must not be reduced as a result of 22.31 the delinquency proceedings, regardless of any provision in the 22.32 reinsurance contract or other agreement, except as provided in 22.33 subdivision 2. 22.34 Subd. 2. [PAYMENTS.] Payments by the reinsurer must be 22.35 made directly to the ceding insurer or its receiver, except 22.36 where the contract of insurance or reinsurance specifically 23.1 provides for another payee for the reinsurance in the event of 23.2 insolvency of the ceding insurer according to the applicable 23.3 requirements of statutes, rules, or orders of the domiciliary 23.4 state of the ceding insurer. The receiver and reinsurer are 23.5 entitled to recover from a person who unsuccessfully makes a 23.6 claim directly against the reinsurer the receiver's attorneys' 23.7 fees and expenses incurred in preventing any collection by the 23.8 person. 23.9 Sec. 21. Minnesota Statutes 1998, section 60B.39, 23.10 subdivision 2, is amended to read: 23.11 Subd. 2. [CLAIMS UNDER TERMINATED POLICIES.] Any claim 23.12 that would have become absolute if there had been no termination 23.13 of coverage under section 60B.22, and which was not covered by 23.14 insurance acquired to replace the terminated coverage, shall be 23.15 allowed as if the coverage had remained in effect, unless at 23.16 least ten days before the insured event occurred either the 23.17 claimant had actual notice of the termination or notice was 23.18 mailed to the claimant as prescribed by section 60B.26, 23.19 subdivision 1, or60B.27, subdivision 1this chapter. If 23.20 allowed the claim shall share in distributions under section 23.21 60B.44, subdivision 9. 23.22 Sec. 22. Minnesota Statutes 1998, section 60B.44, 23.23 subdivision 4, is amended to read: 23.24 Subd. 4. [LOSS CLAIMS; INCLUDING CLAIMS NOT COVERED BY A 23.25 GUARANTY ASSOCIATION.] All claims under policies or contracts of 23.26 coverage for losses incurred including third party claims, and 23.27 all claims against the insurer for liability for bodily injury 23.28 or for injury to or destruction of tangible property which are 23.29 not under policies or contracts. All claims under life 23.30 insurance and annuity policies, whether for death proceeds, 23.31 annuity proceeds, or investment values, shall be treated as loss 23.32 claims. That portion of any loss for which indemnification is 23.33 provided by other benefits or advantages recovered or 23.34 recoverable by the claimant shall not be included in this class, 23.35 other than benefits or advantages recovered or recoverable in 23.36 discharge of familial obligations of support or by way of 24.1 succession at death or as proceeds of life insurance, or as 24.2 gratuities. No payment made by an employer to an employee shall 24.3 be treated as a gratuity. Claims not covered by a guaranty 24.4 association are loss claims.If any portion of a claim is24.5covered by a reinsurance treaty or similar contractual24.6obligation, that claim shall be entitled to a pro rata share,24.7based upon the relationship the claim amount bears to all claims24.8payable under the treaty or contract, of the proceeds received24.9under that treaty or contractual obligation.24.10Claims receiving pro rata payments shall not, as to any24.11remaining unpaid portion of their claim, be treated in a24.12different manner than if no such payment had been received.24.13 Sec. 23. Minnesota Statutes 1998, section 60B.44, is 24.14 amended by adding a subdivision to read: 24.15 Subd. 4a. [FEDERAL GOVERNMENT.] Claims of the federal 24.16 government. 24.17 Sec. 24. Minnesota Statutes 1998, section 60B.44, is 24.18 amended by adding a subdivision to read: 24.19 Subd. 4b. [WAGES.] (a) Debts due to employees for services 24.20 performed, not to exceed $1,000 to each employee, that have been 24.21 earned within one year before the filing of the petition for 24.22 liquidation, subject to payment of applicable federal, state, or 24.23 local government taxes required by law to be withheld from the 24.24 debts. Officers are not entitled to the benefit of this 24.25 priority. In cases where there are no claims and no potential 24.26 claims of the federal government in the estate, these claims 24.27 will have priority over claims in subdivision 4. 24.28 (b) The priority in paragraph (a) is in lieu of other 24.29 similar priority authorized by law as to wages or compensation 24.30 of employees. 24.31 Sec. 25. Minnesota Statutes 1998, section 60B.44, 24.32 subdivision 6, is amended to read: 24.33 Subd. 6. [RESIDUAL CLASSIFICATION.] All other claims 24.34 including claims ofthe federal orany state or local 24.35 government, not falling within other classes under this 24.36 section. Claims, including those of any governmental body for a 25.1 penalty or forfeiture, shall be allowed in this class only to 25.2 the extent of the pecuniary loss sustained from the act, 25.3 transaction, or proceeding out of which the penalty or 25.4 forfeiture arose, with reasonable and actual costs occasioned 25.5 thereby. The remainder of such claims shall be postponed to the 25.6 class of claims under subdivision 9. 25.7 Sec. 26. Minnesota Statutes 1998, section 60D.20, 25.8 subdivision 2, is amended to read: 25.9 Subd. 2. [DIVIDENDS AND OTHER DISTRIBUTIONS.] (a) Subject 25.10 to the limitations and requirements of this subdivision, the 25.11 board of directors of any domestic insurer within an insurance 25.12 holding company system may authorize and cause the insurer to 25.13 declare and pay any dividend or distribution to its shareholders 25.14 as the directors deem prudent from the earned surplus of the 25.15 insurer. An insurer's earned surplus, also known as unassigned 25.16 funds, shall be determined in accordance with the accounting 25.17 procedures and practices governing preparation of its annual 25.18 statement, minus 25 percent of earned surplus attributable to25.19net unrealized capital gains. Dividends which are paid from 25.20 sources other than an insurer's earned surplus as of the end of 25.21 the immediately preceding quarter for which the insurer has 25.22 filed a quarterly or annual statement as appropriate, or are 25.23 extraordinary dividends or distributions may be paid only as 25.24 provided in paragraphs (d), (e), and (f). 25.25 (b) The insurer shall notify the commissioner within five 25.26 business days following declaration of a dividend declared 25.27 pursuant to paragraph (a) and at least ten days prior to its 25.28 payment. The commissioner shall promptly consider the 25.29 notification filed pursuant to this paragraph, taking into 25.30 consideration the factors described in subdivision 4. 25.31 (c) The commissioner shall review at least annually the 25.32 dividends paid by an insurer pursuant to paragraph (a) for the 25.33 purpose of determining if the dividends are reasonable based 25.34 upon (1) the adequacy of the level of surplus as regards 25.35 policyholders remaining after the dividend payments, and (2) the 25.36 quality of the insurer's earnings and extent to which the 26.1 reported earnings include extraordinary items, such as surplus 26.2 relief reinsurance transactions and reserve destrengthening. 26.3 (d) No domestic insurer shall pay any extraordinary 26.4 dividend or make any other extraordinary distribution to its 26.5 shareholders until: (1) 30 days after the commissioner has 26.6 received notice of the declaration of it and has not within the 26.7 period disapproved the payment; or (2) the commissioner has 26.8 approved the payment within the 30-day period. 26.9 (e) For purposes of this section, an extraordinary dividend 26.10 or distribution includes any dividend or distribution of cash or 26.11 other property, whose fair market value together with that of 26.12 other dividends or distributions made within the preceding 12 26.13 months exceeds the greater of (1) ten percent of the insurer's 26.14 surplus as regards policyholdersas of the 31st day of December26.15next precedingon December 31 of the preceding year; or (2) the 26.16 net gain from operations of the insurer, if the insurer is a 26.17 life insurer, or the net income, if the insurer is not a life 26.18 insurer, not including realized capital gains, for the 12-month 26.19 period endingthe 31st day of December next precedingon 26.20 December 31 of the preceding year, but does not include pro rata 26.21 distributions of any class of the insurer's own securities. 26.22 (f) Notwithstanding any other provision of law, an insurer 26.23 may declare an extraordinary dividend or distribution that is 26.24 conditional upon the commissioner's approval, and the 26.25 declaration shall confer no rights upon shareholders until: (1) 26.26 the commissioner has approved the payment of such a dividend or 26.27 distribution; or (2) the commissioner has not disapproved the 26.28 payment within the 30-day period referred to above. 26.29 Sec. 27. Minnesota Statutes 1998, section 60K.02, 26.30 subdivision 1, is amended to read: 26.31 Subdivision 1. [REQUIREMENT.] No person shall act or 26.32 assume to act as an insurance agent in the solicitation or 26.33 procurement of applications for insurance, nor in the sale of 26.34 insurance or policies of insurance, nor in any manner aid as an 26.35 insurance agent in the negotiation of insurance by or with an 26.36 insurer, including resident agents or reciprocal or 27.1 interinsurance exchanges and fraternal benefit societies, until 27.2 that person obtains from the commissioner a license for that 27.3 purpose. The license must specifically set forth the name of 27.4 the person authorized to act as an agent and the class or 27.5 classes of insurance for which that person is authorized to 27.6 solicit or countersign policies. An insurance agent may qualify 27.7 for a licensein the following classesto sell: (1) life and 27.8 health;and(2) life and health and variable contracts; (3) 27.9 property and casualty; (4) travel baggage; (5) bail bonds; (6) 27.10 title insurance; and (7) farm property and liability. 27.11 No insurer shall appoint or reappoint a natural person, 27.12 partnership, or corporation to act as an insurance agent on its 27.13 behalf until that natural person, partnership, or corporation 27.14 obtains a license as an insurance agent. 27.15 Sec. 28. Minnesota Statutes 1998, section 60K.03, 27.16 subdivision 2, is amended to read: 27.17 Subd. 2. [RESIDENT AGENT.] The commissioner shall issue a 27.18 resident insurance agent's license to a qualified resident of 27.19 this state as follows: 27.20 (a) A person may qualify as a resident of this state if 27.21 that person resides in this state or the principal place of 27.22 business of that person is maintained in this state. 27.23 Application for a license claiming residency in this state for 27.24 licensing purposes constitutes an election of residency in this 27.25 state. A license issued upon an application claiming residency 27.26 in this state is void if the licensee, while holding a resident 27.27 license in this state, also holds, or makes application for, a 27.28 resident license in, or thereafter claims to be a resident of, 27.29 any other state or jurisdiction or if the licensee ceases to be 27.30 a resident of this state; provided, however, if the applicant is 27.31 a resident of a community or trade area, the border of which is 27.32 contiguous with the state line of this state, the applicant may 27.33 qualify for a resident license in this state and at the same 27.34 time hold a resident license from the contiguous state. 27.35 (b) The commissioner shall subject each applicant who is a 27.36 natural person to a written examination as to the applicant's 28.1 competence to act as an insurance agent. The examination must 28.2 be held at a reasonable time and place designated by the 28.3 commissioner. 28.4 (c) The examination shall be approved for use by the 28.5 commissioner and shall test the applicant's knowledge of the 28.6 lines of insurance, policies, and transactions to be handled 28.7 under the class of license applied for, of the duties and 28.8 responsibilities of the licensee, and pertinent insurance laws 28.9 of this state. 28.10 (d) The examination shall be given only after the applicant 28.11 has completed a program of classroom studies in a school, which 28.12 shall not include a school sponsored by, offered by, or 28.13 affiliated with an insurance company or its agents; except that 28.14 this limitation does not preclude a bona fide professional 28.15 association of agents, not acting on behalf of an insurer, from 28.16 offering courses. The course of study shall consist of 30 hours 28.17 of classroom study devoted to the basic fundamentals of 28.18 insurance for those seeking a Minnesota license for the first 28.19 time,; three hours devoted to state laws, regulations, and rules 28.20 applicable to the line or lines of insurance for which licensure 28.21 is being applied; 15 hours devoted to specific life and health 28.22 topics for those seeking a life and health license,; and 15 28.23 hours devoted to specific property and casualty topics for those 28.24 seeking a property and casualty license. The program of studies 28.25 or study course shall have been approved by the commissioner in 28.26 order to qualify under this paragraph. If the applicant has 28.27 been previously licensed for the particular line of insurance in 28.28 the state of Minnesota, the requirement of a program of studies 28.29 or a study course shall be waived. A certification of 28.30 compliance by the organization offering the course shall 28.31 accompany the applicant's license application. This program of 28.32 studies in a school or a study course shall not apply to farm 28.33 property perils and farm liability applicants, or to agents 28.34 writing such other lines of insurance as the commissioner may 28.35 exempt from examination by order. 28.36 (e) The applicant must pass the examination with a grade 29.1 determined by the commissioner to indicate satisfactory 29.2 knowledge and understanding of the class or classes of insurance 29.3 for which the applicant seeks qualification. The commissioner 29.4 shall inform the applicant as to whether or not the applicant 29.5 has passed. Examination results are valid for a period of three 29.6 years from the date of the examination. The applicant must pass 29.7 the examination with a grade determined by the commissioner. 29.8 (f) An applicant who has failed to pass an examination may 29.9 take subsequent examinations. Examination fees for subsequent 29.10 examinations shall not be waived. 29.11 (g) Any applicant for a license covering the same class or 29.12 classes of insurance for which the applicant was licensed under 29.13 a similar license in this state, other than a temporary license, 29.14 within the three years preceding the date of the application 29.15 shall be exempt from the requirement of a written examination, 29.16 unless the previous license was revoked or suspended by the 29.17 commissioner. An applicant whose license is not renewed under 29.18 section 60K.12 is exempt from the requirement of a written 29.19 examination. 29.20 Sec. 29. Minnesota Statutes 1998, section 60K.03, 29.21 subdivision 3, is amended to read: 29.22 Subd. 3. [NONRESIDENT AGENT.] The commissioner shall issue 29.23 a nonresident insurance agent's license to a qualified person 29.24 who is a resident of another state or country as follows: 29.25 (a) A person may qualify for a license under this section 29.26 as a nonresident only if that person holds a license in another 29.27 state, province of Canada, or other foreign country which, in 29.28 the opinion of the commissioner, qualifies that person for the 29.29 same activity as that for which a license is sought. 29.30 (b) The commissioner shall not issue a license to a 29.31 nonresident applicant until that person files with the 29.32 commissioner a designation of the commissioner and the 29.33 commissioner's successors in office as the applicant's true and 29.34 lawful attorney upon whom may be served all lawful process in an 29.35 action, suit, or proceeding instituted by or on behalf of an 29.36 interested person arising out of the applicant's insurance 30.1 business in this state. This designation constitutes an 30.2 agreement that this service of process is of the same legal 30.3 force and validity as personal service of process in this state 30.4 upon that applicant. 30.5 Service of process upon a licensee in an action or 30.6 proceeding begun in a court of competent jurisdiction of this 30.7 state may be made in compliance with section 45.028, subdivision 30.8 2. 30.9 (c) A nonresident agent shall be held to the same knowledge 30.10 of insurance law, regulations, and rules as that required of a 30.11 resident agent according to subdivision 2, paragraph (d). 30.12(c)(d) A nonresident license terminates automatically when 30.13 the resident license for that class of license in the state, 30.14 province, or foreign country in which the licensee is a resident 30.15 is terminated for any reason. 30.16 Sec. 30. Minnesota Statutes 1998, section 60K.19, 30.17 subdivision 7, is amended to read: 30.18 Subd. 7. [CRITERIA FOR COURSE ACCREDITATION.] (a) The 30.19 commissioner may accredit a course only to the extent it is 30.20 designed to impart substantive and procedural knowledge of the 30.21 insurance field. The burden of demonstrating that the course 30.22 satisfies this requirement is on the individual or organization 30.23 seeking accreditation. The commissioner shall approve any 30.24 educational program approved by Minnesota Continuing Legal 30.25 Education relating to the insurance field. The commissioner is 30.26 authorized to establish a procedure for renewal of course 30.27 accreditation. 30.28 (b) The commissioner shall approve or disapprove 30.29 professional designation examinations that are recommended for 30.30 approval by the advisory task force. In order for an agent to 30.31 receive full continuing education credit for a professional 30.32 designation examination, the agent must pass the examination. 30.33 An agent may not receive credit for classroom instruction 30.34 preparing for the professional designation examination and also 30.35 receive continuing education credit for passing the professional 30.36 designation examination. 31.1 (c) The commissioner may not accredit a course: 31.2 (1) that is designed to prepare students for a license 31.3 examination; 31.4 (2) in mechanical office or business skills, including 31.5 typing, speedreading, use of calculators, or other machines or 31.6 equipment; 31.7 (3) in sales promotion, including meetings held in 31.8 conjunction with the general business of the licensed agent; or 31.9 (4) in motivation, the art of selling, psychology, or time 31.10 management; or. 31.11(5) which can be completed by the student at home or31.12outside the classroom without the supervision of an instructor31.13approved by the department of commerce, except that home-study31.14courses may be accredited by the commissioner if the student is31.15a nonresident agent residing in a state which is not contiguous31.16to Minnesota.31.17 Sec. 31. Minnesota Statutes 1998, section 60K.19, 31.18 subdivision 8, is amended to read: 31.19 Subd. 8. [MINIMUM EDUCATION REQUIREMENT.] Each person 31.20 subject to this section shall complete a minimum of 30 credit 31.21 hours of courses accredited by the commissioner during each 31.22 24-month licensing periodafter the expiration of the person's31.23initial licensing period, two hours of which must be devoted to 31.24 state law, regulations, and rules applicable to the line or 31.25 lines of insurance for which the agent is licensed.At least 1531.26of the 30 credit hours must be completed during the first 1231.27months of the 24-month licensing period.Any person whose 31.28 initial licensing period extends more than six months shall 31.29 complete 15 hours of courses accredited by the commissioner 31.30 during the initial license period. Any person teaching or 31.31 lecturing at an accredited course qualifies for 1-1/2 times the 31.32 number of credit hours that would be granted to a person 31.33 completing the accredited course. No more than 15 credit hours 31.34 per licensing period may be credited to a person for courses 31.35 sponsored by, offered by, or affiliated with an insurance 31.36 company or its agents. Courses sponsored by, offered by, or 32.1 affiliated with an insurance company or agent may restrict its 32.2 students to agents of the company or agency. 32.3 Sec. 32. Minnesota Statutes 1998, section 61A.60, 32.4 subdivision 1, is amended to read: 32.5 Subdivision 1. [NOTICE FORM; AGENT SALES.] The notice 32.6 required where sections 61A.53 to 61A.60 refer to this 32.7 subdivision is as follows: 32.8 IMPORTANT NOTICE 32.9 32.10 DEFINITION REPLACEMENT is any transaction where, in connection 32.11 with the purchase of New Insurance or a New 32.12 Annuity, you LAPSE, SURRENDER, CONVERT to 32.13 Paid-up Insurance, Place on Extended Term, 32.14 or BORROW all or part of the policy loan 32.15 values on an existing insurance policy or an 32.16 annuity. (See reverse side for DEFINITIONS.) 32.17 32.18 32.19 IF YOU In connection with the purchase of this insurance 32.20 INTEND TO or annuity, if you have REPLACED or intend to 32.21 REPLACE REPLACE your present life insurance coverage 32.22 COVERAGE or annuity(ies), you should be certain that you 32.23 understand all the relevant factors involved. 32.24 32.25 You should BE AWARE that you may be required to 32.26 provide EVIDENCE OF INSURABILITY and 32.28 (1) If your HEALTH condition has CHANGED since 32.29 the application was taken on your present 32.30 policies, you may be required to pay ADDITIONAL 32.31 PREMIUMS under the NEW POLICY, or be DENIED 32.32 coverage. 32.34 (2) Your present occupation or activities may not 32.35 be covered or could require additional premiums. 33.1 (3) The INCONTESTABLE and SUICIDE CLAUSE will 33.2 begin anew in a new policy. This could RESULT 33.3 in a CLAIM under the new policy BEING DENIED 33.4 that would otherwise have been paid. 33.6 (4) Current lawDOESMAY NOT REQUIRE your present 33.7 insurer(s) to REFUND any premiums. 33.9 (5) It is to your advantage to OBTAIN INFORMATION 33.10 regarding your existing policies or annuity 33.11 contracts [FROM THE INSURER OR AGENT FROM WHOM 33.12 YOU PURCHASED THE POLICY OR ANNUITY CONTRACT.] 33.13 33.14 (If you are purchasing an annuity, clauses (1), 33.15 (2), and (3) above would not apply to the new 33.16 annuity contract.) 33.18 THE INSURANCE OR ANNUITY I INTEND TO PURCHASE FROM 33.19 _______________________________________INSURANCE CO. 33.20 MAY REPLACE OR ALTER EXISTING LIFE INSURANCE 33.21 POLICY(IES) OR ANNUITY CONTRACT(S). 33.23 The following policy(ies) or annuity contract(s) 33.24 may be replaced as a result of this transaction: 33.26 Insurer Insured 33.27 as it appears on the policy as it appears on the policy 33.28 or contract or contract 33.29 ______________________________ ______________________________ 33.30 ______________________________ ______________________________ 33.31 ______________________________ ______________________________ 33.32 ______________________________ ______________________________ 33.33 Policy or contract number Insured birthdate 33.34 ______________________________ ______________________________ 33.35 ______________________________ ______________________________ 33.36 ______________________________ ______________________________ 34.1 ______________________________ ______________________________ 34.2 The proposed policy or contract is: 34.3 ______________________________________ $_______________ 34.4 type of policy- or contract-generic name face amount 34.6 ________________________________________________________ 34.7 signature of applicant date 34.9 ________________________________________________________ 34.10 address of applicant city state 34.12 I certify that this form was given to and completed by 34.14 ________________________________________________________ 34.15 (applicant-please print or type) 34.17 prior to taking an application and that I am leaving a 34.18 signed copy for the applicant. 34.20 ___________________________________________________ 34.21 agent's signature date 34.23 ___________________________________________________ 34.24 address 34.26 ___________________________________________________ 34.27 city state 34.28 Note important statement on reverse side 34.29 Sec. 33. Minnesota Statutes 1998, section 61B.19, 34.30 subdivision 3, is amended to read: 34.31 Subd. 3. [LIMITATION OF COVERAGE.] Sections 61B.18 to 34.32 61B.32 do not provide coverage for: 34.33 (1) a portion of a policy or contract under which the 34.34 investment risk is borne by the policy or contract holder; 34.35 (2) a policy or contract of reinsurance, unless assumption 34.36 certificates have been issued and the insured has consented to 34.37 the assumption as provided under section 60A.09, subdivision 4a; 34.38 (3) a policy or contract issued by an assessment benefit 34.39 association operating under section 61A.39, or a fraternal 34.40 benefit society operating under chapter 64B; 34.41 (4) any obligation to nonresident participants of a covered 34.42 retirement plan or to the plan sponsor, employer, trustee, or 34.43 other party who owns the contract; in these cases, the 34.44 association is obligated under this chapter only to participants 34.45 in a covered plan who are residents of the state of Minnesota on 34.46 the date of impairment or insolvency; 34.47 (5) an annuity contract issued in connection with and for 34.48 the purpose of funding a structured settlement of a liability 35.1 claim, where the liability insurer remains liable; 35.2 (6) a portion of an unallocated annuity contract which is 35.3 not issued to or in connection with a specific employee, union, 35.4 or association of natural persons benefit plan or a governmental 35.5 lottery, including but not limited to, a contract issued to, or 35.6 purchased at the direction of, any governmental bonding 35.7 authority, such as a municipal guaranteed investment contract; 35.8 (7) a plan or program of an employer, association, or 35.9 similar entity to provide life, health, or annuity benefits to 35.10 its employees or members to the extent that the plan or program 35.11 is self-funded or uninsured, including benefits payable by an 35.12 employer, association, or similar entity under: 35.13 (i) a multiple employer welfare arrangement as defined in 35.14 the Employee Retirement Income Security Act of 1974, United 35.15 States Code, title 29, section 1002(40)(A), as amended; 35.16 (ii) a minimum premium group insurance plan; 35.17 (iii) a stop-loss group insurance plan; or 35.18 (iv) an administrative services only contract; 35.19 (8) any policy or contract issued by an insurer at a time 35.20 when it was not licensed or did not have a certificate of 35.21 authority to issue the policy or contract in this state; 35.22 (9) an unallocated annuity contract issued to an employee 35.23 benefit plan protected under the federal Pension Benefit 35.24 Guaranty Corporation;and35.25 (10) a portion of a policy or contract to the extent that 35.26 it provides dividends or experience rating credits except to the 35.27 extent the dividends or experience rating credits have actually 35.28 become due and payable or have been credited to the policy or 35.29 contract before the date of impairment or insolvency, or 35.30 provides that a fee or allowance be paid to a person, including 35.31 the policy or contract holder, in connection with the service 35.32 to, or administration of, the policy or contract.; and 35.33 (11) a contractual agreement that establishes the member 35.34 insurer's obligations to provide a book value accounting 35.35 guaranty for defined contribution benefit plan participants by 35.36 reference to a portfolio of assets that is owned by the benefit 36.1 plan or its trustee, which in each case is not an affiliate of 36.2 the member insurer. 36.3 Sec. 34. Minnesota Statutes 1998, section 62A.04, 36.4 subdivision 3, is amended to read: 36.5 Subd. 3. [OPTIONAL PROVISIONS.] Except as provided in 36.6 subdivision 4, no such policy delivered or issued for delivery 36.7 to any person in this state shall contain provisions respecting 36.8 the matters set forth below unless such provisions are in the 36.9 words in which the same appear in this section. The insurer 36.10 may, at its option, use in lieu of any such provision a 36.11 corresponding provision of different wording approved by the 36.12 commissioner which is not less favorable in any respect to the 36.13 insured or the beneficiary. Any such provision contained in the 36.14 policy shall be preceded individually by the appropriate caption 36.15 appearing in this subdivision or, at the option of the insurer, 36.16 by such appropriate individual or group captions or subcaptions 36.17 as the commissioner may approve. 36.18 (1) A provision as follows: 36.19 CHANGE OF OCCUPATION: If the insured be injured or 36.20 contract sickness after having changed occupations to one 36.21 classified by the insurer as more hazardous than that stated in 36.22 this policy or while doing for compensation anything pertaining 36.23 to an occupation so classified, the insurer will pay only such 36.24 portion of the indemnities provided in this policy as the 36.25 premiums paid would have purchased at the rates and within the 36.26 limits fixed by the insurer for such more hazardous occupation. 36.27 If the insured changes occupations to one classified by the 36.28 insurer as less hazardous than that stated in this policy, the 36.29 insurer, upon receipt of proof of such change of occupation will 36.30 reduce the premium rate accordingly, and will return the excess 36.31 pro rata unearned premium from the date of change of occupation 36.32 or from the policy anniversary date immediately preceding 36.33 receipt of such proof, whichever is the more recent. In 36.34 applying this provision, the classification of occupational risk 36.35 and the premium rates shall be such as have been last filed by 36.36 the insurer prior to the occurrence of the loss for which the 37.1 insurer is liable or prior to date of proof of change in 37.2 occupation with the state official having supervision of 37.3 insurance in the state where the insured resided at the time 37.4 this policy was issued; but if such filing was not required, 37.5 then the classification of occupational risk and the premium 37.6 rates shall be those last made effective by the insurer in such 37.7 state prior to the occurrence of the loss or prior to the date 37.8 of proof of change of occupation. 37.9 (2) A provision as follows: 37.10 MISSTATEMENT OF AGE: If the age of the insured has been 37.11 misstated, all amounts payable under this policy shall be such 37.12 as the premium paid would have purchased at the correct age. 37.13 (3) A provision as follows: 37.14 OTHER INSURANCE IN THIS INSURER: If an accident or 37.15 sickness or accident and sickness policy or policies previously 37.16 issued by the insurer to the insured be in force concurrently 37.17 herewith, making the aggregate indemnity for ..... (insert type 37.18 of coverage or coverages) in excess of $..... (insert maximum 37.19 limit of indemnity or indemnities) the excess insurance shall be 37.20 void and all premiums paid for such excess shall be returned to 37.21 the insured or to the insured's estate, or, in lieu thereof: 37.22 Insurance effective at any one time on the insured under a 37.23 like policy or policies in this insurer is limited to the one 37.24 such policy elected by the insured, or the insured's beneficiary 37.25 or estate, as the case may be, and the insurer will return all 37.26 premiums paid for all other such policies. 37.27 (4) A provision as follows: 37.28 INSURANCE WITH OTHER INSURERS: If there be other valid 37.29 coverage, not with this insurer, providing benefits for the same 37.30 loss on a provision of service basis or on an expense incurred 37.31 basis and of which this insurer has not been given written 37.32 notice prior to the occurrence or commencement of loss, the only 37.33 liability under any expense incurred coverage of this policy 37.34 shall be for such proportion of the loss as the amount which 37.35 would otherwise have been payable hereunder plus the total of 37.36 the like amounts under all such other valid coverages for the 38.1 same loss of which this insurer had notice bears to the total 38.2 like amounts under all valid coverages for such loss, and for 38.3 the return of such portion of the premiums paid as shall exceed 38.4 the pro rata portion for the amount so determined. For the 38.5 purpose of applying this provision when other coverage is on a 38.6 provision of service basis, the "like amount" of such other 38.7 coverage shall be taken as the amount which the services 38.8 rendered would have cost in the absence of such coverage. 38.9 If the foregoing policy provision is included in a policy 38.10 which also contains the next following policy provision there 38.11 shall be added to the caption of the foregoing provision the 38.12 phrase "EXPENSE INCURRED BENEFITS." The insurer may, at its 38.13 option, include in this provision a definition of "other valid 38.14 coverage," approved as to form by the commissioner, which 38.15 definition shall be limited in subject matter to coverage 38.16 provided by organizations subject to regulation by insurance law 38.17 or by insurance authorities of this or any other state of the 38.18 United States or any province of Canada, and by hospital or 38.19 medical service organizations, and to any other coverage the 38.20 inclusion of which may be approved by the commissioner. In the 38.21 absence of such definition such term shall not include group 38.22 insurance, automobile medical payments insurance, or coverage 38.23 provided by hospital or medical service organizations or by 38.24 union welfare plans or employer or employee benefit 38.25 organizations. For the purpose of applying the foregoing policy 38.26 provision with respect to any insured, any amount of benefit 38.27 provided for such insured pursuant to any compulsory benefit 38.28 statute (including any workers' compensation or employer's 38.29 liability statute) whether provided by a governmental agency or 38.30 otherwise shall in all cases be deemed to be "other valid 38.31 coverage" of which the insurer has had notice. In applying the 38.32 foregoing policy provision no third party liability coverage 38.33 shall be included as "other valid coverage." 38.34 (5) A provision as follows: 38.35 INSURANCE WITH OTHER INSURERS: If there be other valid 38.36 coverage, not with this insurer, providing benefits for the same 39.1 loss on other than an expense incurred basis and of which this 39.2 insurer has not been given written notice prior to the 39.3 occurrence or commencement of loss, the only liability for such 39.4 benefits under this policy shall be for such proportion of the 39.5 indemnities otherwise provided hereunder for such loss as the 39.6 like indemnities of which the insurer had notice (including the 39.7 indemnities under this policy) bear to the total amount of all 39.8 like indemnities for such loss, and for the return of such 39.9 portion of the premium paid as shall exceed the pro rata portion 39.10 for the indemnities thus determined. 39.11 If the foregoing policy provision is included in a policy 39.12 which also contains the next preceding policy provision there 39.13 shall be added to the caption of the foregoing provision the 39.14 phrase -- "OTHER BENEFITS." The insurer may, at its option, 39.15 include in this provision a definition of "other valid 39.16 coverage," approved as to form by the commissioner, which 39.17 definition shall be limited in subject matter to coverage 39.18 provided by organizations subject to regulation by insurance law 39.19 or by insurance authorities of this or any other state of the 39.20 United States or any province of Canada, and to any other 39.21 coverage the inclusion of which may be approved by the 39.22 commissioner. In the absence of such definition such term shall 39.23 not include group insurance, or benefits provided by union 39.24 welfare plans or by employer or employee benefit organizations. 39.25 For the purpose of applying the foregoing policy provision with 39.26 respect to any insured, any amount of benefit provided for such 39.27 insured pursuant to any compulsory benefit statute (including 39.28 any workers' compensation or employer's liability statute) 39.29 whether provided by a governmental agency or otherwise shall in 39.30 all cases be deemed to be "other valid coverage" of which the 39.31 insurer has had notice. In applying the foregoing policy 39.32 provision no third party liability coverage shall be included as 39.33 "other valid coverage." 39.34 (6) A provision as follows: 39.35 RELATION OF EARNINGS TO INSURANCE: If the total monthly 39.36 amount of loss of time benefits promised for the same loss under 40.1 all valid loss of time coverage upon the insured, whether 40.2 payable on a weekly or monthly basis, shall exceed the monthly 40.3 earnings of the insured at the time disability commenced or the 40.4 insured's average monthly earnings for the period of two years 40.5 immediately preceding a disability for which claim is made, 40.6 whichever is the greater, the insurer will be liable only for 40.7 such proportionate amount of such benefits under this policy as 40.8 the amount of such monthly earnings or such average monthly 40.9 earnings of the insured bears to the total amount of monthly 40.10 benefits for the same loss under all such coverage upon the 40.11 insured at the time such disability commences and for the return 40.12 of such part of the premiums paid during such two years as shall 40.13 exceed the pro rata amount of the premiums for the benefits 40.14 actually paid hereunder; but this shall not operate to reduce 40.15 the total monthly amount of benefits payable under all such 40.16 coverage upon the insured below the sum of $200 or the sum of 40.17 the monthly benefits specified in such coverages, whichever is 40.18 the lesser, nor shall it operate to reduce benefits other than 40.19 those payable for loss of time. 40.20 The foregoing policy provision may be inserted only in a 40.21 policy which the insured has the right to continue in force 40.22 subject to its terms by the timely payment of premiums (1) until 40.23 at least age 50, or, (2) in the case of a policy issued after 40.24 age 44, for at least five years from its date of issue. The 40.25 insurer may, at its option, include in this provision a 40.26 definition of "valid loss of time coverage," approved as to form 40.27 by the commissioner, which definition shall be limited in 40.28 subject matter to coverage provided by governmental agencies or 40.29 by organizations subject to regulation by insurance law or by 40.30 insurance authorities of this or any other state of the United 40.31 States or any province of Canada, or to any other coverage the 40.32 inclusion of which may be approved by the commissioner or any 40.33 combination of such coverages. In the absence of such 40.34 definition such term shall not include any coverage provided for 40.35 such insured pursuant to any compulsory benefit statute 40.36 (including any workers' compensation or employer's liability 41.1 statute), or benefits provided by union welfare plans or by 41.2 employer or employee benefit organizations. 41.3 (7) A provision as follows: 41.4 UNPAID PREMIUM: Upon the payment of a claim under this 41.5 policy, any premium then due and unpaid or covered by any note 41.6 or written order may be deducted therefrom. 41.7 (8) A provision as follows: 41.8 CANCELLATION: The insurer may cancel this policy at any 41.9 time by written notice delivered to the insured or mailed to the 41.10 insured's last address as shown by the records of the insurer, 41.11 stating when, not less than five days thereafter, such 41.12 cancellation shall be effective; and after the policy has been 41.13 continued beyond its original term the insured may cancel this 41.14 policy at any time by written notice delivered or mailed to the 41.15 insurer, effective upon receipt or on such later date as may be 41.16 specified in such notice. In the event of cancellation, the 41.17 insurer will return promptly the unearned portion of any premium 41.18 paid.IfRegardless of whether it is the insurer or the insured 41.19 who cancels,the earned premium shall be computed by the use of41.20the short-rate table last filed with the state official having41.21supervision of insurance in the state where the insured resided41.22when the policy was issued. If the insurer cancels,the earned 41.23 premium shall be computed pro rata, unless the mode of payment 41.24 is monthly or less, or if the unearned amount is for less than 41.25 one month. Cancellation shall be without prejudice to any claim 41.26 originating prior to the effective date of cancellation. 41.27 (9) A provision as follows: 41.28 CONFORMITY WITH STATE STATUTES: Any provision of this 41.29 policy which, on its effective date, is in conflict with the 41.30 statutes of the state in which the insured resides on such date 41.31 is hereby amended to conform to the minimum requirements of such 41.32 statutes. 41.33 (10) A provision as follows: 41.34 ILLEGAL OCCUPATION: The insurer shall not be liable for 41.35 any loss to which a contributing cause was the insured's 41.36 commission of or attempt to commit a felony or to which a 42.1 contributing cause was the insured's being engaged in an illegal 42.2 occupation. 42.3 (11) A provision as follows: 42.4 NARCOTICS: The insurer shall not be liable for any loss 42.5 sustained or contracted in consequence of the insured's being 42.6 under the influence of any narcotic unless administered on the 42.7 advice of a physician. 42.8 Sec. 35. Minnesota Statutes 1998, section 62A.135, 42.9 subdivision 5, is amended to read: 42.10 Subd. 5. [SUPPLEMENT TO ANNUAL STATEMENTSSUPPLEMENTAL 42.11 FILINGS.] Each insurer that has fixed indemnity policies in 42.12 force in this state shall,as a supplement to the annual42.13statement required by section 60A.13upon request by the 42.14 commissioner, submit, in a form prescribed by the 42.15 commissioner,theexperience datafor the calendar yearshowing 42.16 its incurred claims, earned premiums, incurred to earned loss 42.17 ratio, and the ratio of the actual loss ratio to the expected 42.18 loss ratio for each fixed indemnity policy form in force in 42.19 Minnesota. The experience data must be provided on both a 42.20 Minnesota only and a national basis. If in the opinion of the 42.21 company's actuary, the deviation of the actual loss ratio from 42.22 the expected loss ratio for a policy form is due to unusual 42.23 reserve fluctuations, economic conditions, or other nonrecurring 42.24 conditions, the insurer should also file that opinion with 42.25 appropriate justification. 42.26 If the data submitted does not confirm that the insurer has 42.27 satisfied the loss ratio requirements of this section, the 42.28 commissioner shall notify the insurer in writing of the 42.29 deficiency. The insurer shall have 30 days from the date of 42.30 receipt of the commissioner's notice to file amended rates that 42.31 comply with this section or a request for an exemption with 42.32 appropriate justification. If the insurer fails to file amended 42.33 rates within the prescribed time and the commissioner does not 42.34 exempt the policy form from the need for a rate revision, the 42.35 commissioner shall order that the insurer's filed rates for the 42.36 nonconforming policy be reduced to an amount that would have 43.1 resulted in a loss ratio that complied with this section had it 43.2 been in effect for the reporting period of the supplement. The 43.3 insurer's failure to file amended rates within the specified 43.4 time of the issuance of the commissioner's order amending the 43.5 rates does not preclude the insurer from filing an amendment of 43.6 its rates at a later time. 43.7 Sec. 36. Minnesota Statutes 1998, section 62A.50, 43.8 subdivision 3, is amended to read: 43.9 Subd. 3. [DISCLOSURES.] No long-term care policy shall be 43.10 offered or delivered in this state, whether or not the policy is 43.11 issued in this state, and no certificate of coverage under a 43.12 group long-term care policy shall be offered or delivered in 43.13 this state, unless a statement containing at least the following 43.14 information is delivered to the applicant at the time the 43.15 application is made: 43.16 (1) a description of the benefits and coverage provided by 43.17 the policy and the differences between this policy, a 43.18 supplemental Medicare policy and the benefits to which an 43.19 individual is entitled under parts A and B of Medicare; 43.20 (2) a statement of the exceptions and limitations in the 43.21 policy including the following language, as applicable, in bold 43.22 print: "THIS POLICY DOES NOT COVER ALL NURSING CARE FACILITIES 43.23 OR NURSING HOME, HOME CARE, OR ADULT DAY CARE EXPENSES AND DOES 43.24 NOT COVER RESIDENTIAL CARE. READ YOUR POLICY CAREFULLY TO 43.25 DETERMINE WHICH FACILITIES AND EXPENSES ARE COVERED BY YOUR 43.26 POLICY."; 43.27 (3) a statement of the renewal provisions including any 43.28 reservation by the insurer of the right to change premiums; 43.29 (4) a statement that the outline of coverage is a summary 43.30 of the policy issued or applied for and that the policy should 43.31 be consulted to determine governing contractual provisions; 43.32 (5) an explanation of the policy's loss ratio including at 43.33 least the following language: "This means that, on the average, 43.34 policyholders may expect that $........ of every $100 in premium 43.35 will be returned as benefits to policyholders over the life of 43.36 the contract."; 44.1 (6) a statement of the out-of-pocket expenses, including 44.2 deductibles and copayments for which the insured is responsible, 44.3 and an explanation of the specific out-of-pocket expenses that 44.4 may be accumulated toward any out-of-pocket maximum as specified 44.5 in the policy; 44.6 (7) the following language, in bold print: "YOUR PREMIUMS 44.7 CAN BE INCREASED IN THE FUTURE. THE RATE SCHEDULE THAT LISTS 44.8 YOUR PREMIUM NOW CAN CHANGE."; 44.9(8) the following language, if applicable, in bold print:44.10"IF YOU ARE NOT HOSPITALIZED PRIOR TO ENTERING A NURSING HOME OR44.11NEEDING HOME CARE, YOU WILL NOT BE ABLE TO COLLECT ANY BENEFITS44.12UNDER THIS PARTICULAR POLICY.";44.13(9)(8) the following language in bold print, with any 44.14 provisions that are inapplicable to the particular policy 44.15 omitted or crossed out: "THIS POLICY HAS A WAITING PERIOD OF 44.16 ..... (CALENDAR OR BENEFIT) DAYS FOR NURSING CARE SERVICES AND A 44.17 WAITING PERIOD OF ..... (CALENDAR OR BENEFIT) DAYS FOR HOME CARE 44.18 SERVICES. THIS MEANS THAT THIS POLICY WILL NOT COVER YOUR CARE 44.19 FOR THE FIRST ..... (CALENDAR OR BENEFIT) DAYS AFTER YOU ENTER A 44.20 NURSING HOME, OR THE FIRST ..... (CALENDAR OR BENEFIT) DAYS 44.21 AFTER YOU BEGIN TO USE HOME CARE SERVICES. YOU WOULD NEED TO 44.22 PAY FOR YOUR CARE FROM OTHER SOURCES FOR THOSE WAITING 44.23 PERIODS."; and 44.24(10)(9) a signed and completed copy of the application for 44.25 insurance is left with the applicant at the time the application 44.26 is made. 44.27 Sec. 37. Minnesota Statutes 1998, section 62A.61, is 44.28 amended to read: 44.29 62A.61 [DISCLOSURE OF METHODS USED BY HEALTH CARRIERS TO 44.30 DETERMINE USUAL AND CUSTOMARY FEES.] 44.31 (a) A health carrier that bases reimbursement to health 44.32 care providers upon a usual and customary fee must maintain in 44.33 its office a copy of a description of the methodology used to 44.34 calculate fees including at least the following: 44.35 (1) the frequency of the determination of usual and 44.36 customary fees; 45.1 (2) a general description of the methodology used to 45.2 determine usual and customary fees; and 45.3 (3) the percentile of usual and customary fees that 45.4 determines the maximum allowable reimbursement. 45.5 (b) A health carrier must provide a copy of the information 45.6 described in paragraph (a) to the commissioner of health or the 45.7 commissioner of commerce, upon request. 45.8 (c) The commissioner of health or the commissioner of 45.9 commerce, as appropriate, may use to enforce this section any 45.10 enforcement powers otherwise available to the commissioner with 45.11 respect to the health carrier. The commissioner of health or 45.12 commerce, as appropriate, may require health carriers to provide 45.13 the information required under this section and may use any 45.14 powers granted under other laws relating to the regulation of 45.15 health carriers to enforce compliance. 45.16 (d) For purposes of this section, "health carrier" has the 45.17 meaning given in section 62A.011. 45.18 (e) "Usual and customary" means the normal charge, in the 45.19 absence of insurance, of the provider for a service or article, 45.20 but not more than the prevailing charge in the area for like 45.21 service or article. A "like service" is the same nature and 45.22 duration, requires the same skill, and is performed by a 45.23 provider of similar training and experience. A "like article" 45.24 is one that is identically or substantially equivalent. "Area" 45.25 means the municipality or, in the case of a large city, a 45.26 subdivision of the city, in which the service or article is 45.27 actually provided or a greater area as is necessary to obtain a 45.28 representative cross-section of charges for like service or 45.29 article. 45.30 Sec. 38. Minnesota Statutes 1998, section 62A.65, 45.31 subdivision 5, is amended to read: 45.32 Subd. 5. [PORTABILITY AND CONVERSION OF COVERAGE.] (a) No 45.33 individual health plan may be offered, sold, issued, or with 45.34 respect to children age 18 or under renewed, to a Minnesota 45.35 resident that contains a preexisting condition limitation, 45.36 preexisting condition exclusion, or exclusionary rider, unless 46.1 the limitation or exclusion is permitted under this 46.2 subdivision and under chapter 62L, provided that, except for 46.3 children age 18 or under, underwriting restrictions may be 46.4 retained on individual contracts that are issued without 46.5 evidence of insurability as a replacement for prior individual 46.6 coverage that was sold before May 17, 1993. The individual may 46.7 be subjected to an 18-month preexisting condition limitation, 46.8 unless the individual has maintained continuous coverage as 46.9 defined in section 62L.02. The individual must not be subjected 46.10 to an exclusionary rider. An individual who has maintained 46.11 continuous coverage may be subjected to a one-time preexisting 46.12 condition limitation of up to 12 months, with credit for time 46.13 covered under qualifying coverage as defined in section 62L.02, 46.14 at the time that the individual first is covered under an 46.15 individual health plan by any health carrier. Credit must be 46.16 given for all qualifying coverage with respect to all 46.17 preexisting conditions, regardless of whether the conditions 46.18 were preexisting with respect to any previous qualifying 46.19 coverage. The individual must not be subjected to an 46.20 exclusionary rider. Thereafter, the individual must not be 46.21 subject to any preexisting condition limitation, preexisting 46.22 condition exclusion, or exclusionary rider under an individual 46.23 health plan by any health carrier, except an unexpired portion 46.24 of a limitation under prior coverage, so long as the individual 46.25 maintains continuous coverage as defined in section 62L.02. 46.26 (b) A health carrier must offer an individual health plan 46.27 to any individual previously covered under a group health plan 46.28 issued by that health carrier, regardless of the size of the 46.29 group, so long as the individual maintained continuous coverage 46.30 as defined in section 62L.02. If the individual has available 46.31 any continuation coverage provided under sections 62A.146; 46.32 62A.148; 62A.17, subdivisions 1 and 2; 62A.20; 62A.21; 62C.142; 46.33 62D.101; or 62D.105, or continuation coverage provided under 46.34 federal law, the health carrier need not offer coverage under 46.35 this paragraph until the individual has exhausted the 46.36 continuation coverage. The offer must not be subject to 47.1 underwriting, except as permitted under this paragraph. A 47.2 health plan issued under this paragraph must be a qualified plan 47.3 as defined in section 62E.02 and must not contain any 47.4 preexisting condition limitation, preexisting condition 47.5 exclusion, or exclusionary rider, except for any unexpired 47.6 limitation or exclusion under the previous coverage. The 47.7 individual health plan must cover pregnancy on the same basis as 47.8 any other covered illness under the individual health plan. The 47.9 initial premium rate for the individual health plan must comply 47.10 with subdivision 3. The premium rate upon renewal must comply 47.11 with subdivision 2. In no event shall the premium rate exceed 47.12 90 percent of the premium charged for comparable individual 47.13 coverage by the Minnesota comprehensive health association, and 47.14 the premium rate must be less than that amount if necessary to 47.15 otherwise comply with this section. An individual health plan 47.16 offered under this paragraph to a person satisfies the health 47.17 carrier's obligation to offer conversion coverage under section 47.18 62E.16, with respect to that person. Coverage issued under this 47.19 paragraph must provide that it cannot be canceled or nonrenewed 47.20 as a result of the health carrier's subsequent decision to leave 47.21 the individual, small employer, or other group market. Section 47.22 72A.20, subdivision 28, applies to this paragraph. 47.23 Sec. 39. Minnesota Statutes 1998, section 62B.04, 47.24 subdivision 2, is amended to read: 47.25 Subd. 2. [CREDIT ACCIDENT AND HEALTH INSURANCE.] (a) The 47.26 total amount of periodic indemnity payable by credit accident 47.27 and health insurance in the event of disability, as defined in 47.28 the policy, shall not exceed the aggregate of the periodic 47.29 scheduled unpaid installments of the indebtedness; and the 47.30 amount of each periodic indemnity payment shall not exceed the 47.31 original indebtedness divided by the number of periodic 47.32 installments. If the credit transaction provides for a variable 47.33 rate of finance charge or interest, the initial rate or the 47.34 scheduled rates based on the initial index must be used in 47.35 determining the aggregate of the periodic scheduled unpaid 47.36 installments of the indebtedness. 48.1 (b) If for any reason a policy of credit disability 48.2 insurance will not or may not provide the policyholder or 48.3 certificate holder with coverage for the total amount of 48.4 indebtedness on the related loan or debt in the event of any one 48.5 instance of disability, the applicant must be given a written 48.6 disclosure on or accompanying the application. If the 48.7 disclosure is on the application, it must be immediately above 48.8 the signature line, within a box and the word "WARNING" must be 48.9 in 14-point bold face capital letters. The rest of the text 48.10 must be in capital letters and bold face 10-point print. If the 48.11 disclosure is on a separate sheet, it must be on an 8-1/2 inch 48.12 by 11 inch sheet of paper with the word "WARNING" in 14-point 48.13 bold face capital letters with the remaining text in 10-point 48.14 bold faced capital letters. If a separate disclosure is used, 48.15 it must be signed by the applicant with one copy provided to the 48.16 applicant and one copy maintained by the insurer for at least 48.17 the term of the policy or certificate, if coverage is issued. 48.18 The disclosure must state: 48.19 WARNING: IF YOU BECOME DISABLED AS DEFINED IN THE 48.20 POLICY/CERTIFICATE, THIS DISABILITY INSURANCE POLICY/CERTIFICATE 48.21 MAY NOT COVER YOUR ENTIRE INDEBTEDNESS. IF YOU BECOME DISABLED 48.22 AT A POINT WHERE THE NUMBER OF MONTHLY INSTALLMENT PAYMENTS 48.23 REMAINING EXCEEDS THE PERIOD OF COVERAGE BEING PROVIDED BY THIS 48.24 POLICY/CERTIFICATE, THE BENEFITS AVAILABLE WILL BE LESS THAN THE 48.25 AMOUNT NECESSARY TO PAY OFF YOUR LOAN. IF YOU WANT COVERAGE FOR 48.26 THE FULL AMOUNT OF YOUR INDEBTEDNESS OR HAVE ANY QUESTIONS ABOUT 48.27 THE EXTENT OR NATURE OF YOUR COVERAGE, YOU SHOULD DISCUSS THEM 48.28 WITH YOUR AGENT AND/OR ENROLLER BEFORE SUBMITTING YOUR 48.29 APPLICATION. 48.30 (c) Any policy or certificate of credit disability 48.31 insurance which contains a critical period must make available 48.32 for any single instance of disability monthly indemnity benefit 48.33 payments for the term of the loan, 24 months, or the term of the 48.34 disability, whichever is less. For the purposes of this 48.35 section, a critical period is when there is a limited number of 48.36 monthly benefit payments that may be paid to the beneficiary or 49.1 the policyholder or certificate holder as a result of any one 49.2 instance of disability. 49.3 (d) Unless the policy or certificate provides for such 49.4 coverage, nothing in this section shall be interpreted as 49.5 requiring an insurer to provide coverage for the final payment 49.6 of a balloon loan or for a period that exceeds the age 49.7 limitation in the policy or certificate or for amounts that 49.8 exceed the insurer's maximum liability limits. 49.9 Sec. 40. Minnesota Statutes 1998, section 62E.02, 49.10 subdivision 1, is amended to read: 49.11 Subdivision 1. [APPLICATION.] For the purposes of sections 49.12 62E.01 to62E.1662E.19, the terms and phrases defined in this 49.13 section have the meanings given them. 49.14 Sec. 41. Minnesota Statutes 1998, section 62E.05, 49.15 subdivision 1, is amended to read: 49.16 Subdivision 1. [CERTIFICATION.] Upon application by an 49.17 insurer, fraternal, or employer for certification of a plan of 49.18 health coverage as a qualified plan or a qualified Medicare 49.19 supplement plan for the purposes of sections 62E.01 to62E.1649.20 62E.19, the commissioner shall make a determination within 90 49.21 days as to whether the plan is qualified. All plans of health 49.22 coverage, except Medicare supplement policies, shall be labeled 49.23 as "qualified" or "nonqualified" on the front of the policy or 49.24 contract, or on the schedule page. All qualified plans shall 49.25 indicate whether they are number one, two, or three coverage 49.26 plans. 49.27 Sec. 42. Minnesota Statutes 1998, section 62E.09, is 49.28 amended to read: 49.29 62E.09 [DUTIES OF COMMISSIONER.] 49.30 The commissioner may: 49.31 (a) Formulate general policies to advance the purposes of 49.32 sections 62E.01 to62E.1662E.19; 49.33 (b) Supervise the creation of the Minnesota comprehensive 49.34 health association within the limits described in section 49.35 62E.10; 49.36 (c) Approve the selection of the writing carrier by the 50.1 association, approve the association's contract with the writing 50.2 carrier, and approve the state plan coverage; 50.3 (d) Appoint advisory committees; 50.4 (e) Conduct periodic audits to assure the general accuracy 50.5 of the financial data submitted by the writing carrier and the 50.6 association; 50.7 (f) Contract with the federal government or any other unit 50.8 of government to ensure coordination of the state plan with 50.9 other governmental assistance programs; 50.10 (g) Undertake directly or through contracts with other 50.11 persons studies or demonstration programs to develop awareness 50.12 of the benefits of sections 62E.01 to 62E.16, so that the 50.13 residents of this state may best avail themselves of the health 50.14 care benefits provided by these sections; 50.15 (h) Contract with insurers and others for administrative 50.16 services; and 50.17 (i) Adopt, amend, suspend and repeal rules as reasonably 50.18 necessary to carry out and make effective the provisions and 50.19 purposes of sections 62E.01 to62E.1662E.19. 50.20 Sec. 43. Minnesota Statutes 1998, section 62E.13, 50.21 subdivision 6, is amended to read: 50.22 Subd. 6. [CLAIMS PAYMENTS.] All claims shall be paid by 50.23 the writing carrier pursuant to the provisions of sections 50.24 62E.01 to62E.1662E.19, and shall indicate that the claim was 50.25 paid by the state plan. Each claim payment shall include 50.26 information specifying the procedure to be followed in the event 50.27 of a dispute over the amount of payment. 50.28 Sec. 44. Minnesota Statutes 1998, section 62E.13, 50.29 subdivision 8, is amended to read: 50.30 Subd. 8. [WRITING CARRIER AS AGENT.] The writing carrier 50.31 shall at all times when carrying out its duties under sections 50.32 62E.01 to62E.1662E.19 be considered an agent of the 50.33 association and the commissioner with civil liability subject to 50.34 the provisions of section 3.751. 50.35 Sec. 45. Minnesota Statutes 1998, section 62E.14, 50.36 subdivision 2, is amended to read: 51.1 Subd. 2. [WRITING CARRIER'S RESPONSE.] Within 30 days of 51.2 receipt of the certificate described in subdivision 1, the 51.3 writing carrier shall either reject the application for failing 51.4 to comply with the requirements in subdivision 1 or forward the 51.5 eligible person a notice of acceptance and billing information. 51.6 Insurance shall be effective immediately upon receipt of the 51.7 first month's state plan premium, and shall be retroactive to 51.8 the date of the application, if the applicant otherwise complies 51.9 with the requirements of sections 62E.01 to62E.1662E.19. 51.10 Sec. 46. Minnesota Statutes 1998, section 62E.15, 51.11 subdivision 2, is amended to read: 51.12 Subd. 2. [ASSOCIATION'S DUTY.] The association shall 51.13 devise and implement means of maintaining public awareness of 51.14 the provisions of sections 62E.01 to62E.1762E.19 and shall 51.15 administer these sections in a manner which facilitates public 51.16 participation in the state plan. 51.17 Sec. 47. Minnesota Statutes 1998, section 62L.02, 51.18 subdivision 24, is amended to read: 51.19 Subd. 24. [QUALIFYING COVERAGE.] "Qualifying coverage" 51.20 means health benefits or health coverage provided under: 51.21 (1) a health benefit plan, as defined in this section, but 51.22 without regard to whether it is issued to a small employer and 51.23 including blanket accident and sickness insurance, other than 51.24 accident-only coverage, as defined in section 62A.11; 51.25 (2) part A or part B of Medicare; 51.26 (3) medical assistance under chapter 256B; 51.27 (4) general assistance medical care under chapter 256D; 51.28 (5) MCHA; 51.29 (6) a self-insured health plan; 51.30 (7) the MinnesotaCare program established under section 51.31 256L.02; 51.32 (8) a plan provided under section 43A.316, 43A.317, or 51.33 471.617; 51.34 (9) the Civilian Health and Medical Program of the 51.35 Uniformed Services (CHAMPUS) or other coverage provided under 51.36 United States Code, title 10, chapter 55; 52.1 (10) coverage provided by a health care network cooperative 52.2 under chapter 62R or by a health provider cooperative under 52.3 section 62R.17; 52.4 (11) a medical care program of the Indian Health Service or 52.5 of a tribal organization; 52.6 (12) the federal Employees Health Benefits Plan, or other 52.7 coverage provided under United States Code, title 5, chapter 89; 52.8 (13) a health benefit plan under section 5(e) of the Peace 52.9 Corps Act, codified as United States Code, title 22, section 52.10 2504(e);or52.11 (14) a health plan; or 52.12(14)(15) a plan similar to any of the above plans provided 52.13 in this state or in another state as determined by the 52.14 commissioner. 52.15 Sec. 48. Minnesota Statutes 1998, section 62L.03, 52.16 subdivision 5, is amended to read: 52.17 Subd. 5. [CANCELLATIONS AND FAILURES TO RENEW.] (a) No 52.18 health carrier shall cancel, decline to issue, or fail to renew 52.19 a health benefit plan as a result of the claim experience or 52.20 health status of the persons covered or to be covered by the 52.21 health benefit plan. For purposes of this subdivision, a 52.22 failure to renew does not include a uniform modification of 52.23 coverage at time of renewal, as described in subdivision 1. 52.24 (b) A health carrier may cancel or fail to renew a health 52.25 benefit plan: 52.26 (1) for nonpayment of the required premium; 52.27 (2) for fraud or misrepresentation by the small employer 52.28 with respect to eligibility for coverage or any other material 52.29 fact; 52.30 (3) if the employer fails to comply with the minimum 52.31 contribution percentage required under subdivision 3; or 52.32 (4) for any other reasons or grounds expressly permitted by 52.33 the respective licensing laws and regulations governing a health 52.34 carrier, including, but not limited to, service area 52.35 restrictions imposed on health maintenance organizations under 52.36 section 62D.03, subdivision 4, paragraph (m), to the extent that 53.1 these grounds are not expressly inconsistent with this chapter. 53.2 (c) A health carrier may fail to renew a health benefit 53.3 plan: 53.4 (1) if eligible employee participation during the preceding 53.5 calendar year declines to less than 75 percent, subject to the 53.6 waiver of coverage provision in subdivision 3; 53.7 (2) if the health carrier ceases to do business in the 53.8 small employer market under section 62L.09; or 53.9 (3) if a failure to renew is based upon the health 53.10 carrier's decision to discontinue the health benefit plan form 53.11 previously issued to the small employer, but only if the health 53.12 carrier permits each small employer covered under the prior form 53.13 to switch to its choice of any other health benefit plan offered 53.14 by the health carrier, without any underwriting restrictions 53.15 that would not have been permitted for renewal purposes. 53.16 (d) A health carrier need not renew a health benefit plan, 53.17 and shall not renew a small employer plan, if an employer ceases 53.18 to qualify as a small employer as defined in section 62L.02. If 53.19 a health benefit plan, other than a small employer plan, 53.20 provides terms of renewal that do not exclude an employer that 53.21 is no longer a small employer, the health benefit plan may be 53.22 renewed according to its own terms. If a health carrier issues 53.23 or renews a health plan to an employer that is no longer a small 53.24 employer, without interruption of coverage, the health plan is 53.25 subject to section 60A.082. 53.26 (e) A health carrier may cancel or fail to renew the 53.27 coverage of an individual employee or dependent under a health 53.28 benefit plan for fraud or misrepresentation by the eligible 53.29 employee or dependent with respect to eligibility for coverage 53.30 or any other material fact. 53.31 Sec. 49. Minnesota Statutes 1998, section 62L.05, 53.32 subdivision 5, is amended to read: 53.33 Subd. 5. [PLAN VARIATIONS.] (a) No health carrier shall 53.34 offer to a small employer a health benefit plan that differs 53.35 from the two small employer plans described in subdivisions 1 to 53.36 4, unless the health benefit plan complies with all provisions 54.1 of chapters 62A, 62C, 62D, 62E, 62H, 62N, 62Q, and 64B that 54.2 otherwise apply to the health carrier, except as expressly 54.3 permitted by paragraph (b). 54.4 (b) As an exception to paragraph (a), a health benefit plan 54.5 is deemed to be a small employer plan and to be in compliance 54.6 with paragraph (a) if it differs from one of the two small 54.7 employer plans described in subdivisions 1 to 4 only by 54.8 providing benefits in addition to those described in subdivision 54.9 4, provided that the health benefit plan has an actuarial value 54.10 that exceeds the actuarial value of the benefits described in 54.11 subdivision 4 by no more than two percent. "Benefits in 54.12 addition" means additional units of a benefit listed in 54.13 subdivision 4 or one or more benefits not listed in subdivision 54.14 4. 54.15 Sec. 50. Minnesota Statutes 1998, section 62L.14, 54.16 subdivision 7, is amended to read: 54.17 Subd. 7. [COMPENSATION.] Public directors may be 54.18 reimbursed by the association for reasonable and necessary 54.19 expenses incurred by them in performing their duties as 54.20 directors, but shall not otherwise be compensated by the54.21association for their servicesand may be compensated by the 54.22 association at a rate of up to $55 per day spent on authorized 54.23 association activities. 54.24 Sec. 51. Minnesota Statutes 1998, section 62Q.185, is 54.25 amended to read: 54.26 62Q.185 [GUARANTEED RENEWABILITY; LARGE EMPLOYER GROUP 54.27 HEALTH COVERAGE.] 54.28 (a) No health plan company, as defined in section 62Q.01, 54.29 subdivision 4, shall refuse to renew a health benefit plan, as 54.30 defined in section 62L.02, subdivision 15, but issued to a large 54.31 employer, as defined in section 62Q.18, subdivision 1. 54.32 (b) This section does not require renewal if: 54.33 (1) the large employer has failed to pay premiums or 54.34 contributions as required under the terms of the health benefit 54.35 plan, or the health plan company has not received timely premium 54.36 payments unless the late payments were received within a grace 55.1 period provided under state law; 55.2 (2) the large employer has performed an act or practice 55.3 that constitutes fraud or misrepresentation of material fact 55.4 under the terms of the health benefit plan; 55.5 (3) the large employer has failed to comply with a material 55.6 plan provision relating to employer contribution or group 55.7 participation rules not prohibited by state law; 55.8 (4) the health plan company is ceasing to offer coverage in 55.9 the large employer market in this state in compliance with 55.10 United States Code, title 42, section 300gg-12(c), and 55.11 applicable state law; 55.12 (5) in the case of a health maintenance organization, there 55.13 is no longer any enrollee in the large employer's health benefit 55.14 plan who lives, resides, or works in the approved service area; 55.15 or 55.16 (6) in the case of a health benefit plan made available to 55.17 large employers only through one or more bona fide associations, 55.18 the membership of the large employer in the association ceases, 55.19 but only if such coverage is terminated uniformly without regard 55.20 to any health-related factor relating to any covered individual. 55.21 (c) This section does not prohibit a health plan company 55.22 from modifying the premium rate or from modifying the coverage 55.23 for purposes of renewal. 55.24 (d) This section does not require renewal of the coverage 55.25 of individual enrollees under the health benefit plan if the 55.26 individual enrollee has performed an act or practice that 55.27 constitutes fraud or misrepresentation of material fact under 55.28 the terms of the health benefit plan. 55.29 Sec. 52. Minnesota Statutes 1998, section 62S.01, 55.30 subdivision 14, is amended to read: 55.31 Subd. 14. [LOSS OF FUNCTIONAL CAPACITY.] "Loss of 55.32 functional capacity" means requiring the substantial assistance 55.33 of another person to perform the prescribed activities of daily 55.34 living. 55.35 Sec. 53. Minnesota Statutes 1998, section 62S.05, 55.36 subdivision 2, is amended to read: 56.1 Subd. 2. [PROHIBITED EXCLUSION.] A long-term care 56.2 insurance policy or certificate, other than a policy or 56.3 certificate issued to a group as defined in section 62S.01, 56.4 subdivision 15, clause (1), may not exclude coverage for a loss 56.5 or confinement that is the result of a preexisting condition 56.6unless the loss or confinement begins withinmore than six 56.7 months following the effective date of coverage of an insured 56.8 person. 56.9 Sec. 54. Minnesota Statutes 1998, section 65A.01, 56.10 subdivision 1, is amended to read: 56.11 Subdivision 1. [DESIGNATION AND SCOPE.] The printed form 56.12 of a policy of fire insurance, as set forth in subdivisions 3 56.13 and 3a, shall be known and designated as the "Minnesota standard 56.14 fire insurance policy" to be used in the state of Minnesota. No 56.15 policy or contract of fire insurance shall be made, issued or 56.16 delivered by any insurer including reciprocals or interinsurance 56.17 exchanges or any agent or representative thereof, on any 56.18 property in this state, unless it shall provide the specified 56.19 coverage and conform as to all provisions, stipulations, and 56.20 conditions, with such form of policy, except as provided in 56.21 sections 60A.08, subdivision 9;60A.31 to 60A.35160A.352; 56.22 65A.06; 65A.29; 72A.20, subdivision 17; and other statutes 56.23 containing specific requirements that are inconsistent with the 56.24 form of this policy. Any policy or contract otherwise subject 56.25 to the provisions of this subdivision, subdivisions 3 and 3a 56.26 which includes either on an unspecified basis as to coverage or 56.27 for a single premium, coverage against the peril of fire and 56.28 coverage against other perils may be issued without 56.29 incorporating the exact language of the Minnesota standard fire 56.30 insurance policy, provided: Such policy or contract shall, with 56.31 respect to the peril of fire, afford the insured all the rights 56.32 and benefits of the Minnesota standard fire insurance policy and 56.33 such additional benefits as the policy provides; the provisions 56.34 in relation to mortgagee interests and obligations in said 56.35 Minnesota standard fire insurance policy shall be incorporated 56.36 therein without change; such policy or contract is complete as 57.1 to its terms of coverage; and, the commissioner is satisfied 57.2 that such policy or contract complies with the provisions hereof. 57.3 Sec. 55. Minnesota Statutes 1998, section 65A.27, 57.4 subdivision 4, is amended to read: 57.5 Subd. 4. "Homeowner's insurance" means insurance coverage, 57.6 as provided in section 60A.06, subdivision 1, clause (1)(c), 57.7 normally written by the insurer as a standard homeowner's 57.8 package policy or as a standard residential renter's package 57.9 policy. This definition includes, but is not limited to, 57.10 policies that are generally described as homeowner's policies, 57.11 mobile/manufactured homeowner's policies, dwelling owner 57.12 policies, condominium owner policies, and tenant policies. 57.13 Sec. 56. Minnesota Statutes 1998, section 65A.29, 57.14 subdivision 4, is amended to read: 57.15 Subd. 4. [FORM REQUIREMENTS.] Any notice or statement 57.16 required by subdivisions 1 to 3, or any other notice canceling a 57.17 homeowner's insurance policy must be written in language which 57.18 is easily readable and understandable by a person of average 57.19 intelligence and understanding. The statement of reason must be 57.20 sufficiently specific to convey, clearly and without further 57.21 inquiry, the basis for the insurer's refusal to renew or to 57.22 write the insurance coverage. 57.23 The notice or statement must also inform the insured of: 57.24 (1) the possibility of coverage through the Minnesota 57.25 property insurance placement facility under sections 65A.31 to 57.26 65A.42; 57.27 (2) the right to object to the commissioner under 57.28 subdivision 9; and 57.29 (3) the right to the return of unearned premium in 57.30 appropriate situations under subdivision 10. 57.31 Sec. 57. Minnesota Statutes 1998, section 65B.02, 57.32 subdivision 2, is amended to read: 57.33 Subd. 2. [QUALIFIED APPLICANT.] "Qualified applicant" 57.34 means a person who: 57.35 (1) Is a resident of this state, 57.36 (2) Owns a motor vehicle registered in accordance with the 58.1 laws of this state, or has a valid driver's license, or is 58.2 required to fileproof of financial responsibilitya certificate 58.3 of insurancewith the commissioner of public safety in58.4accordance with the provisions of this chapter, and 58.5 (3) Has no unpaid premiums with respect to prior automobile 58.6 insurance. 58.7 Sec. 58. Minnesota Statutes 1998, section 65B.44, 58.8 subdivision 1, is amended to read: 58.9 Subdivision 1. [INCLUSIONS.] Basic economic loss benefits 58.10 shall provide reimbursement for all loss suffered through injury 58.11 arising out of the maintenance or use of a motor vehicle, 58.12 subject to any applicable deductibles, exclusions, 58.13 disqualifications, and other conditions, and shall provide a 58.14maximumminimum of $40,000 for loss arising out of the injury of 58.15 any one person, consisting of: 58.16 (a) $20,000 for medical expense loss arising out of injury 58.17 to any one person; and 58.18 (b) a total of $20,000 for income loss, replacement 58.19 services loss, funeral expense loss, survivor's economic loss, 58.20 and survivor's replacement services loss arising out of the 58.21 injury to any one person. 58.22 Sec. 59. Minnesota Statutes 1998, section 65B.48, 58.23 subdivision 5, is amended to read: 58.24 Subd. 5. (a) Every owner of a motorcycle registered or 58.25 required to be registered in this state or operated in this 58.26 state by the owner or with the owner's permission shall provide 58.27 and maintain security for the payment of tort liabilities 58.28 arising out of the maintenance or use of the motorcycle in this 58.29 state. Security may be provided by a contract of liability 58.30 insurance complying with section 65B.49, subdivision 3, or by 58.31 qualifying as a self insurer in the manner provided in 58.32 subdivision 3. 58.33 (b) At the time an application for motorcycle insurance 58.34 without personal injury protection coverage is completed, there 58.35 must be attached to the application a separate form containing a 58.36 written notice in at least 10-point bold type, if printed, or in 59.1 capital letters, if typewritten that states: 59.2 "Under Minnesota law, a policy of motorcycle coverage 59.3 issued in the State of Minnesota must provide liability 59.4 coverage only, and there is no requirement that the policy 59.5 provide personal injury protection (PIP) coverage in the 59.6 case of injury sustained by the insured. No PIP coverage 59.7 provided by an automobile insurance policy you may have in 59.8 force will extend to provide coverage in the event of a 59.9 motorcycle accident." 59.10 Sec. 60. Minnesota Statutes 1998, section 72A.125, 59.11 subdivision 3, is amended to read: 59.12 Subd. 3. [COLLISION DAMAGE WAIVER.] A "collision damage 59.13 waiver" is a discharge of the responsibility of the renter or 59.14 leasee to return the motor vehicle in the same condition as when 59.15 it was first rented. The waiver is a full and complete 59.16 discharge of the responsibility to return the vehicle in the 59.17 same condition as when it was first rented. The waiver may not 59.18 contain any exclusions except those approved by the commissioner 59.19pursuant to the requirements contained in section 61A.02,59.20subdivisions 2 to 5. 59.21 Sec. 61. Minnesota Statutes 1998, section 72A.20, 59.22 subdivision 29, is amended to read: 59.23 Subd. 29. [HIV TESTS; CRIME VICTIMS AND EMERGENCY MEDICAL 59.24 SERVICE PERSONNEL.] No insurer regulated under chapter 61Aor, 59.25 62B, or 62S, or providing health, medical, hospitalization, 59.26 long-term care insurance, or accident and sickness insurance 59.27 regulated under chapter 62A, or nonprofit healthservices59.28 service plan corporation regulated under chapter 62C, health 59.29 maintenance organization regulated under chapter 62D, or 59.30 fraternal benefit society regulated under chapter 64B, may: 59.31 (1) obtain or use the performance of or the results of a 59.32 test to determine the presence of the human immunodeficiency 59.33 virus (HIV) antibody performed on an offender under section 59.34 611A.19 or performed on a crime victim who was exposed to or had 59.35 contact with an offender's bodily fluids during commission of a 59.36 crime that was reported to law enforcement officials, in order 60.1 to make an underwriting decision, cancel, fail to renew, or take 60.2 any other action with respect to a policy, plan, certificate, or 60.3 contract; 60.4 (2) obtain or use the performance of or the results of a 60.5 test to determine the presence of the human immunodeficiency 60.6 virus (HIV) antibody performed on a patient pursuant to sections 60.7 144.761 to 144.7691, or performed on emergency medical services 60.8 personnel pursuant to the protocol under section 144.762, 60.9 subdivision 2, in order to make an underwriting decision, 60.10 cancel, fail to renew, or take any other action with respect to 60.11 a policy, plan, certificate, or contract; for purposes of this 60.12 clause, "patient" and "emergency medical services personnel" 60.13 have the meanings given in section 144.761; or 60.14 (3) ask an applicant for coverage or a person already 60.15 covered whether the person has: (i) had a test performed for 60.16 the reason set forth in clause (1) or (2); or (ii) been the 60.17 victim of an assault or any other crime which involves bodily 60.18 contact with the offender. 60.19 A question that purports to require an answer that would 60.20 provide information regarding a test performed for the reason 60.21 set forth in clause (1) or (2) may be interpreted as excluding 60.22 this test. An answer that does not mention the test is 60.23 considered to be a truthful answer for all purposes. An 60.24 authorization for the release of medical records for insurance 60.25 purposes must specifically exclude any test performed for the 60.26 purpose set forth in clause (1) or (2) and must be read as 60.27 providing this exclusion regardless of whether the exclusion is 60.28 expressly stated. This subdivision does not affect tests 60.29 conducted for purposes other than those described in clause (1) 60.30 or (2), including any test to determine the presence of the 60.31 human immunodeficiency virus (HIV) antibody if such test was 60.32 performed at the insurer's direction as part of the insurer's 60.33 normal underwriting requirements. 60.34 Sec. 62. Minnesota Statutes 1998, section 72B.04, 60.35 subdivision 10, is amended to read: 60.36 Subd. 10. [FEES.] A fee of $40 is imposed for each initial 61.1 license or temporary permit and $25 for each renewal thereof or 61.2 amendment thereto. A fee of $20 is imposed for the registration 61.3 of each nonlicensed adjuster who is required to register under 61.4 section 72B.06. All fees shall be transmitted to the 61.5 commissioner and shall be payable to thestate61.6treasurerdepartment of commerce.If a fee is paid for an61.7examination and if within one year from the date of that payment61.8no written request for a refund is received by the commissioner61.9or the examination for which the fee was paid is not taken, the61.10fee is forfeited to the state of Minnesota.61.11 Sec. 63. Minnesota Statutes 1998, section 79A.01, 61.12 subdivision 10, is amended to read: 61.13 Subd. 10. [COMMON CLAIMS FUND.] "Common claims fund," with 61.14 respect to group self-insurers, means the cash, cash 61.15 equivalents, or investment accounts maintained by themutual61.16 self-insurance group to pay its workers' compensation 61.17 liabilities. 61.18 Sec. 64. Minnesota Statutes 1998, section 79A.01, is 61.19 amended by adding a subdivision to read: 61.20 Subd. 11. [DIMINUTIVE APPLICANTS.] "Diminutive applicants" 61.21 to group self-insurance means applicants to existing 61.22 self-insurance groups whose equity and premium are both less 61.23 than five percent of the total group's equity and premium. 61.24 Sec. 65. Minnesota Statutes 1998, section 79A.02, 61.25 subdivision 1, is amended to read: 61.26 Subdivision 1. [MEMBERSHIP.] For the purposes of assisting 61.27 the commissioner, there is established a workers' compensation 61.28 self-insurers' advisory committee of five members that are 61.29 employers authorized to self-insure in Minnesota. Three of the 61.30 members and three alternates shall be elected by the 61.31 self-insurers' security fund board of trustees and two members 61.32 and two alternates shall be appointed by the commissioner. 61.33 Sec. 66. Minnesota Statutes 1998, section 79A.02, 61.34 subdivision 4, is amended to read: 61.35 Subd. 4. [RECOMMENDATIONS TO COMMISSIONER REGARDING 61.36 REVOCATION.] After each fifth anniversary from the date each 62.1 individual and group self-insurer becomes certified to 62.2 self-insure, the committee shall review all relevant financial 62.3 data filed with the department of commerce that is otherwise 62.4 available to the public and make a recommendation to the 62.5 commissioner about whether each self-insurer's certificate 62.6 should be revoked. For group self-insurers who have been in 62.7 existence for five years or more and have been granted renewal 62.8 authority, a level of funding in the common claims fund must be 62.9 maintained at not less than the greater of either: (1) one 62.10 year's claim losses paid in the most recent year; or (2) 62.11 one-third of the security deposit posted with the department of 62.12 commerce according to section 79A.04, subdivision 2. This 62.13 provision supersedes any requirements under section 79A.03, 62.14 subdivision 10, and Minnesota Rules, part 2780.5000. 62.15 Sec. 67. Minnesota Statutes 1998, section 79A.03, 62.16 subdivision 6, is amended to read: 62.17 Subd. 6. [APPLICATIONS FOR GROUP SELF-INSURANCE.] (a) Two 62.18 or more employers may apply to the commissioner for the 62.19 authority to self-insure as a group, using forms available from 62.20 the commissioner. This initial application shall be accompanied 62.21 by a copy of the bylaws or plan of operation adopted by the 62.22 group. Such bylaws or plan of operation shall conform to the 62.23 conditions prescribed by law or rule. The commissioner shall 62.24 approve or disapprove the bylaws within 60 days unless a 62.25 question as to the legality of a specific bylaw or plan 62.26 provision has been referred to the attorney general's office. 62.27 The commissioner shall make a determination as to the 62.28 application within 15 days after receipt of the requested 62.29 response from the attorney general's office. 62.30 (b) After the initial application and the bylaws or plan of 62.31 operation have been approved by the commissioner or at the time 62.32 of the initial application, the group shall submit the names of 62.33 employers that will be members of the group; an indemnity 62.34 agreement providing for joint and several liability for all 62.35 group members for any and all workers' compensation claims 62.36 incurred by any member of the group, as set forth in Minnesota 63.1 Rules, part 2780.9920, signed by an officer of each member; and 63.2 an accounting review performed by a certified public 63.3 accountant. A certified financial audit may be filed in lieu of 63.4 an accounting review. 63.5 (c) When a group has obtained its authority to self-insure, 63.6 additional applicants who wish to join the group must apply for 63.7 approval by submitting, at least 45 days before joining the 63.8 group: (1) an application; (2) an indemnity agreement providing 63.9 for joint and several liability as set forth in Minnesota Rules, 63.10 part 2780.9920, signed by an officer of the applicant; and (3) a 63.11 certified financial audit performed by a certified public 63.12 accountant. An accounting review performed by a certified 63.13 public accountant may be filed in lieu of a certified audit. 63.14 New diminutive applicants to the group, as defined in 63.15 section 79A.01, subdivision 11, applying for membership in 63.16 groups in existence longer than one year, who have a combined 63.17 equity of all group members in excess of 15 times the last 63.18 retention limit selected by the group with the workers' 63.19 compensation reinsurance association, and have posted 125 63.20 percent of the group's total estimated future liability, must 63.21 submit the items in this paragraph at least ten days before 63.22 joining the group. 63.23 If the cumulative total of premium added to the group by 63.24 diminutive new members is greater than 50 percent in a fiscal 63.25 year of the group, all subsequent new members' applications must 63.26 be submitted at least 45 days before joining the group. 63.27 In all cases of new membership, evidence that cash premiums 63.28 equal to not less than 20 percent of the current year's modified 63.29 premium of each applicant have been paid into a common claims 63.30 fund, maintained by the group in a designated depository, must 63.31 be filed with the department at least ten days before joining 63.32 the group. 63.33 Sec. 68. Minnesota Statutes 1998, section 79A.03, 63.34 subdivision 7, is amended to read: 63.35 Subd. 7. [FINANCIAL STANDARDS.] A self-insurer group 63.36proposing to self-insureshall have and maintain: 64.1 (a) A combined net worth of all of the members of an amount 64.2 at least equal to the greater of ten times the retention 64.3 selected with the workers' compensation reinsurance association 64.4 or one-third of the current annual modified premium of the 64.5 members. 64.6 (b) Sufficient assets, net worth, and liquidity to promptly 64.7 and completely meet all obligations of its members under chapter 64.8 176 or this chapter. In determining whether a group is in sound 64.9 financial condition, consideration shall be given to the 64.10 combined net worth of the member companies; the consolidated 64.11 long-term and short-term debt to equity ratios of the member 64.12 companies; any excess insurance other than reinsurance with the 64.13 workers' compensation reinsurance association, purchased by the 64.14 group from an insurer licensed in Minnesota or from an 64.15 authorized surplus line carrier; other financial data requested 64.16 by the commissioner or submitted by the group; and the combined 64.17 workers' compensation experience of the group for the last four 64.18 years. 64.19 Sec. 69. Minnesota Statutes 1998, section 79A.03, 64.20 subdivision 9, is amended to read: 64.21 Subd. 9. [FILING REPORTS.] (a) Incurred losses, paid and 64.22 unpaid, specifying indemnity and medical losses by 64.23 classification, payroll by classification, and current estimated 64.24 outstanding liability for workers' compensation shall be 64.25 reported to the commissioner by each self-insurer on a calendar 64.26 year basis, in a manner and on forms available from the 64.27 commissioner. Payroll information must be filed by April 1 of 64.28 the following year, and loss information and total workers'64.29compensation liability must be filed by August 1 of the64.30following year. 64.31 (b) Each self-insurer shall, under oath, attest to the 64.32 accuracy of each report submitted pursuant to paragraph (a). 64.33 Upon sufficient cause, the commissioner shall require the 64.34 self-insurer to submit a certified audit of payroll and claim 64.35 records conducted by an independent auditor approved by the 64.36 commissioner, based on generally accepted accounting principles 65.1 and generally accepted auditing standards, and supported by an 65.2 actuarial review and opinion of the future contingent 65.3 liabilities. The basis for sufficient cause shall include the 65.4 following factors: where the losses reported appear 65.5 significantly different from similar types of businesses; where 65.6 major changes in the reports exist from year to year, which are 65.7 not solely attributable to economic factors; or where the 65.8 commissioner has reason to believe that the losses and payroll 65.9 in the report do not accurately reflect the losses and payroll 65.10 of that employer. If any discrepancy is found, the commissioner 65.11 shall require changes in the self-insurer's or workers' 65.12 compensation service company record keeping practices. 65.13 (c)With theAn annuallossstatus report due August 1 by 65.14 each self-insurer shallreport to the commissioner any workers'65.15compensation claim from the previous year where the full,65.16undiscounted value is estimated to exceed $50,000,be filed in a 65.17 manner and on forms prescribed by the commissioner. 65.18 (d) Each individual self-insurer shall, within four months 65.19 after the end of its fiscal year, annually file with the 65.20 commissioner its latest 10K report required by the Securities 65.21 and Exchange Commission. If an individual self-insurer does not 65.22 prepare a 10K report, it shall file an annual certified 65.23 financial statement, together with such other financial 65.24 information as the commissioner may require to substantiate data 65.25 in the financial statement. 65.26 (e) Each member of the group shall, withinfourseven 65.27 months after the end of each fiscal year for that group, file 65.28 the most recent annual financial statement, reviewed by a 65.29 certified public accountant in accordance with the Statements on 65.30 Standards for Accounting and Review Services, Volume 2, the 65.31 American Institute of Certified Public Accountants Professional 65.32 Standards, or audited in accordance with generally accepted 65.33 auditing standards, together with such other financial 65.34 information the commissioner may require. In addition, the 65.35 group shall file, withinfourseven months after the end of each 65.36 fiscal year for that group, combining financial statements of 66.1 the group members, compiled by a certified public accountant in 66.2 accordance with the Statements on Standards for Accounting and 66.3 Review Services, Volume 2, the American Institute of Certified 66.4 Public Accountants Professional Standards. The combining 66.5 financial statements shall include, but not be limited to, a 66.6 balance sheet, income statement, statement of changes in net 66.7 worth, and statement of cash flow. Each combining financial 66.8 statement shall include a column for each individual group 66.9 member along with a total column. 66.10 Where a group has 50 or more members, the group shall file, 66.11 in lieu of the combining financial statements, a combined 66.12 financial statement showing only the total column for the entire 66.13 group's balance sheet, income statement, statement of changes in 66.14 net worth, and statement of cash flow. Additionally, the group 66.15 shall disclose, for each member, the total assets, net worth, 66.16 revenue, and income for the most recent fiscal year. The 66.17 combining and combined financial statements may omit all 66.18 footnote disclosures. 66.19 (f) In addition to the financial statements required by 66.20 paragraphs (d) and (e), interim financial statements or 10Q 66.21 reports required by the Securities and Exchange Commission may 66.22 be required by the commissioner upon an indication that there 66.23 has been deterioration in the self-insurer's financial 66.24 condition, including a worsening of current ratio, lessening of 66.25 net worth, net loss of income, the downgrading of the company's 66.26 bond rating, or any other significant change that may adversely 66.27 affect the self-insurer's ability to pay expected losses. Any 66.28 self-insurer that files an 8K report with the Securities and 66.29 Exchange Commission shall also file a copy of the report with 66.30 the commissioner within 30 days of the filing with the 66.31 Securities and Exchange Commission. 66.32 Sec. 70. Minnesota Statutes 1998, section 79A.03, 66.33 subdivision 10, is amended to read: 66.34 Subd. 10. [ANNUAL AUDIT AND REFUNDS.] (a) The accounts and 66.35 records of the group self-insurer's fund shall be audited 66.36 annually. Audits shall be made by certified public accountants, 67.1 based on generally accepted accounting principles and generally 67.2 accepted auditing standards, and supported by actuarial review 67.3 and opinion of the future contingent liabilities, in order to 67.4 determine the solvency of the self-insurer's fund. All audits 67.5 required by this subdivision shall be filed with the 67.6 commissioner 90 days after the close of the fiscal year for the 67.7 group self-insurer. The commissioner may require a special 67.8 audit to be made at other times if the financial stability of 67.9 the fund or the adequacy of its monetary reserves is in question. 67.10 (b) One hundred percent of any surplus money for a fund 67.11 year in excess of 125 percent of the amount necessary to fulfill 67.12 all obligations under chapter 176 for that fund year may be 67.13 declared refundable to a member at any time after 18 months 67.14 following the end of such fund year. There can be no more than 67.15 one refund in any 12-month period. When all claims of any one 67.16 fund year have been fully paid, as certified by an actuary, all 67.17 surplus money from that fund year may be declared refundable. 67.18 Sec. 71. Minnesota Statutes 1998, section 79A.03, is 67.19 amended by adding a subdivision to read: 67.20 Subd. 13. [ANNUAL REQUIREMENTS.] The financial 67.21 requirements set forth in subdivisions 3, 4, 5, and 7, must be 67.22 met on an annual basis. 67.23 Sec. 72. Minnesota Statutes 1998, section 79A.21, 67.24 subdivision 2, is amended to read: 67.25 Subd. 2. [REQUIRED DOCUMENTS.] All first-year applications 67.26 must be accompanied by the following: 67.27 (a) A detailed business plan including the risk profile of 67.28 the proposed membership, underwriting guidelines, marketing 67.29 plan, minimum financial criteria for each member, and financial 67.30 projections for the first year of operation. 67.31 (b) A plan describing the method in which premiums are to 67.32 be charged to the employer members. The plan shall be 67.33 accompanied by copies of the member's workers' compensation 67.34 insurance policies in force at the time of application. In 67.35 developing the premium for the group, the commercial 67.36 self-insurance group shall base its premium on the Minnesota 68.1 workers' compensation insurers association's manual of rules, 68.2 loss costs, and classifications approved for use in Minnesota by 68.3 the commissioner. Each member applicant shall, on a form 68.4 approved by the commissioner, complete estimated payrolls for 68.5 the first 12-month period that the applicant will be 68.6 self-insured. Premium volume discounts per the plan will be 68.7 permitted if they can be shown to be consistent with actuarial 68.8 standards. 68.9 (c) A schedule indicating actual or anticipated operational 68.10 expenses of the commercial self-insurance group. No authority 68.11 to self-insure will be granted unless, over the term of the 68.12 policy year, at least 65 percent of total revenues from all 68.13 sources for the year are available for the payment of its claim 68.14 and assessment obligations. For purposes of this calculation, 68.15 claim and assessment obligations include the cost of allocated 68.16 loss expenses as well as special compensation fund and 68.17 commercial self-insurance group security fund assessments but 68.18 exclude the cost of unallocated loss expenses. 68.19 (d) An indemnity agreement from each member who will 68.20 participate in the commercial self-insurance group, signed by an 68.21 officer of each member, providing for joint and several 68.22 liability for all claims and expenses of all of the members of 68.23 the commercial self-insurance group arising in any fund year in 68.24 which the member was a participant on a form approved by the 68.25 commissioner. The indemnity agreement shall provide for 68.26 assessments according to the group's bylaws on an individual and 68.27 proportionate basis. 68.28 (e) A copy of the commercial self-insurance group bylaws. 68.29 (f) Evidence of the security deposit required under section 68.30 79A.24, accompanied by the actuarial certification study for the 68.31 minimum security deposit as required under section 79A.24. 68.32 (g) Each initial member of the commercial self-insurance 68.33 group shall submit to the commercial self-insurance group 68.34 accountant its most recent annual financial statement. 68.35 Financial statements for a period ending more than six months 68.36 prior to the date of the application must be accompanied by an 69.1 affidavit, signed by a company officer under oath, stating that 69.2 there has been no material lessening of the net worth nor other 69.3 adverse changes in its financial condition since the end of the 69.4 period. Individual group members constituting at least7550 69.5 percent of the group's annual premium shall submit reviewed or 69.6 audited financial statements. The remaining membersmaymust 69.7 submit compilation level statements. Statements for a period 69.8 ending more than 12 months prior to the date of application 69.9 cannot be accepted. 69.10 (h) A compiled combined financial statement of all group 69.11 members prepared by the commercial self-insurance group's 69.12 accountant and a list of members included in such 69.13 statements. An "Agreed Upon Procedures" report, as determined 69.14 by the commissioner, indicating combined net worth, total 69.15 assets, cash flow, and net income of the group members may be 69.16 filed in lieu of the compiled combined financial statement. 69.17 (i) A copy of each member's accountant's report letter from 69.18 the reports used in compiling the combined financial statements. 69.19 (j) A list of all members and the percentage of premium 69.20 each represents to the total group's annual premium for the 69.21 policy year. 69.22 Sec. 73. Minnesota Statutes 1998, section 79A.23, 69.23 subdivision 1, is amended to read: 69.24 Subdivision 1. [REQUIRED REPORTS TO COMMISSIONER.] Each 69.25 commercial self-insurance group shall submit the following 69.26 documents to the commissioner. 69.27 (a) An annual report shall be submitted by April 1 showing 69.28 the incurred losses, paid and unpaid, specifying indemnity and 69.29 medical losses by classification, payroll by classification, and 69.30 current estimated outstanding liability for workers' 69.31 compensation on a calendar year basis, in a manner and on forms 69.32 available from the commissioner. In addition each group will 69.33 submit a quarterly interim loss report showing incurred losses 69.34 for all its membership. 69.35 (b) Each commercial self-insurance group shall submit 69.36 within 45 days of the end of each quarter: 70.1 (1) a schedule showing all the members who participate in 70.2 the group, their date of inception, and date of withdrawal, if 70.3 applicable; 70.4 (2) a separate section identifying which members were added 70.5 or withdrawn during that quarter; and 70.6 (3) an internal financial statement and copies of the 70.7 fiscal agent's statements supporting the balances in the common 70.8 claims fund. 70.9 (c) The commercial self-insurance group shall submit an 70.10 annual certified financial audit report of the commercial 70.11 self-insurance group fund by April 1 of the following year. The 70.12 report must be accompanied by an expense schedule showing the 70.13 commercial self-insurance group's operational costs for the same 70.14 year including service company charges, accounting and actuarial 70.15 fees, fund administration charges, reinsurance premiums, 70.16 commissions, and any other costs associated with the 70.17 administration of the group program. 70.18 (d) An officer of the commercial self-insurance group 70.19 shall, under oath, attest to the accuracy of each report 70.20 submitted under paragraphs (a), (b), and (c). Upon sufficient 70.21 cause, the commissioner shall require the commercial 70.22 self-insurance group to submit a certified audit of payroll and 70.23 claim records conducted by an independent auditor approved by 70.24 the commissioner, based on generally accepted accounting 70.25 principles and generally accepted auditing standards, and 70.26 supported by an actuarial review and opinion of the future 70.27 contingent liabilities. The basis for sufficient cause shall 70.28 include the following factors: 70.29 (1) where the losses reported appear significantly 70.30 different from similar types of groups; 70.31 (2) where major changes in the reports exist from year to 70.32 year, which are not solely attributable to economic factors; or 70.33 (3) where the commissioner has reason to believe that the 70.34 losses and payroll in the report do not accurately reflect the 70.35 losses and payroll of the commercial self-insurance group. 70.36 If any discrepancy is found, the commissioner shall require 71.1 changes in the commercial self-insurance group's business plan 71.2 or service company recordkeeping practices. 71.3 (e) Each commercial self-insurance group shall submit by 71.4 September 15 a copy of the group's annual federal and state 71.5 income tax returns or provide proof that it has received an 71.6 exemption from these filings. 71.7 (f) With the annual loss report each commercial 71.8 self-insurance group shall report to the commissioner any 71.9 worker's compensation claim where the full, undiscounted value 71.10 is estimated to exceed $50,000, in a manner and on forms 71.11 prescribed by the commissioner. 71.12 (g) Each commercial self-insurance group shall submit by 71.13 May 1 a list of all members and the percentage of premium each 71.14 represents to the total group's premium for the previous 71.15 calendar year. 71.16 (h) Each commercial self-insurance group shall submit by 71.17MayAugust 1 the following documents prepared by the group's 71.18 certified public accountant: 71.19 (1) a compiled combined financial statement of group 71.20 members and a list of members included in this statement;. An 71.21 "Agreed Upon Procedures" report, as determined by the 71.22 commissioner, indicating combined net worth, total assets, cash 71.23 flow, and net income of the group members may be filed in lieu 71.24 of the compiled combined financial statement; and 71.25 (2) a report that the statements which were combined have 71.26 met the requirements of subdivision 2. 71.27 (i) If any group member comprises over 25 percent of total 71.28 group premium, that member's financial statement must be 71.29 reviewed or audited, and, at the commissioner's option, must be 71.30 filed with the department of commerce by May 1 of the following 71.31 year. 71.32 (j) Each commercial self-insurance group shall submit a 71.33 copy of each member's accountant's report letter from the 71.34 reports used in compiling the combined financial statements. 71.35 Sec. 74. Minnesota Statutes 1998, section 79A.23, 71.36 subdivision 2, is amended to read: 72.1 Subd. 2. [REQUIRED REPORTS FROM MEMBERS TO GROUP.] Each 72.2 member of the commercial self-insurance group shall, by 72.3AprilJuly 1, submit to the group its most recent annual 72.4 financial statement, together with other financial information 72.5 the group may require. These financial statements submitted 72.6 must not have a fiscal year end date older than January 15 of 72.7 the group's calendar year end. Individual group members 72.8 constituting at least 50 percent of the group's annual premium 72.9 shall submit to the group reviewed or audited financial 72.10 statements. The remaining membersmaymust submit compilation 72.11 level statements. 72.12 Sec. 75. Minnesota Statutes 1998, section 256B.0644, is 72.13 amended to read: 72.14 256B.0644 [PARTICIPATION REQUIRED FOR REIMBURSEMENT UNDER 72.15 OTHER STATE HEALTH CARE PROGRAMS.] 72.16 A vendor of medical care, as defined in section 256B.02, 72.17 subdivision 7, and a health maintenance organization, as defined 72.18 in chapter 62D, must participate as a provider or contractor in 72.19 the medical assistance program, general assistance medical care 72.20 program, and MinnesotaCare as a condition of participating as a 72.21 provider in health insurance plans and programs or contractor 72.22 for state employees established under section 43A.18, the public 72.23 employees insurance program under section 43A.316, for health 72.24 insurance plans offered to local statutory or home rule charter 72.25 city, county, and school district employees, the workers' 72.26 compensation system under section 176.135, and insurance plans 72.27 provided through the Minnesota comprehensive health association 72.28 under sections 62E.01 to62E.1662E.19. The limitations on 72.29 insurance plans offered to local government employees shall not 72.30 be applicable in geographic areas where provider participation 72.31 is limited by managed care contracts with the department of 72.32 human services. For providers other than health maintenance 72.33 organizations, participation in the medical assistance program 72.34 means that (1) the provider accepts new medical assistance, 72.35 general assistance medical care, and MinnesotaCare patients, (2) 72.36 for providers other than dental services providers, at least 20 73.1 percent of the provider's patients are covered by medical 73.2 assistance, general assistance medical care, and MinnesotaCare 73.3 as their primary source of coverage, or (3) for dental services 73.4 providers, at least ten percent of the provider's patients are 73.5 covered by medical assistance, general assistance medical care, 73.6 and MinnesotaCare as their primary source of coverage. The 73.7 commissioner shall establish participation requirements for 73.8 health maintenance organizations. The commissioner shall 73.9 provide lists of participating medical assistance providers on a 73.10 quarterly basis to the commissioner of employee relations, the 73.11 commissioner of labor and industry, and the commissioner of 73.12 commerce. Each of the commissioners shall develop and implement 73.13 procedures to exclude as participating providers in the program 73.14 or programs under their jurisdiction those providers who do not 73.15 participate in the medical assistance program. The commissioner 73.16 of employee relations shall implement this section through 73.17 contracts with participating health and dental carriers. 73.18 Sec. 76. [REPEALER.] 73.19 (a) Minnesota Statutes 1998, sections 60A.11, subdivision 73.20 24a; 60B.36; 60B.44, subdivision 3; 65A.29, subdivision 12; and 73.21 79A.04, subdivision 8, are repealed. 73.22 (b) Minnesota Rules, part 2780.0500, item C, is repealed. 73.23 Sec. 77. [EFFECTIVE DATES.] 73.24 Section 6 is effective the day following final enactment. 73.25 Sections 12 to 14 are effective the day following final 73.26 enactment and apply to plans of merger approved on or after that 73.27 date by the board of directors of the first of the constituent 73.28 corporations to grant such approval. Merging or consolidating 73.29 insurance corporations may, however, elect to have the changes 73.30 made by sections 12 to 14 not apply to a merger or consolidation 73.31 arising out of a joint agreement entered into prior to January 73.32 1, 2000.