3rd Engrossment - 81st Legislature (1999 - 2000) Posted on 12/15/2009 12:00am
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, subdivision 1a, and by adding a 1.9 subdivision; 60A.052, subdivision 2, and by adding a 1.10 subdivision; 60A.06, subdivisions 1 and 2; 60A.075, by 1.11 adding a subdivision; 60A.092, subdivisions 6 and 11; 1.12 60A.10, 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.276, subdivision 2; 61A.60, subdivision 1; 61B.19, 1.20 subdivision 3; 62A.04, subdivision 3; 62A.135, 1.21 subdivision 5; 62A.50, subdivision 3; 62A.61; 62A.65, 1.22 subdivision 5; 62B.04, subdivision 2; 62D.12, 1.23 subdivision 2; 62E.02, subdivision 1; 62E.05, 1.24 subdivision 1; 62E.09; 62E.13, subdivisions 6 and 8; 1.25 62E.14, subdivision 2; 62E.15, subdivision 2; 62I.07, 1.26 subdivision 1; 62L.02, subdivision 24; 62L.03, 1.27 subdivision 5; 62L.05, subdivision 5; 62L.14, 1.28 subdivision 7; 62Q.105, subdivision 1; 62Q.185; 1.29 62Q.30; 62S.01, subdivision 14; 62S.05, subdivision 2; 1.30 65A.01, subdivisions 1, 3, and by adding a 1.31 subdivision; 65A.27, subdivision 4; 65A.29, 1.32 subdivision 4; 65B.02, subdivision 2; 65B.44, 1.33 subdivision 1; 65B.48, subdivision 5; 72A.125, 1.34 subdivision 3; 72A.20, subdivision 29; 72B.04, 1.35 subdivision 10; 79A.01, subdivision 10, and by adding 1.36 a subdivision; 79A.02, subdivisions 1, 3, and 4; 1.37 79A.03, subdivisions 6, 7, 9, 10, and by adding a 1.38 subdivision; 79A.06, subdivision 5, and by adding a 1.39 subdivision; 79A.21, subdivision 2; 79A.23, 1.40 subdivisions 1 and 2; and 256B.0644; proposing coding 1.41 for new law in Minnesota Statutes, chapter 60B; 1.42 repealing Minnesota Statutes 1998, sections 60A.11, 1.43 subdivision 24a; 60B.36; 60B.44, subdivisions 3 and 5; 1.44 60K.08; 65A.29, subdivision 12; 62Q.30; and 79A.04, 1.45 subdivision 8; Minnesota Rules, part 2780.0500, item C. 2.1 BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF MINNESOTA: 2.2 Section 1. Minnesota Statutes 1998, section 60A.02, 2.3 subdivision 1a, is amended to read: 2.4 Subd. 1a. [ASSOCIATION OR ASSOCIATIONS.] (a) "Association" 2.5 or "associations" means an organized body of people who have 2.6 some interest in common and that has at the onset a minimum of 2.7 100 persons; is organized and maintained in good faith for 2.8 purposes other than that of obtaining insurance; and has a 2.9 constitution and bylaws which provide that: (1) the association 2.10 or associations hold regular meetings not less frequently than 2.11 annually to further purposes of the members; (2) except for 2.12 credit unions, the association or associations collect dues or 2.13 solicit contributions from members; (3) the members have voting 2.14 privileges and representation on the governing board and 2.15 committees, which provide the members with control of the 2.16 association including the purchase and administration of 2.17 insurance products offered to members; and (4) the members are 2.18 not, within the first 30 days of membership, directly solicited, 2.19 offered, or sold an insurance policy if the policy is available 2.20 as an association benefit. 2.21 (b) An association may apply to the commissioner for a 2.22 waiver of the 30-day waiting period to that association. The 2.23 commissioner may grant the waiver upon a finding ofallat least 2.24 three of the following: (1) the association is in full 2.25 compliance with this subdivision; (2) sanctions have not been 2.26 imposed against the association as a result of significant 2.27 disciplinary action by the commissioner;and(3) at least 80 2.28 percent of the association's income comes from dues, 2.29 contributions, or sources other than income from the sale of 2.30 insurance; or (4) the association has been organized and 2.31 maintained for at least ten years. 2.32 Sec. 2. Minnesota Statutes 1998, section 60A.02, is 2.33 amended by adding a subdivision to read: 2.34 Subd. 2b. [FILED.] In cases where a law requires documents 2.35 to be filed with the commissioner, the documents will be 2.36 considered filed when they are received by the department of 3.1 commerce. 3.2 Sec. 3. Minnesota Statutes 1998, section 60A.052, 3.3 subdivision 2, is amended to read: 3.4 Subd. 2. [SUSPENSION OR REVOCATION OF AUTHORITY OR 3.5 CENSURE.] If the commissioner determines that one of the 3.6 conditions listed in subdivision 1 exists, the commissioner may 3.7 issue an order requiring the insurance company to show cause why 3.8 any or all of the following should not occur: (1) revocation or 3.9 suspension of any or all certificates of authority granted to 3.10 the foreign or domestic insurance company or its agent; (2) 3.11 censuring of the insurance company;or(3) cancellation of all 3.12 or some of the company's insurance contracts then in force in 3.13 this state; or (4) the imposition of a civil penalty. The order 3.14 shall be calculated to give reasonable notice of the time and 3.15 place for hearing thereon, and shall state the reasons for the 3.16 entry of the order. All hearings shall be conducted in 3.17 accordance with chapter 14. The insurer may waive its right to 3.18 the hearing. If the insurer is under the supervision or control 3.19 of the insurance department of the insurer's state of domicile, 3.20 that insurance department, acting on behalf of the insurer, may 3.21 waive the insurer's right to the hearing. After the hearing, 3.22 the commissioner shall enter an order disposing of the matter as 3.23 the facts require. If the insurance company fails to appear at 3.24 a hearing after having been duly notified of it, the company 3.25 shall be considered in default, and the proceeding may be 3.26 determined against the company upon consideration of the order 3.27 to show cause, the allegations of which may be considered to be 3.28 true. 3.29 Sec. 4. Minnesota Statutes 1998, section 60A.052, is 3.30 amended by adding a subdivision to read: 3.31 Subd. 4a. [WITHDRAWAL OF INSURER FROM STATE.] No insurer 3.32 shall withdraw from this state until its direct liability to its 3.33 policyholders and obligees under all its insurance contracts 3.34 then in force in this state have been assumed by another 3.35 licensed insurer according to section 60A.09, subdivision 4a. 3.36 Sec. 5. Minnesota Statutes 1998, section 60A.06, 4.1 subdivision 1, is amended to read: 4.2 Subdivision 1. [STATUTORY LINES.] Insurance corporations 4.3 may be authorized to transact in any state or territory in the 4.4 United States, in the Dominion of Canada, and in foreign 4.5 countries, when specified in their charters or certificates of 4.6 incorporation, either as originally granted or as thereafter 4.7 amended, any of the following kinds of business, upon the stock 4.8 plan, or upon the mutual plan when the formation of such mutual 4.9 companies is otherwise authorized by law; and business trusts as 4.10 authorized by law of this state shall only be authorized to 4.11 transact in this state the following kind of business 4.12 hereinafter specified in clause (7) hereof when specified in 4.13 their "declaration of trust": 4.14 (1) To insure against loss or damage to property on land 4.15 and against loss of rents and rental values, leaseholds of 4.16 buildings, use and occupancy and direct or consequential loss or 4.17 damage caused by fire, smoke or smudge, water or other fluid or 4.18 substance, lightning, windstorm, tornado, cyclone, earthquake, 4.19 collapse and slippage, rain, hail, frost, snow, freeze, change 4.20 of temperature, weather or climatic conditions, excess or 4.21 deficiency of moisture, floods, the rising of waters, oceans, 4.22 lakes, rivers or their tributaries, bombardment, invasion, 4.23 insurrection, riot, civil war or commotion, military or usurped 4.24 power, electrical power interruption or electrical breakdown 4.25 from any cause, railroad equipment, motor vehicles or aircraft, 4.26 accidental injury to sprinklers, pumps, conduits or containers 4.27 or other apparatus erected for extinguishing fires, explosion, 4.28 whether fire ensues or not, except explosions on risks specified 4.29 in clause (3); provided, however, that there may be insured 4.30 hereunder the following: (a) explosion of any kind originating 4.31 outside the insured building or outside of the building 4.32 containing the property insured, (b) explosion of pressure 4.33 vessels which do not contain steam or which are not operated 4.34 with steam coils or steam jackets; and (c) risks under home 4.35 owners multiple peril policies; 4.36 (2)(a) To insure vessels, freight, goods, wares, 5.1 merchandise, specie, bullion, jewels, profits, commissions, bank 5.2 notes, bills of exchange, and other evidences of debt, bottomry 5.3 and respondentia interest, and every insurance appertaining to 5.4 or connected with risks of transportation and navigation on and 5.5 under water, on land or in the air; 5.6 (b) To insure all personal property floater risks; 5.7 (3) To insure against any loss from either direct or 5.8 indirect damage to any property or interest of the assured or of 5.9 another, resulting from the explosion of or injury to (a) any 5.10 boiler, heater or other fired pressure vessel; (b) any unfired 5.11 pressure vessel; (c) pipes or containers connected with any of 5.12 said boilers or vessels; (d) any engine, turbine, compressor, 5.13 pump or wheel; (e) any apparatus generating, transmitting or 5.14 using electricity; (f) any other machinery or apparatus 5.15 connected with or operated by any of the previously named 5.16 boilers, vessels or machines; and including the incidental power 5.17 to make inspections of and to issue certificates of inspection 5.18 upon, any such boilers, apparatus, and machinery, whether 5.19 insured or otherwise; 5.20 (4) To make contracts of life and endowment insurance, to 5.21 grant, purchase, or dispose of annuities or endowments of any 5.22 kind; and, in such contracts, or in contracts supplemental 5.23 thereto to provide for additional benefits in event of death of 5.24 the insured by accidental means, total permanent disability of 5.25 the insured, or specific dismemberment or disablement suffered 5.26 by the insured, or acceleration of life or endowment or annuity 5.27 benefits in advance of the time they would otherwise be payable; 5.28 (5)(a) To insure against loss or damage by the sickness, 5.29 bodily injury or death by accident of the assured or dependents, 5.30 or those for whom the assured has assumed a portion of the 5.31 liability for the loss or damage, including liability for 5.32 payment of medical care costs or for provision of medical care; 5.33 (b) To insure against the legal liability, whether imposed 5.34 by common law or by statute or assumed by contract, of employers 5.35 for the death or disablement of, or injury to, employees; 5.36 (6) To guarantee the fidelity of persons in fiduciary 6.1 positions, public or private, or to act as surety on official 6.2 and other bonds, and for the performance of official or other 6.3 obligations; 6.4 (7) To insure owners and others interested in real estate 6.5 against loss or damage, by reason of defective titles, 6.6 encumbrances, or otherwise; 6.7 (8) To insure against loss or damage by breakage of glass, 6.8 located or in transit; 6.9 (9)(a) To insure against loss by burglary, theft, or 6.10 forgery; 6.11 (b) To insure against loss of or damage to moneys, coins, 6.12 bullion, securities, notes, drafts, acceptance or any other 6.13 valuable paper or document, resulting from any cause, except 6.14 while in the custody or possession of and being transported by 6.15 any carrier for hire or in the mail; 6.16 (c) To insure individuals by means of an all risk type of 6.17 policy commonly known as the "personal property floater" against 6.18 any kind and all kinds of loss of or damage to, or loss of use 6.19 of, any personal property other than merchandise; 6.20 (d) To insure against loss or damage by water or other 6.21 fluid or substance; 6.22 (10) To insure against loss from death of domestic animals 6.23 and to furnish veterinary service; 6.24 (11) To guarantee merchants and those engaged in business, 6.25 and giving credit, from loss by reason of giving credit to those 6.26 dealing with them; this shall be known as credit insurance; 6.27 (12) To insure against loss or damage to automobiles or 6.28 other vehicles or aircraft and their contents, by collision, 6.29 fire, burglary, or theft, and other perils of operation, and 6.30 against liability for damage to persons, or property of others, 6.31 by collision with such vehicles or aircraft, and to insure 6.32 against any loss or hazard incident to the ownership, operation, 6.33 or use of motor or other vehicles or aircraft; 6.34 (13) To insure against liability for loss or damage to the 6.35 property or person of another caused by the insured or by those 6.36 for whom the insured is responsible, including insurance of 7.1 medical, hospital, surgical, funeral or other related expense of 7.2 the insured or other person injured, irrespective of legal 7.3 liability of the insured, when issued with or supplemental to 7.4 policies of liability insurance; 7.5 (14) To insure against loss of or damage to any property of 7.6 the insured, resulting from the ownership, maintenance or use of 7.7 elevators, except loss or damage by fire; 7.8 (15) To insure against attorneys fees, court costs, witness 7.9 fees and incidental expenses incurred in connection with the use 7.10 of the professional services of attorneys at law. 7.11 Sec. 6. Minnesota Statutes 1998, section 60A.06, 7.12 subdivision 2, is amended to read: 7.13 Subd. 2. [OTHER LINES.] Any insurance corporation or 7.14 association heretofore or hereafter licensed to transact within 7.15 the state any of the kinds or classes of insurance specifically 7.16 authorized under the laws of this state may, when authorized by 7.17 its charter, transact within and without the state any lines of 7.18 insurance germane to its charter powers and not specifically 7.19 provided for under the laws of this state when these lines, or 7.20 combinations of lines, of insurance are not in violation of the 7.21 constitution or the laws of the state and, in the opinion of the 7.22 commissioner, not contrary to public policy, provided the 7.23 company or association shall first obtain authority of the 7.24 commissioner and meetsuch requirements as tocapital or 7.25 surplus, or both,and other solvency and policy form 7.26 requirements as the commissioner shall prescribe. These 7.27 additional hazards may be insured against by attachment to, or 7.28 in extension of, any policy which the company may be authorized 7.29 to issue under the laws of this state. This subdivision shall 7.30 apply to companies operating upon the stock or mutual plan, 7.31 reciprocal or interinsurance exchanges. 7.32 Sec. 7. Minnesota Statutes 1998, section 60A.075, is 7.33 amended by adding a subdivision to read: 7.34 Subd. 18. [POST CONVERSION ACQUISITION.] Prior to and for 7.35 a period of five years following the date when the distribution 7.36 of consideration to the eligible members in exchange for their 8.1 membership interests is completed under a plan of conversion 8.2 according to this section, no person other than the reorganized 8.3 company shall directly or indirectly acquire or offer to acquire 8.4 in any manner ownership or beneficial ownership of ten percent 8.5 or more of any class of voting security of the reorganized 8.6 company, or of any affiliate of the reorganized company which 8.7 controls, directly or indirectly, a majority of the voting power 8.8 of the reorganized company, without the prior approval of the 8.9 commissioner. For the purposes of this subdivision, the terms 8.10 "affiliate" and "person" have the meanings given in section 8.11 60D.15, and the term "reorganized company" includes any 8.12 successor of the reorganized company. 8.13 Sec. 8. Minnesota Statutes 1998, section 60A.092, 8.14 subdivision 6, is amended to read: 8.15 Subd. 6. [SINGLE ASSUMING INSURER; TRUST FUND 8.16 REQUIREMENTS.] In the case of a single assuming insurer, the 8.17 trust shall consist of a trusteed account representing the 8.18 assuming insurer's liabilities attributable to business written 8.19 in the United States and, in addition,the assuming insurer8.20shall maintaina trusteed surplus of not less than $20,000,000 8.21 or an additional amount as the commissioner considers necessary. 8.22 The assuming insurer shall maintainaits surplus as regards 8.23 policyholders in an amount not less than $50,000,000 for 8.24 long-tail casualty reinsurers as provided under subdivision 3, 8.25 paragraph (a), clause (5). 8.26 Sec. 9. Minnesota Statutes 1998, section 60A.092, 8.27 subdivision 11, is amended to read: 8.28 Subd. 11. [REINSURANCE AGREEMENT REQUIREMENTS.] (a) If the 8.29 assuming insurer is not licensed or accredited to transact 8.30 insurance or reinsurance in this state, the credit authorized 8.31 under subdivisions 4 and 5 shall not be allowed unless the 8.32 assuming insurer agrees in the reinsurance agreements: 8.33 (1) that in the event of the failure of the assuming 8.34 insurer to perform its obligations under the terms of the 8.35 reinsurance agreement, the assuming insurer shall submit to the 8.36 jurisdiction of any court of competent jurisdiction in any state 9.1 of the United States, comply with all requirements necessary to 9.2 give the court jurisdiction, and abide by the final decision of 9.3 the court or of any appellate court in the event of an appeal; 9.4 and 9.5 (2) to designate the commissioner or a designated attorney 9.6 as its true and lawful attorney upon whom may be served any 9.7 lawful process in any action, suit, or proceeding instituted by 9.8 or on behalf of the ceding company. 9.9 (b) Paragraph (a) is not intended to conflict with or 9.10 override the obligation of the parties to a reinsurance 9.11 agreement to arbitrate their disputes, if an obligation to do so 9.12 is created in the agreement. 9.13 (c) Credit will not be granted, nor an asset or a reduction 9.14 from liability allowed, to a ceding insurer for reinsurance 9.15 effected with assuming insurers meeting the requirements of 9.16 subdivision 2, 3, 4, 5, 6, or 7, unless the reinsurance contract 9.17 provides that in the event of the insolvency of the ceding 9.18 insurer, the reinsurance will be payable under the contract 9.19 without diminution because of that insolvency. 9.20 Payments by the reinsurer must be made directly to the 9.21 ceding insurer or its receiver, except where the contract of 9.22 insurance or reinsurance specifically provides for another payee 9.23 for the reinsurance in the event of insolvency of the ceding 9.24 insurer according to the applicable requirements of statutes, 9.25 rules, or orders of the domiciliary state of the ceding insurer. 9.26 Sec. 10. Minnesota Statutes 1998, section 60A.10, 9.27 subdivision 1, is amended to read: 9.28 Subdivision 1. [DOMESTIC COMPANIES.] (1) [DEPOSIT AS 9.29 SECURITY FOR ALL POLICYHOLDERS REQUIRED.] No company in this 9.30 state, other than farmers' mutual, or real estate title 9.31 insurance companies, shall do business in this state unless it 9.32 has on deposit with the commissioner, for the protection of both 9.33 its resident and nonresident policyholders, securities to an 9.34 amount, the actual market value of which, exclusive of interest, 9.35 shall never be less than$200,000 until July 1, 1986, $300,0009.36until July 1, 1987, $400,000 until July 1, 1988, and$500,000on10.1and after July 1, 1988or one-half the applicable financial 10.2 requirement set forth in section 60A.07, whichever is less. The 10.3 securities shall be retained under the control of the 10.4 commissioner as long as any policies of the depositing company 10.5 remain in force. 10.6 (2) [SECURITIES DEFINED.] For the purpose of this 10.7 subdivision, the word "securities" means bonds or other 10.8 obligations of, or bonds or other obligations insured or 10.9 guaranteed by, the United States, any state of the United 10.10 States, any municipality of this state, or any agency or 10.11 instrumentality of the foregoing. 10.12 (3) [PROTECTION OF DEPOSIT FROM LEVY.] No judgment 10.13 creditor or other claimant may levy upon any securities held on 10.14 deposit with, or for the account of, the commissioner. Upon the 10.15 entry of an order by a court of competent jurisdiction for the 10.16 rehabilitation, liquidation or conservation of any depositing 10.17 company as provided in chapter 60B, that company's deposit 10.18 together with any accrued income thereon shall be transferred to 10.19 the commissioner as rehabilitator, liquidator, or conservator. 10.20 Sec. 11. Minnesota Statutes 1998, section 60A.111, 10.21 subdivision 1, is amended to read: 10.22 Subdivision 1. [REPORT.] Annually, or more frequently if 10.23 determined by the commissioner to be necessary for the 10.24 protection of policyholders, each foreign, alienand domestic 10.25 insurance company other than a life insurance company shall 10.26 report to the commissioner the ratio of its qualified assets to 10.27 its required liabilities. 10.28 Sec. 12. Minnesota Statutes 1998, section 60A.13, 10.29 subdivision 1, is amended to read: 10.30 Subdivision 1. [ANNUAL STATEMENTS REQUIRED.] Every 10.31 insurance company, including fraternal benefit societies, and 10.32 reciprocal exchanges, doing business in this state, shall 10.33transmit tofile with the commissioner, annually, on or before 10.34 March 1, the appropriate verified National Association of 10.35 Insurance Commissioners' annual statement blank, prepared in 10.36 accordance with the association's instructions handbook and 11.1 following those accounting procedures and practices prescribed 11.2 by the association's accounting practices and procedures manual, 11.3 unless the commissioner requires or finds another method of 11.4 valuation reasonable under the circumstances. Another method of 11.5 valuation permitted by the commissioner must be at least as 11.6 conservative as those prescribed in the association's manual. 11.7 All companies required to file an annual statement under this 11.8 subdivisionmustmay also be required to file with the 11.9 commissioner and the National Association of Insurance 11.10 Commissioners a copy of their annual statementon computer11.11diskettein an electronic form prescribed by the commissioner. 11.12 All Minnesota domestic insurers required to file annual 11.13 statements under this subdivision must also file quarterly 11.14 statements with the commissioner for the first, second, and 11.15 third calendar quarter on or before 45 days after the end of the 11.16 applicable quarter, prepared in accordance with the 11.17 association's instruction handbook. All companies required to 11.18 file quarterly statements under this subdivisionmust also file11.19a copy of their quarterly statement on computer diskettemay 11.20 also be required to file the quarterly statements with the 11.21 commissioner and the National Association of Insurance 11.22 Commissioners in an electronic form prescribed by the 11.23 commissioner. In addition, the commissioner may require the 11.24 filing of any other information determined to be reasonably 11.25 necessary for the continual enforcement of these laws. The 11.26 statement may be limited to the insurer's business and condition 11.27 in the United States unless the commissioner finds that the 11.28 business conducted outside the United States may detrimentally 11.29 affect the interests of policyholders in this state. The 11.30 statements shall also contain a verified schedule showing all 11.31 details required by law for assessment and taxation. The 11.32 statement or schedules shall be in the form and shall contain 11.33 all matters the commissioner may prescribe, and it may be varied 11.34 as to different types of insurers so as to elicit a true exhibit 11.35 of the condition of each insurer. 11.36 Sec. 13. Minnesota Statutes 1998, section 60A.16, 12.1 subdivision 2, is amended to read: 12.2 Subd. 2. [PROCEDURE TO BE FOLLOWED.] (1) [AGREEMENTPLAN 12.3 OF MERGER.] The merger or consolidation of insurance 12.4 corporations can be effected only as a result of ajoint12.5agreement entered intoplan of merger adopted, approved, and 12.6 filed as follows: 12.7 (a)The board of directors of each of such insurance12.8corporations as desire to merge or consolidate may, by majority12.9vote, enter into a joint agreement signed by such directors and12.10prescribingA resolution containing the plan of merger shall be 12.11 approved by the affirmative vote of a majority of the directors 12.12 of the board of each constituent corporation. The plan of 12.13 merger shall prescribe the terms and conditions of merger or 12.14 consolidation, and the mode of carrying the same into effect, 12.15 with such other details and provisions as are deemed necessary. 12.16 In the case of merging or consolidating stock insurance 12.17 corporations or stock and mutual insurance corporations, 12.18 suchjoint agreementplan of merger may prescribe that stock of 12.19 one or more of such corporations shall be converted, in whole or 12.20 in part, into stock or other securities of a corporation which 12.21 is not a merging or consolidating corporation or into cash. 12.22 (b) Theagreementplan of merger, or a summary of the plan 12.23 approved by the commissioner, shall be submitted to the 12.24 respective shareholders or members, as the case may be, of 12.25 eachof the merging or consolidating insurance12.26corporationsconstituent corporation, for consideration at a 12.27 regular meeting or at a special meeting duly called for the 12.28 purpose of considering and acting upon theagreement, and12.29ifplan. Written notice of the meeting, which shall state that 12.30 the purpose of the meeting is to consider the proposed plan of 12.31 merger, shall be given to each shareholder or member entitled to 12.32 vote upon the plan of merger not less than 30 nor more than 60 12.33 days before the meeting. The plan of merger must be approved by 12.34 the affirmative vote of the holders of two-thirds of the voting 12.35 power of the shareholders or members present or represented at 12.36 the meeting of eachsuch insuranceconstituent corporationshall13.1vote for the adoption of the agreement, then that fact shall be13.2certified on the agreement by the secretary of each insurance13.3corporation, and the agreement so adopted and certified shall be13.4signed and acknowledged by the president and secretary of each13.5of said insurance corporations; provided, however, that in the 13.6 case of a merger, except onewherebyin which any shares of the 13.7 surviving insurance corporation are to be converted into shares 13.8 or other securities of another corporation or into cash, the 13.9 agreement need not be submitted to the shareholders or members 13.10 of that one of the insurance corporations into which it has been 13.11 agreed the others shall be merged, but the agreement may be13.12signed and acknowledged by the president and secretary of such13.13insurance corporation at the direction of the board of13.14directors. Upon receiving the approval of the shareholders or 13.15 members of each constituent corporation, articles of merger 13.16 shall be prepared that contain the plan of merger and a 13.17 statement that the plan has been approved by each corporation 13.18 under this section. 13.19 (c) Theagreement so adopted, certified and acknowledged13.20 articles of merger shall be delivered to the commissioner of 13.21 commerce, who, if theagreementplan of merger is reasonable and 13.22 if the provisions thereof providing for any transfer of assets 13.23 and assumption of liabilities are fair and equitable to the 13.24 claimants and policyholders, shall place a certificate of 13.25 approval on theagreementarticles of merger and shall file 13.26 theagreementarticles in the commissioner's office, anda copy13.27 copies of theagreementarticles, certified by the commissioner 13.28 of commerce, shall be filed for record in the office of the 13.29 secretary of state andin the offices of the county recorders of13.30the counties in this state in which any of the corporate parties13.31to the agreement have their home or principal offices, and of13.32any counties in which any of the corporate parties have land,13.33title to which will be transferred as a result of the merger or13.34consolidationdelivered to the surviving corporation or its 13.35 legal representative. 13.36 (2) [ARTICLES OF INCORPORATION OF NEW COMPANY.] (a) If the 14.1joint agreementplan of merger is for a consolidation into a new 14.2 insurance corporation to be formed under any law or laws of this 14.3 state, articles of incorporation for such new insurance 14.4 corporation shall be prepared and delivered to the commissioner 14.5 of commerce together with theagreementarticles of merger as 14.6 provided in clause (1) hereof. 14.7 (b) Such articles shall be prepared, executed, approved, 14.8 filed and recorded in the form and manner prescribed in, or 14.9 applicable to, the particular law or laws under which the new 14.10 insurance corporation is to be formed. 14.11 (3) [ABANDONMENT.] A proposed merger or consolidation may 14.12 be abandoned at any time prior to approval by the commissioner 14.13 under the provision for abandonment, if any, set forth in the 14.14 plan of merger. 14.15 (4) [MUTUAL INSURANCE HOLDING COMPANIES.] In the case of a 14.16 merger of two mutual insurance holding companies under section 14.17 60A.077, subdivision 2, paragraph (c), the procedures set forth 14.18 in subdivisions 1, 2, 3, 4, and 6 of this section shall apply, 14.19 subject to the following: 14.20 (a) the plan of merger must be fair and reasonable to the 14.21 members of each constituent corporation; 14.22 (b) no member of either constituent corporation on the 14.23 effective date of the merger shall lose membership solely on 14.24 account of the merger; 14.25 (c) membership and voting rights in each respective 14.26 constituent corporation for purposes of the meeting of the 14.27 members held to consider the plan of merger shall be determined 14.28 in accordance with the articles and bylaws of that constituent 14.29 corporation as of a record date established in the plan of 14.30 merger; and 14.31 (d) the commissioner may require changes to the plan or 14.32 require certain undertakings from the surviving corporation to 14.33 assure compliance with this clause. 14.34 Sec. 14. Minnesota Statutes 1998, section 60A.16, 14.35 subdivision 3, is amended to read: 14.36 Subd. 3. [CONSUMMATION OF MERGER.] (1) A merger of one or 15.1 more insurance corporations into a domestic insurance 15.2 corporation shall be effective when thejoint agreement has15.3 articles of merger have been approved and filed in the office of 15.4 the commissioner of commerce, or at a later date specified in 15.5 the articles of merger. 15.6 (2) A consolidation of insurance corporations into a new 15.7 domestic insurance corporation shall be effective when thejoint15.8agreementarticles of merger and the new articles of 15.9 incorporation have been approved and filed in the office of the 15.10 commissioner of commerce, or at a later date as specified in the 15.11 plan of merger. 15.12 (3) A merger or consolidation of one or more domestic 15.13 insurance corporations into a foreign insurance corporation 15.14 shall be effective according to the provisions of law of the 15.15 jurisdiction in whichsuchthe foreign insurance corporation was 15.16 formed, but not until thejoint agreement has been adopted,15.17certified and acknowledged, and copies thereof approved and15.18 articles of merger have been filed in accordance with 15.19 subdivision 2, clause (1). 15.20 Sec. 15. Minnesota Statutes 1998, section 60A.16, 15.21 subdivision 4, is amended to read: 15.22 Subd. 4. [EFFECT OF MERGER OR CONSOLIDATION.] Upon the 15.23 consummation of the merger or consolidation as provided in 15.24 subdivision 3, the effect ofsuchthe merger or consolidation 15.25 shall be: 15.26 (1) That the several corporate parties to thejoint15.27agreementplan of merger shall be one insurance corporation, 15.28 which shall be 15.29 (a) in the case of a merger, that one of the constituent 15.30 insurance corporations into which it has been agreed the others 15.31 shall be merged and which shall survive the merger for that 15.32 purpose, or 15.33 (b) in the case of a consolidation, the new insurance 15.34 corporation into which it has been agreed the others shall be 15.35 consolidated; 15.36 (2) The separate existence of the constituent insurance 16.1 corporations shall cease, except that of the surviving insurance 16.2 corporation in the case of a merger; 16.3 (3) The surviving or new insurance corporation, as the case 16.4 may be, shall possess all the rights, privileges and franchises 16.5 possessed by each of the former insurance corporations so merged 16.6 or consolidated except that such surviving or new corporation 16.7 shall not thereby acquire authority to engage in any insurance 16.8 business or exercise any right which an insurance corporation 16.9 may not be formed under the laws of this state to engage in or 16.10 exercise; 16.11 (4) All the property, real, personal and mixed, of each of 16.12 the constituent insurance corporations, and all debts due on 16.13 whatever account to any of them, including without limitation 16.14 subscriptions for shares, premiums on existing policies, and 16.15 other choses in action belonging to any of them, shall be taken 16.16 and be deemed to be transferred to and invested in such 16.17 surviving or new insurance corporation, as the case may be, 16.18 without further act or deed; 16.19 (5) The surviving or new insurance corporation shall be 16.20 responsible for all the liabilities and obligations of each of 16.21 the insurance corporations merged or consolidated, in accordance 16.22 with the terms of the agreement for merger or consolidation; but 16.23 the rights of the creditors of the constituent insurance 16.24 corporations, or of any persons dealing with such insurance 16.25 corporations shall not be impaired by such merger or 16.26 consolidation, and any claim existing or action or proceeding 16.27 pending by or against any of the constituent insurance 16.28 corporations may be prosecuted to judgment as if the merger or 16.29 consolidation had not taken place, or the surviving or new 16.30 insurance corporation may be proceeded against or substituted in 16.31 its place. 16.32 Sec. 16. Minnesota Statutes 1998, section 60A.19, 16.33 subdivision 1, is amended to read: 16.34 Subdivision 1. [REQUIREMENTS.] Any insurance company of 16.35 another state, upon compliance with all laws governing such 16.36 corporations in general and with the foregoing provisions so far 17.1 as applicable and the following requirements, shall be admitted 17.2 to do business in this state: 17.3 (1) It shall deposit with the commissioner a certified copy 17.4 of its charter or certificate of incorporation and its bylaws, 17.5 and a statement showing its financial condition and business, 17.6 verified by its president and secretary or other proper 17.7 officers; 17.8 (2) It shall furnish the commissioner satisfactory evidence 17.9 of its legal organization and authority to transact the proposed 17.10 business and that its capital, assets, deposits with the proper 17.11 official of its own state, amount insured, number of risks, 17.12 reserve and other securities, and guaranties for protection of 17.13 policyholders, creditors, and the public, comply with those 17.14 required of like domestic companies; 17.15 (3) By a duly executed instrument filed in the office of 17.16 the commissioner, it shall appoint the commissioner and 17.17 successors in office its lawful attorneys in fact and therein 17.18 irrevocably agree that legal process in any action or proceeding 17.19 against it may be served upon them with the same force and 17.20 effect as if personally served upon it, so long as any of its 17.21 liability exists in this state; 17.22 (4) It shall appoint, as its agents in this state, 17.23 residents thereof, and obtain from the commissioner a license to 17.24 transact business; 17.25 (5) Regardless of what lines of business an insurer of 17.26 another state is seeking to write in this state, the lines of 17.27 business it is licensed to write in its state of incorporation 17.28 shall be the basis for establishing the financial requirements 17.29 it must meet for admission in this state or for continuance of 17.30 its authority to write business in this state; 17.31 (6) No insurer of another state shall be admitted to do 17.32 business in this state for a line of business that it is not 17.33 authorized to write in its state of incorporation, unless the 17.34 statutes of that state prohibit all insurers from writing that 17.35 line of business. 17.36 Sec. 17. Minnesota Statutes 1998, section 60A.32, is 18.1 amended to read: 18.2 60A.32 [RATE FILING FOR CROP HAIL INSURANCE.] 18.3 An insurer issuing policies of insurance against crop 18.4 damage by hail in this state shall file its insurance rates with 18.5 the commissioner. The insurance rates must be filed before 18.6March 1February 1 of the year in which a policy is issued. 18.7 Sec. 18. Minnesota Statutes 1998, section 60B.21, 18.8 subdivision 2, is amended to read: 18.9 Subd. 2. [FIXING OF RIGHTS.] Upon issuance of the order, 18.10 the rights and liabilities of any such insurer and of its 18.11 creditors, policyholders, shareholders, members, and all other 18.12 persons interested in its estate are fixed as of the date of 18.13 filing of the petition for liquidation, except as provided in 18.14 sections 60B.22, 60B.25, clause (22), and 60B.39. 18.15 Sec. 19. Minnesota Statutes 1998, section 60B.25, is 18.16 amended to read: 18.17 60B.25 [POWERS OF LIQUIDATOR.] 18.18 The liquidator shall report to the court monthly, or at 18.19 other intervals specified by the court, on the progress of the 18.20 liquidation in whatever detail the court orders. The liquidator 18.21 shall coordinate activities with those of each guaranty 18.22 association having an interest in the liquidation and shall 18.23 submit a report detailing how coordination will be achieved to 18.24 the court for its approval within 30 days following appointment, 18.25 or within the time which the court, in its discretion, may 18.26 establish. Subject to the court's control, the liquidator may: 18.27 (1) Appoint a special deputy to act under sections 60B.01 18.28 to 60B.61 and determine the deputy's compensation. The special 18.29 deputy shall have all powers of the liquidator granted by this 18.30 section. The special deputy shall serve at the pleasure of the 18.31 liquidator. 18.32 (2) Appoint or engage employees and agents, actuaries, 18.33 accountants, appraisers, consultants, and other personnel deemed 18.34 necessary to assist in the liquidation without regard to chapter 18.35 14. 18.36 (3) Fix the compensation of persons under clause (2), 19.1 subject to the control of the court. 19.2 (4) Defray all expenses of taking possession of, 19.3 conserving, conducting, liquidating, disposing of, or otherwise 19.4 dealing with the business and property of the insurer. If the 19.5 property of the insurer does not contain sufficient cash or 19.6 liquid assets to defray the costs incurred, the liquidator may 19.7 advance the costs so incurred out of the appropriation made to 19.8 the department of commerce. Any amounts so paid shall be deemed 19.9 expense of administration and shall be repaid for the credit of 19.10 the department of commerce out of the first available money of 19.11 the insurer. 19.12 (5) Hold hearings, subpoena witnesses and compel their 19.13 attendance, administer oaths, examine any person under oath and 19.14 compel any person to subscribe to testimony after it has been 19.15 correctly reduced to writing, and in connection therewith 19.16 require the production of any books, papers, records, or other 19.17 documents which the liquidator deems relevant to the inquiry. 19.18 (6) Collect all debts and money due and claims belonging to 19.19 the insurer, wherever located, and for this purpose institute 19.20 timely action in other jurisdictions, in order to forestall 19.21 garnishment and attachment proceedings against such debts; do 19.22 such other acts as are necessary or expedient to collect, 19.23 conserve, or protect its assets or property, including sell, 19.24 compound, compromise, or assign for purposes of collection, upon 19.25 such terms and conditions as the liquidator deems best, any bad 19.26 or doubtful debts; and pursue any creditor's remedies available 19.27 to enforce claims. 19.28 (7) Conduct public and private sales of the property of the 19.29 insurer in a manner prescribed by the court. 19.30 (8) Use assets of the estate to transfer coverage 19.31 obligations to a solvent assuming insurer, if the transfer can 19.32 be arranged without prejudice to applicable priorities under 19.33 section 60B.44. 19.34 (9) Acquire, hypothecate, encumber, lease, improve, sell, 19.35 transfer, abandon, or otherwise dispose of or deal with any 19.36 property of the insurer at its market value or upon such terms 20.1 and conditions as are fair and reasonable, except that no 20.2 transaction involving property the market value of which exceeds 20.3 $10,000 shall be concluded without express permission of the 20.4 court. The liquidator may also execute, acknowledge, and 20.5 deliver any deeds, assignments, releases, and other instruments 20.6 necessary or proper to effectuate any sale of property or other 20.7 transaction in connection with the liquidation. In cases where 20.8 real property sold by the liquidator is located other than in 20.9 the county where the liquidation is pending, the liquidator 20.10 shall cause to be filed with the county recorder for the county 20.11 in which the property is located a certified copy of the order 20.12 of appointment. 20.13 (10) Borrow money on the security of the insurer's assets 20.14 or without security and execute and deliver all documents 20.15 necessary to that transaction for the purpose of facilitating 20.16 the liquidation. 20.17 (11) Enter into such contracts as are necessary to carry 20.18 out the order to liquidate, and affirm or disavow any contracts 20.19 to which the insurer is a party. 20.20 (12) Continue to prosecute and institute in the name of the 20.21 insurer or in the liquidator's own name any suits and other 20.22 legal proceedings, in this state or elsewhere, and abandon the 20.23 prosecution of claims the liquidator deems unprofitable to 20.24 pursue further. If the insurer is dissolved under section 20.25 60B.23, the liquidator may apply to any court in this state or 20.26 elsewhere for leave to be substituted for the insurer as 20.27 plaintiff. 20.28 (13) Prosecute any action which may exist in behalf of the 20.29 creditors, members, policyholders, or shareholders of the 20.30 insurer against any officer of the insurer, or any other person. 20.31 (14) Remove any records and property of the insurer to the 20.32 offices of the commissioner or to such other place as is 20.33 convenient for the purposes of efficient and orderly execution 20.34 of the liquidation. 20.35 (15) Deposit in one or more banks in this state such sums 20.36 as are required for meeting current administration expenses and 21.1 dividend distributions. 21.2 (16) Deposit with the state board of investment for 21.3 investment pursuant to section 11A.24, all sums not currently 21.4 needed, unless the court orders otherwise. 21.5 (17) File any necessary documents for record in the office 21.6 of any county recorder or record office in this state or 21.7 elsewhere where property of the insurer is located. 21.8 (18) Assert all defenses available to the insurer as 21.9 against third persons, including statutes of limitations, 21.10 statutes of frauds, and the defense of usury. A waiver of any 21.11 defense by the insurer after a petition for liquidation has been 21.12 filed shall not bind the liquidator. 21.13 (19) Exercise and enforce all the rights, remedies, and 21.14 powers of any creditor, shareholder, policyholder, or member, 21.15 including any power to avoid any transfer or lien that may be 21.16 given by law and that is not included within sections 60B.30 and 21.17 60B.32. 21.18 (20) Intervene in any proceeding wherever instituted that 21.19 might lead to the appointment of a receiver or trustee, and act 21.20 as the receiver or trustee whenever the appointment is offered. 21.21 (21) Enter into agreements with any receiver or 21.22 commissioner of any other state relating to the rehabilitation, 21.23 liquidation, conservation, or dissolution of an insurer doing 21.24 business in both states. 21.25 (22) Collect from an insured any unpaid earned premium or 21.26 retrospectively rated premium due the insurer based on the 21.27 termination of coverage under section 60B.22. Premium on surety 21.28 business is considered earned at inception if no policy term can 21.29 be determined. All other premium will be considered earned and 21.30 will be prorated over the determined policy term, regardless of 21.31 any provision in the bond, guaranty, contract, or other 21.32 agreement. 21.33(22)(23) Exercise all powers now held or hereafter 21.34 conferred upon receivers by the laws of this state not 21.35 inconsistent with sections 60B.01 to 60B.61. 21.36(23)(24) The enumeration in this section of the powers and 22.1 authority of the liquidator is not a limitation, nor does it 22.2 exclude the right to do such other acts not herein specifically 22.3 enumerated or otherwise provided for as are necessary or 22.4 expedient for the accomplishment of or in aid of the purpose of 22.5 liquidation. 22.6(24)(25) The power of the liquidator of a health 22.7 maintenance organization includes the power to transfer coverage 22.8 obligations to a solvent and voluntary health maintenance 22.9 organization, insurer, or nonprofit health service plan, and to 22.10 assign provider contracts of the insolvent health maintenance 22.11 organization to an assuming health maintenance organization, 22.12 insurer, or nonprofit health service plan permitted to enter 22.13 into such agreements. The liquidator is not required to meet 22.14 the notice requirements of section 62D.121. Transferees of 22.15 coverage obligations or provider contracts shall have no 22.16 liability to creditors or obligees of the health maintenance 22.17 organization except those liabilities expressly assumed. 22.18 Sec. 20. Minnesota Statutes 1998, section 60B.26, 22.19 subdivision 1, is amended to read: 22.20 Subdivision 1. [NOTICE REQUIRED.] (a) The liquidator shall 22.21 give notice of the liquidation order as soon as possible by 22.22 first class mail and either by telegram or telephone to the 22.23 commissioner of commerce of each jurisdiction in which the 22.24 insurer is licensed to do business, by first class mail and by 22.25 telephone to the department of labor and industry of this state 22.26 if the insurer is or has been an insurer of workers' 22.27 compensation, by first class mail within this state and by 22.28 airmail outside this state to all agents of the insurer having a 22.29 duty undersection 60B.27this chapter, by first class mail, if 22.30 the insurer is a surety company to every district court judge 22.31 exercising probate jurisdiction and the court administrator of 22.32 all courts of record in this state and upon receipt of such 22.33 notice it shall be the duty of those judges and court 22.34 administrators to notify and require every executor, 22.35 administrator, guardian, trustee, or other fiduciary having 22.36 filed a bond on which such company is surety, to forthwith file 23.1 a new bond with new sureties, and by first class mail within 23.2 this state and by airmail outside this state at the last known 23.3 address to all persons known or reasonably expected to have 23.4 claims against the insurer, including all policyholders. The 23.5 liquidator also shall publish a notice three consecutive times 23.6 in a newspaper of general circulation in the county in which the 23.7 liquidation is pending or in Ramsey county, the last publication 23.8 to be not less than three months before the earliest deadline 23.9 specified in the notice under subdivision 2. 23.10 (b) Notice to agents shall inform them of their duties 23.11 undersection 60B.27this chapter and inform them what 23.12 information they must communicate to policyholders. Notice to 23.13 policyholders shall include notice of impairment and termination 23.14 of coverage under section 60B.22. When it is applicable, notice 23.15 to policyholders shall include (1) notice of withdrawal of the 23.16 insurer from the defense of any case in which the policyholder 23.17 is interested, and (2) notice of the right to file a claim under 23.18 section 60B.40, subdivision 2, and (3) information about the23.19existence of section 79.28, relating to certain unpaid workers'23.20compensation awards. 23.21 (c) Within 15 days of the date of entry of the order, the 23.22 liquidator shall report to the court what notice has been 23.23 given. The court may order such additional notice as it deems 23.24 appropriate. 23.25 Sec. 21. [60B.365] [REINSURER'S LIABILITY.] 23.26 Subdivision 1. [GENERALLY.] The amount recoverable by the 23.27 liquidator from reinsurers must not be reduced as a result of 23.28 the delinquency proceedings, regardless of any provision in the 23.29 reinsurance contract or other agreement, except as provided in 23.30 subdivision 2. 23.31 Subd. 2. [PAYMENTS.] Payments by the reinsurer must be 23.32 made directly to the ceding insurer or its receiver, except 23.33 where the contract of insurance or reinsurance specifically 23.34 provides for another payee for the reinsurance in the event of 23.35 insolvency of the ceding insurer according to the applicable 23.36 requirements of statutes, rules, or orders of the domiciliary 24.1 state of the ceding insurer. The receiver and reinsurer are 24.2 entitled to recover from a person who unsuccessfully makes a 24.3 claim directly against the reinsurer the receiver's attorneys' 24.4 fees and expenses incurred in preventing any collection by the 24.5 person. 24.6 Sec. 22. Minnesota Statutes 1998, section 60B.39, 24.7 subdivision 2, is amended to read: 24.8 Subd. 2. [CLAIMS UNDER TERMINATED POLICIES.] Any claim 24.9 that would have become absolute if there had been no termination 24.10 of coverage under section 60B.22, and which was not covered by 24.11 insurance acquired to replace the terminated coverage, shall be 24.12 allowed as if the coverage had remained in effect, unless at 24.13 least ten days before the insured event occurred either the 24.14 claimant had actual notice of the termination or notice was 24.15 mailed to the claimant as prescribed by section 60B.26, 24.16 subdivision 1, or60B.27, subdivision 1this chapter. If 24.17 allowed the claim shall share in distributions under section 24.18 60B.44, subdivision 9. 24.19 Sec. 23. Minnesota Statutes 1998, section 60B.44, 24.20 subdivision 4, is amended to read: 24.21 Subd. 4. [LOSS CLAIMS; INCLUDING CLAIMS NOT COVERED BY A 24.22 GUARANTY ASSOCIATION.] All claims under policies or contracts of 24.23 coverage for losses incurred including third party claims, and 24.24 all claims against the insurer for liability for bodily injury 24.25 or for injury to or destruction of tangible property which are 24.26 not under policies or contracts. All claims under life 24.27 insurance and annuity policies, whether for death proceeds, 24.28 annuity proceeds, or investment values, shall be treated as loss 24.29 claims. That portion of any loss for which indemnification is 24.30 provided by other benefits or advantages recovered or 24.31 recoverable by the claimant shall not be included in this class, 24.32 other than benefits or advantages recovered or recoverable in 24.33 discharge of familial obligations of support or by way of 24.34 succession at death or as proceeds of life insurance, or as 24.35 gratuities. No payment made by an employer to an employee shall 24.36 be treated as a gratuity. Claims not covered by a guaranty 25.1 association are loss claims.If any portion of a claim is25.2covered by a reinsurance treaty or similar contractual25.3obligation, that claim shall be entitled to a pro rata share,25.4based upon the relationship the claim amount bears to all claims25.5payable under the treaty or contract, of the proceeds received25.6under that treaty or contractual obligation.25.7Claims receiving pro rata payments shall not, as to any25.8remaining unpaid portion of their claim, be treated in a25.9different manner than if no such payment had been received.25.10 Sec. 24. Minnesota Statutes 1998, section 60B.44, is 25.11 amended by adding a subdivision to read: 25.12 Subd. 4a. [UNEARNED PREMIUMS.] Claims under nonassessable 25.13 policies or contracts of coverage for unearned premiums or 25.14 subscription rates or other refunds. 25.15 Sec. 25. Minnesota Statutes 1998, section 60B.44, is 25.16 amended by adding a subdivision to read: 25.17 Subd. 4b. [FEDERAL GOVERNMENT.] Claims of the federal 25.18 government. 25.19 Sec. 26. Minnesota Statutes 1998, section 60B.44, is 25.20 amended by adding a subdivision to read: 25.21 Subd. 4c. [WAGES.] (a) Debts due to employees for services 25.22 performed, not to exceed $1,000 to each employee, that have been 25.23 earned within one year before the filing of the petition for 25.24 liquidation, subject to payment of applicable federal, state, or 25.25 local government taxes required by law to be withheld from the 25.26 debts. Officers are not entitled to the benefit of this 25.27 priority. In cases where there are no claims and no potential 25.28 claims of the federal government in the estate, these claims 25.29 will have priority over claims in subdivision 4. 25.30 (b) The priority in paragraph (a) is in lieu of other 25.31 similar priority authorized by law as to wages or compensation 25.32 of employees. 25.33 Sec. 27. Minnesota Statutes 1998, section 60B.44, 25.34 subdivision 6, is amended to read: 25.35 Subd. 6. [RESIDUAL CLASSIFICATION.] All other claims 25.36 including claims ofthe federal orany state or local 26.1 government, not falling within other classes under this 26.2 section. Claims, including those of any governmental body for a 26.3 penalty or forfeiture, shall be allowed in this class only to 26.4 the extent of the pecuniary loss sustained from the act, 26.5 transaction, or proceeding out of which the penalty or 26.6 forfeiture arose, with reasonable and actual costs occasioned 26.7 thereby. The remainder of such claims shall be postponed to the 26.8 class of claims under subdivision 9. 26.9 Sec. 28. Minnesota Statutes 1998, section 60D.20, 26.10 subdivision 2, is amended to read: 26.11 Subd. 2. [DIVIDENDS AND OTHER DISTRIBUTIONS.] (a) Subject 26.12 to the limitations and requirements of this subdivision, the 26.13 board of directors of any domestic insurer within an insurance 26.14 holding company system may authorize and cause the insurer to 26.15 declare and pay any dividend or distribution to its shareholders 26.16 as the directors deem prudent from the earned surplus of the 26.17 insurer. An insurer's earned surplus, also known as unassigned 26.18 funds, shall be determined in accordance with the accounting 26.19 procedures and practices governing preparation of its annual 26.20 statement, minus 25 percent of earned surplus attributable to26.21net unrealized capital gains. Dividends which are paid from 26.22 sources other than an insurer's earned surplus as of the end of 26.23 the immediately preceding quarter for which the insurer has 26.24 filed a quarterly or annual statement as appropriate, or are 26.25 extraordinary dividends or distributions may be paid only as 26.26 provided in paragraphs (d), (e), and (f). 26.27 (b) The insurer shall notify the commissioner within five 26.28 business days following declaration of a dividend declared 26.29 pursuant to paragraph (a) and at least ten days prior to its 26.30 payment. The commissioner shall promptly consider the 26.31 notification filed pursuant to this paragraph, taking into 26.32 consideration the factors described in subdivision 4. 26.33 (c) The commissioner shall review at least annually the 26.34 dividends paid by an insurer pursuant to paragraph (a) for the 26.35 purpose of determining if the dividends are reasonable based 26.36 upon (1) the adequacy of the level of surplus as regards 27.1 policyholders remaining after the dividend payments, and (2) the 27.2 quality of the insurer's earnings and extent to which the 27.3 reported earnings include extraordinary items, such as surplus 27.4 relief reinsurance transactions and reserve destrengthening. 27.5 (d) No domestic insurer shall pay any extraordinary 27.6 dividend or make any other extraordinary distribution to its 27.7 shareholders until: (1) 30 days after the commissioner has 27.8 received notice of the declaration of it and has not within the 27.9 period disapproved the payment; or (2) the commissioner has 27.10 approved the payment within the 30-day period. 27.11 (e) For purposes of this section, an extraordinary dividend 27.12 or distribution includes any dividend or distribution of cash or 27.13 other property, whose fair market value together with that of 27.14 other dividends or distributions made within the preceding 12 27.15 months exceeds the greater of (1) ten percent of the insurer's 27.16 surplus as regards policyholdersas of the 31st day of December27.17next precedingon December 31 of the preceding year; or (2) the 27.18 net gain from operations of the insurer, if the insurer is a 27.19 life insurer, or the net income, if the insurer is not a life 27.20 insurer, not including realized capital gains, for the 12-month 27.21 period endingthe 31st day of December next precedingon 27.22 December 31 of the preceding year, but does not include pro rata 27.23 distributions of any class of the insurer's own securities. 27.24 (f) Notwithstanding any other provision of law, an insurer 27.25 may declare an extraordinary dividend or distribution that is 27.26 conditional upon the commissioner's approval, and the 27.27 declaration shall confer no rights upon shareholders until: (1) 27.28 the commissioner has approved the payment of such a dividend or 27.29 distribution; or (2) the commissioner has not disapproved the 27.30 payment within the 30-day period referred to above. 27.31 Sec. 29. Minnesota Statutes 1998, section 60K.02, 27.32 subdivision 1, is amended to read: 27.33 Subdivision 1. [REQUIREMENT.] No person shall act or 27.34 assume to act as an insurance agent in the solicitation or 27.35 procurement of applications for insurance, nor in the sale of 27.36 insurance or policies of insurance, nor in any manner aid as an 28.1 insurance agent in the negotiation of insurance by or with an 28.2 insurer, including resident agents or reciprocal or 28.3 interinsurance exchanges and fraternal benefit societies, until 28.4 that person obtains from the commissioner a license for that 28.5 purpose. The license must specifically set forth the name of 28.6 the person authorized to act as an agent and the class or 28.7 classes of insurance for which that person is authorized to 28.8 solicit or countersign policies. An insurance agent may qualify 28.9 for a licensein the following classesto sell: (1) life and 28.10 health;and(2) life and health and variable contracts; (3) 28.11 property and casualty; (4) travel baggage; (5) bail bonds; (6) 28.12 title insurance; and (7) farm property and liability. 28.13 No insurer shall appoint or reappoint a natural person, 28.14 partnership, or corporation to act as an insurance agent on its 28.15 behalf until that natural person, partnership, or corporation 28.16 obtains a license as an insurance agent. 28.17 Sec. 30. Minnesota Statutes 1998, section 60K.03, 28.18 subdivision 2, is amended to read: 28.19 Subd. 2. [RESIDENT AGENT.] The commissioner shall issue a 28.20 resident insurance agent's license to a qualified resident of 28.21 this state as follows: 28.22 (a) A person may qualify as a resident of this state if 28.23 that person resides in this state or the principal place of 28.24 business of that person is maintained in this state. 28.25 Application for a license claiming residency in this state for 28.26 licensing purposes constitutes an election of residency in this 28.27 state. A license issued upon an application claiming residency 28.28 in this state is void if the licensee, while holding a resident 28.29 license in this state, also holds, or makes application for, a 28.30 resident license in, or thereafter claims to be a resident of, 28.31 any other state or jurisdiction or if the licensee ceases to be 28.32 a resident of this state; provided, however, if the applicant is 28.33 a resident of a community or trade area, the border of which is 28.34 contiguous with the state line of this state, the applicant may 28.35 qualify for a resident license in this state and at the same 28.36 time hold a resident license from the contiguous state. 29.1 (b) The commissioner shall subject each applicant who is a 29.2 natural person to a written examination as to the applicant's 29.3 competence to act as an insurance agent. The examination must 29.4 be held at a reasonable time and place designated by the 29.5 commissioner. 29.6 (c) The examination shall be approved for use by the 29.7 commissioner and shall test the applicant's knowledge of the 29.8 lines of insurance, policies, and transactions to be handled 29.9 under the class of license applied for, of the duties and 29.10 responsibilities of the licensee, and pertinent insurance laws 29.11 of this state. 29.12 (d) The examination shall be given only after the applicant 29.13 has completed a program of classroom studies in a school, which 29.14 shall not include a school sponsored by, offered by, or 29.15 affiliated with an insurance company or its agents; except that 29.16 this limitation does not preclude a bona fide professional 29.17 association of agents, not acting on behalf of an insurer, from 29.18 offering courses. The course of study shall consist of 30 hours 29.19 of classroom study devoted to the basic fundamentals of 29.20 insurance for those seeking a Minnesota license for the first 29.21 time, 15 hours devoted to specific life and health topics for 29.22 those seeking a life and health license, and 15 hours devoted to 29.23 specific property and casualty topics for those seeking a 29.24 property and casualty license. Of the 30 hours of required 29.25 classroom study, at least three hours must be devoted to state 29.26 insurance laws, regulations, and rules. The program of studies 29.27 or study course shall have been approved by the commissioner in 29.28 order to qualify under this paragraph. If the applicant has 29.29 been previously licensed for the particular line of insurance in 29.30 the state of Minnesota, the requirement of a program of studies 29.31 or a study course shall be waived. A certification of 29.32 compliance by the organization offering the course shall 29.33 accompany the applicant's license application. This program of 29.34 studies in a school or a study course shall not apply to farm 29.35 property perils and farm liability applicants, or to agents 29.36 writing such other lines of insurance as the commissioner may 30.1 exempt from examination by order. 30.2 (e) The applicant must pass the examination with a grade 30.3 determined by the commissioner to indicate satisfactory 30.4 knowledge and understanding of the class or classes of insurance 30.5 for which the applicant seeks qualification. The commissioner 30.6 shall inform the applicant as to whether or not the applicant 30.7 has passed. Examination results are valid for a period of three 30.8 years from the date of the examination. 30.9 (f) An applicant who has failed to pass an examination may 30.10 take subsequent examinations. Examination fees for subsequent 30.11 examinations shall not be waived. 30.12 (g) Any applicant for a license covering the same class or 30.13 classes of insurance for which the applicant was licensed under 30.14 a similar license in this state, other than a temporary license, 30.15 within the three years preceding the date of the application 30.16 shall be exempt from the requirement of a written examination, 30.17 unless the previous license was revoked or suspended by the 30.18 commissioner. An applicant whose license is not renewed under 30.19 section 60K.12 is exempt from the requirement of a written 30.20 examination. 30.21 Sec. 31. Minnesota Statutes 1998, section 60K.03, 30.22 subdivision 3, is amended to read: 30.23 Subd. 3. [NONRESIDENT AGENT.] The commissioner shall issue 30.24 a nonresident insurance agent's license to a qualified person 30.25 who is a resident of another state or country as follows: 30.26 (a) A person may qualify for a license under this section 30.27 as a nonresident only if that person holds a license in another 30.28 state, province of Canada, or other foreign country which, in 30.29 the opinion of the commissioner, qualifies that person for the 30.30 same activity as that for which a license is sought. 30.31 (b) The commissioner shall not issue a license to a 30.32 nonresident applicant until that person files with the 30.33 commissioner a designation of the commissioner and the 30.34 commissioner's successors in office as the applicant's true and 30.35 lawful attorney upon whom may be served all lawful process in an 30.36 action, suit, or proceeding instituted by or on behalf of an 31.1 interested person arising out of the applicant's insurance 31.2 business in this state. This designation constitutes an 31.3 agreement that this service of process is of the same legal 31.4 force and validity as personal service of process in this state 31.5 upon that applicant. 31.6 Service of process upon a licensee in an action or 31.7 proceeding begun in a court of competent jurisdiction of this 31.8 state may be made in compliance with section 45.028, subdivision 31.9 2. 31.10 (c) A nonresident agent shall be held to the same knowledge 31.11 of state insurance law, regulations, and rules as that required 31.12 of a resident agent according to subdivision 2, paragraph (d). 31.13(c)(d) A nonresident license terminates automatically when 31.14 the resident license for that class of license in the state, 31.15 province, or foreign country in which the licensee is a resident 31.16 is terminated for any reason. 31.17 Sec. 32. Minnesota Statutes 1998, section 60K.19, 31.18 subdivision 7, is amended to read: 31.19 Subd. 7. [CRITERIA FOR COURSE ACCREDITATION.] (a) The 31.20 commissioner may accredit a course only to the extent it is 31.21 designed to impart substantive and procedural knowledge of the 31.22 insurance field. The burden of demonstrating that the course 31.23 satisfies this requirement is on the individual or organization 31.24 seeking accreditation. The commissioner shall approve any 31.25 educational program approved by Minnesota Continuing Legal 31.26 Education relating to the insurance field. The commissioner is 31.27 authorized to establish a procedure for renewal of course 31.28 accreditation. 31.29 (b) The commissioner shall approve or disapprove 31.30 professional designation examinations that are recommended for 31.31 approval by the advisory task force. In order for an agent to 31.32 receive full continuing education credit for a professional 31.33 designation examination, the agent must pass the examination. 31.34 An agent may not receive credit for classroom instruction 31.35 preparing for the professional designation examination and also 31.36 receive continuing education credit for passing the professional 32.1 designation examination. 32.2 (c) The commissioner may not accredit a course: 32.3 (1) that is designed to prepare students for a license 32.4 examination; 32.5 (2) in mechanical office or business skills, including 32.6 typing, speedreading, use of calculators, or other machines or 32.7 equipment; 32.8 (3) in sales promotion, including meetings held in 32.9 conjunction with the general business of the licensed agent; or 32.10 (4) in motivation, the art of selling, psychology, or time 32.11 management; or. 32.12(5) which can be completed by the student at home or32.13outside the classroom without the supervision of an instructor32.14approved by the department of commerce, except that home-study32.15courses may be accredited by the commissioner if the student is32.16a nonresident agent residing in a state which is not contiguous32.17to Minnesota.32.18 Sec. 33. Minnesota Statutes 1998, section 60K.19, 32.19 subdivision 8, is amended to read: 32.20 Subd. 8. [MINIMUM EDUCATION REQUIREMENT.] Each person 32.21 subject to this section shall complete a minimum of 30 credit 32.22 hours of courses accredited by the commissioner during each 32.23 24-month licensing periodafter the expiration of the person's32.24initial licensing period, two hours of which must be devoted to 32.25 state law, regulations, and rules applicable to the line or 32.26 lines of insurance for which the agent is licensed.At least 1532.27of the 30 credit hours must be completed during the first 1232.28months of the 24-month licensing period.Any person whose 32.29 initial licensing period extends more than six months shall 32.30 complete 15 hours of courses accredited by the commissioner 32.31 during the initial license period. Any person teaching or 32.32 lecturing at an accredited course qualifies for 1-1/2 times the 32.33 number of credit hours that would be granted to a person 32.34 completing the accredited course. No more than 15 credit hours 32.35 per licensing period may be credited to a person for courses 32.36 sponsored by, offered by, or affiliated with an insurance 33.1 company or its agents. Courses sponsored by, offered by, or 33.2 affiliated with an insurance company or agent may restrict its 33.3 students to agents of the company or agency. 33.4 Sec. 34. Minnesota Statutes 1998, section 61A.276, 33.5 subdivision 2, is amended to read: 33.6 Subd. 2. [ISSUANCE.] The funding agreements may be issued 33.7 to: (1) individuals; or (2) persons authorized by a state or 33.8 foreign country to engage in an insurance business or 33.9 subsidiaries or affiliates of these persons; or (3) entities 33.10 other than individuals and other than persons authorized to 33.11 engage in an insurance business, and subsidiaries and affiliates 33.12 of these persons, for the following purposes: (i) to fund 33.13 benefits under any employee benefit plan as defined in the 33.14 Employee Retirement Income Security Act of 1974, as now or 33.15 hereafter amended, maintained in the United States or in a 33.16 foreign country; (ii) to fund the activities of any organization 33.17 exempt from taxation under section 501(c) of the Internal 33.18 Revenue Code of 1986, as amended through December 31, 1992, or 33.19 of any similar organization in any foreign country; (iii) to 33.20 fund any program of any state, foreign country or political 33.21 subdivision thereof, or any agency or instrumentality thereof; 33.22or(iv) to fund any agreement providing for periodic payments in 33.23 satisfaction of a claim; or (v) to fund a program of a financial 33.24 institution limited to banks, thrifts, credit unions, and 33.25 investment companies registered under the Investment Company Act 33.26 of 1940. No funding agreement shall be issued in an amount less 33.27 than $1,000,000. 33.28 Sec. 35. Minnesota Statutes 1998, section 61A.60, 33.29 subdivision 1, is amended to read: 33.30 Subdivision 1. [NOTICE FORM; AGENT SALES.] The notice 33.31 required where sections 61A.53 to 61A.60 refer to this 33.32 subdivision is as follows: 33.33 IMPORTANT NOTICE 33.34 33.35 DEFINITION REPLACEMENT is any transaction where, in connection 33.36 with the purchase of New Insurance or a New 34.1 Annuity, you LAPSE, SURRENDER, CONVERT to 34.2 Paid-up Insurance, Place on Extended Term, 34.3 or BORROW all or part of the policy loan 34.4 values on an existing insurance policy or an 34.5 annuity. (See reverse side for DEFINITIONS.) 34.8 IF YOU In connection with the purchase of this insurance 34.9 INTEND TO or annuity, if you have REPLACED or intend to 34.10 REPLACE REPLACE your present life insurance coverage 34.11 COVERAGE or annuity(ies), you should be certain that you 34.12 understand all the relevant factors involved. 34.14 You should BE AWARE that you may be required to 34.15 provide EVIDENCE OF INSURABILITY and 34.17 (1) If your HEALTH condition has CHANGED since 34.18 the application was taken on your present 34.19 policies, you may be required to pay ADDITIONAL 34.20 PREMIUMS under the NEW POLICY, or be DENIED 34.21 coverage. 34.23 (2) Your present occupation or activities may not 34.24 be covered or could require additional premiums. 34.26 (3) The INCONTESTABLE and SUICIDE CLAUSE will 34.27 begin anew in a new policy. This could RESULT 34.28 in a CLAIM under the new policy BEING DENIED 34.29 that would otherwise have been paid. 34.31 (4) Current lawDOESMAY NOT REQUIRE your present 34.32 insurer(s) to REFUND any premiums. 34.34 (5) It is to your advantage to OBTAIN INFORMATION 34.35 regarding your existing policies or annuity 34.36 contracts [FROM THE INSURER OR AGENT FROM WHOM 35.1 YOU PURCHASED THE POLICY OR ANNUITY CONTRACT.] 35.3 (If you are purchasing an annuity, clauses (1), 35.4 (2), and (3) above would not apply to the new 35.5 annuity contract.) 35.7 THE INSURANCE OR ANNUITY I INTEND TO PURCHASE FROM 35.8 _______________________________________INSURANCE CO. 35.9 MAY REPLACE OR ALTER EXISTING LIFE INSURANCE 35.10 POLICY(IES) OR ANNUITY CONTRACT(S). 35.12 The following policy(ies) or annuity contract(s) 35.13 may be replaced as a result of this transaction: 35.15 Insurer Insured 35.16 as it appears on the policy as it appears on the policy 35.17 or contract or contract 35.18 ______________________________ ______________________________ 35.19 ______________________________ ______________________________ 35.20 ______________________________ ______________________________ 35.21 ______________________________ ______________________________ 35.22 Policy or contract number Insured birthdate 35.23 ______________________________ ______________________________ 35.24 ______________________________ ______________________________ 35.25 ______________________________ ______________________________ 35.26 ______________________________ ______________________________ 35.27 The proposed policy or contract is: 35.28 ______________________________________ $_______________ 35.29 type of policy- or contract-generic name face amount 35.31 ________________________________________________________ 35.32 signature of applicant date 35.34 ________________________________________________________ 35.35 address of applicant city state 35.37 I certify that this form was given to and completed by 35.39 ________________________________________________________ 35.40 (applicant-please print or type) 35.42 prior to taking an application and that I am leaving a 35.43 signed copy for the applicant. 36.1 ___________________________________________________ 36.2 agent's signature date 36.4 ___________________________________________________ 36.5 address 36.7 ___________________________________________________ 36.8 city state 36.9 Note important statement on reverse side 36.10 Sec. 36. Minnesota Statutes 1998, section 61B.19, 36.11 subdivision 3, is amended to read: 36.12 Subd. 3. [LIMITATION OF COVERAGE.] Sections 61B.18 to 36.13 61B.32 do not provide coverage for: 36.14 (1) a portion of a policy or contract under which the 36.15 investment risk is borne by the policy or contract holder; 36.16 (2) a policy or contract of reinsurance, unless assumption 36.17 certificates have been issued and the insured has consented to 36.18 the assumption as provided under section 60A.09, subdivision 4a; 36.19 (3) a policy or contract issued by an assessment benefit 36.20 association operating under section 61A.39, or a fraternal 36.21 benefit society operating under chapter 64B; 36.22 (4) any obligation to nonresident participants of a covered 36.23 retirement plan or to the plan sponsor, employer, trustee, or 36.24 other party who owns the contract; in these cases, the 36.25 association is obligated under this chapter only to participants 36.26 in a covered plan who are residents of the state of Minnesota on 36.27 the date of impairment or insolvency; 36.28 (5) an annuity contract issued in connection with and for 36.29 the purpose of funding a structured settlement of a liability 36.30 claim, where the liability insurer remains liable; 36.31 (6) a portion of an unallocated annuity contract which is 36.32 not issued to or in connection with a specific employee, union, 36.33 or association of natural persons benefit plan or a governmental 36.34 lottery, including but not limited to, a contract issued to, or 36.35 purchased at the direction of, any governmental bonding 36.36 authority, such as a municipal guaranteed investment contract; 36.37 (7) a plan or program of an employer, association, or 36.38 similar entity to provide life, health, or annuity benefits to 36.39 its employees or members to the extent that the plan or program 37.1 is self-funded or uninsured, including benefits payable by an 37.2 employer, association, or similar entity under: 37.3 (i) a multiple employer welfare arrangement as defined in 37.4 the Employee Retirement Income Security Act of 1974, United 37.5 States Code, title 29, section 1002(40)(A), as amended; 37.6 (ii) a minimum premium group insurance plan; 37.7 (iii) a stop-loss group insurance plan; or 37.8 (iv) an administrative services only contract; 37.9 (8) any policy or contract issued by an insurer at a time 37.10 when it was not licensed or did not have a certificate of 37.11 authority to issue the policy or contract in this state; 37.12 (9) an unallocated annuity contract issued to an employee 37.13 benefit plan protected under the federal Pension Benefit 37.14 Guaranty Corporation;and37.15 (10) a portion of a policy or contract to the extent that 37.16 it provides dividends or experience rating credits except to the 37.17 extent the dividends or experience rating credits have actually 37.18 become due and payable or have been credited to the policy or 37.19 contract before the date of impairment or insolvency, or 37.20 provides that a fee or allowance be paid to a person, including 37.21 the policy or contract holder, in connection with the service 37.22 to, or administration of, the policy or contract.; and 37.23 (11) a contractual agreement that establishes the member 37.24 insurer's obligations to provide a book value accounting 37.25 guaranty for defined contribution benefit plan participants by 37.26 reference to a portfolio of assets that is owned by the benefit 37.27 plan or its trustee, which in each case is not an affiliate of 37.28 the member insurer. 37.29 Sec. 37. Minnesota Statutes 1998, section 62A.04, 37.30 subdivision 3, is amended to read: 37.31 Subd. 3. [OPTIONAL PROVISIONS.] Except as provided in 37.32 subdivision 4, no such policy delivered or issued for delivery 37.33 to any person in this state shall contain provisions respecting 37.34 the matters set forth below unless such provisions are in the 37.35 words in which the same appear in this section. The insurer 37.36 may, at its option, use in lieu of any such provision a 38.1 corresponding provision of different wording approved by the 38.2 commissioner which is not less favorable in any respect to the 38.3 insured or the beneficiary. Any such provision contained in the 38.4 policy shall be preceded individually by the appropriate caption 38.5 appearing in this subdivision or, at the option of the insurer, 38.6 by such appropriate individual or group captions or subcaptions 38.7 as the commissioner may approve. 38.8 (1) A provision as follows: 38.9 CHANGE OF OCCUPATION: If the insured be injured or 38.10 contract sickness after having changed occupations to one 38.11 classified by the insurer as more hazardous than that stated in 38.12 this policy or while doing for compensation anything pertaining 38.13 to an occupation so classified, the insurer will pay only such 38.14 portion of the indemnities provided in this policy as the 38.15 premiums paid would have purchased at the rates and within the 38.16 limits fixed by the insurer for such more hazardous occupation. 38.17 If the insured changes occupations to one classified by the 38.18 insurer as less hazardous than that stated in this policy, the 38.19 insurer, upon receipt of proof of such change of occupation will 38.20 reduce the premium rate accordingly, and will return the excess 38.21 pro rata unearned premium from the date of change of occupation 38.22 or from the policy anniversary date immediately preceding 38.23 receipt of such proof, whichever is the more recent. In 38.24 applying this provision, the classification of occupational risk 38.25 and the premium rates shall be such as have been last filed by 38.26 the insurer prior to the occurrence of the loss for which the 38.27 insurer is liable or prior to date of proof of change in 38.28 occupation with the state official having supervision of 38.29 insurance in the state where the insured resided at the time 38.30 this policy was issued; but if such filing was not required, 38.31 then the classification of occupational risk and the premium 38.32 rates shall be those last made effective by the insurer in such 38.33 state prior to the occurrence of the loss or prior to the date 38.34 of proof of change of occupation. 38.35 (2) A provision as follows: 38.36 MISSTATEMENT OF AGE: If the age of the insured has been 39.1 misstated, all amounts payable under this policy shall be such 39.2 as the premium paid would have purchased at the correct age. 39.3 (3) A provision as follows: 39.4 OTHER INSURANCE IN THIS INSURER: If an accident or 39.5 sickness or accident and sickness policy or policies previously 39.6 issued by the insurer to the insured be in force concurrently 39.7 herewith, making the aggregate indemnity for ..... (insert type 39.8 of coverage or coverages) in excess of $..... (insert maximum 39.9 limit of indemnity or indemnities) the excess insurance shall be 39.10 void and all premiums paid for such excess shall be returned to 39.11 the insured or to the insured's estate, or, in lieu thereof: 39.12 Insurance effective at any one time on the insured under a 39.13 like policy or policies in this insurer is limited to the one 39.14 such policy elected by the insured, or the insured's beneficiary 39.15 or estate, as the case may be, and the insurer will return all 39.16 premiums paid for all other such policies. 39.17 (4) A provision as follows: 39.18 INSURANCE WITH OTHER INSURERS: If there be other valid 39.19 coverage, not with this insurer, providing benefits for the same 39.20 loss on a provision of service basis or on an expense incurred 39.21 basis and of which this insurer has not been given written 39.22 notice prior to the occurrence or commencement of loss, the only 39.23 liability under any expense incurred coverage of this policy 39.24 shall be for such proportion of the loss as the amount which 39.25 would otherwise have been payable hereunder plus the total of 39.26 the like amounts under all such other valid coverages for the 39.27 same loss of which this insurer had notice bears to the total 39.28 like amounts under all valid coverages for such loss, and for 39.29 the return of such portion of the premiums paid as shall exceed 39.30 the pro rata portion for the amount so determined. For the 39.31 purpose of applying this provision when other coverage is on a 39.32 provision of service basis, the "like amount" of such other 39.33 coverage shall be taken as the amount which the services 39.34 rendered would have cost in the absence of such coverage. 39.35 If the foregoing policy provision is included in a policy 39.36 which also contains the next following policy provision there 40.1 shall be added to the caption of the foregoing provision the 40.2 phrase "EXPENSE INCURRED BENEFITS." The insurer may, at its 40.3 option, include in this provision a definition of "other valid 40.4 coverage," approved as to form by the commissioner, which 40.5 definition shall be limited in subject matter to coverage 40.6 provided by organizations subject to regulation by insurance law 40.7 or by insurance authorities of this or any other state of the 40.8 United States or any province of Canada, and by hospital or 40.9 medical service organizations, and to any other coverage the 40.10 inclusion of which may be approved by the commissioner. In the 40.11 absence of such definition such term shall not include group 40.12 insurance, automobile medical payments insurance, or coverage 40.13 provided by hospital or medical service organizations or by 40.14 union welfare plans or employer or employee benefit 40.15 organizations. For the purpose of applying the foregoing policy 40.16 provision with respect to any insured, any amount of benefit 40.17 provided for such insured pursuant to any compulsory benefit 40.18 statute (including any workers' compensation or employer's 40.19 liability statute) whether provided by a governmental agency or 40.20 otherwise shall in all cases be deemed to be "other valid 40.21 coverage" of which the insurer has had notice. In applying the 40.22 foregoing policy provision no third party liability coverage 40.23 shall be included as "other valid coverage." 40.24 (5) A provision as follows: 40.25 INSURANCE WITH OTHER INSURERS: If there be other valid 40.26 coverage, not with this insurer, providing benefits for the same 40.27 loss on other than an expense incurred basis and of which this 40.28 insurer has not been given written notice prior to the 40.29 occurrence or commencement of loss, the only liability for such 40.30 benefits under this policy shall be for such proportion of the 40.31 indemnities otherwise provided hereunder for such loss as the 40.32 like indemnities of which the insurer had notice (including the 40.33 indemnities under this policy) bear to the total amount of all 40.34 like indemnities for such loss, and for the return of such 40.35 portion of the premium paid as shall exceed the pro rata portion 40.36 for the indemnities thus determined. 41.1 If the foregoing policy provision is included in a policy 41.2 which also contains the next preceding policy provision there 41.3 shall be added to the caption of the foregoing provision the 41.4 phrase -- "OTHER BENEFITS." The insurer may, at its option, 41.5 include in this provision a definition of "other valid 41.6 coverage," approved as to form by the commissioner, which 41.7 definition shall be limited in subject matter to coverage 41.8 provided by organizations subject to regulation by insurance law 41.9 or by insurance authorities of this or any other state of the 41.10 United States or any province of Canada, and to any other 41.11 coverage the inclusion of which may be approved by the 41.12 commissioner. In the absence of such definition such term shall 41.13 not include group insurance, or benefits provided by union 41.14 welfare plans or by employer or employee benefit organizations. 41.15 For the purpose of applying the foregoing policy provision with 41.16 respect to any insured, any amount of benefit provided for such 41.17 insured pursuant to any compulsory benefit statute (including 41.18 any workers' compensation or employer's liability statute) 41.19 whether provided by a governmental agency or otherwise shall in 41.20 all cases be deemed to be "other valid coverage" of which the 41.21 insurer has had notice. In applying the foregoing policy 41.22 provision no third party liability coverage shall be included as 41.23 "other valid coverage." 41.24 (6) A provision as follows: 41.25 RELATION OF EARNINGS TO INSURANCE: If the total monthly 41.26 amount of loss of time benefits promised for the same loss under 41.27 all valid loss of time coverage upon the insured, whether 41.28 payable on a weekly or monthly basis, shall exceed the monthly 41.29 earnings of the insured at the time disability commenced or the 41.30 insured's average monthly earnings for the period of two years 41.31 immediately preceding a disability for which claim is made, 41.32 whichever is the greater, the insurer will be liable only for 41.33 such proportionate amount of such benefits under this policy as 41.34 the amount of such monthly earnings or such average monthly 41.35 earnings of the insured bears to the total amount of monthly 41.36 benefits for the same loss under all such coverage upon the 42.1 insured at the time such disability commences and for the return 42.2 of such part of the premiums paid during such two years as shall 42.3 exceed the pro rata amount of the premiums for the benefits 42.4 actually paid hereunder; but this shall not operate to reduce 42.5 the total monthly amount of benefits payable under all such 42.6 coverage upon the insured below the sum of $200 or the sum of 42.7 the monthly benefits specified in such coverages, whichever is 42.8 the lesser, nor shall it operate to reduce benefits other than 42.9 those payable for loss of time. 42.10 The foregoing policy provision may be inserted only in a 42.11 policy which the insured has the right to continue in force 42.12 subject to its terms by the timely payment of premiums (1) until 42.13 at least age 50, or, (2) in the case of a policy issued after 42.14 age 44, for at least five years from its date of issue. The 42.15 insurer may, at its option, include in this provision a 42.16 definition of "valid loss of time coverage," approved as to form 42.17 by the commissioner, which definition shall be limited in 42.18 subject matter to coverage provided by governmental agencies or 42.19 by organizations subject to regulation by insurance law or by 42.20 insurance authorities of this or any other state of the United 42.21 States or any province of Canada, or to any other coverage the 42.22 inclusion of which may be approved by the commissioner or any 42.23 combination of such coverages. In the absence of such 42.24 definition such term shall not include any coverage provided for 42.25 such insured pursuant to any compulsory benefit statute 42.26 (including any workers' compensation or employer's liability 42.27 statute), or benefits provided by union welfare plans or by 42.28 employer or employee benefit organizations. 42.29 (7) A provision as follows: 42.30 UNPAID PREMIUM: Upon the payment of a claim under this 42.31 policy, any premium then due and unpaid or covered by any note 42.32 or written order may be deducted therefrom. 42.33 (8) A provision as follows: 42.34 CANCELLATION: The insurer may cancel this policy at any 42.35 time by written notice delivered to the insured or mailed to the 42.36 insured's last address as shown by the records of the insurer, 43.1 stating when, not less than five days thereafter, such 43.2 cancellation shall be effective; and after the policy has been 43.3 continued beyond its original term the insured may cancel this 43.4 policy at any time by written notice delivered or mailed to the 43.5 insurer, effective upon receipt or on such later date as may be 43.6 specified in such notice. In the event of cancellation, the 43.7 insurer will return promptly the unearned portion of any premium 43.8 paid.IfRegardless of whether it is the insurer or the insured 43.9 who cancels,the earned premium shall be computed by the use of43.10the short-rate table last filed with the state official having43.11supervision of insurance in the state where the insured resided43.12when the policy was issued. If the insurer cancels,the earned 43.13 premium shall be computed pro rata, unless the mode of payment 43.14 is monthly or less, or if the unearned amount is for less than 43.15 one month. Cancellation shall be without prejudice to any claim 43.16 originating prior to the effective date of cancellation. 43.17 (9) A provision as follows: 43.18 CONFORMITY WITH STATE STATUTES: Any provision of this 43.19 policy which, on its effective date, is in conflict with the 43.20 statutes of the state in which the insured resides on such date 43.21 is hereby amended to conform to the minimum requirements of such 43.22 statutes. 43.23 (10) A provision as follows: 43.24 ILLEGAL OCCUPATION: The insurer shall not be liable for 43.25 any loss to which a contributing cause was the insured's 43.26 commission of or attempt to commit a felony or to which a 43.27 contributing cause was the insured's being engaged in an illegal 43.28 occupation. 43.29 (11) A provision as follows: 43.30 NARCOTICS: The insurer shall not be liable for any loss 43.31 sustained or contracted in consequence of the insured's being 43.32 under the influence of any narcotic unless administered on the 43.33 advice of a physician. 43.34 Sec. 38. Minnesota Statutes 1998, section 62A.135, 43.35 subdivision 5, is amended to read: 43.36 Subd. 5. [SUPPLEMENT TO ANNUAL STATEMENTSSUPPLEMENTAL 44.1 FILINGS.] Each insurer that has fixed indemnity policies in 44.2 force in this state shall,as a supplement to the annual44.3statement required by section 60A.13upon request by the 44.4 commissioner, submit, in a form prescribed by the 44.5 commissioner,theexperience datafor the calendar yearshowing 44.6 its incurred claims, earned premiums, incurred to earned loss 44.7 ratio, and the ratio of the actual loss ratio to the expected 44.8 loss ratio for each fixed indemnity policy form in force in 44.9 Minnesota. The experience data must be provided on both a 44.10 Minnesota only and a national basis. If in the opinion of the 44.11 company's actuary, the deviation of the actual loss ratio from 44.12 the expected loss ratio for a policy form is due to unusual 44.13 reserve fluctuations, economic conditions, or other nonrecurring 44.14 conditions, the insurer should also file that opinion with 44.15 appropriate justification. 44.16 If the data submitted does not confirm that the insurer has 44.17 satisfied the loss ratio requirements of this section, the 44.18 commissioner shall notify the insurer in writing of the 44.19 deficiency. The insurer shall have 30 days from the date of 44.20 receipt of the commissioner's notice to file amended rates that 44.21 comply with this section or a request for an exemption with 44.22 appropriate justification. If the insurer fails to file amended 44.23 rates within the prescribed time and the commissioner does not 44.24 exempt the policy form from the need for a rate revision, the 44.25 commissioner shall order that the insurer's filed rates for the 44.26 nonconforming policy be reduced to an amount that would have 44.27 resulted in a loss ratio that complied with this section had it 44.28 been in effect for the reporting period of the supplement. The 44.29 insurer's failure to file amended rates within the specified 44.30 time of the issuance of the commissioner's order amending the 44.31 rates does not preclude the insurer from filing an amendment of 44.32 its rates at a later time. 44.33 Sec. 39. Minnesota Statutes 1998, section 62A.50, 44.34 subdivision 3, is amended to read: 44.35 Subd. 3. [DISCLOSURES.] No long-term care policy shall be 44.36 offered or delivered in this state, whether or not the policy is 45.1 issued in this state, and no certificate of coverage under a 45.2 group long-term care policy shall be offered or delivered in 45.3 this state, unless a statement containing at least the following 45.4 information is delivered to the applicant at the time the 45.5 application is made: 45.6 (1) a description of the benefits and coverage provided by 45.7 the policy and the differences between this policy, a 45.8 supplemental Medicare policy and the benefits to which an 45.9 individual is entitled under parts A and B of Medicare; 45.10 (2) a statement of the exceptions and limitations in the 45.11 policy including the following language, as applicable, in bold 45.12 print: "THIS POLICY DOES NOT COVER ALL NURSING CARE FACILITIES 45.13 OR NURSING HOME, HOME CARE, OR ADULT DAY CARE EXPENSES AND DOES 45.14 NOT COVER RESIDENTIAL CARE. READ YOUR POLICY CAREFULLY TO 45.15 DETERMINE WHICH FACILITIES AND EXPENSES ARE COVERED BY YOUR 45.16 POLICY."; 45.17 (3) a statement of the renewal provisions including any 45.18 reservation by the insurer of the right to change premiums; 45.19 (4) a statement that the outline of coverage is a summary 45.20 of the policy issued or applied for and that the policy should 45.21 be consulted to determine governing contractual provisions; 45.22 (5) an explanation of the policy's loss ratio including at 45.23 least the following language: "This means that, on the average, 45.24 policyholders may expect that $........ of every $100 in premium 45.25 will be returned as benefits to policyholders over the life of 45.26 the contract."; 45.27 (6) a statement of the out-of-pocket expenses, including 45.28 deductibles and copayments for which the insured is responsible, 45.29 and an explanation of the specific out-of-pocket expenses that 45.30 may be accumulated toward any out-of-pocket maximum as specified 45.31 in the policy; 45.32 (7) the following language, in bold print: "YOUR PREMIUMS 45.33 CAN BE INCREASED IN THE FUTURE. THE RATE SCHEDULE THAT LISTS 45.34 YOUR PREMIUM NOW CAN CHANGE."; 45.35(8) the following language, if applicable, in bold print:45.36"IF YOU ARE NOT HOSPITALIZED PRIOR TO ENTERING A NURSING HOME OR46.1NEEDING HOME CARE, YOU WILL NOT BE ABLE TO COLLECT ANY BENEFITS46.2UNDER THIS PARTICULAR POLICY.";46.3(9)(8) the following language in bold print, with any 46.4 provisions that are inapplicable to the particular policy 46.5 omitted or crossed out: "THIS POLICY HAS A WAITING PERIOD OF 46.6 ..... (CALENDAR OR BENEFIT) DAYS FOR NURSING CARE SERVICES AND A 46.7 WAITING PERIOD OF ..... (CALENDAR OR BENEFIT) DAYS FOR HOME CARE 46.8 SERVICES. THIS MEANS THAT THIS POLICY WILL NOT COVER YOUR CARE 46.9 FOR THE FIRST ..... (CALENDAR OR BENEFIT) DAYS AFTER YOU ENTER A 46.10 NURSING HOME, OR THE FIRST ..... (CALENDAR OR BENEFIT) DAYS 46.11 AFTER YOU BEGIN TO USE HOME CARE SERVICES. YOU WOULD NEED TO 46.12 PAY FOR YOUR CARE FROM OTHER SOURCES FOR THOSE WAITING 46.13 PERIODS."; and 46.14(10)(9) a signed and completed copy of the application for 46.15 insurance is left with the applicant at the time the application 46.16 is made. 46.17 Sec. 40. Minnesota Statutes 1998, section 62A.61, is 46.18 amended to read: 46.19 62A.61 [DISCLOSURE OF METHODS USED BY HEALTH CARRIERS TO 46.20 DETERMINE USUAL AND CUSTOMARY FEES.] 46.21 (a) A health carrier that bases reimbursement to health 46.22 care providers upon a usual and customary fee must maintain in 46.23 its office a copy of a description of the methodology used to 46.24 calculate fees including at least the following: 46.25 (1) the frequency of the determination of usual and 46.26 customary fees; 46.27 (2) a general description of the methodology used to 46.28 determine usual and customary fees; and 46.29 (3) the percentile of usual and customary fees that 46.30 determines the maximum allowable reimbursement. 46.31 (b) A health carrier must provide a copy of the information 46.32 described in paragraph (a) to the commissioner of health or the 46.33 commissioner of commerce, upon request. 46.34 (c) The commissioner of health or the commissioner of 46.35 commerce, as appropriate, may use to enforce this section any 46.36 enforcement powers otherwise available to the commissioner with 47.1 respect to the health carrier. The commissioner of health or 47.2 commerce, as appropriate, may require health carriers to provide 47.3 the information required under this section and may use any 47.4 powers granted under other laws relating to the regulation of 47.5 health carriers to enforce compliance. 47.6 (d) For purposes of this section, "health carrier" has the 47.7 meaning given in section 62A.011. 47.8 (e) "Usual and customary" means the normal charge, in the 47.9 absence of insurance, of the provider for a service or article, 47.10 but not more than the prevailing charge in the area for like 47.11 service or article. A "like service" is the same nature and 47.12 duration, requires the same skill, and is performed by a 47.13 provider of similar training and experience. A "like article" 47.14 is one that is identically or substantially equivalent. "Area" 47.15 means the municipality or, in the case of a large city, a 47.16 subdivision of the city, in which the service or article is 47.17 actually provided or a greater area as is necessary to obtain a 47.18 representative cross-section of charges for like service or 47.19 article. 47.20 Sec. 41. Minnesota Statutes 1998, section 62A.65, 47.21 subdivision 5, is amended to read: 47.22 Subd. 5. [PORTABILITY AND CONVERSION OF COVERAGE.] (a) No 47.23 individual health plan may be offered, sold, issued, or with 47.24 respect to children age 18 or under renewed, to a Minnesota 47.25 resident that contains a preexisting condition limitation, 47.26 preexisting condition exclusion, or exclusionary rider, unless 47.27 the limitation or exclusion is permitted under this 47.28 subdivision and under chapter 62L, provided that, except for 47.29 children age 18 or under, underwriting restrictions may be 47.30 retained on individual contracts that are issued without 47.31 evidence of insurability as a replacement for prior individual 47.32 coverage that was sold before May 17, 1993. The individual may 47.33 be subjected to an 18-month preexisting condition limitation, 47.34 unless the individual has maintained continuous coverage as 47.35 defined in section 62L.02. The individual must not be subjected 47.36 to an exclusionary rider. An individual who has maintained 48.1 continuous coverage may be subjected to a one-time preexisting 48.2 condition limitation of up to 12 months, with credit for time 48.3 covered under qualifying coverage as defined in section 62L.02, 48.4 at the time that the individual first is covered under an 48.5 individual health plan by any health carrier. Credit must be 48.6 given for all qualifying coverage with respect to all 48.7 preexisting conditions, regardless of whether the conditions 48.8 were preexisting with respect to any previous qualifying 48.9 coverage. The individual must not be subjected to an 48.10 exclusionary rider. Thereafter, the individual must not be 48.11 subject to any preexisting condition limitation, preexisting 48.12 condition exclusion, or exclusionary rider under an individual 48.13 health plan by any health carrier, except an unexpired portion 48.14 of a limitation under prior coverage, so long as the individual 48.15 maintains continuous coverage as defined in section 62L.02. 48.16 (b) A health carrier must offer an individual health plan 48.17 to any individual previously covered under a group health plan 48.18 issued by that health carrier, regardless of the size of the 48.19 group, so long as the individual maintained continuous coverage 48.20 as defined in section 62L.02. If the individual has available 48.21 any continuation coverage provided under sections 62A.146; 48.22 62A.148; 62A.17, subdivisions 1 and 2; 62A.20; 62A.21; 62C.142; 48.23 62D.101; or 62D.105, or continuation coverage provided under 48.24 federal law, the health carrier need not offer coverage under 48.25 this paragraph until the individual has exhausted the 48.26 continuation coverage. The offer must not be subject to 48.27 underwriting, except as permitted under this paragraph. A 48.28 health plan issued under this paragraph must be a qualified plan 48.29 as defined in section 62E.02 and must not contain any 48.30 preexisting condition limitation, preexisting condition 48.31 exclusion, or exclusionary rider, except for any unexpired 48.32 limitation or exclusion under the previous coverage. The 48.33 individual health plan must cover pregnancy on the same basis as 48.34 any other covered illness under the individual health plan. The 48.35 initial premium rate for the individual health plan must comply 48.36 with subdivision 3. The premium rate upon renewal must comply 49.1 with subdivision 2. In no event shall the premium rate exceed 49.2 90 percent of the premium charged for comparable individual 49.3 coverage by the Minnesota comprehensive health association, and 49.4 the premium rate must be less than that amount if necessary to 49.5 otherwise comply with this section. An individual health plan 49.6 offered under this paragraph to a person satisfies the health 49.7 carrier's obligation to offer conversion coverage under section 49.8 62E.16, with respect to that person. Coverage issued under this 49.9 paragraph must provide that it cannot be canceled or nonrenewed 49.10 as a result of the health carrier's subsequent decision to leave 49.11 the individual, small employer, or other group market. Section 49.12 72A.20, subdivision 28, applies to this paragraph. 49.13 Sec. 42. Minnesota Statutes 1998, section 62B.04, 49.14 subdivision 2, is amended to read: 49.15 Subd. 2. [CREDIT ACCIDENT AND HEALTH INSURANCE.] (a) The 49.16 total amount of periodic indemnity payable by credit accident 49.17 and health insurance in the event of disability, as defined in 49.18 the policy, shall not exceed the aggregate of the periodic 49.19 scheduled unpaid installments of the indebtedness; and the 49.20 amount of each periodic indemnity payment shall not exceed the 49.21 original indebtedness divided by the number of periodic 49.22 installments. If the credit transaction provides for a variable 49.23 rate of finance charge or interest, the initial rate or the 49.24 scheduled rates based on the initial index must be used in 49.25 determining the aggregate of the periodic scheduled unpaid 49.26 installments of the indebtedness. 49.27 (b) If for any reason a policy of credit disability 49.28 insurance will not or may not provide the policyholder or 49.29 certificate holder with coverage for the total amount of 49.30 indebtedness on the related loan or debt in the event of any one 49.31 instance of disability, the applicant must be given a written 49.32 disclosure on or accompanying the application. If the 49.33 disclosure is on the application, it must be immediately above 49.34 the signature line, within a box and the word "WARNING" must be 49.35 in 14-point bold face capital letters. The rest of the text 49.36 must be in capital letters and bold face 10-point print. If the 50.1 disclosure is on a separate sheet, it must be on an 8-1/2 inch 50.2 by 11 inch sheet of paper with the word "WARNING" in 14-point 50.3 bold face capital letters with the remaining text in 10-point 50.4 bold faced capital letters. If a separate disclosure is used, 50.5 it must be signed by the applicant with one copy provided to the 50.6 applicant and one copy maintained by the insurer for at least 50.7 the term of the policy or certificate, if coverage is issued. 50.8 The disclosure must state: 50.9 WARNING: IF YOU BECOME DISABLED AS DEFINED IN THE 50.10 POLICY/CERTIFICATE, THIS DISABILITY INSURANCE POLICY/CERTIFICATE 50.11 MAY NOT COVER YOUR ENTIRE INDEBTEDNESS. IF YOU BECOME DISABLED 50.12 AT A POINT WHERE THE NUMBER OF MONTHLY INSTALLMENT PAYMENTS 50.13 REMAINING EXCEEDS THE PERIOD OF COVERAGE BEING PROVIDED BY THIS 50.14 POLICY/CERTIFICATE, THE BENEFITS AVAILABLE WILL BE LESS THAN THE 50.15 AMOUNT NECESSARY TO PAY OFF YOUR LOAN. IF YOU WANT COVERAGE FOR 50.16 THE FULL AMOUNT OF YOUR INDEBTEDNESS OR HAVE ANY QUESTIONS ABOUT 50.17 THE EXTENT OR NATURE OF YOUR COVERAGE, YOU SHOULD DISCUSS THEM 50.18 WITH YOUR AGENT AND/OR ENROLLER BEFORE SUBMITTING YOUR 50.19 APPLICATION. 50.20 (c) Any policy or certificate of credit disability 50.21 insurance which contains a critical period must make available 50.22 for any single instance of disability monthly indemnity benefit 50.23 payments for the term of the loan, 24 months, or the term of the 50.24 disability, whichever is less. For the purposes of this 50.25 section, a critical period is when there is a limited number of 50.26 monthly benefit payments that may be paid to the beneficiary or 50.27 the policyholder or certificate holder as a result of any one 50.28 instance of disability. 50.29 (d) Unless the policy or certificate provides for such 50.30 coverage, nothing in this section shall be interpreted as 50.31 requiring an insurer to provide coverage for the final payment 50.32 of a balloon loan or for a period that exceeds the age 50.33 limitation in the policy or certificate or for amounts that 50.34 exceed the insurer's maximum liability limits. 50.35 Sec. 43. Minnesota Statutes 1998, section 62D.12, 50.36 subdivision 2, is amended to read: 51.1 Subd. 2. [COVERAGE CANCELLATION; NONRENEWAL.] No health 51.2 maintenance organization may cancel or fail to renew the 51.3 coverage of an enrollee except for (a) failure to pay the charge 51.4 for health care coverage; (b) termination of the health care 51.5 plan; (c) termination of the group plan; (d) enrollee moving out 51.6 of the area served, subject to section 62A.17, subdivisions 1 51.7 and 6, and section 62D.104; (e) enrollee moving out of an 51.8 eligible group, subject to section 62A.17, subdivisions 1 and 6, 51.9 and section 62D.104; (f) failure to make copayments required by 51.10 the health care plan;or(g) fraud or misrepresentation by the 51.11 enrollee with respect to eligibility for coverage or any other 51.12 material fact; or (h) other reasons established in rules 51.13 promulgated by the commissioner of health. 51.14 Sec. 44. Minnesota Statutes 1998, section 62E.02, 51.15 subdivision 1, is amended to read: 51.16 Subdivision 1. [APPLICATION.] For the purposes of sections 51.17 62E.01 to62E.1662E.19, the terms and phrases defined in this 51.18 section have the meanings given them. 51.19 Sec. 45. Minnesota Statutes 1998, section 62E.05, 51.20 subdivision 1, is amended to read: 51.21 Subdivision 1. [CERTIFICATION.] Upon application by an 51.22 insurer, fraternal, or employer for certification of a plan of 51.23 health coverage as a qualified plan or a qualified Medicare 51.24 supplement plan for the purposes of sections 62E.01 to62E.1651.25 62E.19, the commissioner shall make a determination within 90 51.26 days as to whether the plan is qualified. All plans of health 51.27 coverage, except Medicare supplement policies, shall be labeled 51.28 as "qualified" or "nonqualified" on the front of the policy or 51.29 contract, or on the schedule page. All qualified plans shall 51.30 indicate whether they are number one, two, or three coverage 51.31 plans. 51.32 Sec. 46. Minnesota Statutes 1998, section 62E.09, is 51.33 amended to read: 51.34 62E.09 [DUTIES OF COMMISSIONER.] 51.35 The commissioner may: 51.36 (a) Formulate general policies to advance the purposes of 52.1 sections 62E.01 to62E.1662E.19; 52.2 (b) Supervise the creation of the Minnesota comprehensive 52.3 health association within the limits described in section 52.4 62E.10; 52.5 (c) Approve the selection of the writing carrier by the 52.6 association, approve the association's contract with the writing 52.7 carrier, and approve the state plan coverage; 52.8 (d) Appoint advisory committees; 52.9 (e) Conduct periodic audits to assure the general accuracy 52.10 of the financial data submitted by the writing carrier and the 52.11 association; 52.12 (f) Contract with the federal government or any other unit 52.13 of government to ensure coordination of the state plan with 52.14 other governmental assistance programs; 52.15 (g) Undertake directly or through contracts with other 52.16 persons studies or demonstration programs to develop awareness 52.17 of the benefits of sections 62E.01 to 62E.16, so that the 52.18 residents of this state may best avail themselves of the health 52.19 care benefits provided by these sections; 52.20 (h) Contract with insurers and others for administrative 52.21 services; and 52.22 (i) Adopt, amend, suspend and repeal rules as reasonably 52.23 necessary to carry out and make effective the provisions and 52.24 purposes of sections 62E.01 to62E.1662E.19. 52.25 Sec. 47. Minnesota Statutes 1998, section 62E.13, 52.26 subdivision 6, is amended to read: 52.27 Subd. 6. [CLAIMS PAYMENTS.] All claims shall be paid by 52.28 the writing carrier pursuant to the provisions of sections 52.29 62E.01 to62E.1662E.19, and shall indicate that the claim was 52.30 paid by the state plan. Each claim payment shall include 52.31 information specifying the procedure to be followed in the event 52.32 of a dispute over the amount of payment. 52.33 Sec. 48. Minnesota Statutes 1998, section 62E.13, 52.34 subdivision 8, is amended to read: 52.35 Subd. 8. [WRITING CARRIER AS AGENT.] The writing carrier 52.36 shall at all times when carrying out its duties under sections 53.1 62E.01 to62E.1662E.19 be considered an agent of the 53.2 association and the commissioner with civil liability subject to 53.3 the provisions of section 3.751. 53.4 Sec. 49. Minnesota Statutes 1998, section 62E.14, 53.5 subdivision 2, is amended to read: 53.6 Subd. 2. [WRITING CARRIER'S RESPONSE.] Within 30 days of 53.7 receipt of the certificate described in subdivision 1, the 53.8 writing carrier shall either reject the application for failing 53.9 to comply with the requirements in subdivision 1 or forward the 53.10 eligible person a notice of acceptance and billing information. 53.11 Insurance shall be effective immediately upon receipt of the 53.12 first month's state plan premium, and shall be retroactive to 53.13 the date of the application, if the applicant otherwise complies 53.14 with the requirements of sections 62E.01 to62E.1662E.19. 53.15 Sec. 50. Minnesota Statutes 1998, section 62E.15, 53.16 subdivision 2, is amended to read: 53.17 Subd. 2. [ASSOCIATION'S DUTY.] The association shall 53.18 devise and implement means of maintaining public awareness of 53.19 the provisions of sections 62E.01 to62E.1762E.19 and shall 53.20 administer these sections in a manner which facilitates public 53.21 participation in the state plan. 53.22 Sec. 51. Minnesota Statutes 1998, section 62I.07, 53.23 subdivision 1, is amended to read: 53.24 Subdivision 1. [GENERAL ASSESSMENT.] Each member of the 53.25 association that is authorized to write property and casualty 53.26 insurance in the state shall participate in its losses and 53.27 expenses in the proportion that the direct written premiums of 53.28 the member on the kinds of insurance in that account bears to 53.29 the total aggregate direct written premiums written in this 53.30 state by all members on the kinds of insurance in that account. 53.31 The members' participation in the association shall be 53.32 determined annually on the direct written premiums written 53.33 during the preceding calendar year as reported on the annual 53.34 statements and other reports filed by the member with the 53.35 commissioner. Direct written premiums mean that amount at page 53.36 14, column (2), lines55.1, 8, 9, 17, 21.2, 22, 23, 24, 25, 26, 54.1 and 27 of the annual statement filed annually with the 54.2 department of commerce under section 60A.13. 54.3 Sec. 52. Minnesota Statutes 1998, section 62L.02, 54.4 subdivision 24, is amended to read: 54.5 Subd. 24. [QUALIFYING COVERAGE.] "Qualifying coverage" 54.6 means health benefits or health coverage provided under: 54.7 (1) a health benefit plan, as defined in this section, but 54.8 without regard to whether it is issued to a small employer and 54.9 including blanket accident and sickness insurance, other than 54.10 accident-only coverage, as defined in section 62A.11; 54.11 (2) part A or part B of Medicare; 54.12 (3) medical assistance under chapter 256B; 54.13 (4) general assistance medical care under chapter 256D; 54.14 (5) MCHA; 54.15 (6) a self-insured health plan; 54.16 (7) the MinnesotaCare program established under section 54.17 256L.02; 54.18 (8) a plan provided under section 43A.316, 43A.317, or 54.19 471.617; 54.20 (9) the Civilian Health and Medical Program of the 54.21 Uniformed Services (CHAMPUS) or other coverage provided under 54.22 United States Code, title 10, chapter 55; 54.23 (10) coverage provided by a health care network cooperative 54.24 under chapter 62R or by a health provider cooperative under 54.25 section 62R.17; 54.26 (11) a medical care program of the Indian Health Service or 54.27 of a tribal organization; 54.28 (12) the federal Employees Health Benefits Plan, or other 54.29 coverage provided under United States Code, title 5, chapter 89; 54.30 (13) a health benefit plan under section 5(e) of the Peace 54.31 Corps Act, codified as United States Code, title 22, section 54.32 2504(e);or54.33 (14) a health plan; or 54.34(14)(15) a plan similar to any of the above plans provided 54.35 in this state or in another state as determined by the 54.36 commissioner. 55.1 Sec. 53. Minnesota Statutes 1998, section 62L.03, 55.2 subdivision 5, is amended to read: 55.3 Subd. 5. [CANCELLATIONS AND FAILURES TO RENEW.] (a) No 55.4 health carrier shall cancel, decline to issue, or fail to renew 55.5 a health benefit plan as a result of the claim experience or 55.6 health status of the persons covered or to be covered by the 55.7 health benefit plan. For purposes of this subdivision, a 55.8 failure to renew does not include a uniform modification of 55.9 coverage at time of renewal, as described in subdivision 1. 55.10 (b) A health carrier may cancel or fail to renew a health 55.11 benefit plan: 55.12 (1) for nonpayment of the required premium; 55.13 (2) for fraud or misrepresentation by the small employer 55.14 with respect to eligibility for coverage or any other material 55.15 fact; 55.16 (3) if the employer fails to comply with the minimum 55.17 contribution percentage required under subdivision 3; or 55.18 (4) for any other reasons or grounds expressly permitted by 55.19 the respective licensing laws and regulations governing a health 55.20 carrier, including, but not limited to, service area 55.21 restrictions imposed on health maintenance organizations under 55.22 section 62D.03, subdivision 4, paragraph (m), to the extent that 55.23 these grounds are not expressly inconsistent with this chapter. 55.24 (c) A health carrier may fail to renew a health benefit 55.25 plan: 55.26 (1) if eligible employee participation during the preceding 55.27 calendar year declines to less than 75 percent, subject to the 55.28 waiver of coverage provision in subdivision 3; 55.29 (2) if the health carrier ceases to do business in the 55.30 small employer market under section 62L.09; or 55.31 (3) if a failure to renew is based upon the health 55.32 carrier's decision to discontinue the health benefit plan form 55.33 previously issued to the small employer, but only if the health 55.34 carrier permits each small employer covered under the prior form 55.35 to switch to its choice of any other health benefit plan offered 55.36 by the health carrier, without any underwriting restrictions 56.1 that would not have been permitted for renewal purposes. 56.2 (d) A health carrier need not renew a health benefit plan, 56.3 and shall not renew a small employer plan, if an employer ceases 56.4 to qualify as a small employer as defined in section 62L.02. If 56.5 a health benefit plan, other than a small employer plan, 56.6 provides terms of renewal that do not exclude an employer that 56.7 is no longer a small employer, the health benefit plan may be 56.8 renewed according to its own terms. If a health carrier issues 56.9 or renews a health plan to an employer that is no longer a small 56.10 employer, without interruption of coverage, the health plan is 56.11 subject to section 60A.082. 56.12 (e) A health carrier may cancel or fail to renew the 56.13 coverage of an individual employee or dependent under a health 56.14 benefit plan for fraud or misrepresentation by the eligible 56.15 employee or dependent with respect to eligibility for coverage 56.16 or any other material fact. 56.17 Sec. 54. Minnesota Statutes 1998, section 62L.05, 56.18 subdivision 5, is amended to read: 56.19 Subd. 5. [PLAN VARIATIONS.] (a) No health carrier shall 56.20 offer to a small employer a health benefit plan that differs 56.21 from the two small employer plans described in subdivisions 1 to 56.22 4, unless the health benefit plan complies with all provisions 56.23 of chapters 62A, 62C, 62D, 62E, 62H, 62N, 62Q, and 64B that 56.24 otherwise apply to the health carrier, except as expressly 56.25 permitted by paragraph (b). 56.26 (b) As an exception to paragraph (a), a health benefit plan 56.27 is deemed to be a small employer plan and to be in compliance 56.28 with paragraph (a) if it differs from one of the two small 56.29 employer plans described in subdivisions 1 to 4 only by 56.30 providing benefits in addition to those described in subdivision 56.31 4, provided that the health benefit plan has an actuarial value 56.32 that exceeds the actuarial value of the benefits described in 56.33 subdivision 4 by no more than two percent. "Benefits in 56.34 addition" means additional units of a benefit listed in 56.35 subdivision 4 or one or more benefits not listed in subdivision 56.36 4. 57.1 Sec. 55. Minnesota Statutes 1998, section 62L.14, 57.2 subdivision 7, is amended to read: 57.3 Subd. 7. [COMPENSATION.] Public directors may be 57.4 reimbursed by the association for reasonable and necessary 57.5 expenses incurred by them in performing their duties as 57.6 directors, but shall not otherwise be compensated by the57.7association for their servicesand may be compensated by the 57.8 association at a rate of up to $55 per day spent on authorized 57.9 association activities. 57.10 Sec. 56. Minnesota Statutes 1998, section 62Q.105, 57.11 subdivision 1, is amended to read: 57.12 Subdivision 1. [ESTABLISHMENT.] Each health plan company 57.13 shall establish and make available to enrollees, by July 1,199957.14 2001, an informal complaint resolution process that meets the 57.15 requirements of this section. A health plan company must make 57.16 reasonable efforts to resolve enrollee complaints, and must 57.17 inform complainants in writing of the company's decision within 57.18 30 days of receiving the complaint. The complaint resolution 57.19 process must treat the complaint and information related to it 57.20 as required under sections 72A.49 to 72A.505. 57.21 Sec. 57. Minnesota Statutes 1998, section 62Q.185, is 57.22 amended to read: 57.23 62Q.185 [GUARANTEED RENEWABILITY; LARGE EMPLOYER GROUP 57.24 HEALTH COVERAGE.] 57.25 (a) No health plan company, as defined in section 62Q.01, 57.26 subdivision 4, shall refuse to renew a health benefit plan, as 57.27 defined in section 62L.02, subdivision 15, but issued to a large 57.28 employer, as defined in section 62Q.18, subdivision 1. 57.29 (b) This section does not require renewal if: 57.30 (1) the large employer has failed to pay premiums or 57.31 contributions as required under the terms of the health benefit 57.32 plan, or the health plan company has not received timely premium 57.33 payments unless the late payments were received within a grace 57.34 period provided under state law; 57.35 (2) the large employer has performed an act or practice 57.36 that constitutes fraud or misrepresentation of material fact 58.1 under the terms of the health benefit plan; 58.2 (3) the large employer has failed to comply with a material 58.3 plan provision relating to employer contribution or group 58.4 participation rules not prohibited by state law; 58.5 (4) the health plan company is ceasing to offer coverage in 58.6 the large employer market in this state in compliance with 58.7 United States Code, title 42, section 300gg-12(c), and 58.8 applicable state law; 58.9 (5) in the case of a health maintenance organization, there 58.10 is no longer any enrollee in the large employer's health benefit 58.11 plan who lives, resides, or works in the approved service area; 58.12 or 58.13 (6) in the case of a health benefit plan made available to 58.14 large employers only through one or more bona fide associations, 58.15 the membership of the large employer in the association ceases, 58.16 but only if such coverage is terminated uniformly without regard 58.17 to any health-related factor relating to any covered individual. 58.18 (c) This section does not prohibit a health plan company 58.19 from modifying the premium rate or from modifying the coverage 58.20 for purposes of renewal. 58.21 (d) This section does not require renewal of the coverage 58.22 of individual enrollees under the health benefit plan if the 58.23 individual enrollee has performed an act or practice that 58.24 constitutes fraud or misrepresentation of material fact under 58.25 the terms of the health benefit plan. 58.26 Sec. 58. Minnesota Statutes 1998, section 62Q.30, is 58.27 amended to read: 58.28 62Q.30 [EXPEDITED FACT FINDING AND DISPUTE RESOLUTION 58.29 PROCESS.] 58.30 The commissioner shall establish an expedited fact finding 58.31 and dispute resolution process to assist enrollees of health 58.32 plan companies with contested treatment, coverage, and service 58.33 issues to be in effect July 1,19992001. If the disputed issue 58.34 relates to whether a service is appropriate and necessary, the 58.35 commissioner shall issue an order only after consulting with 58.36 appropriate experts knowledgeable, trained, and practicing in 59.1 the area in dispute, reviewing pertinent literature, and 59.2 considering the availability of satisfactory alternatives. The 59.3 commissioner shall take steps including but not limited to 59.4 fining, suspending, or revoking the license of a health plan 59.5 company that is the subject of repeated orders by the 59.6 commissioner that suggests a pattern of inappropriate 59.7 underutilization. 59.8 Sec. 59. Minnesota Statutes 1998, section 62S.01, 59.9 subdivision 14, is amended to read: 59.10 Subd. 14. [LOSS OF FUNCTIONAL CAPACITY.] "Loss of 59.11 functional capacity" means requiring the substantial assistance 59.12 of another person to perform the prescribed activities of daily 59.13 living. 59.14 Sec. 60. Minnesota Statutes 1998, section 62S.05, 59.15 subdivision 2, is amended to read: 59.16 Subd. 2. [PROHIBITED EXCLUSION.] A long-term care 59.17 insurance policy or certificate, other than a policy or 59.18 certificate issued to a group as defined in section 62S.01, 59.19 subdivision 15, clause (1), may not exclude coverage for a loss 59.20 or confinement that is the result of a preexisting condition 59.21unless the loss or confinement begins withinmore than six 59.22 months following the effective date of coverage of an insured 59.23 person. 59.24 Sec. 61. Minnesota Statutes 1998, section 65A.01, 59.25 subdivision 1, is amended to read: 59.26 Subdivision 1. [DESIGNATION AND SCOPE.] The printed form 59.27 of a policy of fire insurance, as set forth in subdivisions 3 59.28 and 3a, shall be known and designated as the "Minnesota standard 59.29 fire insurance policy" to be used in the state of Minnesota. No 59.30 policy or contract of fire insurance shall be made, issued or 59.31 delivered by any insurer including reciprocals or interinsurance 59.32 exchanges or any agent or representative thereof, on any 59.33 property in this state, unless it shall provide the specified 59.34 coverage and conform as to all provisions, stipulations, and 59.35 conditions, with such form of policy, except as provided in 59.36 sections 60A.08, subdivision 9;60A.31 to 60A.35160A.352; 60.1 65A.06; 65A.29; 72A.20, subdivision 17; and other statutes 60.2 containing specific requirements that are inconsistent with the 60.3 form of this policy. Any policy or contract otherwise subject 60.4 to the provisions of this subdivision, subdivisions 3 and 3a 60.5 which includes either on an unspecified basis as to coverage or 60.6 for a single premium, coverage against the peril of fire and 60.7 coverage against other perils may be issued without 60.8 incorporating the exact language of the Minnesota standard fire 60.9 insurance policy, provided: Such policy or contract shall, with 60.10 respect to the peril of fire, afford the insured all the rights 60.11 and benefits of the Minnesota standard fire insurance policy and 60.12 such additional benefits as the policy provides; the provisions 60.13 in relation to mortgagee interests and obligations in said 60.14 Minnesota standard fire insurance policy shall be incorporated 60.15 therein without change; such policy or contract is complete as 60.16 to its terms of coverage; and, the commissioner is satisfied 60.17 that such policy or contract complies with the provisions hereof. 60.18 Sec. 62. Minnesota Statutes 1998, section 65A.01, 60.19 subdivision 3, is amended to read: 60.20 Subd. 3. [POLICY PROVISIONS.] On said policy following 60.21 such matter as provided in subdivisions 1 and 2, printed in the 60.22 English language in type of such size or sizes and arranged in 60.23 such manner, as is approved by the commissioner of commerce, the 60.24 following provisions and subject matter shall be stated in the 60.25 following words and in the following sequence, but with the 60.26 convenient placing, if desired, of such matter as will act as a 60.27 cover or back for such policy when folded, with the blanks below 60.28 indicated being left to be filled in at the time of the issuing 60.29 of the policy, to wit: 60.30 (Space for listing the amounts of insurance, rates and 60.31 premiums for the basic coverages provided under the standard 60.32 form of policy and for additional coverages or perils provided 60.33 under endorsements attached. The description and location of 60.34 the property covered and the insurable value(s) of any 60.35 building(s) or structure(s) covered by the policy or its 60.36 attached endorsements; also in the above space may be stated 61.1 whether other insurance is limited and if limited the total 61.2 amount permitted.) 61.3 In consideration of the provisions and stipulations herein 61.4 or added hereto and of the premium above specified this company, 61.5 for a term of ..... from ..... (At 12:01 a.m. Standard Time) to 61.6 ..... (At 12:01 a.m. Standard Time) at location of property 61.7 involved, to an amount not exceeding the amount(s) above 61.8 specified does insure ..... and legal representatives 61.9 ........................................... 61.10 (In above space may be stated whether other insurance is 61.11 limited.) (And if limited the total amount permitted.) 61.12 Subject to form No.(s) ..... attached hereto. 61.13 This policy is made and accepted subject to the foregoing 61.14 provisions and stipulations and those hereinafter stated, which 61.15 are hereby made a part of this policy, together with such 61.16 provisions, stipulations and agreements as may be added hereto 61.17 as provided in this policy. 61.18 The insurance effected above is granted against all loss or 61.19 damage by fire originating from any cause, except as hereinafter 61.20 provided, also any damage by lightning and by removal from 61.21 premises endangered by the perils insured against in this 61.22 policy, to the property described hereinafter while located or 61.23 contained as described in this policy, or pro rata for five days 61.24 at each proper place to which any of the property shall 61.25 necessarily be removed for preservation from the perils insured 61.26 against in this policy, but not elsewhere. The amount of said 61.27 loss or damage, except in case of total loss on buildings, to be 61.28 estimated according to the actual value of the insured property 61.29 at the time when such loss or damage happens. 61.30 If the insured property shall be exposed to loss or damage 61.31 from the perils insured against, the insured shall make all 61.32 reasonable exertions to save and protect same. 61.33 This entire policy shall be void if, whether before a loss, 61.34 the insured has willfully, or after a loss, the insured has 61.35 willfully and with intent to defraud, concealed or 61.36 misrepresented any material fact or circumstance concerning this 62.1 insurance or the subject thereof, or the interests of the 62.2 insured therein. 62.3 This policy shall not cover accounts, bills, currency, 62.4 deeds, evidences of debt, money or securities; nor, unless 62.5 specifically named hereon in writing, bullion, or manuscripts. 62.6 This company shall not be liable for loss by fire or other 62.7 perils insured against in this policy caused, directly or 62.8 indirectly by: (a) enemy attack by armed forces, including 62.9 action taken by military, naval or air forces in resisting an 62.10 actual or immediately impending enemy attack; (b) invasion; (c) 62.11 insurrection; (d) rebellion; (e) revolution; (f) civil war; (g) 62.12 usurped power; (h) order of any civil authority except acts of 62.13 destruction at the time of and for the purpose of preventing the 62.14 spread of fire, providing that such fire did not originate from 62.15 any of the perils excluded by this policy. 62.16 Other insurance may be prohibited or the amount of 62.17 insurance may be limited by so providing in the policy or an 62.18 endorsement, rider or form attached thereto. 62.19 Unless otherwise provided in writing added hereto this 62.20 company shall not be liable for loss occurring: 62.21 (a) while the hazard is increased by any means within the 62.22 control or knowledge of the insured; or 62.23 (b) while the described premises, whether intended for 62.24 occupancy by owner or tenant, are vacant or unoccupied beyond a 62.25 period of 60 consecutive days; or 62.26 (c) as a result of explosion or riot, unless fire ensue, 62.27 and in that event for loss by fire only. 62.28 Any other peril to be insured against or subject of 62.29 insurance to be covered in this policy shall be by endorsement 62.30 in writing hereon or added hereto. 62.31 The extent of the application of insurance under this 62.32 policy and the contributions to be made by this company in case 62.33 of loss, and any other provision or agreement not inconsistent 62.34 with the provisions of this policy, may be provided for in 62.35 writing added hereto, but no provision may be waived except such 62.36 as by the terms of this policy is subject to change. 63.1 No permission affecting this insurance shall exist, or 63.2 waiver of any provision be valid, unless granted herein or 63.3 expressed in writing added hereto. No provision, stipulation or 63.4 forfeiture shall be held to be waived by any requirements or 63.5 proceeding on the part of this company relating to appraisal or 63.6 to any examination provided for herein. 63.7 This policy shall be canceled at any time at the request of 63.8 the insured, in which case this company shall, upon demand and 63.9 surrender of this policy, refund the excess of paid premium 63.10 above the customary short rates for the expired time. This 63.11 policy may be canceled at any time by this company by giving to 63.12 the insured30 days'a written notice of cancellation with or 63.13 without tender of the excess of paid premium above the pro rata 63.14 premium for the expired time, which excess, if not tendered, 63.15 shall be refunded on demand. Notice of cancellation shall state 63.16 that said excess premium (if not tendered) will be refunded on 63.17 demand. 63.18 If loss hereunder is made payable, in whole or in part, to 63.19 a designated mortgagee or contract for deed vendor not named 63.20 herein as insured, such interest in this policy may be canceled 63.21 by giving to such mortgagee or vendor a ten days' written notice 63.22 of cancellation. 63.23 Notwithstanding any other provisions of this policy, if 63.24 this policy shall be made payable to a mortgagee or contract for 63.25 deed vendor of the covered real estate, no act or default of any 63.26 person other than such mortgagee or vendor or the mortgagee's or 63.27 vendor's agent or those claiming under the mortgagee or vendor, 63.28 whether the same occurs before or during the term of this 63.29 policy, shall render this policy void as to such mortgagee or 63.30 vendor nor affect such mortgagee's or vendor's right to recover 63.31 in case of loss on such real estate; provided, that the 63.32 mortgagee or vendor shall on demand pay according to the 63.33 established scale of rates for any increase of risks not paid 63.34 for by the insured; and whenever this company shall be liable to 63.35 a mortgagee or vendor for any sum for loss under this policy for 63.36 which no liability exists as to the mortgagor, vendee, or owner, 64.1 and this company shall elect by itself, or with others, to pay 64.2 the mortgagee or vendor the full amount secured by such mortgage 64.3 or contract for deed, then the mortgagee or vendor shall assign 64.4 and transfer to the company the mortgagee's or vendor's 64.5 interest, upon such payment, in the said mortgage or contract 64.6 for deed together with the note and debts thereby secured. 64.7 This company shall not be liable for a greater proportion 64.8 of any loss than the amount hereby insured shall bear to the 64.9 whole insurance covering the property against the peril involved. 64.10 In case of any loss under this policy the insured shall 64.11 give immediate written notice to this company of any loss, 64.12 protect the property from further damage, and a statement in 64.13 writing, signed and sworn to by the insured, shall within 60 64.14 days be rendered to the company, setting forth the value of the 64.15 property insured, except in case of total loss on buildings the 64.16 value of said buildings need not be stated, the interest of the 64.17 insured therein, all other insurance thereon, in detail, the 64.18 purposes for which and the persons by whom the building insured, 64.19 or containing the property insured, was used, and the time at 64.20 which and manner in which the fire originated, so far as known 64.21 to the insured. 64.22 The insured, as often as may be reasonably required, shall 64.23 exhibit to any person designated by this company all that 64.24 remains of any property herein described, and, after being 64.25 informed of the right to counsel and that any answers may be 64.26 used against the insured in later civil or criminal proceedings, 64.27 the insured shall, within a reasonable period after demand by 64.28 this company, submit to examinations under oath by any person 64.29 named by this company, and subscribe the oath. The insured, as 64.30 often as may be reasonably required, shall produce for 64.31 examination all records and documents reasonably related to the 64.32 loss, or certified copies thereof if originals are lost, at a 64.33 reasonable time and place designated by this company or its 64.34 representatives, and shall permit extracts and copies thereof to 64.35 be made. 64.36 In case the insured and this company, except in case of 65.1 total loss on buildings, shall fail to agree as to the actual 65.2 cash value or the amount of loss, then, on the written demand of 65.3 either, each shall select a competent and disinterested 65.4 appraiser and notify the other of the appraiser selected within 65.5 20 days of such demand. In case either fails to select an 65.6 appraiser within the time provided, then a presiding judge of 65.7 the district court of the county wherein the loss occurs may 65.8 appoint such appraiser for such party upon application of the 65.9 other party in writing by giving five days' notice thereof in 65.10 writing to the party failing to appoint. The appraisers shall 65.11 first select a competent and disinterested umpire; and failing 65.12 for 15 days to agree upon such umpire, then a presiding judge of 65.13 the above mentioned court may appoint such an umpire upon 65.14 application of party in writing by giving five days' notice 65.15 thereof in writing to the other party. The appraisers shall 65.16 then appraise the loss, stating separately actual value and loss 65.17 to each item; and, failing to agree, shall submit their 65.18 differences, only, to the umpire. An award in writing, so 65.19 itemized, of any two when filed with this company shall 65.20 determine the amount of actual value and loss. Each appraiser 65.21 shall be paid by the selecting party, or the party for whom 65.22 selected, and the expense of the appraisal and umpire shall be 65.23 paid by the parties equally. 65.24 It shall be optional with this company to take all of the 65.25 property at the agreed or appraised value, and also to repair, 65.26 rebuild or replace the property destroyed or damaged with other 65.27 of like kind and quality within a reasonable time, on giving 65.28 notice of its intention so to do within 30 days after the 65.29 receipt of the proof of loss herein required. 65.30 There can be no abandonment to this company of any property. 65.31 The amount of loss for which this company may be liable 65.32 shall be payable 60 days after proof of loss, as herein 65.33 provided, is received by this company and ascertainment of the 65.34 loss is made either by agreement between the insured and this 65.35 company expressed in writing or by the filing with this company 65.36 of an award as herein provided. It is moreover understood that 66.1 there can be no abandonment of the property insured to the 66.2 company, and that the company will not in any case be liable for 66.3 more than the sum insured, with interest thereon from the time 66.4 when the loss shall become payable, as above provided. 66.5 No suit or action on this policy for the recovery of any 66.6 claim shall be sustainable in any court of law or equity unless 66.7 all the requirements of this policy have been complied with, and 66.8 unless commenced within two years after inception of the loss. 66.9 This company is subrogated to, and may require from the 66.10 insured an assignment of all right of recovery against any party 66.11 for loss to the extent that payment therefor is made by this 66.12 company; and the insurer may prosecute therefor in the name of 66.13 the insured retaining such amount as the insurer has paid. 66.14 Assignment of this policy shall not be valid except with 66.15 the written consent of this company. 66.16 IN WITNESS WHEREOF, this company has executed and attested 66.17 these presents. 66.18 66.19 ........................ ........................ 66.20 (Signature) (Signature) 66.21 ........................ ........................ 66.22 (Name of office) (Name of office) 66.23 Sec. 63. Minnesota Statutes 1998, section 65A.01, is 66.24 amended by adding a subdivision to read: 66.25 Subd. 3c. [TIME REQUIREMENTS.] (a) In the event of a 66.26 policy less than 60 days old that is not being renewed, or a 66.27 policy that it is being canceled for nonpayment of premium, the 66.28 notice must be mailed to the insured so that it is received at 66.29 least 20 days before the effective cancellation date. If a 66.30 policy is being canceled for underwriting considerations, the 66.31 insured must be informed of the source from which the 66.32 information was received. 66.33 (b) In the event of a mid-term cancellation, for reasons 66.34 listed in subdivision 3a, or according to policy provisions, the 66.35 insured must receive a 30-day notice. 66.36 (c) In the event of a nonrenewal, a 60-day notice must be 67.1 sent to the insured, containing the specific underwriting or 67.2 other reason for the indicated actions. 67.3 (d) This subdivision does not apply to commercial policies 67.4 regulated under sections 60A.36 and 60A.37. 67.5 Sec. 64. Minnesota Statutes 1998, section 65A.27, 67.6 subdivision 4, is amended to read: 67.7 Subd. 4. "Homeowner's insurance" means insurance coverage, 67.8 as provided in section 60A.06, subdivision 1, clause (1)(c), 67.9 normally written by the insurer as a standard homeowner's 67.10 package policy or as a standard residential renter's package 67.11 policy. This definition includes, but is not limited to, 67.12 policies that are generally described as homeowner's policies, 67.13 mobile/manufactured homeowner's policies, dwelling owner 67.14 policies, condominium owner policies, and tenant policies. 67.15 Sec. 65. Minnesota Statutes 1998, section 65A.29, 67.16 subdivision 4, is amended to read: 67.17 Subd. 4. [FORM REQUIREMENTS.] Any notice or statement 67.18 required by subdivisions 1 to 3, or any other notice canceling a 67.19 homeowner's insurance policy must be written in language which 67.20 is easily readable and understandable by a person of average 67.21 intelligence and understanding. The statement of reason must be 67.22 sufficiently specific to convey, clearly and without further 67.23 inquiry, the basis for the insurer's refusal to renew or to 67.24 write the insurance coverage. 67.25 The notice or statement must also inform the insured of: 67.26 (1) the possibility of coverage through the Minnesota 67.27 property insurance placement facility under sections 65A.31 to 67.28 65A.42; 67.29 (2) the right to object to the commissioner under 67.30 subdivision 9; and 67.31 (3) the right to the return of unearned premium in 67.32 appropriate situations under subdivision 10. 67.33 Sec. 66. Minnesota Statutes 1998, section 65B.02, 67.34 subdivision 2, is amended to read: 67.35 Subd. 2. [QUALIFIED APPLICANT.] "Qualified applicant" 67.36 means a person who: 68.1 (1) Is a resident of this state, 68.2 (2) Owns a motor vehicle registered in accordance with the 68.3 laws of this state, or has a valid driver's license, or is 68.4 required to fileproof of financial responsibilitya certificate 68.5 of insurance with the commissioner of public safetyin68.6accordance with the provisions of this chapter, and 68.7 (3) Has no unpaid premiums with respect to prior automobile 68.8 insurance. 68.9 Sec. 67. Minnesota Statutes 1998, section 65B.44, 68.10 subdivision 1, is amended to read: 68.11 Subdivision 1. [INCLUSIONS.] Basic economic loss benefits 68.12 shall provide reimbursement for all loss suffered through injury 68.13 arising out of the maintenance or use of a motor vehicle, 68.14 subject to any applicable deductibles, exclusions, 68.15 disqualifications, and other conditions, and shall provide a 68.16maximumminimum of $40,000 for loss arising out of the injury of 68.17 any one person, consisting of: 68.18 (a) $20,000 for medical expense loss arising out of injury 68.19 to any one person; and 68.20 (b) a total of $20,000 for income loss, replacement 68.21 services loss, funeral expense loss, survivor's economic loss, 68.22 and survivor's replacement services loss arising out of the 68.23 injury to any one person. 68.24 Sec. 68. Minnesota Statutes 1998, section 65B.48, 68.25 subdivision 5, is amended to read: 68.26 Subd. 5. (a) Every owner of a motorcycle registered or 68.27 required to be registered in this state or operated in this 68.28 state by the owner or with the owner's permission shall provide 68.29 and maintain security for the payment of tort liabilities 68.30 arising out of the maintenance or use of the motorcycle in this 68.31 state. Security may be provided by a contract of liability 68.32 insurance complying with section 65B.49, subdivision 3, or by 68.33 qualifying as a self insurer in the manner provided in 68.34 subdivision 3. 68.35 (b) At the time an application for motorcycle insurance 68.36 without personal injury protection coverage is completed, there 69.1 must be attached to the application a separate form containing a 69.2 written notice in at least 10-point bold type, if printed, or in 69.3 capital letters, if typewritten that states: 69.4 "Under Minnesota law, a policy of motorcycle coverage 69.5 issued in the State of Minnesota must provide liability 69.6 coverage only, and there is no requirement that the policy 69.7 provide personal injury protection (PIP) coverage in the 69.8 case of injury sustained by the insured. No PIP coverage 69.9 provided by an automobile insurance policy you may have in 69.10 force will extend to provide coverage in the event of a 69.11 motorcycle accident." 69.12 Sec. 69. Minnesota Statutes 1998, section 72A.125, 69.13 subdivision 3, is amended to read: 69.14 Subd. 3. [COLLISION DAMAGE WAIVER.] A "collision damage 69.15 waiver" is a discharge of the responsibility of the renter or 69.16 leasee to return the motor vehicle in the same condition as when 69.17 it was first rented. The waiver is a full and complete 69.18 discharge of the responsibility to return the vehicle in the 69.19 same condition as when it was first rented. The waiver may not 69.20 contain any exclusions except those approved by the commissioner 69.21pursuant to the requirements contained in section 61A.02,69.22subdivisions 2 to 5. 69.23 Sec. 70. Minnesota Statutes 1998, section 72A.20, 69.24 subdivision 29, is amended to read: 69.25 Subd. 29. [HIV TESTS; CRIME VICTIMS AND EMERGENCY MEDICAL 69.26 SERVICE PERSONNEL.] No insurer regulated under chapter 61Aor, 69.27 62B, or 62S, or providing health, medical, hospitalization, 69.28 long-term care insurance, or accident and sickness insurance 69.29 regulated under chapter 62A, or nonprofit healthservices69.30 service plan corporation regulated under chapter 62C, health 69.31 maintenance organization regulated under chapter 62D, or 69.32 fraternal benefit society regulated under chapter 64B, may: 69.33 (1) obtain or use the performance of or the results of a 69.34 test to determine the presence of the human immunodeficiency 69.35 virus (HIV) antibody performed on an offender under section 69.36 611A.19 or performed on a crime victim who was exposed to or had 70.1 contact with an offender's bodily fluids during commission of a 70.2 crime that was reported to law enforcement officials, in order 70.3 to make an underwriting decision, cancel, fail to renew, or take 70.4 any other action with respect to a policy, plan, certificate, or 70.5 contract; 70.6 (2) obtain or use the performance of or the results of a 70.7 test to determine the presence of the human immunodeficiency 70.8 virus (HIV) antibody performed on a patient pursuant to sections 70.9 144.761 to 144.7691, or performed on emergency medical services 70.10 personnel pursuant to the protocol under section 144.762, 70.11 subdivision 2, in order to make an underwriting decision, 70.12 cancel, fail to renew, or take any other action with respect to 70.13 a policy, plan, certificate, or contract; for purposes of this 70.14 clause, "patient" and "emergency medical services personnel" 70.15 have the meanings given in section 144.761; or 70.16 (3) ask an applicant for coverage or a person already 70.17 covered whether the person has: (i) had a test performed for 70.18 the reason set forth in clause (1) or (2); or (ii) been the 70.19 victim of an assault or any other crime which involves bodily 70.20 contact with the offender. 70.21 A question that purports to require an answer that would 70.22 provide information regarding a test performed for the reason 70.23 set forth in clause (1) or (2) may be interpreted as excluding 70.24 this test. An answer that does not mention the test is 70.25 considered to be a truthful answer for all purposes. An 70.26 authorization for the release of medical records for insurance 70.27 purposes must specifically exclude any test performed for the 70.28 purpose set forth in clause (1) or (2) and must be read as 70.29 providing this exclusion regardless of whether the exclusion is 70.30 expressly stated. This subdivision does not affect tests 70.31 conducted for purposes other than those described in clause (1) 70.32 or (2), including any test to determine the presence of the 70.33 human immunodeficiency virus (HIV) antibody if such test was 70.34 performed at the insurer's direction as part of the insurer's 70.35 normal underwriting requirements. 70.36 Sec. 71. Minnesota Statutes 1998, section 72B.04, 71.1 subdivision 10, is amended to read: 71.2 Subd. 10. [FEES.] A fee of $40 is imposed for each initial 71.3 license or temporary permit and $25 for each renewal thereof or 71.4 amendment thereto. A fee of $20 is imposed for the registration 71.5 of each nonlicensed adjuster who is required to register under 71.6 section 72B.06. All fees shall be transmitted to the 71.7 commissioner and shall be payable to thestate71.8treasurerdepartment of commerce.If a fee is paid for an71.9examination and if within one year from the date of that payment71.10no written request for a refund is received by the commissioner71.11or the examination for which the fee was paid is not taken, the71.12fee is forfeited to the state of Minnesota.71.13 Sec. 72. Minnesota Statutes 1998, section 79A.01, 71.14 subdivision 10, is amended to read: 71.15 Subd. 10. [COMMON CLAIMS FUND.] "Common claims fund," with 71.16 respect to group self-insurers, means the cash, cash 71.17 equivalents, or investment accounts maintained by themutual71.18 self-insurance group to pay its workers' compensation 71.19 liabilities. 71.20 Sec. 73. Minnesota Statutes 1998, section 79A.01, is 71.21 amended by adding a subdivision to read: 71.22 Subd. 11. [DIMINUTIVE APPLICANTS.] "Diminutive applicants" 71.23 to group self-insurance means applicants to existing 71.24 self-insurance groups whose equity and premium are both less 71.25 than five percent of the total group's equity and premium. 71.26 Sec. 74. Minnesota Statutes 1998, section 79A.02, 71.27 subdivision 1, is amended to read: 71.28 Subdivision 1. [MEMBERSHIP.] For the purposes of assisting 71.29 the commissioner, there is established a workers' compensation 71.30 self-insurers' advisory committee of five members that are 71.31 employers authorized to self-insure in Minnesota. Three of the 71.32 members and three alternates shall be elected by the 71.33 self-insurers' security fund board of trustees and two members 71.34 and two alternates shall be appointed by the commissioner. 71.35 Sec. 75. Minnesota Statutes 1998, section 79A.02, 71.36 subdivision 3, is amended to read: 72.1 Subd. 3. [AUDIT OF SELF-INSURANCE APPLICATION.] (a) The 72.2self-insurer'sself-insurers' security fundshallmay retain a 72.3 certified public accountantwho shallto perform services for, 72.4 and report directly to, the commissioner of commerce. When 72.5 requested by the workers' compensation self-insurers' advisory 72.6 committee, the certified public accountant shall revieweachan 72.7 application to self-insure, including the applicant's financial 72.8 data. The certified public accountant shall provide a report to 72.9 the commissioner of commerce indicating whetherthethat 72.10 applicant has met the requirements of section 79A.03, 72.11 subdivisions 2 and 3. Additionally, the certified public 72.12 accountant shall provide advice and counsel to the commissioner 72.13 about relevant facts regardingthethat applicant's financial 72.14 condition. 72.15 (b) If the report of the certified public accountant is 72.16 used by the commissioner as the basis for the commissioner's 72.17 determination regarding the applicant's self-insurance status, 72.18 the certified public accountant shall be made available to the 72.19 commissioner for any hearings or other proceedings arising from 72.20 that determination. 72.21 (c) The commissioner shall provide the advisory committee 72.22 with the summary report by the certified public accountant and 72.23 any financial data in possession of the department of commerce 72.24 that is otherwise available to the public. 72.25 The cost of the review shall be the obligation of the 72.26 self-insurer's security fund. 72.27 Sec. 76. Minnesota Statutes 1998, section 79A.02, 72.28 subdivision 4, is amended to read: 72.29 Subd. 4. [RECOMMENDATIONS TO COMMISSIONER REGARDING 72.30 REVOCATION.] After each fifth anniversary from the date each 72.31 individual and group self-insurer becomes certified to 72.32 self-insure, the committee shall review all relevant financial 72.33 data filed with the department of commerce that is otherwise 72.34 available to the public and make a recommendation to the 72.35 commissioner about whether each self-insurer's certificate 72.36 should be revoked. For group self-insurers who have been in 73.1 existence for five years or more and have been granted renewal 73.2 authority, a level of funding in the common claims fund must be 73.3 maintained at not less than the greater of either: (1) one 73.4 year's claim losses paid in the most recent year; or (2) 73.5 one-third of the security deposit posted with the department of 73.6 commerce according to section 79A.04, subdivision 2. This 73.7 provision supersedes any requirements under section 79A.03, 73.8 subdivision 10, and Minnesota Rules, part 2780.5000. 73.9 Sec. 77. Minnesota Statutes 1998, section 79A.03, 73.10 subdivision 6, is amended to read: 73.11 Subd. 6. [APPLICATIONS FOR GROUP SELF-INSURANCE.] (a) Two 73.12 or more employers may apply to the commissioner for the 73.13 authority to self-insure as a group, using forms available from 73.14 the commissioner. This initial application shall be accompanied 73.15 by a copy of the bylaws or plan of operation adopted by the 73.16 group. Such bylaws or plan of operation shall conform to the 73.17 conditions prescribed by law or rule. The commissioner shall 73.18 approve or disapprove the bylaws within 60 days unless a 73.19 question as to the legality of a specific bylaw or plan 73.20 provision has been referred to the attorney general's office. 73.21 The commissioner shall make a determination as to the 73.22 application within 15 days after receipt of the requested 73.23 response from the attorney general's office. 73.24 (b) After the initial application and the bylaws or plan of 73.25 operation have been approved by the commissioner or at the time 73.26 of the initial application, the group shall submit the names of 73.27 employers that will be members of the group; an indemnity 73.28 agreement providing for joint and several liability for all 73.29 group members for any and all workers' compensation claims 73.30 incurred by any member of the group, as set forth in Minnesota 73.31 Rules, part 2780.9920, signed by an officer of each member; and 73.32 an accounting review performed by a certified public 73.33 accountant. A certified financial audit may be filed in lieu of 73.34 an accounting review. 73.35 (c) When a group has obtained its authority to self-insure, 73.36 additional applicants who wish to join the group must apply for 74.1 approval by submitting, at least 45 days before joining the 74.2 group: (1) an application; (2) an indemnity agreement providing 74.3 for joint and several liability as set forth in Minnesota Rules, 74.4 part 2780.9920, signed by an officer of the applicant; and (3) a 74.5 certified financial audit performed by a certified public 74.6 accountant. An accounting review performed by a certified 74.7 public accountant may be filed in lieu of a certified audit. 74.8 New diminutive applicants to the group, as defined in 74.9 section 79A.01, subdivision 11, applying for membership in 74.10 groups in existence longer than one year, who have a combined 74.11 equity of all group members in excess of 15 times the last 74.12 retention limit selected by the group with the workers' 74.13 compensation reinsurance association, and have posted 125 74.14 percent of the group's total estimated future liability, must 74.15 submit the items in this paragraph at least ten days before 74.16 joining the group. 74.17 If the cumulative total of premium added to the group by 74.18 diminutive new members is greater than 50 percent in a fiscal 74.19 year of the group, all subsequent new members' applications must 74.20 be submitted at least 45 days before joining the group. 74.21 In all cases of new membership, evidence that cash premiums 74.22 equal to not less than 20 percent of the current year's modified 74.23 premium of each applicant have been paid into a common claims 74.24 fund, maintained by the group in a designated depository, must 74.25 be filed with the department at least ten days before joining 74.26 the group. 74.27 Sec. 78. Minnesota Statutes 1998, section 79A.03, 74.28 subdivision 7, is amended to read: 74.29 Subd. 7. [FINANCIAL STANDARDS.] A self-insurer group 74.30proposing to self-insureshall have and maintain: 74.31 (a) A combined net worth of all of the members of an amount 74.32 at least equal to the greater of ten times the retention 74.33 selected with the workers' compensation reinsurance association 74.34 or one-third of the current annual modified premium of the 74.35 members. 74.36 (b) Sufficient assets, net worth, and liquidity to promptly 75.1 and completely meet all obligations of its members under chapter 75.2 176 or this chapter. In determining whether a group is in sound 75.3 financial condition, consideration shall be given to the 75.4 combined net worth of the member companies; the consolidated 75.5 long-term and short-term debt to equity ratios of the member 75.6 companies; any excess insurance other than reinsurance with the 75.7 workers' compensation reinsurance association, purchased by the 75.8 group from an insurer licensed in Minnesota or from an 75.9 authorized surplus line carrier; other financial data requested 75.10 by the commissioner or submitted by the group; and the combined 75.11 workers' compensation experience of the group for the last four 75.12 years. 75.13 Sec. 79. Minnesota Statutes 1998, section 79A.03, 75.14 subdivision 9, is amended to read: 75.15 Subd. 9. [FILING REPORTS.] (a) Incurred losses, paid and 75.16 unpaid, specifying indemnity and medical losses by 75.17 classification, payroll by classification, and current estimated 75.18 outstanding liability for workers' compensation shall be 75.19 reported to the commissioner by each self-insurer on a calendar 75.20 year basis, in a manner and on forms available from the 75.21 commissioner. Payroll information must be filed by April 1 of 75.22 the following year, and loss information and total workers'75.23compensation liability must be filed by August 1 of the75.24following year. 75.25 (b) Each self-insurer shall, under oath, attest to the 75.26 accuracy of each report submitted pursuant to paragraph (a). 75.27 Upon sufficient cause, the commissioner shall require the 75.28 self-insurer to submit a certified audit of payroll and claim 75.29 records conducted by an independent auditor approved by the 75.30 commissioner, based on generally accepted accounting principles 75.31 and generally accepted auditing standards, and supported by an 75.32 actuarial review and opinion of the future contingent 75.33 liabilities. The basis for sufficient cause shall include the 75.34 following factors: where the losses reported appear 75.35 significantly different from similar types of businesses; where 75.36 major changes in the reports exist from year to year, which are 76.1 not solely attributable to economic factors; or where the 76.2 commissioner has reason to believe that the losses and payroll 76.3 in the report do not accurately reflect the losses and payroll 76.4 of that employer. If any discrepancy is found, the commissioner 76.5 shall require changes in the self-insurer's or workers' 76.6 compensation service company record keeping practices. 76.7 (c)With theAn annuallossstatus report due August 1 by 76.8 each self-insurer shallreport to the commissioner any workers'76.9compensation claim from the previous year where the full,76.10undiscounted value is estimated to exceed $50,000,be filed in a 76.11 manner and on forms prescribed by the commissioner. 76.12 (d) Each individual self-insurer shall, within four months 76.13 after the end of its fiscal year, annually file with the 76.14 commissioner its latest 10K report required by the Securities 76.15 and Exchange Commission. If an individual self-insurer does not 76.16 prepare a 10K report, it shall file an annual certified 76.17 financial statement, together with such other financial 76.18 information as the commissioner may require to substantiate data 76.19 in the financial statement. 76.20 (e) Each member of the group shall, withinfourseven 76.21 months after the end of each fiscal year for that group, file 76.22 the most recent annual financial statement, reviewed by a 76.23 certified public accountant in accordance with the Statements on 76.24 Standards for Accounting and Review Services, Volume 2, the 76.25 American Institute of Certified Public Accountants Professional 76.26 Standards, or audited in accordance with generally accepted 76.27 auditing standards, together with such other financial 76.28 information the commissioner may require. In addition, the 76.29 group shall file, withinfourseven months after the end of each 76.30 fiscal year for that group, combining financial statements of 76.31 the group members, compiled by a certified public accountant in 76.32 accordance with the Statements on Standards for Accounting and 76.33 Review Services, Volume 2, the American Institute of Certified 76.34 Public Accountants Professional Standards. The combining 76.35 financial statements shall include, but not be limited to, a 76.36 balance sheet, income statement, statement of changes in net 77.1 worth, and statement of cash flow. Each combining financial 77.2 statement shall include a column for each individual group 77.3 member along with a total column. 77.4 Where a group has 50 or more members, the group shall file, 77.5 in lieu of the combining financial statements, a combined 77.6 financial statement showing only the total column for the entire 77.7 group's balance sheet, income statement, statement of changes in 77.8 net worth, and statement of cash flow. Additionally, the group 77.9 shall disclose, for each member, the total assets, net worth, 77.10 revenue, and income for the most recent fiscal year. The 77.11 combining and combined financial statements may omit all 77.12 footnote disclosures. 77.13 (f) In addition to the financial statements required by 77.14 paragraphs (d) and (e), interim financial statements or 10Q 77.15 reports required by the Securities and Exchange Commission may 77.16 be required by the commissioner upon an indication that there 77.17 has been deterioration in the self-insurer's financial 77.18 condition, including a worsening of current ratio, lessening of 77.19 net worth, net loss of income, the downgrading of the company's 77.20 bond rating, or any other significant change that may adversely 77.21 affect the self-insurer's ability to pay expected losses. Any 77.22 self-insurer that files an 8K report with the Securities and 77.23 Exchange Commission shall also file a copy of the report with 77.24 the commissioner within 30 days of the filing with the 77.25 Securities and Exchange Commission. 77.26 Sec. 80. Minnesota Statutes 1998, section 79A.03, 77.27 subdivision 10, is amended to read: 77.28 Subd. 10. [ANNUAL AUDIT AND REFUNDS.] (a) The accounts and 77.29 records of the group self-insurer's fund shall be audited 77.30 annually. Audits shall be made by certified public accountants, 77.31 based on generally accepted accounting principles and generally 77.32 accepted auditing standards, and supported by actuarial review 77.33 and opinion of the future contingent liabilities, in order to 77.34 determine the solvency of the self-insurer's fund. All audits 77.35 required by this subdivision shall be filed with the 77.36 commissioner 90 days after the close of the fiscal year for the 78.1 group self-insurer. The commissioner may require a special 78.2 audit to be made at other times if the financial stability of 78.3 the fund or the adequacy of its monetary reserves is in question. 78.4 (b) One hundred percent of any surplus money for a fund 78.5 year in excess of 125 percent of the amount necessary to fulfill 78.6 all obligations under chapter 176 for that fund year may be 78.7 declared refundable to a member at any time after 18 months 78.8 following the end of such fund year. There can be no more than 78.9 one refund in any 12-month period. When all claims of any one 78.10 fund year have been fully paid, as certified by an actuary, all 78.11 surplus money from that fund year may be declared refundable. 78.12 Sec. 81. Minnesota Statutes 1998, section 79A.03, is 78.13 amended by adding a subdivision to read: 78.14 Subd. 13. [ANNUAL REQUIREMENTS.] The financial 78.15 requirements set forth in subdivisions 3, 4, 5, and 7, must be 78.16 met on an annual basis. 78.17 Sec. 82. Minnesota Statutes 1998, section 79A.06, 78.18 subdivision 5, is amended to read: 78.19 Subd. 5. [PRIVATE EMPLOYERS WHO HAVE CEASED TO BE 78.20 SELF-INSURED.] (a) Private employers who have ceased to be 78.21 private self-insurers shall discharge their continuing 78.22 obligations to secure the payment of compensation which is 78.23 accrued during the period of self-insurance, for purposes of 78.24 Laws 1988, chapter 674, sections 1 to 21, by compliance with all 78.25 of the following obligations of current certificate holders: 78.26 (1) Filing reports with the commissioner to carry out the 78.27 requirements of this chapter; 78.28 (2) Depositing and maintaining a security deposit for 78.29 accrued liability for the payment of any compensation which may 78.30 become due, pursuant to chapter 176. However, if a private 78.31 employer who has ceased to be a private self-insurer purchases 78.32 an insurance policy from an insurer authorized to transact 78.33 workers' compensation insurance in this state which provides 78.34 coverage of all claims for compensation arising out of injuries 78.35 occurring during the entire period the employer was 78.36 self-insured, whether or not reported during that period, the 79.1 policy will: 79.2 (i) discharge the obligation of the employer to maintain a 79.3 security deposit for the payment of the claims covered under the 79.4 policy; 79.5 (ii) discharge any obligation which the self-insurers' 79.6 security fund has or may have for payment of all claims for 79.7 compensation arising out of injuries occurring during the period 79.8 the employer was self-insured, whether or not reported during 79.9 that period; and 79.10 (iii) discharge the obligations of the employer to pay any 79.11 future assessments to the self-insurers' security fund. 79.12 A private employer who has ceased to be a private 79.13 self-insurer may instead buy an insurance policy described 79.14 above, except that it covers only a portion of the period of 79.15 time during which the private employer was self-insured; 79.16 purchase of such a policy discharges any obligation that the 79.17 self-insurers' security fund has or may have for payment of all 79.18 claims for compensation arising out of injuries occurring during 79.19 the period for which the policy provides coverage, whether or 79.20 not reported during that period. 79.21TheA policy described in this clause may not be issued by 79.22 an insurer unless it has previously been approved as to form and 79.23 substance by the commissioner; and 79.24 (3) Paying within 30 days all assessments of which notice 79.25 is sent by the security fund, for a period of seven years from 79.26 the last day its certificate of self-insurance was in effect. 79.27 Thereafter, the private employer who has ceased to be a private 79.28 self-insurer may either: (i) continue to pay within 30 days all 79.29 assessments of which notice is sent by the security fund until 79.30 it has no incurred liabilities for the payment of compensation 79.31 arising out of injuries during the period of self-insurance; or 79.32 (ii) pay the security fund a cash payment equal to four percent 79.33 of the net present value of all remaining incurred liabilities 79.34 for the payment of compensation under sections 176.101 and 79.35 176.111 as certified by a member of the casualty actuarial 79.36 society. Assessments shall be based on the benefits paid by the 80.1 employer during the calendar year immediately preceding the 80.2 calendar year in which the employer's right to self-insure is 80.3 terminated or withdrawn. 80.4 (b) With respect to a self-insurer who terminates its 80.5 self-insurance authority after April 1, 1998, that member shall 80.6 obtain and file with the commissioner an actuarial opinion of 80.7 its outstanding liabilities as determined by an associate or 80.8 fellow of the Casualty Actuarial Society. The opinion must 80.9 separate liability for indemnity benefits from liability from 80.10 medical benefits, and must discount each up to four percent per 80.11 annum to net present value. Within 30 days after notification 80.12 of approval of the actuarial opinion by the commissioner, the 80.13 member shall pay to the security fund an amount equal to 120 80.14 percent of that discounted outstanding indemnity liability, 80.15 multiplied by the greater of the average annualized assessment 80.16 rate since inception of the security fund or the annual rate at 80.17 the time of the most recent assessment before termination. 80.18 (c) A former member who terminated its self-insurance 80.19 authority before April 1, 1998, who has paid assessments to the 80.20 self-insurers' security fund for seven years, and whose 80.21 annualized assessment is $500 or less, may buy out of its 80.22 outstanding liabilities to the self-insurers' security fund by 80.23 an amount calculated as follows: 1.35 multiplied by the 80.24 indemnity case reserves at the time of the calculation, 80.25 multiplied by the then current self-insurers' security fund 80.26 annualized assessment rate. 80.27 (d) A former member who terminated its self-insurance 80.28 authority before April 1, 1998, and who is paying assessments 80.29 within the first seven years after ceasing to be self-insured 80.30 under paragraph (a), clause (3), may elect to buy out its 80.31 outstanding liabilities to the self-insurers' security fund by 80.32 obtaining and filing with the commissioner an actuarial opinion 80.33 of its outstanding liabilities as determined by an associate or 80.34 fellow of the Casualty Actuarial Society. The opinion must 80.35 separate liability for indemnity benefits from liability from 80.36 medical benefits, and must discount each up to four percent per 81.1 annum to net present value. Within 30 days after notification 81.2 of approval of the actuarial opinion by the commissioner, the 81.3 member shall pay to the security fund an amount equal to 120 81.4 percent of that discounted outstanding indemnity liability, 81.5 multiplied by the greater of the average annualized assessment 81.6 rate since inception of the security fund or the annual rate at 81.7 the time of the most recent assessment. 81.8 (e) A former member who has paid the security fund 81.9 according to paragraphs (b) to (d) and subsequently receives 81.10 authority from the commissioner to again self-insure shall be 81.11 assessed under section 79A.12, subdivision 2, only on indemnity 81.12 benefits paid on injuries that occurred after the former member 81.13 received authority to self-insure again; provided that the 81.14 member furnishes verified data regarding those benefits to the 81.15 security fund. 81.16 (f) In addition to proceedings to establish liabilities and 81.17 penalties otherwise provided, a failure to comply may be the 81.18 subject of a proceeding before the commissioner. An appeal from 81.19 the commissioner's determination may be taken pursuant to the 81.20 contested case procedures of chapter 14 within 30 days of the 81.21 commissioner's written determination. 81.22 Any current or past member of the self-insurers' security 81.23 fund is subject to service of process on any claim arising out 81.24 of chapter 176 or this chapter in the manner provided by section 81.25 5.25, or as otherwise provided by law. The issuance of a 81.26 certificate to self-insure to the private self-insured employer 81.27 shall be deemed to be the agreement that any process which is 81.28 served in accordance with this section shall be of the same 81.29 legal force and effect as if served personally within this state. 81.30 Sec. 83. Minnesota Statutes 1998, section 79A.06, is 81.31 amended by adding a subdivision to read: 81.32 Subd. 6. [PRIVATE EMPLOYERS WHO ARE SELF-INSURED.] Private 81.33 employers who are currently self-insurers may also purchase a 81.34 policy described in subdivision 5, paragraph (a), clause (2), of 81.35 this section, with the same effect as specified in that clause 81.36 for the period covered by the policy. 82.1 Sec. 84. Minnesota Statutes 1998, section 79A.21, 82.2 subdivision 2, is amended to read: 82.3 Subd. 2. [REQUIRED DOCUMENTS.] All first-year applications 82.4 must be accompanied by the following: 82.5 (a) A detailed business plan including the risk profile of 82.6 the proposed membership, underwriting guidelines, marketing 82.7 plan, minimum financial criteria for each member, and financial 82.8 projections for the first year of operation. 82.9 (b) A plan describing the method in which premiums are to 82.10 be charged to the employer members. The plan shall be 82.11 accompanied by copies of the member's workers' compensation 82.12 insurance policies in force at the time of application. In 82.13 developing the premium for the group, the commercial 82.14 self-insurance group shall base its premium on the Minnesota 82.15 workers' compensation insurers association's manual of rules, 82.16 loss costs, and classifications approved for use in Minnesota by 82.17 the commissioner. Each member applicant shall, on a form 82.18 approved by the commissioner, complete estimated payrolls for 82.19 the first 12-month period that the applicant will be 82.20 self-insured. Premium volume discounts per the plan will be 82.21 permitted if they can be shown to be consistent with actuarial 82.22 standards. 82.23 (c) A schedule indicating actual or anticipated operational 82.24 expenses of the commercial self-insurance group. No authority 82.25 to self-insure will be granted unless, over the term of the 82.26 policy year, at least 65 percent of total revenues from all 82.27 sources for the year are available for the payment of its claim 82.28 and assessment obligations. For purposes of this calculation, 82.29 claim and assessment obligations include the cost of allocated 82.30 loss expenses as well as special compensation fund and 82.31 commercial self-insurance group security fund assessments but 82.32 exclude the cost of unallocated loss expenses. 82.33 (d) An indemnity agreement from each member who will 82.34 participate in the commercial self-insurance group, signed by an 82.35 officer of each member, providing for joint and several 82.36 liability for all claims and expenses of all of the members of 83.1 the commercial self-insurance group arising in any fund year in 83.2 which the member was a participant on a form approved by the 83.3 commissioner. The indemnity agreement shall provide for 83.4 assessments according to the group's bylaws on an individual and 83.5 proportionate basis. 83.6 (e) A copy of the commercial self-insurance group bylaws. 83.7 (f) Evidence of the security deposit required under section 83.8 79A.24, accompanied by the actuarial certification study for the 83.9 minimum security deposit as required under section 79A.24. 83.10 (g) Each initial member of the commercial self-insurance 83.11 group shall submit to the commercial self-insurance group 83.12 accountant its most recent annual financial statement. 83.13 Financial statements for a period ending more than six months 83.14 prior to the date of the application must be accompanied by an 83.15 affidavit, signed by a company officer under oath, stating that 83.16 there has been no material lessening of the net worth nor other 83.17 adverse changes in its financial condition since the end of the 83.18 period. Individual group members constituting at least7550 83.19 percent of the group's annual premium shall submit reviewed or 83.20 audited financial statements. The remaining membersmaymust 83.21 submit compilation level statements. Statements for a period 83.22 ending more than 12 months prior to the date of application 83.23 cannot be accepted. 83.24 (h) A compiled combined financial statement of all group 83.25 members prepared by the commercial self-insurance group's 83.26 accountant and a list of members included in such 83.27 statements. An "Agreed Upon Procedures" report, as determined 83.28 by the commissioner, indicating combined net worth, total 83.29 assets, cash flow, and net income of the group members may be 83.30 filed in lieu of the compiled combined financial statement. 83.31 (i) A copy of each member's accountant's report letter from 83.32 the reports used in compiling the combined financial statements. 83.33 (j) A list of all members and the percentage of premium 83.34 each represents to the total group's annual premium for the 83.35 policy year. 83.36 Sec. 85. Minnesota Statutes 1998, section 79A.23, 84.1 subdivision 1, is amended to read: 84.2 Subdivision 1. [REQUIRED REPORTS TO COMMISSIONER.] Each 84.3 commercial self-insurance group shall submit the following 84.4 documents to the commissioner. 84.5 (a) An annual report shall be submitted by April 1 showing 84.6 the incurred losses, paid and unpaid, specifying indemnity and 84.7 medical losses by classification, payroll by classification, and 84.8 current estimated outstanding liability for workers' 84.9 compensation on a calendar year basis, in a manner and on forms 84.10 available from the commissioner. In addition each group will 84.11 submit a quarterly interim loss report showing incurred losses 84.12 for all its membership. 84.13 (b) Each commercial self-insurance group shall submit 84.14 within 45 days of the end of each quarter: 84.15 (1) a schedule showing all the members who participate in 84.16 the group, their date of inception, and date of withdrawal, if 84.17 applicable; 84.18 (2) a separate section identifying which members were added 84.19 or withdrawn during that quarter; and 84.20 (3) an internal financial statement and copies of the 84.21 fiscal agent's statements supporting the balances in the common 84.22 claims fund. 84.23 (c) The commercial self-insurance group shall submit an 84.24 annual certified financial audit report of the commercial 84.25 self-insurance group fund by April 1 of the following year. The 84.26 report must be accompanied by an expense schedule showing the 84.27 commercial self-insurance group's operational costs for the same 84.28 year including service company charges, accounting and actuarial 84.29 fees, fund administration charges, reinsurance premiums, 84.30 commissions, and any other costs associated with the 84.31 administration of the group program. 84.32 (d) An officer of the commercial self-insurance group 84.33 shall, under oath, attest to the accuracy of each report 84.34 submitted under paragraphs (a), (b), and (c). Upon sufficient 84.35 cause, the commissioner shall require the commercial 84.36 self-insurance group to submit a certified audit of payroll and 85.1 claim records conducted by an independent auditor approved by 85.2 the commissioner, based on generally accepted accounting 85.3 principles and generally accepted auditing standards, and 85.4 supported by an actuarial review and opinion of the future 85.5 contingent liabilities. The basis for sufficient cause shall 85.6 include the following factors: 85.7 (1) where the losses reported appear significantly 85.8 different from similar types of groups; 85.9 (2) where major changes in the reports exist from year to 85.10 year, which are not solely attributable to economic factors; or 85.11 (3) where the commissioner has reason to believe that the 85.12 losses and payroll in the report do not accurately reflect the 85.13 losses and payroll of the commercial self-insurance group. 85.14 If any discrepancy is found, the commissioner shall require 85.15 changes in the commercial self-insurance group's business plan 85.16 or service company recordkeeping practices. 85.17 (e) Each commercial self-insurance group shall submit by 85.18 September 15 a copy of the group's annual federal and state 85.19 income tax returns or provide proof that it has received an 85.20 exemption from these filings. 85.21 (f) With the annual loss report each commercial 85.22 self-insurance group shall report to the commissioner any 85.23 worker's compensation claim where the full, undiscounted value 85.24 is estimated to exceed $50,000, in a manner and on forms 85.25 prescribed by the commissioner. 85.26 (g) Each commercial self-insurance group shall submit by 85.27 May 1 a list of all members and the percentage of premium each 85.28 represents to the total group's premium for the previous 85.29 calendar year. 85.30 (h) Each commercial self-insurance group shall submit by 85.31May 1October 15 the following documents prepared by the group's 85.32 certified public accountant: 85.33 (1) a compiled combined financial statement of group 85.34 members and a list of members included in this statement;. An 85.35 "Agreed Upon Procedures" report, as determined by the 85.36 commissioner, indicating combined net worth, total assets, cash 86.1 flow, and net income of the group members may be filed in lieu 86.2 of the compiled combined financial statement; and 86.3 (2) a report that the statements which were combined have 86.4 met the requirements of subdivision 2. 86.5 (i) If any group member comprises over 25 percent of total 86.6 group premium, that member's financial statement must be 86.7 reviewed or audited, and, at the commissioner's option, must be 86.8 filed with the department of commerce by May 1 of the following 86.9 year. 86.10 (j) Each commercial self-insurance group shall submit a 86.11 copy of each member's accountant's report letter from the 86.12 reports used in compiling the combined financial statements. 86.13 Sec. 86. Minnesota Statutes 1998, section 79A.23, 86.14 subdivision 2, is amended to read: 86.15 Subd. 2. [REQUIRED REPORTS FROM MEMBERS TO GROUP.] Each 86.16 member of the commercial self-insurance group shall, byApril86.171September 15, submit to the group its most recent annual 86.18 financial statement, together with other financial information 86.19 the group may require. These financial statements submitted 86.20 must not have a fiscal year end date older than January 15 of 86.21 the group's calendar year end. Individual group members 86.22 constituting at least 50 percent of the group's annual premium 86.23 shall submit to the group reviewed or audited financial 86.24 statements. The remaining membersmaymust submit compilation 86.25 level statements. 86.26 Sec. 87. Minnesota Statutes 1998, section 256B.0644, is 86.27 amended to read: 86.28 256B.0644 [PARTICIPATION REQUIRED FOR REIMBURSEMENT UNDER 86.29 OTHER STATE HEALTH CARE PROGRAMS.] 86.30 A vendor of medical care, as defined in section 256B.02, 86.31 subdivision 7, and a health maintenance organization, as defined 86.32 in chapter 62D, must participate as a provider or contractor in 86.33 the medical assistance program, general assistance medical care 86.34 program, and MinnesotaCare as a condition of participating as a 86.35 provider in health insurance plans and programs or contractor 86.36 for state employees established under section 43A.18, the public 87.1 employees insurance program under section 43A.316, for health 87.2 insurance plans offered to local statutory or home rule charter 87.3 city, county, and school district employees, the workers' 87.4 compensation system under section 176.135, and insurance plans 87.5 provided through the Minnesota comprehensive health association 87.6 under sections 62E.01 to62E.1662E.19. The limitations on 87.7 insurance plans offered to local government employees shall not 87.8 be applicable in geographic areas where provider participation 87.9 is limited by managed care contracts with the department of 87.10 human services. For providers other than health maintenance 87.11 organizations, participation in the medical assistance program 87.12 means that (1) the provider accepts new medical assistance, 87.13 general assistance medical care, and MinnesotaCare patients, (2) 87.14 for providers other than dental services providers, at least 20 87.15 percent of the provider's patients are covered by medical 87.16 assistance, general assistance medical care, and MinnesotaCare 87.17 as their primary source of coverage, or (3) for dental services 87.18 providers, at least ten percent of the provider's patients are 87.19 covered by medical assistance, general assistance medical care, 87.20 and MinnesotaCare as their primary source of coverage. The 87.21 commissioner shall establish participation requirements for 87.22 health maintenance organizations. The commissioner shall 87.23 provide lists of participating medical assistance providers on a 87.24 quarterly basis to the commissioner of employee relations, the 87.25 commissioner of labor and industry, and the commissioner of 87.26 commerce. Each of the commissioners shall develop and implement 87.27 procedures to exclude as participating providers in the program 87.28 or programs under their jurisdiction those providers who do not 87.29 participate in the medical assistance program. The commissioner 87.30 of employee relations shall implement this section through 87.31 contracts with participating health and dental carriers. 87.32 Sec. 88. [REPEALER.] 87.33 (a) Minnesota Statutes 1998, sections 60A.11, subdivision 87.34 24a; 60B.36; 60K.08; 65A.29, subdivision 12; and 79A.04, 87.35 subdivision 8, are repealed. 87.36 (b) Minnesota Statutes 1998, section 60B.44, subdivisions 3 88.1 and 5, are repealed. 88.2 (c) Minnesota Rules, part 2780.0500, item C, is repealed. 88.3 Sec. 89. [EFFECTIVE DATES.] 88.4 (a) Sections 1, 3, 5 to 8, 20, 22 to 28, 31, 34, 35, 38, 88.5 39, 44 to 51, 54 to 56, 58 to 60, 66, 67, 69 to 87, and 88, 88.6 paragraph (b), are effective the day following final enactment. 88.7 (b) Sections 13 to 15 are effective the day following final 88.8 enactment and apply to plans of merger approved on or after that 88.9 date by the board of directors of the first of the constituent 88.10 corporations to grant such approval. Merging or consolidating 88.11 insurance corporations may, however, elect to have the changes 88.12 made by sections 13 to 15 not apply to a merger or consolidation 88.13 arising out of a joint agreement entered into prior to January 88.14 1, 2000. 88.15 (c) Section 32 is effective July 1, 2000. 88.16 (d) Section 33 is effective December 1, 1999, and applies 88.17 to all license renewals on or after that date. 88.18 (e) Section 30 is effective as follows: 88.19 (1) The amendment to Minnesota Statutes, section 60K.03, 88.20 subdivision 2, paragraph (d), is effective January 1, 2000. 88.21 (2) The amendment to Minnesota Statutes, section 60K.03, 88.22 subdivision 2, paragraph (e), is effective the day following 88.23 final enactment.