SF 349

as introduced - 80th Legislature (1997 - 1998) Posted on 12/15/2009 12:00am

  1.1                          A bill for an act 
  1.2             relating to insurance; regulating companies and 
  1.3             agents; providing immunity from suit and 
  1.4             indemnification for receivers and their employees; 
  1.5             regulating coverages; providing certain notices and 
  1.6             filing requirements; providing for a study; making 
  1.7             certain technical changes; amending Minnesota Statutes 
  1.8             1996, sections 60A.02, by adding a subdivision; 
  1.9             60A.052, subdivision 2, and by adding a subdivision; 
  1.10            60A.06, subdivision 2; 60A.075, subdivisions 1, 8, and 
  1.11            9; 60A.077, subdivisions 1, 2, 3, 5, 7, 8, and 10; 
  1.12            60A.092, subdivision 6; 60A.10, subdivision 1; 
  1.13            60A.111, subdivision 1; 60A.13, subdivision 1; 60A.19, 
  1.14            subdivision 1; 60B.04, by adding a subdivision; 
  1.15            60B.21, subdivision 2; 60B.25; 60B.44, subdivisions 3, 
  1.16            4, and 6; 60D.20, subdivision 2; 60K.02, subdivision 
  1.17            1; 60K.03, subdivisions 2 and 3; 60K.14, subdivision 
  1.18            4; 60K.19, subdivisions 7 and 8; 61A.28, subdivisions 
  1.19            6, 9a, and 12; 61A.60, subdivision 1; 61B.19, 
  1.20            subdivision 3; 62A.04, subdivision 3; 62A.135, 
  1.21            subdivision 5; 62A.50, subdivision 3; 62B.04, 
  1.22            subdivision 2; 65A.01, subdivision 3, and by adding 
  1.23            subdivisions; 65A.27, subdivision 4; 65B.48, 
  1.24            subdivision 5; 67A.231; 72A.20, subdivision 34; 
  1.25            72B.04, subdivision 10; 79A.01, subdivision 10; 
  1.26            79A.02, subdivisions 1 and 4; 79A.03, subdivisions 6, 
  1.27            7, 9, and by adding a subdivision; 79A.06, subdivision 
  1.28            5; 79A.20, subdivision 1; 79A.21, subdivision 2; 
  1.29            79A.22, subdivision 7, and by adding a subdivision; 
  1.30            79A.23, subdivisions 1 and 2; 79A.24, subdivisions 1, 
  1.31            2, and 4; 79A.26, subdivision 2; and 79A.31, 
  1.32            subdivision 1; proposing coding for new law in 
  1.33            Minnesota Statutes, chapters 60B; and 65B; repealing 
  1.34            Minnesota Statutes 1996, sections 60B.36; and 79A.04, 
  1.35            subdivision 8. 
  1.36  BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF MINNESOTA: 
  1.37     Section 1.  Minnesota Statutes 1996, section 60A.02, is 
  1.38  amended by adding a subdivision to read: 
  1.39     Subd. 2b.  [FILED.] In cases where a law requires documents 
  1.40  to be filed with the commissioner, the documents will be 
  2.1   considered filed when they are received by the department of 
  2.2   commerce. 
  2.3      Sec. 2.  Minnesota Statutes 1996, section 60A.052, 
  2.4   subdivision 2, is amended to read: 
  2.5      Subd. 2.  [SUSPENSION OR REVOCATION OF AUTHORITY OR 
  2.6   CENSURE.] If the commissioner determines that one of the 
  2.7   conditions listed in subdivision 1 exists, the commissioner may 
  2.8   issue an order requiring the insurance company to show cause why 
  2.9   any or all of the following should not occur:  (1) revocation or 
  2.10  suspension of any or all certificates of authority granted to 
  2.11  the foreign or domestic insurance company or its agent; (2) 
  2.12  censuring of the insurance company; or (3) cancellation of all 
  2.13  or some of the company's insurance contracts then in force in 
  2.14  this state; or (4) the imposition of a civil penalty.  The order 
  2.15  shall be calculated to give reasonable notice of the time and 
  2.16  place for hearing thereon, and shall state the reasons for the 
  2.17  entry of the order.  All hearings shall be conducted in 
  2.18  accordance with chapter 14.  The insurer may waive its right to 
  2.19  the hearing.  If the insurer is under the supervision or control 
  2.20  of the insurance department of the insurer's state of domicile, 
  2.21  that insurance department, acting on behalf of the insurer, may 
  2.22  waive the insurer's right to the hearing.  After the hearing, 
  2.23  the commissioner shall enter an order disposing of the matter as 
  2.24  the facts require.  If the insurance company fails to appear at 
  2.25  a hearing after having been duly notified of it, the company 
  2.26  shall be considered in default, and the proceeding may be 
  2.27  determined against the company upon consideration of the order 
  2.28  to show cause, the allegations of which may be considered to be 
  2.29  true. 
  2.30     Sec. 3.  Minnesota Statutes 1996, section 60A.052, is 
  2.31  amended by adding a subdivision to read: 
  2.32     Subd. 4a.  [WITHDRAWAL OF INSURER FROM STATE.] No insurer 
  2.33  shall withdraw from this state until its direct liability to its 
  2.34  policyholders and obligees under all its insurance contracts 
  2.35  then in force in this state have been assumed by another 
  2.36  licensed insurer according to section 60A.09, subdivision 4a. 
  3.1      Sec. 4.  Minnesota Statutes 1996, section 60A.06, 
  3.2   subdivision 2, is amended to read: 
  3.3      Subd. 2.  [OTHER LINES.] Any insurance corporation or 
  3.4   association heretofore or hereafter licensed to transact within 
  3.5   the state any of the kinds or classes of insurance specifically 
  3.6   authorized under the laws of this state may, when authorized by 
  3.7   its charter, transact within and without the state any lines of 
  3.8   insurance germane to its charter powers and not specifically 
  3.9   provided for under the laws of this state when these lines, or 
  3.10  combinations of lines, of insurance are not in violation of the 
  3.11  constitution or the laws of the state and, in the opinion of the 
  3.12  commissioner, not contrary to public policy, provided the 
  3.13  company or association shall first obtain authority of the 
  3.14  commissioner and meet such requirements as to capital or 
  3.15  surplus, or both, and other requirements as the commissioner 
  3.16  shall prescribe.  These additional hazards may be insured 
  3.17  against by attachment to, or in extension of, any policy which 
  3.18  the company may be authorized to issue under the laws of this 
  3.19  state.  This subdivision shall apply to companies operating upon 
  3.20  the stock or mutual plan, reciprocal or interinsurance exchanges.
  3.21     Sec. 5.  Minnesota Statutes 1996, section 60A.075, 
  3.22  subdivision 1, is amended to read: 
  3.23     Subdivision 1.  [DEFINITIONS.] For the purposes of this 
  3.24  section, the terms in this subdivision have the meanings given 
  3.25  them. 
  3.26     (a) "Eligible member" means a policyholder whose policy is 
  3.27  in force as of the record date, which is the date that the 
  3.28  mutual company's board of directors adopts a plan of conversion 
  3.29  or some other date specified as the record date in the plan of 
  3.30  conversion and approved by the commissioner.  Unless otherwise 
  3.31  provided in the plan, a person insured under a group policy is 
  3.32  not an eligible member, unless on the record date: 
  3.33     (1) the person is insured or covered under a group life 
  3.34  policy or group annuity contract under which funds are 
  3.35  accumulated and allocated to the respective covered persons; 
  3.36     (2) the person has the right to direct the application of 
  4.1   the funds so allocated; 
  4.2      (3) the group policyholder makes no contribution to the 
  4.3   premiums or deposits for the policy or contract; and 
  4.4      (4) the converting mutual company has the names and 
  4.5   addresses of the persons covered under the group life policy or 
  4.6   group annuity contract. 
  4.7      (b) "Reorganized company" means a Minnesota domestic stock 
  4.8   insurance company that has converted from a Minnesota domestic 
  4.9   mutual insurance company according to this section. 
  4.10     (c) "Plan of conversion" or "plan" means a plan adopted by 
  4.11  a Minnesota domestic mutual insurance company's board of 
  4.12  directors under this section to convert the mutual company into 
  4.13  a Minnesota domestic stock insurance company. 
  4.14     (d) "Policy" means a policy or contract of insurance issued 
  4.15  by a converting mutual company, including an annuity contract. 
  4.16     (e) "Commissioner" means the commissioner of commerce. 
  4.17     (f) "Converting mutual company" means a Minnesota domestic 
  4.18  mutual insurance company seeking to convert to a Minnesota 
  4.19  domestic stock insurance company according to this section. 
  4.20     (g) "Effective date of a conversion" means the date 
  4.21  determined according to subdivision 6. 
  4.22     (h) "Membership interests" means all policyholders' rights 
  4.23  as members of the converting mutual company, including but not 
  4.24  limited to, rights to vote and to participate in any 
  4.25  distributions of surplus, whether or not incident to the 
  4.26  company's liquidation. 
  4.27     (i) "Equitable surplus" means the converting mutual 
  4.28  company's surplus as regards policyholders as of the effective 
  4.29  date of the conversion determined in a manner that is not unfair 
  4.30  or inequitable to policyholders. 
  4.31     (j) "Permitted issuer" means:  (1) a corporation organized 
  4.32  and owned by the converting mutual company or by any other 
  4.33  insurance company or insurance holding company for the purpose 
  4.34  of purchasing and holding all of the stock securities 
  4.35  representing majority of voting control of the reorganized 
  4.36  company; (2) a stock insurance company owned by the converting 
  5.1   mutual company or by any other insurance company or insurance 
  5.2   holding company into which the converting mutual company will be 
  5.3   merged; or (3) any other corporation approved by the 
  5.4   commissioner. 
  5.5      Sec. 6.  Minnesota Statutes 1996, section 60A.075, 
  5.6   subdivision 8, is amended to read: 
  5.7      Subd. 8.  [SHARE CONVERSION.] A plan of conversion under 
  5.8   this subdivision shall provide for exchange of policyholders' 
  5.9   membership interests in return for shares in the reorganized 
  5.10  company, according to paragraphs (a) to (c). 
  5.11     (a) The policyholders' membership interests shall be 
  5.12  exchanged, in a manner that takes into account the estimated 
  5.13  proportionate contribution of equitable surplus of each class of 
  5.14  participating policies and contracts, for all of the common 
  5.15  shares of the reorganized company or its parent company or a 
  5.16  permitted issuer, or for a combination of the common shares of 
  5.17  the reorganized company or common shares of its parent company 
  5.18  or a permitted issuer. 
  5.19     (b) Unless the anticipated issuance within a shorter period 
  5.20  is disclosed in the plan of conversion, the issuer of common 
  5.21  shares shall not, within two years after the effective date of 
  5.22  reorganization, issue either of the following: 
  5.23     (1) any of its common shares or any securities convertible 
  5.24  with or without consideration into the common shares or carrying 
  5.25  any warrant to subscribe to or purchase common shares; and 
  5.26     (2) any warrant, right, or option to subscribe to or 
  5.27  purchase the common shares or other securities described in 
  5.28  paragraph (a), except for the issue of common shares to or for 
  5.29  the benefit of policyholders according to the plan of conversion 
  5.30  and the issue of options nontransferable subscription rights for 
  5.31  the purchase of common shares being granted to officers, 
  5.32  directors, or employees a tax qualified employee benefit plan of 
  5.33  the reorganized company or its parent company, if any, or a 
  5.34  permitted issuer, according to this section subdivision 11. 
  5.35     (c) Unless the common shares have a public market when 
  5.36  issued, the issuer shall use its best efforts to encourage and 
  6.1   assist in the establishment of a public market for the common 
  6.2   shares within two years of the effective date of the conversion 
  6.3   or a longer period as disclosed in the plan of conversion.  
  6.4   Within one year after any offering of stock other than the 
  6.5   initial distribution, but no later than six years after the 
  6.6   effective date of the conversion, the reorganized company shall 
  6.7   offer to make available to policyholders who received and 
  6.8   retained shares of common stock or securities described in 
  6.9   paragraph (b), clause (1), a procedure to dispose of those 
  6.10  shares of stock at market value without brokerage commissions or 
  6.11  similar fees. 
  6.12     Sec. 7.  Minnesota Statutes 1996, section 60A.075, 
  6.13  subdivision 9, is amended to read: 
  6.14     Subd. 9.  [SURPLUS DISTRIBUTION.] A plan of conversion 
  6.15  under this subdivision shall provide for the exchange of the 
  6.16  policyholders' membership interests in return for the operation 
  6.17  of the converting mutual company's participating policies as a 
  6.18  closed block of business and for the distribution of the 
  6.19  company's equitable surplus to policyholders, and shall provide 
  6.20  for the issuance of new shares of the reorganized company or its 
  6.21  parent corporation, each according to paragraphs (a) to (i). 
  6.22     (a) The converting mutual company's participating business, 
  6.23  comprised of its participating policies and contracts in force 
  6.24  on the effective date of the conversion or other reasonable date 
  6.25  as provided in the plan, shall be operated by the reorganized 
  6.26  company as a closed block of participating business.  However, 
  6.27  at the option of the converting mutual company, group policies 
  6.28  and group contracts may be omitted from the closed block. 
  6.29     (b) Assets of the converting mutual company must be 
  6.30  allocated to the closed block of participating business in an 
  6.31  amount equal to the reserves and liabilities for the converting 
  6.32  mutual life insurer's participating policies and contracts in 
  6.33  force on the effective date of the conversion.  The plan must be 
  6.34  accompanied by an opinion of an independent qualified actuary 
  6.35  who meets the standards set forth in the insurance laws or 
  6.36  regulations for the submission of actuarial opinions as to the 
  7.1   adequacy of reserves or assets.  The opinion must relate to the 
  7.2   adequacy of the assets allocated to support the closed block of 
  7.3   business.  The actuarial opinion must be based on methods of 
  7.4   analysis considered appropriate for those purposes by the 
  7.5   Actuarial Standards Board. 
  7.6      (c) The reorganized company shall keep a separate 
  7.7   accounting for the closed block and shall make and include in 
  7.8   the annual statement to be filed with the commissioner each year 
  7.9   a separate statement showing the gains, losses, and expenses 
  7.10  properly attributable to the closed block. 
  7.11     (d) Notwithstanding the establishment of a closed block, 
  7.12  the entire assets of the reorganized company shall be available 
  7.13  for the payment of benefits to policyholders.  Payment must 
  7.14  first be made from the assets supporting the closed block until 
  7.15  exhausted, and then from the general assets of the reorganized 
  7.16  company. 
  7.17     (e) The converting mutual company's equitable surplus shall 
  7.18  be distributed to eligible participating policyholders in a form 
  7.19  or forms selected by the converting mutual company.  The form of 
  7.20  distribution may consist of cash, securities of the reorganized 
  7.21  company, securities of another institution, a certificate of 
  7.22  contribution, additional life insurance, annuity benefits, 
  7.23  increased dividends, reduced premiums, or other equitable 
  7.24  consideration or any combination of forms of consideration.  The 
  7.25  consideration, if any, given to a class or category of 
  7.26  policyholders may differ from the consideration given to another 
  7.27  class or category of policyholders.  A certificate of 
  7.28  contribution must be repayable in ten years, be equal to 100 
  7.29  percent of the value of the policyholders' membership interest, 
  7.30  and bear interest at the highest rate charged by the reorganized 
  7.31  company for policy loans on the effective date of the conversion.
  7.32     (f) The consideration must be allocated among the 
  7.33  policyholders in a manner that is fair and equitable to the 
  7.34  policyholders. 
  7.35     (g) The reorganized company or its parent corporation shall 
  7.36  issue and sell shares of one or more classes having a total 
  8.1   price equal to the estimated value in the market of the shares 
  8.2   on the initial offering date.  The estimated value must take 
  8.3   into account all of the following: 
  8.4      (1) the pro forma market value of the reorganized company; 
  8.5      (2) the consideration to be given to policyholders 
  8.6   according to paragraph (e); 
  8.7      (3) the proceeds of the sale of the shares; and 
  8.8      (4) any additional value attributable to the shares as a 
  8.9   result of a purchaser or a group of purchasers who acted in 
  8.10  concert to obtain shares in the initial offering, attaining, 
  8.11  through such purchase, control of the reorganized company or its 
  8.12  parent corporation. 
  8.13     (h) If a purchaser or a group of purchasers acting in 
  8.14  concert is to attain control in the initial offering, the mutual 
  8.15  company shall not, directly or indirectly, pay for any of the 
  8.16  costs or expenses of conversion of the mutual company, whether 
  8.17  or not the conversion is effected, except with permission of the 
  8.18  commissioner. 
  8.19     (i) Periodically, with the commissioner's approval, the 
  8.20  reorganized company may share in the profits of the closed block 
  8.21  of participating business for the benefit of stockholders if the 
  8.22  assets allocated to the closed block are in excess of those 
  8.23  necessary to support the closed block. 
  8.24     Sec. 8.  Minnesota Statutes 1996, section 60A.077, 
  8.25  subdivision 1, is amended to read: 
  8.26     Subdivision 1.  [FORMATION.] (a) A domestic mutual 
  8.27  insurance company, upon approval of the commissioner, may 
  8.28  reorganize by forming an insurance holding company based upon a 
  8.29  mutual plan and continuing the corporate existence of the 
  8.30  reorganizing insurance company as a stock insurance company.  
  8.31  The commissioner, if satisfied that the interests of the 
  8.32  policyholders are properly protected and that the plan of 
  8.33  reorganization is fair and equitable to the policyholders, may 
  8.34  approve the proposed plan of reorganization and may require as a 
  8.35  condition of approval the modifications of the proposed plan of 
  8.36  reorganization as the commissioner finds necessary for the 
  9.1   protection of the policyholders' interests.  The commissioner 
  9.2   shall retain jurisdiction over the mutual insurance holding 
  9.3   company according to this section and chapter 60D to assure that 
  9.4   policyholder interests are protected. 
  9.5      (b) All of the initial voting shares of the capital stock 
  9.6   of the reorganized insurance company must be issued to the 
  9.7   mutual insurance holding company or to an intermediate stock 
  9.8   holding company that is wholly owned by the mutual insurance 
  9.9   holding company.  For purposes of this section, "intermediate 
  9.10  stock holding company" means either a holding company wholly 
  9.11  owned by the mutual insurance holding company or a holding 
  9.12  company in which the mutual insurance holding company holds at 
  9.13  least 51 percent of the voting power.  The membership interests 
  9.14  of the policyholders of the reorganized insurance company become 
  9.15  membership interests in the mutual insurance holding company.  
  9.16  "Membership interests" means those interests described in 
  9.17  section 60A.075, subdivision 1, paragraph (h).  Policyholders of 
  9.18  the reorganized insurance company shall be members of the mutual 
  9.19  insurance holding company and their voting rights must be 
  9.20  determined in accordance with the articles of incorporation and 
  9.21  bylaws of the mutual insurance holding company.  The mutual 
  9.22  insurance holding company shall, at all times, directly or 
  9.23  through an intermediate stock holding company, control:  (i) all 
  9.24  of the voting shares of the capital stock of the reorganized 
  9.25  insurance company; (ii) if the intermediate holding company is 
  9.26  not wholly owned by the mutual insurance holding company, the 
  9.27  percentage of the voting control of the reorganized insurance 
  9.28  company approved by the commissioner; or (iii) if the 
  9.29  intermediate holding company is wholly owned by the mutual 
  9.30  insurance holding company, a majority of the voting shares of 
  9.31  the capital stock of the reorganized insurance company. 
  9.32     Sec. 9.  Minnesota Statutes 1996, section 60A.077, 
  9.33  subdivision 2, is amended to read: 
  9.34     Subd. 2.  [MERGER.] (a) A domestic or foreign mutual 
  9.35  insurance company, upon the approval of the commissioner, may 
  9.36  reorganize by merging its policyholders' membership interests 
 10.1   into a mutual insurance holding company formed according to 
 10.2   subdivision 1 and continuing the corporate existence of the 
 10.3   reorganizing insurance company as a stock insurance company 
 10.4   subsidiary of the mutual insurance holding company.  "Membership 
 10.5   interests" means those interests described in section 60A.075, 
 10.6   subdivision 1, paragraph (h).  The commissioner, if satisfied 
 10.7   that the interests of the policyholder policyholders of the 
 10.8   reorganizing company and the interests of the existing members 
 10.9   of the mutual insurance holding company are properly protected 
 10.10  and that the merger is fair and equitable to the policyholders 
 10.11  those parties, may approve the proposed merger and may require 
 10.12  as a condition of approval the modifications of the proposed 
 10.13  merger as the commissioner finds necessary for the protection of 
 10.14  the policyholders' or members' interests.  The commissioner 
 10.15  shall retain jurisdiction over the mutual insurance holding 
 10.16  company organized according to this section and according to 
 10.17  chapter 60D to assure that policyholder and member interests are 
 10.18  protected. 
 10.19     (b) All of the initial voting shares of the capital stock 
 10.20  of the reorganized insurance company must be issued to the 
 10.21  mutual insurance holding company, or to an intermediate stock 
 10.22  holding company that is wholly owned by the mutual insurance 
 10.23  holding company.  The membership interests of the policyholders 
 10.24  of the reorganized insurance company become membership interests 
 10.25  in the mutual insurance holding company.  Policyholders of the 
 10.26  reorganized insurance company shall be members of the mutual 
 10.27  insurance holding company and their voting rights must be 
 10.28  determined according to the articles of incorporation and bylaws 
 10.29  of the mutual insurance holding company. 
 10.30     Sec. 10.  Minnesota Statutes 1996, section 60A.077, 
 10.31  subdivision 3, is amended to read: 
 10.32     Subd. 3.  [PLAN OF REORGANIZATION; APPROVAL BY 
 10.33  COMMISSIONER.] (a) The reorganizing or merging insurer shall 
 10.34  file a plan of reorganization, approved by the affirmative vote 
 10.35  of a majority of its board of directors, for review and approval 
 10.36  by the commissioner.  The plan must provide for the following: 
 11.1      (1) establishing a mutual insurance holding company with at 
 11.2   least one stock insurance company subsidiary, the majority of 
 11.3   voting shares of which, taking into account any dilution 
 11.4   resulting from convertible securities, must be owned, either 
 11.5   directly or through an intermediate stock holding company, by 
 11.6   the mutual insurance holding company; 
 11.7      (2) analyzing the benefits and risks attendant to the 
 11.8   proposed reorganization, including the rationale for the 
 11.9   reorganization and analysis of the comparative benefits and 
 11.10  risks of a demutualization under section 60A.075; 
 11.11     (3) protecting the immediate and long-term interests of 
 11.12  existing policyholders; 
 11.13     (4) ensuring immediate membership in the mutual insurance 
 11.14  holding company of all existing policyholders of the 
 11.15  reorganizing domestic insurance company; 
 11.16     (5) describing a plan providing for membership interests of 
 11.17  future policyholders; 
 11.18     (6) describing the number of members of the board of 
 11.19  directors of the mutual insurance holding company required to be 
 11.20  policyholders; 
 11.21     (7) ensuring that, in the event of proceedings under 
 11.22  chapter 60B involving a stock insurance company subsidiary of 
 11.23  the mutual insurance holding company that resulted from the 
 11.24  reorganization of a domestic mutual insurance company, the 
 11.25  assets of the mutual insurance holding company will be available 
 11.26  to satisfy the policyholder obligations of the stock insurance 
 11.27  company; 
 11.28     (8) for periodic distribution of accumulated holding 
 11.29  company earnings to members; 
 11.30     (9) (8) describing the nature and content of the annual 
 11.31  report and financial statement to be sent to each member; 
 11.32     (10) (9) a copy of the proposed mutual insurance holding 
 11.33  company's articles of incorporation and bylaws specifying all 
 11.34  membership rights; 
 11.35     (11) (10) the names, addresses, and occupational 
 11.36  information of all corporate officers and members of the 
 12.1   proposed mutual insurance holding company board of directors; 
 12.2      (12) (11) information sufficient to demonstrate that the 
 12.3   financial condition of the reorganizing or merging company will 
 12.4   not be diminished upon reorganization; 
 12.5      (13) (12) a copy of the articles of incorporation and 
 12.6   bylaws for any proposed insurance company subsidiary or 
 12.7   intermediate holding company subsidiary; 
 12.8      (14) (13) describing any plans for the initial sale of 
 12.9   stock for the reorganized insurance company; and 
 12.10     (15) (14) any other information requested by the 
 12.11  commissioner or required by rule. 
 12.12     (b) The commissioner may approve the plan upon finding that 
 12.13  the requirements of this section have been fully met and the 
 12.14  plan will protect the immediate and long-term interests of 
 12.15  policyholders. 
 12.16     (c) The commissioner may retain, at the reorganizing or 
 12.17  merging mutual company's expense, any qualified experts not 
 12.18  otherwise a part of the commissioner's staff to assist in 
 12.19  reviewing the plan. 
 12.20     (d) The commissioner may, but need not, conduct a public 
 12.21  hearing regarding the proposed plan.  The hearing must be held 
 12.22  within 30 days after submission of a completed plan of 
 12.23  reorganization to the commissioner.  The commissioner shall give 
 12.24  the reorganizing mutual company at least 20 days' notice of the 
 12.25  hearing.  At the hearing, the reorganizing mutual company, its 
 12.26  policyholders, and any other person whose interest may be 
 12.27  affected by the proposed reorganization, may present evidence, 
 12.28  examine and cross-examine witnesses, and offer oral and written 
 12.29  arguments or comments according to the procedure for contested 
 12.30  cases under chapter 14.  The persons participating may conduct 
 12.31  discovery proceedings in the same manner as prescribed for the 
 12.32  district courts of this state.  All discovery proceedings must 
 12.33  be concluded no later than three days before the scheduled 
 12.34  commencement of the public hearing. 
 12.35     Sec. 11.  Minnesota Statutes 1996, section 60A.077, 
 12.36  subdivision 5, is amended to read: 
 13.1      Subd. 5.  [APPROVAL BY MEMBERS.] In the case of a formation 
 13.2   under subdivision 1, the plan shall be approved by the members 
 13.3   as provided in section 60A.075, subdivision 5.  In the case of a 
 13.4   merger under subdivision 2, the plan must be approved by the 
 13.5   eligible members of the reorganizing insurance company and by 
 13.6   the eligible members of the mutual insurance holding company as 
 13.7   provided in section 60A.075, subdivision 5. 
 13.8      Sec. 12.  Minnesota Statutes 1996, section 60A.077, 
 13.9   subdivision 7, is amended to read: 
 13.10     Subd. 7.  [APPLICABILITY OF CERTAIN PROVISIONS.] (a) A 
 13.11  mutual insurance holding company is considered to be an insurer 
 13.12  subject to chapter 60B. and shall automatically be a party to 
 13.13  any proceeding under chapter 60B involving an insurance company 
 13.14  that, as a result of a reorganization according to subdivision 1 
 13.15  or 2, is a subsidiary of the mutual insurance holding company.  
 13.16  In any proceeding under chapter 60B involving the reorganized 
 13.17  insurance company, the assets of the mutual insurance holding 
 13.18  company are considered to be assets of the estate of the 
 13.19  reorganized insurance company for purposes of satisfying the 
 13.20  claims of the reorganized insurance company's 
 13.21  policyholders.  However, a mutual insurance holding company 
 13.22  shall not dissolve or liquidate without the approval of the 
 13.23  commissioner or as ordered by the district a court according to 
 13.24  chapter 60B of competent jurisdiction. 
 13.25     (b) A mutual insurance holding company is subject to 
 13.26  chapter 60D to the extent consistent with this section. 
 13.27     (c) As a condition to approval of the plan, the 
 13.28  commissioner may require the mutual insurance holding company to 
 13.29  comply with any provision of the insurance laws necessary to 
 13.30  protect the interests of the policyholders as if the mutual 
 13.31  insurance holding company were a domestic mutual insurance 
 13.32  company.  
 13.33     (d) No person or group of persons other than the chief 
 13.34  executive officer of a mutual insurance holding company, or the 
 13.35  chief executive officer's designee, shall seek to obtain proxies 
 13.36  from the members of the mutual insurance holding company for the 
 14.1   purposes of affecting a change of the membership of the board of 
 14.2   directors of the mutual insurance holding company unless that 
 14.3   person or persons have filed with the commissioner and have sent 
 14.4   to the mutual insurance holding company a statement containing 
 14.5   the information required by section 60D.17.  Section 60D.17, 
 14.6   subdivisions 2 to 7, apply in the event of a proxy solicitation 
 14.7   regulated by this paragraph. 
 14.8      Sec. 13.  Minnesota Statutes 1996, section 60A.077, 
 14.9   subdivision 8, is amended to read: 
 14.10     Subd. 8.  [APPLICABILITY OF DEMUTUALIZATION PROVISIONS.] 
 14.11  (a) Except as otherwise provided, section 60A.075 is not 
 14.12  applicable to a reorganization or merger according to this 
 14.13  section, except for provided, however, that section 60A.075, 
 14.14  subdivisions 14 to 16, apply to the reorganization or merger. 
 14.15     (b) Section 60A.075 is applicable to demutualization of a 
 14.16  mutual insurance holding company that resulted from the 
 14.17  reorganization of a domestic mutual insurance company organized 
 14.18  under chapter 300 as if it were a mutual insurance company. 
 14.19     Sec. 14.  Minnesota Statutes 1996, section 60A.077, 
 14.20  subdivision 10, is amended to read: 
 14.21     Subd. 10.  [FINANCIAL STATEMENT REQUIREMENTS.] (a) In 
 14.22  addition to any items required under chapter 60D, each mutual 
 14.23  insurance holding company shall file with the commissioner, by 
 14.24  April 1 of each year, an annual statement consisting of the 
 14.25  following: 
 14.26     (1) an income statement, balance sheet, and cashflow 
 14.27  statement prepared in accordance with generally accepted 
 14.28  accounting principles; 
 14.29     (2) complete information on the status of any closed block 
 14.30  formed as part of a plan of reorganization; 
 14.31     (3) an investment plan covering all assets; and 
 14.32     (4) a statement disclosing any intention to pledge, borrow 
 14.33  against, alienate, hypothecate, or in any way encumber the 
 14.34  assets of the mutual insurance holding company or an 
 14.35  intermediate stock holding company.  Action taken according to 
 14.36  the statement is subject to the commissioner's prior written 
 15.1   approval. 
 15.2      (b) The aggregate pledges and encumbrances of a mutual 
 15.3   holding company's assets shall not affect more than 49 percent 
 15.4   of the company's stock in any subsidiary insurance holding 
 15.5   company or subsidiary insurance company that resulted from a 
 15.6   reorganization or merger. 
 15.7      (c) At least 50 percent of the generally accepted 
 15.8   accounting principles (GAAP) net worth of a mutual insurance 
 15.9   holding company must be invested in insurance company 
 15.10  subsidiaries. 
 15.11     Sec. 15.  Minnesota Statutes 1996, section 60A.092, 
 15.12  subdivision 6, is amended to read: 
 15.13     Subd. 6.  [SINGLE ASSUMING INSURER; TRUST FUND 
 15.14  REQUIREMENTS.] In the case of a single assuming insurer, the 
 15.15  trust shall consist of a trusteed account representing the 
 15.16  assuming insurer's liabilities attributable to business written 
 15.17  in the United States and, in addition, the assuming insurer 
 15.18  shall maintain a trusteed surplus of not less than $20,000,000 
 15.19  or maintain a trusteed surplus as regards policyholders in an 
 15.20  amount of not less than $50,000,000 for long-tail casualty 
 15.21  reinsurers as provided under subdivision 3, paragraph (a), 
 15.22  clause (5). 
 15.23     Sec. 16.  Minnesota Statutes 1996, section 60A.10, 
 15.24  subdivision 1, is amended to read: 
 15.25     Subdivision 1.  [DOMESTIC COMPANIES.] (1)  [DEPOSIT AS 
 15.26  SECURITY FOR ALL POLICYHOLDERS REQUIRED.] No company in this 
 15.27  state, other than farmers' mutual, or real estate title 
 15.28  insurance companies, shall do business in this state unless it 
 15.29  has on deposit with the commissioner, for the protection of both 
 15.30  its resident and nonresident policyholders, securities to an 
 15.31  amount, the actual market value of which, exclusive of interest, 
 15.32  shall never be less than $200,000 until July 1, 1986, $300,000 
 15.33  until July 1, 1987, $400,000 until July 1, 1988, and $500,000 on 
 15.34  and after July 1, 1988 or one-half the applicable financial 
 15.35  requirement set forth in section 60A.07, whichever is less.  The 
 15.36  securities shall be retained under the control of the 
 16.1   commissioner as long as any policies of the depositing company 
 16.2   remain in force. 
 16.3      (2)  [SECURITIES DEFINED.] For the purpose of this 
 16.4   subdivision, the word "securities" means bonds or other 
 16.5   obligations of, or bonds or other obligations insured or 
 16.6   guaranteed by, the United States, any state of the United 
 16.7   States, any municipality of this state, or any agency or 
 16.8   instrumentality of the foregoing. 
 16.9      (3)  [PROTECTION OF DEPOSIT FROM LEVY.] No judgment 
 16.10  creditor or other claimant may levy upon any securities held on 
 16.11  deposit with, or for the account of, the commissioner.  Upon the 
 16.12  entry of an order by a court of competent jurisdiction for the 
 16.13  rehabilitation, liquidation or conservation of any depositing 
 16.14  company as provided in chapter 60B, that company's deposit 
 16.15  together with any accrued income thereon shall be transferred to 
 16.16  the commissioner as rehabilitator, liquidator, or conservator. 
 16.17     Sec. 17.  Minnesota Statutes 1996, section 60A.111, 
 16.18  subdivision 1, is amended to read: 
 16.19     Subdivision 1.  [REPORT.] Annually, or more frequently if 
 16.20  determined by the commissioner to be necessary for the 
 16.21  protection of policyholders, each foreign, alien and domestic 
 16.22  insurance company other than a life insurance company shall 
 16.23  report to the commissioner the ratio of its qualified assets to 
 16.24  its required liabilities.  
 16.25     Sec. 18.  Minnesota Statutes 1996, section 60A.13, 
 16.26  subdivision 1, is amended to read: 
 16.27     Subdivision 1.  [ANNUAL STATEMENTS REQUIRED.] Every 
 16.28  insurance company, including fraternal benefit societies, and 
 16.29  reciprocal exchanges, doing business in this state, shall 
 16.30  transmit to file with the commissioner, annually, on or before 
 16.31  March 1, the appropriate verified National Association of 
 16.32  Insurance Commissioners' annual statement blank, prepared in 
 16.33  accordance with the association's instructions handbook and 
 16.34  following those accounting procedures and practices prescribed 
 16.35  by the association's accounting practices and procedures manual, 
 16.36  unless the commissioner requires or finds another method of 
 17.1   valuation reasonable under the circumstances.  Another method of 
 17.2   valuation permitted by the commissioner must be at least as 
 17.3   conservative as those prescribed in the association's manual.  
 17.4   All companies required to file an annual statement under this 
 17.5   subdivision must also file with the commissioner a copy of their 
 17.6   annual statement on computer diskette.  All Minnesota domestic 
 17.7   insurers required to file annual statements under this 
 17.8   subdivision must also file quarterly statements with the 
 17.9   commissioner for the first, second, and third calendar quarter 
 17.10  on or before 45 days after the end of the applicable quarter, 
 17.11  prepared in accordance with the association's instruction 
 17.12  handbook.  All companies required to file quarterly statements 
 17.13  under this subdivision must also file a copy of their quarterly 
 17.14  statement on computer diskette.  In addition, the commissioner 
 17.15  may require the filing of any other information determined to be 
 17.16  reasonably necessary for the continual enforcement of these 
 17.17  laws.  The statement may be limited to the insurer's business 
 17.18  and condition in the United States unless the commissioner finds 
 17.19  that the business conducted outside the United States may 
 17.20  detrimentally affect the interests of policyholders in this 
 17.21  state.  The statements shall also contain a verified schedule 
 17.22  showing all details required by law for assessment and 
 17.23  taxation.  The statement or schedules shall be in the form and 
 17.24  shall contain all matters the commissioner may prescribe, and it 
 17.25  may be varied as to different types of insurers so as to elicit 
 17.26  a true exhibit of the condition of each insurer. 
 17.27     Sec. 19.  Minnesota Statutes 1996, section 60A.19, 
 17.28  subdivision 1, is amended to read: 
 17.29     Subdivision 1.  [REQUIREMENTS.] Any insurance company of 
 17.30  another state, upon compliance with all laws governing such 
 17.31  corporations in general and with the foregoing provisions so far 
 17.32  as applicable and the following requirements, shall be admitted 
 17.33  to do business in this state: 
 17.34     (1) It shall deposit with the commissioner a certified copy 
 17.35  of its charter or certificate of incorporation and its bylaws, 
 17.36  and a statement showing its financial condition and business, 
 18.1   verified by its president and secretary or other proper 
 18.2   officers; 
 18.3      (2) It shall furnish the commissioner satisfactory evidence 
 18.4   of its legal organization and authority to transact the proposed 
 18.5   business and that its capital, assets, deposits with the proper 
 18.6   official of its own state, amount insured, number of risks, 
 18.7   reserve and other securities, and guaranties for protection of 
 18.8   policyholders, creditors, and the public, comply with those 
 18.9   required of like domestic companies; 
 18.10     (3) By a duly executed instrument filed in the office of 
 18.11  the commissioner, it shall appoint the commissioner and 
 18.12  successors in office its lawful attorneys in fact and therein 
 18.13  irrevocably agree that legal process in any action or proceeding 
 18.14  against it may be served upon them with the same force and 
 18.15  effect as if personally served upon it, so long as any of its 
 18.16  liability exists in this state; 
 18.17     (4) It shall appoint, as its agents in this state, 
 18.18  residents thereof, and obtain from the commissioner a license to 
 18.19  transact business; 
 18.20     (5) Regardless of what lines of business an insurer of 
 18.21  another state is seeking to write in this state, the lines of 
 18.22  business it is licensed to write in its state of incorporation 
 18.23  shall be the basis for establishing the financial requirements 
 18.24  it must meet for admission in this state or for continuance of 
 18.25  its authority to write business in this state; 
 18.26     (6) No insurer of another state shall be admitted to do 
 18.27  business in this state for a line of business that it is not 
 18.28  authorized to write in its state of incorporation, unless the 
 18.29  statutes of that state prohibit all insurers from writing that 
 18.30  line of business. 
 18.31     Sec. 20.  Minnesota Statutes 1996, section 60B.04, is 
 18.32  amended by adding a subdivision to read: 
 18.33     Subd. 7.  [JURISDICTION.] If there is a delinquency 
 18.34  proceeding under this chapter, the provisions of this chapter 
 18.35  govern those proceedings, and all conflicting contractual 
 18.36  provisions contained in a contract between the insurer that is 
 19.1   subject to the delinquency proceeding and a third party, 
 19.2   including, but not limited to, the choice of law or arbitration 
 19.3   provisions, are subordinated to the provisions of this chapter. 
 19.4      Sec. 21.  [60B.085] [IMMUNITY AND INDEMNIFICATION OF THE 
 19.5   RECEIVER AND EMPLOYEES.] 
 19.6      Subdivision 1.  [SCOPE.] The persons entitled to protection 
 19.7   under this section are: 
 19.8      (1) all receivers responsible for the conduct of a 
 19.9   delinquency proceeding under this chapter, including present and 
 19.10  former receivers; and 
 19.11     (2) their employees, meaning all present and former special 
 19.12  deputies and assistant special deputies and assistant special 
 19.13  deputies appointed by the commissioner, and all persons whom the 
 19.14  commissioner, special deputies, or assistant special deputies 
 19.15  have employed to assist in a delinquency proceeding under this 
 19.16  chapter.  Attorneys, accountants, auditors, and other 
 19.17  professional persons or firms, who are retained by the receiver 
 19.18  as independent contractors and their employees shall not be 
 19.19  considered employees of the receiver for purposes of this 
 19.20  section. 
 19.21     Subd. 2.  [IMMUNITY FROM LIABILITY.] The receiver and the 
 19.22  receiver's employees shall have official immunity and shall be 
 19.23  immune from suit and liability, both personally and in their 
 19.24  official capacities, for a claim for damage to or loss of 
 19.25  property or personal injury or other civil liability caused by 
 19.26  or resulting from an alleged act, error, or omission of the 
 19.27  receiver or an employee arising out of or by reason of their 
 19.28  duties or employment.  Nothing in this subdivision shall be 
 19.29  construed to hold the receiver or an employee immune from suit 
 19.30  or liability for damage, loss, injury, or liability caused by 
 19.31  the intentional or willful and wanton misconduct of the receiver 
 19.32  or an employee. 
 19.33     Subd. 3.  [INDEMNIFICATION.] If a legal action is commenced 
 19.34  against the receiver or any employee, whether against the 
 19.35  receiver or employee personally or in their official capacity, 
 19.36  alleging property damage, property loss, personal injury, or 
 20.1   other civil liability caused by or resulting from an alleged 
 20.2   act, error, or omission of the receiver or an employee arising 
 20.3   out of or by reason of their duties or employment, the receiver 
 20.4   and employee must be indemnified from the assets of the insurer 
 20.5   for all expenses, attorneys' fees, judgments, settlements, 
 20.6   decrees, or amounts due and owing or paid in satisfaction or 
 20.7   incurred in the defense of the legal action unless it is 
 20.8   determined upon a final adjudication on the merits that the 
 20.9   alleged act, error, or omission of the receiver or employee 
 20.10  giving rise to the claim did not arise out of or by reason of 
 20.11  the receiver's or employee's duties or employment, or was caused 
 20.12  by intentional or willful and wanton misconduct. 
 20.13     (a) Attorney's fees and related expenses incurred in 
 20.14  defending a legal action for which immunity or indemnity is 
 20.15  available under this section must be paid from the assets of the 
 20.16  insurer, as they are incurred, in advance of the final 
 20.17  disposition of the action upon receipt of an undertaking by or 
 20.18  on behalf of the receiver or employee to repay the attorneys' 
 20.19  fees and expenses if it is ultimately determined upon a final 
 20.20  adjudication on the merits that the receiver or employee is not 
 20.21  entitled to immunity or indemnity under this section. 
 20.22     (b) Indemnification for expense payments, judgments, 
 20.23  settlements, decrees, attorneys' fees, surety bond premiums, or 
 20.24  other amounts paid or to be paid from the insurer's assets 
 20.25  according to this section is an administrative expense of the 
 20.26  insurer. 
 20.27     (c) In the event of an actual or threatened litigation 
 20.28  against a receiver or an employee for which immunity or 
 20.29  indemnity may be available under this section, a reasonable 
 20.30  amount of funds which in the judgment of the commissioner may be 
 20.31  needed to provide immunity or indemnity must be segregated and 
 20.32  reserved from the assets of the insurer as security for the 
 20.33  payment of indemnity until all applicable statutes of limitation 
 20.34  have run and all actual or threatened actions against the 
 20.35  receiver or an employee have been completely and finally 
 20.36  resolved, and all obligations of the insurer and the 
 21.1   commissioner under this section have been satisfied. 
 21.2      (d) In lieu of segregation and reserving of funds, the 
 21.3   commissioner may, in the commissioner's discretion, obtain a 
 21.4   surety bond or make other arrangements that will enable the 
 21.5   commissioner to fully secure the payment of all obligations 
 21.6   under this section. 
 21.7      Subd. 4.  [SETTLEMENT COVERAGE.] If a legal action against 
 21.8   an employee for which indemnity may be available under this 
 21.9   section is settled before final adjudication on the merits, the 
 21.10  insurer must pay the settlement amount on behalf of the 
 21.11  employee, or indemnify the employee for the settlement amount, 
 21.12  unless the commissioner determines: 
 21.13     (1) that the claim did not arise out of or by reason of the 
 21.14  employee's duties or employment; or 
 21.15     (2) that the claim was caused by the intentional or willful 
 21.16  and wanton misconduct of the employee. 
 21.17     Subd. 5.  [SETTLEMENT APPROVAL.] In a legal action in which 
 21.18  the receiver is a defendant, that portion of a settlement 
 21.19  relating to the alleged act, error, or omission of the receiver 
 21.20  is subject to the approval of the court before which the 
 21.21  delinquency proceeding is pending.  The court shall not approve 
 21.22  that portion of the settlement if it determines: 
 21.23     (1) that the claim did not arise out of or by reason of the 
 21.24  receiver's duties or employment; or 
 21.25     (2) that the claim was caused by the intentional or willful 
 21.26  and wanton misconduct of the receiver. 
 21.27     Subd. 6.  [CONSTRUCTION.] Nothing contained or implied in 
 21.28  this section operates, or shall be construed or applied, to 
 21.29  deprive the receiver or an employee of immunity, indemnity, 
 21.30  benefits of law, rights, or any defense otherwise available. 
 21.31     Sec. 22.  Minnesota Statutes 1996, section 60B.21, 
 21.32  subdivision 2, is amended to read: 
 21.33     Subd. 2.  [FIXING OF RIGHTS.] Upon issuance of the order, 
 21.34  the rights and liabilities of any such insurer and of its 
 21.35  creditors, policyholders, shareholders, members, and all other 
 21.36  persons interested in its estate are fixed as of the date of 
 22.1   filing of the petition for liquidation, except as provided in 
 22.2   sections 60B.22, 60B.25, clause (22), and 60B.39. 
 22.3      Sec. 23.  Minnesota Statutes 1996, section 60B.25, is 
 22.4   amended to read: 
 22.5      60B.25 [POWERS OF LIQUIDATOR.] 
 22.6      The liquidator shall report to the court monthly, or at 
 22.7   other intervals specified by the court, on the progress of the 
 22.8   liquidation in whatever detail the court orders.  The liquidator 
 22.9   shall coordinate activities with those of each guaranty 
 22.10  association having an interest in the liquidation and shall 
 22.11  submit a report detailing how coordination will be achieved to 
 22.12  the court for its approval within 30 days following appointment, 
 22.13  or within the time which the court, in its discretion, may 
 22.14  establish.  Subject to the court's control, the liquidator may: 
 22.15     (1) Appoint a special deputy to act under sections 60B.01 
 22.16  to 60B.61 and determine the deputy's compensation.  The special 
 22.17  deputy shall have all powers of the liquidator granted by this 
 22.18  section.  The special deputy shall serve at the pleasure of the 
 22.19  liquidator. 
 22.20     (2) Appoint or engage employees and agents, actuaries, 
 22.21  accountants, appraisers, consultants, and other personnel deemed 
 22.22  necessary to assist in the liquidation without regard to chapter 
 22.23  14. 
 22.24     (3) Fix the compensation of persons under clause (2), 
 22.25  subject to the control of the court. 
 22.26     (4) Defray all expenses of taking possession of, 
 22.27  conserving, conducting, liquidating, disposing of, or otherwise 
 22.28  dealing with the business and property of the insurer.  If the 
 22.29  property of the insurer does not contain sufficient cash or 
 22.30  liquid assets to defray the costs incurred, the liquidator may 
 22.31  advance the costs so incurred out of the appropriation made to 
 22.32  the department of commerce.  Any amounts so paid shall be deemed 
 22.33  expense of administration and shall be repaid for the credit of 
 22.34  the department of commerce out of the first available money of 
 22.35  the insurer. 
 22.36     (5) Hold hearings, subpoena witnesses and compel their 
 23.1   attendance, administer oaths, examine any person under oath and 
 23.2   compel any person to subscribe to testimony after it has been 
 23.3   correctly reduced to writing, and in connection therewith 
 23.4   require the production of any books, papers, records, or other 
 23.5   documents which the liquidator deems relevant to the inquiry. 
 23.6      (6) Collect all debts and money due and claims belonging to 
 23.7   the insurer, wherever located, and for this purpose institute 
 23.8   timely action in other jurisdictions, in order to forestall 
 23.9   garnishment and attachment proceedings against such debts; do 
 23.10  such other acts as are necessary or expedient to collect, 
 23.11  conserve, or protect its assets or property, including sell, 
 23.12  compound, compromise, or assign for purposes of collection, upon 
 23.13  such terms and conditions as the liquidator deems best, any bad 
 23.14  or doubtful debts; and pursue any creditor's remedies available 
 23.15  to enforce claims. 
 23.16     (7) Conduct public and private sales of the property of the 
 23.17  insurer in a manner prescribed by the court. 
 23.18     (8) Use assets of the estate to transfer coverage 
 23.19  obligations to a solvent assuming insurer, if the transfer can 
 23.20  be arranged without prejudice to applicable priorities under 
 23.21  section 60B.44. 
 23.22     (9) Acquire, hypothecate, encumber, lease, improve, sell, 
 23.23  transfer, abandon, or otherwise dispose of or deal with any 
 23.24  property of the insurer at its market value or upon such terms 
 23.25  and conditions as are fair and reasonable, except that no 
 23.26  transaction involving property the market value of which exceeds 
 23.27  $10,000 shall be concluded without express permission of the 
 23.28  court.  The liquidator may also execute, acknowledge, and 
 23.29  deliver any deeds, assignments, releases, and other instruments 
 23.30  necessary or proper to effectuate any sale of property or other 
 23.31  transaction in connection with the liquidation.  In cases where 
 23.32  real property sold by the liquidator is located other than in 
 23.33  the county where the liquidation is pending, the liquidator 
 23.34  shall cause to be filed with the county recorder for the county 
 23.35  in which the property is located a certified copy of the order 
 23.36  of appointment. 
 24.1      (10) Borrow money on the security of the insurer's assets 
 24.2   or without security and execute and deliver all documents 
 24.3   necessary to that transaction for the purpose of facilitating 
 24.4   the liquidation. 
 24.5      (11) Enter into such contracts as are necessary to carry 
 24.6   out the order to liquidate, and affirm or disavow any contracts 
 24.7   to which the insurer is a party. 
 24.8      (12) Continue to prosecute and institute in the name of the 
 24.9   insurer or in the liquidator's own name any suits and other 
 24.10  legal proceedings, in this state or elsewhere, and abandon the 
 24.11  prosecution of claims the liquidator deems unprofitable to 
 24.12  pursue further.  If the insurer is dissolved under section 
 24.13  60B.23, the liquidator may apply to any court in this state or 
 24.14  elsewhere for leave to be substituted for the insurer as 
 24.15  plaintiff. 
 24.16     (13) Prosecute any action which may exist in behalf of the 
 24.17  creditors, members, policyholders, or shareholders of the 
 24.18  insurer against any officer of the insurer, or any other person. 
 24.19     (14) Remove any records and property of the insurer to the 
 24.20  offices of the commissioner or to such other place as is 
 24.21  convenient for the purposes of efficient and orderly execution 
 24.22  of the liquidation. 
 24.23     (15) Deposit in one or more banks in this state such sums 
 24.24  as are required for meeting current administration expenses and 
 24.25  dividend distributions. 
 24.26     (16) Deposit with the state board of investment for 
 24.27  investment pursuant to section 11A.24, all sums not currently 
 24.28  needed, unless the court orders otherwise. 
 24.29     (17) File any necessary documents for record in the office 
 24.30  of any county recorder or record office in this state or 
 24.31  elsewhere where property of the insurer is located. 
 24.32     (18) Assert all defenses available to the insurer as 
 24.33  against third persons, including statutes of limitations, 
 24.34  statutes of frauds, and the defense of usury.  A waiver of any 
 24.35  defense by the insurer after a petition for liquidation has been 
 24.36  filed shall not bind the liquidator. 
 25.1      (19) Exercise and enforce all the rights, remedies, and 
 25.2   powers of any creditor, shareholder, policyholder, or member, 
 25.3   including any power to avoid any transfer or lien that may be 
 25.4   given by law and that is not included within sections 60B.30 and 
 25.5   60B.32. 
 25.6      (20) Intervene in any proceeding wherever instituted that 
 25.7   might lead to the appointment of a receiver or trustee, and act 
 25.8   as the receiver or trustee whenever the appointment is offered. 
 25.9      (21) Enter into agreements with any receiver or 
 25.10  commissioner of any other state relating to the rehabilitation, 
 25.11  liquidation, conservation, or dissolution of an insurer doing 
 25.12  business in both states. 
 25.13     (22) Collect from an insured any unpaid earned premium or 
 25.14  retrospectively rated premium due the insurer based on the 
 25.15  termination of coverage under section 60B.22.  Premium on surety 
 25.16  business is considered earned at inception if no policy term can 
 25.17  be determined.  All other premium will be considered earned and 
 25.18  will be prorated over the determined policy term, regardless of 
 25.19  any provision in the bond, guaranty, contract, or other 
 25.20  agreement. 
 25.21     (22) (23) Exercise all powers now held or hereafter 
 25.22  conferred upon receivers by the laws of this state not 
 25.23  inconsistent with sections 60B.01 to 60B.61. 
 25.24     (23) (24) The enumeration in this section of the powers and 
 25.25  authority of the liquidator is not a limitation, nor does it 
 25.26  exclude the right to do such other acts not herein specifically 
 25.27  enumerated or otherwise provided for as are necessary or 
 25.28  expedient for the accomplishment of or in aid of the purpose of 
 25.29  liquidation. 
 25.30     (24) (25) The power of the liquidator of a health 
 25.31  maintenance organization includes the power to transfer coverage 
 25.32  obligations to a solvent and voluntary health maintenance 
 25.33  organization, insurer, or nonprofit health service plan, and to 
 25.34  assign provider contracts of the insolvent health maintenance 
 25.35  organization to an assuming health maintenance organization, 
 25.36  insurer, or nonprofit health service plan permitted to enter 
 26.1   into such agreements.  The liquidator is not required to meet 
 26.2   the notice requirements of section 62D.121.  Transferees of 
 26.3   coverage obligations or provider contracts shall have no 
 26.4   liability to creditors or obligees of the health maintenance 
 26.5   organization except those liabilities expressly assumed. 
 26.6      Sec. 24.  [60B.365] [REINSURER'S LIABILITY.] 
 26.7      Subdivision 1.  [GENERALLY.] The amount recoverable by the 
 26.8   liquidator from reinsurers must not be reduced as a result of 
 26.9   the delinquency proceedings, regardless of any provision in the 
 26.10  reinsurance contract or other agreement. 
 26.11     Subd. 2.  [REQUIRED CONTRACT PROVISIONS.] All reinsurance 
 26.12  contracts to which an insurer domiciled in this state is a party 
 26.13  that do not contain the provisions required with respect to the 
 26.14  obligation of reinsurers in the event of insolvency of the 
 26.15  reinsured in order to obtain credit for reinsurance or other 
 26.16  applicable statutes, must be construed to contain the following 
 26.17  provisions: 
 26.18     (1) in the event of insolvency and the appointment of a 
 26.19  receiver, the reinsurance obligation is payable to the receiver 
 26.20  upon demand, with reasonable provision for verification, without 
 26.21  diminution because of the insolvency or because the receiver has 
 26.22  failed to pay all or a portion of any claims.  Payments by the 
 26.23  reinsurer must be made directly to the ceding insurer or to its 
 26.24  receiver; and 
 26.25     (2) the receiver of a reinsured company shall give written 
 26.26  notice of the pendency of a claim against the reinsured company 
 26.27  indicating the policy or bond reinsured, within a reasonable 
 26.28  time after the claim is filed.  The receiver of a reinsured 
 26.29  company may arrange for the giving of notice of the pendency of 
 26.30  claims on reinsured policies by guaranty funds or by other 
 26.31  persons responsible for the adjustment and settlement of the 
 26.32  reinsured company's claims.  Failure to give notice does not 
 26.33  excuse the obligation of the reinsurer unless it is 
 26.34  substantially prejudiced by the failure of the receiver to give 
 26.35  notice.  The reinsurer may interpose, at its own expense, in the 
 26.36  proceeding where the claim is to be adjudicated, any defense or 
 27.1   defenses that it may consider available to the reinsured company 
 27.2   or its receiver. 
 27.3      Subd. 3.  [PAYMENTS.] Payments by the reinsurer must be 
 27.4   made directly to the ceding insurer or its receiver, except 
 27.5   where the contract of insurance or reinsurance specifically 
 27.6   provides for another payee for the reinsurance in the event of 
 27.7   insolvency of the ceding insurer according to the applicable 
 27.8   requirements of statutes, rules, or orders of the domiciliary 
 27.9   state of the ceding insurer.  The receiver is entitled to 
 27.10  recover from a person who unsuccessfully makes a claim directly 
 27.11  against the reinsurer the receiver's attorneys' fees and 
 27.12  expenses incurred in preventing any collection by the person. 
 27.13     Sec. 25.  Minnesota Statutes 1996, section 60B.44, 
 27.14  subdivision 3, is amended to read: 
 27.15     Subd. 3.  [WAGES.] (a) Debts due to employees for services 
 27.16  performed, not to exceed $1,000 to each employee which have been 
 27.17  earned within one year before the filing of the petition for 
 27.18  liquidation, subject to payment therefrom of applicable federal, 
 27.19  state or any local government taxes required by law to be 
 27.20  withheld from said debts.  Officers shall not be entitled to the 
 27.21  benefit of this priority.  In cases where there are no claims 
 27.22  and no potential claims of the federal government in the estate, 
 27.23  these claims will have priority over claims in subdivision 4. 
 27.24     (b) Such priority shall be in lieu of any other similar 
 27.25  priority authorized by law as to wages or compensation of 
 27.26  employees.  
 27.27     Sec. 26.  Minnesota Statutes 1996, section 60B.44, 
 27.28  subdivision 4, is amended to read: 
 27.29     Subd. 4.  [LOSS CLAIMS; INCLUDING CLAIMS NOT COVERED BY A 
 27.30  GUARANTY ASSOCIATION.] All claims under policies or contracts of 
 27.31  coverage for losses incurred including third party claims, and 
 27.32  all claims against the insurer for liability for bodily injury 
 27.33  or for injury to or destruction of tangible property which are 
 27.34  not under policies or contracts.  All claims under life 
 27.35  insurance and annuity policies, whether for death proceeds, 
 27.36  annuity proceeds, or investment values, shall be treated as loss 
 28.1   claims.  That portion of any loss for which indemnification is 
 28.2   provided by other benefits or advantages recovered or 
 28.3   recoverable by the claimant shall not be included in this class, 
 28.4   other than benefits or advantages recovered or recoverable in 
 28.5   discharge of familial obligations of support or by way of 
 28.6   succession at death or as proceeds of life insurance, or as 
 28.7   gratuities.  No payment made by an employer to an employee shall 
 28.8   be treated as a gratuity.  Claims not covered by a guaranty 
 28.9   association are loss claims.  If any portion of a claim is 
 28.10  covered by a reinsurance treaty or similar contractual 
 28.11  obligation, that claim shall be entitled to a pro rata share, 
 28.12  based upon the relationship the claim amount bears to all claims 
 28.13  payable under the treaty or contract, of the proceeds received 
 28.14  under that treaty or contractual obligation.  
 28.15     Claims receiving pro rata payments shall not, as to any 
 28.16  remaining unpaid portion of their claim, be treated in a 
 28.17  different manner than if no such payment had been received.  
 28.18     Sec. 27.  Minnesota Statutes 1996, section 60B.44, 
 28.19  subdivision 6, is amended to read: 
 28.20     Subd. 6.  [RESIDUAL CLASSIFICATION.] All other claims 
 28.21  including claims of the federal or any state or local 
 28.22  government, not falling within other classes under this 
 28.23  section.  Claims, including those of any governmental body for a 
 28.24  penalty or forfeiture, shall be allowed in this class only to 
 28.25  the extent of the pecuniary loss sustained from the act, 
 28.26  transaction, or proceeding out of which the penalty or 
 28.27  forfeiture arose, with reasonable and actual costs occasioned 
 28.28  thereby.  The remainder of such claims shall be postponed to the 
 28.29  class of claims under subdivision 9.  
 28.30     Sec. 28.  Minnesota Statutes 1996, section 60D.20, 
 28.31  subdivision 2, is amended to read: 
 28.32     Subd. 2.  [DIVIDENDS AND OTHER DISTRIBUTIONS.] (a) Subject 
 28.33  to the limitations and requirements of this subdivision, the 
 28.34  board of directors of any domestic insurer within an insurance 
 28.35  holding company system may authorize and cause the insurer to 
 28.36  declare and pay any dividend or distribution to its shareholders 
 29.1   as the directors deem prudent from the earned surplus of the 
 29.2   insurer.  An insurer's earned surplus, also known as unassigned 
 29.3   funds, shall be determined in accordance with the accounting 
 29.4   procedures and practices governing preparation of its annual 
 29.5   statement, minus 25 percent of earned surplus attributable to 
 29.6   net unrealized capital gains.  Dividends which are paid from 
 29.7   sources other than an insurer's earned surplus as of the end of 
 29.8   the immediately preceding quarter for which the insurer has 
 29.9   filed a quarterly or annual statement as appropriate, or are 
 29.10  extraordinary dividends or distributions may be paid only as 
 29.11  provided in paragraphs (d), (e), and (f). 
 29.12     (b) The insurer shall notify the commissioner within five 
 29.13  business days following declaration of a dividend declared 
 29.14  pursuant to paragraph (a) and at least ten days prior to its 
 29.15  payment.  The commissioner shall promptly consider the 
 29.16  notification filed pursuant to this paragraph, taking into 
 29.17  consideration the factors described in subdivision 4. 
 29.18     (c) The commissioner shall review at least annually the 
 29.19  dividends paid by an insurer pursuant to paragraph (a) for the 
 29.20  purpose of determining if the dividends are reasonable based 
 29.21  upon (1) the adequacy of the level of surplus as regards 
 29.22  policyholders remaining after the dividend payments, and (2) the 
 29.23  quality of the insurer's earnings and extent to which the 
 29.24  reported earnings include extraordinary items, such as surplus 
 29.25  relief reinsurance transactions and reserve destrengthening. 
 29.26     (d) No domestic insurer shall pay any extraordinary 
 29.27  dividend or make any other extraordinary distribution to its 
 29.28  shareholders until:  (1) 30 days after the commissioner has 
 29.29  received notice of the declaration of it and has not within the 
 29.30  period disapproved the payment; or (2) the commissioner has 
 29.31  approved the payment within the 30-day period. 
 29.32     (e) For purposes of this section, an extraordinary dividend 
 29.33  or distribution includes any dividend or distribution of cash or 
 29.34  other property, whose fair market value together with that of 
 29.35  other dividends or distributions made within the preceding 12 
 29.36  months exceeds the greater of (1) ten percent of the insurer's 
 30.1   surplus as regards policyholders as of the 31st day of December 
 30.2   next preceding on December 31 of the preceding year; or (2) the 
 30.3   net gain from operations of the insurer, if the insurer is a 
 30.4   life insurer, or the net income, if the insurer is not a life 
 30.5   insurer, not including realized capital gains, for the 12-month 
 30.6   period ending the 31st day of December next preceding on 
 30.7   December 31 of the preceding year, but does not include pro rata 
 30.8   distributions of any class of the insurer's own securities.  
 30.9      (f) Notwithstanding any other provision of law, an insurer 
 30.10  may declare an extraordinary dividend or distribution that is 
 30.11  conditional upon the commissioner's approval, and the 
 30.12  declaration shall confer no rights upon shareholders until:  (1) 
 30.13  the commissioner has approved the payment of such a dividend or 
 30.14  distribution; or (2) the commissioner has not disapproved the 
 30.15  payment within the 30-day period referred to above. 
 30.16     Sec. 29.  Minnesota Statutes 1996, section 60K.02, 
 30.17  subdivision 1, is amended to read: 
 30.18     Subdivision 1.  [REQUIREMENT.] No person shall act or 
 30.19  assume to act as an insurance agent in the solicitation or 
 30.20  procurement of applications for insurance, nor in the sale of 
 30.21  insurance or policies of insurance, nor in any manner aid as an 
 30.22  insurance agent in the negotiation of insurance by or with an 
 30.23  insurer, including resident agents or reciprocal or 
 30.24  interinsurance exchanges and fraternal benefit societies, until 
 30.25  that person obtains from the commissioner a license for that 
 30.26  purpose.  The license must specifically set forth the name of 
 30.27  the person authorized to act as an agent and the class or 
 30.28  classes of insurance for which that person is authorized to 
 30.29  solicit or countersign policies.  An insurance agent may qualify 
 30.30  for a license in the following classes:  (1) life and health; 
 30.31  and (2) property and casualty; (3) travel baggage; (4) bail 
 30.32  bonds; (5) title insurance; (6) farm property and liability; and 
 30.33  (7) variable annuities.  
 30.34     No insurer shall appoint or reappoint a natural person, 
 30.35  partnership, or corporation to act as an insurance agent on its 
 30.36  behalf until that natural person, partnership, or corporation 
 31.1   obtains a license as an insurance agent.  
 31.2      Sec. 30.  Minnesota Statutes 1996, section 60K.03, 
 31.3   subdivision 2, is amended to read: 
 31.4      Subd. 2.  [RESIDENT AGENT.] The commissioner shall issue a 
 31.5   resident insurance agent's license to a qualified resident of 
 31.6   this state as follows:  
 31.7      (a) A person may qualify as a resident of this state if 
 31.8   that person resides in this state or the principal place of 
 31.9   business of that person is maintained in this state.  
 31.10  Application for a license claiming residency in this state for 
 31.11  licensing purposes constitutes an election of residency in this 
 31.12  state.  A license issued upon an application claiming residency 
 31.13  in this state is void if the licensee, while holding a resident 
 31.14  license in this state, also holds, or makes application for, a 
 31.15  resident license in, or thereafter claims to be a resident of, 
 31.16  any other state or jurisdiction or if the licensee ceases to be 
 31.17  a resident of this state; provided, however, if the applicant is 
 31.18  a resident of a community or trade area, the border of which is 
 31.19  contiguous with the state line of this state, the applicant may 
 31.20  qualify for a resident license in this state and at the same 
 31.21  time hold a resident license from the contiguous state. 
 31.22     (b) The commissioner shall subject each applicant who is a 
 31.23  natural person to a written examination as to the applicant's 
 31.24  competence to act as an insurance agent.  The examination must 
 31.25  be held at a reasonable time and place designated by the 
 31.26  commissioner. 
 31.27     (c) The examination shall be approved for use by the 
 31.28  commissioner and shall test the applicant's knowledge of the 
 31.29  lines of insurance, policies, and transactions to be handled 
 31.30  under the class of license applied for, of the duties and 
 31.31  responsibilities of the licensee, and pertinent insurance laws 
 31.32  of this state. 
 31.33     (d) The examination shall be given only after the applicant 
 31.34  has completed a program of classroom studies in a school, which 
 31.35  shall not include a school sponsored by, offered by, or 
 31.36  affiliated with an insurance company or its agents; except that 
 32.1   this limitation does not preclude a bona fide professional 
 32.2   association of agents, not acting on behalf of an insurer, from 
 32.3   offering courses.  The course of study shall consist of 30 hours 
 32.4   of classroom study devoted to the basic fundamentals of 
 32.5   insurance for those seeking a Minnesota license for the first 
 32.6   time,; three hours devoted to state laws, regulations, and rules 
 32.7   applicable to the line or lines of insurance for which licensure 
 32.8   is being applied; 15 hours devoted to specific life and health 
 32.9   topics for those seeking a life and health license,; and 15 
 32.10  hours devoted to specific property and casualty topics for those 
 32.11  seeking a property and casualty license.  The program of studies 
 32.12  or study course shall have been approved by the commissioner in 
 32.13  order to qualify under this paragraph.  If the applicant has 
 32.14  been previously licensed for the particular line of insurance in 
 32.15  the state of Minnesota, the requirement of a program of studies 
 32.16  or a study course shall be waived.  A certification of 
 32.17  compliance by the organization offering the course shall 
 32.18  accompany the applicant's license application.  This program of 
 32.19  studies in a school or a study course shall not apply to farm 
 32.20  property perils and farm liability applicants, or to agents 
 32.21  writing such other lines of insurance as the commissioner may 
 32.22  exempt from examination by order. 
 32.23     (e) The applicant must pass the examination with a grade 
 32.24  determined by the commissioner to indicate satisfactory 
 32.25  knowledge and understanding of the class or classes of insurance 
 32.26  for which the applicant seeks qualification.  The commissioner 
 32.27  shall inform the applicant as to whether or not the applicant 
 32.28  has passed.  Examination results are valid for a period of three 
 32.29  years from the date of the examination.  The applicant must pass 
 32.30  the examination with a grade determined by the commissioner. 
 32.31     (f) An applicant who has failed to pass an examination may 
 32.32  take subsequent examinations.  Examination fees for subsequent 
 32.33  examinations shall not be waived. 
 32.34     (g) Any applicant for a license covering the same class or 
 32.35  classes of insurance for which the applicant was licensed under 
 32.36  a similar license in this state, other than a temporary license, 
 33.1   within the three years preceding the date of the application 
 33.2   shall be exempt from the requirement of a written examination, 
 33.3   unless the previous license was revoked or suspended by the 
 33.4   commissioner.  An applicant whose license is not renewed under 
 33.5   section 60K.12 is exempt from the requirement of a written 
 33.6   examination.  
 33.7      Sec. 31.  Minnesota Statutes 1996, section 60K.03, 
 33.8   subdivision 3, is amended to read: 
 33.9      Subd. 3.  [NONRESIDENT AGENT.] The commissioner shall issue 
 33.10  a nonresident insurance agent's license to a qualified person 
 33.11  who is a resident of another state or country as follows: 
 33.12     (a) A person may qualify for a license under this section 
 33.13  as a nonresident only if that person holds a license in another 
 33.14  state, province of Canada, or other foreign country which, in 
 33.15  the opinion of the commissioner, qualifies that person for the 
 33.16  same activity as that for which a license is sought. 
 33.17     (b) The commissioner shall not issue a license to a 
 33.18  nonresident applicant until that person files with the 
 33.19  commissioner a designation of the commissioner and the 
 33.20  commissioner's successors in office as the applicant's true and 
 33.21  lawful attorney upon whom may be served all lawful process in an 
 33.22  action, suit, or proceeding instituted by or on behalf of an 
 33.23  interested person arising out of the applicant's insurance 
 33.24  business in this state.  This designation constitutes an 
 33.25  agreement that this service of process is of the same legal 
 33.26  force and validity as personal service of process in this state 
 33.27  upon that applicant.  
 33.28     Service of process upon a licensee in an action or 
 33.29  proceeding begun in a court of competent jurisdiction of this 
 33.30  state may be made in compliance with section 45.028, subdivision 
 33.31  2.  
 33.32     (c) A nonresident agent shall be held to the same knowledge 
 33.33  of insurance law, regulations, and rules as that required of a 
 33.34  resident agent according to subdivision 2, paragraph (d). 
 33.35     (c) (d) A nonresident license terminates automatically when 
 33.36  the resident license for that class of license in the state, 
 34.1   province, or foreign country in which the licensee is a resident 
 34.2   is terminated for any reason.  
 34.3      Sec. 32.  Minnesota Statutes 1996, section 60K.14, 
 34.4   subdivision 4, is amended to read: 
 34.5      Subd. 4.  [SUITABILITY OF INSURANCE.] In recommending the 
 34.6   purchase of any life, endowment, individual accident and 
 34.7   sickness, long-term care, annuity, life-endowment, or Medicare 
 34.8   supplement insurance to a customer, an agent must have 
 34.9   reasonable grounds for believing that the recommendation is 
 34.10  suitable for the customer and must make reasonable inquiries to 
 34.11  determine suitability.  The suitability of a recommended 
 34.12  purchase of insurance will be determined by reference to the 
 34.13  totality of the particular customer's circumstances upon the 
 34.14  basis of the facts disclosed by the customer as to the 
 34.15  customer's other insurance and financial situation and needs, 
 34.16  including, but not limited to, the customer's income financial 
 34.17  status, the customer's need for insurance, and the values, 
 34.18  benefits, and costs of the customer's existing insurance 
 34.19  program, if any, when compared to the values, benefits, and 
 34.20  costs of the recommended policy or policies. 
 34.21     Sec. 33.  Minnesota Statutes 1996, section 60K.19, 
 34.22  subdivision 7, is amended to read: 
 34.23     Subd. 7.  [CRITERIA FOR COURSE ACCREDITATION.] (a) The 
 34.24  commissioner may accredit a course only to the extent it is 
 34.25  designed to impart substantive and procedural knowledge of the 
 34.26  insurance field.  The burden of demonstrating that the course 
 34.27  satisfies this requirement is on the individual or organization 
 34.28  seeking accreditation.  The commissioner shall approve any 
 34.29  educational program approved by Minnesota Continuing Legal 
 34.30  Education relating to the insurance field.  The commissioner is 
 34.31  authorized to establish a procedure for renewal of course 
 34.32  accreditation. 
 34.33     (b) The commissioner shall approve or disapprove 
 34.34  professional designation examinations that are recommended for 
 34.35  approval by the advisory task force.  In order for an agent to 
 34.36  receive full continuing education credit for a professional 
 35.1   designation examination, the agent must pass the examination.  
 35.2   An agent may not receive credit for classroom instruction 
 35.3   preparing for the professional designation examination and also 
 35.4   receive continuing education credit for passing the professional 
 35.5   designation examination. 
 35.6      (c) The commissioner may not accredit a course:  
 35.7      (1) that is designed to prepare students for a license 
 35.8   examination; 
 35.9      (2) in mechanical office or business skills, including 
 35.10  typing, speedreading, use of calculators, or other machines or 
 35.11  equipment; 
 35.12     (3) in sales promotion, including meetings held in 
 35.13  conjunction with the general business of the licensed agent; or 
 35.14     (4) in motivation, the art of selling, psychology, or time 
 35.15  management; or. 
 35.16     (5) which can be completed by the student at home or 
 35.17  outside the classroom without the supervision of an instructor 
 35.18  approved by the department of commerce, except that home-study 
 35.19  courses may be accredited by the commissioner if the student is 
 35.20  a nonresident agent residing in a state which is not contiguous 
 35.21  to Minnesota.  
 35.22     Sec. 34.  Minnesota Statutes 1996, section 60K.19, 
 35.23  subdivision 8, is amended to read: 
 35.24     Subd. 8.  [MINIMUM EDUCATION REQUIREMENT.] Each person 
 35.25  subject to this section shall complete a minimum of 30 credit 
 35.26  hours of courses accredited by the commissioner during each 
 35.27  24-month licensing period after the expiration of the person's 
 35.28  initial licensing period, two hours of which must be devoted to 
 35.29  state law, regulations, and rules applicable to the line or 
 35.30  lines of insurance for which the agent is licensed.  At least 15 
 35.31  of the 30 credit hours must be completed during the first 12 
 35.32  months of the 24-month licensing period.  Any person whose 
 35.33  initial licensing period extends more than six months shall 
 35.34  complete 15 hours of courses accredited by the commissioner 
 35.35  during the initial license period.  Any person teaching or 
 35.36  lecturing at an accredited course qualifies for 1-1/2 times the 
 36.1   number of credit hours that would be granted to a person 
 36.2   completing the accredited course.  No more than 15 credit hours 
 36.3   per licensing period may be credited to a person for courses 
 36.4   sponsored by, offered by, or affiliated with an insurance 
 36.5   company or its agents.  Courses sponsored by, offered by, or 
 36.6   affiliated with an insurance company or agent may restrict its 
 36.7   students to agents of the company or agency. 
 36.8      Sec. 35.  Minnesota Statutes 1996, section 61A.28, 
 36.9   subdivision 6, is amended to read: 
 36.10     Subd. 6.  [STOCKS, OBLIGATIONS, AND OTHER INVESTMENTS.] (a) 
 36.11  Common stocks, common stock equivalents, or securities 
 36.12  convertible into common stock or common stock equivalents of a 
 36.13  business entity organized under the laws of the United States or 
 36.14  any state thereof, or the Dominion of Canada or any province 
 36.15  thereof, if the net earnings of the business entity after the 
 36.16  elimination of extraordinary nonrecurring items of income and 
 36.17  expense and before income taxes and fixed charges over the five 
 36.18  immediately preceding completed fiscal years, or its period of 
 36.19  existence if less than five years, has averaged not less than 
 36.20  1-1/4 times its average annual fixed charges applicable to the 
 36.21  period.  
 36.22     (b) Preferred stock of, or common or preferred stock 
 36.23  guaranteed as to dividends by a business entity organized under 
 36.24  the laws of the United States or any state thereof, or the 
 36.25  Dominion of Canada or any province thereof, under the following 
 36.26  conditions:  (1) No investment may be made under this paragraph 
 36.27  in a stock upon which any dividend, current or cumulative, is in 
 36.28  arrears; (2) the company may not invest in stocks under this 
 36.29  paragraph and in common stocks under paragraph (a) if the 
 36.30  investment causes the company's aggregate investments in the 
 36.31  common or preferred stocks to exceed 25 percent of the company's 
 36.32  total admitted assets, provided that no more than 20 percent of 
 36.33  the company's admitted assets may be invested in common stocks 
 36.34  under paragraph (a); and (3) the company may not invest in any 
 36.35  preferred stock or common stock guaranteed as to dividends, 
 36.36  which is rated in the four lowest categories established by the 
 37.1   securities valuation office of the National Association of 
 37.2   Insurance Commissioners, if the investment causes the company's 
 37.3   aggregate investment in the lower rated preferred or common 
 37.4   stock guaranteed as to dividends to exceed five percent of its 
 37.5   total admitted assets.  
 37.6      (c) Warrants, options, and rights to purchase stock if the 
 37.7   stock, at the time of the acquisition of the warrant, option, or 
 37.8   right to purchase, would qualify as an investment under 
 37.9   paragraph (a) or (b), whichever is applicable.  A company shall 
 37.10  not invest in a warrant, option, or right to purchase stock if, 
 37.11  upon purchase and immediate exercise thereof, the acquisition of 
 37.12  the stock violates any of the concentration limitations 
 37.13  contained in paragraphs (a) and (b).  
 37.14     (d) In addition to amounts that may be invested under 
 37.15  subdivision 8 and without regard to the percentage limitation 
 37.16  applicable to stocks, warrants, options, and rights to purchase, 
 37.17  the securities of any face amount certificate company, unit 
 37.18  investment trust, or management type investment company, 
 37.19  registered or in the process of registration under the 
 37.20  Investment Company Act of 1940 as from time to time amended.  In 
 37.21  addition, the company may transfer assets into one or more of 
 37.22  its separate accounts for the purpose of establishing, or 
 37.23  supporting its contractual obligations under, the accounts in 
 37.24  accordance with the provisions of sections 61A.13 to 61A.21.  A 
 37.25  company may not invest in a security authorized under this 
 37.26  paragraph if the investment causes the company's aggregate 
 37.27  investments in the securities to exceed five percent of its 
 37.28  total admitted assets, except that for a health service plan 
 37.29  corporation operating under chapter 62C, and for a health 
 37.30  maintenance organization operating under chapter 62D, the 
 37.31  company's aggregate investments may not exceed 20 percent of its 
 37.32  total admitted assets.  No more than five percent of the allowed 
 37.33  investment by health service plan corporations or health 
 37.34  maintenance organizations may be invested in funds that invest 
 37.35  in assets not backed by the federal government.  When investing 
 37.36  in money market mutual funds, nonprofit health service plans 
 38.1   regulated under chapter 62C, and health maintenance 
 38.2   organizations regulated under chapter 62D, shall establish a 
 38.3   trustee custodial account for the transfer of cash into the 
 38.4   money market mutual fund. 
 38.5      (e) Investment grade obligations that are:  
 38.6      (1) bonds, obligations, notes, debentures, repurchase 
 38.7   agreements, or other evidences of indebtedness of a business 
 38.8   entity, organized under the laws of the United States or any 
 38.9   state thereof, or the Dominion of Canada or any province 
 38.10  thereof; and 
 38.11     (2) rated in one of the four highest rating categories by 
 38.12  at least one nationally recognized statistical rating 
 38.13  organization, or are rated in one of the two highest categories 
 38.14  established by the securities valuation office of the National 
 38.15  Association of Insurance Commissioners. 
 38.16     (f) Noninvestment grade obligations:  A company may acquire 
 38.17  noninvestment grade obligations as defined in subclause (i) 
 38.18  (hereinafter noninvestment grade obligations) which meet the 
 38.19  earnings test set forth in subclause (ii).  A company may not 
 38.20  acquire a noninvestment grade obligation if the acquisition will 
 38.21  cause the company to exceed the limitations set forth in 
 38.22  subclause (iii). 
 38.23     (i) A noninvestment grade obligation is an obligation of a 
 38.24  business entity, organized under the laws of the United States 
 38.25  or any state thereof, or the Dominion of Canada or any province 
 38.26  thereof, that is not rated in one of the four highest rating 
 38.27  categories by at least one nationally recognized statistical 
 38.28  rating organization, or is not rated in one of the two highest 
 38.29  categories established by the securities valuation office of the 
 38.30  National Association of Insurance Commissioners. 
 38.31     (ii) Noninvestment grade obligations authorized by this 
 38.32  subdivision may be acquired by a company if the business entity 
 38.33  issuing or assuming the obligation, or the business entity 
 38.34  securing or guaranteeing the obligation, has had net earnings 
 38.35  after the elimination of extraordinary nonrecurring items of 
 38.36  income and expense and before income taxes and fixed charges 
 39.1   over the five immediately preceding completed fiscal years, or 
 39.2   its period of existence of less than five years, has averaged 
 39.3   not less than 1-1/4 times its average annual fixed charges 
 39.4   applicable to the period; provided, however, that if a business 
 39.5   entity issuing or assuming the obligation, or the business 
 39.6   entity securing or guaranteeing the obligation, has undergone an 
 39.7   acquisition, recapitalization, or reorganization within the 
 39.8   immediately preceding 12 months, or will use the proceeds of the 
 39.9   obligation for an acquisition, recapitalization, or 
 39.10  reorganization, then such business entity shall also have, on a 
 39.11  pro forma basis, for the next succeeding 12 months, net earnings 
 39.12  averaging 1-1/4 times its average annual fixed charges 
 39.13  applicable to such period after elimination of extraordinary 
 39.14  nonrecurring items of income and expense and before taxes and 
 39.15  fixed charges; no investment may be made under this section upon 
 39.16  which any interest obligation is in default. 
 39.17     (iii) Limitation on aggregate interest in noninvestment 
 39.18  grade obligations.  A company may not invest in a noninvestment 
 39.19  grade obligation if the investment will cause the company's 
 39.20  aggregate investments in noninvestment grade obligations to 
 39.21  exceed the applicable percentage of admitted assets set forth in 
 39.22  the following table:  
 39.23                                          Percentage of
 39.24              Effective Date              Admitted Assets
 39.25              January 1, 1992                  20
 39.26              January 1, 1993                  17.5
 39.27              January 1, 1994                  15
 39.28     Nothing in this paragraph limits the ability of a company 
 39.29  to invest in noninvestment grade obligations as provided under 
 39.30  subdivision 12. 
 39.31     (g) Obligations for the payment of money under the 
 39.32  following conditions:  (1) The obligation must be secured, 
 39.33  either solely or in conjunction with other security, by an 
 39.34  assignment of a lease or leases on property, real or personal; 
 39.35  (2) the lease or leases must be nonterminable by the lessee or 
 39.36  lessees upon foreclosure of any lien upon the leased property; 
 40.1   (3) the rents payable under the lease or leases must be 
 40.2   sufficient to amortize at least 90 percent of the obligation 
 40.3   during the primary term of the lease; and (4) the lessee or 
 40.4   lessees under the lease or leases, or a governmental entity or 
 40.5   business entity, organized under the laws of the United States 
 40.6   or any state thereof, or the Dominion of Canada, or any province 
 40.7   thereof, that has assumed or guaranteed any lessee's performance 
 40.8   thereunder, must be a governmental entity or business entity 
 40.9   whose obligations would qualify as an investment under 
 40.10  subdivision 2 or paragraph (e) or (f).  A company may acquire 
 40.11  leases assumed or guaranteed by a noninvestment grade lessee 
 40.12  unless the value of the lease, when added to the other 
 40.13  noninvestment grade obligations owned by the company, exceeds 15 
 40.14  percent of the company's admitted assets.  
 40.15     (h) A company may sell exchange-traded call options against 
 40.16  stocks or other securities owned by the company and may purchase 
 40.17  exchange-traded call options in a closing transaction against a 
 40.18  call option previously written by the company.  In addition to 
 40.19  the authority granted by paragraph (c), to the extent and on the 
 40.20  terms and conditions the commissioner determines to be 
 40.21  consistent with the purposes of this chapter, a company may 
 40.22  purchase or sell other exchange-traded call options, and may 
 40.23  sell or purchase exchange-traded put options.  
 40.24     (i) A company may not invest in a security or other 
 40.25  obligation authorized under this subdivision if the investment, 
 40.26  valued at cost at the date of purchase, causes the company's 
 40.27  aggregate investment in any one business entity to exceed two 
 40.28  percent of the company's admitted assets.  
 40.29     (j) For nonprofit health service plan corporations 
 40.30  regulated under chapter 62C, and for health maintenance 
 40.31  organizations regulated under chapter 62D, a company may invest 
 40.32  in commercial paper rated in one of the two highest rating 
 40.33  categories by at least one nationally recognized statistical 
 40.34  rating organization, or rated in one of the two highest 
 40.35  categories established by the securities valuation office of the 
 40.36  National Association of Insurance Commissioners, if the 
 41.1   investment, valued at cost at the date of purchase, does not 
 41.2   cause the company's aggregate investment in any one business 
 41.3   entity to exceed six percent of the company's admitted assets. 
 41.4      Sec. 36.  Minnesota Statutes 1996, section 61A.28, 
 41.5   subdivision 9a, is amended to read: 
 41.6      Subd. 9a.  [HEDGING.] A domestic life insurance company may 
 41.7   enter into financial transactions solely for the purpose of 
 41.8   managing reducing the interest rate risk associated with the 
 41.9   company's assets and liabilities that the company has acquired 
 41.10  or incurred or has legally contracted to acquire or incur, and 
 41.11  not for speculative or other purposes. For purposes of this 
 41.12  subdivision, "financial transactions"  include, but are not 
 41.13  limited to, futures, options to buy or sell fixed income 
 41.14  securities, repurchase and reverse repurchase agreements, and 
 41.15  interest rate swaps, caps, and floors.  This authority is in 
 41.16  addition to any other authority of the insurer.  
 41.17     Sec. 37.  Minnesota Statutes 1996, section 61A.28, 
 41.18  subdivision 12, is amended to read: 
 41.19     Subd. 12.  [ADDITIONAL INVESTMENTS.] Investments of any 
 41.20  kind, without regard to the categories, conditions, standards, 
 41.21  or other limitations set forth in the foregoing subdivisions and 
 41.22  section 61A.31, subdivision 3, except that the prohibitions in 
 41.23  clause (d) of subdivision 3 remains applicable, may be made by a 
 41.24  domestic life insurance company in an amount not to exceed the 
 41.25  lesser of the following: 
 41.26     (1) Five percent of the company's total admitted assets as 
 41.27  of the end of the preceding calendar year, or 
 41.28     (2) Fifty percent of the amount by which its capital and 
 41.29  surplus as of the end of the preceding calendar year exceeds 
 41.30  $675,000.  Except as provided in section 61A.281, a company's 
 41.31  total investment under this section in the common stock of any 
 41.32  corporation, other than the stock of the types of corporations 
 41.33  specified in section 61A.284, may not exceed ten percent of the 
 41.34  common stock of the corporation.  No investment may be made 
 41.35  under the authority of this clause or clause (1) by a company 
 41.36  that has not completed five years of actual operation since the 
 42.1   date of its first certificate of authority.  
 42.2      If, subsequent to being made under the provisions of this 
 42.3   subdivision, an investment is determined to have become 
 42.4   qualified or eligible under any of the other provisions of this 
 42.5   chapter, the company may consider the investment as being held 
 42.6   under the other provision and the investment need no longer be 
 42.7   considered as having been made under the provisions of this 
 42.8   subdivision.  
 42.9      In addition to the investments authorized by this 
 42.10  subdivision, with the written order of the commissioner, a 
 42.11  domestic life insurance company may make qualified investments 
 42.12  in any additional securities or property of the type authorized 
 42.13  by subdivision 6, paragraph (e), (f), or (g), with the written 
 42.14  order of the commissioner other type of investment or exceeding 
 42.15  any limitations of quality, quantity, or percentage of admitted 
 42.16  assets contained in this section, section 61A.29 or 61A.31, or 
 42.17  other provision governing the investments of a domestic life 
 42.18  insurance company.  This approval is at the discretion of the 
 42.19  commissioner, provided that the additional investments allowed 
 42.20  by the commissioner's written order may not exceed five percent 
 42.21  of the company's admitted assets.  This authorization does not 
 42.22  negate or reduce the investment authority granted in subdivision 
 42.23  6, paragraph (e), (f), or (g), or this subdivision. 
 42.24     Sec. 38.  Minnesota Statutes 1996, section 61A.60, 
 42.25  subdivision 1, is amended to read: 
 42.26     Subdivision 1.  [NOTICE FORM; AGENT SALES.] The notice 
 42.27  required where sections 61A.53 to 61A.60 refer to this 
 42.28  subdivision is as follows: 
 42.29                          IMPORTANT NOTICE 
 42.30  
 42.31  DEFINITION   REPLACEMENT is any transaction where, in connection
 42.32               with the purchase of New Insurance or a New 
 42.33               Annuity, you LAPSE, SURRENDER, CONVERT to 
 42.34               Paid-up Insurance, Place on Extended Term, 
 42.35               or BORROW all or part of the policy loan 
 42.36               values on an existing insurance policy or an 
 43.1                annuity.  (See reverse side for DEFINITIONS.) 
 43.2    
 43.3    
 43.4   IF YOU       In connection with the purchase of this insurance 
 43.5   INTEND TO    or annuity, if you have REPLACED or intend to 
 43.6   REPLACE      REPLACE your present life insurance coverage 
 43.7   COVERAGE     or annuity(ies), you should be certain that you   
 43.8                understand all the relevant factors involved.
 43.9    
 43.10               You should BE AWARE that you may be required to
 43.11               provide EVIDENCE OF INSURABILITY and 
 43.13               (1)  If your HEALTH condition has CHANGED since 
 43.14               the application was taken on your present 
 43.15               policies, you may be required to pay ADDITIONAL 
 43.16               PREMIUMS under the NEW POLICY, or be DENIED 
 43.17               coverage. 
 43.19               (2)  Your present occupation or activities may not
 43.20               be covered or could require additional premiums.  
 43.22               (3)  The INCONTESTABLE and SUICIDE CLAUSE will 
 43.23               begin anew in a new policy.  This could RESULT 
 43.24               in a CLAIM under the new policy BEING DENIED 
 43.25               that would otherwise have been paid.
 43.27               (4)  Current law DOES MAY NOT REQUIRE your present 
 43.28               insurer(s) to REFUND any premiums.
 43.30               (5)  It is to your advantage to OBTAIN INFORMATION
 43.31               regarding your existing policies or annuity 
 43.32               contracts  [FROM THE INSURER OR AGENT FROM WHOM 
 43.33               YOU PURCHASED THE POLICY OR ANNUITY CONTRACT.] 
 43.34   
 43.35               (If you are purchasing an annuity, clauses (1), 
 43.36               (2), and (3) above would not apply to the new 
 44.1                annuity contract.)
 44.3                THE INSURANCE OR ANNUITY I INTEND TO PURCHASE FROM 
 44.4                _______________________________________INSURANCE CO.
 44.5                MAY REPLACE OR ALTER EXISTING LIFE INSURANCE 
 44.6                POLICY(IES) OR ANNUITY CONTRACT(S). 
 44.8                The following policy(ies) or annuity contract(s) 
 44.9                may be replaced as a result of this transaction:
 44.11            Insurer                               Insured 
 44.12   as it appears on the policy        as it appears on the policy 
 44.13   or contract                        or contract  
 44.14  ______________________________     ______________________________
 44.15  ______________________________     ______________________________
 44.16  ______________________________     ______________________________
 44.17  ______________________________     ______________________________
 44.18    Policy or contract number               Insured birthdate 
 44.19  ______________________________     ______________________________
 44.20  ______________________________     ______________________________
 44.21  ______________________________     ______________________________
 44.22  ______________________________     ______________________________
 44.23          The proposed policy or contract is:
 44.24          ______________________________________  $_______________
 44.25          type of policy- or contract-generic name   face amount
 44.27          ________________________________________________________
 44.28          signature of applicant                   date
 44.30          ________________________________________________________
 44.31          address of applicant        city              state
 44.33          I certify that this form was given to and completed by 
 44.35          ________________________________________________________
 44.36                      (applicant-please print or type)
 44.38          prior to taking an application and that I am leaving a 
 44.39          signed copy for the applicant.
 44.41               ___________________________________________________
 44.42               agent's signature                    date
 44.44               ___________________________________________________
 44.45                                address
 44.47               ___________________________________________________
 44.48                       city                       state
 45.1             Note important statement on reverse side 
 45.2      Sec. 39.  Minnesota Statutes 1996, section 61B.19, 
 45.3   subdivision 3, is amended to read: 
 45.4      Subd. 3.  [LIMITATION OF COVERAGE.] Sections 61B.18 to 
 45.5   61B.32 do not provide coverage for: 
 45.6      (1) a portion of a policy or contract under which the 
 45.7   investment risk is borne by the policy or contract holder; 
 45.8      (2) a policy or contract of reinsurance, unless assumption 
 45.9   certificates have been issued and the insured has consented to 
 45.10  the assumption as provided under section 60A.09, subdivision 4a; 
 45.11     (3) a policy or contract issued by an assessment benefit 
 45.12  association operating under section 61A.39, or a fraternal 
 45.13  benefit society operating under chapter 64B; 
 45.14     (4) any obligation to nonresident participants of a covered 
 45.15  retirement plan or to the plan sponsor, employer, trustee, or 
 45.16  other party who owns the contract; in these cases, the 
 45.17  association is obligated under this chapter only to participants 
 45.18  in a covered plan who are residents of the state of Minnesota on 
 45.19  the date of impairment or insolvency; 
 45.20     (5) an annuity contract issued in connection with and for 
 45.21  the purpose of funding a structured settlement of a liability 
 45.22  claim, where the liability insurer remains liable; 
 45.23     (6) a portion of an unallocated annuity contract which is 
 45.24  not issued to or in connection with a specific employee, union, 
 45.25  or association of natural persons benefit plan or a governmental 
 45.26  lottery, including but not limited to, a contract issued to, or 
 45.27  purchased at the direction of, any governmental bonding 
 45.28  authority, such as a municipal guaranteed investment contract; 
 45.29     (7) a plan or program of an employer, association, or 
 45.30  similar entity to provide life, health, or annuity benefits to 
 45.31  its employees or members to the extent that the plan or program 
 45.32  is self-funded or uninsured, including benefits payable by an 
 45.33  employer, association, or similar entity under: 
 45.34     (i) a multiple employer welfare arrangement as defined in 
 45.35  the Employee Retirement Income Security Act of 1974, United 
 46.1   States Code, title 29, section 1002(40)(A), as amended; 
 46.2      (ii) a minimum premium group insurance plan; 
 46.3      (iii) a stop-loss group insurance plan; or 
 46.4      (iv) an administrative services only contract; 
 46.5      (8) any policy or contract issued by an insurer at a time 
 46.6   when it was not licensed or did not have a certificate of 
 46.7   authority to issue the policy or contract in this state; 
 46.8      (9) an unallocated annuity contract issued to an employee 
 46.9   benefit plan protected under the federal Pension Benefit 
 46.10  Guaranty Corporation; and 
 46.11     (10) a portion of a policy or contract to the extent that 
 46.12  it provides dividends or experience rating credits except to the 
 46.13  extent the dividends or experience rating credits have actually 
 46.14  become due and payable or have been credited to the policy or 
 46.15  contract before the date of impairment or insolvency, or 
 46.16  provides that a fee or allowance be paid to a person, including 
 46.17  the policy or contract holder, in connection with the service 
 46.18  to, or administration of, the policy or contract.; and 
 46.19     (11) a contractual agreement that establishes the member 
 46.20  insurer's obligations to provide a book value accounting 
 46.21  guaranty for defined contribution benefit plan participants by 
 46.22  reference to a portfolio of assets that is owned by the benefit 
 46.23  plan or its trustee, which in each case is not an affiliate of 
 46.24  the member insurer. 
 46.25     Sec. 40.  Minnesota Statutes 1996, section 62A.04, 
 46.26  subdivision 3, is amended to read: 
 46.27     Subd. 3.  [OPTIONAL PROVISIONS.] Except as provided in 
 46.28  subdivision 4, no such policy delivered or issued for delivery 
 46.29  to any person in this state shall contain provisions respecting 
 46.30  the matters set forth below unless such provisions are in the 
 46.31  words in which the same appear in this section.  The insurer 
 46.32  may, at its option, use in lieu of any such provision a 
 46.33  corresponding provision of different wording approved by the 
 46.34  commissioner which is not less favorable in any respect to the 
 46.35  insured or the beneficiary.  Any such provision contained in the 
 46.36  policy shall be preceded individually by the appropriate caption 
 47.1   appearing in this subdivision or, at the option of the insurer, 
 47.2   by such appropriate individual or group captions or subcaptions 
 47.3   as the commissioner may approve. 
 47.4      (1) A provision as follows: 
 47.5      CHANGE OF OCCUPATION:  If the insured be injured or 
 47.6   contract sickness after having changed occupations to one 
 47.7   classified by the insurer as more hazardous than that stated in 
 47.8   this policy or while doing for compensation anything pertaining 
 47.9   to an occupation so classified, the insurer will pay only such 
 47.10  portion of the indemnities provided in this policy as the 
 47.11  premiums paid would have purchased at the rates and within the 
 47.12  limits fixed by the insurer for such more hazardous occupation.  
 47.13  If the insured changes occupations to one classified by the 
 47.14  insurer as less hazardous than that stated in this policy, the 
 47.15  insurer, upon receipt of proof of such change of occupation will 
 47.16  reduce the premium rate accordingly, and will return the excess 
 47.17  pro rata unearned premium from the date of change of occupation 
 47.18  or from the policy anniversary date immediately preceding 
 47.19  receipt of such proof, whichever is the more recent.  In 
 47.20  applying this provision, the classification of occupational risk 
 47.21  and the premium rates shall be such as have been last filed by 
 47.22  the insurer prior to the occurrence of the loss for which the 
 47.23  insurer is liable or prior to date of proof of change in 
 47.24  occupation with the state official having supervision of 
 47.25  insurance in the state where the insured resided at the time 
 47.26  this policy was issued; but if such filing was not required, 
 47.27  then the classification of occupational risk and the premium 
 47.28  rates shall be those last made effective by the insurer in such 
 47.29  state prior to the occurrence of the loss or prior to the date 
 47.30  of proof of change of occupation. 
 47.31     (2) A provision as follows: 
 47.32     MISSTATEMENT OF AGE:  If the age of the insured has been 
 47.33  misstated, all amounts payable under this policy shall be such 
 47.34  as the premium paid would have purchased at the correct age. 
 47.35     (3) A provision as follows: 
 47.36     OTHER INSURANCE IN THIS INSURER:  If an accident or 
 48.1   sickness or accident and sickness policy or policies previously 
 48.2   issued by the insurer to the insured be in force concurrently 
 48.3   herewith, making the aggregate indemnity for ..... (insert type 
 48.4   of coverage or coverages) in excess of $..... (insert maximum 
 48.5   limit of indemnity or indemnities) the excess insurance shall be 
 48.6   void and all premiums paid for such excess shall be returned to 
 48.7   the insured or to the insured's estate, or, in lieu thereof: 
 48.8      Insurance effective at any one time on the insured under a 
 48.9   like policy or policies in this insurer is limited to the one 
 48.10  such policy elected by the insured, or the insured's beneficiary 
 48.11  or estate, as the case may be, and the insurer will return all 
 48.12  premiums paid for all other such policies. 
 48.13     (4) A provision as follows: 
 48.14     INSURANCE WITH OTHER INSURERS:  If there be other valid 
 48.15  coverage, not with this insurer, providing benefits for the same 
 48.16  loss on a provision of service basis or on an expense incurred 
 48.17  basis and of which this insurer has not been given written 
 48.18  notice prior to the occurrence or commencement of loss, the only 
 48.19  liability under any expense incurred coverage of this policy 
 48.20  shall be for such proportion of the loss as the amount which 
 48.21  would otherwise have been payable hereunder plus the total of 
 48.22  the like amounts under all such other valid coverages for the 
 48.23  same loss of which this insurer had notice bears to the total 
 48.24  like amounts under all valid coverages for such loss, and for 
 48.25  the return of such portion of the premiums paid as shall exceed 
 48.26  the pro rata portion for the amount so determined.  For the 
 48.27  purpose of applying this provision when other coverage is on a 
 48.28  provision of service basis, the "like amount" of such other 
 48.29  coverage shall be taken as the amount which the services 
 48.30  rendered would have cost in the absence of such coverage. 
 48.31     If the foregoing policy provision is included in a policy 
 48.32  which also contains the next following policy provision there 
 48.33  shall be added to the caption of the foregoing provision the 
 48.34  phrase "EXPENSE INCURRED BENEFITS."  The insurer may, at its 
 48.35  option, include in this provision a definition of "other valid 
 48.36  coverage," approved as to form by the commissioner, which 
 49.1   definition shall be limited in subject matter to coverage 
 49.2   provided by organizations subject to regulation by insurance law 
 49.3   or by insurance authorities of this or any other state of the 
 49.4   United States or any province of Canada, and by hospital or 
 49.5   medical service organizations, and to any other coverage the 
 49.6   inclusion of which may be approved by the commissioner.  In the 
 49.7   absence of such definition such term shall not include group 
 49.8   insurance, automobile medical payments insurance, or coverage 
 49.9   provided by hospital or medical service organizations or by 
 49.10  union welfare plans or employer or employee benefit 
 49.11  organizations.  For the purpose of applying the foregoing policy 
 49.12  provision with respect to any insured, any amount of benefit 
 49.13  provided for such insured pursuant to any compulsory benefit 
 49.14  statute (including any workers' compensation or employer's 
 49.15  liability statute) whether provided by a governmental agency or 
 49.16  otherwise shall in all cases be deemed to be "other valid 
 49.17  coverage" of which the insurer has had notice.  In applying the 
 49.18  foregoing policy provision no third party liability coverage 
 49.19  shall be included as "other valid coverage." 
 49.20     (5) A provision as follows: 
 49.21     INSURANCE WITH OTHER INSURERS:  If there be other valid 
 49.22  coverage, not with this insurer, providing benefits for the same 
 49.23  loss on other than an expense incurred basis and of which this 
 49.24  insurer has not been given written notice prior to the 
 49.25  occurrence or commencement of loss, the only liability for such 
 49.26  benefits under this policy shall be for such proportion of the 
 49.27  indemnities otherwise provided hereunder for such loss as the 
 49.28  like indemnities of which the insurer had notice (including the 
 49.29  indemnities under this policy) bear to the total amount of all 
 49.30  like indemnities for such loss, and for the return of such 
 49.31  portion of the premium paid as shall exceed the pro rata portion 
 49.32  for the indemnities thus determined. 
 49.33     If the foregoing policy provision is included in a policy 
 49.34  which also contains the next preceding policy provision there 
 49.35  shall be added to the caption of the foregoing provision the 
 49.36  phrase -- "OTHER BENEFITS."  The insurer may, at its option, 
 50.1   include in this provision a definition of "other valid 
 50.2   coverage," approved as to form by the commissioner, which 
 50.3   definition shall be limited in subject matter to coverage 
 50.4   provided by organizations subject to regulation by insurance law 
 50.5   or by insurance authorities of this or any other state of the 
 50.6   United States or any province of Canada, and to any other 
 50.7   coverage the inclusion of which may be approved by the 
 50.8   commissioner.  In the absence of such definition such term shall 
 50.9   not include group insurance, or benefits provided by union 
 50.10  welfare plans or by employer or employee benefit organizations.  
 50.11  For the purpose of applying the foregoing policy provision with 
 50.12  respect to any insured, any amount of benefit provided for such 
 50.13  insured pursuant to any compulsory benefit statute (including 
 50.14  any workers' compensation or employer's liability statute) 
 50.15  whether provided by a governmental agency or otherwise shall in 
 50.16  all cases be deemed to be "other valid coverage" of which the 
 50.17  insurer has had notice.  In applying the foregoing policy 
 50.18  provision no third party liability coverage shall be included as 
 50.19  "other valid coverage." 
 50.20     (6) A provision as follows: 
 50.21     RELATION OF EARNINGS TO INSURANCE:  If the total monthly 
 50.22  amount of loss of time benefits promised for the same loss under 
 50.23  all valid loss of time coverage upon the insured, whether 
 50.24  payable on a weekly or monthly basis, shall exceed the monthly 
 50.25  earnings of the insured at the time disability commenced or the 
 50.26  insured's average monthly earnings for the period of two years 
 50.27  immediately preceding a disability for which claim is made, 
 50.28  whichever is the greater, the insurer will be liable only for 
 50.29  such proportionate amount of such benefits under this policy as 
 50.30  the amount of such monthly earnings or such average monthly 
 50.31  earnings of the insured bears to the total amount of monthly 
 50.32  benefits for the same loss under all such coverage upon the 
 50.33  insured at the time such disability commences and for the return 
 50.34  of such part of the premiums paid during such two years as shall 
 50.35  exceed the pro rata amount of the premiums for the benefits 
 50.36  actually paid hereunder; but this shall not operate to reduce 
 51.1   the total monthly amount of benefits payable under all such 
 51.2   coverage upon the insured below the sum of $200 or the sum of 
 51.3   the monthly benefits specified in such coverages, whichever is 
 51.4   the lesser, nor shall it operate to reduce benefits other than 
 51.5   those payable for loss of time. 
 51.6      The foregoing policy provision may be inserted only in a 
 51.7   policy which the insured has the right to continue in force 
 51.8   subject to its terms by the timely payment of premiums (1) until 
 51.9   at least age 50, or, (2) in the case of a policy issued after 
 51.10  age 44, for at least five years from its date of issue.  The 
 51.11  insurer may, at its option, include in this provision a 
 51.12  definition of "valid loss of time coverage," approved as to form 
 51.13  by the commissioner, which definition shall be limited in 
 51.14  subject matter to coverage provided by governmental agencies or 
 51.15  by organizations subject to regulation by insurance law or by 
 51.16  insurance authorities of this or any other state of the United 
 51.17  States or any province of Canada, or to any other coverage the 
 51.18  inclusion of which may be approved by the commissioner or any 
 51.19  combination of such coverages.  In the absence of such 
 51.20  definition such term shall not include any coverage provided for 
 51.21  such insured pursuant to any compulsory benefit statute 
 51.22  (including any workers' compensation or employer's liability 
 51.23  statute), or benefits provided by union welfare plans or by 
 51.24  employer or employee benefit organizations. 
 51.25     (7) A provision as follows: 
 51.26     UNPAID PREMIUM:  Upon the payment of a claim under this 
 51.27  policy, any premium then due and unpaid or covered by any note 
 51.28  or written order may be deducted therefrom. 
 51.29     (8) A provision as follows: 
 51.30     CANCELLATION:  The insurer may cancel this policy at any 
 51.31  time by written notice delivered to the insured or mailed to the 
 51.32  insured's last address as shown by the records of the insurer, 
 51.33  stating when, not less than five days thereafter, such 
 51.34  cancellation shall be effective; and after the policy has been 
 51.35  continued beyond its original term the insured may cancel this 
 51.36  policy at any time by written notice delivered or mailed to the 
 52.1   insurer, effective upon receipt or on such later date as may be 
 52.2   specified in such notice.  In the event of cancellation, the 
 52.3   insurer will return promptly the unearned portion of any premium 
 52.4   paid.  If Regardless of whether it is the insurer or the insured 
 52.5   who cancels, the earned premium shall be computed by the use of 
 52.6   the short-rate table last filed with the state official having 
 52.7   supervision of insurance in the state where the insured resided 
 52.8   when the policy was issued.  If the insurer cancels, the earned 
 52.9   premium shall be computed pro rata, unless the mode of payment 
 52.10  is monthly or less, or if the unearned amount is for more than 
 52.11  one month.  Cancellation shall be without prejudice to any claim 
 52.12  originating prior to the effective date of cancellation. 
 52.13     (9) A provision as follows: 
 52.14     CONFORMITY WITH STATE STATUTES:  Any provision of this 
 52.15  policy which, on its effective date, is in conflict with the 
 52.16  statutes of the state in which the insured resides on such date 
 52.17  is hereby amended to conform to the minimum requirements of such 
 52.18  statutes. 
 52.19     (10) A provision as follows: 
 52.20     ILLEGAL OCCUPATION:  The insurer shall not be liable for 
 52.21  any loss to which a contributing cause was the insured's 
 52.22  commission of or attempt to commit a felony or to which a 
 52.23  contributing cause was the insured's being engaged in an illegal 
 52.24  occupation. 
 52.25     (11) A provision as follows: 
 52.26     NARCOTICS:  The insurer shall not be liable for any loss 
 52.27  sustained or contracted in consequence of the insured's being 
 52.28  under the influence of any narcotic unless administered on the 
 52.29  advice of a physician. 
 52.30     Sec. 41.  Minnesota Statutes 1996, section 62A.135, 
 52.31  subdivision 5, is amended to read: 
 52.32     Subd. 5.  [SUPPLEMENT TO ANNUAL STATEMENTS SUPPLEMENTAL 
 52.33  FILINGS.] Each insurer that has fixed indemnity policies in 
 52.34  force in this state shall, as a supplement to the annual 
 52.35  statement required by section 60A.13 upon request by the 
 52.36  commissioner, submit, in a form prescribed by the 
 53.1   commissioner, the experience data for the calendar year showing 
 53.2   its incurred claims, earned premiums, incurred to earned loss 
 53.3   ratio, and the ratio of the actual loss ratio to the expected 
 53.4   loss ratio for each fixed indemnity policy form in force in 
 53.5   Minnesota.  The experience data must be provided on both a 
 53.6   Minnesota only and a national basis.  If in the opinion of the 
 53.7   company's actuary, the deviation of the actual loss ratio from 
 53.8   the expected loss ratio for a policy form is due to unusual 
 53.9   reserve fluctuations, economic conditions, or other nonrecurring 
 53.10  conditions, the insurer should also file that opinion with 
 53.11  appropriate justification.  
 53.12     If the data submitted does not confirm that the insurer has 
 53.13  satisfied the loss ratio requirements of this section, the 
 53.14  commissioner shall notify the insurer in writing of the 
 53.15  deficiency.  The insurer shall have 30 days from the date of 
 53.16  receipt of the commissioner's notice to file amended rates that 
 53.17  comply with this section or a request for an exemption with 
 53.18  appropriate justification.  If the insurer fails to file amended 
 53.19  rates within the prescribed time and the commissioner does not 
 53.20  exempt the policy form from the need for a rate revision, the 
 53.21  commissioner shall order that the insurer's filed rates for the 
 53.22  nonconforming policy be reduced to an amount that would have 
 53.23  resulted in a loss ratio that complied with this section had it 
 53.24  been in effect for the reporting period of the supplement.  The 
 53.25  insurer's failure to file amended rates within the specified 
 53.26  time of the issuance of the commissioner's order amending the 
 53.27  rates does not preclude the insurer from filing an amendment of 
 53.28  its rates at a later time. 
 53.29     Sec. 42.  Minnesota Statutes 1996, section 62A.50, 
 53.30  subdivision 3, is amended to read: 
 53.31     Subd. 3.  [DISCLOSURES.] No long-term care policy shall be 
 53.32  offered or delivered in this state, whether or not the policy is 
 53.33  issued in this state, and no certificate of coverage under a 
 53.34  group long-term care policy shall be offered or delivered in 
 53.35  this state, unless a statement containing at least the following 
 53.36  information is delivered to the applicant at the time the 
 54.1   application is made: 
 54.2      (1) a description of the benefits and coverage provided by 
 54.3   the policy and the differences between this policy, a 
 54.4   supplemental Medicare policy and the benefits to which an 
 54.5   individual is entitled under parts A and B of Medicare; 
 54.6      (2) a statement of the exceptions and limitations in the 
 54.7   policy including the following language, as applicable, in bold 
 54.8   print:  "THIS POLICY DOES NOT COVER ALL NURSING CARE FACILITIES 
 54.9   OR NURSING HOME, HOME CARE, OR ADULT DAY CARE EXPENSES AND DOES 
 54.10  NOT COVER RESIDENTIAL CARE.  READ YOUR POLICY CAREFULLY TO 
 54.11  DETERMINE WHICH FACILITIES AND EXPENSES ARE COVERED BY YOUR 
 54.12  POLICY."; 
 54.13     (3) a statement of the renewal provisions including any 
 54.14  reservation by the insurer of the right to change premiums; 
 54.15     (4) a statement that the outline of coverage is a summary 
 54.16  of the policy issued or applied for and that the policy should 
 54.17  be consulted to determine governing contractual provisions; 
 54.18     (5) an explanation of the policy's loss ratio including at 
 54.19  least the following language:  "This means that, on the average, 
 54.20  policyholders may expect that $........ of every $100 in premium 
 54.21  will be returned as benefits to policyholders over the life of 
 54.22  the contract."; 
 54.23     (6) a statement of the out-of-pocket expenses, including 
 54.24  deductibles and copayments for which the insured is responsible, 
 54.25  and an explanation of the specific out-of-pocket expenses that 
 54.26  may be accumulated toward any out-of-pocket maximum as specified 
 54.27  in the policy; 
 54.28     (7) the following language, in bold print:  "YOUR PREMIUMS 
 54.29  CAN BE INCREASED IN THE FUTURE.  THE RATE SCHEDULE THAT LISTS 
 54.30  YOUR PREMIUM NOW CAN CHANGE."; 
 54.31     (8) the following language, if applicable, in bold print:  
 54.32  "IF YOU ARE NOT HOSPITALIZED PRIOR TO ENTERING A NURSING HOME OR 
 54.33  NEEDING HOME CARE, YOU WILL NOT BE ABLE TO COLLECT ANY BENEFITS 
 54.34  UNDER THIS PARTICULAR POLICY."; 
 54.35     (9) (8) the following language in bold print, with any 
 54.36  provisions that are inapplicable to the particular policy 
 55.1   omitted or crossed out:  "THIS POLICY HAS A WAITING PERIOD OF 
 55.2   ..... (CALENDAR OR BENEFIT) DAYS FOR NURSING CARE SERVICES AND A 
 55.3   WAITING PERIOD OF ..... (CALENDAR OR BENEFIT) DAYS FOR HOME CARE 
 55.4   SERVICES.  THIS MEANS THAT THIS POLICY WILL NOT COVER YOUR CARE 
 55.5   FOR THE FIRST ..... (CALENDAR OR BENEFIT) DAYS AFTER YOU ENTER A 
 55.6   NURSING HOME, OR THE FIRST ..... (CALENDAR OR BENEFIT) DAYS 
 55.7   AFTER YOU BEGIN TO USE HOME CARE SERVICES.  YOU WOULD NEED TO 
 55.8   PAY FOR YOUR CARE FROM OTHER SOURCES FOR THOSE WAITING 
 55.9   PERIODS."; and 
 55.10     (10) (9) a signed and completed copy of the application for 
 55.11  insurance is left with the applicant at the time the application 
 55.12  is made. 
 55.13     Sec. 43.  Minnesota Statutes 1996, section 62B.04, 
 55.14  subdivision 2, is amended to read: 
 55.15     Subd. 2.  [CREDIT ACCIDENT AND HEALTH INSURANCE.] (a) The 
 55.16  total amount of periodic indemnity payable by credit accident 
 55.17  and health insurance in the event of disability, as defined in 
 55.18  the policy, shall not exceed the aggregate of the periodic 
 55.19  scheduled unpaid installments of the indebtedness; and the 
 55.20  amount of each periodic indemnity payment shall not exceed the 
 55.21  original indebtedness divided by the number of periodic 
 55.22  installments.  If the credit transaction provides for a variable 
 55.23  rate of finance charge or interest, the initial rate or the 
 55.24  scheduled rates based on the initial index must be used in 
 55.25  determining the aggregate of the periodic scheduled unpaid 
 55.26  installments of the indebtedness. 
 55.27     (b) All individual policies or group certificates of credit 
 55.28  accident and health insurance must provide that benefits 
 55.29  available for a single total disability must not be less than 
 55.30  the total amount of insurance. 
 55.31     Sec. 44.  Minnesota Statutes 1996, section 65A.01, 
 55.32  subdivision 3, is amended to read: 
 55.33     Subd. 3.  [POLICY PROVISIONS.] On said policy following 
 55.34  such matter as provided in subdivisions 1 and 2, printed in the 
 55.35  English language in type of such size or sizes and arranged in 
 55.36  such manner, as is approved by the commissioner of commerce, the 
 56.1   following provisions and subject matter shall be stated in the 
 56.2   following words and in the following sequence, but with the 
 56.3   convenient placing, if desired, of such matter as will act as a 
 56.4   cover or back for such policy when folded, with the blanks below 
 56.5   indicated being left to be filled in at the time of the issuing 
 56.6   of the policy, to wit: 
 56.7      (Space for listing the amounts of insurance, rates and 
 56.8   premiums for the basic coverages provided under the standard 
 56.9   form of policy and for additional coverages or perils provided 
 56.10  under endorsements attached.  The description and location of 
 56.11  the property covered and the insurable value(s) of any 
 56.12  building(s) or structure(s) covered by the policy or its 
 56.13  attached endorsements; also in the above space may be stated 
 56.14  whether other insurance is limited and if limited the total 
 56.15  amount permitted.) 
 56.16     In consideration of the provisions and stipulations herein 
 56.17  or added hereto and of the premium above specified this company, 
 56.18  for a term of ..... from ..... (At 12:01 a.m. Standard Time) to 
 56.19  ..... (At 12:01 a.m. Standard Time) at location of property 
 56.20  involved, to an amount not exceeding the amount(s) above 
 56.21  specified does insure .....  and legal representatives 
 56.22  ........................................... 
 56.23     (In above space may be stated whether other insurance is 
 56.24  limited.) (And if limited the total amount permitted.) 
 56.25     Subject to form No.(s) ..... attached hereto. 
 56.26     This policy is made and accepted subject to the foregoing 
 56.27  provisions and stipulations and those hereinafter stated, which 
 56.28  are hereby made a part of this policy, together with such 
 56.29  provisions, stipulations and agreements as may be added hereto 
 56.30  as provided in this policy. 
 56.31     The insurance effected above is granted against all loss or 
 56.32  damage by fire originating from any cause, except as hereinafter 
 56.33  provided, also any damage by lightning and by removal from 
 56.34  premises endangered by the perils insured against in this 
 56.35  policy, to the property described hereinafter while located or 
 56.36  contained as described in this policy, or pro rata for five days 
 57.1   at each proper place to which any of the property shall 
 57.2   necessarily be removed for preservation from the perils insured 
 57.3   against in this policy, but not elsewhere.  The amount of said 
 57.4   loss or damage, except in case of total loss on buildings, to be 
 57.5   estimated according to the actual value of the insured property 
 57.6   at the time when such loss or damage happens. 
 57.7      If the insured property shall be exposed to loss or damage 
 57.8   from the perils insured against, the insured shall make all 
 57.9   reasonable exertions to save and protect same. 
 57.10     This entire policy shall be void if, whether before a loss, 
 57.11  the insured has willfully, or after a loss, the insured has 
 57.12  willfully and with intent to defraud, concealed or 
 57.13  misrepresented any material fact or circumstance concerning this 
 57.14  insurance or the subject thereof, or the interests of the 
 57.15  insured therein. 
 57.16     This policy shall not cover accounts, bills, currency, 
 57.17  deeds, evidences of debt, money or securities; nor, unless 
 57.18  specifically named hereon in writing, bullion, or manuscripts. 
 57.19     This company shall not be liable for loss by fire or other 
 57.20  perils insured against in this policy caused, directly or 
 57.21  indirectly by:  (a) enemy attack by armed forces, including 
 57.22  action taken by military, naval or air forces in resisting an 
 57.23  actual or immediately impending enemy attack; (b) invasion; (c) 
 57.24  insurrection; (d) rebellion; (e) revolution; (f) civil war; (g) 
 57.25  usurped power; (h) order of any civil authority except acts of 
 57.26  destruction at the time of and for the purpose of preventing the 
 57.27  spread of fire, providing that such fire did not originate from 
 57.28  any of the perils excluded by this policy. 
 57.29     Other insurance may be prohibited or the amount of 
 57.30  insurance may be limited by so providing in the policy or an 
 57.31  endorsement, rider or form attached thereto. 
 57.32     Unless otherwise provided in writing added hereto this 
 57.33  company shall not be liable for loss occurring: 
 57.34     (a) while the hazard is increased by any means within the 
 57.35  control or knowledge of the insured; or 
 57.36     (b) while the described premises, whether intended for 
 58.1   occupancy by owner or tenant, are vacant or unoccupied beyond a 
 58.2   period of 60 consecutive days; or 
 58.3      (c) as a result of explosion or riot, unless fire ensue, 
 58.4   and in that event for loss by fire only. 
 58.5      Any other peril to be insured against or subject of 
 58.6   insurance to be covered in this policy shall be by endorsement 
 58.7   in writing hereon or added hereto. 
 58.8      The extent of the application of insurance under this 
 58.9   policy and the contributions to be made by this company in case 
 58.10  of loss, and any other provision or agreement not inconsistent 
 58.11  with the provisions of this policy, may be provided for in 
 58.12  writing added hereto, but no provision may be waived except such 
 58.13  as by the terms of this policy is subject to change. 
 58.14     No permission affecting this insurance shall exist, or 
 58.15  waiver of any provision be valid, unless granted herein or 
 58.16  expressed in writing added hereto.  No provision, stipulation or 
 58.17  forfeiture shall be held to be waived by any requirements or 
 58.18  proceeding on the part of this company relating to appraisal or 
 58.19  to any examination provided for herein. 
 58.20     This policy shall be canceled at any time at the request of 
 58.21  the insured, in which case this company shall, upon demand and 
 58.22  surrender of this policy, refund the excess of paid premium 
 58.23  above the customary short rates for the expired time.  This 
 58.24  policy may be canceled at any time by this company by giving to 
 58.25  the insured 30 days' a written notice of cancellation with or 
 58.26  without tender of the excess of paid premium above the pro rata 
 58.27  premium for the expired time, which excess, if not tendered, 
 58.28  shall be refunded on demand.  Notice of cancellation shall state 
 58.29  that said excess premium (if not tendered) will be refunded on 
 58.30  demand. 
 58.31     If loss hereunder is made payable, in whole or in part, to 
 58.32  a designated mortgagee or contract for deed vendor not named 
 58.33  herein as insured, such interest in this policy may be canceled 
 58.34  by giving to such mortgagee or vendor a ten days' written notice 
 58.35  of cancellation. 
 58.36     Notwithstanding any other provisions of this policy, if 
 59.1   this policy shall be made payable to a mortgagee or contract for 
 59.2   deed vendor of the covered real estate, no act or default of any 
 59.3   person other than such mortgagee or vendor or the mortgagee's or 
 59.4   vendor's agent or those claiming under the mortgagee or vendor, 
 59.5   whether the same occurs before or during the term of this 
 59.6   policy, shall render this policy void as to such mortgagee or 
 59.7   vendor nor affect such mortgagee's or vendor's right to recover 
 59.8   in case of loss on such real estate; provided, that the 
 59.9   mortgagee or vendor shall on demand pay according to the 
 59.10  established scale of rates for any increase of risks not paid 
 59.11  for by the insured; and whenever this company shall be liable to 
 59.12  a mortgagee or vendor for any sum for loss under this policy for 
 59.13  which no liability exists as to the mortgagor, vendee, or owner, 
 59.14  and this company shall elect by itself, or with others, to pay 
 59.15  the mortgagee or vendor the full amount secured by such mortgage 
 59.16  or contract for deed, then the mortgagee or vendor shall assign 
 59.17  and transfer to the company the mortgagee's or vendor's 
 59.18  interest, upon such payment, in the said mortgage or contract 
 59.19  for deed together with the note and debts thereby secured. 
 59.20     This company shall not be liable for a greater proportion 
 59.21  of any loss than the amount hereby insured shall bear to the 
 59.22  whole insurance covering the property against the peril involved.
 59.23     In case of any loss under this policy the insured shall 
 59.24  give immediate written notice to this company of any loss, 
 59.25  protect the property from further damage, and a statement in 
 59.26  writing, signed and sworn to by the insured, shall within 60 
 59.27  days be rendered to the company, setting forth the value of the 
 59.28  property insured, except in case of total loss on buildings the 
 59.29  value of said buildings need not be stated, the interest of the 
 59.30  insured therein, all other insurance thereon, in detail, the 
 59.31  purposes for which and the persons by whom the building insured, 
 59.32  or containing the property insured, was used, and the time at 
 59.33  which and manner in which the fire originated, so far as known 
 59.34  to the insured. 
 59.35     The insured, as often as may be reasonably required, shall 
 59.36  exhibit to any person designated by this company all that 
 60.1   remains of any property herein described, and, after being 
 60.2   informed of the right to counsel and that any answers may be 
 60.3   used against the insured in later civil or criminal proceedings, 
 60.4   the insured shall, within a reasonable period after demand by 
 60.5   this company, submit to examinations under oath by any person 
 60.6   named by this company, and subscribe the oath.  The insured, as 
 60.7   often as may be reasonably required, shall produce for 
 60.8   examination all records and documents reasonably related to the 
 60.9   loss, or certified copies thereof if originals are lost, at a 
 60.10  reasonable time and place designated by this company or its 
 60.11  representatives, and shall permit extracts and copies thereof to 
 60.12  be made.  
 60.13     In case the insured and this company, except in case of 
 60.14  total loss on buildings, shall fail to agree as to the actual 
 60.15  cash value or the amount of loss, then, on the written demand of 
 60.16  either, each shall select a competent and disinterested 
 60.17  appraiser and notify the other of the appraiser selected within 
 60.18  20 days of such demand.  In case either fails to select an 
 60.19  appraiser within the time provided, then a presiding judge of 
 60.20  the district court of the county wherein the loss occurs may 
 60.21  appoint such appraiser for such party upon application of the 
 60.22  other party in writing by giving five days' notice thereof in 
 60.23  writing to the party failing to appoint.  The appraisers shall 
 60.24  first select a competent and disinterested umpire; and failing 
 60.25  for 15 days to agree upon such umpire, then a presiding judge of 
 60.26  the above mentioned court may appoint such an umpire upon 
 60.27  application of party in writing by giving five days' notice 
 60.28  thereof in writing to the other party.  The appraisers shall 
 60.29  then appraise the loss, stating separately actual value and loss 
 60.30  to each item; and, failing to agree, shall submit their 
 60.31  differences, only, to the umpire.  An award in writing, so 
 60.32  itemized, of any two when filed with this company shall 
 60.33  determine the amount of actual value and loss.  Each appraiser 
 60.34  shall be paid by the selecting party, or the party for whom 
 60.35  selected, and the expense of the appraisal and umpire shall be 
 60.36  paid by the parties equally. 
 61.1      It shall be optional with this company to take all of the 
 61.2   property at the agreed or appraised value, and also to repair, 
 61.3   rebuild or replace the property destroyed or damaged with other 
 61.4   of like kind and quality within a reasonable time, on giving 
 61.5   notice of its intention so to do within 30 days after the 
 61.6   receipt of the proof of loss herein required. 
 61.7      There can be no abandonment to this company of any property.
 61.8      The amount of loss for which this company may be liable 
 61.9   shall be payable 60 days after proof of loss, as herein 
 61.10  provided, is received by this company and ascertainment of the 
 61.11  loss is made either by agreement between the insured and this 
 61.12  company expressed in writing or by the filing with this company 
 61.13  of an award as herein provided.  It is moreover understood that 
 61.14  there can be no abandonment of the property insured to the 
 61.15  company, and that the company will not in any case be liable for 
 61.16  more than the sum insured, with interest thereon from the time 
 61.17  when the loss shall become payable, as above provided. 
 61.18     No suit or action on this policy for the recovery of any 
 61.19  claim shall be sustainable in any court of law or equity unless 
 61.20  all the requirements of this policy have been complied with, and 
 61.21  unless commenced within two years after inception of the loss. 
 61.22     This company is subrogated to, and may require from the 
 61.23  insured an assignment of all right of recovery against any party 
 61.24  for loss to the extent that payment therefor is made by this 
 61.25  company; and the insurer may prosecute therefor in the name of 
 61.26  the insured retaining such amount as the insurer has paid. 
 61.27     Assignment of this policy shall not be valid except with 
 61.28  the written consent of this company. 
 61.29     IN WITNESS WHEREOF, this company has executed and attested 
 61.30  these presents. 
 61.31   
 61.32   ........................         ........................
 61.33        (Signature)                     (Signature)         
 61.34   ........................         ........................
 61.35       (Name of office)                (Name of office)     
 61.36     Sec. 45.  Minnesota Statutes 1996, section 65A.01, is 
 62.1   amended by adding a subdivision to read: 
 62.2      Subd. 3c.  [REQUIREMENTS OF TERMINATION 
 62.3   NOTICES.] Regardless of the age of a property insurance policy, 
 62.4   no notice of termination of a standard fire insurance policy 
 62.5   issued to cover buildings used for residential purposes other 
 62.6   than a hotel or motel is valid unless, on the face of the 
 62.7   notice, the notice: 
 62.8      (1) lists the specific reasons that the policy is being 
 62.9   terminated, according to sections 65A.29, subdivision 4, and 
 62.10  72A.20, subdivision 13; 
 62.11     (2) informs the insured of the possible eligibility for 
 62.12  coverage through the Minnesota property insurance placement 
 62.13  facility as provided in sections 65A.31 to 65A.43; 
 62.14     (3) informs the insured of the right to complain to the 
 62.15  commissioner of commerce, according to section 65A.29, 
 62.16  subdivision 9; and 
 62.17     (4) informs the insured that refunds, if any, must be 
 62.18  tendered by the effective cancellation date, according to 
 62.19  section 65A.29, subdivision 10.  If the refund is not received 
 62.20  by the cancellation, the notice is invalid. 
 62.21     Sec. 46.  Minnesota Statutes 1996, section 65A.01, is 
 62.22  amended by adding a subdivision to read: 
 62.23     Subd. 3d.  [NOTICE.] Cancellation under subdivision 3a, 
 62.24  clause (1)(b) to (e), is not effective before 30 days after 
 62.25  notice to the policyholder.  The notice of cancellation must 
 62.26  contain a specific reason for cancellation as provided in 
 62.27  subdivision 1. 
 62.28     A policy must not be canceled for nonpayment of premium 
 62.29  according to subdivision 3a, clause (1)(a), unless the insurer, 
 62.30  at least ten days before the effective cancellation date, has 
 62.31  given notice to the policyholder. 
 62.32     Sec. 47.  Minnesota Statutes 1996, section 65A.01, is 
 62.33  amended by adding a subdivision to read: 
 62.34     Subd. 3e.  [NEW POLICIES.] Subdivision 3d does not apply to 
 62.35  an insurance policy that has not been previously renewed if the 
 62.36  policy has been in effect fewer than 60 days at the time the 
 63.1   notice of cancellation is mailed or delivered.  No cancellation 
 63.2   under this subdivision is effective until at least ten days 
 63.3   after the written notice to the policyholder. 
 63.4      Sec. 48.  Minnesota Statutes 1996, section 65A.01, is 
 63.5   amended by adding a subdivision to read: 
 63.6      Subd. 3f.  [TIME REQUIREMENTS.] (a) In the event of a 
 63.7   policy less than 60 days old, or if it is being canceled for 
 63.8   nonpayment of premium, the notice must be mailed to the insured 
 63.9   so that it is received at least ten days before the effective 
 63.10  cancellation date.  If a newer policy is being canceled for 
 63.11  underwriting considerations, the insured must be informed of the 
 63.12  source from which the information was received. 
 63.13     (b) In the event of a mid-term cancellation, for reasons 
 63.14  listed in subdivision 3a, or according to policy provisions, the 
 63.15  insured must receive a 30-day notice. 
 63.16     (c) In the event of a nonrenewal, a 60-day notice must be 
 63.17  sent to the insured, according to section 65A.29, subdivision 7. 
 63.18     Sec. 49.  Minnesota Statutes 1996, section 65A.27, 
 63.19  subdivision 4, is amended to read: 
 63.20     Subd. 4.  "Homeowner's insurance" means insurance coverage, 
 63.21  as provided in section 60A.06, subdivision 1, clause (1)(c), 
 63.22  normally written by the insurer as a standard homeowner's 
 63.23  package policy or as a standard residential renter's package 
 63.24  policy.  This definition includes, but is not limited to, 
 63.25  policies that are generally described as homeowners' policies, 
 63.26  mobile/manufactured homeowners' policies, dwelling owner 
 63.27  policies, condominium owner policies, and tenant policies. 
 63.28     Sec. 50.  Minnesota Statutes 1996, section 65B.48, 
 63.29  subdivision 5, is amended to read: 
 63.30     Subd. 5.  (a) Every owner of a motorcycle registered or 
 63.31  required to be registered in this state or operated in this 
 63.32  state by the owner or with the owner's permission shall provide 
 63.33  and maintain security for the payment of tort liabilities 
 63.34  arising out of the maintenance or use of the motorcycle in this 
 63.35  state.  Security may be provided by a contract of liability 
 63.36  insurance complying with section 65B.49, subdivision 3, or by 
 64.1   qualifying as a self insurer in the manner provided in 
 64.2   subdivision 3. 
 64.3      (b) At the time an application for motorcycle insurance is 
 64.4   completed, there must be attached to the application a separate 
 64.5   form containing a written notice in at least 10-point bold type, 
 64.6   if printed, or in capital letters, if typewritten that states: 
 64.7      "Under Minnesota law, a policy of motorcycle coverage 
 64.8      issued in the State of Minnesota provides liability 
 64.9      coverage only, and there is no requirement that the policy 
 64.10     provide personal injury protection (PIP) coverage in the 
 64.11     case of injury sustained by the insured.  No PIP coverage 
 64.12     provided by an automobile insurance policy I may have in 
 64.13     force will extend to provide coverage in the event of a 
 64.14     motorcycle accident." 
 64.15     Sec. 51.  [65B.492] [TOTAL DISABILITY; WAIVER OF WAGE LOSS 
 64.16  REIMBURSEMENT.] 
 64.17     A plan of reparation security issued to or renewed with a 
 64.18  person who is totally disabled may contain a waiver of wage loss 
 64.19  reimbursement coverage, provided that the rate for any plan for 
 64.20  which this coverage has been excluded or reduced must be reduced 
 64.21  accordingly.  For purposes of this section, the term "total 
 64.22  disability" means the inability of an insured who is ill or 
 64.23  injured to engage in any paid employment or work.  The 
 64.24  reparation obligor may request the insured to provide written 
 64.25  certification of the disability by a licensed practicing 
 64.26  physician so long as the written certification is required no 
 64.27  more frequently than on an annual basis.  This section applies 
 64.28  to self-insurance. 
 64.29     Sec. 52.  Minnesota Statutes 1996, section 67A.231, is 
 64.30  amended to read: 
 64.31     67A.231 [DEPOSIT OF FUNDS; INVESTMENT; LIMITATIONS.] 
 64.32     The directors of any township mutual insurance company may 
 64.33  authorize the treasurer to invest any of its funds and 
 64.34  accumulations in:  
 64.35     (a) Bonds, notes, mortgages, or other obligations 
 64.36  guaranteed by the full faith and credit of the United States of 
 65.1   America and those for which the credit of the United States is 
 65.2   pledged to pay principal, interest or dividends, including 
 65.3   United States agency and instrumentality bonds, debentures, or 
 65.4   obligations; 
 65.5      (b) Bonds, notes, evidence of indebtedness, or other public 
 65.6   authority obligations guaranteed by this state; 
 65.7      (c) Bonds, notes, evidence of the indebtedness or other 
 65.8   obligations guaranteed by the full faith and credit of any 
 65.9   county, municipality, school district, or other duly authorized 
 65.10  political subdivision of this state; 
 65.11     (d) Bonds or other interest bearing obligations, payable 
 65.12  from revenues, provided that the bonds or other interest bearing 
 65.13  obligations are at the time of purchase rated among the highest 
 65.14  four quality categories used by a nationally recognized rating 
 65.15  agency for rating the quality of similar bonds or other interest 
 65.16  bearing obligations, and are not rated lower by any other such 
 65.17  agency; or obligations of a United States agency or 
 65.18  instrumentality that have been rated in one of the two highest 
 65.19  categories established by the Securities Valuation Office of the 
 65.20  National Association of Insurance Commissioners.  A company may 
 65.21  not invest more than 20 percent of its admitted assets in the 
 65.22  obligations of any one corporation.  This is not applicable to 
 65.23  bonds or other interest bearing obligations in default as to 
 65.24  principal; 
 65.25     (e) Investments in the obligations stated in paragraphs 
 65.26  (a), (b), (c), and (d), may be made either directly or in the 
 65.27  form of securities of, or other interests in, an investment 
 65.28  company registered under the Federal Investment Company Act of 
 65.29  1940.  Investment company shares authorized pursuant to this 
 65.30  subdivision shall not exceed 20 percent of the company's 
 65.31  surplus.  These obligations must be carried at the lower of cost 
 65.32  or market on the annual statement filed with the commissioner 
 65.33  and adjusted to market on an annual basis; 
 65.34     (f) Loans upon improved and unencumbered real property in 
 65.35  this state worth at least twice the amount loaned thereon, not 
 65.36  including buildings, unless insured by property insurance 
 66.1   policies payable to and held by the security holder; 
 66.2      (g) Real estate, including land, buildings and fixtures, 
 66.3   located in this state and used primarily as home office space 
 66.4   for the insurance company; 
 66.5      (h) Demand or time deposits or savings accounts in 
 66.6   federally insured depositories located in this state to the 
 66.7   extent that the deposit or investment is insured by the Federal 
 66.8   Deposit Insurance Corporation, Federal Savings and Loan 
 66.9   Corporation, or the National Credit Union Administration.  Up to 
 66.10  an additional $100,000 may be located in these depositories if 
 66.11  covered by private deposit insurance written by an insurer 
 66.12  licensed by the department of commerce.  In no case may the 
 66.13  aggregate privately insured deposits exceed a township mutual 
 66.14  insurance company's surplus; 
 66.15     (i) Guarantee fund certificates of a mutual insurer which 
 66.16  reinsures the business of the township mutual insurance 
 66.17  company.  The commissioner may by rule limit the amount of 
 66.18  guarantee fund certificates which the township mutual insurance 
 66.19  company may purchase and this limit may be a function of the 
 66.20  size of the township mutual insurance company; and 
 66.21     (j) Up to $1,500 in stock of an insurer which issues 
 66.22  directors and officers liability insurance to township mutual 
 66.23  insurance company directors and officers. 
 66.24     Sec. 53.  Minnesota Statutes 1996, section 72A.20, 
 66.25  subdivision 34, is amended to read: 
 66.26     Subd. 34.  [SUITABILITY OF INSURANCE FOR CUSTOMER.] In 
 66.27  recommending or issuing life, endowment, individual accident and 
 66.28  sickness, long-term care, annuity, life-endowment, or Medicare 
 66.29  supplement insurance to a customer, an insurer, either directly 
 66.30  or through its agent, must have reasonable grounds for believing 
 66.31  that the recommendation is suitable for the customer, upon the 
 66.32  basis of facts disclosed by the customer as to the customer's 
 66.33  other insurance and financial situation and needs, including, 
 66.34  but not limited to, the customer's financial status, the 
 66.35  customer's need for insurance, and the values, benefits, and 
 66.36  costs of the customer's existing insurance program, if any, when 
 67.1   compared to the values, benefits, and costs of the recommended 
 67.2   policy or policies.  
 67.3      In the case of group insurance marketed on a direct 
 67.4   response basis without the use of direct agent contact, this 
 67.5   subdivision is satisfied if the insurer has reasonable grounds 
 67.6   to believe that the insurance offered is generally suitable for 
 67.7   the group to whom the offer is made. 
 67.8      Sec. 54.  Minnesota Statutes 1996, section 72B.04, 
 67.9   subdivision 10, is amended to read: 
 67.10     Subd. 10.  [FEES.] A fee of $40 is imposed for each initial 
 67.11  license or temporary permit and $25 for each renewal thereof or 
 67.12  amendment thereto.  A fee of $20 is imposed for each examination 
 67.13  taken.  A fee of $20 is imposed for the registration of each 
 67.14  nonlicensed adjuster who is required to register under section 
 67.15  72B.06.  All fees shall be transmitted to the commissioner and 
 67.16  shall be payable to the state treasurer department of commerce.  
 67.17  If a fee is paid for an examination and if within one year from 
 67.18  the date of that payment no written request for a refund is 
 67.19  received by the commissioner or the examination for which the 
 67.20  fee was paid is not taken, the fee is forfeited to the state of 
 67.21  Minnesota. 
 67.22     Sec. 55.  Minnesota Statutes 1996, section 79A.01, 
 67.23  subdivision 10, is amended to read: 
 67.24     Subd. 10.  [COMMON CLAIMS FUND.] "Common claims fund," with 
 67.25  respect to group self-insurers, means the cash, cash 
 67.26  equivalents, or investment accounts maintained by the mutual 
 67.27  self-insurance group to pay its workers' compensation 
 67.28  liabilities.  
 67.29     Sec. 56.  Minnesota Statutes 1996, section 79A.02, 
 67.30  subdivision 1, is amended to read: 
 67.31     Subdivision 1.  [MEMBERSHIP.] For the purposes of assisting 
 67.32  the commissioner, there is established a workers' compensation 
 67.33  self-insurers' advisory committee of five members that are 
 67.34  employers authorized to self-insure in Minnesota.  Three of the 
 67.35  members and three alternates shall be elected by the 
 67.36  self-insurers' security fund board of trustees and two members 
 68.1   and two alternates shall be appointed by the commissioner.  
 68.2      Sec. 57.  Minnesota Statutes 1996, section 79A.02, 
 68.3   subdivision 4, is amended to read: 
 68.4      Subd. 4.  [RECOMMENDATIONS TO COMMISSIONER REGARDING 
 68.5   REVOCATION.] After each fifth anniversary from the date each 
 68.6   individual and group self-insurer becomes certified to 
 68.7   self-insure, the committee shall review all relevant financial 
 68.8   data filed with the department of commerce that is otherwise 
 68.9   available to the public and make a recommendation to the 
 68.10  commissioner about whether each self-insurer's certificate 
 68.11  should be revoked.  For group self-insurers who have been in 
 68.12  existence for five years or more and have been granted renewal 
 68.13  authority, a level of funding in the common claims fund must be 
 68.14  maintained at not less than the greater of either:  (1) one 
 68.15  year's claim losses paid in the most recent year; or (2) 
 68.16  one-third of the security deposit posted with the department of 
 68.17  commerce according to section 79A.04, subdivision 2.  This 
 68.18  provision supersedes any requirements under section 79A.03, 
 68.19  subdivision 10, and Minnesota Rules, part 2780.5000. 
 68.20     Sec. 58.  Minnesota Statutes 1996, section 79A.03, 
 68.21  subdivision 6, is amended to read: 
 68.22     Subd. 6.  [APPLICATIONS FOR GROUP SELF-INSURANCE.] (a) Two 
 68.23  or more employers may apply to the commissioner for the 
 68.24  authority to self-insure as a group, using forms available from 
 68.25  the commissioner.  This initial application shall be accompanied 
 68.26  by a copy of the bylaws or plan of operation adopted by the 
 68.27  group.  Such bylaws or plan of operation shall conform to the 
 68.28  conditions prescribed by law or rule.  The commissioner shall 
 68.29  approve or disapprove the bylaws within 60 days unless a 
 68.30  question as to the legality of a specific bylaw or plan 
 68.31  provision has been referred to the attorney general's office.  
 68.32  The commissioner shall make a determination as to the 
 68.33  application within 15 days after receipt of the requested 
 68.34  response from the attorney general's office. 
 68.35     (b) After the initial application and the bylaws or plan of 
 68.36  operation have been approved by the commissioner or at the time 
 69.1   of the initial application, the group shall submit the names of 
 69.2   employers that will be members of the group; an indemnity 
 69.3   agreement providing for joint and several liability for all 
 69.4   group members for any and all workers' compensation claims 
 69.5   incurred by any member of the group, as set forth in Minnesota 
 69.6   Rules, part 2780.9920, signed by an officer of each member; and 
 69.7   an accounting review performed by a certified public 
 69.8   accountant.  A certified financial audit may be filed in lieu of 
 69.9   an accounting review.  
 69.10     (c) When a group has obtained its authority to self-insure, 
 69.11  additional applicants who wish to join the group must apply for 
 69.12  approval by submitting:  (1) an application; (2) an indemnity 
 69.13  agreement providing for joint and several liability as set forth 
 69.14  in Minnesota Rules, part 2780.9920, signed by an officer of the 
 69.15  applicant; and (3) a certified financial audit performed by a 
 69.16  certified public accountant at least 45 days before joining the 
 69.17  group.  An accounting review performed by a certified public 
 69.18  accountant may be filed in lieu of a certified audit. 
 69.19     New diminutive applicants to the group, as defined in 
 69.20  section 79A.01, subdivision 11, applying for membership in 
 69.21  groups in existence longer than one year, who have a combined 
 69.22  equity of all group members in excess of 15 times the last 
 69.23  retention limit selected by the group with the workers' 
 69.24  compensation reinsurance association, and have posted 125 
 69.25  percent of the group's total estimated future liability, must 
 69.26  submit the items in this paragraph at least ten days before 
 69.27  joining the group. 
 69.28     If the cumulative total of premium added to the group by 
 69.29  diminutive new members is greater than 50 percent in a fiscal 
 69.30  year of the group, all subsequent new members' applications must 
 69.31  be submitted at least 45 days before joining the group. 
 69.32     In all cases of new membership, evidence that cash premiums 
 69.33  equal to not less than 20 percent of the current year's modified 
 69.34  premium of each applicant have been paid into a common claims 
 69.35  fund, maintained by the group in a designated depository must be 
 69.36  filed with the department at least ten days before joining the 
 70.1   group. 
 70.2      Sec. 59.  Minnesota Statutes 1996, section 79A.03, 
 70.3   subdivision 7, is amended to read: 
 70.4      Subd. 7.  [FINANCIAL STANDARDS.] A self-insurer group 
 70.5   proposing to self-insure shall have and maintain: 
 70.6      (a) A combined net worth of all of the members of an amount 
 70.7   at least equal to the greater of ten times the retention 
 70.8   selected with the workers' compensation reinsurance association 
 70.9   or one-third of the current annual modified premium of the 
 70.10  members.  
 70.11     (b) Sufficient assets, net worth, and liquidity to promptly 
 70.12  and completely meet all obligations of its members under chapter 
 70.13  176 or this chapter.  In determining whether a group is in sound 
 70.14  financial condition, consideration shall be given to the 
 70.15  combined net worth of the member companies; the consolidated 
 70.16  long-term and short-term debt to equity ratios of the member 
 70.17  companies; any excess insurance other than reinsurance with the 
 70.18  workers' compensation reinsurance association, purchased by the 
 70.19  group from an insurer licensed in Minnesota or from an 
 70.20  authorized surplus line carrier; other financial data requested 
 70.21  by the commissioner or submitted by the group; and the combined 
 70.22  workers' compensation experience of the group for the last four 
 70.23  years. 
 70.24     Sec. 60.  Minnesota Statutes 1996, section 79A.03, 
 70.25  subdivision 9, is amended to read: 
 70.26     Subd. 9.  [FILING REPORTS.] (a) Incurred losses, paid and 
 70.27  unpaid, specifying indemnity and medical losses by 
 70.28  classification, payroll by classification, and current estimated 
 70.29  outstanding liability for workers' compensation shall be 
 70.30  reported to the commissioner by each self-insurer on a calendar 
 70.31  year basis, in a manner and on forms available from the 
 70.32  commissioner.  Payroll information must be filed by April 1 of 
 70.33  the following year, and loss information and total workers' 
 70.34  compensation liability must be filed by August 1 of the 
 70.35  following year.  
 70.36     (b) Each self-insurer shall, under oath, attest to the 
 71.1   accuracy of each report submitted pursuant to paragraph (a).  
 71.2   Upon sufficient cause, the commissioner shall require the 
 71.3   self-insurer to submit a certified audit of payroll and claim 
 71.4   records conducted by an independent auditor approved by the 
 71.5   commissioner, based on generally accepted accounting principles 
 71.6   and generally accepted auditing standards, and supported by an 
 71.7   actuarial review and opinion of the future contingent 
 71.8   liabilities.  The basis for sufficient cause shall include the 
 71.9   following factors:  where the losses reported appear 
 71.10  significantly different from similar types of businesses; where 
 71.11  major changes in the reports exist from year to year, which are 
 71.12  not solely attributable to economic factors; or where the 
 71.13  commissioner has reason to believe that the losses and payroll 
 71.14  in the report do not accurately reflect the losses and payroll 
 71.15  of that employer.  If any discrepancy is found, the commissioner 
 71.16  shall require changes in the self-insurer's or workers' 
 71.17  compensation service company record keeping practices. 
 71.18     (c) With the An annual loss status report due August 1, 
 71.19  by each self-insurer shall report to the commissioner any 
 71.20  workers' compensation claim from the previous year where the 
 71.21  full, undiscounted value is estimated to exceed $50,000, be 
 71.22  filed in a manner and on forms prescribed by the commissioner.  
 71.23     (d) Each individual self-insurer shall, within four months 
 71.24  after the end of its fiscal year, annually file with the 
 71.25  commissioner its latest 10K report required by the Securities 
 71.26  and Exchange Commission.  If an individual self-insurer does not 
 71.27  prepare a 10K report, it shall file an annual certified 
 71.28  financial statement, together with such other financial 
 71.29  information as the commissioner may require to substantiate data 
 71.30  in the financial statement.  
 71.31     (e) Each member of the group shall, within four months 
 71.32  after the end of each fiscal year for that group, file the most 
 71.33  recent annual financial statement, reviewed by a certified 
 71.34  public accountant in accordance with the Statements on Standards 
 71.35  for Accounting and Review Services, Volume 2, the American 
 71.36  Institute of Certified Public Accountants Professional 
 72.1   Standards, or audited in accordance with generally accepted 
 72.2   auditing standards, together with such other financial 
 72.3   information the commissioner may require.  In addition, the 
 72.4   group shall file, within four months after the end of each 
 72.5   fiscal year for that group, combining financial statements of 
 72.6   the group members, compiled by a certified public accountant in 
 72.7   accordance with the Statements on Standards for Accounting and 
 72.8   Review Services, Volume 2, the American Institute of Certified 
 72.9   Public Accountants Professional Standards.  The combining 
 72.10  financial statements shall include, but not be limited to, a 
 72.11  balance sheet, income statement, statement of changes in net 
 72.12  worth, and statement of cash flow.  Each combining financial 
 72.13  statement shall include a column for each individual group 
 72.14  member along with a total column.  
 72.15     Where a group has 50 or more members, the group shall file, 
 72.16  in lieu of the combining financial statements, a combined 
 72.17  financial statement showing only the total column for the entire 
 72.18  group's balance sheet, income statement, statement of changes in 
 72.19  net worth, and statement of cash flow.  Additionally, the group 
 72.20  shall disclose, for each member, the total assets, net worth, 
 72.21  revenue, and income for the most recent fiscal year.  The 
 72.22  combining and combined financial statements may omit all 
 72.23  footnote disclosures. 
 72.24     (f) In addition to the financial statements required by 
 72.25  paragraphs (d) and (e), interim financial statements or 10Q 
 72.26  reports required by the Securities and Exchange Commission may 
 72.27  be required by the commissioner upon an indication that there 
 72.28  has been deterioration in the self-insurer's financial 
 72.29  condition, including a worsening of current ratio, lessening of 
 72.30  net worth, net loss of income, the downgrading of the company's 
 72.31  bond rating, or any other significant change that may adversely 
 72.32  affect the self-insurer's ability to pay expected losses.  Any 
 72.33  self-insurer that files an 8K report with the Securities and 
 72.34  Exchange Commission shall also file a copy of the report with 
 72.35  the commissioner within 30 days of the filing with the 
 72.36  Securities and Exchange Commission. 
 73.1      Sec. 61.  Minnesota Statutes 1996, section 79A.03, is 
 73.2   amended by adding a subdivision to read: 
 73.3      Subd. 13.  [ANNUAL REQUIREMENTS.] The financial 
 73.4   requirements set forth in subdivisions 3, 4, 5, and 7 must be 
 73.5   met on an annual basis. 
 73.6      Sec. 62.  Minnesota Statutes 1996, section 79A.06, 
 73.7   subdivision 5, is amended to read: 
 73.8      Subd. 5.  [PRIVATE EMPLOYERS WHO HAVE CEASED TO BE 
 73.9   SELF-INSURED.] Private employers who have ceased to be private 
 73.10  self-insurers shall discharge their continuing obligations to 
 73.11  secure the payment of compensation which is accrued during the 
 73.12  period of self-insurance, for purposes of Laws 1988, chapter 
 73.13  674, sections 1 to 21, by compliance with all of the following 
 73.14  obligations of current certificate holders: 
 73.15     (1) Filing reports with the commissioner to carry out the 
 73.16  requirements of this chapter; 
 73.17     (2) Depositing and maintaining a security deposit for 
 73.18  accrued liability for the payment of any compensation which may 
 73.19  become due, pursuant to chapter 176.  However, if a private 
 73.20  employer who has ceased to be a private self-insurer purchases 
 73.21  an insurance policy from an insurer authorized to transact 
 73.22  workers' compensation insurance in this state which provides 
 73.23  coverage of all claims for compensation arising out of injuries 
 73.24  occurring during the period the employer was self-insured, 
 73.25  whether or not reported during that period, the policy will 
 73.26  discharge the obligation of the employer to maintain a security 
 73.27  deposit for the payment of the claims covered under the policy.  
 73.28  The policy may not be issued by an insurer unless it has 
 73.29  previously been approved as to form and substance by the 
 73.30  commissioner; and 
 73.31     (3) Paying within 30 days all assessments of which notice 
 73.32  is sent by the security fund, for a period of seven years from 
 73.33  the last day its certificate of self-insurance was in effect.  
 73.34  Thereafter, the private employer who has ceased to be a private 
 73.35  self-insurer may either:  (a) continue to pay within 30 days all 
 73.36  assessments of which notice is sent by the security fund until 
 74.1   it has no incurred liabilities for the payment of compensation 
 74.2   arising out of injuries during the period of self-insurance; or 
 74.3   (b) pay the security fund a cash payment equal to four percent 
 74.4   of the net present value of all remaining incurred liabilities 
 74.5   for the payment of compensation under sections 176.101 and 
 74.6   176.111 as certified by a member of the casualty actuarial 
 74.7   society.  Assessments shall be based on the benefits paid by the 
 74.8   employer during the calendar year immediately preceding the 
 74.9   calendar year in which the employer's right to self-insure is 
 74.10  terminated or withdrawn. 
 74.11     (3) At the time of the cessation of a member of the 
 74.12  self-insurer's authority to self-insure, that member shall 
 74.13  obtain and file with the commissioner an actuarial opinion of 
 74.14  its outstanding liabilities as determined by an associate or 
 74.15  fellow associate of the casualty actuarial society.  The opinion 
 74.16  must separate liability for indemnity benefits from liability 
 74.17  from medical benefits, and must discount each up to four percent 
 74.18  per annum to net present value.  Within 30 days after 
 74.19  notification of approval of the actuarial opinion by the 
 74.20  commissioner, the member shall pay to the security fund an 
 74.21  amount equal to 120 percent of that discounted outstanding 
 74.22  indemnity liability, multiplied by the greater of the average 
 74.23  annualized assessment rate since inception of the security fund 
 74.24  or the annual rate at the time of the most recent assessment 
 74.25  prior to termination. 
 74.26     A former member who has paid the security fund in 
 74.27  accordance with this clause and later receives authority from 
 74.28  the commissioner to self-insure again shall be assessed under 
 74.29  section 79A.12, subdivision 2, only on indemnity benefits paid 
 74.30  on injuries that occurred after the former member received 
 74.31  authority to self-insure again if the member furnishes verified 
 74.32  data regarding those benefits to the security fund. 
 74.33     In addition to proceedings to establish liabilities and 
 74.34  penalties otherwise provided, a failure to comply may be the 
 74.35  subject of a proceeding before the commissioner.  An appeal from 
 74.36  the commissioner's determination may be taken pursuant to the 
 75.1   contested case procedures of chapter 14 within 30 days of the 
 75.2   commissioner's written determination. 
 75.3      Any current or past member of the self-insurers' security 
 75.4   fund is subject to service of process on any claim arising out 
 75.5   of chapter 176 or this chapter in the manner provided by section 
 75.6   5.25, or as otherwise provided by law.  The issuance of a 
 75.7   certificate to self-insure to the private self-insured employer 
 75.8   shall be deemed to be the agreement that any process which is 
 75.9   served in accordance with this section shall be of the same 
 75.10  legal force and effect as if served personally within this state.
 75.11     Sec. 63.  Minnesota Statutes 1996, section 79A.20, 
 75.12  subdivision 1, is amended to read: 
 75.13     Subdivision 1.  [GROUP ELIGIBILITY.] A commercial 
 75.14  self-insurance group consists of two or more employers in 
 75.15  similar industries.  The commercial self-insurance group shall 
 75.16  not incorporate or form a business trust pursuant to chapter 318.
 75.17     Sec. 64.  Minnesota Statutes 1996, section 79A.21, 
 75.18  subdivision 2, is amended to read: 
 75.19     Subd. 2.  [REQUIRED DOCUMENTS.] All first year applications 
 75.20  must be accompanied by the following: 
 75.21     (a) A detailed business plan including the risk profile of 
 75.22  the proposed membership, underwriting guidelines, marketing 
 75.23  plan, minimum financial criteria for each member, and financial 
 75.24  projections for the first year of operation.  
 75.25     (b) A plan describing the method in which premiums are to 
 75.26  be charged to the employer members.  The plan shall be 
 75.27  accompanied by copies of the member's workers' compensation 
 75.28  insurance policies in force at the time of application.  In 
 75.29  developing the premium for the group, the commercial 
 75.30  self-insurance group shall base its premium on the Minnesota 
 75.31  workers' compensation insurers association's manual of rules, 
 75.32  loss costs, and classifications approved for use in Minnesota by 
 75.33  the commissioner.  Each member applicant shall, on a form 
 75.34  approved by the commissioner, complete estimated payrolls for 
 75.35  the first 12-month period that the applicant will be 
 75.36  self-insured.  Premium volume discounts per the plan will be 
 76.1   permitted if they can be shown to be consistent with actuarial 
 76.2   standards.  
 76.3      (c) A schedule indicating actual or anticipated operational 
 76.4   expenses of the commercial self-insurance group.  No authority 
 76.5   to self-insure will be granted unless, over the term of the 
 76.6   policy year, at least 65 percent of total revenues from all 
 76.7   sources for the year are available for the payment of its claim 
 76.8   and assessment obligations.  For purposes of this calculation, 
 76.9   claim and assessment obligations include the cost of allocated 
 76.10  loss expenses as well as special compensation fund and 
 76.11  commercial self-insurance group security fund assessments but 
 76.12  exclude the cost of unallocated loss expenses. 
 76.13     (d) An indemnity agreement from each member who will 
 76.14  participate in the commercial self-insurance group, signed by an 
 76.15  officer of each member, providing for joint and several 
 76.16  liability for all claims and expenses of all of the members of 
 76.17  the commercial self-insurance group arising in any fund year in 
 76.18  which the member was a participant on a form approved by the 
 76.19  commissioner.  The indemnity agreement shall provide for 
 76.20  assessments according to the group's bylaws on an individual and 
 76.21  proportionate basis. 
 76.22     (e) A copy of the commercial self-insurance group bylaws. 
 76.23     (f) Evidence of the security deposit required under section 
 76.24  79A.24, accompanied by the actuarial certification study for the 
 76.25  minimum security deposit as required under section 79A.24.  
 76.26     (g) Each initial member of the commercial self-insurance 
 76.27  group shall submit to the commercial self-insurance group 
 76.28  accountant its most recent annual financial statement.  
 76.29  Financial statements for a period ending more than six months 
 76.30  prior to the date of the application must be accompanied by an 
 76.31  affidavit, signed by a company officer under oath, stating that 
 76.32  there has been no material lessening of the net worth nor other 
 76.33  adverse changes in its financial condition since the end of the 
 76.34  period.  Individual group members constituting at least 75 
 76.35  percent of the group's annual premium shall submit reviewed or 
 76.36  audited financial statements.  The remaining members may submit 
 77.1   compilation level statements.  Statements for a period ending 
 77.2   more than 12 months prior to the date of application cannot be 
 77.3   accepted. 
 77.4      (h) A compiled combined financial statement of all group 
 77.5   members prepared by the commercial self-insurance group's 
 77.6   accountant and a list of members included in such statements.  
 77.7      (i) A copy of each member's accountant's report letter from 
 77.8   the reports used in compiling the combined financial statements. 
 77.9      (j) A list of all members and the percentage of premium 
 77.10  each represents to the total group's annual premium for the 
 77.11  policy year.  
 77.12     Sec. 65.  Minnesota Statutes 1996, section 79A.22, 
 77.13  subdivision 7, is amended to read: 
 77.14     Subd. 7.  [INVESTMENTS.] (a) Any securities purchased by 
 77.15  the common claims fund shall be in such denominations and with 
 77.16  dates of maturity to ensure securities may be redeemable at 
 77.17  sufficient time and in sufficient amounts to meet the fund's 
 77.18  current and long-term liabilities. 
 77.19     (b) Cash assets of the common claims fund may be invested 
 77.20  in the following securities: 
 77.21     (1) direct obligations of the United States government, 
 77.22  except mortgage-backed securities of the Government National 
 77.23  Mortgage Association; 
 77.24     (2) bonds, notes, debentures, and other instruments which 
 77.25  are obligations of agencies and instrumentalities of the United 
 77.26  States including, but not limited to, the federal National 
 77.27  Mortgage Association, the federal Home Loan Mortgage 
 77.28  Corporation, the federal Home Loan Bank, the Student Loan 
 77.29  Marketing Association, and the Farm Credit System, and their 
 77.30  successors, but not including collateralized mortgage 
 77.31  obligations or mortgage pass-through instruments; 
 77.32     (3) bonds or securities that are issued by the state of 
 77.33  Minnesota and that are secured by the full faith and credit of 
 77.34  the state; 
 77.35     (4) certificates of deposit which are insured by the 
 77.36  federal Deposit Insurance Corporation and are issued by a 
 78.1   Minnesota depository institution; 
 78.2      (5) obligations of, or instruments unconditionally 
 78.3   guaranteed by, Minnesota depository institutions whose long-term 
 78.4   debt rating is at least AA-, or Aa3, or their equivalent by at 
 78.5   least two nationally recognized rating agencies. 
 78.6      (b) Cash assets of the self-insurer's fund may be invested 
 78.7   as provided in section 60A.11 for a casualty insurance company, 
 78.8   provided that investment in real estate of or indebtedness from 
 78.9   any member company or affiliates prohibited.  In addition, 
 78.10  investment in the following is allowed: 
 78.11     (1) savings accounts or certificates of deposit in a duly 
 78.12  chartered commercial bank located within the state of Minnesota 
 78.13  and insured through the Federal Deposit Insurance Corporation; 
 78.14     (2) share accounts or savings certificates in a duly 
 78.15  chartered savings and loan association located within the state 
 78.16  of Minnesota and insured through the Federal Savings and Loan 
 78.17  Insurance Corporation; 
 78.18     (3) direct obligations of the United States Treasury, such 
 78.19  as notes, bonds, or bills; 
 78.20     (4) a bond or security issued by the state of Minnesota and 
 78.21  backed by the full faith and credit of the state; 
 78.22     (5) a credit union where the employees of the self-insurer 
 78.23  are members if the credit union is located in Minnesota, 
 78.24  licensed by the state of Minnesota, and insured through the 
 78.25  Federal Deposit Insurance Corporation; or 
 78.26     (6) real estate, common stock, preferred stock, or 
 78.27  corporate bonds listed on the New York, American Stock Exchange 
 78.28  or NASDAQ Stock Market, so long as these investments are not 
 78.29  issued by any member company or affiliate and the total in all 
 78.30  other allowable categories make up at least 75 percent of the 
 78.31  total required in the common claims fund. 
 78.32     Sec. 66.  Minnesota Statutes 1996, section 79A.22, is 
 78.33  amended by adding a subdivision to read: 
 78.34     Subd. 13.  [COMMON CLAIMS FUND; FIVE-YEAR EXCEPTION.] For 
 78.35  commercial group self-insurers who have been in existence for 
 78.36  five years or more, a level of funding in the common claims fund 
 79.1   must be maintained at not less than the greater of either: 
 79.2      (1) one year's claim losses paid in the most recent year; 
 79.3   or 
 79.4      (2) one-third of the security deposit posted with the 
 79.5   department of commerce according to section 79A.24, subdivision 
 79.6   2.  
 79.7      This provision supersedes any requirements under 
 79.8   subdivisions 11 and 12 and Minnesota Rules, part 2780.5000. 
 79.9      Sec. 67.  Minnesota Statutes 1996, section 79A.23, 
 79.10  subdivision 1, is amended to read: 
 79.11     Subdivision 1.  [REQUIRED REPORTS TO COMMISSIONER.] Each 
 79.12  commercial self-insurance group shall submit the following 
 79.13  documents to the commissioner.  
 79.14     (a) An annual report shall be submitted by April 1 showing 
 79.15  the incurred losses, paid and unpaid, specifying indemnity and 
 79.16  medical losses by classification, payroll by classification, and 
 79.17  current estimated outstanding liability for workers' 
 79.18  compensation on a calendar year basis, in a manner and on forms 
 79.19  available from the commissioner.  In addition each group will 
 79.20  submit a quarterly interim loss report showing incurred losses 
 79.21  for all its membership. 
 79.22     (b) Each commercial self-insurance group shall submit 
 79.23  within 45 days of the end of each quarter:  
 79.24     (1) a schedule showing all the members who participate in 
 79.25  the group, their date of inception, and date of withdrawal, if 
 79.26  applicable; 
 79.27     (2) a separate section identifying which members were added 
 79.28  or withdrawn during that quarter; and 
 79.29     (3) an internal financial statement and copies of the 
 79.30  fiscal agent's statements supporting the balances in the common 
 79.31  claims fund. 
 79.32     (c) The commercial self-insurance group shall submit an 
 79.33  annual certified financial audit report of the commercial 
 79.34  self-insurance group fund by April 1 of the following year.  The 
 79.35  report must be accompanied by an expense schedule showing the 
 79.36  commercial self-insurance group's operational costs for the same 
 80.1   year including service company charges, accounting and actuarial 
 80.2   fees, fund administration charges, reinsurance premiums, 
 80.3   commissions, and any other costs associated with the 
 80.4   administration of the group program. 
 80.5      (d) An officer of the commercial self-insurance group 
 80.6   shall, under oath, attest to the accuracy of each report 
 80.7   submitted under paragraphs (a), (b), and (c).  Upon sufficient 
 80.8   cause, the commissioner shall require the commercial 
 80.9   self-insurance group to submit a certified audit of payroll and 
 80.10  claim records conducted by an independent auditor approved by 
 80.11  the commissioner, based on generally accepted accounting 
 80.12  principles and generally accepted auditing standards, and 
 80.13  supported by an actuarial review and opinion of the future 
 80.14  contingent liabilities.  The basis for sufficient cause shall 
 80.15  include the following factors: 
 80.16     (1) where the losses reported appear significantly 
 80.17  different from similar types of groups; 
 80.18     (2) where major changes in the reports exist from year to 
 80.19  year, which are not solely attributable to economic factors; or 
 80.20     (3) where the commissioner has reason to believe that the 
 80.21  losses and payroll in the report do not accurately reflect the 
 80.22  losses and payroll of the commercial self-insurance group.  
 80.23  If any discrepancy is found, the commissioner shall require 
 80.24  changes in the commercial self-insurance group's business plan 
 80.25  or service company recordkeeping practices. 
 80.26     (e) Each commercial self-insurance group shall submit by 
 80.27  August 15 a copy of the group's annual federal and state income 
 80.28  tax returns or provide proof that it has received an exemption 
 80.29  from these filings. 
 80.30     (f) With the annual loss report each commercial 
 80.31  self-insurance group shall report to the commissioner any 
 80.32  worker's compensation claim where the full, undiscounted value 
 80.33  is estimated to exceed $50,000, in a manner and on forms 
 80.34  prescribed by the commissioner. 
 80.35     (g) Each commercial self-insurance group shall submit by 
 80.36  May 1 a list of all members and the percentage of premium each 
 81.1   represents to the total group's premium for the previous 
 81.2   calendar year.  
 81.3      (h) Each commercial self-insurance group shall submit by 
 81.4   May 1 the following documents prepared by the group's certified 
 81.5   public accountant:  
 81.6      (1) a compiled combined financial statement of group 
 81.7   members and a list of members included in this statement; and 
 81.8      (2) a report that the statements which were combined have 
 81.9   met the requirements of subdivision 2.  
 81.10     (i) If any group member comprises over 25 percent of total 
 81.11  group premium, that member's financial statement must be 
 81.12  reviewed or audited, and must be submitted to the commissioner, 
 81.13  at the commissioner's option, must be filed with the department 
 81.14  of commerce by May 1 of the following year. 
 81.15     (j) Each commercial self-insurance group shall submit a 
 81.16  copy of each member's accountant's report letter from the 
 81.17  reports used in compiling the combined financial statements.  
 81.18     Sec. 68.  Minnesota Statutes 1996, section 79A.23, 
 81.19  subdivision 2, is amended to read: 
 81.20     Subd. 2.  [REQUIRED REPORTS FROM MEMBERS TO GROUP.] Each 
 81.21  member of the commercial self-insurance group shall, by April 1, 
 81.22  submit to the group its most recent annual financial statement, 
 81.23  together with other financial information the group may 
 81.24  require.  These financial statements submitted must not have a 
 81.25  fiscal year end date older than January 15 of the group's 
 81.26  calendar year end.  Individual group members constituting at 
 81.27  least 75 50 percent of the group's annual premium shall submit 
 81.28  to the group reviewed or audited financial statements.  The 
 81.29  remaining members may submit compilation level statements. 
 81.30     Sec. 69.  Minnesota Statutes 1996, section 79A.24, 
 81.31  subdivision 1, is amended to read: 
 81.32     Subdivision 1.  [ANNUAL SECURING OF LIABILITY.] Each year 
 81.33  every commercial self-insurance group shall secure its estimated 
 81.34  future incurred liabilities liability for the payment of 
 81.35  compensation and the performance of the obligations of its 
 81.36  membership imposed under chapter 176.  A new deposit must be 
 82.1   posted within 30 days of the filing of the commercial 
 82.2   self-insurance group's annual actuarial report with the 
 82.3   commissioner. 
 82.4      Sec. 70.  Minnesota Statutes 1996, section 79A.24, 
 82.5   subdivision 2, is amended to read: 
 82.6      Subd. 2.  [MINIMUM DEPOSIT.] The minimum deposit is 150 
 82.7   percent of the commercial self-insurance group's estimated 
 82.8   future incurred liabilities liability for the payment of 
 82.9   compensation as determined by an actuary.  If all the members of 
 82.10  the commercial self-insurance group have submitted reviewed or 
 82.11  audited financial statements to the group's accountant, this 
 82.12  minimum deposit shall be 110 percent of the commercial 
 82.13  self-insurance group's estimated future incurred 
 82.14  liabilities liability for the payment of workers' compensation 
 82.15  as determined by an actuary.  The group must file a letter with 
 82.16  the commissioner from the group's accountant which confirms that 
 82.17  the compiled combined financial statements were prepared from 
 82.18  members reviewed or audited financial statements only before the 
 82.19  lower security deposit is allowed.  Each actuarial study shall 
 82.20  include a projection of future losses during a one-year period 
 82.21  until the next scheduled actuarial study, less payments 
 82.22  anticipated to be made during that time.  Deduction should be 
 82.23  made for the total amount which is estimated to be returned to 
 82.24  the commercial self-insurance group from any specific excess 
 82.25  insurance coverage, aggregate excess insurance coverage, and any 
 82.26  supplementary benefits which are estimated to be reimbursed by 
 82.27  the special compensation fund.  Supplementary benefits will not 
 82.28  be reimbursed by the special compensation fund unless the 
 82.29  special compensation fund assessment pursuant to section 176.129 
 82.30  is paid and the required reports are filed with the special 
 82.31  compensation fund.  In the case of surety bonds, bonds shall 
 82.32  secure administrative and legal costs in addition to the 
 82.33  liability for payment of compensation reflected on the face of 
 82.34  the bond.  In no event shall the security be less than the 
 82.35  group's selected retention limit of the workers' compensation 
 82.36  reinsurance association.  The posting or depositing of security 
 83.1   under this section shall release all previously posted or 
 83.2   deposited security from any obligations under the posting or 
 83.3   depositing and any surety bond so released shall be returned to 
 83.4   the surety.  Any other security shall be returned to the 
 83.5   depositor or the person posting the bond. 
 83.6      Sec. 71.  Minnesota Statutes 1996, section 79A.24, 
 83.7   subdivision 4, is amended to read: 
 83.8      Subd. 4.  [CUSTODIAL ACCOUNTS.] (a) All surety bonds, 
 83.9   irrevocable letters of credit, and documents showing issuance of 
 83.10  any irrevocable letter of credit shall be deposited in 
 83.11  accordance with the provisions of section 79A.071.  
 83.12     (b) Upon the commissioner sending a request to renew, 
 83.13  request to post, or request to increase a security deposit, a 
 83.14  perfected security interest is created in the commercial 
 83.15  self-insurance group's and member's assets in favor of the 
 83.16  commissioner to the extent of any then unsecured portion of the 
 83.17  commercial self-insurance group's incurred liabilities.  The 
 83.18  perfected security interest is transferred to any cash or 
 83.19  securities thereafter posted by the commercial self-insurance 
 83.20  group with the state treasurer and is released only upon either 
 83.21  of the following: 
 83.22     (1) the acceptance by the commissioner of a surety bond or 
 83.23  irrevocable letter of credit for the full amount of the incurred 
 83.24  liabilities for the payment of compensation; or 
 83.25     (2) the return of cash or securities by the commissioner.  
 83.26  The commercial self-insurance group loses all right, title, and 
 83.27  interest in and any right to control all assets or obligations 
 83.28  posted or left on deposit as security.  In the event of a 
 83.29  declaration of bankruptcy or insolvency by a court of competent 
 83.30  jurisdiction, or in the event of the issuance of a certificate 
 83.31  of default by the commissioner, the commissioner shall liquidate 
 83.32  the deposit as provided in this chapter, and transfer it to the 
 83.33  commercial self-insurance group security fund for application to 
 83.34  the commercial self-insurance group's incurred liability. 
 83.35     (c) No securities in physical form on deposit with the 
 83.36  state treasurer or the commissioner or custodial accounts 
 84.1   assigned to the state shall be released or exchanged without an 
 84.2   order from the commissioner.  No security can be exchanged more 
 84.3   than once every 90 days. 
 84.4      (d) Any securities deposited with the state treasurer or 
 84.5   with a custodial account assigned to the state treasurer or 
 84.6   letters of credit or surety bonds held by the commissioner may 
 84.7   be exchanged or replaced by the depositor with any other 
 84.8   acceptable securities or letters of credit or surety bond of 
 84.9   like amount so long as the market value of the securities or 
 84.10  amount of the surety bonds or letter of credit equals or exceeds 
 84.11  the amount of the deposit required.  If securities are replaced 
 84.12  by surety bond, the commercial self-insurance group must 
 84.13  maintain securities on deposit in an amount sufficient to meet 
 84.14  all outstanding workers' compensation liability arising during 
 84.15  the period covered by the deposit of the replaced securities. 
 84.16     (e) The commissioner shall return on an annual basis to the 
 84.17  commercial self-insurance group all amounts of security 
 84.18  determined by the commissioner to be in excess of the statutory 
 84.19  requirements for the group to self-insure, including that 
 84.20  necessary for administrative costs, legal fees, and the payment 
 84.21  of any future workers' compensation claims. 
 84.22     Sec. 72.  Minnesota Statutes 1996, section 79A.26, 
 84.23  subdivision 2, is amended to read: 
 84.24     Subd. 2.  [BOARD OF TRUSTEES.] The commercial security fund 
 84.25  shall be governed by a board consisting of a minimum of three 
 84.26  and maximum of five trustees.  The trustees shall be 
 84.27  representatives of commercial self-insurance groups who shall be 
 84.28  elected by the participants of the commercial security fund, 
 84.29  each group having one vote.  The trustees initially elected by 
 84.30  the participants shall serve staggered terms of either two or 
 84.31  three years.  Thereafter, trustees shall be elected to 
 84.32  three-year terms and shall serve until their successors are 
 84.33  elected and assume office pursuant to the bylaws of the 
 84.34  commercial security fund.  Two additional trustees shall be 
 84.35  appointed by the commissioner.  These trustees shall serve 
 84.36  four-year terms.  Initially, one of these trustees shall serve a 
 85.1   two-year term.  Thereafter, the trustees shall be appointed to 
 85.2   four-year terms, and shall serve until their successors are 
 85.3   appointed and assume office according to the bylaws of the 
 85.4   commercial security fund.  In addition to the trustees elected 
 85.5   by the participants or appointed by the commissioner, the 
 85.6   commissioner of labor and industry or the commissioner's 
 85.7   designee shall be an ex officio, nonvoting member of the board 
 85.8   of trustees.  A member of the board of trustees may designate 
 85.9   another person to act in the member's place as though the member 
 85.10  were acting and the designee's actions shall be deemed those of 
 85.11  the member. 
 85.12     Sec. 73.  Minnesota Statutes 1996, section 79A.31, 
 85.13  subdivision 1, is amended to read: 
 85.14     Subdivision 1.  [WITHDRAWAL.] Any group self-insurer that 
 85.15  is a member as of August 1, 1995, of the self-insurers' security 
 85.16  fund established under section 79A.09, may until January 1, 
 85.17  1996, elect to withdraw from that fund and become a member of 
 85.18  the commercial self-insurance group security fund established 
 85.19  under section 79A.26.  The transferring group shall be subject 
 85.20  to the provisions and requirements of sections 79A.19 to 79A.32 
 85.21  as of the date of transfer.  Additional security may be required 
 85.22  pursuant to section 79A.24.  Group self-insurers electing to 
 85.23  transfer to the commercial self-insurance group fund shall not 
 85.24  be subject to the provisions of section 79A.06, subdivision 5, 
 85.25  including, but not limited to, assessments by the self-insurers' 
 85.26  security fund.  Notice of transfer must be filed by November 1 
 85.27  for all transfers that must be effective at midnight on December 
 85.28  31. 
 85.29     Sec. 74.  [WARRANTY PRODUCTS AND EXTENDED SERVICE 
 85.30  CONTRACTS; STUDY.] 
 85.31     The commissioner of commerce shall conduct a study to 
 85.32  determine the appropriate regulatory framework for warranty 
 85.33  products and extended service contracts offered for sale in 
 85.34  Minnesota. 
 85.35     The commissioner shall make a written report to the 
 85.36  legislature on or before February 15, 1998, discussing the types 
 86.1   of warranty and extended service contracts available to 
 86.2   Minnesota consumers.  The report must also include 
 86.3   recommendations as to how these products should be regulated in 
 86.4   Minnesota, including a discussion as to when these products 
 86.5   should be regulated as insurance.  In examining these issues, 
 86.6   the commissioner may seek the advice of representatives from the 
 86.7   attorney general's office, the retail merchants industry, public 
 86.8   utilities, and the insurance industry. 
 86.9      Sec. 75.  [APPLICATION.] 
 86.10     (a) Section 21, subdivision 2, applies to a suit based in 
 86.11  whole or in part on an alleged act, error, or omission that 
 86.12  takes place on or after the effective date of the section. 
 86.13     (b) No legal action lies against the receiver or any 
 86.14  employee based in whole or in part on any alleged act, error, or 
 86.15  omission that took place before the effective date of the 
 86.16  section, unless suit is filed and valid service of process is 
 86.17  obtained within 12 months after the effective date of the 
 86.18  section. 
 86.19     (c) Section 21, subdivisions 3 to 5, apply to a suit that 
 86.20  is pending on or filed after the effective date of the section 
 86.21  without regard to when the alleged act, error, or omission took 
 86.22  place. 
 86.23     (d) Section 24 applies to all contracts entered into, 
 86.24  renewed, extended, or amended on or after its effective date and 
 86.25  to obligations arising from any business written or transaction 
 86.26  occurring covered by reinsurance after the effective date 
 86.27  according to any contract including those in existence before 
 86.28  the effective date. 
 86.29     Sec. 76.  [REPEALER.] 
 86.30     Minnesota Statutes 1996, sections 60B.36; and 79A.04, 
 86.31  subdivision 8, are repealed. 
 86.32     Sec. 77.  [EFFECTIVE DATE.] 
 86.33     Section 72 is effective the day after final enactment.