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Key: (1) language to be deleted (2) new language


                         Laws of Minnesota 1986 

                        CHAPTER 313-S.F.No. 1612 
           An act relating to insurance; changing certain 
          incorporation requirements for domestic insurance 
          corporations; redefining cost for purpose of insurance 
          company bidding for government contracts; classifying 
          certain data collected by the commissioner of commerce 
          as nonpublic data; changing certain investment 
          requirements for life insurance companies; authorizing 
          joint underwriting association issuance of insurance 
          to hospitals and nursing homes; providing liability 
          insurance for foster parents; regulating fraternal 
          benefit societies; allowing the Minnesota automobile 
          insurance plan to write liability insurance on school 
          buses up to $1,000,000; redefining cost for purpose of 
          insurance company bidding for government contracts; 
          amending Minnesota Statutes 1984, sections 60A.07, 
          subdivision 1; 61A.282, subdivision 1; 65B.06, 
          subdivision 3; 62F.06, subdivision 1; 62F.09; 245.814; 
          and 471.616, subdivision 1; Minnesota Statutes 1985 
          Supplement, sections 13.71, by adding a subdivision; 
          64B.01; and 64B.03; proposing coding for new law in 
          Minnesota Statutes, chapter 62F. 
    Section 1.  Minnesota Statutes 1985 Supplement, section 
13.71, is amended by adding a subdivision to read: 
COMPANIES.] The following data collected and maintained by the 
department of commerce are classified as nonpublic data: 
    (a) that portion of any of the following data which would 
identify the affected insurance company or township mutual 
company:  (1) any order issued pursuant to section 60A.031, 
subdivision 5, or section 67A.241, subdivision 4, and based in 
whole or in part upon a determination or allegation by the 
commerce department or commissioner that an insurance company or 
township mutual company is in an unsound, impaired, or 
potentially unsound or impaired condition; or (2) any 
stipulation, consent agreement, letter agreement, or similar 
document evidencing the settlement of any proceeding commenced 
pursuant to an order of a type described in clause (1), or an 
agreement between the department and an insurance company or 
township mutual company entered in lieu of the issuance of an 
order of the type described in clause (1); 
    (b) any correspondence or attachments relating to the data 
listed in this subdivision. 
    Sec. 2.  Minnesota Statutes 1984, section 60A.07, 
subdivision 1, is amended to read:  
    Subdivision 1.  [INCORPORATION.] Except when the manner of 
organization is specifically otherwise provided in sections 
dealing with such these insurers, domestic insurance 
corporations shall be organized under and governed by chapter 
300 and.  The articles or certificate of incorporation shall be 
as required under Minnesota Statutes 1965, must meet the 
requirements of section 300.025, except section 300.025, clause 
    Sec. 3.  Minnesota Statutes 1984, section 61A.282, 
subdivision 1, is amended to read: 
    Subdivision 1.  [REQUIREMENTS.] A company's investments 
shall be held in its corporate name or its nominee name, except 
    (a) Investments may be held in the name of a clearing 
corporation or of a custodian bank or in the name of the nominee 
of either under the following conditions:  
    (1) The clearing corporation, custodian bank, or nominee 
must be legally authorized to hold the particular investment for 
the account of others;  
    (2) Where the investment is evidenced by a certificate and 
held in the name of a custodian bank or the nominee of a 
custodian bank, a written agreement shall provide that 
certificates so deposited shall at all times be kept separate 
and apart from other deposits with the depository, so that at 
all times they may be identified as belonging solely to the 
company making the deposit; or 
    (3) Where a clearing corporation is to act as depository, 
the investment may be merged or held in bulk in the clearing 
corporation's name, or in the name of its nominee, together with 
any other investments deposited with the clearing corporation by 
any other person, if a written agreement provides that adequate 
evidence of the deposit will be obtained and retained by the 
company or a custodian bank.  
    As used in this subdivision, "clearing corporation" means 
The Depository Trust Company and, with the approval of the 
commissioner, any other clearing corporation as defined in 
section 336.8-102; the term "custodian bank" means a bank or 
trust company licensed by the United States or any state thereof.
    (b) A company may participate, through a bank or trust 
company which is a member of the Federal Reserve System, in the 
Federal Reserve's book-entry system, if the records of the 
member bank or trust company at all times show that the 
investments are held for the company and/or for specific 
accounts of the company.  
    (c) If an investment consists of an individual interest in 
a pool of obligations, or of a fractional interest in a single 
obligation, the certificate of participation or interest, or the 
confirmation of participation or interest in the investment, 
shall be held in the manner set forth in paragraph (a) or held 
in the name of the company.  
    (d) Where an investment is not evidenced by a certificate, 
except as provided in paragraph (b), adequate evidence of the 
company's investment shall be obtained from the issuer or its 
transfer or recording agent and retained by the company, a 
custodian bank, or clearing corporation.  Adequate evidence, for 
purposes of this section, shall mean a written receipt or other 
verification issued by the depository or issuer or a custodian 
bank which shows that the investment is held for the company.  
Transfers of ownership of investments held as described in 
paragraphs (a) (3), (b), and (c) may be evidenced by bookkeeping 
entry on the books of the issuer of the investment or its 
transfer or recording agent or the clearing corporation without 
physical delivery of certificates, if any, evidencing the 
company's investment. 
    Sec. 4.  [62F.041] [HOSPITALS AND NURSING HOMES.] 
    Subdivision 1.  The association is authorized to issue 
medical malpractice insurance on a primary basis to hospitals 
and nursing homes which are unable to obtain coverage in the 
voluntary market.  Issuance of these coverages is not subject to 
the hearing requirement set forth in section 62F.04, subdivision 
1, but shall be otherwise governed by the provisions of section 
    Subd. 2.  This section shall expire on June 30, 1987. 
    Sec. 5.  Minnesota Statutes 1984, section 62F.06, 
subdivision 1, is amended to read: 
    Subdivision 1.  A policy issued by the association shall 
provide for a continuous period of coverage beginning with its 
effective date and terminating automatically at 12:01 a.m. on 
September 1, 1988, or sooner as provided in sections 62F.01 to 
62F.14.  The policy shall be issued subject to the group 
retrospective rating plan and the stabilization reserve fund 
authorized by section 62F.09.  The policy shall be written to 
apply to injury which results from acts or omissions claims 
first made against the insured and reported to the association 
during the policy period.  No policy form shall be used by the 
association unless it has been filed with the commissioner, and 
the commissioner may disapprove the form within 30 days if he 
determines it is misleading or violates public policy. 
    Sec. 6.  Minnesota Statutes 1984, section 62F.09, is 
amended to read: 
    Subdivision 1.  There is created a stabilization reserve 
fund administered by three directors, as follows: the 
commissioner; a representative of the association appointed by 
the commissioner; and a representative of the policyholders of 
the association, appointed by the commissioner. 
    Subd. 2.  The directors shall act by majority vote with two 
directors constituting a quorum for the transaction of any 
business or the exercise of any power of the fund.  The 
directors shall serve without salary, but shall be reimbursed 
for expenses in the manner provided for state employees.  The 
directors shall not be subject to personal liability or 
accountability in the administration of the fund the association 
or its designee. 
    Subd. 3 2.  Each policyholder shall pay to the association 
a stabilization reserve fund charge of 33 percent of each 
premium payment due for insurance through the association.  This 
charge shall be separately stated in the policy.  The 
association shall cancel the policy of any policyholder who 
fails to pay the stabilization reserve fund charge. 
    Subd. 4 3.  The association shall promptly pay into the 
stabilization reserve fund charges which it collects from its 
policyholders and any retrospective premium refunds payable 
under the group retrospective rating plan. 
    Subd. 5 4.  All moneys paid into the fund shall be held in 
trust by a corporate trustee selected by the directors.  The 
corporate trustee may invest the moneys held in trust, subject 
to the approval of the directors association.  All investment 
income gains or losses from the investment of stabilization 
reserve fund money shall be credited to the fund.  All expenses 
of administration of the fund shall be charged against the 
fund.  The moneys held in trust Stabilization reserve fund money 
shall be used solely for the purpose of discharging when due any 
retrospective premium charges payable by policyholders of the 
association under the group retrospective rating plan.  Payment 
of retrospective premium charges shall be made by the directors 
upon certification to them by the association of the amount 
due.  If all moneys accruing to the fund are exhausted in 
payment of retrospective premium charges, all liability and 
obligations of the association's policyholders with respect to 
the payment of retrospective premium charges shall terminate and 
shall be conclusively presumed to have been discharged.  Any 
moneys remaining in the fund after all retrospective premium 
charges have been paid shall be returned to policyholders under 
procedures authorized by the directors association. 
    Sec. 7.  Minnesota Statutes 1985 Supplement, section 
64B.01, is amended to read: 
    Any incorporated society, order, or supreme lodge, without 
capital stock, including one exempted under section 64B.38, 
subdivision 1, clause (2), whether incorporated or not, 
conducted solely for the benefit of its members and their 
beneficiaries and not for profit, operated on a lodge system 
with ritualistic form of work or branch system that confines its 
membership to any one religious denomination, having a 
representative form of government, and which provides benefits 
in accordance with this chapter, is hereby declared to be a 
fraternal benefit society. 
    Sec. 8.  Minnesota Statutes 1985 Supplement, section 
64B.03, is amended to read:  
    (a) A society has a representative form of government when 
it has a supreme governing body constituted in one of the 
following ways: 
    (1) The supreme governing body is an assembly composed of 
delegates elected directly by the members or at intermediate 
assemblies or conventions of members or their representatives, 
together with other delegates as may be prescribed in the 
society's laws.  A society may provide for election of delegates 
by mail.  The elected delegates shall constitute a majority in 
number and shall not have less than two-thirds of the votes and 
not less than the number of votes required to amend the 
society's laws.  The assembly shall be elected and shall meet at 
least once every four years and shall elect a board of directors 
to conduct the business of the society between meetings of the 
assembly.  Vacancies on the board of directors between elections 
may be filled in the manner prescribed by the society's laws. 
    (2) The supreme governing body is a board composed of 
persons elected by the members, either directly or by their 
representatives in intermediate assemblies, and any other 
persons prescribed in the society's laws.  A society may provide 
for election of the board by mail.  Each term of a board member 
may not exceed four years.  Vacancies on the board between 
elections may be filled in the manner prescribed by the 
society's laws.  Those persons elected to the board shall 
constitute a majority in number and not less than the number of 
votes required to amend the society's laws.  A person filling 
the unexpired term of an elected board member shall be 
considered to be an elected member.  The board shall meet at 
least quarterly to conduct the business of the society. 
    (b) A society has a representative form of government when 
the officers of the society are elected either by the supreme 
governing body or by the board of directors. 
    (c) A society has a representative form of government when 
only benefit members are eligible for election to the supreme 
governing body, and the board of directors, or any intermediate 
    (d) A society has a representative form of government when 
each voting member shall have one vote and no vote may be cast 
by proxy. 
    Sec. 9.  Minnesota Statutes 1984, section 65B.06, 
subdivision 3, is amended to read: 
    Subd. 3.  With respect to all automobiles not included in 
subdivisions 1 and 2, the facility shall provide: 
    (1) Only the insurance coverage required by law; 
    (2) For the equitable distribution of qualified applicants 
for this coverage among the participating members in accord with 
the applicable participation ratio; and 
    (3) For a school district or contractor transporting school 
children under contract with a school district, that amount of 
automobile liability insurance coverage, not to exceed 
$1,000,000, required by the school district by resolution or 
contract, or that portion of such $1,000,000 of coverage for 
which the school district or contractor applies and for which it 
is eligible under section 65B.10. 
    Sec. 10.  Minnesota Statutes 1984, section 245.814, is 
amended to read: 
    Subdivision 1.  The commissioner of human services shall 
within the appropriation provided purchase and provide insurance 
to foster parents to cover their liability for: 
    (1) injuries or property damage caused or sustained by 
foster children in their home; and 
    (2) actions arising out of alienation of affections 
sustained by the natural parents of a foster child. 
    Subd. 2.  Coverage shall apply to all foster boarding homes 
licensed by the department of human services, licensed by a 
federally recognized tribal government, or established by the 
juvenile court and certified by the commissioner of corrections 
pursuant to section 260.185, subdivision 1, clause (c) (5), to 
the extent that the liability is not covered by the provisions 
of the standard homeowner's or automobile insurance policy.  The 
insurance shall not cover property owned by the foster parents, 
damage caused intentionally by a child over 12 years of age, or 
property damage arising out of business pursuits or the 
operation of any vehicle, machinery, or equipment. 
    Subd. 3.  If the commissioner of human services is unable 
to obtain insurance through ordinary methods for coverage of 
foster parents, the appropriation shall be returned to the 
general fund and the state shall pay claims subject to the 
following limitations. 
    (a) Compensation shall be provided only for injuries, 
damage, or actions set forth in subdivision 1. 
    (b) Compensation shall be subject to the conditions and 
exclusions set forth in subdivision 2. 
    (c) The state shall provide compensation for bodily injury, 
property damage, or personal injury resulting from the foster 
parent's activities as a foster parent while the foster child is 
in the care, custody, and control of the foster parent in an 
amount not to exceed $250,000 for each occurrence. 
    (d) The state shall provide compensation for damage or 
destruction of property caused or sustained by a foster child in 
an amount not to exceed $250 for each occurrence. 
    (e) The compensation in clauses (c) and (d) is the total 
obligation for all damages because of each occurrence regardless 
of the number of claims made in connection with the same 
occurrence, but compensation applies separately to each foster 
home.  The state shall have no other responsibility to provide 
compensation for any injury or loss caused or sustained by any 
foster parent or foster child. 
    This coverage is extended as a benefit to foster parents to 
encourage care of children who need out-of-home care.  Nothing 
in this section shall be construed to mean that foster parents 
are agents or employees of the state nor does the state accept 
any responsibility for the selection, monitoring, supervision, 
or control of foster parents which is exclusively the 
responsibility of the counties which shall regulate foster 
parents in the manner set forth in the rules of the commissioner 
of human services. 
    Sec. 11.  Minnesota Statutes 1984, section 471.616, 
subdivision 1, is amended to read: 
    Subdivision 1.  [BIDDING REQUIRED.] No governmental 
subdivision, political subdivision, or any other body corporate 
and politic authorized by law to purchase group insurance for 
its employees and providing or intending to provide group 
insurance protections and benefits for 25 or more of its 
employees shall enter into a contract for or renew any group 
insurance policy or contract without calling for bids and 
awarding the contract to the lowest responsible bidder by way of 
competitive bidding procedures similar to those for the 
provision of services and supplies under section 16B.07, 
subdivisions 1 to 5.  A political subdivision may provide in the 
bid specifications that self insured health benefit plans will 
not be considered.  Lowest responsible bidder means the insurer, 
service plan corporation, or self insurance plan, if allowed by 
the bid specifications which offers the lowest cost, is 
authorized to do business in this state, and is deemed by the 
governmental unit to be capable of satisfactorily performing the 
administration of the policy or contract in accordance with the 
bid specifications.  "Cost" means in the case of an insurer, the 
net premium rate, including consideration of any expense and 
risk charges; in the case of service plan corporation, the 
charge for expenses and risk taking; and in the case of self 
insurance plans, the sum of the cost of paid claims, including 
provision for estimated incurred but unpaid claims at the end of 
the term, administrative costs, and premium for excess 
coverage.  The cost of changing plans may also be considered in 
determining the lowest cost.  The aggregate value of benefits 
provided by a contract entered into after July 1, 1973 shall not 
be less than those provided by the preexisting contract (a) 
unless a majority of the employees covered under the group 
insurance plan and voting on the question agree to a reduction 
in the benefits, if the employees are not represented by an 
exclusive representative pursuant to section 179A.12, or (b) 
unless the public employer and the exclusive representative of 
the employees of an appropriate bargaining unit, certified 
pursuant to section 179.67, agree to a reduction in the 
benefits.  The aggregate value of benefits of any former 
employee who has retired shall not, in any event, be reduced 
pursuant to clause (a) or (b), unless he has individually agreed 
to the reduction. 
    No contract need be submitted to bid more frequently than 
once every 48 months, unless for any reason whatsoever, a 50 
percent or greater change in the premium per covered employee 
under the policy contract is provided, required or indicated.  
If additional employees are added to an existing group pursuant 
to a joint powers agreement under section 471.59, new bids and 
award are not required.  
    When an insurer proposes an increase in rates, it shall 
accompany its proposal with an aggregate claims record for the 
appropriate period that explains the proposed increase.  When a 
contract is resubmitted for bids the aggregate claims record 
shall accompany the specifications for the contract.  Cost 
comparisons are not required between insured and self-insurance 
alternatives, but apply to comparisons between two or more 
insured proposals or comparisons between two or more self 
insurance proposals.  
    Sec. 12.  [EFFECTIVE DATE.] 
    Sections 1 to 11 are effective the day following final 
    Approved March 5, 1986

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Revisor of Statutes