Minnesota Session Laws - 1988, Regular Session

  

                         Laws of Minnesota 1988 

                        CHAPTER 541-H.F.No. 1897 
           An act relating to insurance; regulating the Minnesota 
          Insurance Guaranty Association; excluding investment 
          risks insurance from coverage; modifying the 
          definitions of "resident" and "covered claim"; 
          regulating claims; preventing insolvencies; making 
          certain technical changes; amending Minnesota Statutes 
          1986, sections 60C.02, subdivision 1; 60C.03, 
          subdivisions 2, 7, and by adding a subdivision; 
          60C.05, subdivisions 1 and 2; 60C.06, by adding a 
          subdivision; 60C.13, subdivision 2; 60C.15; and 
          60C.18; Minnesota Statutes 1987 Supplement, section 
          60C.09; repealing Minnesota Statutes 1987 Supplement, 
          section 60C.06, subdivision 5. 
BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF MINNESOTA: 
    Section 1.  Minnesota Statutes 1986, section 60C.02, 
subdivision 1, is amended to read:  
    Subdivision 1.  [SCOPE.] Laws 1971, chapter 145 This 
chapter applies to all kinds of direct insurance, except life, 
title, accident and sickness written by life insurance 
companies, credit, mortgage guaranty, and ocean marine. 
    Sec. 2.  Minnesota Statutes 1986, section 60C.03, 
subdivision 2, is amended to read:  
    Subd. 2.  "Account" means any of the three five accounts 
created under section 60C.04.  
    Sec. 3.  Minnesota Statutes 1986, section 60C.03, 
subdivision 7, is amended to read:  
    Subd. 7.  "Resident" means: 
    (a) An individual person who fixes habitation in this state 
without any intention of removing therefrom and who, whenever 
absent therefrom, intends to return; or 
    (b) Any other person who maintains a place of business or a 
resident agent in this state whose principal place of business 
is located in this state at the time of the insured event; or 
    (c) A person whose principal place of business is in 
Wisconsin, Iowa, North Dakota or South Dakota, but who maintains 
substantial business in Minnesota. 
    Sec. 4.  Minnesota Statutes 1986, section 60C.03, is 
amended by adding a subdivision to read:  
     Subd. 9.  "Affiliate" means a person other than a natural 
person who directly, or indirectly, through one or more 
intermediaries, controls, is controlled by, or is under common 
control with an insolvent insurer on December 31 of the year 
preceding the date the insurer becomes an insolvent insurer. 
    Sec. 5.  Minnesota Statutes 1986, section 60C.05, 
subdivision 1, is amended to read:  
    Subdivision 1.  The association shall: 
    (a) Be deemed the insurer to the extent of its obligation 
on the covered claims.  The claims found by the board of 
directors to be covered shall be paid out of available funds 
after they have been approved or settled under sections 60B.45, 
subdivision 2, and 60B.58, subdivision 2, or the corresponding 
laws of another jurisdiction, subject to the board's power to 
reduce the amount of or reject the award under section 60C.10. 
    (b) Allocate claims paid and expenses incurred among 
the four five accounts and assess member insurers separately for 
each account the amounts necessary to pay the obligations of the 
association under clause (a), the expenses of handling covered 
claims, the cost of examinations under section 60C.15 and other 
expenses authorized by Laws 1971, chapter 145 this chapter. 
    (c) Notify the persons as the commissioner directs under 
Laws 1971, chapter 145 this chapter. 
    (d) Handle claims through its employees or through one or 
more insurers or other persons designated as servicing 
facilities.  Designation of a servicing facility is subject to 
the approval of the commissioner, but the designation may be 
declined. 
    (e) Reimburse each servicing facility for obligations of 
the association paid by the facility and for expenses incurred 
by the facility while handling claims on behalf of the 
association and shall pay the other expenses of the association 
authorized by Laws 1971, chapter 145 this chapter.  
    (f) Notify each member insurer of its assessment not later 
than 30 days before it is due.  
    (g) Issue to each insurer paying an assessment under this 
chapter a certificate of contribution, in a form prescribed by 
the commissioner, for the amount so paid.  All outstanding 
certificates shall be of equal dignity and priority without 
reference to amounts or dates of issue.  A certificate of 
contribution may be shown by the insurer in its financial 
statement as an asset in the form and for the amount, if any, 
and period of time the commissioner approves. 
     Sec. 6.  Minnesota Statutes 1986, section 60C.05, 
subdivision 2, is amended to read:  
    Subd. 2.  The association may: 
    (a) Employ or retain the persons necessary to handle claims 
and perform other duties of the association.  
    (b) Borrow funds necessary to effect the purposes of Laws 
1971, chapter 145 in accord with the plan of operation.  
    (c) Sue or be sued.  
    (d) Negotiate and become a party to the contracts necessary 
to carry out the purpose of Laws 1971, chapter 145.  
    (e) Perform other acts necessary or proper to effectuate 
the purpose of Laws 1971, chapter 145.  
    (f) Subject to section 7, refund to the member insurers in 
proportion to the contribution of each member insurer to that 
account the amount by which the assets of the account exceed the 
liabilities, if at the end of the calendar year the board of 
directors finds that the assets of the association in any 
account exceed the liabilities of that account as estimated by 
the board of directors for the coming year.  
    (g) Request the court to disapprove or modify any claim for 
which approval is sought under the provisions of section 60B.45, 
subdivision 2 or 60B.58, subdivision 2. 
    Sec. 7.  Minnesota Statutes 1986, section 60C.06, is 
amended by adding a subdivision to read: 
    Subd. 6.  [REFUNDS RETAINED.] All money which the 
association receives from the estate of an insolvent insurer or 
an insurer that is the subject of delinquency proceedings shall 
not be refunded to members but must be credited to the account 
from which the claims were paid that resulted in the payment 
from the estate.  If that cannot be determined, the money shall 
be credited to the account which the board determines is most 
likely to have been the source of the paid claims.  The money 
shall be used to pay future claims. 
    Sec. 8.  Minnesota Statutes 1987 Supplement, section 
60C.09, is amended to read:  
    60C.09 [COVERED CLAIMS.] 
    Subdivision 1.  [DEFINITION.] A covered claim is any unpaid 
claim, including one for unearned premium, which: 
    (a) (1) Arises out of and is within the coverage of an 
insurance policy issued by a member insurer if the insurer 
becomes an insolvent insurer after April 30, 1979; or 
    (2) Would be within the coverage of an extended reporting 
endorsement to a claims-made insurance policy if insolvency had 
not prevented the member insurer from fulfilling its obligation 
to issue the endorsement, if: 
    (i) the claims-made policy contained a provision affording 
the insured the right to purchase a reporting endorsement; 
    (ii) coverage will be no greater than if a reporting 
endorsement had been issued; 
    (iii) the insured has not purchased other insurance which 
applies to the claim; and 
    (iv) the insured's deductible under the policy is increased 
by an amount equal to the premium for the reporting endorsement, 
as provided in the insured's claims-made policy, or if not so 
provided, then as established by a rate service organization. 
    (b) Arises out of a class of business which is not excepted 
from the scope of Laws 1971, chapter 145, this chapter by 
section 60C.02; and 
    (c) Is made by: 
    (i) A policyholder, or an insured beneficiary under a 
policy, who, at the time of the insured event, was a resident of 
this state; or 
    (ii) A person designated in the policy as having an 
insurable interest in or related to property situated in this 
state at the time of the insured event; or 
    (iii) An obligee or creditor under any surety bond, who, at 
the time of default by the principal debtor or obligor, was a 
resident of this state; or 
    (iv) A third party claimant under a liability policy or 
surety bond, if:  (a) the insured or the third party claimant 
was a resident of this state at the time of the insured event; 
(b) the claim is for bodily or personal injuries suffered in 
this state by a person who when injured was a resident of this 
state; or (c) the claim is for damages to real property situated 
in this state at the time of damage; or 
    (v) A direct or indirect assignee of a person who except 
for the assignment might have claimed under (i), (ii) or (iii). 
    For purposes of paragraph (c), item (i) (ii), unit owners 
of condominiums, townhouses, or cooperatives are considered as 
having an insurable interest.  
    A covered claim also includes any unpaid claim which arises 
or exists within 30 days after the time of entry of an order of 
liquidation with a finding of insolvency by a court of competent 
jurisdiction unless prior thereto the insured replaces the 
policy or causes its cancellation or the policy expires on its 
expiration date.  A covered claim does not include claims filed 
with the guaranty fund after the final date set by the court for 
the filing of claims except for excused late filings permitted 
under section 60B.37. 
    Subd. 2.  [FURTHER DEFINITION.] In addition to subdivision 
1, a covered claim does not include: 
    (1) claims by an affiliate of the insurer; and 
    (2) claims due a reinsurer, insurer, insurance pool, or 
underwriting association, as subrogation recoveries or otherwise.
This clause does not prevent a person from presenting the 
excluded claim to the insolvent insurer or its liquidator, but 
the claims shall not be asserted against another person, 
including the person to whom the benefits were paid or the 
insured of the insolvent insurer, except to the extent that the 
claim is outside the coverage of the policy issued by the 
insolvent insurer. 
    Subd. 3.  [LIMITATION OF AMOUNT.] Payment of a covered 
claim, except a claim for unearned premium by any single 
claimant, whether upon a single policy or multiple policies of 
insurance, is limited to the amount by which the allowance on 
any claim exceeds $100 and is less than $300,000.  In the case 
of claim for unearned premium by a single claimant, the entire 
claim up to $300,000 shall be allowed.  The limitation on the 
amount of payment for a covered claim does not apply to claims 
for workers' compensation insurance.  In no event is the 
association obligated to the policyholder or claimant in an 
amount in excess of the obligation of the insurer under the 
policy from which the claim arises.  For insolvencies occurring 
on or after October 1, 1985, no deductible applies to claims 
eligible for payment under the assigned claims plan under 
sections 65B.63 to 65B.65. 
    Sec. 9.  Minnesota Statutes 1986, section 60C.13, 
subdivision 2, is amended to read:  
    Subd. 2.  Any person having a claim which may be recovered 
under more than one insurance guaranty association or its 
equivalent shall seek recovery first from the association of the 
state of residence of the insured except that if the claim is a 
first party claim for damage to property with a permanent 
location, that person shall seek recovery first from the 
association of the state in which the property is located, and 
if it is a workers' compensation claim, that person shall seek 
recovery first from the association of the residence of the 
claimant.  Any recovery under Laws 1971, chapter 145 this 
chapter shall be reduced by the amount of recovery from any 
other insurance guaranty association or its equivalent.  
    Sec. 10.  Minnesota Statutes 1986, section 60C.15, is 
amended to read:  
    60C.15 [PREVENTION OF INSOLVENCIES.] 
    To aid in the detection and prevention of insurer 
insolvencies: 
    (1) It is the duty of each member insurer to notify the 
commissioner of any established facts indicating any other 
member insurer may be insolvent or in a financial condition 
hazardous to its policyholders or the public.  
    (2) The board of directors shall request that the 
commissioner order an examination of any member insurer which 
the board in good faith believes may be in a financial condition 
hazardous to its policyholders or the public.  Within 30 days of 
the receipt of the request, the commissioner shall begin the 
examination.  The examination may be conducted as a national 
association of insurance commissioners examination or may be 
conducted by persons designated by the commissioner.  The cost 
of the examination shall be paid by the association and the 
examination report shall be treated as are other examination 
reports.  In no event shall the examination report be released 
to the board of directors prior to its release to the public, 
but this shall not preclude the commissioner from complying with 
paragraph (3).  The commissioner shall notify the board of 
directors when the examination is completed.  The request for an 
examination shall be kept on file by the commissioner, but it 
shall not be open to public inspection unless the report finds 
the company to be insolvent.  
    (3) It shall be the duty of the commissioner to report to 
the board of directors when the commissioner has reasonable 
cause to believe that any member insurer examined or being 
examined at the request of the board of directors may be 
insolvent or in a financial condition hazardous to the 
policyholders or the public. 
    (4) The board of directors may, upon majority vote, make 
reports and recommendations to the commissioner upon any matter 
germane to the solvency, liquidation, rehabilitation or 
conservation of any member insurer.  The reports and 
recommendations shall not be considered public documents.  
    (5) (1) The board of directors:  (a) may, upon majority 
vote, make recommendations to the commissioner for the detection 
and prevention of insurer insolvencies; and (b) shall respond to 
requests by the commissioner to discuss and make recommendations 
regarding the status of any member insurer whose financial 
condition may be hazardous to policyholders or the public.  
These recommendations are classified as nonpublic data under 
section 13.02. 
    (2) The board of directors may, at the conclusion of any 
domestic insurer insolvency in which the association was 
obligated to pay covered claims, prepare and submit to the 
commissioner a report on the history and causes of the 
insolvency, based on the information available to the 
association. 
     Sec. 11.  Minnesota Statutes 1986, section 60C.18, is 
amended to read: 
    60C.18 [RECOGNITION OF ASSESSMENTS IN RATES.] 
    Subdivision 1.  The rates and premiums charged for 
insurance policies and fidelity and surety bonds to which this 
chapter applies may must include amounts sufficient to recoup a 
sum equal to the amounts paid to the association by the member 
insurer less any amounts returned to the member insurer by the 
association.  The rates shall not be deemed excessive because 
they contain an amount reasonably calculated to recoup 
assessments paid by the member insurer. 
    Subd. 2.  Beginning with assessments payable by member 
insurers in 1988, each member insurer must separately state on 
either a billing notice or policy declaration sent to an 
insured, the percentage, dollar amount, or both, of the amount 
contained in the premium to recoup assessments paid by the 
member insurer in Minnesota. 
    Sec. 12.  [AUTHORIZATION FOR STAGGERED TERMS FOR BOARD 
MEMBERS.] 
    Notwithstanding section 60C.08, subdivision 1, four board 
members may be appointed for one-year terms beginning on August 
1, 1987, to achieve staggered terms under the plan of operation. 
    Sec. 13.  [EFFECTIVE DATE CLARIFICATION.] 
    Laws 1987, chapter 337, sections 27, 28, 29, and 30, 
effective August 1, 1987, apply to delinquency proceedings 
commencing on or after August 1, 1987. 
    Sec. 14.  [REPEALER.] 
    Minnesota Statutes 1987 Supplement, section 60C.06, 
subdivision 5, is repealed. 
    Sec. 15.  [EFFECTIVE DATE.] 
    (a) Sections 1 to 5 and 8 to 10 are effective the day 
following final enactment and apply to all unsettled current or 
existing and future claims paid after that date arising out of 
any past or future member insolvency.  
    (b) Sections 11, 13, and 14 are effective the day following 
final enactment. 
    Approved April 18, 1988