Minnesota Legislature
Office of the Revisor of Statutes
Minnesota Session Laws - 1997, Regular Session
Key: (1) language to be deleted (2) new language
CHAPTER 52-S.F.No. 1527
An act relating to insurance; Minnesota Insurance
Guaranty Act; conforming state law to provisions of
the Post-Assessment Property and Liability Insurance
Guaranty Association Model Act of the National
Association of Insurance Commissioners; amending
Minnesota Statutes 1996, sections 60C.02; 60C.03,
subdivisions 6, 8, and by adding a subdivision;
60C.05, subdivision 1; 60C.07, subdivision 2; 60C.09;
60C.11, subdivision 5; 60C.13, subdivision 1; 60C.14,
subdivision 2; 60C.15; 60C.19; and 60C.21, subdivision
2; proposing coding for new law in Minnesota Statutes,
chapter 60C; repealing Minnesota Statutes 1996,
section 60C.06, subdivision 6.
BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF MINNESOTA:
Section 1. Minnesota Statutes 1996, section 60C.02, is
amended to read:
60C.02 [SCOPE, PURPOSE AND CONSTRUCTION.]
Subdivision 1. [SCOPE.] This chapter applies to all kinds
of direct insurance, except:
(1) life,;
(2) annuity;
(3) title,;
(4) accident and sickness,;
(5) credit,;
(6) vendor's single interest or collateral protection or
any similar insurance protecting the interests of a creditor
arising out of a creditor debtor transaction;
(7) mortgage guaranty,;
(8) financial guaranty or other forms of insurance offering
protection against investment risks, and;
(9) ocean marine.;
(10) a transaction or combination of transactions between a
person, including affiliates of the person, and an insurer,
including affiliates of the insurer, that involves the transfer
of investment or credit risk unaccompanied by transfer or
insurance risk; or
(11) insurance provided by or guaranteed by government.
Subd. 2. [PURPOSES.] The purposes of Laws 1971, chapter
145 this chapter are to provide a mechanism for the payment of
covered claims under certain insurance policies and surety
bonds, to avoid the extent provided in this chapter, minimize
excessive delay in payment and to avoid financial loss to
claimants or policyholders because of the liquidation of an
insurer, to assist in the detection and prevention of insurer
insolvencies, and to provide an association to assess the cost
of the protection among insurers.
Subd. 3. [CONSTRUCTION.] Laws 1971, chapter 145 This
chapter shall be liberally construed to effect the purposes
stated in subdivision 2.
Sec. 2. Minnesota Statutes 1996, section 60C.03,
subdivision 6, is amended to read:
Subd. 6. [MEMBER INSURER.] "Member insurer" means any
person, including reciprocals or interinsurance exchanges
operating under chapter 71A, township mutual fire insurance
companies operating under sections 67A.01 to 67A.26, and farmers
mutual fire insurance companies operating under sections 67A.27
to 67A.39, who (a) writes any kind of insurance not excepted
from the scope of Laws 1971, chapter 145 by section 60C.02, and
(b) is licensed to transact insurance business in this state,
except any nonprofit service plan incorporated or operating
under sections 62C.01 to 62C.23 and any health plan incorporated
under chapter 317A, and includes an insurer whose license or
certificate of authority in this state may have been suspended,
revoked, not renewed, or voluntarily withdrawn.
An insurer ceases to be a member insurer the day following
the termination or expiration of its license to transact the
kinds of insurance to which this chapter applies. The insurer
remains liable as a member insurer for any and all obligations,
including obligations for assessments levied before the
termination or expiration with respect to an insurer that became
an insolvent insurer before the termination or expiration of the
insurer's license.
Sec. 3. Minnesota Statutes 1996, section 60C.03,
subdivision 8, is amended to read:
Subd. 8. [INSOLVENT INSURER.] "Insolvent insurer" means an
insurer licensed to transact insurance in this state, either at
the time the policy was issued, or when the insured event
occurred, and against whom an order of liquidation with a
finding of insolvency has been entered after April 30, 1979 by a
court of competent jurisdiction, in the insurer's state of
domicile or of this state, under the provisions of chapter 60B,
and which order of liquidation has not been stayed or been the
subject of a writ of supersedeas or other comparable order a
final order of liquidation has been entered after April 30,
1979, with a finding of insolvency by a court of competent
jurisdiction in the insurer's state of domicile. An insurer
placed under administrative supervision under sections 60G.01 to
60G.09 or determined to be in hazardous financial condition
under sections 60G.20 to 60G.22 is not an insolvent insurer as a
result of that placement or determination.
Sec. 4. Minnesota Statutes 1996, section 60C.03, is
amended by adding a subdivision to read:
Subd. 11. [OCEAN MARINE INSURANCE.] "Ocean marine
insurance" means a form of insurance, regardless of the name,
label, or marketing designation of the insurance policy, that
insures against maritime perils or risks and other related
perils or risks, that are usually insured against by traditional
marine insurance, such as hull and machinery, marine builders
risk, and marine protection and indemnity. Perils and risks
insured against include without limitation loss, damage,
expense, or legal liability of the insured for loss, damage, or
expense arising out of or incident to ownership, operation,
chartering, maintenance, use, repair, or construction of a
vessel, craft, or instrumentality in use in ocean or inland
waterways for commercial purposes, including liability of the
insured for personal injury, illness, or death or for loss or
damage to the property of the insured or another person.
Sec. 5. Minnesota Statutes 1996, 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 and have the right to pursue and retain
salvage and subrogation recoverables on covered claim
obligations to the extent paid or acknowledged in writing as an
obligation by the association. 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
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 claims,
the cost of examinations under section 60C.15, and other
expenses authorized by this chapter.
(c) Notify the persons as the commissioner directs under
this chapter claimants in this state as considered necessary by
the commissioner, to the extent records are available to the
association. If sufficient information for notification by mail
is not available, notice by publication in a newspaper of
general circulation is sufficient.
(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 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.
(h) Have the right to appoint or substitute and to direct
legal counsel retained under liability insurance policies for
the defense of covered claims.
Sec. 6. Minnesota Statutes 1996, section 60C.07,
subdivision 2, is amended to read:
Subd. 2. The plan of operation shall:
(a) Establish the procedures whereby all the powers and
duties of the association under section 60C.05 will be performed.
(b) Establish procedures for handling assets of the
association.
(c) Establish the amount and method of reimbursement of
members of the board of directors under section 60C.08,
subdivision 3.
(d) Establish procedures by which claims may be filed with
the association.
(e) Establish regular places and times for meetings for the
board of directors.
(f) Establish procedures for records to be kept of all
financial transactions of the association, its agents, and the
board of directors.
(g) Provide that any member insurer aggrieved by any final
action or decision of the association may appeal to the
commissioner within 30 days after the action or decision.
(h) Establish the procedures whereby selections for the
board of directors will be submitted to the commissioner.
(i) Contain additional provisions necessary or proper for
the execution of the powers and duties of the association.
(j) Establish procedures for the disposition of liquidating
dividends or other money received from the estate of the
insolvent insurer.
Sec. 7. Minnesota Statutes 1996, 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 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 item (i), (ii), or
(iii).
For purposes of paragraph (c), item (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 a final
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 workers' compensation
claims that have met the time limitations and other requirements
of chapter 176 and 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;
(2) claims due a reinsurer, insurer, insurance pool, or
underwriting association, as subrogation recoveries, reinsurance
recoveries, contribution, indemnification, 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; and
(3) any first-party claims, resulting from insolvencies
which occur after July 31, 1996, by an insured whose net worth
exceeds $25,000,000 on December 31 of the year prior to the year
in which the insurer becomes an insolvent insurer; provided that
an insured's net worth on that date shall be deemed to include
the aggregate net worth of the insured and all of its
subsidiaries as calculated on a consolidated basis.
Subd. 3. [LIMITATION OF AMOUNT.] Payment of a covered
claim, 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 no more 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. 8. Minnesota Statutes 1996, section 60C.11,
subdivision 5, is amended to read:
Subd. 5. The expenses of the association or similar
organization in handling claims are accorded the same priority
as the liquidator's expenses. The association and a similar
organization in another state must be recognized as claimants in
the liquidation of an insolvent insurer for amounts paid by them
on covered claims as determined under this chapter or similar
laws in other states and must receive dividends and other
distributions at the priority set forth in chapter 60B. The
receiver, liquidator, or statutory successor of an insolvent
insurer is bound by determinations of covered claim eligibility
under this chapter and by settlements of claims made by the
association or a similar organization in another state. The
court having jurisdiction shall grant the claims priority equal
to that which the claimant would have been entitled against the
assets of the insolvent insurer in the absence of this chapter.
Sec. 9. Minnesota Statutes 1996, section 60C.13,
subdivision 1, is amended to read:
Subdivision 1. Any person having a claim under another
policy whether or not the policy is a policy of a member
insurer, which claim arises out of the same facts which give
rise to the covered claim, shall be first required to exhaust
the person's right under the other policy. Any amount payable
on a covered claim under this chapter shall be reduced by the
amount of any recovery under such insurance policy. For
purposes of this subdivision, another insurance policy does not
include a workers' compensation policy.
Sec. 10. Minnesota Statutes 1996, section 60C.14,
subdivision 2, is amended to read:
Subd. 2. [OPTIONAL POWERS AND DUTIES.] The commissioner
may:
(a) Require the association to notify the insureds of any
insurer undergoing liquidation and any other interested parties
of their possible rights under Laws 1971, chapter 145.
Notification shall be by mail at their last known address, where
available, but if sufficient information for notification by
mail is not available, notice by publication in a newspaper of
general circulation shall be sufficient.
(b) Suspend or revoke, after notice and hearing, the
certificate of authority to transact insurance or to execute
surety bonds in this state of any member insurer which fails to
pay an assessment when due or fails to comply with the plan of
operation. As an alternative, the commissioner may levy a fine
on any member insurer which fails to pay an assessment when
due. The fine shall not exceed five percent of the unpaid
assessment per month, except that no fine shall be less than
$100 per month.
(c) (b) Revoke the designation of any servicing facility if
the commissioner finds claims are being handled unsatisfactorily.
(d) (c) Disclose to the board of directors information
regarding any member insurer, or any company seeking admission
to transact insurance business in this state, whose financial
condition may be hazardous to policyholders or to the public.
This disclosure does not violate any data privacy requirement or
any obligation to treat the information as privileged. This
disclosure does not change the data privacy or privileged status
of the information. Board members shall not disclose the
information to anyone else or use the information for any
purpose other than their duties as board members.
Sec. 11. Minnesota Statutes 1996, section 60C.15, is
amended to read:
60C.15 [PREVENTION OF INSOLVENCIES.]
To aid in the detection and prevention of insurer
insolvencies:
(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.
(1) The board of directors may upon majority vote make
recommendations to the commissioner on matters generally related
to improving or enhancing regulation for solvency.
(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. 12. Minnesota Statutes 1996, section 60C.19, is
amended to read:
60C.19 [IMMUNITY.]
There shall be no liability on the part of and no cause of
action of any nature shall arise against any member insurer, the
association or its agents or employees, the board of directors,
or a person serving as an alternative or substitute
representative of a director, or the commissioner, or the
commissioner's representatives for action taken or a failure to
act by them in the ordinary performance of their powers and
duties under Laws 1971, chapter 145 this chapter.
Sec. 13. [60C.195] [STAY OF PROCEEDINGS.]
All proceedings in which the insolvent insurer is a party
or is obligated to defend a party in a court in this state
shall, subject to waiver by the association in specific cases
involving covered claims, be stayed for six months and
additional time that may be determined by the court. The stay
must run from the date of the final order of liquidation with a
finding of insolvency is entered or an ancillary proceeding is
instituted in the state, whichever is later. The proceedings
are stayed to permit proper defense by the association of all
pending causes of action. As to covered claims arising from a
judgment under decision, verdict, or finding based on the
default of the insolvent insurer or its failure to defend an
insured, the association, either on its own behalf or on behalf
of an insured, may apply to have the judgment, order, decision,
verdict, or finding set aside by the same court or administrator
that made the judgment, order, decision, verdict, or finding and
must be permitted to defend the claim on the merits.
The liquidator, receiver, or statutory successor of an
insolvent insurer covered by this chapter must permit access by
the board or its authorized representative to the insolvent
insurer's records that are necessary for the board in carrying
out its functions under this chapter with regard to covered
claims. In addition, the liquidator, receiver, or statutory
successor must provide the board or its representative with
copies of those records upon request by the board and at the
expense of the board.
Sec. 14. Minnesota Statutes 1996, section 60C.21,
subdivision 2, is amended to read:
Subd. 2. [FORM.] The notice required under subdivision 1
must be in the following form:
"NOTICE CONCERNING POLICYHOLDER RIGHTS IN AN
INSOLVENCY UNDER THE MINNESOTA INSURANCE
GUARANTY ASSOCIATION LAW
The financial strength of your insurer is one of the most
important things for you to consider when determining from whom
to purchase a property or liability insurance policy. It is
your best assurance that you will receive the protection for
which you purchased the policy. If your insurer becomes
insolvent, you may have protection from the Minnesota Insurance
Guaranty Association as described below but to the extent that
your policy is not protected by the Minnesota Insurance Guaranty
Association or if it exceeds the guaranty association's limits,
you will only have the assets, if any, of the insolvent insurer
to satisfy your claim.
Residents of Minnesota who purchase property and casualty
or liability insurance from insurance companies licensed to do
business in Minnesota are protected, SUBJECT TO LIMITS AND
EXCLUSIONS, in the event the insurer becomes insolvent. This
protection is provided by the Minnesota Insurance Guaranty
Association.
Minnesota Insurance Guaranty Association
(insert current address and telephone number)
The maximum amount that the Minnesota Insurance Guaranty
Association will pay in regard to a claim under all policies
issued by the same insurer is limited to $300,000. This limit
does not apply to workers' compensation insurance. Protection
by the guaranty association is subject to other substantial
limitations and exclusions. If your claim exceeds the guaranty
association's limits, you may still recover a part or all of
that amount from the proceeds from the liquidation of the
insolvent insurer, if any exist. Funds to pay claims may not be
immediately available. The guaranty association assesses
insurers licensed to sell property and casualty or liability
insurance in Minnesota after the insolvency occurs. Claims are
paid from the assessment.
THE PROTECTION PROVIDED BY THE GUARANTY ASSOCIATION IS NOT
A SUBSTITUTE FOR USING CARE IN SELECTING INSURANCE COMPANIES
THAT ARE WELL MANAGED AND FINANCIALLY STABLE. IN SELECTING AN
INSURANCE COMPANY OR POLICY, YOU SHOULD NOT RELY ON PROTECTION
BY THE GUARANTY ASSOCIATION.
THIS NOTICE IS REQUIRED BY MINNESOTA STATE LAW TO ADVISE
POLICYHOLDERS OF PROPERTY AND CASUALTY INSURANCE POLICIES OF
THEIR RIGHTS IN THE EVENT THEIR INSURANCE CARRIER BECOMES
INSOLVENT. THIS NOTICE IN NO WAY IMPLIES THAT THE COMPANY
CURRENTLY HAS ANY TYPE OF FINANCIAL PROBLEMS. ALL PROPERTY AND
CASUALTY INSURANCE POLICIES ARE REQUIRED TO PROVIDE THIS NOTICE."
Additional language may be added to the notice if approved
by the commissioner prior to its use in the form.
Sec. 15. [REPEALER.]
Minnesota Statutes 1996, section 60C.06, subdivision 6, is
repealed.
Sec. 16. [EFFECTIVE DATE.]
Sections 1 to 15 are effective the day following final
enactment and apply to all matters arising out of any past or
future insolvency.
Presented to the governor April 21, 1997
Signed by the governor April 23, 1997, 1:27 p.m.
Official Publication of the State of Minnesota
Revisor of Statutes