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

                             CHAPTER 40-S.F.No. 350 
                  An act relating to insurance; regulating notices of 
                  terminations of certain health coverages; regulating 
                  the FAIR plan; amending Minnesota Statutes 2002, 
                  sections 62A.14; 62A.301; 62C.14, subdivision 5; 
                  65A.29, subdivision 4; 65A.32; 65A.33, subdivisions 4, 
                  6, 9, by adding subdivisions; 65A.34; 65A.35; 65A.36; 
                  65A.37; 65A.375; 65A.38, subdivisions 1, 5; 65A.40; 
                  65A.41; 65A.42; repealing Minnesota Statutes 2002, 
                  section 65A.33, subdivision 5. 
        BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF MINNESOTA: 
           Section 1.  Minnesota Statutes 2002, section 62A.14, is 
        amended to read: 
           62A.14 [HANDICAPPED CHILDREN.] 
           Subdivision 1.  [INDIVIDUAL FAMILY POLICIES.] An individual 
        hospital or medical expense insurance policy delivered or issued 
        for delivery in this state more than 120 days after May 16, 
        1969, or an individual health maintenance contract delivered or 
        issued for delivery in this state after August 1, 1984, which 
        provides that coverage of a dependent child shall terminate upon 
        attainment of the limiting age for dependent children specified 
        in the policy or contract shall also provide in substance that 
        attainment of such limiting age shall not operate to terminate 
        the coverage of such child while the child is and continues to 
        be both (a) incapable of self-sustaining employment by reason of 
        mental retardation, mental illness or disorder, or physical 
        handicap and (b) chiefly dependent upon the policyholder for 
        support and maintenance, provided proof of such incapacity and 
        dependency is furnished to the insurer or health maintenance 
        organization by the policyholder or enrollee within 31 days of 
        the child's attainment of the limiting age and subsequently as 
        may be required by the insurer or organization but not more 
        frequently than annually after the two-year period following the 
        child's attainment of the limiting age.  Any notice regarding 
        termination of coverage due to attainment of the limiting age 
        must include all the information in this section.  
           Subd. 2.  [GROUP POLICIES.] A group hospital or medical 
        expense insurance policy delivered or issued for delivery in 
        this state more than 120 days after May 16, 1969, or a group 
        health maintenance contract delivered or issued for delivery in 
        this state after August 1, 1984, which provides that coverage of 
        a dependent child of an employee or other member of the covered 
        group shall terminate upon attainment of the limiting age for 
        dependent children specified in the policy or contract shall 
        also provide in substance that attainment of such limiting age 
        shall not operate to terminate the coverage of such child while 
        the child is and continues to be both (a) incapable of 
        self-sustaining employment by reason of mental retardation, 
        mental illness or disorder, or physical handicap and (b) chiefly 
        dependent upon the employee or member for support and 
        maintenance, provided proof of such incapacity and dependency is 
        furnished to the insurer or organization by the employee or 
        member within 31 days of the child's attainment of the limiting 
        age and subsequently as may be required by the insurer or 
        organization but not more frequently than annually after the 
        two-year period following the child's attainment of the limiting 
        age.  Any notice regarding termination of coverage due to 
        attainment of the limiting age must include information about 
        this provision. 
           Sec. 2.  Minnesota Statutes 2002, section 62A.301, is 
        amended to read: 
           62A.301 [COVERAGE OF FULL-TIME STUDENTS.] 
           If an insurer provides individual or group accident and 
        health coverage for dependents after what otherwise would be the 
        limiting age based on full-time student status the insurer must 
        include in its definition of full-time student, any student who 
        by reason of illness, injury, or physical or mental disability 
        as documented by a physician is unable to carry what the 
        educational institution considers a full-time course load so 
        long as the student's course load is at least 60 percent of what 
        otherwise is considered by the institution to be a full-time 
        course load.  Any notice regarding termination of coverage due 
        to attainment of the limiting age must include information about 
        this provision. 
           For purposes of this section, "insurer" means an insurer 
        providing accident and health insurance regulated under this 
        chapter, a nonprofit health service plan corporation regulated 
        under chapter 62C, a health maintenance organization regulated 
        under chapter 62D, or a fraternal benefit society regulated 
        under chapter 64B. 
           Sec. 3.  Minnesota Statutes 2002, section 62C.14, 
        subdivision 5, is amended to read: 
           Subd. 5.  [HANDICAPPED DEPENDENTS.] A subscriber's 
        individual contract or any group contract delivered or issued 
        for delivery in this state and providing that coverage of a 
        dependent child of the subscriber or a dependent child of a 
        covered group member shall terminate upon attainment of a 
        specified age shall also provide in substance that attainment of 
        that age shall not terminate coverage while the child is (a) 
        incapable of self-sustaining employment by reason of mental 
        retardation, mental illness or disorder, or physical handicap, 
        and (b) chiefly dependent upon the subscriber or employee for 
        support and maintenance, provided proof of incapacity and 
        dependency is furnished by the subscriber within 31 days of 
        attainment of the age, and subsequently as required by the 
        corporation, but not more frequently than annually after a two 
        year period following attainment of the age.  Any notice 
        regarding termination of coverage due to attainment of the 
        limiting age must include information about this provision. 
           Sec. 4.  Minnesota Statutes 2002, section 65A.29, 
        subdivision 4, is amended to read: 
           Subd. 4.  [FORM REQUIREMENTS.] Any notice or statement 
        required by subdivisions 1 to 3, or any other notice canceling a 
        homeowner's insurance policy must be written in language which 
        is easily readable and understandable by a person of average 
        intelligence and understanding.  The statement of reason must be 
        sufficiently specific to convey, clearly and without further 
        inquiry, the basis for the insurer's refusal to renew or to 
        write the insurance coverage. 
           The notice or statement must also inform the insured of: 
           (1) the possibility of coverage through the Minnesota 
        property insurance placement facility FAIR plan under sections 
        65A.31 to 65A.42; 
           (2) the right to object to the commissioner under 
        subdivision 9; and 
           (3) the right to the return of unearned premium in 
        appropriate situations under subdivision 10. 
           Sec. 5.  Minnesota Statutes 2002, section 65A.32, is 
        amended to read: 
           65A.32 [PURPOSES.] 
           The purposes of sections 65A.31 to 65A.42 are: 
           (1) to encourage stability in the property and liability 
        insurance market for property located in this state; 
           (2) to encourage maximum use, in obtaining property and 
        liability insurance, as defined in sections 65A.31 to 65A.42, of 
        the normal insurance market provided by the private property and 
        casualty insurance industry; 
           (3) to encourage the improvement of the condition of 
        properties located in this state and to further orderly 
        community development generally; 
           (4) to provide for an organization known as the Minnesota 
        property insurance placement facility FAIR plan, which will 
        assure fair access to insurance requirements (FAIR plan) in 
        order that no property shall be is denied property or liability 
        insurance through the FAIR plan due to the condition of the 
        property, except after a physical inspection of such the 
        property and a fair evaluation of its individual underwriting 
        characteristics; 
           (5) to publicize the purposes and procedures of the FAIR 
        plan to the end that no one may fail to seek its assistance 
        through lack of knowledge of its existence; and 
           (6) to provide for the formulation and administration by 
        the Minnesota property insurance placement facility FAIR plan of 
        a reinsurance arrangement whereby property and casualty insurers 
        shall share equitably the responsibility for insuring insurable 
        property for which property and liability insurance cannot be 
        obtained through the normal insurance markets. 
           Sec. 6.  Minnesota Statutes 2002, section 65A.33, 
        subdivision 4, is amended to read: 
           Subd. 4.  "Minnesota property insurance placement 
        facility FAIR plan," hereinafter referred to as the facility, or 
        "plan," means the organization formed by insurers to assist 
        applicants in securing property or liability insurance and to 
        administer the FAIR plan. 
           Sec. 7.  Minnesota Statutes 2002, section 65A.33, is 
        amended by adding a subdivision to read: 
           Subd. 5a.  [MEMBER.] "Member" means any insurer as defined 
        in subdivision 2. 
           Sec. 8.  Minnesota Statutes 2002, section 65A.33, 
        subdivision 6, is amended to read: 
           Subd. 6.  "Premiums written" means gross direct written 
        premiums charged during the second preceding calendar year with 
        respect to property in this state on all policies of property or 
        liability insurance and the property or liability insurance 
        premium components of all multiperil policies, as computed by 
        the facility, less return premiums, dividends paid or credited 
        to policyholders, or the unused or unabsorbed portions of 
        premium deposits for fire, allied lines, homeowners, the 
        nonliability component of farm policies, and the nonliability 
        component of commercial multiperil policies, as reported by the 
        members to the NAIC. 
           Sec. 9.  Minnesota Statutes 2002, section 65A.33, 
        subdivision 9, is amended to read: 
           Subd. 9.  [BOARD.] "Board" means the governing board of 
        directors of the Minnesota property insurance placement facility 
        FAIR plan. 
           Sec. 10.  Minnesota Statutes 2002, section 65A.33, is 
        amended by adding a subdivision to read: 
           Subd. 10.  [NAIC.] "NAIC" means the National Association of 
        Insurance Commissioners. 
           Sec. 11.  Minnesota Statutes 2002, section 65A.34, is 
        amended to read: 
           65A.34 [APPLICATION FOR PLAN COVERAGE.] 
           Subdivision 1.  [APPLICATION.] Any person having an 
        insurable interest in real or tangible personal property who has 
        been canceled, nonrenewed, or otherwise rejected for coverage in 
        the private market shall be entitled to may submit an 
        application for coverage to the facility plan.  If an inspection 
        of the premises is performed, it must be done at no cost to the 
        applicant. 
           Subd. 2.  [INSPECTIONS.] Before the plan may deny coverage 
        due to the condition of the property or write coverage with a 
        condition charge, it must first inspect the property for which 
        coverage has been requested.  The manner and scope of the 
        inspections of Minnesota FAIR plan business shall must be 
        prescribed by the facility plan with the approval of the 
        commissioner.  
           Subd. 3.  [INITIAL INSPECTION REPORT.] An inspection report 
        shall must be made for each property inspected.  The 
        report shall must cover pertinent structural and occupancy 
        features as well as the general condition of the building and 
        surrounding structures.  A representative photograph of the 
        property may be taken during the inspection.  
           Subd. 4.  [CONDITION CHARGES.] Either during the inspection 
        or immediately thereafter after the inspection, an employee of 
        the FAIR plan shall inform the applicant as to the features that 
        result in a condition charge if the risk is accepted.  No 
        inspector shall have has the authority to advise whether 
        the facility plan will provide the coverage.  
           Subd. 5.  [COMPLETED INSPECTION REPORT.] Within ten 
        business days after the inspection, the FAIR plan shall prepare 
        or have prepared a completed inspection report that includes 
        conditions that are subject to a condition charge under the 
        rating plan approved by the commissioner.  A copy of the 
        inspection report must be made available to the applicant or the 
        applicant's agent upon request. 
           Subd. 6.  Before the facility may deny coverage or write 
        coverage with a condition charge, it must cause an inspection to 
        be made of any risk submitted to it, without cost to the owner. 
           Sec. 12.  Minnesota Statutes 2002, section 65A.35, is 
        amended to read: 
           65A.35 [ADMINISTRATION.] 
           Subdivision 1.  [MEMBERSHIP.] Each insurer which is 
        authorized to write and is engaged in writing within this state, 
        on a direct basis, property or liability insurance or any 
        component thereof of this insurance contained in a multiperil 
        policy, including homeowners and commercial multiperil policies, 
        shall participate in the facility, as hereinafter 
        described, plan as a condition of its authority to write such 
        kinds of insurance within this state.  
           Subd. 2.  [PURPOSES.] The purposes of the facility shall be 
        twofold, as more fully set forth in this section Minnesota FAIR 
        plan are: 
           (1) to formulate and administer, subject to the approval of 
        the commissioner, a plan assuring fair access to insurance 
        requirements in order that no property shall be is denied 
        property or liability insurance through the normal insurance 
        market provided by the private property and casualty insurance 
        industry FAIR plan due to the condition of the property, except 
        after a physical inspection of such the property and a fair 
        evaluation of its individual underwriting characteristics; and 
           (2) to formulate and administer, subject to the approval of 
        the commissioner, a reinsurance arrangement whereby the members 
        of the facility shall Minnesota FAIR plan share equitably the 
        responsibility for insuring property which is insurable but for 
        which property or liability insurance cannot be obtained through 
        normal insurance markets.  
           Subd. 3.  [PLAN OF OPERATION.] The plan of operation of the 
        facility Minnesota FAIR plan, consistent with the provisions of 
        sections 65A.31 to 65A.42 and the purpose of the facility, which 
        shall plan must provide for the FAIR plan, the reinsurance 
        arrangement, and the economical and efficient administration of 
        the facility Minnesota FAIR plan, including, but not limited to, 
        management of the facility plan, establishment of necessary 
        facilities within this state, assessment of members to defray 
        losses and expenses, commission arrangements, reasonable 
        underwriting standards, acceptance and cession of reinsurance, 
        and procedures for determining amounts of insurance to be 
        provided.  
           The plan of operation shall be is subject to approval by 
        the commissioner. 
           Subd. 4.  [AMENDMENT OF THE PLAN OF OPERATION.] The 
        facility Minnesota FAIR plan shall, amend the plan of operation 
        on its own initiative, subject to prior approval by the 
        commissioner, or at the direction of the commissioner, amend the 
        Plan of Operation.  
           Subd. 5.  [ADMINISTRATION.] (1) The facility shall be 
        Minnesota FAIR plan is administered by a board of nine 
        directors, five of whom are elected by the members of 
        the facility plan and four who represent the public.  Public 
        directors may include licensed insurance agents.  Public 
        directors are appointed by the commissioner.  At least one 
        elected director shall be a domestic stock insurer, and at least 
        one director shall be a domestic nonstock insurer.  No less than 
        two elected directors must be representatives of domestic 
        insurers.  In the election of directors, each member of 
        the facility shall be Minnesota FAIR plan is allotted votes 
        bearing the same ratio to the total number of votes to be cast 
        as its degree of participation in the facility plan bears to the 
        total participation.  
           (2) Any vacancy among the elected directors shall must be 
        filled by a vote of the other elected directors. 
           (3) If at any time the members fail to elect the required 
        number of directors to the board, or a vacancy remains unfilled 
        for more than 15 days, the commissioner may appoint the 
        directors necessary to constitute a full board of directors. 
           (4) Vacancies among directors appointed by the commissioner 
        shall must be filled by appointment by the commissioner.  A 
        person so appointed serves until the end of the term of the 
        director the person is replacing.  
           (5) All public directors serve for a period of two years.  
        The terms of all public directors begin on January July 1 of the 
        year their appointments begin.  
           (6) The plan of operation must provide for adequate 
        compensation of public directors.  A per diem amount and a 
        procedure for reimbursement of expenses incurred in the 
        discharge of their duties must be included in the plan.  Private 
        directors whose employers compensate them while serving on the 
        board or who would submit their compensation to their employers 
        are not eligible for compensation under the plan. 
           Subd. 6.  [PARTICIPATION.] All members of the 
        facility Minnesota FAIR plan shall participate in its expenses, 
        losses, and equity distribution in the proportion that the 
        premiums written as herein defined in this subdivision, but 
        excluding that portion, if any, of premiums which is 
        attributable to the reinsurance arrangement maintained by the 
        facility, by each such member during the second preceding 
        calendar year bear to the aggregate premiums written in this 
        state by all members of the facility plan.  Such Participation 
        by each member in the facility shall be plan is determined 
        annually by the facility plan on the basis of such premiums 
        written during the second preceding calendar year as disclosed 
        in the annual statements and other reports filed by the member 
        with the commissioner NAIC.  
           Sec. 13.  Minnesota Statutes 2002, section 65A.36, is 
        amended to read: 
           65A.36 [UNDERWRITING.] 
           Subdivision 1.  [EVALUATION OF RISK.] Agents are not 
        permitted to bind coverage.  The facility Minnesota FAIR plan 
        shall issue a policy if the risk meets preliminary underwriting 
        requirements.  The facility plan may request an inspection 
        report to obtain further underwriting information.  If the 
        inspection reveals that the applicant is not eligible for the 
        coverage applied for, the facility plan shall inform the 
        applicant within 59 days of the inception of the policy that the 
        policy will be rescinded under section 65A.01, subdivision 3, 
        paragraph (b), or canceled under section 65A.38.  If the 
        applicant is eligible for other coverage provided by 
        the facility plan, the facility plan will offer to replace the 
        rescinded or canceled policy with a policy providing coverage 
        for which the applicant is eligible. 
           Before the 60th day after the inception of the policy, the 
        facility FAIR plan shall advise the applicant that: 
           (a) (1) the risk is acceptable with or without a condition 
        charge or adjustment of policy limits.  If a condition charge 
        applies, the facility plan will tell the insured what 
        improvements are necessary in order to remove the charge; 
           (b) (2) the risk is not acceptable unless improvements 
        noted by the facility plan are made by the applicant and 
        confirmed by the facility plan; or 
           (c) (3) the risk is not acceptable for the reasons stated 
        by the facility plan.  
           Subd. 2.  [PREMIUM INVOICE.] If the risk is accepted, an 
        invoice will be delivered to the applicant requiring payment 
        remittance of the appropriate premium amount.  After receipt of 
        the invoiced premium, the facility shall issue an insurance 
        policy to the applicant within five business days.  
           Subd. 3.  [DECLINING A RISK.] In the event a risk is 
        declined because it fails to meet reasonable underwriting 
        standards, the applicant shall must be so notified.  Reasonable 
        underwriting standards shall include, but are not be limited to, 
        the following: 
           (a) (1) the physical condition of the property, such as its 
        construction, heating, wiring, evidence of previous 
        fires, significant unrepaired damage, or general deterioration; 
           (b) its (2) the present use or housekeeping of the property 
        such as vacancy, overcrowding, storage of rubbish, or flammable 
        materials; or 
           (c) (3) other specific characteristics of ownership, 
        condition, occupancy, or maintenance which are violative of 
        public policy and result in increased exposure to loss.  
           Neighborhood or area location or any environmental hazard 
        beyond the control of the property owner shall are not be deemed 
        to be acceptable criteria for declining a risk.  
           Subd. 4.  [APPEAL OF PLAN DECISION.] In the event that a 
        risk is declined on the basis that it does not meet reasonable 
        underwriting standards, or the coverage will be written on 
        condition that the property be improved, the facility plan 
        shall, within five business days, send copies of the inspection 
        report to the applicant and the commissioner, and shall advise 
        the applicant of the right to and the procedure for an appeal to 
        the governing board and to the commissioner.  
           Subd. 5.  [ACTION ON COMPLETED APPLICATION.] The facility 
        plan must within five business days of the receipt of a 
        completed application advise the applicant that the risk has 
        been declined, the risk has been accepted, or that the risk 
        meets preliminary underwriting standards and a policy has been 
        issued limit of coverage has been adjusted to reflect the 
        insurable value of the subject property. 
           Sec. 14.  Minnesota Statutes 2002, section 65A.37, is 
        amended to read: 
           65A.37 [POLICY FORMS.] 
           All policies shall must be on standard policy forms at loss 
        costs published by Insurance Services Office, issued for a term 
        of one year, and approved by the commissioner.  All homeowners, 
        cooperative housing insurance, and condominium unit owners 
        insurance policies must be on forms published by Insurance 
        Services Office and approved by the commissioner. 
           Sec. 15.  Minnesota Statutes 2002, section 65A.375, is 
        amended to read: 
           65A.375 [RATES FOR COOPERATIVE HOUSING AND NEIGHBORHOOD 
        REAL ESTATE TRUSTS.] 
           The commissioner shall set the insurance rates for 
        cooperative housing, organized under chapter 308A, and for 
        neighborhood real estate trusts, characterized as nonprofit 
        ownership of real estate with resident control.  The rates must 
        be actuarially sound.  All other rates used by the Minnesota 
        FAIR plan must be approved by the commissioner prior to use. 
           Sec. 16.  Minnesota Statutes 2002, section 65A.38, 
        subdivision 1, is amended to read: 
           Subdivision 1.  The facility Minnesota FAIR plan shall not 
        cancel a policy issued under sections 65A.31 to 65A.42 except 
        for: 
           (a) (1) for cause which would have been grounds for 
        nonacceptance of the risk under the program had the cause been 
        known to the facility plan at the time of acceptance; 
           (b) (2) for nonpayment of premium; or 
           (c) (3) with the approval of the governing board. 
           Sec. 17.  Minnesota Statutes 2002, section 65A.38, 
        subdivision 5, is amended to read: 
           Subd. 5.  Cancellation of a commercial property insurance 
        policy issued by the facility Minnesota FAIR plan must comply 
        with sections 60A.35 to 60A.38.  
           Sec. 18.  Minnesota Statutes 2002, section 65A.40, is 
        amended to read: 
           65A.40 [EDUCATION PROGRAMS.] 
           The facility plan will undertake a continuing public 
        education program, in cooperation with producers and others, to 
        assure that the Minnesota FAIR Plan Act receives adequate public 
        attention.  
           Sec. 19.  Minnesota Statutes 2002, section 65A.41, is 
        amended to read: 
           65A.41 [AGENTS.] 
           Subdivision 1.  [GENERALLY.] A person licensed under 
        chapter 60K may submit an application for coverage to 
        the facility Minnesota FAIR plan and receive a commission from 
        the facility plan for submitting the application premiums paid 
        for coverage.  However, the licensee is not an agent of 
        the facility Minnesota FAIR plan for purposes of state law.  All 
        checks or similar instruments submitted in payment of facility 
        plan premiums must be made payable to the facility Minnesota 
        FAIR plan and not the agent.  
           Subd. 2.  [DUTY TO SUBMIT APPLICATION.] An agent or broker 
        shall not refuse to submit an application for basic property 
        insurance coverage to the facility Minnesota FAIR plan if 
        licensed to write and actively engaged in writing such insurance.
           Sec. 20.  Minnesota Statutes 2002, section 65A.42, is 
        amended to read: 
           65A.42 [IMMUNITY FROM LIABILITY.] 
           There shall be is no civil or criminal liability on the 
        part of, and no cause of action of any nature shall arise arises 
        against insurers, the facility Minnesota FAIR plan, the 
        governing board, or employees of the facility plan or the 
        commissioner or the commissioner's authorized representatives, 
        for any acts or omissions by them if the acts or omissions were 
        in good faith and within the scope of their responsibilities 
        under sections 65A.31 to 65A.42.  The inspection reports and 
        communications of the inspection vendors and the facility 
        Minnesota FAIR plan are not public documents. 
           Sec. 21.  [REPEALER.] 
           Minnesota Statutes 2002, section 65A.33, subdivision 5, is 
        repealed. 
           Sec. 22.  [EFFECTIVE DATE; APPLICATION.] 
           Sections 1 to 3 are effective August 1, 2003, and apply to 
        all notices regarding termination of coverage due to attainment 
        of the limiting age sent on or after that date. 
           Presented to the governor May 9, 2003 
           Signed by the governor May 13, 2003, 1:20 p.m.