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

                             CHAPTER 74-H.F.No. 946 
                  An act relating to insurance; regulating the insurance 
                  guaranty association; regulating the collection and 
                  use of certain insurance information; amending 
                  Minnesota Statutes 2002, sections 60C.02, subdivision 
                  1; 60C.03, subdivisions 5, 9; 60C.05, subdivision 1; 
                  60C.07, subdivision 2; 60C.09; 60C.11, subdivision 7; 
                  60C.16; 60C.18, subdivision 1; 72A.501, subdivision 2; 
                  repealing Minnesota Statutes 2002, section 60C.18, 
                  subdivision 2. 
           Section 1.  Minnesota Statutes 2002, section 60C.02, 
        subdivision 1, is amended to read: 
           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; 
           (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 of 
        insurance risk; or 
           (11) insurance provided by or guaranteed by government; or 
           (12) insurance of warranties or service contracts, 
        including insurance that provides for the repair, replacement, 
        or services of goods or property, or indemnification for repair, 
        replacement or service, for the operation or structural failure 
        of the goods or property due to a defect in materials, 
        workmanship or normal wear and tear, or provides reimbursement 
        for the liability insured by the user of agreement or service 
        contracts that provide these benefits. 
           Sec. 2.  Minnesota Statutes 2002, section 60C.03, 
        subdivision 5, is amended to read: 
           Subd. 5.  [PERSON.] "Person" means any individual, 
        corporation, partnership, association, or voluntary 
        organization, and includes governmental entities. 
           Sec. 3.  Minnesota Statutes 2002, section 60C.03, 
        subdivision 9, is amended to read: 
           Subd. 9.  [AFFILIATE.] "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 
        another person. 
           Sec. 4.  Minnesota Statutes 2002, 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. 
           The association shall not be deemed the insolvent insurer 
        for any purpose relating to the issue of whether the association 
        is amenable to the personal jurisdiction of the courts of any 
           (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 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 
           (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. 5.  Minnesota Statutes 2002, 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 
           (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 insurers. 
           Sec. 6.  Minnesota Statutes 2002, 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 an assignee of a person who except 
        for the assignment might have claimed under item (i), (ii), or 
           For purposes of paragraph (c), item (ii), unit owners of 
        units in a common interest community 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 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 
           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 and affiliates as calculated on a consolidated 
           (4) any claims under a policy written by an insolvent 
        insurer with a deductible or self-insured retention of $300,000 
        or more, nor that portion of a claim that is within an insured's 
        deductible or self-insured retention; 
           (5) claims that are a fine, penalty, interest, or punitive 
        or exemplary damages. 
           Subd. 3.  [LIMITATION OF AMOUNT.] Payment of a covered 
        claim, whether upon a single policy or multiple policies of 
        insurance, is limited to 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 excluding retrospective 
        or, experience-rated insurance plans or premiums subject to 
        adjustment after termination of the policy.  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. 
           Subd. 4.  [AGGREGATE LIMITATION.] Except in the case of a 
        claim for benefits under workers' compensation coverage, any 
        obligation of the association to or on behalf of an insured and 
        its affiliates on covered claims ceases when $10,000,000 has 
        been paid in the aggregate by the association and any one or 
        more associations similar to the association of any other state 
        or states, to or on behalf of that insured, its affiliates, and 
        additional insureds on covered claims or allowed claims arising 
        under the policy or policies of any one insolvent insurer. 
           Sec. 7.  Minnesota Statutes 2002, section 60C.11, 
        subdivision 7, is amended to read: 
           Subd. 7.  The association may recover the amount of any 
        covered claim including claim handling expenses paid, resulting 
        from insolvencies which occur after July 31, 1996, on behalf of 
        an insured who has a net worth of $25,000,000 as provided in 
        section 60C.09, subdivision 2, clause (3), on December 31 of the 
        year immediately preceding the date the insurer becomes an 
        insolvent insurer and whose liability obligations to other 
        persons are satisfied in whole or in part by payments made under 
        this chapter. 
           Sec. 8.  Minnesota Statutes 2002, section 60C.16, is 
        amended to read: 
           The association is subject to examination and regulation by 
        the commissioner.  The board of directors shall submit, not 
        later than March 30 of each year, a financial report for the 
        preceding calendar year in a form approved by the commissioner.  
           Sec. 9.  Minnesota Statutes 2002, section 60C.18, 
        subdivision 1, is amended to read: 
           Subdivision 1.  The rates and premiums charged for 
        insurance policies and fidelity and surety bonds to which this 
        chapter applies must may 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. 
           Sec. 10.  Minnesota Statutes 2002, section 72A.501, 
        subdivision 2, is amended to read: 
           Subd. 2.  [APPLICATION.] (a) If the authorization is signed 
        to collect information in connection with an application for a 
        property and casualty insurance policy, a policy reinstatement, 
        or a request for a change in benefits, the authorization must 
        not remain valid for longer than one year from the date the 
        authorization is signed or the date the insurer grants or denies 
        coverage, reinstatement, or change in benefits, whichever is 
           (b) If the authorization is signed to collect information 
        in connection with an application for a life, disability, and 
        health insurance policy or contract, reinstatement, or request 
        for change in benefits, the authorization may not remain valid 
        for longer than 26 months from the date the authorization is 
           (c) This section and section 72A.502, subdivisions 1 and 
        12, do not apply to the collection and use of a numeric product 
        referred to as an insurance score or credit score that is used 
        by a licensed insurance agent exclusively for the purpose of 
        underwriting or rating an insurance policy, if the agent informs 
        the policyholder or prospective policyholder requesting the 
        insurance coverage that an insurance score or credit score will 
        be obtained for the purpose of underwriting or rating the policy.
           Sec. 11.  [REPEALER.] 
           Minnesota Statutes 2002, section 60C.18, subdivision 2, is 
           Sec. 12.  [EFFECTIVE DATE.] 
           Sections 1 to 8 and 11 are effective the day following 
        final enactment and apply to unpaid covered claims pending on, 
        and unpaid covered claims arising on or after, that date.  
        Section 10 is effective the day following final enactment. 
           Presented to the governor May 19, 2003 
           Became law without the governor's signature May 22, 2003

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Revisor of Statutes