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1987 Minnesota Session Laws

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                         Laws of Minnesota 1987 

                        CHAPTER 337-S.F.No. 478 
           An act relating to insurance; requiring notification 
          of group life or health coverage changes; allowing 
          mandatory temporary insurance agent licenses; 
          requiring those who solicit insurance to act as agent 
          for the insurer; regulating insurance continuing 
          education; providing for the definition of an 
          ineligible surplus lines insurer; regulating rates and 
          forms; regulating insurance plan administrators; 
          regulating trust funds; regulating the renewal, 
          nonrenewal, and cancellation of commercial liability 
          and property insurance policies; authorizing employers 
          to jointly self-insure for property or casualty 
          liability and regulating these plans; providing 
          continued group life coverage upon termination or 
          layoff; providing for the establishment and operation 
          of the insurance guaranty association and the life and 
          health guaranty association; regulating accident and 
          health insurance; regulating joint self-insurance 
          employee health plans; requiring the treatment of 
          pregnancy-related conditions in the same manner as 
          other illnesses; mandating certain coverages; 
          clarifying coverage for handicapped dependents; 
          providing continued group accident and health coverage 
          upon termination or layoff; requiring coverage of 
          current spouse and children; imposing surety bond or 
          security requirements on certain health benefit plans; 
          regulating Medicare supplement plan premium refunds; 
          regulating long-term care policies; providing for the 
          establishment and operation of the comprehensive 
          health association, the medical joint underwriting 
          association, and the joint underwriting association; 
          providing comprehensive health insurance coverage for 
          certain employees not eligible for Medicare; 
          regulating fraternal benefit associations; regulating 
          automobile insurance; providing for exemption from 
          certain legal process of cash value, proceeds, or 
          benefits under certain life insurance or annuity 
          contracts; limiting the cancellation of fire insurance 
          binders and policies; providing for administration of 
          the FAIR plan; requiring accident prevention course 
          premium reductions; limiting the grounds for 
          cancellation or reduction in limits during the policy 
          period; requiring the commissioner to set rates for 
          cooperative housing and neighborhood real estate trust 
          insurance; regulating no-fault automobile insurance; 
          providing for the priority of security for payment of 
          basic economic loss benefits; extending basic economic 
          loss benefit protection; requiring coverages for 
          former spouses; specifying membership on the assigned 
          claims bureau; extending no-fault benefits to 
          pedestrians who are struck by motorcycles; regulating 
          township mutual insurance companies; providing for 
          mandatory arbitration of certain claims; authorizing 
          investments in certain insurers; regulating rental 
          vehicle personal accident insurance; regulating trade 
          practices; requiring life and health insurers to 
          substantiate the underwriting standards they use; 
          providing assigned risk plan coverage for certain 
          vehicles used by the handicapped; establishing a 
          demonstration project to provide medical insurance to 
          certain low income persons; regulating certain 
          self-insurance by political subdivisions; clarifying 
          the statute of limitations applicable to actions 
          regarding manufacturers or suppliers of material 
          containing asbestos; granting immunity from liability 
          for volunteer coaches, managers, and officials; 
          requiring a home health care study; prescribing 
          penalties; amending Minnesota Statutes 1986, sections 
          16A.133, subdivision 1; 45.024, subdivision 2; 60A.17, 
          subdivisions 1a, 2c, 11, and 13; 60A.1701, 
          subdivisions 5, 7, and 8; 60A.196; 60A.198, 
          subdivision 3; 60A.23, subdivision 8; 60A.29, 
          subdivisions 2, 5, and 16, and by adding subdivisions; 
          60A.30; 60A.31; 60B.44, subdivisions 1, 4, 5, and 9; 
          60C.08, subdivision 1; 60C.09; 60C.12; 61A.28, 
          subdivision 12; 61B.09; 62A.041; 62A.043, by adding a 
          subdivision; 62A.141; 62A.146; 62A.152, subdivision 2; 
          62A.17; 62A.21; 62A.27; 62A.31, subdivision 1a; 
          62A.43, subdivision 2, and by adding a subdivision; 
          62A.46, by adding a subdivision; 62A.48, subdivisions 
          1, 2, 6, and by adding a subdivision; 62A.50, 
          subdivision 3; 62D.05, by adding a subdivision; 
          62D.102; 62E.06, subdivision 1; 62E.10, subdivision 2, 
          and by adding subdivisions; 62E.14, by adding a 
          subdivision; 62F.041, subdivision 2; 62F.06, 
          subdivision 1; 62H.01; 62H.02; 62H.04; 62I.02, 
          subdivisions 1 and 3; 62I.03, subdivision 5; 62I.04; 
          62I.12, subdivision 1; 62I.13, by adding a subdivision;
          62I.16, subdivision 3; 62I.22, subdivision 2, and by 
          adding a subdivision; 64B.11, subdivision 4; 64B.18; 
          64B.27; 65A.01, subdivision 3a; 65A.03, subdivision 1; 
          65A.10; 65A.29, by adding a subdivision; 65A.35, 
          subdivision 5; 65A.39; 65B.03, subdivision 1; 65B.12; 
          65B.1311; 65B.15, subdivision 1; 65B.16; 65B.21, 
          subdivision 2; 65B.28; 65B.46; 65B.48, subdivision 1; 
          65B.49, by adding a subdivision; 65B.525, subdivision 
          1; 65B.63, subdivision 1; 67A.05, subdivision 2; 
          67A.06; 67A.231; 70A.06, by adding a subdivision; 
          70A.08, subdivision 3; 72A.20, subdivisions 11, 17, 
          and by adding subdivisions; 72A.31, subdivision 1; 
          169.045, subdivision 1, and by adding a subdivision; 
          471.98, subdivision 2; proposing coding for new law in 
          Minnesota Statutes, chapters 60A; 61A; 62A; 62E; 65A; 
          65B; 72A; 256B; 541; and 604; proposing coding for new 
          law as Minnesota Statutes, chapter 60F; repealing 
          Minnesota Statutes 1986, sections 62A.12; and 67A.43, 
          subdivision 3; and Minnesota Rules, parts 2700.2400 to 
          2700.2440. 
BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF MINNESOTA: 
    Section 1.  Minnesota Statutes 1986, section 16A.133, 
subdivision 1, is amended to read:  
    Subdivision 1.  [CREDIT UNION; ORGANIZATION; COMPANY.] An 
agency head may, with the written request of an employee, deduct 
from the pay of the employee a requested amount to be paid to 
any state employees' credit union, or the Minnesota benefit 
association, or to any organization contemplated by section 
179A.06, of which the employee is a member, or to a company that 
has contracted to insure the employee for the medical costs of 
cancer or intensive care.  If an employee is a member of more 
than one such credit union or more than one such 
organization, or is insured by more than one company, only one 
credit union and one organization and one company may be paid 
money by payroll deduction from the employee's pay.  No 
deduction may be made from the salary of an employee for payment 
to a credit union or organization or company unless 100 
employees request deductions for payment to the credit union or 
organization or company.  The 100 employee minimum does not 
apply to credit unions and organizations which received 
authorized payroll deduction payments on June 5, 1971. 
    Sec. 2.  Minnesota Statutes 1986, section 45.024, 
subdivision 2, is amended to read: 
    Subd. 2.  [DELEGATION.] The commissioner of commerce may 
delegate to one or more of the a deputy commissioners 
commissioner, assistant commissioner, or director the exercise 
of the commissioner's statutory powers and duties, including the 
authority to decide and issue final orders in contested cases, 
rulemaking proceedings, and other hearings held under chapter 14.
    Sec. 3.  [60A.084] [NOTIFICATION ON GROUP POLICIES.] 
    An employer providing life or health benefits may not 
change benefits, limit coverage, or otherwise restrict 
participation until the certificate holder or enrollee has been 
notified of any changes, limitations, or restrictions.  Notice 
in a format which meets the requirements of the Employee 
Retirement Income Security Act, 29 U.S.C.A., sections 1001 to 
1461, is satisfactory for compliance with this section. 
    Sec. 4.  Minnesota Statutes 1986, section 60A.17, 
subdivision 1a, is amended to read:  
    Subd. 1a.  [LICENSE APPLICATION.] (a)  [PROCEDURE.] An 
application for a license to act as an insurance agent shall be 
made to the commissioner by the person who seeks to be 
licensed.  The application for license shall be accompanied by a 
written appointment from an admitted insurer authorizing the 
applicant to act as its agent under one or both classes of 
license.  The insurer must also submit its check payable to the 
state treasurer for the amount of the appointment fee prescribed 
by section 60A.14, subdivision 1, paragraph (c), clause (9) at 
the time the agent becomes licensed.  The application and 
appointment shall be on forms prescribed by the commissioner.  
    If the applicant is a natural person, no license shall be 
issued until that natural person has become qualified.  
    If the applicant is a partnership or corporation, no 
license shall be issued until at least one natural person who is 
a partner, director, officer, stockholder, or employee shall be 
licensed as an insurance agent.  
    (b)  [RESIDENT AGENT.] The commissioner shall issue a 
resident insurance agent's license to a qualified resident of 
this state as follows:  
     (1) a person may qualify as a resident of this state if 
that person resides in this state or the principal place of 
business of that person is maintained in this state.  
Application for a license claiming residency in this state for 
licensing purposes, shall constitute an election of residency in 
this state.  Any license issued upon an application claiming 
residency in this state shall be void if the licensee, while 
holding a resident license in this state, also holds, or makes 
application for, a resident license in, or thereafter claims to 
be a resident of, any other state or jurisdiction or if the 
licensee ceases to be a resident of this state; provided, 
however, if the applicant is a resident of a community or trade 
area, the border of which is contiguous with the state line of 
this state, the applicant may qualify for a resident license in 
this state and at the same time hold a resident license from the 
contiguous state; 
    (2) the commissioner shall subject each applicant who is a 
natural person to a written examination as to the applicant's 
competence to act as an insurance agent.  The examination shall 
be held at a reasonable time and place designated by the 
commissioner; 
    (3) the examination shall be approved for use by the 
commissioner and shall test the applicant's knowledge of the 
lines of insurance, policies, and transactions to be handled 
under the class of license applied for, of the duties and 
responsibilities of the licensee, and pertinent insurance laws 
of this state; 
    (4) the examination shall be given only after the applicant 
has completed a program of classroom studies in a school, which 
shall not include a school conducted by an admitted insurer 
sponsored by, offered by, or affiliated with an insurance 
company or its agents; except that this limitation does not 
preclude a bona fide professional association of agents, not 
acting on behalf of an insurer, from offering courses.  The 
course of study shall consist of 30 hours of classroom study 
devoted to the basic fundamentals of insurance for those seeking 
a Minnesota license for the first time, 15 hours devoted to 
specific life and health topics for those seeking a life and 
health license, and 15 hours devoted to specific property and 
casualty topics for those seeking a property and casualty 
license.  The program of studies or study course shall have been 
approved by the commissioner in order to qualify under this 
clause.  If the applicant has been previously licensed for the 
particular line of insurance in the state of Minnesota, the 
requirement of a program of studies or a study course shall be 
waived.  A certification of compliance by the organization 
offering the course shall accompany the applicant's license 
application.  This program of studies in a school or a study 
course shall not apply to farm property perils and farm 
liability applicants, or to agents writing such other lines of 
insurance as the commissioner may exempt from examination by 
order; 
    (5) the applicant must pass the examination with a grade 
determined by the commissioner to indicate satisfactory 
knowledge and understanding of the class or classes of insurance 
for which the applicant seeks qualification.  The commissioner 
shall inform the applicant as to whether or not the applicant 
has passed; 
      (6) an applicant who has failed to pass an examination may 
take subsequent examinations.  Examination fees for subsequent 
examinations shall not be waived; and 
     (7) any applicant for a license covering the same class or 
classes of insurance for which the applicant was licensed under 
a similar license in this state, other than a temporary license, 
within the three years preceding the date of the application 
shall be exempt from the requirement of a written examination, 
unless the previous license was revoked or suspended by the 
commissioner.  An applicant whose license is not renewed under 
subdivision 20 is exempt from the requirement of a written 
examination.  
     (c)  [NONRESIDENT AGENT.] The commissioner shall issue a 
nonresident insurance agent's license to a qualified person who 
is a resident of another state or country as follows:  
     (1) A person may qualify for a license under this section 
as a nonresident only if that person holds a license in another 
state, province of Canada, or other foreign country which, in 
the opinion of the commissioner, qualifies that person for the 
same activity as that for which a license is sought; 
     (2) The commissioner shall not issue a license to any 
nonresident applicant until that person files with the 
commissioner a designation of the commissioner and the 
commissioner's successors in office as the applicant's true and 
lawful attorney upon whom may be served all lawful process in 
any action, suit, or proceeding instituted by or on behalf of 
any interested person arising out of the applicant's insurance 
business in this state.  This designation shall constitute an 
agreement that this service of process is of the same legal 
force and validity as personal service of process in this state 
upon that applicant.  
         Service of process upon any licensee in any action or 
proceeding commenced in any court of competent jurisdiction of 
this state may be made by serving the commissioner with 
appropriate copies of the process along with payment of the fee 
pursuant to section 60A.14, subdivision 1, paragraph (c), clause 
(4).  The commissioner shall forward a copy of the process by 
registered or certified mail to the licensee at the last known 
address of record or principal place of business of the 
licensee; and 
        (3) A nonresident license shall terminate automatically 
when the resident license for that class of license in the 
state, province, or foreign country in which the licensee is a 
resident is terminated for any reason.  
        (d)  [DENIAL.] (1) If the commissioner finds that an 
applicant for a resident or nonresident license has not fully 
met the requirements for licensing, the commissioner shall 
refuse to issue the license and shall promptly give written 
notice to both the applicant and the appointing insurer of the 
denial, stating the grounds for the denial.  All fees which 
accompanied the application and appointment shall be deemed 
earned and shall not be refundable.  
       (2) The commissioner may also deny issuance of a license 
for any cause that would subject the license of a licensee to 
suspension or revocation.  If a license is denied pursuant to 
this clause, the provisions of subdivision 6c, paragraph (c) 
apply.  
      (3) The applicant may make a written demand upon the 
commissioner for a hearing within 30 days of the denial of a 
license to determine whether the reasons stated for the denial 
were lawful.  The hearing shall be held pursuant to chapter 14.  
      (e)  [TERM.] All licenses issued pursuant to this section 
shall remain in force until voluntarily terminated by the 
licensee, not renewed as prescribed in subdivision 1d, or until 
suspended or revoked by the commissioner.  A voluntary 
termination shall occur when the license is surrendered to the 
commissioner with the request that it be terminated or when the 
licensee dies, or when the licensee is dissolved or its 
existence is terminated.  In the case of a nonresident license, 
a voluntary termination shall also occur upon the happening of 
the event described in paragraph (c), clause (3).  
       Every licensed agent shall notify the commissioner within 
30 days of any change of name, address, or information contained 
in the application. 
       (f)  [SUBSEQUENT APPOINTMENTS.] A person who holds a valid 
agent's license from this state may solicit applications for 
insurance on behalf of an admitted insurer with which the 
licensee does not have a valid appointment on file with the 
commissioner; provided, that the licensee has permission from 
the insurer to solicit insurance on its behalf and, provided 
further, that the insurer upon receipt of the application for 
insurance submits a written notice of appointment to the 
commissioner accompanied by its check payable to the state 
treasurer in the amount of the appointment fee prescribed by 
section 60A.14, subdivision 1, paragraph (c), clause (9).  The 
notice of appointment shall be on a form prescribed by the 
commissioner.  
      (g)  [AMENDMENT OF LICENSE.] An application to the 
commissioner to amend a license to reflect a change of name, or 
to include an additional class of license, or for any other 
reason, shall be on forms provided by the commissioner and shall 
be accompanied by the applicant's surrendered license and a 
check payable to the state treasurer for the amount of fee 
specified in section 60A.14, subdivision 1, paragraph (c).  
      An applicant who surrenders an insurance license pursuant 
to this clause retains licensed status until an amended license 
is received.  
      (h)  [EXCEPTIONS.] The following are exempt from the 
general licensing requirements prescribed by this section:  
      (1) agents of township mutuals who are exempted pursuant to 
subdivision 1b; 
      (2) fraternal beneficiary association representatives 
exempted pursuant to subdivision 1c; 
     (3) any regular salaried officer or employee of a licensed 
insurer, without license or other qualification, may act on 
behalf of that licensed insurer in the negotiation of insurance 
for that insurer; provided that a licensed agent must 
participate in the sale of any such insurance; 
     (4) employers and their officers or employees, and the 
trustees or employees of any trust plan, to the extent that the 
employers, officers, employees, or trustees are engaged in the 
administration or operation of any program of employee benefits 
for the employees of the employers or employees of their 
subsidiaries or affiliates involving the use of insurance issued 
by a licensed insurance company; provided, that the activities 
of the officers, employees and trustees are incidental to 
clerical or administrative duties and their compensation does 
not vary with the volume of insurance or applications therefor; 
    (5) employees of a creditor who enroll debtors for life or 
accident and health insurance; provided the employees receive no 
commission or fee therefor; and 
    (6) clerical or administrative employees of an insurance 
agent who take insurance applications or receive premiums in the 
office of their employer, if the activities are incidental to 
clerical or administrative duties and the employee's 
compensation does not vary with the volume of the applications 
or premiums; and 
    (7) rental vehicle companies and their employees in 
connection with the offer of rental vehicle personal accident 
insurance under section 72A.125. 
    Sec. 5.  Minnesota Statutes 1986, section 60A.17, 
subdivision 2c, is amended to read:  
    Subd. 2c.  [MANDATORY TEMPORARY LICENSES.] The commissioner 
shall may grant a temporary insurance agent's license to a 
person who has submitted an application for a resident license 
which is accepted by the commissioner and who has successfully 
completed the examination, if any, required by the 
commissioner.  The temporary license shall may be granted no 
later than as of the date upon which the applicant receives 
written notice from the commissioner that the application for 
resident license has been accepted by the commissioner and that 
the person has passed any required examination.  A temporary 
license will permit the applicant to act as an insurance agent 
for the original appointing insurer for the class of business 
specified therein until the earlier of (a) receipt by the 
applicant of the resident license, or (b) the expiration of 90 
days from the date on which the temporary license was granted.  
    Sec. 6.  Minnesota Statutes 1986, section 60A.17, 
subdivision 11, is amended to read:  
    Subd. 11.  [LIFE COMPANY AGENTS INSURER'S AGENT.] Any 
person who shall solicit an application for solicits insurance 
upon the life of another shall, in any controversy between the 
assured or the assured's beneficiary and the company issuing any 
policy upon such application, be regarded as is the agent of the 
company insurer and not the agent of the assured insured. 
    Sec. 7.  Minnesota Statutes 1986, section 60A.17, 
subdivision 13, is amended to read: 
    Subd. 13.  [AGENTS; VARIABLE CONTRACTS.] (a) [LICENSE 
REQUIRED.] No person shall sell or offer for sale a contract on 
a variable basis unless prior to making any solicitation or sale 
the person has obtained from the commissioner a license 
therefor.  The license shall only be granted, upon the written 
requisition of an insurer, to a qualified person who holds a 
current license authorizing the person to solicit and sell life 
insurance and annuity contracts in this state.  To become 
qualified, a person shall complete a written application on a 
form prescribed by the commissioner and shall take and pass an 
examination prescribed by the commissioner.  Prior to the taking 
of the examination, or upon reexamination, the applicant shall 
transmit to the commissioner, by money order or cashiers check 
payable to the state treasurer, an examination fee of $10. 
    (b) [EXCEPTIONS.] (1) Any regularly salaried officer or 
employee of a licensed insurer may, without license or other 
qualification, act on behalf of that licensed insurer in the 
negotiation of a contract on a variable basis, provided that a 
licensed agent must participate in the sale of any contract. 
    (2) Any person who, on July 1, 1969, holds a valid license 
authorizing the person to solicit and sell life insurance and 
annuity contracts and who also holds a valid license issued by 
the department of commerce authorizing the person to sell or 
offer for sale contracts on a variable basis shall be issued a 
license by the commissioner of commerce upon application 
therefor and payment of a $2 fee, which license shall expire on 
May 31, 1970, unless renewed by an insurer as provided in 
paragraph (a). 
    (3) Any person who holds a valid license to solicit and 
sell life insurance and annuity contracts may solicit and sell 
contracts on a variable basis without acquiring a license under 
this subdivision if the contract is based on an account which is 
excluded from the definition of investment company under the 
Investment Company Act of 1940, United States Code, title 15, 
section 80a-3(11). 
    (c) [RULES.] The commissioner may by rules waive or modify 
any of the foregoing requirements or prescribe additional 
requirements deemed necessary for the proper sale and 
solicitation of contracts on a variable basis. 
    Sec. 8.  Minnesota Statutes 1986, section 60A.1701, 
subdivision 5, is amended to read:  
    Subd. 5.  [POWERS OF THE ADVISORY TASK FORCE.] (a) 
Applications for accreditation of each course and for approval 
of individuals responsible for monitoring course offerings must 
be submitted to the commissioner on forms prescribed by the 
commissioner and must be accompanied by a fee of not more than 
$50 payable to the state of Minnesota for deposit in the general 
fund.  A fee of $5 for each hour or fraction of one hour of 
course approval sought must be forwarded with the application 
for course approval.  If the advisory task force is created, it 
shall make recommendations to the commissioner regarding the 
accreditation of courses sponsored by institutions, both public 
and private, which satisfy the criteria established by this 
section, the number of credit hours to be assigned to the 
courses, and rules which may be promulgated by the 
commissioner.  The advisory task force shall seek out and 
encourage the presentation of courses.  
    (b) If the advisory task force is created, it shall make 
recommendations and provide subsequent evaluations to the 
commissioner regarding procedures for reporting compliance with 
the minimum education requirement.  
    Sec. 9.  Minnesota Statutes 1986, section 60A.1701, 
subdivision 7, is amended to read:  
    Subd. 7.  [CRITERIA FOR COURSE ACCREDITATION.] (a) The 
commissioner may accredit a course only to the extent it is 
designed to impart substantive and procedural knowledge of the 
insurance field.  The burden of demonstrating that the course 
satisfies this requirement is on the individual or organization 
seeking accreditation.  The commissioner shall approve any 
educational program approved by Minnesota Continuing Legal 
Education relating to the insurance field.  
    (b) The commissioner may not accredit a course:  
    (1) that is designed to prepare students for a license 
examination; 
    (2) in mechanical office or business skills, including 
typing, speedreading, use of calculators, or other machines or 
equipment; 
    (3) in sales promotion, including meetings held in 
conjunction with the general business of the licensed agent; or 
    (4) in motivation, the art of selling, psychology, or time 
management; 
    (5) unless the student attends classroom instruction 
conducted by an instructor approved by the department of 
commerce; or 
    (6) which can be completed by the student at home or 
outside the classroom without the supervision of an instructor 
approved by the department of commerce.  
    Sec. 10.  Minnesota Statutes 1986, section 60A.1701, 
subdivision 8, is amended to read:  
    Subd. 8.  [MINIMUM EDUCATION REQUIREMENT.] Each person 
subject to this section shall complete annually a minimum of 20 
credit hours of courses accredited by the commissioner.  Any 
person teaching or lecturing at an accredited course qualifies 
for 1-1/2 times the number of credit hours that would be granted 
to a person completing the accredited course.  Credit hours over 
20 earned in any one year may be carried forward for the 
following two years.  The commissioner may recognize accredited 
courses completed in 1983, 1984, or 1985 for the minimum 
education requirement for 1985. No more than ten credit hours 
per year may be credited to a person for courses sponsored by, 
offered by, or affiliated with an insurance company or its 
agents.  Courses sponsored by, offered by, or affiliated with an 
insurance company or agent may restrict its students to agents 
of the company or agency. 
    Sec. 11.  Minnesota Statutes 1986, section 60A.196, is 
amended to read:  
    60A.196 [DEFINITIONS.] 
    Unless the context otherwise requires, the following terms 
have the meanings given them for the purposes of sections 
60A.195 to 60A.209: 
    (a) "Surplus lines insurance" means insurance placed with 
an insurer permitted to transact the business of insurance in 
this state only pursuant to sections 60A.195 to 60A.209. 
    (b) "Eligible surplus lines insurer" means an insurer 
recognized as eligible to write insurance business under 
sections 60A.195 to 60A.209 but not licensed by any other 
Minnesota law to transact the business of insurance.  
    (c) "Ineligible surplus lines insurer" means an insurer not 
recognized as an eligible surplus lines insurer pursuant to 
sections 60A.195 to 60A.209 and not licensed by any other 
Minnesota law to transact the business of 
insurance.  "Ineligible surplus lines insurer" includes a risk 
retention group as defined under the Liability Risk Retention 
Act, Public Law Number 99-563. 
    (d) "Surplus lines licensee" or "licensee" means a person 
licensed under sections 60A.195 to 60A.209 to place insurance 
with an eligible or ineligible surplus lines insurer.  
    (e) "Association" means an association registered under 
section 60A.208.  
    (f) "Alien insurer" means any insurer which is incorporated 
or otherwise organized outside of the United States.  
    (g) "Insurance laws" means chapters 60 to 79 inclusive.  
    Sec. 12.  Minnesota Statutes 1986, section 60A.198, 
subdivision 3, is amended to read:  
    Subd. 3.  [PROCEDURE FOR OBTAINING LICENSE.] A person 
licensed as a resident an agent in this state pursuant to other 
law may obtain a surplus lines license by doing the following:  
    (a) filing an application in the form and with the 
information the commissioner may reasonably require to determine 
the ability of the applicant to act in accordance with sections 
60A.195 to 60A.209; 
    (b) maintaining a resident agent an agent's license in this 
state; 
    (c) delivering to the commissioner a financial guarantee 
bond from a surety acceptable to the commissioner for the 
greater of the following:  
    (1) $5,000; or 
    (2) the largest semiannual surplus lines premium tax 
liability incurred by the applicant in the immediately preceding 
five years; and 
    (d) agreeing to file with the commissioner of revenue no 
later than February 15 and August 15 annually, a sworn statement 
of the charges for insurance procured or placed and the amounts 
returned on the insurance canceled under the license for the 
preceding six-month period ending December 31 and June 30 
respectively, and at the time of the filing of this statement, 
paying the commissioner a tax on premiums equal to three percent 
of the total written premiums less cancellations; and 
    (e) annually paying a fee as prescribed by section 60A.14, 
subdivision 1, paragraph (c), clause (11). 
    Sec. 13.  [60A.2095] [CONSTRUCTION.] 
    Nothing in sections 60A.195 to 60A.209 shall be construed 
to permit the state to impose requirements beyond those granted 
by the Liability Risk Retention Act, Public Law Number 99-563.  
    Sec. 14.  Minnesota Statutes 1986, section 60A.23, 
subdivision 8, is amended to read: 
    Subd. 8.  [SELF-INSURANCE OR INSURANCE PLAN ADMINISTRATORS; 
WHO ARE VENDORS OF RISK MANAGEMENT SERVICES.] (1) [SCOPE.] This 
subdivision applies to any vendor of risk management services 
and to any entity which administers, for compensation, a 
self-insurance or insurance plan.  This subdivision does not 
apply (a) to an insurance company authorized to transact 
insurance in this state, as defined by section 60A.06, 
subdivision 1, clauses (4) and (5); (b) to a service plan 
corporation, as defined by section 62C.02, subdivision 6; (c) to 
a health maintenance organization, as defined by section 62D.02, 
subdivision 4; (d) to an employer directly operating a 
self-insurance plan for its employees' benefits; or (e) to an 
entity which administers a program of health benefits 
established pursuant to a collective bargaining agreement 
between an employer, or group or association of employers, and a 
union or unions. 
    (2) [DEFINITIONS.] For purposes of this subdivision the 
following terms have the meanings given them. 
    (a) "Administering a self-insurance or insurance plan" 
means (i) processing, reviewing or paying claims, (ii) 
establishing or operating funds and accounts, or (iii) otherwise 
providing necessary administrative services in connection with 
the operation of a self-insurance or insurance plan. 
    (b) "Employer" means an employer, as defined by section 
62E.02, subdivision 2. 
    (c) "Entity" means any association, corporation, 
partnership, sole proprietorship, trust, or other business 
entity engaged in or transacting business in this state. 
    (d) "Self-insurance or insurance plan" means a plan 
providing life, medical or hospital care, accident, sickness or 
disability insurance, as an employee fringe benefit, or a plan 
providing liability coverage for any other risk or hazard, which 
is or is not directly insured or provided by a licensed insurer, 
service plan corporation, or health maintenance organization. 
    (e) "Vendor of risk management services" means an entity 
providing for compensation actuarial, financial management, 
accounting, legal or other services for the purpose of designing 
and establishing a self-insurance or insurance plan for an 
employer. 
    (3) [LICENSE.] No vendor of risk management services or 
entity administering a self-insurance or insurance plan may 
transact this business in this state unless it is licensed to do 
so by the commissioner.  An applicant for a license shall state 
in writing the type of activities it seeks authorization to 
engage in and the type of services it seeks authorization to 
provide.  The license may be granted only when the commissioner 
is satisfied that the entity possesses the necessary 
organization, background, expertise, and financial integrity to 
supply the services sought to be offered.  The commissioner may 
issue a license subject to restrictions or limitations upon the 
authorization, including the type of services which may be 
supplied or the activities which may be engaged in.  The license 
fee is $100.  All licenses are for a period of two years. 
    (4) [REGULATORY RESTRICTIONS; POWERS OF THE COMMISSIONER.] 
To assure that self-insurance or insurance plans are financially 
solvent, are administered in a fair and equitable fashion, and 
are processing claims and paying benefits in a prompt, fair, and 
honest manner, vendors of risk management services and entities 
administering insurance or self-insurance plans are subject to 
the supervision and examination by the commissioner.  Vendors of 
risk management services, entities administering insurance or 
self-insurance plans, and insurance or self-insurance plans 
established or operated by them are subject to the trade 
practice requirements of sections 72A.19 to 72A.30. 
    (5) [RULE MAKING AUTHORITY.] To carry out the purposes of 
this subdivision, the commissioner may adopt rules, including 
emergency rules, pursuant to sections 14.01 to 14.70 14.69.  
These rules may: 
    (a) establish reporting requirements for administrators of 
insurance or self-insurance plans; 
    (b) establish standards and guidelines to assure the 
adequacy of financing, reinsuring, and administration of 
insurance or self-insurance plans; 
    (c) establish bonding requirements or other provisions 
assuring the financial integrity of entities administering 
insurance or self-insurance plans; or 
    (d) establish other reasonable requirements to further the 
purposes of this subdivision. 
    Sec. 15.  Minnesota Statutes 1986, section 60A.29, 
subdivision 2, is amended to read:  
    Subd. 2.  [PURPOSE.] The purpose of this section is to 
authorize the establishment of trust funds for the purpose of 
indemnifying nonprofit beneficiary organizations and their 
officers, directors, and agents for financial loss due to the 
imposition of legal liability or for damage or destruction of 
property, and to regulate the operation of trust funds 
established under this section.  
    Sec. 16.  Minnesota Statutes 1986, section 60A.29, 
subdivision 5, is amended to read:  
    Subd. 5.  [INELIGIBLE RISKS.] No trust fund established 
under this section shall indemnify any beneficiary for property 
loss, liabilities incurred under the workers' compensation act, 
or for benefits provided to employees pursuant to any medical, 
dental, life, or disability income protection plan. 
    Sec. 17.  Minnesota Statutes 1986, section 60A.29, 
subdivision 16, is amended to read:  
    Subd. 16.  [REINSURANCE.] Authorized trust funds may insure 
or reinsure their obligations and liabilities with: 
    (1) insurance companies authorized to do business in 
Minnesota, pursuant to section 60A.06, or with; 
    (2) insurance companies similarly authorized in any other 
state of the United States; 
    (3) insurance companies not authorized in Minnesota or any 
other state if the unauthorized insurance company establishes 
reinsurance security in favor of the ceding trust fund 
conforming to the general rules for allowance of reinsurance 
credits stated in the Financial Condition Examiners Handbook 
adopted by the National Association of Insurance Commissioners; 
or 
    (4) other trust funds organized under this section or under 
similar laws of any other state if the reinsuring trust fund 
establishes reinsurance security as specified in clause (3) in 
favor of the ceding trust fund. 
    Sec. 18.  Minnesota Statutes 1986, section 60A.29, is 
amended by adding a subdivision to read: 
    Subd. 22.  [FOREIGN TRUST FUNDS.] A trust fund organized 
and existing under the laws of another state for the sole 
purpose of indemnifying nonprofit beneficiary organizations and 
their officers, directors, and agents for financial loss due to 
the imposition of legal liability or for damage or destruction 
of property, as provided in subdivisions 2 and 4, may apply to 
the commissioner for authority to operate within this state, 
provided that: 
    (1) the trust fund has been continuously in operation for a 
period of not less than five years prior to the date it applies 
for authorization under this subdivision, during which period it 
must have issued only nonassessable indemnification agreements 
to its beneficiaries, and during each of those years the trust 
fund received not less than $1,000,000 in contributions from 
beneficiaries for protections afforded by the trust fund; 
    (2) the trust fund has been authorized by and is subject to 
regulation and examination by the department of insurance of its 
domiciliary state; 
    (3) the trust fund must file with the commissioner its 
trust agreement, bylaws or plan of operation, schedule of 
benefits, forms of indemnification agreements, and contribution 
schedules applicable to beneficiaries in this state; 
    (4) the trust fund must be governed by a board of not fewer 
than five trustees, all of whom must be elected by the 
beneficiaries of the trust fund, and none of whom may receive 
compensation for service as a trustee; 
    (5) the trust fund has, as of the last day of the calendar 
year immediately prior to its application for authority, a net 
fund balance surplus of not less than $1,000,000, as evidenced 
by its financial statements certified by an independent 
certified public accountant in accordance with generally 
accepted accounting principles consistently applied; and 
    (6) the trust fund must, upon and at all times after 
authorization by the commissioner, maintain a registered office 
within this state. 
    Sec. 19.  Minnesota Statutes 1986, section 60A.29, is 
amended by adding a subdivision to read: 
    Subd. 23.  [STANDARDS FOR AUTHORIZATION.] Within 60 days 
after receipt of the documents specified under subdivision 22 
and supporting evidence which establishes compliance with the 
standards set forth under that subdivision, the commissioner 
shall grant to the trust fund a certificate of authority to 
conduct operations in this state.  The operations in this state 
are subject to the limitations and standards set forth in 
subdivisions 4 to 22 of this section.  In the event an 
authorized foreign trust fund violates one of those subdivisions 
or the rules of the commissioner applicable to foreign trust 
funds, the commissioner may suspend or revoke the certificate of 
authority. 
    Sec. 20.  Minnesota Statutes 1986, section 60A.29, is 
amended by adding a subdivision to read: 
    Subd. 24.  [RULES.] The commissioner may adopt rules to 
enforce and administer requirements of sections 18 and 19. 
    Sec. 21.  Minnesota Statutes 1986, section 60A.30, is 
amended to read: 
    60A.30 [RENEWAL OF INSURANCE POLICY WITH ALTERED RATES.] 
    If an insurance company licensed to do business in this 
state offers or purports to offer to renew any commercial 
liability and/or property insurance policy at less favorable 
terms as to the dollar amount of coverage or deductibles, higher 
rates, and/or higher rating plan, the new terms, the new rates 
and/or rating plan may take effect on the renewal date of the 
policy if the insurer has sent to the policyholder notice of the 
new terms, new rates and/or rating plan at least 30 60 days 
prior to the expiration date.  If the insurer has not so 
notified the policyholder, the policyholder may elect to cancel 
the renewal policy within the 30-day 60-day period after receipt 
of the notice.  Earned premium for the period of coverage, if 
any, shall be calculated pro rata upon the prior rate.  This 
subdivision does not apply to ocean marine insurance, accident 
and health insurance, and reinsurance. 
    This section does not apply if the change relates to guide 
"a" rates or excess rates also known as "consent to rates."  
    Sec. 22.  Minnesota Statutes 1986, section 60A.31, is 
amended to read:  
    60A.31 [MIDTERM CANCELLATION WORKER'S COMPENSATION 
INSURANCE.] 
    In addition to the requirements of Minnesota Statutes 1984, 
section 176.185, subdivision 1, no a policy of insurance issued 
to cover the liability to pay compensation under Minnesota 
Statutes 1984, chapter 176, shall be canceled by the insurer 
within the policy period unless the insurer has also complied 
with the requirements of such rules as the commissioner of 
commerce may adopt in regard to the cancellation of commercial 
liability and/ or commercial property insurance policies comply 
with sections 60A.30 and 60A.35 to 60A.38. 
    Sec. 23.  [60A.35] [SCOPE.] 
    Except as specifically limited in section 60A.30, sections 
23 to 26 apply to all commercial liability and/or property 
insurance policies issued by companies licensed to do business 
in this state except ocean marine insurance, accident and health 
insurance, excess insurance, surplus lines insurance, and 
reinsurance.  
    Sec. 24.  [60A.36] [MIDTERM CANCELLATION.] 
    Subdivision 1.  [REASON FOR CANCELLATION.] No insurer may 
cancel a policy of commercial liability and/or property 
insurance during the term of the policy, except for one or more 
of the following reasons:  
    (1) nonpayment of premium; 
    (2) misrepresentation or fraud made by or with the 
knowledge of the insured in obtaining the policy or in pursuing 
a claim under the policy; 
    (3) actions by the insured that have substantially 
increased or substantially changed the risk insured; 
    (4) refusal of the insured to eliminate known conditions 
that increase the potential for loss after notification by the 
insurer that the condition must be removed; 
    (5) substantial change in the risk assumed, except to the 
extent that the insurer should reasonably have foreseen the 
change or contemplated the risk in writing the contract; 
    (6) loss of reinsurance by the insurer which provided 
coverage to the insurer for a significant amount of the 
underlying risk insured.  A notice of cancellation under this 
clause shall advise the policyholder that the policyholder has 
ten days from the date of receipt of the notice to appeal the 
cancellation to the commissioner of commerce and that the 
commissioner will render a decision as to whether the 
cancellation is justified because of the loss of reinsurance 
within five business days after receipt of the appeal; 
    (7) a determination by the commissioner that the 
continuation of the policy could place the insurer in violation 
of the insurance laws of this state; or 
    (8) nonpayment of dues to an association or organization, 
other than an insurance association or organization, where 
payment of dues is a prerequisite to obtaining or continuing the 
insurance.  This provision for cancellation for failure to pay 
dues does not apply to persons who are retired at 62 years of 
age or older or who are disabled according to social security 
standards.  
    Subd. 2.  [NOTICE.] Cancellation under subdivision 1, 
clauses (2) to (8), shall not be effective before 60 days after 
notice to the policyholder.  The notice of cancellation shall 
contain a specific reason for cancellation as provided in 
subdivision 1.  
    A policy shall not be canceled for nonpayment of premium 
pursuant to subdivision 1, clause (1), unless the insurer, at 
least ten days before the effective cancellation date, has given 
notice to the policyholder of the amount of premium due and the 
due date.  The notice shall state the effect of nonpayment by 
the due date.  No cancellation for nonpayment of premium shall 
be effective if payment of the amount due is made before the 
effective date in the notice.  
    Subd. 3.  [NEW POLICIES.] Subdivisions 1 and 2 do not apply 
to any insurance policy that has not been previously renewed if 
the policy has been in effect less than 90 days at the time the 
notice of cancellation is mailed or delivered.  No cancellation 
under this subdivision is effective until at least ten days 
after the written notice to the policyholder.  
    Subd. 4.  [LONGER TERM POLICIES.] A policy may be issued 
for a term longer than one year or for an indefinite term with a 
clause providing for cancellation by the insurer for the reasons 
stated in subdivision 1 by giving notice as required by 
subdivision 2 at least 60 days before any anniversary date.  
    Sec. 25.  [60A.37] [NONRENEWAL.] 
    Subdivision 1.  [NOTICE REQUIRED.] At least 60 days before 
the date of expiration provided in the policy, a notice of 
intention not to renew the policy beyond the agreed expiration 
date must be made to the policyholder by the insurer.  If the 
notice is not given at least 60 days before the date of 
expiration provided in the policy, the policy shall continue in 
force until 60 days after a notice of intent not to renew is 
received by the policyholder.  
    Subd. 2.  [EXCEPTIONS.] This section does not apply if the 
policyholder has insured elsewhere, has accepted replacement 
coverage, or has requested or agreed to nonrenewal.  
    Sec. 26.  [60A.38] [INTERPRETATION AND PENALTIES.] 
    Subdivision 1.  [SECTIONS NOT EXCLUSIVE.] Sections 23 to 26 
are not exclusive, and the commissioner may also consider other 
provisions of Minnesota law to be applicable to the 
circumstances or situations addressed by sections 23 to 26.  The 
rights provided by sections 23 to 26 are in addition to and do 
not prejudice any other rights the policyholder may have at 
common law, under statute, or rules.  
    Subd. 2.  [PENALTIES.] A violation of any provisions of 
sections 23 to 26 shall be deemed to be an unfair trade practice 
in the business of insurance and shall subject the violator to 
the penalties provided by sections 72A.17 to 72A.32 in addition 
to any other penalty provided by law.  
    Subd. 3.  [NOTICES REQUIRED.] All notices required by 
sections 23 to 26 shall only be made by first class mail 
addressed to the policyholder's last known address or by 
delivery to the policyholder's last known address.  Notice by 
first class mail is effective upon deposit in the United States 
mail.  In addition to giving notice to the policyholder, the 
insurer must also give notice to the agent of record, if any, in 
the manner specified for the policyholder.  
    Sec. 27.  Minnesota Statutes 1986, section 60B.44, 
subdivision 1, is amended to read:  
    Subdivision 1.  [DEDUCTIBLE PROVISION.] The distribution of 
claims from the insurer's estate shall be in the order stated in 
this section with a descending degree of preference for each 
subdivision.  The first $50 of the amount allowed on each claim 
in the classes under subdivisions 3 to 7 shall be deducted from 
the claim and included in the class under subdivision 9.  Claims 
may not be cumulated by assignment to avoid application of the 
$50 deductible provision.  Subject to the $50 deductible 
provision, Every claim in each class shall be paid in full or 
adequate funds retained for the payment before the members of 
the next class receive any payment.  No subclasses shall be 
established within any class. 
    Sec. 28.  Minnesota Statutes 1986, section 60B.44, 
subdivision 4, is amended to read:  
    Subd. 4.  [LOSS CLAIMS; INCLUDING CLAIMS NOT COVERED BY A 
GUARANTY ASSOCIATION.] All claims under policies or contracts of 
coverage for losses incurred including third party claims, and 
all claims against the insurer for liability for bodily injury 
or for injury to or destruction of tangible property which are 
not under policies or contracts, except the first $200 of losses 
otherwise payable to any claimant under this subdivision.  All 
claims under life insurance and annuity policies, whether for 
death proceeds, annuity proceeds, or investment values, shall be 
treated as loss claims.  Claims may not be cumulated by 
assignment to avoid application of the $200 deductible 
provision.  That portion of any loss for which indemnification 
is provided by other benefits or advantages recovered or 
recoverable by the claimant shall not be included in this class, 
other than benefits or advantages recovered or recoverable in 
discharge of familial obligations of support or by way of 
succession at death or as proceeds of life insurance, or as 
gratuities.  No payment made by an employer to an employee shall 
be treated as a gratuity.  Claims not covered by a guaranty 
association are loss claims.  If any portion of a claim is 
covered by a reinsurance treaty or similar contractual 
obligation, that claim shall be entitled to a pro rata share, 
based upon the relationship the claim amount bears to all claims 
payable under the treaty or contract, of the proceeds received 
under that treaty or contractual obligation.  
    Claims receiving pro rata payments shall not, as to any 
remaining unpaid portion of their claim, be treated in a 
different manner than if no such payment had been received.  
    Sec. 29.  Minnesota Statutes 1986, section 60B.44, 
subdivision 5, is amended to read:  
    Subd. 5.  [UNEARNED PREMIUMS AND SMALL LOSS CLAIMS.] Claims 
under nonassessable policies or contracts of coverage for 
unearned premiums or subscription rates or other refunds and the 
first $200 of loss excepted by the deductible provision in 
subdivision 4.  
    Sec. 30.  Minnesota Statutes 1986, section 60B.44, 
subdivision 9, is amended to read:  
    Subd. 9.  [MISCELLANEOUS SUBORDINATED CLAIMS.] The 
remaining claims or portions of claims not already paid, with 
interest as in subdivision 8.  
    (a) The first $50 of each claim in the classes under 
subdivisions 3 to 7 subordinated under this section; 
    (b) Claims under section 60B.39, subdivision 2; 
    (c) (b) Claims subordinated by section 60B.61; 
    (d) (c) Except to the extent excused or otherwise permitted 
pursuant to section 60B.37, claims filed late; 
    (e) (d) Portions of claims subordinated under subdivision 
6; and 
    (f) (e) Claims or portions of claims payment of which is 
provided by other benefits or advantages recovered or 
recoverable by the claimant.  
    Sec. 31.  Minnesota Statutes 1986, section 60C.08, 
subdivision 1, is amended to read: 
    Subdivision 1.  The board of directors of the association 
shall consist of nine persons.  Two of the directors shall be 
public members and seven shall be insurer members.  The public 
members shall be appointed by the commissioner.  Public members 
may include licensed insurance agents.  The insurer members of 
the board shall be selected by association members subject to 
the approval of the commissioner.  Vacancies on the board shall 
be filled for the remaining period of the term in the same 
manner as initial appointments.  The term of appointment for all 
members is two years. 
    Sec. 32.  Minnesota Statutes 1986, 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 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), 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.  
    Subd. 2.  [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, 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. 
    Sec. 33.  Minnesota Statutes 1986, section 60C.12, is 
amended to read:  
    60C.12 [APPEAL AND REVIEW.] 
    Subdivision 1.  [APPEAL.] A claimant whose claim has been 
declared to be not covered or reduced by the board under section 
60C.10 may appeal to the board within 30 days after the claimant 
has been notified of the board's decision and of the rights of 
the claimant under this section.  
    Subd. 2.  [REVIEW.] Decisions of the board under 
subdivision 1 are subject to judicial review appeal to the 
commissioner of commerce who may overturn, affirm, or modify the 
board's actions or take other action the commissioner considers 
appropriate. 
     The appeal to the commissioner must be in the manner 
provided in chapter 14. 
    Subd. 3.  [JUDICIAL REVIEW.] A final action or order of the 
commissioner under this subdivision is subject to judicial 
review in the manner provided by chapter 14.  In lieu of the 
appeal to the commissioner under subdivision 2, a claimant may 
seek judicial review of the board's actions. 
    Sec. 34.  [60F.01] [ESTABLISHMENT.] 
    Any three or more employers, excluding the state and its 
political subdivisions as described in section 471.617, 
subdivision 1, who are authorized to transact business in 
Minnesota may jointly self-insure for any property and/or 
casualty or automobile liability.  Joint plans must meet all 
conditions and terms of this chapter.  
    Sec. 35.  [60F.02] [EXCESS STOP-LOSS COVERAGE.] 
    A joint self-insurance plan must include aggregate excess 
stop-loss coverage and individual excess stop-loss coverage 
provided by an insurance company licensed by the state of 
Minnesota.  Aggregate excess stop-loss coverage must include 
provisions to cover the excess claims of incurred, unpaid claim 
liability even in the event of plan termination.  The joint plan 
must bear the risk of coverage for any member of the pool that 
becomes insolvent with outstanding contribution due by providing 
a surety bond from a Minnesota licensed surety in the amount of 
one year's contribution.  In addition, the plan of 
self-insurance must have participants fund an amount at least 
equal to the point at which the excess or stop-loss insurer must 
assume 100 percent of the excess coverage limits of additional 
liability.  A joint self-insurance plan must submit its proposed 
excess or stop-loss insurance contract to the commissioner of 
commerce at least 30 days prior to the proposed plan's effective 
date and at least 30 days subsequent to any renewal date.  The 
commissioner shall review the contract to determine if it meets 
the standards established by this chapter and respond within a 
30-day period.  An excess or stop-loss insurance plan must be 
noncancelable for a minimum term of one year.  
    Sec. 36.  [60F.03] [LIMITATION ON ADMINISTRATIVE SERVICES.] 
    No joint self-insurance plan may offer marketing, risk 
management, or administrative services unless these services are 
provided by vendors duly licensed by the commissioner to provide 
these services.  No vendor of these services may be a trustee of 
a joint self-insurance plan for which they provide marketing, 
risk management, or administrative services. 
    Sec. 37.  [60F.04] [APPLICABILITY OF PROVISIONS.] 
    A joint self-insurance plan is subject to the requirements 
of the applicable parts of chapters 60A, 65A, 65B, 72B, and 72C, 
and section 72A.20, unless otherwise specifically exempt.  A 
joint self-insurance plan must offer a plan which complies with 
all applicable rules and statutes. 
    Sec. 38.  [60F.05] [FUND MANAGEMENT.] 
    Funds collected from the participants under joint 
self-insurance plans must be held in trust subject to the 
following requirements:  
    (a) A board of trustees elected by the participants shall 
serve as fund managers on behalf of participants.  Trustees must 
be plan participants.  No participants may be represented by 
more than one trustee.  A minimum of three and a maximum of 
seven trustees may be elected.  Trustees shall receive no 
remuneration, but they may be reimbursed for actual and 
reasonable expenses incurred in connection with duties as 
trustees. 
    (b) Trustees must be bonded in an amount not less than 
$100,000 nor more than $500,000 from a licensed bonding company. 
    (c) Investment of plan funds is subject to the same 
restrictions as are applicable to political subdivisions 
pursuant to section 475.66.  All investments must be managed by 
a bank or other investment organization licensed to operate in 
Minnesota. 
    (d) Trustees, on behalf of the fund, shall file annual 
reports with the commissioner of commerce within 30 days 
immediately following the end of each calendar year.  The 
reports must summarize the financial condition of the fund, 
itemize collection from participants, and detail all fund 
expenditures. 
    Sec. 39.  [60F.06] [RULES.] 
    The commissioner of commerce shall adopt rules, including 
emergency rules, to ensure the solvency and operation of all 
self-insured plans subject to this chapter.  The commissioner 
may examine the joint self-insurance plans pursuant to sections 
60A.03 and 60A.031. 
    Sec. 40.  [60F.07] [REVENUE FEE.] 
    A joint self-insurance plan shall pay a two percent revenue 
fee.  This revenue must be computed based on two percent of the 
paid claims level for the most recently completed calendar 
year.  This revenue must be deposited in the general fund. 
    Sec. 41.  [60F.08] [APPLICABILITY.] 
    A joint self-insurance plan is not an insurer for purposes 
of chapter 60C.  
    Sec. 42.  [61A.092] [CONTINUATION OF COVERAGE FOR LIFE 
INSURANCE.] 
    Subdivision 1.  [CONTINUATION OF COVERAGE.] Every group 
insurance policy issued or renewed within this state after 
August 1, 1987, providing coverage for life insurance benefits 
shall contain a provision that permits covered employees who are 
voluntarily or involuntarily terminated or laid off from their 
employment, if the policy remains in force for any active 
employee of the employer, to elect to continue the coverage for 
themselves and their dependents. 
    An employee is considered to be laid off from employment if 
there is a reduction in hours to the point where the employee is 
no longer eligible for coverage under the group life insurance 
policy.  Termination does not include discharge for gross 
misconduct. 
    Subd. 2.  [RESPONSIBILITY OF EMPLOYEE.] Every covered 
employee electing to continue coverage shall pay the employee's 
former employer, on a monthly basis, the cost of the continued 
coverage.  In no event shall the amount of premium charged 
exceed 102 percent of the cost to the plan for such period of 
coverage for other similarly situated employees with respect to 
whom neither termination nor layoff has occurred, without 
respect to whether such cost is paid by the employer or 
employee.  The employee is eligible to continue the coverage 
until the employee obtains coverage under another group policy, 
or for a period of 18 months after the termination or layoff 
from employment, whichever is shorter. 
    Subd. 3.  [NOTICE OF OPTIONS.] Upon termination of or 
layoff from employment of a covered employee, the employer shall 
inform the employee of: 
    (1) the employee's right to elect to continue the coverage; 
    (2) the amount the employee must pay monthly to the 
employer to retain the coverage; 
    (3) the manner in which and the office of the employer to 
which the payment to the employer must be made; and 
    (4) the time by which the payments to the employer must be 
made to retain coverage. 
    The employee has 60 days within which to elect coverage.  
The 60-day period shall begin to run on the date coverage would 
otherwise terminate or on the date upon which notice of the 
right to coverage is received, whichever is later. 
    Notice must be in writing and sent by first class certified 
mail to the employee's last known address which the employee has 
provided to the employer. 
    A notice in substantially the following form is 
sufficient:  "As a terminated or laid off employee, the law 
authorizes you to maintain your group insurance benefits for a 
period of up to 18 months.  To do so, you must notify your 
former employer within 60 days of your receipt of this notice 
that you intend to retain this coverage and must make a monthly 
payment of $............ at ............. by the ............. 
of each month." 
    Subd. 4.  [RESPONSIBILITY OF EMPLOYER AND INSURER.] If the 
employer fails to notify a covered employee of the options set 
forth in subdivision 3, or if after timely receipt of the 
monthly payment from a covered employee the employer fails to 
make the payment to the insurer, with the result that the 
employee's coverage is terminated, the employer is still liable 
for the employee's coverage to the same extent as the insurer 
would be if the coverage were still in effect. 
    Subd. 5.  [CONVERSION TO INDIVIDUAL POLICY.] A group 
insurance policy that provides posttermination or layoff 
coverage as required by this section must also include a 
provision allowing a covered employee, surviving spouse, or 
dependent at the expiration of the posttermination or layoff 
coverage provided by subdivision 2 to obtain from the insurer 
offering the group policy, at the employee's, spouse's, or 
dependent's option and expense, without further evidence of 
insurability and without interruption of coverage, an individual 
policy of insurance contract providing the same or substantially 
similar benefits. 
    A policy providing reduced benefits at a reduced premium 
rate may be accepted by the employee, the spouse, or a dependent 
in lieu of the coverage otherwise required by this subdivision.  
    Sec. 43.  Minnesota Statutes 1986, section 61A.28, 
subdivision 12, is amended to read:  
    Subd. 12.  [ADDITIONAL INVESTMENTS.] Investments of any 
kind, without regard to the categories, conditions, standards, 
or other limitations set forth in the foregoing subdivisions and 
section 61A.31, subdivision 3, except that the prohibitions in 
clause (d) of subdivision 3 remains applicable, may be made by a 
domestic life insurance company in an amount not to exceed the 
lesser of the following: 
    (1) Five percent of the company's total admitted assets as 
of the end of the preceding calendar year, or 
    (2) Fifty percent of the amount by which its capital and 
surplus as of the end of the preceding calendar year exceeds 
$675,000.  Provided, however, that a company's total investment 
under this section in the common stock of any corporation, other 
than the stock of the types of corporations specified in 
subdivision 6(a), may not exceed ten percent of the common stock 
of the corporation.  Provided, further, that no investment may 
be made under the authority of this clause or clause (1) by a 
company that has not completed five years of actual operation 
since the date of its first certificate of authority.  
    If, subsequent to being made under the provisions of this 
subdivision, an investment is determined to have become 
qualified or eligible under any of the other provisions of this 
chapter, the company may consider the investment as being held 
under the other provision and the investment need no longer be 
considered as having been made under the provisions of this 
subdivision.  
    In addition to the investments authorized by this 
subdivision, a domestic life insurance company may make 
qualified investments in any additional securities or property 
of the type authorized by subdivision 6, paragraph (f), with the 
written order of the commissioner.  This approval is at the 
discretion of the commissioner.  This authorization does not 
negate or reduce the investment authority granted in subdivision 
6, paragraph (f), or this subdivision. 
    Sec. 44.  Minnesota Statutes 1986, section 61B.09, is 
amended to read: 
    61B.09 [DUTIES AND POWERS OF THE COMMISSIONER.] 
    (a) Subdivision 1.  The commissioner shall: 
    (1) Notify the board of directors of the existence of an 
impaired insurer within three days after a determination of 
impairment is made or the commissioner receives notice of 
impairment; 
    (2) Upon request of the board of directors, provide the 
association with a statement of the premiums in the appropriate 
states for each member insurer; and 
    (3) When an impairment is declared and the amount 
determined, serve a demand upon the impaired insurer to make 
good the impairment within a reasonable time.  Notice to the 
impaired insurer shall constitute notice to its shareholders.  
The failure of the insurer to promptly comply with the demand 
shall not excuse the association from performance under sections 
61B.01 to 61B.16. 
    (b) Subd. 2.  The commissioner may, after notice and 
hearing, suspend or revoke the certificate of authority to 
transact insurance in this state of any member insurer which 
fails to pay an assessment when due or to comply with the plan 
of operation.  As an alternative, the commissioner may levy a 
forfeiture on any member insurer which fails to pay an 
assessment when due.  A forfeiture shall not exceed five percent 
of the unpaid assessment per month, but no forfeiture shall be 
less than $100 per month. 
    (c) Subd. 3.  Any action of the board of directors or the 
association may be appealed to the commissioner by any member 
insurer within 30 days of the occurrence notice of the action.  
Any final action or order of the commissioner shall be subject 
to judicial review in a court of competent jurisdiction, in the 
manner provided by chapter 14.  In lieu of the appeal to the 
commissioner under this subdivision, a claimant may seek 
judicial review of the board's actions.  
    (d) Subd. 4.  The liquidator, rehabilitator, or conservator 
of any impaired insurer may notify all interested persons of the 
effect of sections 61B.01 to 61B.16. 
    Sec. 45.  Minnesota Statutes 1986, section 62A.041, is 
amended to read: 
    62A.041 [MATERNITY BENEFITS; UNMARRIED WOMEN.] 
    Each group policy of accident and health insurance and each 
group health maintenance contract shall provide the same 
coverage for maternity benefits to unmarried women and minor 
female dependents that it provides to married women including 
the wives of employees choosing dependent family coverage.  If 
an unmarried insured or an unmarried enrollee is a parent of a 
dependent child, each group policy and each group contract shall 
provide the same coverage for that child as that provided for 
the child of a married employee choosing dependent family 
coverage if the insured or the enrollee elects dependent family 
coverage. 
    Each individual policy of accident and health insurance and 
each individual health maintenance contract shall provide the 
same coverage for maternity benefits to unmarried women and 
minor female dependents as that provided for married women.  If 
an unmarried insured or an unmarried enrollee is a parent of a 
dependent child, each individual policy and each individual 
contract shall also provide the same coverage for that child as 
that provided for the child of a married insured or a married 
enrollee choosing dependent family coverage if the insured or 
the enrollee elects dependent family coverage. 
    Except for policies which only provide coverage for 
specified diseases, each group subscriber contract of accident 
and health insurance or health maintenance contract, issued or 
renewed after August 1, 1987, shall include maternity benefits 
in the same manner as any other illness covered under the policy 
or contract.  
    For the purposes of this section, the term "maternity 
benefits" shall not include elective, induced abortion whether 
performed in a hospital, other abortion facility, or the office 
of a physician. 
    This section applies to policies and contracts issued, 
delivered, or renewed after August 1, 1985, that cover Minnesota 
residents. 
    Sec. 46.  Minnesota Statutes 1986, section 62A.043, is 
amended by adding a subdivision to read: 
    Subd. 3.  Except for policies which only provide coverage 
for specified diseases, no policy or certificate of health, 
medical, hospitalization, or accident and sickness insurance 
regulated under this chapter, or subscriber contract provided by 
a nonprofit health service plan corporation regulated under 
chapter 62C, or health maintenance organization regulated under 
chapter 62D, shall be issued, renewed, continued, delivered, 
issued for delivery, or executed in this state after August 1, 
1987, unless the policy, plan, or contract specifically provides 
coverage for surgical and nonsurgical treatment of 
temporomandibular joint disorder and craniomandibular disorder.  
Coverage shall be the same as that for treatment to any other 
joint in the body, and shall apply if the treatment is 
administered or prescribed by a physician or dentist. 
    Sec. 47.  Minnesota Statutes 1986, section 62A.141, is 
amended to read: 
    62A.141 [COVERAGE FOR HANDICAPPED DEPENDENTS.] 
    No group policy or plan of health and accident insurance 
regulated under this chapter, chapter 62C, or 62D, which 
provides for dependent coverage may be issued or renewed in this 
state after August 1, 1983, unless it covers the handicapped 
dependents of the insured, subscriber, or enrollee of the policy 
or plan.  Consequently, the policy or plan shall not contain any 
provision concerning preexisting condition limitations, 
insurability, eligibility, or health underwriting approval 
concerning handicapped dependents. 
    If ordered by the commissioner of commerce, the insurer of 
a Minnesota-domiciled nonprofit association which is composed 
solely of agricultural members may restrict coverage under this 
section to apply only to Minnesota residents. 
    Sec. 48.  Minnesota Statutes 1986, section 62A.146, is 
amended to read: 
    62A.146 [CONTINUATION OF BENEFITS TO SURVIVORS.] 
    No policy or plan of accident and health protection issued 
by an insurer, nonprofit health service plan corporation, or 
health maintenance organization, providing coverage of hospital 
or medical expense on either an expense incurred basis or other 
than an expense incurred basis which in addition to coverage of 
the insured, subscriber, or enrollee, also provides coverage to 
dependents, shall, except upon the written consent of the 
survivor or survivors of the deceased insured, subscriber or 
enrollee, terminate, suspend or otherwise restrict the 
participation in or the receipt of benefits otherwise payable 
under the policy or plan to the survivor or survivors until the 
earlier of the following dates:  
    (a) the date of remarriage of the surviving spouse becomes 
covered under another group health plan; or 
    (b) the date coverage would have terminated under the 
policy or plan had the insured, subscriber, or enrollee lived.  
    The survivor or survivors, in order to have the coverage 
and benefits extended, may be required to pay the entire cost of 
the protection on a monthly basis.  In no event shall the amount 
of premium or fee contributions charged exceed 102 percent of 
the cost to the plan for such period of coverage for other 
similarly situated spouses and dependent children who are not 
the survivors of a deceased insured, without regard to whether 
such cost is paid by the employer or employee.  Failure of the 
survivor to make premium or fee payments within 90 days after 
notice of the requirement to pay the premiums or fees shall be a 
basis for the termination of the coverage without written 
consent.  In event of termination by reason of the survivor's 
failure to make required premium or fee contributions, written 
notice of cancellation must be mailed to the survivor's last 
known address at least 30 days before the cancellation.  If the 
coverage is provided under a group policy or plan, any required 
premium or fee contributions for the coverage shall be paid by 
the survivor to the group policyholder or contract holder for 
remittance to the insurer, nonprofit health service plan 
corporation, or health maintenance organization.  
    Sec. 49.  Minnesota Statutes 1986, section 62A.152, 
subdivision 2, is amended to read:  
    Subd. 2.  [MINIMUM BENEFITS.] All group policies and all 
group subscriber contracts providing benefits for mental or 
nervous disorder treatments in a hospital shall also provide 
coverage, to on the same basis as coverage for other benefits 
for at least the extent of 80 percent of the first $750 of the 
cost of the usual and customary charges of the first ten hours 
of treatment incurred over a 12-month benefit period, for mental 
or nervous disorder consultation, diagnosis and treatment 
services delivered while the insured person is not a bed patient 
in a hospital, and at least 75 percent of the cost of the usual 
and customary charges for any additional hours of treatment 
during the same 12-month benefit period for serious and 
persistent mental or nervous disorders, if the services are 
furnished by (1) a licensed or accredited hospital, (2) a 
community mental health center or mental health clinic approved 
or licensed by the commissioner of human services or other 
authorized state agency, or (3) a licensed consulting 
psychologist licensed under the provisions of sections 148.87 to 
148.98, or a psychiatrist licensed under chapter 147.  Prior 
authorization from an accident and health insurance company, or 
a nonprofit health service corporation, shall be required for an 
extension of coverage beyond ten hours of treatment.  This prior 
authorization must be based upon the severity of the disorder, 
the patient's risk of deterioration without ongoing treatment 
and maintenance, degree of functional impairment, and a concise 
treatment plan.  Authorization for extended treatment may not 
exceed a maximum of 30 visit hours during any 12-month benefit 
period. 
    For purposes of this section, covered treatment for a minor 
shall include treatment for the family if family therapy is 
recommended by a provider listed above in item (1), (2) or (3). 
    Sec. 50.  Minnesota Statutes 1986, section 62A.17, is 
amended to read: 
    62A.17 [TERMINATION OF OR LAYOFF FROM EMPLOYMENT.] 
    Subdivision 1.  [CONTINUATION OF COVERAGE.] Every group 
insurance policy, group subscriber contract, and health care 
plan included within the provisions of section 62A.16, except 
policies, contracts, or health care plans covering employees of 
an agency of the federal government, shall contain a provision 
which permits every eligible covered employee who is voluntarily 
or involuntarily terminated or laid off from employment, if the 
policy, contract, or health care plan remains in force for 
active employees of the employer, to elect to continue the 
coverage for the employee and dependents. 
    An employee shall be considered to be laid off from 
employment if there is a reduction in hours to the point where 
the employee is no longer eligible under the policy, contract, 
or health care plan.  Termination shall not include discharge 
for gross misconduct.  
    Subd. 2.  [RESPONSIBILITY OF EMPLOYEE.] Every eligible 
covered employee electing to continue coverage shall pay the 
former employer, on a monthly basis, the cost of the continued 
coverage.  If the policy, contract, or health care plan is 
administered by a trust, every eligible covered employee 
electing to continue coverage shall pay the trust the cost of 
continued coverage according to the eligibility rules 
established by the trust.  In no event shall the amount of 
premium charged exceed 102 percent of the cost to the plan for 
such period of coverage for similarly situated employees with 
respect to whom neither termination nor layoff has occurred, 
without regard to whether such cost is paid by the employer or 
employee.  The employee shall be eligible to continue the 
coverage until reemployed and eligible for health care coverage 
under a group policy, contract, or plan sponsored by the same or 
another employer the employee becomes covered under another 
group health plan, or for a period of 12 18 months after the 
termination of or lay off from employment, whichever is shorter. 
    Subd. 3.  [ELIGIBILITY FOR CONTINUED COVERAGE.] An employee 
shall be eligible to make the election for the employee and 
dependents provided for in subdivision 1 if: 
    (a) In the period preceding the termination of or lay off 
from employment, the employee and dependents were covered 
through employment by a group insurance policy, subscriber's 
contract, or health care plan included within the provisions of 
section 62A.16; 
    (b) The termination of or lay off from employment was for 
reasons other than the discontinuance of the business, 
bankruptcy, or the employee's disability or retirement. 
    Subd. 4.  [RESPONSIBILITY OF EMPLOYER.] After timely 
receipt of the monthly payment from an eligible a covered 
employee, if the employer, or the trustee, if the policy, 
contract, or health care plan is administered by a trust, fails 
to make the payment to the insurer, nonprofit health service 
plan corporation, or health maintenance organization, with the 
result that the employee's coverage is terminated, the employer 
or trust shall become liable for the employee's coverage to the 
same extent as the insurer, nonprofit health service plan 
corporation, or health maintenance organization would be if the 
coverage were still in effect. 
    In the case of a policy, contract or plan administered by a 
trust, the employer must notify the trustee within 30 days of 
the termination or layoff of a covered employee of the name and 
last known address of the employee. 
    If the employer or trust fails to notify a covered 
employee, the employer or trust shall continue to remain liable 
for the employee's coverage to the same extent as the insurer 
would be if the coverage were still in effect. 
    Subd. 5.  [NOTICE OF OPTIONS.] Upon the termination of or 
lay off from employment of an eligible employee, the employer 
shall inform the employee within ten days after termination or 
lay off of: 
    (a)  the right to elect to continue the coverage; 
    (b) the amount the employee must pay monthly to the 
employer to retain the coverage; 
    (c) the manner in which and the office of the employer to 
which the payment to the employer must be made; and 
    (d) the time by which the payments to the employer must be 
made to retain coverage. 
    If the policy, contract, or health care plan is 
administered by a trust, the employer is relieved of the 
obligation imposed by clauses (a) to (d).  The trust shall 
inform the employee of the information required by clauses (a) 
to (d). 
    The employee shall have 60 days within which to elect 
coverage.  The 60-day period shall begin to run on the date plan 
coverage would otherwise terminate or on the date upon which 
notice of the right to coverage is received, whichever is later. 
    Notice may must be in writing and sent by first class mail 
to the employee's last known address which the employee has 
provided the employer or trust.  If the employer or trust fails 
to so notify the employee who is properly enrolled in the 
program, the employee shall have the option to retain coverage 
if the employee makes this election within 60 days of the date 
terminated or laid off by making the proper payment to the 
employer or trust to provide continuous coverage. 
    A notice in substantially the following form shall be 
sufficient.:  "As a terminated or laid off employee, the law 
authorizes you to maintain your group medical insurance for a 
period of up to 12 18 months.  To do so you must notify your 
former employer within ten 60 days of your receipt of this 
notice that you intend to retain this coverage and must make a 
monthly payment of $.......... to ........... at .......... by 
the ............... of each month."  
    Subd. 6.  [CONVERSION TO INDIVIDUAL POLICY.] A group 
insurance policy that provides posttermination or layoff 
coverage as required by this section shall also include a 
provision allowing a covered employee, surviving spouse, or 
dependent at the expiration of the posttermination or layoff 
coverage provided by subdivision 2 to obtain from the insurer 
offering the group policy or group subscriber contract, at the 
employee's, spouse's, or dependent's option and expense, without 
further evidence of insurability and without interruption of 
coverage, an individual policy of insurance or an individual 
subscriber contract providing at least the minimum benefits of a 
qualified plan as prescribed by section 62E.06 and the option of 
a number three qualified plan, a number two qualified plan, and 
a number one qualified plan as provided by section 62E.06, 
subdivisions 1 to 3, provided application is made to the insurer 
within 30 days following notice of the expiration of the 
continued coverage and upon payment of the appropriate premium.  
The required conversion contract must treat pregnancy the same 
as any other covered illness under the conversion contract.  A 
health maintenance contract issued by a health maintenance 
organization that provides posttermination or layoff coverage as 
required by this section shall also include a provision allowing 
a former employee, surviving spouse, or dependent at the 
expiration of the posttermination or layoff coverage provided in 
subdivision 2 to obtain from the health maintenance 
organization, at the former employee's, spouse's, or dependent's 
option and expense, without further evidence of insurability and 
without interruption of coverage, an individual health 
maintenance contract.  Effective January 1, 1985, enrollees who 
have become nonresidents of the health maintenance 
organization's service area shall be given the option, to be 
arranged by the health maintenance organization, of a number 
three qualified plan, a number two qualified plan, or a number 
one qualified plan as provided by section 62E.06, subdivisions 1 
to 3 if an arrangement with an insurer can reasonably be made by 
the health maintenance organization.  This option shall be made 
available at the enrollee's expense, without further evidence of 
insurability and without interruption of coverage.  
    A policy providing reduced benefits at a reduced premium 
rate may be accepted by the employee, the spouse, or a dependent 
in lieu of the optional coverage otherwise required by this 
subdivision. 
    The individual policy or contract shall be renewable at the 
covered under another qualified plan as defined in section 
62E.02, subdivision 4, up to age 65 or to the day before the 
date of eligibility for coverage under title XVIII of the Social 
Security Act, as amended.  Any revisions in the table of rate 
for the individual policy shall apply to the covered person's 
original age at entry and shall apply equally to all similar 
policies issued by the insurer. 
    Sec. 51.  [62A.20] [COVERAGE OF CURRENT SPOUSE AND 
CHILDREN.] 
    Subdivision 1.  [REQUIREMENT.] Every policy of accident and 
health insurance providing coverage of hospital or medical 
expense on either an expense-incurred basis or other than an 
expense-incurred basis, which in addition to covering the 
insured also provides coverage to the spouse and dependent 
children of the insured shall contain: 
    (1) a provision which permits the spouse and dependent 
children to elect to continue coverage when the insured becomes 
enrolled for benefits under Title XVIII of the Social Security 
Act (Medicare); and 
    (2) a provision which permits the dependent children to 
continue coverage when they cease to be dependent children under 
the generally applicable requirement of the plan. 
    Subd. 2.  [CONTINUATION PRIVILEGE.] The coverage described 
in subdivision 1 may be continued until the earlier of the 
following dates: 
    (1) the date coverage would otherwise terminate under the 
policy; 
    (2) 36 months after continuation by the spouse or dependent 
was elected; or 
    (3) the spouse or dependent children become covered under 
another group health plan. 
    If coverage is provided under a group policy, any required 
premium contributions for the coverage shall be paid by the 
insured on a monthly basis to the group policyholder for 
remittance to the insurer.  In no event shall the amount of 
premium charged exceed 102 percent of the cost to the plan for 
such period of coverage for other similarly situated spouse and 
dependent children to whom subdivision 1 is not applicable, 
without regard to whether such cost is paid by the employer or 
employee. 
    Sec. 52.  Minnesota Statutes 1986, section 62A.21, is 
amended to read: 
    62A.21 [CONVERSION PRIVILEGES FOR INSURED FORMER SPOUSES 
AND CHILDREN.] 
    Subdivision 1.  No policy of accident and health insurance 
providing coverage of hospital or medical expense on either an 
expense incurred basis or other than an expense incurred basis, 
which in addition to covering the insured also provides coverage 
to the spouse of the insured shall contain a provision for 
termination of coverage for a spouse covered under the policy 
solely as a result of a break in the marital relationship except 
by reason of an entry of a valid decree of dissolution of 
marriage. 
    Subd. 2a.  [CONTINUATION PRIVILEGE.] Every policy described 
in subdivision 1 shall contain a provision which permits 
continuation of coverage under the policy for the insured's 
former spouse and dependent children upon entry of a valid 
decree of dissolution of marriage, if the decree requires the 
insured to provide continued coverage for those persons.  The 
coverage may shall be continued until the earlier of the 
following dates: 
    (a) The date of remarriage of either the insured or the 
insured's former spouse becomes covered under any other group 
health plan; or 
    (b) The date coverage would otherwise terminate under the 
policy. 
    If the coverage is provided under a group policy, any 
required premium contributions for the coverage shall be paid by 
the insured on a monthly basis to the group policyholder for 
remittance to the insurer.  In no event shall the amount of 
premium charged exceed 102 percent of the cost to the plan for 
such period of coverage for other similarly situated spouses and 
dependent children with respect to whom the marital relationship 
has not dissolved, without regard to whether such cost is paid 
by the employer or employee. 
    Subd. 2b.  [CONVERSION PRIVILEGE.] Every policy described 
in subdivision 1 shall contain a provision allowing a former 
spouse and dependent children of an insured, without providing 
evidence of insurability, to obtain from the insurer at the 
expiration of any continuation of coverage required under 
subdivision 2a or section sections 62A.146 and 62A.20, or upon 
termination of coverage by reason of an entry of a valid decree 
of dissolution which does not require the insured to provide 
continued coverage for the former spouse and dependent children, 
conversion coverage providing at least the minimum benefits of a 
qualified plan as prescribed by section 62E.06 and the option of 
a number three qualified plan, a number two qualified plan, a 
number one qualified plan as provided by section 62E.06, 
subdivisions 1 to 3, provided application is made to the insurer 
within 30 days following notice of the expiration of the 
continued coverage and upon payment of the appropriate premium.  
A policy providing reduced benefits at a reduced premium rate 
may be accepted by the former spouse and dependent children in 
lieu of the optional coverage otherwise required by this 
subdivision.  The individual policy shall be renewable at the 
option of the former spouse as long as the former spouse is not 
covered under another qualified plan as defined in section 
62E.02, subdivision 4, up to age 65 or to the day before the 
date of eligibility for coverage under Title XVIII of the Social 
Security Act, as amended.  Any revisions in the table of rate 
for the individual policy shall apply to the former spouse's 
original age at entry, and shall apply equally to all similar 
policies issued by the insurer. 
    Subd. 3.  Subdivision 1 applies to every policy of accident 
and health insurance which is delivered, issued for delivery, 
renewed or amended on or after July 19, 1977. 
    Subdivisions 2a and 2b apply to every policy of accident 
and health insurance which is delivered, issued for delivery, 
renewed, or amended on or after August 1, 1981.  
    Sec. 53.  Minnesota Statutes 1986, section 62A.27, is 
amended to read:  
    62A.27 [COVERAGE FOR ADOPTED CHILDREN.] 
    No individual or group policy or plan of health and 
accident insurance regulated under this chapter or chapter 64B, 
subscriber contract regulated under chapter 62C, or health 
maintenance contract regulated under chapter 62D, providing 
coverage for more than one person may be issued or renewed in 
this state after August 1, 1983, unless the policy, plan, or 
contract covers adopted children of the insured, subscriber, or 
enrollee on the same basis as other dependents.  Consequently, 
the policy or plan shall not contain any provision concerning 
preexisting condition limitations, insurability, eligibility, or 
health underwriting approval concerning adopted children.  
    The coverage required by this section is effective from the 
date of placement for the purpose of adoption and continues 
unless the placement is disrupted prior to legal adoption and 
the child is removed from placement. 
    Sec. 54.  [62A.29] [SURETY BOND OR SECURITY FOR CERTAIN 
HEALTH BENEFIT PLANS.] 
    Subdivision 1.  [SURETY BOND OR SECURITY REQUIREMENT.] Any 
employer, except the state and its political subdivisions as 
defined in section 65B.43, subdivision 20, who provides a health 
benefit plan to its Minnesota employees, which is to some extent 
self-insured by the employer, and who purchases stop-loss 
insurance coverage, or any other insurance coverage, in 
connection with the health benefit plan, shall annually file 
with the commissioner, within 60 days of the end of the 
employer's fiscal year, security acceptable to the commissioner 
in an amount specified under subdivision 2, or a surety bond in 
the form and amount prescribed by subdivisions 2 and 3.  An 
acceptable surety bond is one issued by a corporate surety 
authorized by the commissioner to transact this business in the 
state of Minnesota for the purposes of this section.  The term 
"Minnesota employees" includes any Minnesota resident who is 
employed by the employer. 
    Subd. 2.  [AMOUNT OF SURETY BOND OR SECURITY.] The amount 
of surety bond or acceptable security required by subdivision 1 
shall be equal to one-fourth of the projected annual medical and 
hospital expenses to be incurred by the employer or $1,000, 
whichever is greater, with respect to its Minnesota employees by 
reason of the portion of the employer's health benefit plan 
which is self-insured by the employer.  
    Subd. 3.  [FORM OF THE SURETY BOND.] The surety bond shall 
provide as follows: 
 SURETY BOND 
    KNOW ALL PERSONS BY THESE PRESENTS:  That (entity to be 
bonded), of (location), (hereinafter called the "principal"), as 
principal, and (bonding company name), a (name of state) 
corporation, of (location) (hereinafter called the "surety"), as 
surety are held and firmly bound unto the commissioner of 
commerce of the state of Minnesota for the use and benefit of 
Minnesota residents entitled to health benefits from the 
principal in the sum of ($.........), for the payment of which 
well and truly to be made, the principal binds itself, its 
successor and assigns, and the surety binds itself and its 
successors and assigns, jointly and severally, firmly by these 
presents. 
    WHEREAS, in accordance with section (......) of the 
Minnesota Statute, principal is required to file a surety bond 
with the commissioner of commerce of the state of Minnesota. 
     NOW, THEREFORE, the condition of this obligation is such 
that if the said principal shall, according to the terms, 
provisions, and limitations of principals' health benefit 
program for its Minnesota employees, pay all of its liabilities 
and obligations, including all benefits as provided in the 
attached plan, then, this obligation shall be null and void, 
otherwise to remain in full force and effect, subject, however, 
to the following terms and conditions: 
    1.  The liability of the surety is limited to the payment 
of the benefits of the employee benefit plan which are payable 
by the principal and within the amount of the bond.  The surety 
shall be bound to payments owed by the principal for obligations 
arising from a default of the principal or any loss incurred 
during the period to which the bond applies.  
    2.  In the event of any default on the part of the 
principal to abide by the terms and provision of the attached 
plan, the commissioner of commerce may, upon ten-days notice to 
the surety and opportunity to be heard, require the surety to 
pay all of the principal's past and future obligations under the 
attached plan with respect to the principal's Minnesota 
employees. 
    3.  Service on the surety shall be deemed to be service on 
the principals. 
    4.  This bond shall be in effect from ............... to 
................, and may not be canceled by either the surety 
or the principal. 
    5.  Any Minnesota employee of principal aggrieved by a 
default of principal under the attached plan, and/or the 
commissioner of commerce on behalf of any such employee, may 
enforce the provisions of this bond. 
    6.  This bond shall become effective at (time of day, 
month, day, year). 
    IN TESTIMONY WHEREOF, said principals and said surety have 
caused this instrument to be signed by their respective, duly 
authorized officers and their corporate seals to be hereunto 
affixed this (day, month, year). 
Signed, sealed and delivered in 
 the presence of:                         Corporation Name 
                                          ____________________ 
                                                               
                                          Bonding Company Name 
                                          By:                   
    Subd. 4.  [PENALTY FOR FAILURE TO COMPLY.] The commissioner 
of revenue shall deny any business tax deduction to an employer 
for the employer's contribution to a health plan for the period 
which the employer fails to comply with this section.  This 
section does not apply to trusts established under chapter 62H 
which have been approved by the commissioner. 
    Subd. 5.  [PETITION TO REDUCE BOND OR SECURITY AMOUNT.] An 
employer subject to this section may petition the commissioner 
to, and the commissioner may, allow the use of a surety bond not 
in the form specified in subdivision 3, or grant a reduction in 
the amount of the surety bond or security required. 
     In reviewing a petition submitted under this subdivision, 
the commissioner must consider, in addition to any other 
factors, information provided by the petitioner in regard to the 
following: 
    (1) the size of the petitioner's business; 
    (2) the number of employees; 
    (3) the cost of providing the bond or security and the 
effect the cost will have on the petitioner's financial 
condition; 
    (4) whether the cost of the bond or security will impair 
the petitioner's ability to self-insure; and 
    (5) the petitioner's likelihood of being able to meet the 
petitioner's future obligations in regard to the health plan. 
    Sec. 55.  Minnesota Statutes 1986, section 62A.31, 
subdivision 1a, is amended to read:  
    Subd. 1a.  [APPLICATION TO CERTAIN POLICIES.] The 
requirements of sections 62A.31 to 62A.44 shall not apply to 
disability income protection insurance policies, long-term care 
policies issued pursuant to sections 62A.46 to 62A.56, or group 
policies of accident and health insurance which do not purport 
to supplement medicare issued to any of the following groups:  
    (a) A policy issued to an employer or employers or to the 
trustee of a fund established by an employer where only 
employees or retirees, and dependents of employees or retirees, 
are eligible for coverage.  
    (b) A policy issued to a labor union or similar employee 
organization.  
    (c) A policy issued to an association, a trust or the 
trustee of a fund established, created or maintained for the 
benefit of members of one or more associations.  The association 
or associations shall have at the outset a minimum of 100 
persons; shall have been organized and maintained in good faith 
for purposes other than that of obtaining insurance; shall have 
a constitution and bylaws which provide that (1) the association 
or associations hold regular meetings not less frequently than 
annually to further purposes of the members, (2) except for 
credit unions, the association or associations collect dues or 
solicit contributions from members, and (3) the members have 
voting privileges and representation on the governing board and 
committees, and (4) the members are not, within the first 30 
days of membership, directly solicited, offered, or sold a 
long-term care policy or Medicare supplement policy if the 
policy is available as an association benefit.  This clause does 
not prohibit direct solicitations, offers, or sales made 
exclusively by mail. 
    Sec. 56.  Minnesota Statutes 1986, section 62A.43, 
subdivision 2, is amended to read: 
    Subd. 2.  [REFUNDS.] Notwithstanding the provisions of 
section 62A.38, an insurer which issues a medicare supplement 
plan to any person who has one plan then in effect, except as 
permitted in subdivision 1, shall, at the request of the 
insured, either refund the premiums or pay any claims on the 
policy, whichever is greater.  Any refund of premium pursuant to 
this section or section 62A.38 shall be sent by the insurer 
directly to the insured within 15 days of the request by the 
insured. 
    Sec. 57.  Minnesota Statutes 1986, section 62A.43, is 
amended by adding a subdivision to read: 
     Subd. 4.  [OTHER POLICIES NOT PROHIBITED.] The prohibition 
in this section against the sale of duplicate Medicare 
supplement coverage does not preclude the sale of insurance 
coverage, such as travel, accident, and sickness coverage, the 
effect or purpose of which is not to supplement Medicare 
coverage.  Notwithstanding this provision, if the commissioner 
determines that the coverage being sold is in fact Medicare 
supplement insurance, the commissioner shall notify the insurer 
in writing of the determination.  If the insurer does not 
thereafter comply with sections 62A.31 to 62A.44, the 
commissioner may, pursuant to chapter 14, revoke or suspend the 
insurer's authority to sell accident and health insurance in 
this state or impose a civil penalty not to exceed $10,000, or 
both. 
    Sec. 58.  Minnesota Statutes 1986, section 62A.46, is 
amended by adding a subdivision to read: 
    Subd. 11.  [BENEFIT PERIOD.] "Benefit period" means one or 
more separate or combined periods of confinement covered by a 
long-term care policy in a nursing facility or at home while 
receiving home care services.  A benefit period begins on the 
first day the insured receives a benefit under the policy and 
ends when the insured has received no benefits for the same or 
related cause for an interval of 180 consecutive days. 
    Sec. 59.  Minnesota Statutes 1986, section 62A.48, 
subdivision 1, is amended to read:  
    Subdivision 1.  [POLICY REQUIREMENTS.] No individual or 
group policy, certificate, subscriber contract, or other 
evidence of coverage of nursing home care or other long-term 
care services shall be offered, issued, delivered, or renewed in 
this state, whether or not the policy is issued in this state, 
unless the policy is offered, issued, delivered, or renewed by a 
qualified insurer and the policy satisfies the requirements of 
sections 62A.46 to 62A.56.  A long-term care policy must cover 
medically prescribed long-term care in nursing facilities and at 
least the medically prescribed long-term home care services in 
section 62A.46, subdivision 4, clauses (1) to (5), provided by a 
home health agency.  Coverage under a long-term care policy AA 
must include:  a maximum lifetime benefit limit of at least 
$100,000 for services, and nursing facility and home care 
coverages must not be subject to separate lifetime maximums, and 
a requirement of prior hospitalization for up to one day may be 
imposed only for long-term care in a nursing facility.  Coverage 
under a long-term care policy A must include:  a maximum 
lifetime benefit limit of at least $50,000 for services, nursing 
facility and home care coverages must not be subject to separate 
lifetime maximums, and a requirement of prior hospitalization 
for up to three days may be imposed for long-term care in a 
nursing facility or home care services.  If long-term care 
policies require the policyholder to be admitted to a nursing 
facility or begin home care services within a specified period 
after discharge from a hospital, that period may be no less than 
30 days.  
    Coverage under either policy designation must cover 
preexisting conditions during the first six months of coverage 
if the insured was not diagnosed or treated for the particular 
condition during the 90 days immediately preceding the effective 
date of coverage.  Coverage under either policy designation may 
include a waiting period of up to 90 days before benefits are 
paid, but there must be no more than one waiting period per 
benefit period.  No policy may exclude coverage for mental or 
nervous disorders which have a demonstrable organic cause, such 
as Alzheimer's and related dementias.  No policy may require the 
insured to meet a prior hospitalization test more than once 
during a single benefit period.  The policy must include a 
provision that the plan will not be canceled or renewal refused 
except on the grounds of nonpayment of the premium, provided 
that the insurer may change the premium rate on a class basis on 
any policy anniversary date.  Policy options include A provision 
that the policyholder may elect to have the premium paid in full 
at age 65 by payment of a higher premium up to age 65 and may be 
offered.  A provision that the premium would be waived during 
any period in which benefits are being paid to the 
insured during confinement in a nursing facility must be 
included.  A nongroup policyholder may return a policy within 30 
days of its delivery and have the premium refunded in full, less 
any benefits paid under the policy, if the policyholder is not 
satisfied for any reason. 
    Sec. 60.  Minnesota Statutes 1986, section 62A.48, 
subdivision 2, is amended to read: 
    Subd. 2.  [PER DIEM COVERAGE.] If benefits are provided on 
a per diem basis, the minimum daily benefit for care in a 
nursing facility must be the lesser of $60 or actual charges 
under a long-term care policy AA or the lesser of $40 or actual 
charges under a long-term care policy A and the minimum daily 
benefit per visit for home care under a long-term care policy AA 
or A must be the lesser of $25 or actual charges under a 
long-term care policy AA or the lesser of $25 or actual charges 
for nurse and therapy services and $20 for home health aide and 
nonmedical services under a long-term care policy A.  If home 
care services are provided less frequently than daily, the 
minimum benefit is the lesser of actual charges or an amount 
determined by multiplying the number of days of the period 
during which services will be provided, or a reasonable interval 
of the service period, by $25 and dividing the resulting amount 
by the number of days during this period on which home care 
services were rendered.  The home care services benefit must 
cover at least seven paid visits per week. 
    Sec. 61.  Minnesota Statutes 1986, section 62A.48, 
subdivision 6, is amended to read:  
    Subd. 6.  [COORDINATION OF BENEFITS.] A long-term care 
policy shall may be secondary coverage for services provided 
under sections 62A.46 to 62A.56.  Nothing in sections 62A.46 to 
62A.56 shall require the secondary payor to pay the obligations 
of the primary payor nor shall it prevent the secondary payor 
from recovering from the primary payor the amount of any 
obligation of the primary payor that the secondary payor elects 
to pay. 
    There shall be no coordination of benefits between a 
long-term care policy and a policy designed primarily to provide 
coverage payable on a per diem, fixed indemnity or 
nonexpense-incurred basis, or a policy that provides only 
accident coverage.  
    Sec. 62.  Minnesota Statutes 1986, section 62A.48, is 
amended by adding a subdivision to read: 
     Subd. 7.  [EXISTING POLICIES.] Nothing in sections 62A.46 
to 62A.56 prohibits the renewal of policies sold outside the 
state of Minnesota to persons who at the time of sale were not 
residents of the state of Minnesota. 
    Sec. 63.  Minnesota Statutes 1986, section 62A.50, 
subdivision 3, is amended to read:  
    Subd. 3.  [DISCLOSURES.] No long-term care policy shall be 
offered or delivered in this state, whether or not the policy is 
issued in this state, and no certificate of coverage under a 
group long-term care policy shall be offered or delivered in 
this state, unless a statement containing at least the following 
information is delivered to the applicant at the time the 
application is made: 
    (1) a description of the benefits and coverage provided by 
the policy and the differences between this policy, a 
supplemental medicare policy and the benefits to which an 
individual is entitled under parts A and B of medicare and the 
differences between policy designations A and AA; 
    (2) a statement of the exceptions and limitations in the 
policy including the following language, as applicable, in bold 
print:  "THIS POLICY DOES NOT COVER ALL NURSING CARE FACILITIES 
OR NURSING HOME OR HOME CARE EXPENSES AND DOES NOT COVER 
RESIDENTIAL CARE.  READ YOUR POLICY CAREFULLY TO DETERMINE WHICH 
FACILITIES AND EXPENSES ARE COVERED BY YOUR POLICY."; 
    (3) a statement of the renewal provisions including any 
reservation by the insurer of the right to change premiums; 
    (4) a statement that the outline of coverage is a summary 
of the policy issued or applied for and that the policy should 
be consulted to determine governing contractual provisions; 
    (5) an explanation of the policy's loss ratio including at 
least the following language:  "This means that, on the average, 
policyholders may expect that $........ of every $100 in premium 
will be returned as benefits to policyholders over the life of 
the contract."; and 
    (6) a statement of the out-of-pocket expenses, including 
deductibles and copayments for which the insured is responsible, 
and an explanation of the specific out-of-pocket expenses that 
may be accumulated toward any out-of-pocket maximum as specified 
in the policy. 
    Sec. 64.  Minnesota Statutes 1986, section 62D.05, is 
amended by adding a subdivision to read: 
    Subd. 6.  [SUPPLEMENTAL BENEFITS.] A health maintenance 
organization may, as a supplemental benefit, provide coverage to 
its enrollees for health care services and supplies received 
from providers who are not employed by, under contract with, or 
otherwise affiliated with the health maintenance organization.  
The commissioner may, pursuant to chapter 14, adopt, enforce, 
and administer rules relating to this subdivision, including:  
rules insuring that these benefits are supplementary and not 
substitutes for comprehensive health maintenance services; rules 
relating to protection against insolvency, including the 
establishment of necessary financial reserves; rules relating to 
appropriate standards for claims processing; rules relating to 
marketing practices; and other rules necessary for the effective 
and efficient administration of this subdivision.  The 
commissioner, in adopting rules, shall give consideration to 
existing laws and rules administered and enforced by the 
department of commerce relating to health insurance plans.  
Except as otherwise provided by law, a health maintenance 
organization may not advertise, offer, or enter into contracts 
for the coverage described in this subdivision until 30 days 
after the effective date of rules adopted by the commissioner of 
health to implement this subdivision. 
    Sec. 65.  Minnesota Statutes 1986, section 62D.102, is 
amended to read: 
    62D.102 [MINIMUM BENEFITS.] 
    In addition to minimum requirements established in other 
sections, all group health maintenance contracts providing 
benefits for mental or nervous disorder treatments in a hospital 
shall also provide coverage for at least ten hours of treatment 
over a 12-month period with a copayment not to exceed the 
greater of $10 or 20 percent of the applicable usual and 
customary charge for mental or nervous disorder consultation, 
diagnosis and treatment services delivered while the enrollee is 
not a bed patient in a hospital and at least 75 percent of the 
cost of the usual and customary charges for any additional hours 
of ambulatory mental health treatment during the same 12-month 
benefit period for serious and persistent mental or nervous 
disorders. 
    Prior authorization may be required for an extension of 
coverage beyond ten hours of treatment.  This prior 
authorization must be based upon the severity of the disorder, 
the patient's risk of deterioration without ongoing treatment 
and maintenance, degree of functional impairment, and a concise 
treatment plan.  Authorization for extended treatment may not 
exceed a maximum of 30 visit hours during any 12-month benefit 
period. 
    For purposes of this section, covered treatment for a minor 
shall include treatment for the family if family therapy is 
recommended by a health maintenance organization provider. 
    Sec. 66.  Minnesota Statutes 1986, section 62E.06, 
subdivision 1, is amended to read:  
    Subdivision 1.  [NUMBER THREE PLAN.] A plan of health 
coverage shall be certified as a number three qualified plan if 
it otherwise meets the requirements established by chapters 62A 
and 62C, and the other laws of this state, whether or not the 
policy is issued in Minnesota, and meets or exceeds the 
following minimum standards: 
    (a) The minimum benefits for a covered individual shall, 
subject to the other provisions of this subdivision, be equal to 
at least 80 percent of the cost of covered services in excess of 
an annual deductible which does not exceed $150 per person.  The 
coverage shall include a limitation of $3,000 per person on 
total annual out-of-pocket expenses for services covered under 
this subdivision.  The coverage shall be subject to a maximum 
lifetime benefit of not less than $250,000. 
    The $3,000 limitation on total annual out-of-pocket 
expenses and the $250,000 maximum lifetime benefit shall not be 
subject to change or substitution by use of an actuarially 
equivalent benefit. 
    (b) Covered expenses shall be the usual and customary 
charges for the following services and articles when prescribed 
by a physician: 
    (1) hospital services; 
    (2) professional services for the diagnosis or treatment of 
injuries, illnesses, or conditions, other than outpatient mental 
or dental, which are rendered by a physician or at the 
physician's direction; 
    (3) drugs requiring a physician's prescription; 
    (4) services of a nursing home for not more than 120 days 
in a year if the services would qualify as reimbursable services 
under medicare; 
    (5) services of a home health agency if the services would 
qualify as reimbursable services under medicare; 
    (6) use of radium or other radioactive materials; 
    (7) oxygen; 
    (8) anesthetics; 
    (9) prostheses other than dental; 
    (10) rental or purchase, as appropriate, of durable medical 
equipment other than eyeglasses and hearing aids; 
    (11) diagnostic X-rays and laboratory tests; 
    (12) oral surgery for partially or completely unerupted 
impacted teeth, a tooth root without the extraction of the 
entire tooth, or the gums and tissues of the mouth when not 
performed in connection with the extraction or repair of teeth; 
    (13) services of a physical therapist; and 
    (14) transportation provided by licensed ambulance service 
to the nearest facility qualified to treat the condition; or a 
reasonable mileage rate for transportation to a kidney dialysis 
center for treatment; and 
     (15) services of an occupational therapist. 
    (c) Covered expenses for the services and articles 
specified in this subdivision do not include the following: 
    (1) any charge for care for injury or disease either (i) 
arising out of an injury in the course of employment and subject 
to a workers' compensation or similar law, (ii) for which 
benefits are payable without regard to fault under coverage 
statutorily required to be contained in any motor vehicle, or 
other liability insurance policy or equivalent self-insurance, 
or (iii) for which benefits are payable under another policy of 
accident and health insurance, medicare or any other 
governmental program except as otherwise provided by law; 
    (2) any charge for treatment for cosmetic purposes other 
than for reconstructive surgery when such service is incidental 
to or follows surgery resulting from injury, sickness or other 
diseases of the involved part or when such service is performed 
on a covered dependent child because of congenital disease or 
anomaly which has resulted in a functional defect as determined 
by the attending physician; 
    (3) care which is primarily for custodial or domiciliary 
purposes which would not qualify as eligible services under 
medicare; 
    (4) any charge for confinement in a private room to the 
extent it is in excess of the institution's charge for its most 
common semiprivate room, unless a private room is prescribed as 
medically necessary by a physician, provided, however, that if 
the institution does not have semiprivate rooms, its most common 
semiprivate room charge shall be considered to be 90 percent of 
its lowest private room charge; 
    (5) that part of any charge for services or articles 
rendered or prescribed by a physician, dentist, or other health 
care personnel which exceeds the prevailing charge in the 
locality where the service is provided; and 
    (6) any charge for services or articles the provision of 
which is not within the scope of authorized practice of the 
institution or individual rendering the services or articles. 
    (d) The minimum benefits for a qualified plan shall 
include, in addition to those benefits specified in clauses (a) 
and (e), benefits for well baby care, effective July 1, 1980, 
subject to applicable deductibles, coinsurance provisions, and 
maximum lifetime benefit limitations. 
    (e) Effective July 1, 1979, the minimum benefits of a 
qualified plan shall include, in addition to those benefits 
specified in clause (a), a second opinion from a physician on 
all surgical procedures expected to cost a total of $500 or more 
in physician, laboratory and hospital fees, provided that the 
coverage need not include the repetition of any diagnostic tests.
    (f) Effective August 1, 1985, the minimum benefits of a 
qualified plan must include, in addition to the benefits 
specified in clauses (a), (d), and (e), coverage for special 
dietary treatment for phenylketonuria when recommended by a 
physician. 
     (g) Outpatient mental health coverage is subject to section 
62A.152, subdivision 2. 
    Sec. 67.  Minnesota Statutes 1986, section 62E.10, 
subdivision 2, is amended to read: 
    Subd. 2.  [BOARD OF DIRECTORS; ORGANIZATION.] The board of 
directors of the association shall be made up of seven 
individuals nine members as follows:  five insurer directors 
selected by participating members, subject to approval by the 
commissioner and two; four public members appointed by the 
governor directors selected by the commissioner.  Public members 
may include licensed insurance agents.  In determining voting 
rights at members' meetings, each member shall be entitled to 
vote in person or proxy.  The vote shall be a weighted vote 
based upon the member's cost of self-insurance, accident and 
health insurance premium, subscriber contract charges, or health 
maintenance contract payment derived from or on behalf of 
Minnesota residents in the previous calendar year, as determined 
by the commissioner.  In approving members directors of the 
board, the commissioner shall consider, among other things, 
whether all types of members are fairly represented.  Members of 
the board Insurer directors may be reimbursed from the money of 
the association for expenses incurred by them as members 
directors, but shall not otherwise be compensated by the 
association for their services.  The costs of conducting 
meetings of the association and its board of directors shall be 
borne by members of the association. 
    Sec. 68.  Minnesota Statutes 1986, section 62E.10, is 
amended by adding a subdivision to read: 
    Subd. 2a.  [APPEALS.] A person may appeal to the 
commissioner within 30 days after notice of an action, ruling, 
or decision by the board.  
    A final action or order of the commissioner under this 
subdivision is subject to judicial review in the manner provided 
by chapter 14.  
     In lieu of the appeal to the commissioner, a person may 
seek judicial review of the board's action. 
    Sec. 69.  Minnesota Statutes 1986, section 62E.10, is 
amended by adding a subdivision to read:  
    Subd. 9.  [EXPERIMENTAL DELIVERY METHOD.] The association 
may petition the commissioner of commerce for a waiver to allow 
the experimental use of alternative means of health care 
delivery.  The commissioner may approve the use of the 
alternative means the commissioner considers appropriate.  The 
commissioner may waive any of the requirements of chapters 60A, 
62A, 62D, and 62E in granting the waiver.  The commissioner may 
also grant to the association any additional powers as are 
necessary to facilitate the specific waiver.  
    This subdivision is effective until August 1, 1989. 
    Sec. 70.  Minnesota Statutes 1986, section 62E.14, is 
amended by adding a subdivision to read: 
    Subd. 5.  [TERMINATED EMPLOYEES.] An employee who is 
voluntarily or involuntarily terminated or laid off from 
employment and unable to exercise the option to continue 
coverage under section 62A.17 may enroll, within 60 days of 
termination or lay-off, with a waiver of the preexisting 
condition limitation set forth in subdivision 3 and a waiver of 
the evidence of rejection set forth in subdivision 1, paragraph 
(c). 
    Sec. 71.  [62E.18] [HEALTH INSURANCE FOR RETIRED EMPLOYEES 
NOT ELIGIBLE FOR MEDICARE.] 
    A Minnesota resident who is age 65 or over and is not 
eligible for the health insurance benefits of the federal 
Medicare program is entitled to purchase the benefits of a 
qualified plan, one or two, offered by the Minnesota 
comprehensive health association without any of the limitations 
set forth in section 62E.14, subdivision 1, paragraph (c), and 
subdivision 3. 
    Sec. 72.  Minnesota Statutes 1986, section 62F.041, 
subdivision 2, is amended to read:  
    Subd. 2.  This section shall expire on June 30, 1987 1989. 
    Sec. 73.  Minnesota Statutes 1986, 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 may not extend beyond a period of one year from the date 
on which the authorization under section 62F.04 ends.  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 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 the 
commissioner determines it is misleading or violates public 
policy. 
    Sec. 74.  Minnesota Statutes 1986, section 62H.01, is 
amended to read:  
    62H.01 [JOINT SELF-INSURANCE EMPLOYEE HEALTH PLAN.] 
    Any three or more employers, excluding the state and its 
political subdivisions as described in 471.617, subdivision 1, 
who are authorized to transact business in Minnesota may jointly 
self-insure employee health, dental, or short-term disability 
benefits.  Joint plans must have a minimum of 250 covered 
employees and meet all conditions and terms of sections 62H.01 
to 62H.08.  Joint plans covering employers not resident in 
Minnesota must meet the requirements of sections 62H.01 to 
62H.08 as if the portion of the plan covering Minnesota resident 
employees was treated as a separate plan.  A plan may cover 
employees resident in other states only if the plan complies 
with the applicable laws of that state. 
    Sec. 75.  Minnesota Statutes 1986, section 62H.02, is 
amended to read:  
    62H.02 [REQUIRED PROVISIONS.] 
    A joint self-insurance plan must include aggregate excess 
stop-loss coverage and individual excess stop-loss coverage 
provided by an insurance company licensed by the state of 
Minnesota.  Aggregate excess stop-loss coverage must include 
provisions to cover incurred, unpaid claim liability in the 
event of plan termination.  The excess or stop-loss insurer must 
bear the risk of coverage for any member of the pool that 
becomes insolvent with outstanding contribution due.  In 
addition, the plan of self-insurance must have participating 
employers fund an amount at least equal to the point at which 
the excess or stop-loss insurer must has contracted to assume 
100 percent of additional liability. A joint self-insurance plan 
must submit its proposed excess or stop-loss insurance contract 
to the commissioner of commerce at least 30 days prior to the 
proposed plan's effective date and at least 30 days subsequent 
to any renewal date.  The commissioner shall review the contract 
to determine if they meet the standards established by sections 
62H.01 to 62H.08 and respond within a 30-day period.  Any excess 
or stop-loss insurance plan must be noncancelable for a minimum 
term of two years contain a provision that the excess or 
stop-loss insurer will give the plan and the commissioner of 
commerce a minimum of 180 days notice of termination or 
nonrenewal.  If the plan fails to secure replacement coverage 
within 60 days after receipt of the notice of cancellation or 
nonrenewal, the commissioner shall issue an order providing for 
the orderly termination of the plan. 
    Sec. 76.  Minnesota Statutes 1986, section 62H.04, is 
amended to read: 
    62H.04 [COMPLIANCE WITH OTHER LAWS.] 
    A joint self-insurance plan is subject to the requirements 
of chapter chapters 62A, and 62E, and sections 72A.17 to 72A.32 
unless otherwise specifically exempt.  A joint self-insurance 
plan must not offer less than a number two qualified plan or its 
actuarial equivalent.  
    Sec. 77.  Minnesota Statutes 1986, section 62I.02, 
subdivision 1, is amended to read:  
    Subdivision 1.  [CREATION.] The Minnesota joint 
underwriting association is created to provide insurance 
coverage to any person or entity unable to obtain insurance 
through ordinary methods if the insurance is required by 
statute, ordinance, or otherwise required by law, or is 
necessary to earn a livelihood or conduct a business and serves 
a public purpose.  Prudent business practice or mere desire to 
have insurance coverage is not a sufficient standard for the 
association to offer insurance coverage to a person or entity.  
For purposes of this subdivision, directors' and officers' 
liability insurance is considered to be a business necessity and 
not merely a prudent business practice.  The association shall 
be specifically authorized to provide insurance coverage to day 
care providers, foster parents, foster homes, developmental 
achievement centers, group homes, and sheltered workshops for 
mentally, emotionally, or physically handicapped persons, and 
citizen participation groups established pursuant to the housing 
and community redevelopment act of 1974, Public Law Number 
93-383.  Because the activities of certain persons or entities 
present a risk that is so great, the association shall not offer 
insurance coverage to any person or entity the board of 
directors of the association determines is outside the intended 
scope and purpose of the association because of the gravity of 
the risk of offering insurance coverage.  The association shall 
not offer environmental impairment liability or product 
liability insurance.  The association shall not offer coverage 
for activities that are conducted substantially outside the 
state of Minnesota unless the insurance is required by statute, 
ordinance, or otherwise required by law.  Every insurer 
authorized to write property and casualty insurance in this 
state shall be a member of the association as a condition to 
obtaining and retaining a license to write insurance in this 
state. 
    Sec. 78.  Minnesota Statutes 1986, section 62I.02, 
subdivision 3, is amended to read: 
    Subd. 3.  [REAUTHORIZATION.] The authorization to issue 
insurance to day care providers, foster parents, foster homes, 
developmental activity centers, group homes, and sheltered 
workshops for mentally, emotionally, or physically handicapped 
persons, and citizen participation groups established pursuant 
to the housing and community redevelopment act of 1974, Public 
Law Number 93-383, is valid for a period of two years from the 
date it was made.  The commissioner may reauthorize the issuance 
of insurance for these groups and other classes of business for 
additional two-year periods pursuant to sections 62I.21 and 
62I.22.  This subdivision is not a limitation on the number of 
times the commissioner may reauthorize the issuance of 
insurance.  Insurance may not be offered pursuant to this 
section to persons or entities other than those listed in this 
subdivision after December 31, 1989. 
    Sec. 79.  Minnesota Statutes 1986, section 62I.03, 
subdivision 5, is amended to read: 
    Subd. 5.  [DEFICIT.] "Deficit" means, for a particular 
policy year and line or type of insurance, that amount by which 
total paid and outstanding losses and loss adjustment expenses 
exceed premium revenue, including retrospective premium revenue. 
    Sec. 80.  Minnesota Statutes 1986, section 62I.04, is 
amended to read: 
    62I.04 [POLICY ISSUANCE.] 
    Any person or entity that is a resident of the state of 
Minnesota who has a current written notice of refusal to insure 
from an insurer licensed to offer insurance in the state of 
Minnesota may make written application to the association for 
coverage.  The applicable premium or required portion of it must 
be paid prior to coverage by the association. 
    The application shall be filed simultaneously with the 
association and the market assistance plan for the association. 
    The association is authorized to (1) issue or cause to be 
issued insurance policies to applicants subject to limits 
specified in the plan of operation; (2) underwrite the insurance 
and adjust and pay losses with respect to it, or appoint service 
companies to perform those functions; (3) assume reinsurance 
from its members; and (4) cede reinsurance. 
    Sec. 81.  Minnesota Statutes 1986, section 62I.12, 
subdivision 1, is amended to read:  
    Subdivision 1.  [ADMINISTRATOR.] The association shall be 
administered by a qualified insurer or vendor of risk management 
services selected by the commissioner.  If the commissioner 
deems it necessary, the commissioner may select more than one 
person to administer the association.  At the option of the 
board, employees may participate in the state retirement plan 
and the state deferred compensation plan for employees in the 
unclassified service, and an insurance plan administered by the 
commissioner of employee relations under chapter 43A. 
    Sec. 82.  Minnesota Statutes 1986, section 62I.13, is 
amended by adding a subdivision to read: 
    Subd. 6.  Notwithstanding any order of the commissioner or 
inconsistent provisions of this chapter, the board of directors 
may decline to offer coverage to any class of business or a 
member of a class of business upon a reasonable underwriting 
basis. 
    Sec. 83.  Minnesota Statutes 1986, section 62I.16, 
subdivision 3, is amended to read: 
    Subd. 3.  [SUPERVISION.] All money paid into the fund shall 
be held in trust by the corporate trustee selected by the board 
of directors.  The corporate trustee may invest the money held 
in trust subject to the approval of the board.  All investment 
income shall be credited to the fund.  All expenses of the 
administration of the fund shall be charged against the fund.  
The money held in trust shall be used solely for the purpose of 
discharging when due any retrospective premium charges payable 
by policyholders and any retrospective premium refunds payable 
to policyholders under the group retrospective rating plan.  
Payment of retrospective premium charges shall be made upon 
certification of the amount due.  If all money accruing to the 
fund is 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 stabilization reserve fund charges from a 
particular policy year and line or type of insurance not used to 
pay retrospective premiums must be returned to policyholders 
after all claims and expense obligations from that particular 
policy year and line or type of insurance are satisfied. 
    Sec. 84.  Minnesota Statutes 1986, section 62I.22, 
subdivision 2, is amended to read: 
    Subd. 2.  [NOTICE.] The commissioner of commerce shall 
publish notice of the hearing in the State Register at least 30 
days before the hearing date.  The notice should be that used 
for rulemaking under chapter 14.  Approval by the administrative 
law judge of the notice prior to publication is not 
required.  The notice must contain a statement that anyone 
wishing to oppose activation beyond 180 days for any particular 
class, must file a petition to intervene with the administrative 
law judge at least ten days before the hearing date.  If no 
notice to intervene is filed for a class, then the class is 
activated beyond the 180-day period without further action. 
    Sec. 85.  Minnesota Statutes 1986, section 62I.22, is 
amended by adding a subdivision to read: 
    Subd. 6.  [CASE PRESENTATION.] The department of commerce, 
upon request by small businesses as defined by section 14.115, 
subdivision 1, shall assist small businesses in any specific 
class requesting continuation of coverage beyond the 180-day 
period, in coordinating the class and presenting the case in the 
contested hearing. 
    Sec. 86.  Minnesota Statutes 1986, section 64B.11, 
subdivision 4, is amended to read:  
    Subd. 4.  [FILING OF AMENDMENTS BY FOREIGN OR ALIEN 
SOCIETY.] Every foreign or alien society authorized to do 
business in this state shall file with the commissioner a duly 
certified copy of all amendments of, or additions to, its laws 
within 90 days after the enactment of same be subject to the 
requirements of section 72A.061, subdivision 2, as to amendments 
or additions to its bylaws. 
    Sec. 87.  Minnesota Statutes 1986, section 64B.18, is 
amended to read:  
    64B.18 [BENEFITS NOT ATTACHABLE.] 
    Except as provided in chapter 256B, the money or other 
benefits, charity, relief, or aid to be paid, provided, or 
rendered by any society authorized to do business under this 
chapter shall, neither before nor after being paid, be liable to 
attachment, garnishment, or other process and shall not be 
ceased, taken, appropriated, or applied by any legal or 
equitable process or operation of laws to pay any debt or 
liability of a certificate holder or of any beneficiary named in 
the certificate, or of any person who may have any right 
thereunder.  The cash value, proceeds, or benefits under any 
matured or unmatured life insurance or annuity contract issued 
before, on, or after the effective date of this section, by any 
society authorized to do business under this chapter, is exempt 
from attachment, garnishment, execution, or other legal process 
to the extent provided by section 550.37, subdivisions 10, 23, 
and 24. 
    Sec. 88.  Minnesota Statutes 1986, section 64B.27, is 
amended to read:  
    64B.27 [ANNUAL LICENSE.] 
    Societies that are now authorized to transact business in 
this state may continue this business until the first day of 
June next succeeding August 1, 1985.  The authority of the 
societies and all societies hereafter licensed, may thereafter 
be renewed annually, subject to section 60A.13, subdivisions 1, 
5, 6, and 7.  However, a license so issued shall continue in 
full force and effect until the new license is issued or 
specifically refused.  For each license or renewal the society 
shall pay the commissioner $20.  A duly certified copy or 
duplicate of the license is prima facie evidence that the 
licensee is a fraternal benefit society within the meaning of 
this chapter. 
    Sec. 89.  Minnesota Statutes 1986, section 65A.01, 
subdivision 3a, is amended to read: 
    Subd. 3a.  [CANCELLATION.] (1) There shall be printed in 
the policy or an endorsement attached to the policy a printed 
form in the following words: 
    When this policy has been issued to cover buildings used 
for residential purposes other than a hotel or motel and has 
been in effect for at least six months 60 days, or if it has 
been renewed, this policy shall not be canceled, except for one 
or more of the following reasons which shall be stated in the 
notice of cancellation: 
    (a) Nonpayment of premium; 
    (b) Misrepresentation or fraud made by or with the 
knowledge of the insured in obtaining the policy or in pursuing 
a claim thereunder; 
    (c) An act or omission of the insured which materially 
increases the risk originally accepted; 
    (d) Physical changes in the insured property which are not 
corrected or restored within a reasonable time after they occur 
and which result in the property becoming uninsurable; or 
    (e) Nonpayment of dues to an association or organization, 
other than an insurance association or organization, where 
payment of dues is a prerequisite to obtaining or continuing the 
insurance. 
    Provided, however, that this limitation on cancellation 
shall not apply to additional coverages in a divisible policy, 
other than a policy of fire and extended coverage insurance.  If 
this company cancels the additional coverages, it may issue a 
new, separate fire policy at a premium calculated on a pro rata 
basis for the remaining period of the original policy. 
    (2) The provisions of clause (1)(e) shall not be included 
in the language of the policy or endorsement unless the payment 
of dues to an association or organization, other than an 
insurance association or organization, is a prerequisite to 
obtaining or continuing the insurance. 
    Sec. 90.  Minnesota Statutes 1986, section 65A.03, 
subdivision 1, is amended to read: 
    65A.03 [BINDERS, TEMPORARY INSURANCE.] 
    Subdivision 1.  [GENERALLY.] Binders or other contracts for 
temporary insurance may be made orally or in writing, and shall 
be deemed to include all the terms of such standard fire 
insurance policy and all such applicable endorsements as may be 
designated in such contract of temporary insurance; except that 
the cancellation clause of such standard fire insurance policy 
and the clause specifying the hour of the day at which the 
insurance shall commence, may be superseded by the express terms 
of such contract of temporary insurance.  
    Sec. 91.  Minnesota Statutes 1986, section 65A.10, is 
amended to read: 
    65A.10 [LIMITATION.] 
    Nothing contained in sections 65A.08 and 65A.09 shall be 
construed to preclude insurance against the cost, in excess of 
actual cash value at the time any loss or damage occurs, of 
actually repairing, rebuilding or replacing the insured 
property.  Subject to any applicable policy limits, where an 
insurer offers replacement cost insurance, the insurance must 
cover the cost of replacing, rebuilding, or repairing any loss 
or damaged property in accordance with the minimum code as 
required by state or local authorities.  In the case of a 
partial loss, unless more extensive coverage is otherwise 
specified in the policy, this coverage applies only to the 
damaged portion of the property. 
    Sec. 92.  Minnesota Statutes 1986, section 65A.29, is 
amended by adding a subdivision to read: 
    Subd. 10.  [RETURN OF UNEARNED PREMIUM.] Cancellation of a 
policy of homeowner's insurance pursuant to this section is not 
effective unless any unearned premium due the insured is 
returned to the insured with the notice of cancellation or is 
delivered or sent by mail to the insured so as to be received by 
the insured not later than the effective date of cancellation.  
If the premium has been paid by the insured's agent and debited 
to the agent's account with the company, upon cancellation, the 
unearned premium must be credited to the agent's account with 
the company. 
    Sec. 93.  Minnesota Statutes 1986, section 65A.35, 
subdivision 5, is amended to read:  
    Subd. 5.  [ADMINISTRATION.] (1) The facility shall be 
administered by a governing committee board of five members nine 
directors, five of whom are elected annually by the members of 
the facility, and four additional members who represent the 
public.  Public directors may include licensed insurance 
agents.  Public directors are appointed by the commissioner, at 
least three of whom shall be public members.  At least one 
elected member of the governing committee director shall be a 
domestic stock insurer, and at least one elected member of the 
governing committee director shall be a domestic nonstock 
insurer.  In the election of members of the governing 
committee directors, each member of the facility shall be 
allotted votes bearing the same ratio to the total number of 
votes to be cast as its degree of participation in the facility 
bears to the total participation.  Pending the determination of 
the degree of participation of the members in the facility, each 
member of the facility shall be allotted votes bearing the same 
ratio to the total number of votes to be cast as each member's 
written premium on basic property insurance during calendar year 
1968 bears to the statewide total written premium for basic 
property insurance during such year.  The first governing 
committee shall be elected at a meeting of the members or their 
authorized representatives. 
    (2) Any vacancy among the elected members on the governing 
committee directors shall be filled by a vote of the other 
elected members of the governing committee directors. 
    (3) If at any time the members directors fail to elect the 
required number of members to the governing committee board, or 
a vacancy remains unfilled for more than 15 days, the 
commissioner may appoint the members necessary to constitute a 
full governing committee board of directors. 
    (4) Vacancies among directors appointed by the commissioner 
shall be filled by appointment by the commissioner.  A person so 
appointed serves until the end of the term of the member they 
are replacing.  
    (5) All directors serve for a period of two years.  The 
terms of all directors begin on January 1 of the year their 
appointment begins.  
    (6) The plan of operation must provide for adequate 
compensation of 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.  Directors whose employers 
compensate them while serving on the board or who would submit 
their compensation to their employer are not eligible for 
compensation under the plan. 
    Sec. 94.  [65A.375] [RATES FOR COOPERATIVE HOUSING AND 
NEIGHBORHOOD REAL ESTATE TRUST INSURANCE.] 
    The commissioner shall set the insurance rates for 
cooperative housing, organized under chapter 308, and for 
neighborhood real estate trusts, characterized as nonprofit 
ownership of real estate with resident control.  The rates must 
be actuarially sound. 
    Sec. 95.  Minnesota Statutes 1986, section 65A.39, is 
amended to read:  
    65A.39 [RIGHT OF APPEAL.] 
    (a) Any applicant or participating insurer shall have the 
right of appeal to the governing committee board of directors, 
which shall promptly determine said the appeal.  A decision of 
the committee board may be appealed to the commissioner within 
30 days from notice of the action or decision of the committee, 
and.  The commissioner shall promptly determine said the 
appeal.  Each denial of insurance shall be accompanied by a 
statement that the applicant has the right of appeal to 
the governing committee board and the commissioner and setting 
forth the procedures to be followed for such the appeal.  A 
final action of the commissioner is subject to judicial review 
as provided in chapter 14.  
    (b) In lieu of the appeal to the commissioner under 
paragraph (a), an applicant or insurer may seek judicial review 
of the board's action. 
    Sec. 96.  Minnesota Statutes 1986, section 65B.03, 
subdivision 1, is amended to read: 
    Subdivision 1.  [MEMBERSHIP.] The commissioner shall direct 
that an election be held among every insurer subject to this 
chapter, for the election of a insurer representatives on the 
facility governing committee.  The governing committee shall be 
made up of eight nine individuals selected, five of whom shall 
be elected by participating members of the facility and one 
public member appointed by the governor to two-year terms four 
who shall be public members.  Public members may include 
licensed insurance agents.  The public members shall be 
appointed by the commissioner.  Each insurer member of the 
governing committee shall be a participating member.  The term 
of office for members of the governing committee is two years. 
    Each participating member serving on the governing 
committee shall be represented by a salaried employee of that 
participating member, and not more than one participating member 
in a group under the same management shall serve on the 
governing committee at the same time.  The commissioner of 
commerce or a designee shall be an ex officio member of the 
governing committee.  
    Sec. 97.  Minnesota Statutes 1986, section 65B.12, is 
amended to read:  
    65B.12 [RIGHT TO HEARING; CONSTRUCTION OF PLAN OF 
OPERATION.] 
    Subdivision 1.  Any participating member, applicant or 
person insured under a policy placed through the facility may 
request a formal hearing and ruling by the governing committee 
on any alleged violation of the plan of operation or any alleged 
improper act or ruling of the facility directly affecting its 
assessment, premium or coverage furnished, provided that such 
right to hearing shall not apply to any claim arising out of 
insurance provided by any participating member.  Such The 
request for hearing must be filed within 30 days after the date 
of the alleged act or decision.  
    Subd. 2.  The plan of operation shall provide for prompt 
and fair hearings, and shall prescribe the procedure to be 
followed in such the hearings.  
    Subd. 3.  Any formal ruling by the governing committee may 
be appealed to the commissioner by filing notice of appeal with 
the facility and the commissioner within 30 days after issuance 
of the ruling.  Such a The hearing shall be governed by the 
procedures for contested cases.  
    Subd. 4.  Upon a hearing pursuant to Laws 1971, chapter 813 
chapter 14, the commissioner shall issue an order approving or 
disapproving the action or decision of the governing committee 
or directing the governing committee to reconsider the ruling.  
    Subd. 4a.  In lieu of the appeal to the commissioner, a 
member, applicant, or person may seek judicial review of the 
governing committee's action.  
    Subd. 5.  The plan of operation shall be interpreted to 
conform to the laws of this state with respect to automobile 
insurance coverage and any changes therein in the laws, unless 
the facility is specifically excluded from the applicability 
of such these laws. 
    Sec. 98.  Minnesota Statutes 1986, section 65B.1311, is 
amended to read: 
    65B.1311 [COVERAGE FOR FORMER SPOUSE.] 
    Subdivision 1.  [NEW POLICY ISSUED.] If the former spouse 
of a named insured under a policy of private passenger vehicle 
insurance applies within 60 days of entry of a valid decree of 
dissolution of the marriage and the former spouse was an insured 
driver under the policy for at least 12 months prior to entry of 
the decree, the insurer must issue a policy, upon payment of the 
appropriate premium, to the former spouse only on the basis of 
the driving record applicable to the former spouse and any 
person who is to be an insured, as defined in section 65B.43, 
under the policy to be issued, provided the person or persons to 
be insured meets the insurer's eligibility standards An insurer 
must issue a policy of private passenger insurance to the former 
spouse of a named insured, within the provisions of subdivision 
2 of this section, if the following conditions are met: 
    (1) the former spouse has been an insured driver under the 
former policy for at least the six months immediately preceding 
the entry of a valid decree of dissolution of marriage; 
    (2) the former spouse makes application for a policy before 
the end of the policy period or within 60 days after the entry 
of the decree of dissolution of marriage, whichever is later; 
    (3) the appropriate premium is paid; and 
    (4) the former spouse and any person or persons who are to 
be an insured, as defined in section 65B.43, meets the insurer's 
eligibility standards for renewal policies. 
    Subd. 2.  [NAMED INSURED.] A named insured under a policy 
of private passenger vehicle insurance shall have the premium 
determined at the first and any subsequent renewals of the 
policy after entry of a valid decree of dissolution of the 
marriage of the named insured only on the basis of the driving 
record and rating classification applicable to the named insured 
and any person who is to be an insured, as defined in section 
65B.43, under the policy to be renewed. 
    Sec. 99.  Minnesota Statutes 1986, section 65B.15, 
subdivision 1, is amended to read: 
    Subdivision 1.  No cancellation or reduction in the limits 
of liability of coverage during the policy period of any policy 
shall be effective unless notice thereof is given and unless 
based on one or more reasons stated in the policy which shall be 
limited to the following: 
    1.  Nonpayment of premium; or 
    2.  The policy was obtained through a material 
misrepresentation; or 
    3.  Any insured made a false or fraudulent claim or 
knowingly aided or abetted another in the presentation of such a 
claim; or 
    4.  The named insured failed to disclose fully motor 
vehicle accidents and moving traffic violations of the named 
insured for the preceding 36 months if called for in the written 
application; or 
    5.  The named insured failed to disclose in the written 
application any requested information necessary for the 
acceptance or proper rating of the risk; or 
    6.  The named insured knowingly failed to give any required 
written notice of loss or notice of lawsuit commenced against 
the named insured, or, when requested, refused to cooperate in 
the investigation of a claim or defense of a lawsuit; or 
    7.  The named insured or any other operator who either 
resides in the same household, unless the other operator is 
identified by name in any other policy as an insured; or 
customarily operates an automobile insured under such policy: 
    (a) has, within the 36 months prior to the notice of 
cancellation, had that person's driver's license under 
suspension or revocation; or 
    (b) is or becomes subject to epilepsy or heart attacks, and 
such individual does not produce a written opinion from a 
physician testifying to that person's medical ability to operate 
a motor vehicle safely, such opinion to be based upon a 
reasonable medical probability; or 
    (c) has an accident record, conviction record (criminal or 
traffic), physical condition or mental condition, any one or all 
of which are such that the person's operation of an automobile 
might endanger the public safety; or 
    (d) has been convicted, or forfeited bail, during the 24 
months immediately preceding the notice of cancellation for 
criminal negligence in the use or operation of an automobile, or 
assault arising out of the operation of a motor vehicle, or 
operating a motor vehicle while in an intoxicated condition or 
while under the influence of drugs; or leaving the scene of an 
accident without stopping to report; or making false statements 
in an application for a driver's license, or theft or unlawful 
taking of a motor vehicle; or 
    (e) has been convicted of, or forfeited bail for, one or 
more violations within the 18 months immediately preceding the 
notice of cancellation, of any law, ordinance, or rule which 
justify a revocation of a driver's license.  
    8.  The insured automobile is: 
    (1) so mechanically defective that its operation might 
endanger public safety; or 
    (2) used in carrying passengers for hire or compensation, 
provided however that the use of an automobile for a car pool 
shall not be considered use of an automobile for hire or 
compensation; or 
    (3) used in the business of transportation of flammables or 
explosives; or 
    (4) an authorized emergency vehicle; or 
    (5) subject to an inspection law and has not been inspected 
or, if inspected, has failed to qualify within the period 
specified under such inspection law; or 
    (6) substantially changed in type or condition during the 
policy period, increasing the risk substantially, such as 
conversion to a commercial type vehicle, a dragster, sports car 
or so as to give clear evidence of a use other than the original 
use. 
    Sec. 100.  Minnesota Statutes 1986, section 65B.16, is 
amended to read: 
    65B.16 [STATEMENT OF REASONS FOR CANCELLATION OR 
REDUCTION.] 
    No notice of cancellation or reduction in the limits of 
liability of coverage of an automobile insurance policy under 
section 65B.15 shall be effective unless the specific 
underwriting or other reason or reasons for such cancellation or 
reduction in the limits of liability of coverage are stated in 
such notice and the notice is mailed or delivered by the insurer 
to the named insured at least 30 days prior to the effective 
date of cancellation; provided, however, that when nonpayment of 
premium is the reason for cancellation or when the company is 
exercising its right to cancel insurance which has been in 
effect for less than 60 days at least ten days notice of 
cancellation, and the reasons for the cancellation, shall be 
given.  Information regarding moving traffic violations or motor 
vehicle accidents must be specifically requested on the 
application in order for a company to use those incidents to 
exercise its right to cancel within the first 59 days of 
coverage.  When nonpayment of premiums is the reason for 
cancellation, the reason must be given to the insured with the 
notice of cancellation; and if the company is exercising its 
right to cancel within the first 59 days of coverage and notice 
is given with less than ten days remaining in the 59-day period, 
the coverage must be extended, to expire ten days after notice 
was mailed.  
    Sec. 101.  [65B.162] [NOTICE OF POSSIBLE CANCELLATION.] 
    A written notice shall be provided to all applicants for 
private passenger insurance, at the time the application is 
submitted, containing the following language in bold print:  
"THE INSURER MAY ELECT TO CANCEL COVERAGE AT ANY TIME DURING THE 
FIRST 59 DAYS FOLLOWING ISSUANCE OF THE COVERAGE FOR ANY REASON 
WHICH IS NOT SPECIFICALLY PROHIBITED BY STATUTE." 
    Sec. 102.  Minnesota Statutes 1986, section 65B.21, 
subdivision 2, is amended to read: 
    Subd. 2.  Upon receipt of a written objection pursuant to 
the provisions herein, the commissioner shall may notify the 
insurer of receipt of such objection and of the right of the 
insurer to file a written response thereto within ten days of 
receipt of such notification.  The commissioner may also order 
an investigation of the objection or complaint, the submission 
of additional information by the insured or the insurer about 
the action by the insurer or the objections of the insured, or 
such other procedure as the commissioner deems appropriate or 
necessary.  Within 23 days of receipt of such written objection 
by an insured the commissioner shall approve or disapprove the 
insurer's action and shall notify the insured and insurer of the 
final decision.  Either party may institute proceedings for 
judicial review of the commissioner's decision; provided, 
however, that the commissioner's final decision shall be binding 
pending judicial review.  
    Sec. 103.  Minnesota Statutes 1986, section 65B.28, is 
amended to read:  
    65B.28 [ACCIDENT PREVENTION COURSE PREMIUM REDUCTIONS.] 
    Subdivision 1.  [REQUIRED REDUCTION.] An insurer must 
provide an appropriate premium reduction of at least ten percent 
on its policies of private passenger vehicle insurance, as 
defined in section 65B.001, subdivision 2, issued, delivered, or 
renewed in this state after January 1, 1985, to insureds 65 55 
years old and older who successfully complete an accident 
prevention course established under subdivision 2.  
    Subd. 2.  [ACCIDENT PREVENTION COURSE; RULES.] The 
commissioner of public safety shall, by January 1, 1985, adopt 
rules establishing and regulating a motor vehicle accident 
prevention course for persons 65 55 years old and older.  The 
rules must, at a minimum, include provisions:  
    (1) establishing curriculum requirements; 
    (2) establishing the number of hours required for 
successful completion of the course; 
    (3) providing for the issuance of a course completion 
certification and requiring its submission to an insured as 
evidence of completion of the course; and 
    (4) requiring persons 65 55 years old and older to retake 
the course every three years to remain eligible for a premium 
reduction.  
    Sec. 104.  Minnesota Statutes 1986, section 65B.46, is 
amended to read: 
    65B.46 [RIGHT TO BENEFITS.] 
    Subdivision 1.  If the accident causing injury occurs in 
this state, every person suffering loss from injury arising out 
of maintenance or use of a motor vehicle or as a result of being 
struck as a pedestrian by a motorcycle has a right to basic 
economic loss benefits. 
    Subd. 2.  If the accident causing injury occurs outside 
this state in the United States, United States possessions, or 
Canada, the following persons and their surviving dependents 
suffering loss from injury arising out of maintenance or use of 
a motor vehicle or as a result of being struck as a pedestrian 
by a motorcycle have a right to basic economic loss benefits: 
    (1) Insureds, and 
    (2) the driver and other occupants of a secured vehicle, 
other than (a) a vehicle which is regularly used in the course 
of the business of transporting persons or property and which is 
one of five or more vehicles under common ownership, or (b) a 
vehicle owned by a government other than this state, its 
political subdivisions, municipal corporations, or public 
agencies.  The reparation obligor may, if the policy expressly 
states, extend the basic economic loss benefits to any stated 
area beyond the limits of the United States, United States 
possessions and Canada.  
    Subd. 3.  For the purposes of sections 65B.41 to 65B.71, 
injuries suffered by a person while on, mounting or alighting 
from a motorcycle do not arise out of the maintenance or use of 
a motor vehicle although a motor vehicle is involved in the 
accident causing the injury. 
    Sec. 105.  Minnesota Statutes 1986, section 65B.48, 
subdivision 1, is amended to read:  
    Subdivision 1.  Every owner of a motor vehicle of a type 
which is required to be registered or licensed or is principally 
garaged in this state shall maintain during the period in which 
operation or use is contemplated a plan of reparation security 
under provisions approved by the commissioner, insuring against 
loss resulting from liability imposed by law for injury and 
property damage sustained by any person arising out of the 
ownership, maintenance, operation or use of the vehicle.  The 
plan of reparation security shall provide for basic economic 
loss benefits and residual liability coverage in amounts not 
less than those specified in section 65B.49, subdivision 3, 
clauses (1) and (2).  The nonresident owner of a motor vehicle 
which is not required to be registered or licensed, or which is 
not principally garaged in this state, shall maintain such 
security in effect continuously throughout the period of the 
operation, maintenance or use of such motor vehicle within this 
state with respect to accidents occurring in this state; such 
security shall include coverage for property damage to a motor 
vehicle rented or leased within this state by a nonresident. 
    Sec. 106.  Minnesota Statutes 1986, section 65B.49, is 
amended by adding a subdivision to read:  
    Subd. 5a.  [RENTAL VEHICLES.] (a) No plan of reparation 
security may be issued or renewed after August 1, 1987, unless 
the plan provides that all coverages under the plan are extended 
to any motor vehicle while being rented by the named insured.  
The plan must also provide that all or any part of the 
obligation of the named insured for property damage to a rented 
vehicle would be covered by the collision or comprehensive 
portion of the plan.  The plan must provide that any deductible 
will not apply to claims that arise while a motor vehicle is 
being rented by a named insured. 
    (b) A vehicle is rented for purposes of this subdivision if 
the rate for the use of the vehicle is determined on a weekly or 
daily basis.  A vehicle is not rented for purposes of this 
subdivision if the rate for the vehicle's use is determined on a 
monthly or longer period or the vehicle is rented principally 
for business purposes. 
    (c) The policy or certificate issued by the plan must 
inform the insured of the application of the plan to rental 
vehicles and that the insured may not need to purchase 
additional coverage from the rental company. 
    (d) Where an insured has two or more plans of reparation 
security containing the rented motor vehicle coverage required 
under paragraph (a), claims must be made against the plan 
covering the motor vehicle most often driven by the insured. 
     (e) A notice advising the insured of rental vehicle 
coverage must be given to each current insured with the first 
renewal notice after January 1, 1988.  The notice must be 
approved by the commissioner of commerce.  The commissioner may 
specify the form of the notice.  A form approved by the 
commissioner must be reasonably calculated to put the insured on 
notice of the coverage. 
     (f) When a motor vehicle is rented or leased in this state, 
the rental contract must contain a written notice in at least 
ten-point bold type, if printed, or in capital letters, if 
typewritten, which states: 
 Under Minnesota law, a personal automobile insurance policy 
issued in Minnesota must cover the rental of a motor 
vehicle unless the rental is principally for business use 
or rented on a monthly or longer basis.  Therefore, 
purchase of any collision damage waiver or other insurance 
affected in this rental contract may not be necessary if 
your policy was issued in Minnesota. 
No collision damage waiver or other insurance offered as part of 
or in conjunction with a rental of a motor vehicle may be sold 
unless the person renting the vehicle provides a written 
acknowledgment that the above consumer protection notice has 
been read and understood. 
    Sec. 107.  [65B.491] [SENIOR CITIZENS.] 
    After August 1, 1987, no plan of reparation security issued 
to or renewed with a person who has attained the age of 65 years 
may provide coverage for wage loss reimbursement that the 
insured will not reasonably be expected to be able to receive.  
It is the responsibility of the person issuing or renewing the 
plan to inquire as to the applicability of this section.  The 
rate for any plan for which coverage has been excluded or 
reduced pursuant to this section must be reduced accordingly.  
This section does apply to self-insurance. 
    Sec. 108.  Minnesota Statutes 1986, section 65B.525, 
subdivision 1, is amended to read:  
    Subdivision 1.  The supreme court and the several courts of 
general trial jurisdiction of this state shall by rules of court 
or other constitutionally allowable device, provide for the 
mandatory submission to arbitration of all cases at issue 
where a the claim at the commencement of arbitration is in an 
amount of $5,000 or less is made by a motor vehicle accident 
victim, whether in an action to recover economic loss or 
noneconomic detriment for the allegedly negligent operation, 
maintenance, or use of a motor vehicle within this state, or 
against any insured's reparation obligor for benefits as 
provided in sections 65B.41 to 65B.71 for no-fault benefits or 
comprehensive or collision damage coverage. 
    Sec. 109.  Minnesota Statutes 1986, section 65B.63, 
subdivision 1, is amended to read: 
    Subdivision 1.  Reparation obligors providing basic 
economic loss insurance in this state shall organize and 
maintain, subject to approval and regulation by the 
commissioner, an assigned claims bureau and an assigned claims 
plan, and adopt rules for their operation and for the assessment 
of costs on a fair and equitable basis consistent with sections 
65B.41 to 65B.71.  The assigned claims bureau shall be managed 
by a governing committee made up of four individuals selected by 
the insurer members, one individual selected by the self-insurer 
members, and two public members appointed by the governor to 
two-year terms.  Public members may include licensed insurance 
agents.  If such obligors do not organize and continuously 
maintain an assigned claims bureau and an assigned claims plan 
in a manner considered by the commissioner of commerce to be 
consistent with sections 65B.41 to 65B.71, the commissioner 
shall organize and maintain an assigned claims bureau and an 
assigned claims plan.  Each reparation obligor providing basic 
economic loss insurance in this state shall participate in the 
assigned claims bureau and the assigned claims plan.  Costs 
incurred shall be allocated fairly and equitably among the 
reparation obligors. 
    A ruling, action, or decision of the governing committee 
may be appealed to the commissioner within 30 days.  A final 
action or order of the commissioner is subject to judicial 
review in the manner provided by chapter 14.  In lieu of an 
appeal to the commissioner, judicial review of the governing 
committee's ruling, action, or decision may be sought. 
    Sec. 110.  Minnesota Statutes 1986, section 67A.05, 
subdivision 2, is amended to read: 
    Subd. 2.  [FILING OF BYLAWS AND AMENDMENTS THERETO.] Every 
township mutual fire insurance company doing business within 
this state shall cause a copy of its bylaws to be certified to 
by its president and its secretary and file the same with the 
commissioner and thereafter every amendment to the bylaws of any 
township mutual fire insurance company, duly certified to by its 
president and its secretary, shall within a reasonable time 
after its adoption be filed in the office of the commissioner be 
subject to the requirements of section 72A.061, subdivision 2, 
as to amendments or additions to its bylaws.  
    Sec. 111.  Minnesota Statutes 1986, section 67A.06, is 
amended to read:  
    67A.06 [POWERS OF CORPORATION.] 
    Every corporation formed under the provisions of sections 
67A.01 to 67A.26, shall have power: 
    (1) To have succession by its corporate name for the time 
stated in its certificate of incorporation; 
    (2) To sue and be sued in any court; 
    (3) To have and use a common seal and alter the same at 
pleasure; 
    (4) To acquire, by purchase or otherwise, and to hold, 
enjoy, improve, lease, encumber, and convey all real and 
personal property necessary for the purpose of its organization, 
subject to such limitations as may be imposed by law or by its 
articles of incorporation; 
    (5) To elect or appoint in such manner as it may determine 
all necessary or proper officers, agents, boards, and 
committees, fix their compensation, and define their powers and 
duties; 
    (6) To make and amend consistently with law bylaws 
providing for the management of its property and the regulation 
and government of its affairs; 
    (7) To wind up and liquidate its business in the manner 
provided by chapter 60B; and 
    (8) To indemnify certain persons against expenses and 
liabilities as provided in section 300.082 300.083.  In applying 
section 300.082 300.083 for this purpose, the term "members" 
shall be substituted for the terms "shareholders" and 
"stockholders." 
    Sec. 112.  Minnesota Statutes 1986, section 67A.231, is 
amended to read:  
    67A.231 [DEPOSIT OF FUNDS; INVESTMENT; LIMITATIONS.] 
    The directors of any township mutual insurance company may 
authorize the treasurer to invest any of its funds and 
accumulations in:  
    (a) Bonds, notes, mortgages, or other obligations 
guaranteed by the full faith and credit of the United States of 
America and those for which the credit of the United States is 
pledged to pay principal, interest or dividends, including 
United States agency and instrumentality bonds, debentures, or 
obligations; 
    (b) Bonds, notes, evidence of indebtedness, or other public 
authority obligations guaranteed by this state; 
    (c) Bonds, notes, evidence of the indebtedness or other 
obligations guaranteed by the full faith and credit of any 
county, municipality, school district, or other duly authorized 
political subdivision of this state; 
     (d) Bonds or other interest bearing obligations, payable 
from revenues, provided that the bonds or other interest bearing 
obligations are at the time of purchase rated among the highest 
four quality categories used by a nationally recognized rating 
agency for rating the quality of similar bonds or other interest 
bearing obligations, and are not rated lower by any other such 
agency; or obligations of a United States agency or 
instrumentality that have been determined to be investment grade 
(as indicated by a "yes" rating) by the Securities Valuation 
Office of the National Association of Insurance Commissioners.  
This is not applicable to bonds or other interest bearing 
obligations in default as to principal; 
    (e) Investments in the obligations stated in paragraphs 
(a), (b), (c), and (d), may be made either directly or in the 
form of securities of, or other interests in, an investment 
company registered under the Federal Investment Company Act of 
1940.  Investment company shares authorized pursuant to this 
subdivision shall not exceed 20 percent of the company's 
surplus.  These obligations must be carried at the lower of cost 
or market on the annual statement filed with the commissioner 
and adjusted to market on an annual basis; 
    (d) (f) Loans upon improved and unencumbered real property 
in this state worth at least twice the amount loaned thereon, 
not including buildings, unless insured by property insurance 
policies payable to and held by the security holder; 
    (e) (g) Real estate, including land, buildings and 
fixtures, located in this state and used primarily as home 
office space for the insurance company; 
    (f) (h) Demand or time deposits or savings accounts in 
federally insured depositories located in this state to the 
extent that the deposit or investment is insured by the Federal 
Deposit Insurance Corporation, Federal Savings and Loan 
Corporation, or the National Credit Union Administration; 
    (g) (i) Guarantee fund certificates of a mutual insurer 
which reinsures the business of the township mutual insurance 
company.  The commissioner may by rule limit the amount of 
guarantee fund certificates which the township mutual insurance 
company may purchase and this limit may be a function of the 
size of the township mutual insurance company; and 
    (j) Up to $1,500 in stock of an insurer which issues 
directors and officers liability insurance to township mutual 
insurance company directors and officers. 
    Sec. 113.  Minnesota Statutes 1986, section 70A.06, is 
amended by adding a subdivision to read: 
    Subd. 1a.  Whenever an insurer files a change in a rate 
that will result in a 25 percent or more increase in a 12-month 
period over existing rates, the commissioner may hold a hearing 
to determine if the change is excessive.  The hearing must be 
conducted under chapter 14.  The commissioner must give notice 
of intent to hold a hearing within 60 days of the filing of the 
change.  It shall be the responsibility of the insurer to show 
the rate is not excessive.  The rate is effective unless it is 
determined as a result of the hearing that the rate is excessive.
    Sec. 114.  Minnesota Statutes 1986, section 70A.08, 
subdivision 3, is amended to read: 
    Subd. 3.  Until January 1, 1988, The commissioner may 
restrict approval on claims-made policies to forms filed by a 
rate service organization which have been approved.  
    Sec. 115.  [72A.125] [RENTAL VEHICLE PERSONAL ACCIDENT 
INSURANCE; SPECIAL REQUIREMENTS.] 
    Subdivision 1.  [DEFINITION.] (a) "Auto rental company" 
means a corporation, partnership, individual, or other person 
that is engaged primarily in the renting of motor vehicles at 
per diem rates. 
    (b) "Rental vehicle personal accident insurance" means 
accident only insurance providing accidental death benefits, 
dismemberment benefits and/or reimbursement for medical expenses 
which is issued by an insurer authorized in this state to issue 
accident and health insurance.  These coverages are nonqualified 
plans under chapter 62E.  
    Subd. 2.  [SALE BY AUTO RENTAL COMPANIES.] An auto rental 
company that offers or sells rental vehicle personal accident 
insurance in this state in conjunction with the rental of a 
vehicle shall only sell these products if the forms and rates 
have met the relevant requirements of section 62A.02, taking 
into account the possible infrequency and severity of loss that 
may be incurred.  Sections 60A.17 and 60A.1701 do not apply if 
the persons engaged in the sale of these products are employees 
of the auto rental company who do not receive commissions or 
other remuneration for selling the product in addition to their 
regular compensation.  Compensation may not be determined in any 
part by the sale of insurance products.  The auto rental company 
before engaging in the sale of the product must file with the 
commissioner the following documents:  
    (1) an appointment of the commissioner as agent for service 
of process; 
    (2) an agreement that the auto rental company assumes all 
responsibility for the authorized actions of all unlicensed 
employees who sell the insurance product on its behalf in 
conjunction with the rental of its vehicles; 
    (3) an agreement that the auto rental company with respect 
to itself and its employees will be subject to this chapter 
regarding the marketing of the insurance products and the 
conduct of those persons involved in the sale of insurance 
products in the same manner as if it were a licensed agent. 
    An auto rental company failing to file the documents in 
clauses (1) to (3) is guilty of an individual violation as to 
the unlicensed sale of insurance for each sale that occurs after 
the effective date of this section until they make the required 
filings.  Each individual sale after the effective date of this 
section and prior to the filing required by this section is 
subject to, in addition to any other penalties allowable by law, 
up to a $100 per violation fine.  Further, the sale of the 
insurance product by an auto rental company or any employee or 
agent of the company after the effective date of this section 
without having complied with this section shall be deemed to be 
in acceptance of the provisions of this section. 
    Insurance sold pursuant to this subdivision must be limited 
in availability to rental vehicle customers though coverage may 
extend to the customer, other drivers, and passengers using or 
riding in the rented vehicles; and limited in duration to a 
period equal to and concurrent with that of the vehicle rental.  
    Persons purchasing rental vehicle personal accident 
insurance may be provided a certificate summarizing the policy 
provisions in lieu of a copy of the policy if a copy of the 
policy is available for inspection at the place of sale and a 
free copy of the policy may be obtained from the auto rental 
company's home office.  
    The commissioner may, after a hearing, revoke an auto 
rental company's right to operate under this section if the 
company has repeatedly violated the insurance laws of this state 
and the revocation is in the public interest. 
    Sec. 116.  Minnesota Statutes 1986, section 72A.20, 
subdivision 11, is amended to read:  
    Subd. 11.  [APPLICATION TO CERTAIN SECTIONS.] Violating any 
provision of the following sections of this chapter not set 
forth in subdivisions 1 to 15 this section shall constitute an 
unfair method of competition and an unfair and deceptive act or 
practice:  sections 72A.12, subdivisions 2, 3, and 4, 72A.16, 
subdivision 2, 72A.03 and 72A.04, 72A.08, subdivision 1 as 
modified by section 72A.08, subdivision 4, and 65B.13.  
    Sec. 117.  Minnesota Statutes 1986, section 72A.20, 
subdivision 17, is amended to read:  
    Subd. 17.  [RETURN OF PREMIUMS UPON DEATH OF INSURED.] (a) 
Refusing, upon surrender of an individual policy of life 
insurance, to refund to the estate of the insured all unearned 
premiums paid on the policy covering the insured as of the time 
of the insured's death if the unearned premium is for a period 
of more than one month.  
    The insurer may deduct from the premium any previously 
accrued claim for loss or damage under the policy.  
    For the purposes of this section, a premium is unearned 
during the period of time the insurer has not been exposed to 
any risk of loss.  
    (b) Refusing, upon termination or cancellation of a policy 
of automobile insurance under section 65B.14, subdivision 2, or 
a policy of homeowner's insurance under section 65A.27, 
subdivision 4, or a policy of accident and sickness insurance 
under section 62A.01, or a policy of comprehensive health 
insurance under chapter 62E, to refund to the insured all 
unearned premiums paid on the policy covering the insured as of 
the time of the termination or cancellation if the unearned 
premium is for a period of more than one month. 
    The insurer may deduct from the premium any previously 
accrued claim for loss or damage under the policy. 
    For purposes of this section, a premium is unearned during 
the period of time the insurer has not been exposed to any risk 
of loss. 
    Sec. 118.  Minnesota Statutes 1986, section 72A.20, is 
amended by adding a subdivision to read: 
    Subd. 18.  [IMPROPER BUSINESS PRACTICES.] (a) Improperly 
withholding, misappropriating, or converting any money belonging 
to a policyholder, beneficiary, or other person when received in 
the course of the insurance business; or (b) engaging in 
fraudulent, coercive, or dishonest practices in connection with 
the insurance business, shall constitute an unfair method of 
competition and an unfair and deceptive act or practice. 
    Sec. 119.  Minnesota Statutes 1986, section 72A.20, is 
amended by adding a subdivision to read: 
    Subd. 19.  [SUPPORT FOR UNDERWRITING STANDARDS.] No life or 
health insurance company doing business in this state shall 
engage in any selection or underwriting process unless the 
insurance company establishes beforehand substantial data, 
actuarial projections, or claims experience which support the 
underwriting standards used by the insurance company.  The data, 
projections, or claims experience used to support the selection 
or underwriting process is not limited to only that of the 
company.  The experience, projections, or data of other 
companies or a rate service organization may be used as well.  
    Sec. 120.  Minnesota Statutes 1986, section 72A.31, 
subdivision 1, is amended to read:  
    Subdivision 1.  No person, firm or corporation engaged in 
the business of financing the purchase of real or personal 
property or of lending money on the security of real or personal 
property or who acts as agent or broker for one who purchases 
real property and borrows money on the security thereof, and no 
trustee, director, officer, agent or other employee of any such 
person, firm, or corporation shall directly or indirectly: 
    (1) require, as a condition precedent to such purchase or 
financing the purchase of such property or to loaning money upon 
the security of a mortgage thereon, or as a condition 
prerequisite for the renewal or extension of any such loan or 
mortgage or for the performance of any other act in connection 
therewith, that the person, firm or corporation making such 
purchase or for whom such purchase is to be financed or to whom 
the money is to be loaned or for whom such extension, renewal or 
other act is to be granted or performed negotiate any policy of 
insurance or renewal thereof covering such property through a 
particular agent, or insurer, or 
    (2) refuse to accept any policy of insurance covering such 
property because it was not negotiated through or with any 
particular agent, or insurer, or 
    (3) refuse to accept any policy of insurance covering the 
property issued by an insurer that is a member insurer as 
defined by section 60C.03, subdivision 6, or 
    (4) require any policy of insurance covering the property 
to exceed the replacement cost of the buildings on the mortgaged 
premises. 
    This section shall not prevent the disapproval of the 
insurer or a policy of insurance by any such person, firm, 
corporation, trustee, director, officer, agent or employee where 
there are reasonable grounds for believing that the insurer is 
insolvent or that such insurance is unsatisfactory as to 
placement with an unauthorized insurer, the financial solvency 
of the insurer, adequacy of the coverage, adequacy of the 
insurer to assume the risk to be insured, the assessment 
features to which the policy is subject, or other grounds which 
are based on the nature of the coverage and which are not 
arbitrary, unreasonable or discriminatory, nor shall this 
section prevent a mortgage lender or mortgage servicer from 
requiring that a policy of insurance or renewal thereof be in 
conformance with standards of the federal national mortgage 
association or the federal home loan mortgage corporation, nor 
shall this section forbid the securing of insurance or a renewal 
thereof at the request of the borrower or because of the 
borrower's failure to furnish the necessary insurance or renewal 
thereof.  For purposes of this section, "insurer" includes a 
township mutual fire insurance company operating under sections 
67A.01 to 67A.26 and a farmers mutual fire insurance company 
operating under sections 67A.27 to 67A.39.  
    Upon notice of any such disapproval of or refusal to accept 
an insurer or a policy of insurance, the commissioner may order 
the approval of the insurer or the acceptance of the tendered 
policy of insurance, or both, if the commissioner determines 
such disapproval or refusal to accept is not in accordance with 
the foregoing requirements.  Failure to comply with such an 
order of the commissioner of commerce shall be deemed a 
violation of this section.  
    Sec. 121.  Minnesota Statutes 1986, section 169.045, 
subdivision 1, is amended to read:  
    Subdivision 1.  [DESIGNATION OF ROADWAYS, PERMIT.] The 
governing body of any home rule charter or statutory city or 
town may by ordinance authorize the operation of motorized golf 
carts, or four-wheel all-terrain vehicles, on designated 
roadways or portions thereof under its jurisdiction.  
Authorization to operate a motorized golf cart or four-wheel 
all-terrain vehicle is by permit only.  Permits are restricted 
to physically handicapped persons defined in section 169.345, 
subdivision 2.  For purposes of this section, a four-wheel 
all-terrain vehicle is a motorized flotation-tired vehicle with 
four low-pressure tires that is limited in engine displacement 
of less than 800 cubic centimeters and total dry weight less 
than 600 pounds. 
    Sec. 122.  Minnesota Statutes 1986, section 169.045, is 
amended by adding a subdivision to read:  
    Subd. 8.  [INSURANCE.] In the event persons operating a 
motorized golf cart or four-wheel, all-terrain vehicle under 
this section cannot obtain liability insurance in the private 
market, that person may purchase automobile insurance, including 
no-fault coverage, from the Minnesota Automobile Assigned Risk 
Plan at a rate to be determined by the commissioner of commerce. 
    Sec. 123.  [256B.73] [DEMONSTRATION PROJECT FOR UNINSURED 
LOW INCOME PERSONS.] 
    Subdivision 1.  [PURPOSE.] The purpose of the demonstration 
project is to determine the need for and the feasibility of 
establishing a statewide program of medical insurance for 
uninsured low income persons.  
    Subd. 2.  [ESTABLISHMENT: GEOGRAPHIC AREA.] The 
commissioner of human services shall establish a demonstration 
project to provide low cost medical insurance to uninsured low 
income persons in Cook, Lake, St. Louis, Carlton, Aitkin, Pine, 
Itasca, and Koochiching counties except an individual county may 
be excluded as determined by the county board of commissioners.  
    Subd. 3.  [DEFINITIONS.] For the purposes of this section, 
the following terms have the meanings given:  
    (1) "commissioner" means the commissioner of human services;
     (2) "coalition" means an organization comprised of members 
representative of small business, health care providers, county 
social service departments, health consumer groups, and the 
health industry, established to serve the purposes of this 
demonstration; 
    (3) "demonstration provider" means a Minnesota corporation 
regulated under chapter 62A, 62C, or 62D;  
    (4) "individual provider" means a medical provider under 
contract to the demonstration provider to provide medical care 
to enrollees; and 
    (5) "enrollee" means a person eligible to receive coverage 
according to subdivision 4.  
    Subd. 4.  [ENROLLEE ELIGIBILITY REQUIREMENTS.] To be 
eligible for participation in the demonstration project, an 
enrollee must:  
    (1) not be eligible for medicare, medical assistance, or 
general assistance medical care; 
    (2) have an income not more than 200 percent of the 
Minnesota income standards by family size used in the aid to 
families with dependent children program; and 
    (3) have no medical insurance or health benefits plan 
available through employment or other means that would provide 
coverage for the same medical services as provided by this 
demonstration. 
     Subd. 5.  [ENROLLEE BENEFITS.] Eligible persons enrolled by 
a demonstration provider shall receive a health services benefit 
package that includes health services which the enrollees might 
reasonably require to be maintained in good health, including 
emergency care, inpatient hospital and physician care, 
outpatient health services, and preventive health services, 
except that services related to chemical dependency, mental 
illness, vision care, dental care, and other benefits may be 
excluded or limited upon approval by the commissioner.  The 
commissioner, the coalition, and demonstration providers shall 
work together to design a package of benefits or packages or 
benefits that can be provided to enrollees for an affordable 
monthly premium. 
    Subd. 6.  [ENROLLEE PARTICIPATION.] An enrollee is not 
required to furnish evidence of good health.  The demonstration 
provider shall accept all persons applying for coverage who meet 
the criteria in subdivision 4, subject to the following 
provisions: 
    (a) Enrollees will be required to pay a sliding fee on a 
monthly basis for health coverage through the demonstration 
project.  Except for any required co-payments, the sliding fee 
should be considered payment in full for the coverage provided.  
The sliding fee shall be based on the enrollee's income and 
shall not exceed 50 percent of the rate that would be paid to a 
prepaid plan serving general assistance medical care recipients 
in the same geographic area.  
    (b) The demonstration provider may terminate the coverage 
for an enrollee who has not made payment within the first ten 
calendar days of the month for which coverage is being 
purchased.  The termination for nonpayment shall be retroactive 
to the first day of the month for which no payment has been made 
by the enrollee.  
    (c) An enrollee who either requests termination of coverage 
under the demonstration or who allows coverage to terminate due 
to nonpayment of the required monthly fee may be required to 
furnish evidence of good health prior to being reinstated in the 
demonstration.  As an alternative to evidence of good health, 
the enrollee may furnish evidence of having been eligible for 
health care services under a plan with similar benefits.  
    (d) The demonstration provider shall establish limits of 
enrollment which allow for a sufficient number of enrollees to 
constitute a reasonable demonstration project.  These limits 
shall be established by county within the project area. 
    Subd. 7.  [CONTRACT WITH DEMONSTRATION PROVIDER.] The 
commissioner shall contract with the demonstration provider for 
the duration of the project.  This contract shall be for 24 
months with an option to renew for no more than 12 months.  This 
contract may be canceled without cause by the commissioner upon 
90 days' written notice to the demonstration provider or by the 
demonstration provider with 90 days' written notice to the 
commissioner.  The commissioner shall assure the cooperation of 
the county human services or social services staff in all 
counties participating in the project.  
    Subd. 8.  [MEDICAL ASSISTANCE AND GENERAL ASSISTANCE 
MEDICAL CARE COORDINATION.] To assure enrollees of uninterrupted 
delivery of health care services, the commissioner may pay the 
premium to the demonstration provider for persons who become 
eligible for medical assistance or general assistance medical 
care.  To determine eligibility for medical assistance, any 
medical expenses for eligible services incurred by the 
demonstration provider shall be considered as evidence of 
satisfying the medical expense requirements of section 256B.06, 
subdivision 1, paragraphs (14) and (15).  To determine 
eligibility for general assistance medical care, any medical 
expenses for eligible services incurred by the demonstration 
provider shall be considered as evidence of satisfying the 
medical expense requirements of section 256D.03, subdivision 3.  
    Subd. 9.  [WAIVER REQUIRED.] No part of the demonstration 
project shall become operational until waivers of appropriate 
federal regulation are obtained from the health care financing 
administration.  
    Subd. 10.  [COORDINATION OF DEMONSTRATION WITH REGION.] The 
commissioner shall consult with a health insurance coalition 
formed locally with members from the demonstration area.  This 
coalition will work with the commissioner and potential 
demonstration providers as well as other private and public 
organizations to suggest program design, to secure additional 
funding support, and to ensure the program's local applicability.
    Sec. 124.  Minnesota Statutes 1986, section 471.98, 
subdivision 2, is amended to read:  
    Subd. 2.  "Political subdivision" includes a statutory or 
home rule charter city, a county, a school district, a town, a 
watershed management organization as defined in section 473.876, 
subdivision 9, or an instrumentality thereof having independent 
policy making and appropriating authority.  For the purposes of 
this section and section 471.981, the governing body of a town 
is the town board. 
    Sec. 125.  [541.22] [LIMITATION ON ASBESTOS CLAIMS.] 
    Subdivision 1.  [FINDINGS AND PURPOSE.] The legislature 
finds that it is in the interest of the general public, 
particularly those persons who may bring claims regarding 
materials containing asbestos and those against whom the claims 
may be brought, to set a specific date by which building owners 
must bring a cause of action for removal or other abatement 
costs associated with the presence of asbestos in their 
building.  By enactment of this statute of limitations the 
legislature does not imply that suits would otherwise be barred 
by an existing limitations period.  
    Subd. 2.  [LIMITATION ON CERTAIN ASBESTOS 
ACTIONS.] Notwithstanding any other law to the contrary, an 
action against a manufacturer or supplier of asbestos or 
material containing asbestos to recover for (1) removal of 
asbestos or materials containing asbestos from a building, (2) 
other measures taken to locate, correct, or ameliorate any 
problem related to asbestos in a building, or (3) reimbursement 
for removal, correction, or amelioration of an asbestos problem 
that would otherwise be barred before July 1, 1990, as a result 
of expiration of the applicable period of limitation, is revived 
or extended.  An asbestos action revived or extended under this 
subdivision may be begun before July 1, 1990. 
    Sec. 126.  [604.08] [VOLUNTEER ATHLETIC COACHES AND 
OFFICIALS; IMMUNITY FROM LIABILITY.] 
    Subdivision 1.  [GRANT.] No individual who provides 
services or assistance without compensation as an athletic 
coach, manager, or official for a sports team that is organized 
or performing under a nonprofit charter, and no community-based, 
voluntary nonprofit athletic association, or any volunteer of 
the nonprofit athletic association, is liable for money damages 
to a player or participant as a result of an individual's acts 
or omissions in the providing of that service or assistance. 
    This section applies to organized sports competitions and 
practice and instruction in that sport. 
    For purposes of this section, "compensation" does not 
include reimbursement for expenses. 
    Subd. 2.  [LIMITATION.] Subdivision 1 does not apply: 
    (1) to the extent that the acts or omissions are covered 
under an insurance policy issued to the entity for whom the 
coach, manager, or official serves; 
    (2) if the individual acts in a willful and wanton or 
reckless manner in providing the services or assistance; 
    (3) if the acts or omissions arise out of the operation, 
maintenance, or use of a motor vehicle; 
    (4) to an athletic coach, manager, or official who provides 
services or assistance as part of a public or private 
educational institution's athletic program; and 
    (5) if the individual acts in violation of federal, state, 
or local law. 
    The limitation in clause (1) constitutes a waiver of the 
defense of immunity to the extent of the liability stated in the 
policy, but has no effect on the liability of the individual 
beyond the coverage provided. 
    Sec. 127.  [SPECIAL STUDY.] 
    The commissioner of health, with the advice and assistance 
of the commissioners of commerce and human services, shall 
prepare a report to the legislature which addresses the issues 
concerning reimbursement by third-party payors of home health 
care benefits for individuals with a medical condition which 
would require inpatient hospital services in the absence of home 
or community-based care, and who are dependent upon medical 
technology in order to avoid death or serious injury.  
Development of the report must include participation by home 
care providers and third-party payors.  The report must include 
recommendations for the adoption of definitions of home care, 
minimum standards of home care services, the costs of providing 
home care, and resolution of the issue of cost-shifting of home 
care.  The report must be delivered to the legislature by 
January 15, 1988. 
    Sec. 128.  [RULE CHANGES.] 
    The commissioner shall adopt rule amendments to Minnesota 
Rules, chapter 2725, as necessary to effect the changes required 
by the legislature in sections 8 to 10. 
    These rules are exempt from the rulemaking provisions of 
chapter 14.  The commissioner must comply with section 14.38, 
subdivision 7, when adopting these rule amendments. 
    Sec. 129.  [APPLICATION.] 
    Sections 49, 65, and 66 apply to all group policies, all 
group subscriber contracts, all health maintenance contracts, 
and all qualified plans within the scope of Minnesota Statutes, 
chapters 62A, 62C, 62D, and 62E, that are issued, delivered or 
renewed in this state after August 1, 1987. 
    Sec. 130.  [SEVERABILITY.] 
    The provisions of Minnesota Statutes, section 645.20 apply 
to this act. 
    Sec. 131.  [REPEALER.] 
    Minnesota Statutes 1986, sections 62A.12; and 67A.43, 
subdivision 3, are repealed.  
    Minnesota Rules, parts 2700.2400; 2700.2410; 2700.2420; 
2700.2430; and 2700.2440, are repealed. 
    Section 123 is repealed effective July 1, 1988, if the 
project implementation phase has not begun by that date. 
    Sec. 132.  [EFFECTIVE DATE.] 
    Section 10 is effective May 31, 1987.  Credits earned and 
reported to the department before May 31, 1988, may be carried 
forward and used to fulfill continuing education requirements 
until May 31, 1989. 
    Sections 2, 5, 6, 15 to 20, 43, 57 to 63, 69 to 75, 77, 81, 
82, 87, 102, 116, and 122 to 125 are effective the day following 
final enactment. 
    Section 126 is effective August 1, 1987, and applies to 
claims arising from incidents occurring on or after that date. 
    Approved June 1, 1987

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