1.1                          A bill for an act
  1.2             relating to insurance; regulating companies and 
  1.3             agents; providing immunity from suit and 
  1.4             indemnification for receivers and their employees; 
  1.5             regulating coverages; providing certain notices and 
  1.6             filing requirements; providing for a study; making 
  1.7             certain technical changes; amending Minnesota Statutes 
  1.8             1996, sections 60A.02, subdivision 1a, and by adding a 
  1.9             subdivision; 60A.052, subdivision 2, and by adding a 
  1.10            subdivision; 60A.06, subdivisions 1 and 2; 60A.075, 
  1.11            subdivisions 1, 8, and 9; 60A.077, subdivisions 1, 2, 
  1.12            3, 5, 6, 7, 8, 9, 10, 11, and by adding a subdivision; 
  1.13            60A.092, subdivisions 6 and 11; 60A.10, subdivision 1; 
  1.14            60A.111, subdivision 1; 60A.13, subdivision 1; 60A.19, 
  1.15            subdivision 1; 60B.21, subdivision 2; 60B.25; 60B.44, 
  1.16            subdivisions 2, 4, 6, and by adding a subdivision; 
  1.17            60D.20, subdivision 2; 60K.02, subdivision 1; 60K.03, 
  1.18            subdivisions 2 and 3; 60K.08; 60K.14, subdivision 4; 
  1.19            60K.19, subdivisions 7 and 8; 61A.28, subdivisions 6, 
  1.20            9a, and 12; 61A.32; 61A.60, subdivision 1; 61B.19, 
  1.21            subdivision 3; 62A.04, subdivision 3; 62A.135, 
  1.22            subdivision 5; 62A.316; 62A.50, subdivision 3; 62B.02, 
  1.23            by adding subdivisions; 62B.04, subdivisions 1 and 2; 
  1.24            62E.12; 62Q.16; 65A.01, subdivision 3, and by adding a 
  1.25            subdivision; 65A.27, subdivision 4; 65A.29, 
  1.26            subdivision 4; 65B.48, subdivision 5; 65B.56, 
  1.27            subdivision 1; 67A.231; 72A.20, subdivision 34; 
  1.28            72B.04, subdivision 10; 79A.01, subdivision 10, and by 
  1.29            adding a subdivision; 79A.02, subdivisions 1 and 4; 
  1.30            79A.03, subdivisions 6, 7, 9, 10, and by adding a 
  1.31            subdivision; 79A.06, subdivision 5; 79A.21, 
  1.32            subdivision 2; 79A.22, subdivision 7, and by adding a 
  1.33            subdivision; 79A.23, subdivisions 1 and 2; 79A.24, 
  1.34            subdivisions 1, 2, and 4; 79A.26, subdivision 2; and 
  1.35            79A.31, subdivision 1; proposing coding for new law in 
  1.36            Minnesota Statutes, chapters 60B; and 65B; repealing 
  1.37            Minnesota Statutes 1996, sections 60A.11, subdivision 
  1.38            24a; 60B.36; 60B.44, subdivision 3; 65A.29, 
  1.39            subdivision 12; and 79A.04, subdivision 8. 
  1.40  BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF MINNESOTA: 
  1.41     Section 1.  Minnesota Statutes 1996, section 60A.02, 
  1.42  subdivision 1a, is amended to read: 
  2.1      Subd. 1a.  [ASSOCIATION OR ASSOCIATIONS.] (a) "Association" 
  2.2   or "associations" means an organized body of people who have 
  2.3   some interest in common and that has at the onset a minimum of 
  2.4   100 persons; is organized and maintained in good faith for 
  2.5   purposes other than that of obtaining insurance; and has a 
  2.6   constitution and bylaws which provide that:  (1) the association 
  2.7   or associations hold regular meetings not less frequently than 
  2.8   annually to further purposes of the members; (2) except for 
  2.9   credit unions, the association or associations collect dues or 
  2.10  solicit contributions from members; (3) the members have voting 
  2.11  privileges and representation on the governing board and 
  2.12  committees, which provide the members with control of the 
  2.13  association including the purchase and administration of 
  2.14  insurance products offered to members; and (4) the members are 
  2.15  not, within the first 30 days of membership, directly solicited, 
  2.16  offered, or sold an insurance policy if the policy is available 
  2.17  as an association benefit. 
  2.18     (b) An association may apply to the commissioner for a 
  2.19  waiver of the 30-day waiting period to that association.  The 
  2.20  commissioner may grant the waiver upon a finding of ~~all~~ at least 
  2.21  three of the following:  (1) the association is in full 
  2.22  compliance with this subdivision; (2) sanctions have not been 
  2.23  imposed against the association as a result of significant 
  2.24  disciplinary action by the commissioner; ~~and~~ (3) at least 80 
  2.25  percent of the association's income comes from dues, 
  2.26  contributions, or sources other than income from the sale of 
  2.27  insurance; or (4) the association has been organized and 
  2.28  maintained for at least ten years. 
  2.29     Sec. 2.  Minnesota Statutes 1996, section 60A.02, is 
  2.30  amended by adding a subdivision to read: 
  2.31     Subd. 2b.  [FILED.] In cases where a law requires documents 
  2.32  to be filed with the commissioner, the documents will be 
  2.33  considered filed when they are received by the department of 
  2.34  commerce. 
  2.35     Sec. 3.  Minnesota Statutes 1996, section 60A.052, 
  2.36  subdivision 2, is amended to read: 
  3.1      Subd. 2.  [SUSPENSION OR REVOCATION OF AUTHORITY OR 
  3.2   CENSURE.] If the commissioner determines that one of the 
  3.3   conditions listed in subdivision 1 exists, the commissioner may 
  3.4   issue an order requiring the insurance company to show cause why 
  3.5   any or all of the following should not occur:  (1) revocation or 
  3.6   suspension of any or all certificates of authority granted to 
  3.7   the foreign or domestic insurance company or its agent; (2) 
  3.8   censuring of the insurance company; ~~or~~ (3) cancellation of all 
  3.9   or some of the company's insurance contracts then in force in 
  3.10  this state; or (4) the imposition of a civil penalty.  The order 
  3.11  shall be calculated to give reasonable notice of the time and 
  3.12  place for hearing thereon, and shall state the reasons for the 
  3.13  entry of the order.  All hearings shall be conducted in 
  3.14  accordance with chapter 14.  The insurer may waive its right to 
  3.15  the hearing.  If the insurer is under the supervision or control 
  3.16  of the insurance department of the insurer's state of domicile, 
  3.17  that insurance department, acting on behalf of the insurer, may 
  3.18  waive the insurer's right to the hearing.  After the hearing, 
  3.19  the commissioner shall enter an order disposing of the matter as 
  3.20  the facts require.  If the insurance company fails to appear at 
  3.21  a hearing after having been duly notified of it, the company 
  3.22  shall be considered in default, and the proceeding may be 
  3.23  determined against the company upon consideration of the order 
  3.24  to show cause, the allegations of which may be considered to be 
  3.25  true. 
  3.26     Sec. 4.  Minnesota Statutes 1996, section 60A.052, is 
  3.27  amended by adding a subdivision to read: 
  3.28     Subd. 4a.  [WITHDRAWAL OF INSURER FROM STATE.] No insurer 
  3.29  shall withdraw from this state until its direct liability to its 
  3.30  policyholders and obligees under all its insurance contracts 
  3.31  then in force in this state have been assumed by another 
  3.32  licensed insurer according to section 60A.09, subdivision 4a. 
  3.33     Sec. 5.  Minnesota Statutes 1996, section 60A.06, 
  3.34  subdivision 1, is amended to read: 
  3.35     Subdivision 1.  [STATUTORY LINES.] Insurance corporations 
  3.36  may be authorized to transact in any state or territory in the 
  4.1   United States, in the Dominion of Canada, and in foreign 
  4.2   countries, when specified in their charters or certificates of 
  4.3   incorporation, either as originally granted or as thereafter 
  4.4   amended, any of the following kinds of business, upon the stock 
  4.5   plan, or upon the mutual plan when the formation of such mutual 
  4.6   companies is otherwise authorized by law; and business trusts as 
  4.7   authorized by law of this state shall only be authorized to 
  4.8   transact in this state the following kind of business 
  4.9   hereinafter specified in clause (7) hereof when specified in 
  4.10  their "declaration of trust": 
  4.11     (1) To insure against loss or damage to property on land 
  4.12  and against loss of rents and rental values, leaseholds of 
  4.13  buildings, use and occupancy and direct or consequential loss or 
  4.14  damage caused by fire, smoke or smudge, water or other fluid or 
  4.15  substance, lightning, windstorm, tornado, cyclone, earthquake, 
  4.16  collapse and slippage, rain, hail, frost, snow, freeze, change 
  4.17  of temperature, weather or climatic conditions, excess or 
  4.18  deficiency of moisture, floods, the rising of waters, oceans, 
  4.19  lakes, rivers or their tributaries, bombardment, invasion, 
  4.20  insurrection, riot, civil war or commotion, military or usurped 
  4.21  power, electrical power interruption or electrical breakdown 
  4.22  from any cause, railroad equipment, motor vehicles or aircraft, 
  4.23  accidental injury to sprinklers, pumps, conduits or containers 
  4.24  or other apparatus erected for extinguishing fires, explosion, 
  4.25  whether fire ensues or not, except explosions on risks specified 
  4.26  in clause (3); provided, however, that there may be insured 
  4.27  hereunder the following:  (a) explosion of any kind originating 
  4.28  outside the insured building or outside of the building 
  4.29  containing the property insured, (b) explosion of pressure 
  4.30  vessels which do not contain steam or which are not operated 
  4.31  with steam coils or steam jackets; and (c) risks under home 
  4.32  owners multiple peril policies; 
  4.33     (2)(a) To insure vessels, freight, goods, wares, 
  4.34  merchandise, specie, bullion, jewels, profits, commissions, bank 
  4.35  notes, bills of exchange, and other evidences of debt, bottomry 
  4.36  and respondentia interest, and every insurance appertaining to 
  5.1   or connected with risks of transportation and navigation on and 
  5.2   under water, on land or in the air; 
  5.3      (b) To insure all personal property floater risks; 
  5.4      (3) To insure against any loss from either direct or 
  5.5   indirect damage to any property or interest of the assured or of 
  5.6   another, resulting from the explosion of or injury to (a) any 
  5.7   boiler, heater or other fired pressure vessel; (b) any unfired 
  5.8   pressure vessel; (c) pipes or containers connected with any of 
  5.9   said boilers or vessels; (d) any engine, turbine, compressor, 
  5.10  pump or wheel; (e) any apparatus generating, transmitting or 
  5.11  using electricity; (f) any other machinery or apparatus 
  5.12  connected with or operated by any of the previously named 
  5.13  boilers, vessels or machines; and including the incidental power 
  5.14  to make inspections of and to issue certificates of inspection 
  5.15  upon, any such boilers, apparatus, and machinery, whether 
  5.16  insured or otherwise; 
  5.17     (4) To make contracts of life and endowment insurance, to 
  5.18  grant, purchase, or dispose of annuities or endowments of any 
  5.19  kind; and, in such contracts, or in contracts supplemental 
  5.20  thereto to provide for additional benefits in event of death of 
  5.21  the insured by accidental means, total permanent disability of 
  5.22  the insured, or specific dismemberment or disablement suffered 
  5.23  by the insured, or acceleration of life or endowment or annuity 
  5.24  benefits in advance of the time they would otherwise be payable; 
  5.25     (5)(a) To insure against loss or damage by the sickness, 
  5.26  bodily injury or death by accident of the assured or dependents 
  5.27  or those for whom the assured has assumed a portion of the 
  5.28  liability for the loss or damage, including liability for 
  5.29  payment of medical care costs or for provisions of medical care; 
  5.30     (b) To insure against the legal liability, whether imposed 
  5.31  by common law or by statute or assumed by contract, of employers 
  5.32  for the death or disablement of, or injury to, employees; 
  5.33     (6) To guarantee the fidelity of persons in fiduciary 
  5.34  positions, public or private, or to act as surety on official 
  5.35  and other bonds, and for the performance of official or other 
  5.36  obligations; 
  6.1      (7) To insure owners and others interested in real estate 
  6.2   against loss or damage, by reason of defective titles, 
  6.3   encumbrances, or otherwise; 
  6.4      (8) To insure against loss or damage by breakage of glass, 
  6.5   located or in transit; 
  6.6      (9)(a) To insure against loss by burglary, theft, or 
  6.7   forgery; 
  6.8      (b) To insure against loss of or damage to moneys, coins, 
  6.9   bullion, securities, notes, drafts, acceptance or any other 
  6.10  valuable paper or document, resulting from any cause, except 
  6.11  while in the custody or possession of and being transported by 
  6.12  any carrier for hire or in the mail; 
  6.13     (c) To insure individuals by means of an all risk type of 
  6.14  policy commonly known as the "personal property floater" against 
  6.15  any kind and all kinds of loss of or damage to, or loss of use 
  6.16  of, any personal property other than merchandise; 
  6.17     (d) To insure against loss or damage by water or other 
  6.18  fluid or substance; 
  6.19     (10) To insure against loss from death of domestic animals 
  6.20  and to furnish veterinary service; 
  6.21     (11) To guarantee merchants and those engaged in business, 
  6.22  and giving credit, from loss by reason of giving credit to those 
  6.23  dealing with them; this shall be known as credit insurance; 
  6.24     (12) To insure against loss or damage to automobiles or 
  6.25  other vehicles or aircraft and their contents, by collision, 
  6.26  fire, burglary, or theft, and other perils of operation, and 
  6.27  against liability for damage to persons, or property of others, 
  6.28  by collision with such vehicles or aircraft, and to insure 
  6.29  against any loss or hazard incident to the ownership, operation, 
  6.30  or use of motor or other vehicles or aircraft; 
  6.31     (13) To insure against liability for loss or damage to the 
  6.32  property or person of another caused by the insured or by those 
  6.33  for whom the insured is responsible, including insurance of 
  6.34  medical, hospital, surgical, funeral or other related expense of 
  6.35  the insured or other person injured, irrespective of legal 
  6.36  liability of the insured, when issued with or supplemental to 
  7.1   policies of liability insurance; 
  7.2      (14) To insure against loss of or damage to any property of 
  7.3   the insured, resulting from the ownership, maintenance or use of 
  7.4   elevators, except loss or damage by fire; 
  7.5      (15) To insure against attorneys fees, court costs, witness 
  7.6   fees and incidental expenses incurred in connection with the use 
  7.7   of the professional services of attorneys at law.  
  7.8      Sec. 6.  Minnesota Statutes 1996, section 60A.06, 
  7.9   subdivision 2, is amended to read: 
  7.10     Subd. 2.  [OTHER LINES.] Any insurance corporation or 
  7.11  association heretofore or hereafter licensed to transact within 
  7.12  the state any of the kinds or classes of insurance specifically 
  7.13  authorized under the laws of this state may, when authorized by 
  7.14  its charter, transact within and without the state any lines of 
  7.15  insurance germane to its charter powers and not specifically 
  7.16  provided for under the laws of this state when these lines, or 
  7.17  combinations of lines, of insurance are not in violation of the 
  7.18  constitution or the laws of the state and, in the opinion of the 
  7.19  commissioner, not contrary to public policy, provided the 
  7.20  company or association shall first obtain authority of the 
  7.21  commissioner and meet ~~such requirements as to~~ capital or 
  7.22  surplus~~, or both,~~ and other solvency and policy form 
  7.23  requirements as the commissioner shall prescribe.  These 
  7.24  additional hazards may be insured against by attachment to, or 
  7.25  in extension of, any policy which the company may be authorized 
  7.26  to issue under the laws of this state.  This subdivision shall 
  7.27  apply to companies operating upon the stock or mutual plan, 
  7.28  reciprocal or interinsurance exchanges. 
  7.29     Sec. 7.  Minnesota Statutes 1996, section 60A.075, 
  7.30  subdivision 1, is amended to read: 
  7.31     Subdivision 1.  [DEFINITIONS.] For the purposes of this 
  7.32  section, the terms in this subdivision have the meanings given 
  7.33  them. 
  7.34     (a) "Eligible member" means a policyholder whose policy is 
  7.35  in force as of the record date, which is the date that the 
  7.36  mutual company's board of directors adopts a plan of conversion 
  8.1   or some other date specified as the record date in the plan of 
  8.2   conversion and approved by the commissioner.  Unless otherwise 
  8.3   provided in the plan, a person insured under a group policy is 
  8.4   not an eligible member, unless on the record date: 
  8.5      (1) the person is insured or covered under a group life 
  8.6   policy or group annuity contract under which funds are 
  8.7   accumulated and allocated to the respective covered persons; 
  8.8      (2) the person has the right to direct the application of 
  8.9   the funds so allocated; 
  8.10     (3) the group policyholder makes no contribution to the 
  8.11  premiums or deposits for the policy or contract; and 
  8.12     (4) the converting mutual company has the names and 
  8.13  addresses of the persons covered under the group life policy or 
  8.14  group annuity contract. 
  8.15     (b) "Reorganized company" means a Minnesota domestic stock 
  8.16  insurance company that has converted from a Minnesota domestic 
  8.17  mutual insurance company according to this section. 
  8.18     (c) "Plan of conversion" or "plan" means a plan adopted by 
  8.19  a Minnesota domestic mutual insurance company's board of 
  8.20  directors under this section to convert the mutual company into 
  8.21  a Minnesota domestic stock insurance company. 
  8.22     (d) "Policy" means a policy or contract of insurance issued 
  8.23  by a converting mutual company, including an annuity contract. 
  8.24     (e) "Commissioner" means the commissioner of commerce. 
  8.25     (f) "Converting mutual company" means a Minnesota domestic 
  8.26  mutual insurance company seeking to convert to a Minnesota 
  8.27  domestic stock insurance company according to this section. 
  8.28     (g) "Effective date of a conversion" means the date 
  8.29  determined according to subdivision 6. 
  8.30     (h) "Membership interests" means all policyholders' rights 
  8.31  as members of the converting mutual company, including but not 
  8.32  limited to, rights to vote and to participate in any 
  8.33  distributions of surplus, whether or not incident to the 
  8.34  company's liquidation. 
  8.35     (i) "Equitable surplus" means the converting mutual 
  8.36  company's surplus as regards policyholders as of the 
  9.1   ~~effective~~ record date of the conversion or other date approved 
  9.2   by the commissioner determined in a manner that is not unfair or 
  9.3   inequitable to policyholders. 
  9.4      (j) "Permitted issuer" means:  (1) a corporation organized 
  9.5   and owned by the converting mutual company or by any other 
  9.6   insurance company or insurance holding company for the purpose 
  9.7   of purchasing and holding ~~all of the stock~~ securities 
  9.8   representing a majority of voting control of the reorganized 
  9.9   company; (2) a stock insurance company owned by the converting 
  9.10  mutual company or by any other insurance company or insurance 
  9.11  holding company into which the converting mutual company will be 
  9.12  merged; or (3) any other corporation approved by the 
  9.13  commissioner. 
  9.14     Sec. 8.  Minnesota Statutes 1996, section 60A.075, 
  9.15  subdivision 8, is amended to read: 
  9.16     Subd. 8.  [SHARE CONVERSION.] A plan of conversion under 
  9.17  this subdivision shall provide for exchange of policyholders' 
  9.18  membership interests in return for shares in the reorganized 
  9.19  company, according to paragraphs (a) to (c). 
  9.20     (a) The policyholders' membership interests shall be 
  9.21  exchanged, in a manner that takes into account the estimated 
  9.22  proportionate contribution of equitable surplus of each class of 
  9.23  participating policies and contracts, for all of the common 
  9.24  shares of the reorganized company or common shares of its parent 
  9.25  company or a permitted issuer, or for a combination of the 
  9.26  common shares of the reorganized company or common shares of its 
  9.27  parent company or a permitted issuer. 
  9.28     (b) Unless the anticipated issuance within a shorter period 
  9.29  is disclosed in the plan of conversion, the issuer of common 
  9.30  shares shall not, within two years after the effective date of 
  9.31  reorganization, issue either of the following: 
  9.32     (1) any of its common shares or any securities convertible 
  9.33  with or without consideration into the common shares or carrying 
  9.34  any warrant to subscribe to or purchase common shares; and 
  9.35     (2) any warrant, right, or option to subscribe to or 
  9.36  purchase the common shares or other securities described in 
 10.1   paragraph (a), except for the issue of common shares to or for 
 10.2   the benefit of policyholders according to the plan of conversion 
 10.3   and the issue of ~~options~~ nontransferable subscription rights for 
 10.4   the purchase of common shares being granted to officers, 
 10.5   directors, or ~~employees~~ a tax qualified employee benefit plan of 
 10.6   the reorganized company or its parent company, if any, or a 
 10.7   permitted issuer, according to ~~this section~~ subdivision 11. 
 10.8      (c) Unless the common shares have a public market when 
 10.9   issued, the issuer shall use its best efforts to encourage and 
 10.10  assist in the establishment of a public market for the common 
 10.11  shares within two years of the effective date of the conversion 
 10.12  or a longer period as disclosed in the plan of conversion.  
 10.13  Within one year after any offering of stock other than the 
 10.14  initial distribution, but no later than six years after the 
 10.15  effective date of the conversion, the reorganized company shall 
 10.16  offer to make available to policyholders who received and 
 10.17  retained shares of common stock or securities described in 
 10.18  paragraph (b), clause (1), a procedure to dispose of those 
 10.19  shares of stock at market value without brokerage commissions or 
 10.20  similar fees. 
 10.21     Sec. 9.  Minnesota Statutes 1996, section 60A.075, 
 10.22  subdivision 9, is amended to read: 
 10.23     Subd. 9.  [SURPLUS DISTRIBUTION.] A plan of conversion 
 10.24  under this subdivision shall provide for the exchange of the 
 10.25  policyholders' membership interests in return for the operation 
 10.26  of the converting mutual company's participating policies as a 
 10.27  closed block of business and for the distribution of the 
 10.28  company's equitable surplus to policyholders, and shall provide 
 10.29  for the issuance of new shares of the reorganized company or its 
 10.30  parent corporation, each according to paragraphs (a) to (i). 
 10.31     (a) The converting mutual company's participating business, 
 10.32  comprised of its participating policies and contracts in force 
 10.33  on the effective date of the conversion or other reasonable date 
 10.34  as provided in the plan, shall be operated by the reorganized 
 10.35  company as a closed block of participating business.  However, 
 10.36  at the option of the converting mutual company, group policies 
 11.1   and group contracts may be omitted from the closed block. 
 11.2      (b) Assets of the converting mutual company must be 
 11.3   allocated to the closed block of participating business in an 
 11.4   amount equal to the reserves and liabilities for the converting 
 11.5   mutual life insurer's participating policies and contracts in 
 11.6   force on the effective date of the conversion.  The plan must be 
 11.7   accompanied by an opinion of an independent qualified actuary 
 11.8   who meets the standards set forth in the insurance laws or 
 11.9   regulations for the submission of actuarial opinions as to the 
 11.10  adequacy of reserves or assets.  The opinion must relate to the 
 11.11  adequacy of the assets allocated to support the closed block of 
 11.12  business.  The actuarial opinion must be based on methods of 
 11.13  analysis considered appropriate for those purposes by the 
 11.14  Actuarial Standards Board. 
 11.15     (c) The reorganized company shall keep a separate 
 11.16  accounting for the closed block and shall make and include in 
 11.17  the annual statement to be filed with the commissioner each year 
 11.18  a separate statement showing the gains, losses, and expenses 
 11.19  properly attributable to the closed block. 
 11.20     (d) Notwithstanding the establishment of a closed block, 
 11.21  the entire assets of the reorganized company shall be available 
 11.22  for the payment of benefits to policyholders.  Payment must 
 11.23  first be made from the assets supporting the closed block until 
 11.24  exhausted, and then from the general assets of the reorganized 
 11.25  company. 
 11.26     (e) The converting mutual company's equitable surplus shall 
 11.27  be distributed to eligible participating policyholders in a form 
 11.28  or forms selected by the converting mutual company.  The form of 
 11.29  distribution may consist of cash, securities of the reorganized 
 11.30  company, securities of another institution, a certificate of 
 11.31  contribution, additional life insurance, annuity benefits, 
 11.32  increased dividends, reduced premiums, or other equitable 
 11.33  consideration or any combination of forms of consideration.  The 
 11.34  consideration, if any, given to a class or category of 
 11.35  policyholders may differ from the consideration given to another 
 11.36  class or category of policyholders.  A certificate of 
 12.1   contribution must be repayable in ten years, be equal to 100 
 12.2   percent of the value of the policyholders' membership interest, 
 12.3   and bear interest at the highest rate charged by the reorganized 
 12.4   company for policy loans on the effective date of the conversion.
 12.5      (f) The consideration must be allocated among the 
 12.6   policyholders in a manner that is fair and equitable to the 
 12.7   policyholders. 
 12.8      (g) The reorganized company or its parent corporation shall 
 12.9   issue and sell shares of one or more classes having a total 
 12.10  price equal to the estimated value in the market of the shares 
 12.11  on the initial offering date.  The estimated value must take 
 12.12  into account all of the following: 
 12.13     (1) the pro forma market value of the reorganized company; 
 12.14     (2) the consideration to be given to policyholders 
 12.15  according to paragraph (e); 
 12.16     (3) the proceeds of the sale of the shares; and 
 12.17     (4) any additional value attributable to the shares as a 
 12.18  result of a purchaser or a group of purchasers who acted in 
 12.19  concert to obtain shares in the initial offering, attaining, 
 12.20  through such purchase, control of the reorganized company or its 
 12.21  parent corporation. 
 12.22     (h) If a purchaser or a group of purchasers acting in 
 12.23  concert is to attain control in the initial offering, the mutual 
 12.24  company shall not, directly or indirectly, pay for any of the 
 12.25  costs or expenses of conversion of the mutual company, whether 
 12.26  or not the conversion is effected, except with permission of the 
 12.27  commissioner. 
 12.28     (i) Periodically, with the commissioner's approval, the 
 12.29  reorganized company may share in the profits of the closed block 
 12.30  of participating business for the benefit of stockholders if the 
 12.31  assets allocated to the closed block are in excess of those 
 12.32  necessary to support the closed block. 
 12.33     Sec. 10.  Minnesota Statutes 1996, section 60A.077, 
 12.34  subdivision 1, is amended to read: 
 12.35     Subdivision 1.  [FORMATION.] (a) A domestic mutual 
 12.36  insurance company, upon approval of the commissioner, may 
 13.1   reorganize by forming an insurance holding company based upon a 
 13.2   mutual plan and continuing the corporate existence of the 
 13.3   reorganizing insurance company as a stock insurance company.  
 13.4   The commissioner, if satisfied that the interests of the 
 13.5   policyholders are properly protected and that the plan of 
 13.6   reorganization is fair and equitable to the policyholders, may 
 13.7   approve the proposed plan of reorganization and may require as a 
 13.8   condition of approval the modifications of the proposed plan of 
 13.9   reorganization as the commissioner finds necessary for the 
 13.10  protection of the policyholders' interests.  The commissioner 
 13.11  shall retain jurisdiction over the mutual insurance holding 
 13.12  company according to this section and chapter 60D to assure that 
 13.13  policyholder and member interests are protected. 
 13.14     (b) All of the initial voting shares of the capital stock 
 13.15  of the reorganized insurance company must be issued to the 
 13.16  mutual insurance holding company or to an intermediate stock 
 13.17  holding company ~~that is wholly owned by the mutual insurance~~ 
 13.18  ~~holding company~~.  The membership interests of the policyholders 
 13.19  of the reorganized insurance company become membership interests 
 13.20  in the mutual insurance holding company.  "Membership interests" 
 13.21  means those interests described in section 60A.075, subdivision 
 13.22  1, paragraph (h).  Policyholders of the reorganized insurance 
 13.23  company shall be members of the mutual insurance holding company 
 13.24  and their voting rights must be determined in accordance with 
 13.25  the articles of incorporation and bylaws of the mutual insurance 
 13.26  holding company.  The mutual insurance holding company shall, at 
 13.27  all times, directly or through ~~an~~ one or more intermediate stock 
 13.28  holding ~~company~~ companies, control a majority of the voting 
 13.29  shares of the capital stock of the reorganized insurance 
 13.30  company, taking into account any potential dilution resulting 
 13.31  from convertible securities. 
 13.32     (c) A majority of the board of directors of a mutual 
 13.33  insurance holding company must be disinterested directors.  For 
 13.34  purposes of this section, a director is disinterested if (i) the 
 13.35  director is not or has not within the past two years been an 
 13.36  officer or employee of the mutual insurance holding company or 
 14.1   any subsidiary or predecessor corporation, and (ii) the director 
 14.2   does not hold, directly or indirectly, a material ownership 
 14.3   interest in any subsidiary of the mutual insurance holding 
 14.4   company.  An ownership interest is material if it represents 
 14.5   more than one-half of one percent of the voting securities of 
 14.6   the issuer, or a larger percentage as the commissioner may 
 14.7   approve. 
 14.8      Sec. 11.  Minnesota Statutes 1996, section 60A.077, 
 14.9   subdivision 2, is amended to read: 
 14.10     Subd. 2.  [MERGER.] (a) A domestic or foreign mutual 
 14.11  insurance company, upon the approval of the commissioner, may 
 14.12  reorganize by merging its policyholders' membership interests 
 14.13  into a mutual insurance holding company formed according to 
 14.14  subdivision 1 and continuing the corporate existence of the 
 14.15  reorganizing insurance company as a stock insurance company 
 14.16  subsidiary of the mutual insurance holding company or of an 
 14.17  intermediate stock holding company.  "Membership interests" 
 14.18  means those interests described in section 60A.075, subdivision 
 14.19  1, paragraph (h).  The commissioner, if satisfied that the 
 14.20  interests of the ~~policyholder~~ policyholders of the reorganizing 
 14.21  company and the interests of the existing members of the mutual 
 14.22  insurance holding company are properly protected and that the 
 14.23  merger is fair and equitable to ~~the policyholders~~ those parties, 
 14.24  may approve the proposed merger and may require as a condition 
 14.25  of approval the modifications of the proposed merger as the 
 14.26  commissioner finds necessary for the protection of the 
 14.27  policyholders' or members' interests.  The commissioner shall 
 14.28  retain jurisdiction, under chapter 60D, over the mutual 
 14.29  insurance holding company organized according to this section to 
 14.30  assure that policyholder and member interests are protected. 
 14.31     (b) All of the initial voting shares of the capital stock 
 14.32  of the reorganized insurance company must be issued to the 
 14.33  mutual insurance holding company, or to an intermediate stock 
 14.34  holding company ~~that is wholly owned by the mutual insurance~~ 
 14.35  ~~holding company~~.  The membership interests of the policyholders 
 14.36  of the reorganized insurance company become membership interests 
 15.1   in the mutual insurance holding company.  Policyholders of the 
 15.2   reorganized insurance company shall be members of the mutual 
 15.3   insurance holding company and their voting rights must be 
 15.4   determined according to the articles of incorporation and bylaws 
 15.5   of the mutual insurance holding company.  The mutual insurance 
 15.6   holding company shall, at all times, directly or through one or 
 15.7   more intermediate stock holding companies, control a majority of 
 15.8   the voting shares of the capital stock of the reorganized 
 15.9   insurance company, taking into account any potential dilution 
 15.10  resulting from convertible securities. 
 15.11     (c) A domestic mutual insurance holding company may merge 
 15.12  with a domestic or foreign mutual insurance holding company in 
 15.13  the manner prescribed for the merger of insurance companies set 
 15.14  forth in section 60A.16, with any exceptions or modifications 
 15.15  the commissioner may approve. 
 15.16     Sec. 12.  Minnesota Statutes 1996, section 60A.077, 
 15.17  subdivision 3, is amended to read: 
 15.18     Subd. 3.  [PLAN OF REORGANIZATION; APPROVAL BY 
 15.19  COMMISSIONER.] (a) ~~The~~ A reorganizing or merging insurer or a 
 15.20  merging mutual insurance holding company shall ~~file a plan of~~ 
 15.21  ~~reorganization, approved~~, by the affirmative vote of a majority 
 15.22  of its board of directors, ~~for review and approval by the~~ 
 15.23  ~~commissioner~~ adopt a plan of reorganization or merger consistent 
 15.24  with the requirements of this section and file the plan with the 
 15.25  commissioner.  At any time before the approval of a plan by the 
 15.26  commissioner, the company, by the affirmative vote of a majority 
 15.27  of its directors, may amend or withdraw the plan.  The plan must 
 15.28  provide for the following: 
 15.29     (1) in the case of a reorganization under subdivision 1, 
 15.30  establishing a mutual insurance holding company with at least 
 15.31  one stock insurance company subsidiary, ~~the majority of shares~~ 
 15.32  ~~of which must be owned, either directly or through an~~ 
 15.33  ~~intermediate stock holding company, by the mutual insurance~~ 
 15.34  ~~holding company~~ or in the case of a reorganization under 
 15.35  subdivision 2, a description of the terms and conditions of the 
 15.36  proposed merger; 
 16.1      (2) analyzing the benefits and risks attendant to the 
 16.2   proposed reorganization, including the rationale for the 
 16.3   reorganization and analysis of the comparative benefits and 
 16.4   risks of a demutualization under section 60A.075; 
 16.5      (3) protecting the immediate and long-term interests of 
 16.6   existing policyholders; 
 16.7      (4) ensuring immediate membership in the mutual insurance 
 16.8   holding company of all existing policyholders of the 
 16.9   reorganizing domestic insurance company; 
 16.10     (5) describing a plan providing for membership interests of 
 16.11  future policyholders; 
 16.12     (6) describing the number of members of the board of 
 16.13  directors of the mutual insurance holding company required to be 
 16.14  policyholders; 
 16.15     (7) ~~ensuring that, in the event of proceedings under~~ 
 16.16  ~~chapter 60B involving a stock insurance company subsidiary of~~ 
 16.17  ~~the mutual insurance holding company that resulted from the~~ 
 16.18  ~~reorganization of a domestic mutual insurance company, the~~ 
 16.19  ~~assets of the mutual insurance holding company will be available~~ 
 16.20  ~~to satisfy the policyholder obligations of the stock insurance~~ 
 16.21  ~~company;~~ 
 16.22     ~~(8) for periodic distribution of accumulated holding~~ 
 16.23  ~~company earnings to members~~ describing the mutual insurance 
 16.24  holding company's plan for distributions to members or other 
 16.25  uses of accumulated mutual holding company earnings; 
 16.26     ~~(9)~~ (8) describing the nature and content of the annual 
 16.27  report and financial statement to be sent to each member; 
 16.28     ~~(10)~~ (9) a copy of the proposed mutual insurance holding 
 16.29  company's articles of incorporation and bylaws specifying all 
 16.30  membership rights; 
 16.31     ~~(11)~~ (10) the names, addresses, and occupational 
 16.32  information of all corporate officers and members of the 
 16.33  proposed mutual insurance holding company board of directors; 
 16.34     ~~(12)~~ (11) information sufficient to demonstrate that the 
 16.35  financial condition of the reorganizing or merging company will 
 16.36  not be materially diminished upon reorganization, including 
 17.1   information concerning any subsidiaries of the reorganizing or 
 17.2   merging insurers that will become subsidiaries of the mutual 
 17.3   insurance holding company or an intermediate holding company as 
 17.4   part of the reorganization; 
 17.5      ~~(13)~~ (12) a copy of the articles of incorporation and 
 17.6   bylaws for any proposed insurance company subsidiary or 
 17.7   intermediate holding company subsidiary; 
 17.8      ~~(14)~~ (13) describing any plans for ~~the~~ an initial sale or 
 17.9   subscription of stock ~~for~~ or other securities of the reorganized 
 17.10  insurance company or any intermediate holding company; and 
 17.11     ~~(15)~~ (14) any other information requested by the 
 17.12  commissioner or required by rule. 
 17.13     (b) The commissioner may approve the plan upon finding that 
 17.14  the requirements of this section have been fully met and the 
 17.15  plan will protect the immediate and long-term interests of 
 17.16  policyholders. 
 17.17     (c) The commissioner may retain, at the reorganizing or 
 17.18  merging mutual company's expense, any qualified experts not 
 17.19  otherwise a part of the commissioner's staff to assist in 
 17.20  reviewing the plan. 
 17.21     (d) The commissioner may, but need not, conduct a public 
 17.22  hearing regarding the proposed plan.  The hearing must be held 
 17.23  within 30 days after submission of a completed plan of 
 17.24  reorganization to the commissioner.  The commissioner shall give 
 17.25  the reorganizing mutual company at least 20 days' notice of the 
 17.26  hearing.  At the hearing, the reorganizing mutual company, its 
 17.27  policyholders, and any other person whose interest may be 
 17.28  affected by the proposed reorganization, may present evidence, 
 17.29  examine and cross-examine witnesses, and offer oral and written 
 17.30  arguments or comments according to the procedure for contested 
 17.31  cases under chapter 14.  The persons participating may conduct 
 17.32  discovery proceedings in the same manner as prescribed for the 
 17.33  district courts of this state.  All discovery proceedings must 
 17.34  be concluded no later than three days before the scheduled 
 17.35  commencement of the public hearing. 
 17.36     Sec. 13.  Minnesota Statutes 1996, section 60A.077, 
 18.1   subdivision 5, is amended to read: 
 18.2      Subd. 5.  [APPROVAL BY MEMBERS.] The plan shall be approved 
 18.3   ~~by the members~~ as provided in section 60A.075, subdivision 5~~.~~ by 
 18.4   the eligible members described in paragraphs (a) to (c).  
 18.5      (a) In the case of a formation under subdivision 1, the 
 18.6   plan must be approved by the eligible members of the 
 18.7   reorganizing insurance company. 
 18.8      (b) In the case of a merger under subdivision 2, paragraph 
 18.9   (a), the plan must be approved by the eligible members of the 
 18.10  merging insurance company and by the eligible members of the 
 18.11  mutual insurance holding company into which the policyholders' 
 18.12  membership interests are to be merged.  The vote of the eligible 
 18.13  members of the mutual insurance holding company is not required 
 18.14  if the commissioner determines that the merger would not be 
 18.15  material to the financial condition of the mutual insurance 
 18.16  holding company. 
 18.17     (c) In the case of a merger of two mutual insurance holding 
 18.18  companies under subdivision 2, paragraph (c), the plan must be 
 18.19  approved by the eligible members of both companies.  The vote of 
 18.20  the eligible members of the surviving mutual holding company is 
 18.21  not required if the commissioner determines that the merger 
 18.22  would not be material to the financial condition of the 
 18.23  surviving company. 
 18.24     Sec. 14.  Minnesota Statutes 1996, section 60A.077, 
 18.25  subdivision 6, is amended to read: 
 18.26     Subd. 6.  [INCORPORATION.] A mutual insurance holding 
 18.27  company ~~resulting from the reorganization of a domestic mutual~~ 
 18.28  ~~insurance company organized under chapter 300~~ shall be 
 18.29  incorporated pursuant to chapter 300.  The articles of 
 18.30  incorporation and any amendments to the articles of the mutual 
 18.31  insurance holding company are subject to approval of the 
 18.32  commissioner in the same manner as those of an insurance 
 18.33  company.  Members of a mutual insurance holding company shall be 
 18.34  entitled to vote on all matters required to be submitted to 
 18.35  members under chapter 300 and shall additionally be treated as 
 18.36  shareholders for purposes of the voting approval requirements of 
 19.1   section 300.09. 
 19.2      Sec. 15.  Minnesota Statutes 1996, section 60A.077, 
 19.3   subdivision 7, is amended to read: 
 19.4      Subd. 7.  [APPLICABILITY OF CERTAIN PROVISIONS.] (a) ~~A~~ In 
 19.5   the event of the insolvency of a mutual insurance holding 
 19.6   company, the mutual insurance holding company is considered to 
 19.7   be an insurer subject to chapter 60B.  ~~and shall automatically~~ 
 19.8   ~~be a party to any proceeding under chapter 60B involving an~~ 
 19.9   ~~insurance company that, as a result of a reorganization~~ 
 19.10  ~~according to subdivision 1 or 2, is a subsidiary of the mutual~~ 
 19.11  ~~insurance holding company.  In any proceeding under chapter 60B~~ 
 19.12  ~~involving the reorganized insurance company, the assets of the~~ 
 19.13  ~~mutual insurance holding company are considered to be assets of~~ 
 19.14  ~~the estate of the reorganized insurance company for purposes of~~ 
 19.15  ~~satisfying the claims of the reorganized insurance company's~~ 
 19.16  ~~policyholders.~~  A mutual insurance holding company shall not 
 19.17  dissolve or liquidate without the approval of the commissioner 
 19.18  or as ordered by ~~the district~~ a court ~~according to chapter~~ 
 19.19  ~~60B~~ of competent jurisdiction. 
 19.20     (b) A mutual insurance holding company is subject to 
 19.21  chapter 60D ~~to the extent consistent with this section~~. 
 19.22     (c) As a condition to approval of the plan, the 
 19.23  commissioner may require the mutual insurance holding company to 
 19.24  comply with any provision of the insurance laws necessary to 
 19.25  protect the interests of the policyholders as if the mutual 
 19.26  insurance holding company were a domestic mutual insurance 
 19.27  company.  
 19.28     (d) No person or group of persons other than the chief 
 19.29  executive officer of a mutual insurance holding company, or the 
 19.30  chief executive officer's designee, shall seek to obtain proxies 
 19.31  from the members of the mutual insurance holding company for the 
 19.32  purposes of affecting a change of control of the mutual 
 19.33  insurance holding company unless that person or persons have 
 19.34  filed with the commissioner and have sent to the mutual 
 19.35  insurance holding company a statement containing the information 
 19.36  required by section 60D.17.  Section 60D.17, subdivisions 2 to 
 20.1   7, apply in the event of a proxy solicitation regulated by this 
 20.2   paragraph. 
 20.3      (e) For purposes of this subdivision, the term "control," 
 20.4   including the terms "controlling," "controlled by," and "under 
 20.5   common control with," means the possession, direct or indirect, 
 20.6   of the power to direct or cause the direction of the management 
 20.7   and policies of a person, whether through membership voting 
 20.8   interests, by contract other than a commercial contract for 
 20.9   goods or nonmanagement services, or otherwise, unless the power 
 20.10  is the result of an official position with, corporate office 
 20.11  held by, or court appointment of, the person.  Control is 
 20.12  presumed to exist if any person directly or indirectly, owns, 
 20.13  controls, holds with the power to vote, or holds proxies 
 20.14  representing, ten percent or more of the membership voting 
 20.15  interests of the mutual insurance holding company.  This 
 20.16  presumption may be rebutted by a showing made in the manner 
 20.17  provided by section 60D.19, subdivision 11, that control does 
 20.18  not exist in fact.  The commissioner may determine after 
 20.19  furnishing all persons in interest notice and opportunity to be 
 20.20  heard and making specific findings of fact to support the 
 20.21  determination, that control exists in fact, notwithstanding the 
 20.22  absence of a presumption to that effect. 
 20.23     Sec. 16.  Minnesota Statutes 1996, section 60A.077, 
 20.24  subdivision 8, is amended to read: 
 20.25     Subd. 8.  [APPLICABILITY OF DEMUTUALIZATION PROVISIONS.] 
 20.26  (a) Except as otherwise provided, section 60A.075 is not 
 20.27  applicable to a reorganization or merger according to this 
 20.28  section~~, except for section 60A.075, subdivisions 14 to 16~~. 
 20.29     (b) Section 60A.075 is applicable to demutualization of a 
 20.30  mutual insurance holding company ~~that resulted from the~~ 
 20.31  ~~reorganization of a domestic mutual insurance company organized~~ 
 20.32  ~~under chapter 300~~ as if it were a mutual insurance company. 
 20.33     (c) Section 60A.075, subdivisions 14 to 16, are applicable 
 20.34  to a reorganization or merger under this section. 
 20.35     Sec. 17.  Minnesota Statutes 1996, section 60A.077, 
 20.36  subdivision 9, is amended to read: 
 21.1      Subd. 9.  [MEMBERSHIP INTERESTS.] A membership interest in 
 21.2   a domestic mutual insurance holding company does not constitute 
 21.3   a security as defined in section 80A.14, subdivision 18.  No 
 21.4   member of a mutual insurance holding company may transfer or 
 21.5   pledge membership in the mutual insurance holding company or any 
 21.6   right arising from the membership except as attendant to the 
 21.7   valid transfer or assignment of the member's policy in any 
 21.8   reorganized company that gave rise to the member's membership 
 21.9   interest.  A member of a mutual insurance holding company is 
 21.10  not, as a member, personally liable for the acts, debts, 
 21.11  liabilities, or obligations of the company.  No assessments of 
 21.12  any kind may be imposed upon the members of a mutual insurance 
 21.13  holding company by the directors or members, or because of any 
 21.14  liability of any company owned or controlled by the mutual 
 21.15  insurance holding company or because of any act, debt, or 
 21.16  liability of the mutual insurance holding company.  A member's 
 21.17  interest in the mutual insurance holding company shall 
 21.18  automatically terminate upon cancellation, nonrenewal, 
 21.19  expiration, or termination of the member's policy in any 
 21.20  insurance company that gave rise to the member's membership 
 21.21  interest. 
 21.22     Sec. 18.  Minnesota Statutes 1996, section 60A.077, 
 21.23  subdivision 10, is amended to read: 
 21.24     Subd. 10.  [FINANCIAL STATEMENT REQUIREMENTS.] (a) In 
 21.25  addition to any items required under chapter 60D, each mutual 
 21.26  insurance holding company shall file with the commissioner, by 
 21.27  April 1 of each year, an annual statement consisting of the 
 21.28  following: 
 21.29     (1) an income statement, balance sheet, and cashflow 
 21.30  statement prepared in accordance with generally accepted 
 21.31  accounting principles; 
 21.32     (2) complete information on the status of any closed block 
 21.33  formed as part of a plan of reorganization; 
 21.34     (3) an investment plan covering all assets; and 
 21.35     (4) a statement disclosing any intention to pledge, borrow 
 21.36  against, alienate, hypothecate, or in any way encumber the 
 22.1   assets of the mutual insurance holding company or an 
 22.2   intermediate stock holding company.  ~~Action taken according to~~ 
 22.3   ~~the statement is subject to the commissioner's prior written~~ 
 22.4   ~~approval.~~ 
 22.5      (b) The aggregate pledges and encumbrances of a mutual 
 22.6   insurance holding company's assets shall not affect more than 49 
 22.7   percent of the ~~company's~~ stock in ownership of any subsidiary 
 22.8   insurance holding company or subsidiary insurance company that 
 22.9   resulted from a reorganization or merger. 
 22.10     (c) At least 50 percent of the generally accepted 
 22.11  accounting principles (GAAP) net worth of a mutual insurance 
 22.12  holding company must be invested in insurance company 
 22.13  subsidiaries. 
 22.14     Sec. 19.  Minnesota Statutes 1996, section 60A.077, 
 22.15  subdivision 11, is amended to read: 
 22.16     Subd. 11.  [SALE OF STOCK AND PAYMENT OF DIVIDENDS.] (a) A 
 22.17  reorganized insurance company and an intermediate stock holding 
 22.18  company may issue subscription rights and may issue or grant any 
 22.19  other securities, rights, options, and similar items to the same 
 22.20  extent as any business corporation organized under chapter 
 22.21  302A.  However, except as provided in paragraphs (b), (c), and 
 22.22  (d), no ~~solicitation for the~~ sale of ~~the stock~~ securities of the 
 22.23  reorganized insurance company, or of an intermediate stock 
 22.24  holding company ~~of the mutual insurance holding company,~~ that 
 22.25  directly or indirectly controls a majority of voting shares of 
 22.26  the reorganized insurance company, may be made without the 
 22.27  commissioner's prior written approval.  
 22.28     (b) A registration statement covering securities that has 
 22.29  been approved by the commissioner and filed with and declared 
 22.30  effective by the Securities and Exchange Commission under the 
 22.31  Securities Act of 1933 pursuant to any provision of that statute 
 22.32  or rule that allows registration of securities to be sold on a 
 22.33  delayed or continuous basis may be sold without further approval.
 22.34     (c) Unless the commissioner has granted the mutual 
 22.35  insurance holding company a written exemption from the 
 22.36  requirements of this paragraph any securities which are 
 23.1   regularly traded on the New York Stock Exchange, the American 
 23.2   Stock Exchange, or another exchange approved by the 
 23.3   commissioner, or designated on the National Association of 
 23.4   Securities Dealers automated quotations (NASDAQ) national market 
 23.5   system, shall be sold according to the procedure in this 
 23.6   paragraph.  If the mutual insurance holding company, an 
 23.7   intermediate holding company, or a reorganized insurance company 
 23.8   intends to offer securities that are governed by this paragraph, 
 23.9   that entity shall deliver to the commissioner, not less than ten 
 23.10  days before the offering, a notice of the planned offering and 
 23.11  information regarding:  (1) the approximate number of shares 
 23.12  intended to be offered; (2) the target date of sale; (3) 
 23.13  evidence the security is regularly traded on one of the public 
 23.14  exchanges noted above; and (4) the recent history of the trading 
 23.15  price and trading volume of the security.  The commissioner is 
 23.16  considered to have approved the sale unless within ten days 
 23.17  following receipt of the notice, the commissioner issues an 
 23.18  objection to the sale.  If the commissioner issues an objection 
 23.19  to the sale, the security may not be sold until the commissioner 
 23.20  issues an order approving the sale. 
 23.21     (d) A reorganized insurance company or intermediate holding 
 23.22  company that has issued securities that are regularly traded on 
 23.23  one of the exchanges or markets described in paragraph (c), may 
 23.24  establish stock option, incentive, and share ownership plans 
 23.25  customary for publicly traded companies in the same or similar 
 23.26  industries.  If the reorganized insurance company or 
 23.27  intermediate holding company intends to establish a stock 
 23.28  option, incentive or share ownership plan, that entity shall 
 23.29  deliver to the commissioner, not less than 30 days before the 
 23.30  establishment of the plan, a notice of the proposed plan along 
 23.31  with any information about the proposed plan the commissioner 
 23.32  requires.  The commissioner is considered to have approved the 
 23.33  plan unless within 30 days following receipt of the notice, the 
 23.34  commissioner issues an objection to the proposed plan.  If the 
 23.35  commissioner issues an objection to the proposed plan, the plan 
 23.36  may not be established until the commissioner issues an order 
 24.1   approving the plan.  If the commissioner approves the 
 24.2   establishment of the stock option, incentive or share ownership 
 24.3   plan, the reorganized insurance company or the intermediate 
 24.4   holding company that obtained the approval may sell or issue 
 24.5   securities according to the approved plan without further 
 24.6   approval. 
 24.7      (e) The total number of shares of capital stock issued by 
 24.8   the reorganized insurance company or an intermediate holding 
 24.9   company that may be held by directors and officers of the mutual 
 24.10  insurance holding company, any intermediate holding company, and 
 24.11  of any reorganized insurance company, and acquired according to 
 24.12  subscription rights or stock option, incentive, and share 
 24.13  ownership plans, may not exceed the percentage limits set forth 
 24.14  in section 60A.075, subdivision 11, paragraph (b).  Subject to 
 24.15  the requirements of subdivision 1, paragraph (c), nothing in 
 24.16  this section prohibits the acquisition of any securities of a 
 24.17  reorganized insurance company or intermediate stock holding 
 24.18  company through a licensed securities broker-dealer by any 
 24.19  officer or director of the reorganized company, an intermediate 
 24.20  stock holding company, or the mutual insurance holding company. 
 24.21     (f) Dividends and other distributions to the shareholders 
 24.22  of the reorganized stock insurance company or of an intermediate 
 24.23  stock holding company ~~shall not be made except in~~ 
 24.24  ~~compliance~~ must comply with section 60D.20.  Any dividends and 
 24.25  other distributions to the members of the mutual insurance 
 24.26  holding company must comply with section 60D.20 and any other 
 24.27  approval requirements contained in the mutual insurance holding 
 24.28  company's articles of incorporation. 
 24.29     (g) Unless previously approved as part of the plan of 
 24.30  reorganization, the initial offering of any voting shares to the 
 24.31  public by a reorganized company, a stock insurance company 
 24.32  subsidiary, or an intermediate holding company which holds a 
 24.33  majority of the voting shares of a reorganized insurance company 
 24.34  or stock insurance company subsidiary, must be approved by a 
 24.35  majority of votes cast at a regular or special meeting of the 
 24.36  members of the mutual insurance holding company.  Any issuer 
 25.1   repurchase program, plan of exchange, recapitalization, or 
 25.2   offering of capital securities to the public, shall, in addition 
 25.3   to any other approvals required by law or by the issuer's 
 25.4   articles of incorporation, be approved by a majority of the 
 25.5   board of directors of the mutual insurance holding company and 
 25.6   by a majority of the disinterested members of the board of 
 25.7   directors of the mutual insurance holding company. 
 25.8      Sec. 20.  Minnesota Statutes 1996, section 60A.077, is 
 25.9   amended by adding a subdivision to read: 
 25.10     Subd. 12.  [PROVISIONS IN THE EVENT OF INSURER 
 25.11  INSOLVENCY.] (a) In the event of any insolvency proceeding 
 25.12  involving an insolvent stock subsidiary, the assets of the 
 25.13  mutual insurance holding company, together with any assets of 
 25.14  any intermediate holding company that directly or indirectly 
 25.15  controls the insolvent stock subsidiary, must be available to 
 25.16  satisfy the policyholder obligations of the insolvent stock 
 25.17  subsidiary in an amount determined by the commissioner, but in 
 25.18  no event more than the total amount of nonpolicyholder dividends 
 25.19  paid by the insolvent stock subsidiary to the mutual insurance 
 25.20  holding company, or any intermediate holding company that 
 25.21  controls the insolvent stock subsidiary, during the ten-year 
 25.22  period immediately preceding the date of insolvency. 
 25.23     (b) In determining the required contribution by the mutual 
 25.24  insurance holding company or any intermediate stock holding 
 25.25  company which controls the insolvent stock subsidiary, the 
 25.26  commissioner shall take into account among other factors: 
 25.27     (1) the possible direct or indirect negative effects of any 
 25.28  required contribution on any insurance company affiliate of the 
 25.29  insolvent stock subsidiary; and 
 25.30     (2) the possible direct or indirect, long-term, or 
 25.31  short-term negative effects on the members of the mutual 
 25.32  insurance holding company, other than those members who, are, or 
 25.33  were policyholders of the insolvent stock subsidiary. 
 25.34     Nothing in this subdivision limits the powers of the 
 25.35  commissioner or the liquidator under chapter 60B. 
 25.36     (c) For purposes of this subdivision, the following terms 
 26.1   have the meanings given: 
 26.2      (1) "date of insolvency" means, as to an insolvent stock 
 26.3   subsidiary, the date established in accordance with chapter 60B 
 26.4   or comparable statute of another state governing the 
 26.5   rehabilitation or liquidation of a foreign insolvent stock 
 26.6   subsidiary; 
 26.7      (2) "insolvency proceeding" means any proceeding under 
 26.8   chapter 60B or comparable statute of another state governing the 
 26.9   rehabilitation and liquidation of a foreign insolvent stock 
 26.10  subsidiary; 
 26.11     (3) "insolvent stock subsidiary" means any stock insurance 
 26.12  company subsidiary of a mutual insurance holding company that 
 26.13  resulted from the reorganization of a domestic or foreign mutual 
 26.14  insurance company according to subdivision 1 or 2, or any other 
 26.15  stock insurance company subsidiary that is subject to an 
 26.16  insolvency proceeding, which on the date of insolvency has in 
 26.17  force policies that have given rise to membership interests in 
 26.18  the mutual insurance holding company; 
 26.19     (4) "control" has the meaning given in section 60D.15, 
 26.20  subdivision 4; and 
 26.21     (5) "dividends" include distributions of cash or any other 
 26.22  assets. 
 26.23     Sec. 21.  Minnesota Statutes 1996, section 60A.092, 
 26.24  subdivision 6, is amended to read: 
 26.25     Subd. 6.  [SINGLE ASSUMING INSURER; TRUST FUND 
 26.26  REQUIREMENTS.] In the case of a single assuming insurer, the 
 26.27  trust shall consist of a trusteed account representing the 
 26.28  assuming insurer's liabilities attributable to business written 
 26.29  in the United States and, in addition, ~~the assuming insurer~~ 
 26.30  ~~shall maintain~~ a trusteed surplus of not less than $20,000,000 
 26.31  or such additional amount as the commissioner deems necessary, 
 26.32  and the assuming insurer shall maintain ~~a~~ its surplus as regards 
 26.33  policyholders in an amount not less than $50,000,000 for 
 26.34  long-tail casualty reinsurers as provided under subdivision 3, 
 26.35  paragraph (a), clause (5). 
 26.36     Sec. 22.  Minnesota Statutes 1996, section 60A.092, 
 27.1   subdivision 11, is amended to read: 
 27.2      Subd. 11.  [REINSURANCE AGREEMENT REQUIREMENTS.] (a) If the 
 27.3   assuming insurer is not licensed or accredited to transact 
 27.4   insurance or reinsurance in this state, the credit authorized 
 27.5   under subdivisions 4 and 5 shall not be allowed unless the 
 27.6   assuming insurer agrees in the reinsurance agreements: 
 27.7      (1) that in the event of the failure of the assuming 
 27.8   insurer to perform its obligations under the terms of the 
 27.9   reinsurance agreement, the assuming insurer shall submit to the 
 27.10  jurisdiction of any court of competent jurisdiction in any state 
 27.11  of the United States, comply with all requirements necessary to 
 27.12  give the court jurisdiction, and abide by the final decision of 
 27.13  the court or of any appellate court in the event of an appeal; 
 27.14  and 
 27.15     (2) to designate the commissioner or a designated attorney 
 27.16  as its true and lawful attorney upon whom may be served any 
 27.17  lawful process in any action, suit, or proceeding instituted by 
 27.18  or on behalf of the ceding company. 
 27.19     (b) Paragraph (a) is not intended to conflict with or 
 27.20  override the obligation of the parties to a reinsurance 
 27.21  agreement to arbitrate their disputes, if an obligation to do so 
 27.22  is created in the agreement. 
 27.23     (c) Credit will not be granted, nor an asset or a reduction 
 27.24  from liability allowed to a ceding insurer for reinsurance 
 27.25  effected with assuming insurers meeting the requirements of 
 27.26  subdivision 2, 3, 4, 5, 6, or 7, unless the reinsurance contract 
 27.27  provides that in the event of the insolvency of the ceding 
 27.28  insurer, the reinsurance will be payable under the contract 
 27.29  without diminution because of that insolvency. 
 27.30     Sec. 23.  Minnesota Statutes 1996, section 60A.10, 
 27.31  subdivision 1, is amended to read: 
 27.32     Subdivision 1.  [DOMESTIC COMPANIES.] (1)  [DEPOSIT AS 
 27.33  SECURITY FOR ALL POLICYHOLDERS REQUIRED.] No company in this 
 27.34  state, other than farmers' mutual, or real estate title 
 27.35  insurance companies, shall do business in this state unless it 
 27.36  has on deposit with the commissioner, for the protection of both 
 28.1   its resident and nonresident policyholders, securities to an 
 28.2   amount, the actual market value of which, exclusive of interest, 
 28.3   shall never be less than ~~$200,000 until July 1, 1986, $300,000~~ 
 28.4   ~~until July 1, 1987, $400,000 until July 1, 1988, and~~ $500,000 ~~on~~ 
 28.5   ~~and after July 1, 1988~~ or one-half the applicable financial 
 28.6   requirement set forth in section 60A.07, whichever is less.  The 
 28.7   securities shall be retained under the control of the 
 28.8   commissioner as long as any policies of the depositing company 
 28.9   remain in force. 
 28.10     (2)  [SECURITIES DEFINED.] For the purpose of this 
 28.11  subdivision, the word "securities" means bonds or other 
 28.12  obligations of, or bonds or other obligations insured or 
 28.13  guaranteed by, the United States, any state of the United 
 28.14  States, any municipality of this state, or any agency or 
 28.15  instrumentality of the foregoing. 
 28.16     (3)  [PROTECTION OF DEPOSIT FROM LEVY.] No judgment 
 28.17  creditor or other claimant may levy upon any securities held on 
 28.18  deposit with, or for the account of, the commissioner.  Upon the 
 28.19  entry of an order by a court of competent jurisdiction for the 
 28.20  rehabilitation, liquidation or conservation of any depositing 
 28.21  company as provided in chapter 60B, that company's deposit 
 28.22  together with any accrued income thereon shall be transferred to 
 28.23  the commissioner as rehabilitator, liquidator, or conservator. 
 28.24     Sec. 24.  Minnesota Statutes 1996, section 60A.111, 
 28.25  subdivision 1, is amended to read: 
 28.26     Subdivision 1.  [REPORT.] Annually, or more frequently if 
 28.27  determined by the commissioner to be necessary for the 
 28.28  protection of policyholders, each foreign~~, alien~~ and domestic 
 28.29  insurance company other than a life insurance company shall 
 28.30  report to the commissioner the ratio of its qualified assets to 
 28.31  its required liabilities.  
 28.32     Sec. 25.  Minnesota Statutes 1996, section 60A.13, 
 28.33  subdivision 1, is amended to read: 
 28.34     Subdivision 1.  [ANNUAL STATEMENTS REQUIRED.] Every 
 28.35  insurance company, including fraternal benefit societies, and 
 28.36  reciprocal exchanges, doing business in this state, shall 
 29.1   ~~transmit to~~ file with the commissioner, annually, on or before 
 29.2   March 1, the appropriate verified National Association of 
 29.3   Insurance Commissioners' annual statement blank, prepared in 
 29.4   accordance with the association's instructions handbook and 
 29.5   following those accounting procedures and practices prescribed 
 29.6   by the association's accounting practices and procedures manual, 
 29.7   unless the commissioner requires or finds another method of 
 29.8   valuation reasonable under the circumstances.  Another method of 
 29.9   valuation permitted by the commissioner must be at least as 
 29.10  conservative as those prescribed in the association's manual.  
 29.11  All companies required to file an annual statement under this 
 29.12  subdivision must also file with the commissioner a copy of their 
 29.13  annual statement on computer diskette.  All Minnesota domestic 
 29.14  insurers required to file annual statements under this 
 29.15  subdivision must also file quarterly statements with the 
 29.16  commissioner for the first, second, and third calendar quarter 
 29.17  on or before 45 days after the end of the applicable quarter, 
 29.18  prepared in accordance with the association's instruction 
 29.19  handbook.  All companies required to file quarterly statements 
 29.20  under this subdivision must also file a copy of their quarterly 
 29.21  statement on computer diskette.  In addition, the commissioner 
 29.22  may require the filing of any other information determined to be 
 29.23  reasonably necessary for the continual enforcement of these 
 29.24  laws.  The statement may be limited to the insurer's business 
 29.25  and condition in the United States unless the commissioner finds 
 29.26  that the business conducted outside the United States may 
 29.27  detrimentally affect the interests of policyholders in this 
 29.28  state.  The statements shall also contain a verified schedule 
 29.29  showing all details required by law for assessment and 
 29.30  taxation.  The statement or schedules shall be in the form and 
 29.31  shall contain all matters the commissioner may prescribe, and it 
 29.32  may be varied as to different types of insurers so as to elicit 
 29.33  a true exhibit of the condition of each insurer. 
 29.34     Sec. 26.  Minnesota Statutes 1996, section 60A.19, 
 29.35  subdivision 1, is amended to read: 
 29.36     Subdivision 1.  [REQUIREMENTS.] Any insurance company of 
 30.1   another state, upon compliance with all laws governing such 
 30.2   corporations in general and with the foregoing provisions so far 
 30.3   as applicable and the following requirements, shall be admitted 
 30.4   to do business in this state: 
 30.5      (1) It shall deposit with the commissioner a certified copy 
 30.6   of its charter or certificate of incorporation and its bylaws, 
 30.7   and a statement showing its financial condition and business, 
 30.8   verified by its president and secretary or other proper 
 30.9   officers; 
 30.10     (2) It shall furnish the commissioner satisfactory evidence 
 30.11  of its legal organization and authority to transact the proposed 
 30.12  business and that its capital, assets, deposits with the proper 
 30.13  official of its own state, amount insured, number of risks, 
 30.14  reserve and other securities, and guaranties for protection of 
 30.15  policyholders, creditors, and the public, comply with those 
 30.16  required of like domestic companies; 
 30.17     (3) By a duly executed instrument filed in the office of 
 30.18  the commissioner, it shall appoint the commissioner and 
 30.19  successors in office its lawful attorneys in fact and therein 
 30.20  irrevocably agree that legal process in any action or proceeding 
 30.21  against it may be served upon them with the same force and 
 30.22  effect as if personally served upon it, so long as any of its 
 30.23  liability exists in this state; 
 30.24     (4) It shall appoint, as its agents in this state, 
 30.25  residents thereof, and obtain from the commissioner a license to 
 30.26  transact business; 
 30.27     (5) Regardless of what lines of business an insurer of 
 30.28  another state is seeking to write in this state, the lines of 
 30.29  business it is licensed to write in its state of incorporation 
 30.30  shall be the basis for establishing the financial requirements 
 30.31  it must meet for admission in this state or for continuance of 
 30.32  its authority to write business in this state; 
 30.33     (6) No insurer of another state shall be admitted to do 
 30.34  business in this state for a line of business that it is not 
 30.35  authorized to write in its state of incorporation, unless the 
 30.36  statutes of that state prohibit all insurers from writing that 
 31.1   line of business. 
 31.2      Sec. 27.  [60B.085] [IMMUNITY AND INDEMNIFICATION OF THE 
 31.3   RECEIVER AND EMPLOYEES.] 
 31.4      Subdivision 1.  [SCOPE.] The persons entitled to protection 
 31.5   under this section are: 
 31.6      (1) all receivers responsible for the conduct of a 
 31.7   delinquency proceeding under this chapter, including present and 
 31.8   former receivers; and 
 31.9      (2) their employees, meaning all present and former special 
 31.10  deputies and assistant special deputies, and all persons whom 
 31.11  the commissioner, special deputies, or assistant special 
 31.12  deputies have employed to assist in a delinquency proceeding 
 31.13  under this chapter.  Attorneys, accountants, auditors, and other 
 31.14  professional persons or firms, who are retained by the receiver 
 31.15  as independent contractors and their employees shall not be 
 31.16  considered employees of the receiver for purposes of this 
 31.17  section. 
 31.18     Subd. 2.  [IMMUNITY FROM LIABILITY.] The receiver and the 
 31.19  receiver's employees shall have official immunity and shall be 
 31.20  immune from suit and liability, both personally and in their 
 31.21  official capacities, for a claim for damage to or loss of 
 31.22  property or personal injury or other civil liability caused by 
 31.23  or resulting from an alleged act, error, or omission of the 
 31.24  receiver or an employee arising out of or by reason of their 
 31.25  duties or employment.  Nothing in this subdivision shall be 
 31.26  construed to hold the receiver or an employee immune from suit 
 31.27  or liability for damage, loss, injury, or liability caused by 
 31.28  the intentional or willful and wanton misconduct of the receiver 
 31.29  or an employee. 
 31.30     Subd. 3.  [INDEMNIFICATION.] If a legal action is commenced 
 31.31  against the receiver or any employee, whether against the 
 31.32  receiver or employee personally or in their official capacity, 
 31.33  alleging property damage, property loss, personal injury, or 
 31.34  other civil liability caused by or resulting from an alleged 
 31.35  act, error, or omission of the receiver or an employee arising 
 31.36  out of or by reason of their duties or employment, the receiver 
 32.1   and employee must be indemnified from the assets of the insurer 
 32.2   for all expenses, attorneys' fees, judgments, settlements, 
 32.3   decrees, or amounts due and owing or paid in satisfaction or 
 32.4   incurred in the defense of the legal action unless it is 
 32.5   determined upon a final adjudication on the merits that the 
 32.6   alleged act, error, or omission of the receiver or employee 
 32.7   giving rise to the claim did not arise out of or by reason of 
 32.8   the receiver's or employee's duties or employment, or was caused 
 32.9   by intentional or willful and wanton misconduct. 
 32.10     (a) Attorney's fees and related expenses incurred in 
 32.11  defending a legal action for which immunity or indemnity is 
 32.12  available under this section must be paid from the assets of the 
 32.13  insurer, as they are incurred, in advance of the final 
 32.14  disposition of the action upon receipt of an undertaking by or 
 32.15  on behalf of the receiver or employee to repay the attorneys' 
 32.16  fees and expenses if it is ultimately determined upon a final 
 32.17  adjudication on the merits that the receiver or employee is not 
 32.18  entitled to immunity or indemnity under this section. 
 32.19     (b) Indemnification for expense payments, judgments, 
 32.20  settlements, decrees, attorneys' fees, surety bond premiums, or 
 32.21  other amounts paid or to be paid from the insurer's assets 
 32.22  according to this section is an administrative expense of the 
 32.23  insurer. 
 32.24     (c) In the event of an actual or threatened litigation 
 32.25  against a receiver or an employee for which immunity or 
 32.26  indemnity may be available under this section, a reasonable 
 32.27  amount of funds which in the judgment of the commissioner may be 
 32.28  needed to provide immunity or indemnity must be segregated and 
 32.29  reserved from the assets of the insurer as security for the 
 32.30  payment of indemnity until all applicable statutes of limitation 
 32.31  have run and all actual or threatened actions against the 
 32.32  receiver or an employee have been completely and finally 
 32.33  resolved, and all obligations of the insurer and the 
 32.34  commissioner under this section have been satisfied. 
 32.35     (d) In lieu of segregation and reserving of funds, the 
 32.36  commissioner may, in the commissioner's discretion, obtain a 
 33.1   surety bond or make other arrangements that will enable the 
 33.2   commissioner to fully secure the payment of all obligations 
 33.3   under this section. 
 33.4      Subd. 4.  [SETTLEMENT COVERAGE.] If a legal action against 
 33.5   an employee for which indemnity may be available under this 
 33.6   section is settled before final adjudication on the merits, the 
 33.7   insurer must pay the settlement amount on behalf of the 
 33.8   employee, or indemnify the employee for the settlement amount, 
 33.9   unless the commissioner determines: 
 33.10     (1) that the claim did not arise out of or by reason of the 
 33.11  employee's duties or employment; or 
 33.12     (2) that the claim was caused by the intentional or willful 
 33.13  and wanton misconduct of the employee. 
 33.14     Subd. 5.  [SETTLEMENT APPROVAL.] In a legal action in which 
 33.15  the receiver is a defendant, that portion of a settlement 
 33.16  relating to the alleged act, error, or omission of the receiver 
 33.17  is subject to the approval of the court before which the 
 33.18  delinquency proceeding is pending.  The court shall not approve 
 33.19  that portion of the settlement if it determines: 
 33.20     (1) that the claim did not arise out of or by reason of the 
 33.21  receiver's duties or employment; or 
 33.22     (2) that the claim was caused by the intentional or willful 
 33.23  and wanton misconduct of the receiver. 
 33.24     Subd. 6.  [CONSTRUCTION.] Nothing contained or implied in 
 33.25  this section operates, or shall be construed or applied, to 
 33.26  deprive the receiver or an employee of immunity, indemnity, 
 33.27  benefits of law, rights, or any defense otherwise available. 
 33.28     Sec. 28.  Minnesota Statutes 1996, section 60B.21, 
 33.29  subdivision 2, is amended to read: 
 33.30     Subd. 2.  [FIXING OF RIGHTS.] Upon issuance of the order, 
 33.31  the rights and liabilities of any such insurer and of its 
 33.32  creditors, policyholders, shareholders, members, and all other 
 33.33  persons interested in its estate are fixed as of the date of 
 33.34  filing of the petition for liquidation, except as provided in 
 33.35  sections 60B.22, 60B.25, clause (22), and 60B.39. 
 33.36     Sec. 29.  Minnesota Statutes 1996, section 60B.25, is 
 34.1   amended to read: 
 34.2      60B.25 [POWERS OF LIQUIDATOR.] 
 34.3      The liquidator shall report to the court monthly, or at 
 34.4   other intervals specified by the court, on the progress of the 
 34.5   liquidation in whatever detail the court orders.  The liquidator 
 34.6   shall coordinate activities with those of each guaranty 
 34.7   association having an interest in the liquidation and shall 
 34.8   submit a report detailing how coordination will be achieved to 
 34.9   the court for its approval within 30 days following appointment, 
 34.10  or within the time which the court, in its discretion, may 
 34.11  establish.  Subject to the court's control, the liquidator may: 
 34.12     (1) Appoint a special deputy to act under sections 60B.01 
 34.13  to 60B.61 and determine the deputy's compensation.  The special 
 34.14  deputy shall have all powers of the liquidator granted by this 
 34.15  section.  The special deputy shall serve at the pleasure of the 
 34.16  liquidator. 
 34.17     (2) Appoint or engage employees and agents, actuaries, 
 34.18  accountants, appraisers, consultants, and other personnel deemed 
 34.19  necessary to assist in the liquidation without regard to chapter 
 34.20  14. 
 34.21     (3) Fix the compensation of persons under clause (2), 
 34.22  subject to the control of the court. 
 34.23     (4) Defray all expenses of taking possession of, 
 34.24  conserving, conducting, liquidating, disposing of, or otherwise 
 34.25  dealing with the business and property of the insurer.  If the 
 34.26  property of the insurer does not contain sufficient cash or 
 34.27  liquid assets to defray the costs incurred, the liquidator may 
 34.28  advance the costs so incurred out of the appropriation made to 
 34.29  the department of commerce.  Any amounts so paid shall be deemed 
 34.30  expense of administration and shall be repaid for the credit of 
 34.31  the department of commerce out of the first available money of 
 34.32  the insurer. 
 34.33     (5) Hold hearings, subpoena witnesses and compel their 
 34.34  attendance, administer oaths, examine any person under oath and 
 34.35  compel any person to subscribe to testimony after it has been 
 34.36  correctly reduced to writing, and in connection therewith 
 35.1   require the production of any books, papers, records, or other 
 35.2   documents which the liquidator deems relevant to the inquiry. 
 35.3      (6) Collect all debts and money due and claims belonging to 
 35.4   the insurer, wherever located, and for this purpose institute 
 35.5   timely action in other jurisdictions, in order to forestall 
 35.6   garnishment and attachment proceedings against such debts; do 
 35.7   such other acts as are necessary or expedient to collect, 
 35.8   conserve, or protect its assets or property, including sell, 
 35.9   compound, compromise, or assign for purposes of collection, upon 
 35.10  such terms and conditions as the liquidator deems best, any bad 
 35.11  or doubtful debts; and pursue any creditor's remedies available 
 35.12  to enforce claims. 
 35.13     (7) Conduct public and private sales of the property of the 
 35.14  insurer in a manner prescribed by the court. 
 35.15     (8) Use assets of the estate to transfer coverage 
 35.16  obligations to a solvent assuming insurer, if the transfer can 
 35.17  be arranged without prejudice to applicable priorities under 
 35.18  section 60B.44. 
 35.19     (9) Acquire, hypothecate, encumber, lease, improve, sell, 
 35.20  transfer, abandon, or otherwise dispose of or deal with any 
 35.21  property of the insurer at its market value or upon such terms 
 35.22  and conditions as are fair and reasonable, except that no 
 35.23  transaction involving property the market value of which exceeds 
 35.24  $10,000 shall be concluded without express permission of the 
 35.25  court.  The liquidator may also execute, acknowledge, and 
 35.26  deliver any deeds, assignments, releases, and other instruments 
 35.27  necessary or proper to effectuate any sale of property or other 
 35.28  transaction in connection with the liquidation.  In cases where 
 35.29  real property sold by the liquidator is located other than in 
 35.30  the county where the liquidation is pending, the liquidator 
 35.31  shall cause to be filed with the county recorder for the county 
 35.32  in which the property is located a certified copy of the order 
 35.33  of appointment. 
 35.34     (10) Borrow money on the security of the insurer's assets 
 35.35  or without security and execute and deliver all documents 
 35.36  necessary to that transaction for the purpose of facilitating 
 36.1   the liquidation. 
 36.2      (11) Enter into such contracts as are necessary to carry 
 36.3   out the order to liquidate, and affirm or disavow any contracts 
 36.4   to which the insurer is a party. 
 36.5      (12) Continue to prosecute and institute in the name of the 
 36.6   insurer or in the liquidator's own name any suits and other 
 36.7   legal proceedings, in this state or elsewhere, and abandon the 
 36.8   prosecution of claims the liquidator deems unprofitable to 
 36.9   pursue further.  If the insurer is dissolved under section 
 36.10  60B.23, the liquidator may apply to any court in this state or 
 36.11  elsewhere for leave to be substituted for the insurer as 
 36.12  plaintiff. 
 36.13     (13) Prosecute any action which may exist in behalf of the 
 36.14  creditors, members, policyholders, or shareholders of the 
 36.15  insurer against any officer of the insurer, or any other person. 
 36.16     (14) Remove any records and property of the insurer to the 
 36.17  offices of the commissioner or to such other place as is 
 36.18  convenient for the purposes of efficient and orderly execution 
 36.19  of the liquidation. 
 36.20     (15) Deposit in one or more banks in this state such sums 
 36.21  as are required for meeting current administration expenses and 
 36.22  dividend distributions. 
 36.23     (16) Deposit with the state board of investment for 
 36.24  investment pursuant to section 11A.24, all sums not currently 
 36.25  needed, unless the court orders otherwise. 
 36.26     (17) File any necessary documents for record in the office 
 36.27  of any county recorder or record office in this state or 
 36.28  elsewhere where property of the insurer is located. 
 36.29     (18) Assert all defenses available to the insurer as 
 36.30  against third persons, including statutes of limitations, 
 36.31  statutes of frauds, and the defense of usury.  A waiver of any 
 36.32  defense by the insurer after a petition for liquidation has been 
 36.33  filed shall not bind the liquidator. 
 36.34     (19) Exercise and enforce all the rights, remedies, and 
 36.35  powers of any creditor, shareholder, policyholder, or member, 
 36.36  including any power to avoid any transfer or lien that may be 
 37.1   given by law and that is not included within sections 60B.30 and 
 37.2   60B.32. 
 37.3      (20) Intervene in any proceeding wherever instituted that 
 37.4   might lead to the appointment of a receiver or trustee, and act 
 37.5   as the receiver or trustee whenever the appointment is offered. 
 37.6      (21) Enter into agreements with any receiver or 
 37.7   commissioner of any other state relating to the rehabilitation, 
 37.8   liquidation, conservation, or dissolution of an insurer doing 
 37.9   business in both states. 
 37.10     (22) Collect from an insured any unpaid earned premium or 
 37.11  retrospectively rated premium due the insurer based on the 
 37.12  termination of coverage under section 60B.22.  Premium on surety 
 37.13  business is considered earned at inception if no policy term can 
 37.14  be determined.  All other premium will be considered earned and 
 37.15  will be prorated over the determined policy term, regardless of 
 37.16  any provision in the bond, guaranty, contract, or other 
 37.17  agreement. 
 37.18     ~~(22)~~ (23) Exercise all powers now held or hereafter 
 37.19  conferred upon receivers by the laws of this state not 
 37.20  inconsistent with sections 60B.01 to 60B.61. 
 37.21     ~~(23)~~ (24) The enumeration in this section of the powers and 
 37.22  authority of the liquidator is not a limitation, nor does it 
 37.23  exclude the right to do such other acts not herein specifically 
 37.24  enumerated or otherwise provided for as are necessary or 
 37.25  expedient for the accomplishment of or in aid of the purpose of 
 37.26  liquidation. 
 37.27     ~~(24)~~ (25) The power of the liquidator of a health 
 37.28  maintenance organization includes the power to transfer coverage 
 37.29  obligations to a solvent and voluntary health maintenance 
 37.30  organization, insurer, or nonprofit health service plan, and to 
 37.31  assign provider contracts of the insolvent health maintenance 
 37.32  organization to an assuming health maintenance organization, 
 37.33  insurer, or nonprofit health service plan permitted to enter 
 37.34  into such agreements.  The liquidator is not required to meet 
 37.35  the notice requirements of section 62D.121.  Transferees of 
 37.36  coverage obligations or provider contracts shall have no 
 38.1   liability to creditors or obligees of the health maintenance 
 38.2   organization except those liabilities expressly assumed. 
 38.3      Sec. 30.  [60B.365] [REINSURER'S LIABILITY.] 
 38.4      Subdivision 1.  [GENERALLY.] The amount recoverable by the 
 38.5   liquidator from reinsurers must not be reduced as a result of 
 38.6   the delinquency proceedings, regardless of any provision in the 
 38.7   reinsurance contract or other agreement. 
 38.8      Subd. 2.  [PAYMENTS.] Payments by the reinsurer must be 
 38.9   made directly to the ceding insurer or its receiver, except 
 38.10  where the contract of insurance or reinsurance specifically 
 38.11  provides for another payee for the reinsurance in the event of 
 38.12  insolvency of the ceding insurer according to the applicable 
 38.13  requirements of statutes, rules, or orders of the domiciliary 
 38.14  state of the ceding insurer.  The receiver and reinsurer are 
 38.15  entitled to recover from a person who unsuccessfully makes a 
 38.16  claim directly against the reinsurer the receiver's attorneys' 
 38.17  fees and expenses incurred in preventing any collection by the 
 38.18  person. 
 38.19     Sec. 31.  Minnesota Statutes 1996, section 60B.44, 
 38.20  subdivision 2, is amended to read: 
 38.21     Subd. 2.  [ADMINISTRATION COSTS.] The costs and expenses of 
 38.22  administration, including but not limited to the following: The 
 38.23  actual and necessary costs of preserving or recovering the 
 38.24  assets of the insurer; compensation for all services rendered in 
 38.25  the liquidation; any necessary filing fees; the fees and mileage 
 38.26  payable to witnesses; and reasonable attorney's fees.  This 
 38.27  includes administration costs incurred by a guaranty association.
 38.28     Sec. 32.  Minnesota Statutes 1996, section 60B.44, 
 38.29  subdivision 4, is amended to read: 
 38.30     Subd. 4.  [LOSS CLAIMS; INCLUDING CLAIMS NOT COVERED BY A 
 38.31  GUARANTY ASSOCIATION.] All claims under policies or contracts of 
 38.32  coverage for losses incurred including third party claims, and 
 38.33  all claims against the insurer for liability for bodily injury 
 38.34  or for injury to or destruction of tangible property which are 
 38.35  not under policies or contracts.  All claims under life 
 38.36  insurance and annuity policies, whether for death proceeds, 
 39.1   annuity proceeds, or investment values, shall be treated as loss 
 39.2   claims.  That portion of any loss for which indemnification is 
 39.3   provided by other benefits or advantages recovered or 
 39.4   recoverable by the claimant shall not be included in this class, 
 39.5   other than benefits or advantages recovered or recoverable in 
 39.6   discharge of familial obligations of support or by way of 
 39.7   succession at death or as proceeds of life insurance, or as 
 39.8   gratuities.  No payment made by an employer to an employee shall 
 39.9   be treated as a gratuity.  Claims not covered by a guaranty 
 39.10  association are loss claims.  ~~If any portion of a claim is~~ 
 39.11  ~~covered by a reinsurance treaty or similar contractual~~ 
 39.12  ~~obligation, that claim shall be entitled to a pro rata share,~~ 
 39.13  ~~based upon the relationship the claim amount bears to all claims~~ 
 39.14  ~~payable under the treaty or contract, of the proceeds received~~ 
 39.15  ~~under that treaty or contractual obligation.~~  
 39.16     ~~Claims receiving pro rata payments shall not, as to any~~ 
 39.17  ~~remaining unpaid portion of their claim, be treated in a~~ 
 39.18  ~~different manner than if no such payment had been received.~~  
 39.19     Sec. 33.  Minnesota Statutes 1996, section 60B.44, is 
 39.20  amended by adding a subdivision to read: 
 39.21     Subd. 4a.  [WAGES.] (a) Debts due to employees for services 
 39.22  performed, not to exceed $1,000 to each employee, which have 
 39.23  been earned within one year before the filing of the petition 
 39.24  for liquidation, subject to payment of applicable federal, 
 39.25  state, or local government taxes required by law to be withheld 
 39.26  from the debts.  Officers are not entitled to the benefit of 
 39.27  this priority.  In cases where there are no claims and no 
 39.28  potential claims of the federal government in the estate, these 
 39.29  claims will have priority over claims in subdivision 4. 
 39.30     (b) The priority in paragraph (a) is in lieu of any other 
 39.31  similar priority authorized by law as to wages or compensation 
 39.32  of employees. 
 39.33     Sec. 34.  Minnesota Statutes 1996, section 60B.44, 
 39.34  subdivision 6, is amended to read: 
 39.35     Subd. 6.  [RESIDUAL CLASSIFICATION.] All other claims 
 39.36  including claims of ~~the federal or~~ any state or local 
 40.1   government, not falling within other classes under this 
 40.2   section.  Claims, including those of any governmental body for a 
 40.3   penalty or forfeiture, shall be allowed in this class only to 
 40.4   the extent of the pecuniary loss sustained from the act, 
 40.5   transaction, or proceeding out of which the penalty or 
 40.6   forfeiture arose, with reasonable and actual costs occasioned 
 40.7   thereby.  The remainder of such claims shall be postponed to the 
 40.8   class of claims under subdivision 9.  
 40.9      Sec. 35.  Minnesota Statutes 1996, section 60D.20, 
 40.10  subdivision 2, is amended to read: 
 40.11     Subd. 2.  [DIVIDENDS AND OTHER DISTRIBUTIONS.] (a) Subject 
 40.12  to the limitations and requirements of this subdivision, the 
 40.13  board of directors of any domestic insurer within an insurance 
 40.14  holding company system may authorize and cause the insurer to 
 40.15  declare and pay any dividend or distribution to its shareholders 
 40.16  as the directors deem prudent from the earned surplus of the 
 40.17  insurer.  An insurer's earned surplus, also known as unassigned 
 40.18  funds, shall be determined in accordance with the accounting 
 40.19  procedures and practices governing preparation of its annual 
 40.20  statement~~, minus 25 percent of earned surplus attributable to~~ 
 40.21  ~~net unrealized capital gains~~.  Dividends which are paid from 
 40.22  sources other than an insurer's earned surplus as of the end of 
 40.23  the immediately preceding quarter for which the insurer has 
 40.24  filed a quarterly or annual statement as appropriate, or are 
 40.25  extraordinary dividends or distributions may be paid only as 
 40.26  provided in paragraphs (d), (e), and (f). 
 40.27     (b) The insurer shall notify the commissioner within five 
 40.28  business days following declaration of a dividend declared 
 40.29  pursuant to paragraph (a) and at least ten days prior to its 
 40.30  payment.  The commissioner shall promptly consider the 
 40.31  notification filed pursuant to this paragraph, taking into 
 40.32  consideration the factors described in subdivision 4. 
 40.33     (c) The commissioner shall review at least annually the 
 40.34  dividends paid by an insurer pursuant to paragraph (a) for the 
 40.35  purpose of determining if the dividends are reasonable based 
 40.36  upon (1) the adequacy of the level of surplus as regards 
 41.1   policyholders remaining after the dividend payments, and (2) the 
 41.2   quality of the insurer's earnings and extent to which the 
 41.3   reported earnings include extraordinary items, such as surplus 
 41.4   relief reinsurance transactions and reserve destrengthening. 
 41.5      (d) No domestic insurer shall pay any extraordinary 
 41.6   dividend or make any other extraordinary distribution to its 
 41.7   shareholders until:  (1) 30 days after the commissioner has 
 41.8   received notice of the declaration of it and has not within the 
 41.9   period disapproved the payment; or (2) the commissioner has 
 41.10  approved the payment within the 30-day period. 
 41.11     (e) For purposes of this section, an extraordinary dividend 
 41.12  or distribution includes any dividend or distribution of cash or 
 41.13  other property, whose fair market value together with that of 
 41.14  other dividends or distributions made within the preceding 12 
 41.15  months exceeds the greater of (1) ten percent of the insurer's 
 41.16  surplus as regards policyholders ~~as of the 31st day of December~~ 
 41.17  ~~next preceding~~ on December 31 of the preceding year; or (2) the 
 41.18  net gain from operations of the insurer, if the insurer is a 
 41.19  life insurer, or the net income, if the insurer is not a life 
 41.20  insurer, not including realized capital gains, for the 12-month 
 41.21  period ending ~~the 31st day of December next preceding~~ on 
 41.22  December 31 of the preceding year, but does not include pro rata 
 41.23  distributions of any class of the insurer's own securities.  
 41.24     (f) Notwithstanding any other provision of law, an insurer 
 41.25  may declare an extraordinary dividend or distribution that is 
 41.26  conditional upon the commissioner's approval, and the 
 41.27  declaration shall confer no rights upon shareholders until:  (1) 
 41.28  the commissioner has approved the payment of such a dividend or 
 41.29  distribution; or (2) the commissioner has not disapproved the 
 41.30  payment within the 30-day period referred to above. 
 41.31     Sec. 36.  Minnesota Statutes 1996, section 60K.02, 
 41.32  subdivision 1, is amended to read: 
 41.33     Subdivision 1.  [REQUIREMENT.] No person shall act or 
 41.34  assume to act as an insurance agent in the solicitation or 
 41.35  procurement of applications for insurance, nor in the sale of 
 41.36  insurance or policies of insurance, nor in any manner aid as an 
 42.1   insurance agent in the negotiation of insurance by or with an 
 42.2   insurer, including resident agents or reciprocal or 
 42.3   interinsurance exchanges and fraternal benefit societies, until 
 42.4   that person obtains from the commissioner a license for that 
 42.5   purpose.  The license must specifically set forth the name of 
 42.6   the person authorized to act as an agent and the class or 
 42.7   classes of insurance for which that person is authorized to 
 42.8   solicit or countersign policies.  An insurance agent may qualify 
 42.9   for a license ~~in the following classes~~ to sell:  (1) life and 
 42.10  health; ~~and~~ (2) life and health and variable contracts; (3) 
 42.11  property and casualty; (4) travel baggage; (5) bail bonds; (6) 
 42.12  title insurance; and (7) farm property and liability.  
 42.13     No insurer shall appoint or reappoint a natural person, 
 42.14  partnership, or corporation to act as an insurance agent on its 
 42.15  behalf until that natural person, partnership, or corporation 
 42.16  obtains a license as an insurance agent.  
 42.17     Sec. 37.  Minnesota Statutes 1996, section 60K.03, 
 42.18  subdivision 2, is amended to read: 
 42.19     Subd. 2.  [RESIDENT AGENT.] The commissioner shall issue a 
 42.20  resident insurance agent's license to a qualified resident of 
 42.21  this state as follows:  
 42.22     (a) A person may qualify as a resident of this state if 
 42.23  that person resides in this state or the principal place of 
 42.24  business of that person is maintained in this state.  
 42.25  Application for a license claiming residency in this state for 
 42.26  licensing purposes constitutes an election of residency in this 
 42.27  state.  A license issued upon an application claiming residency 
 42.28  in this state is void if the licensee, while holding a resident 
 42.29  license in this state, also holds, or makes application for, a 
 42.30  resident license in, or thereafter claims to be a resident of, 
 42.31  any other state or jurisdiction or if the licensee ceases to be 
 42.32  a resident of this state; provided, however, if the applicant is 
 42.33  a resident of a community or trade area, the border of which is 
 42.34  contiguous with the state line of this state, the applicant may 
 42.35  qualify for a resident license in this state and at the same 
 42.36  time hold a resident license from the contiguous state. 
 43.1      (b) The commissioner shall subject each applicant who is a 
 43.2   natural person to a written examination as to the applicant's 
 43.3   competence to act as an insurance agent.  The examination must 
 43.4   be held at a reasonable time and place designated by the 
 43.5   commissioner. 
 43.6      (c) The examination shall be approved for use by the 
 43.7   commissioner and shall test the applicant's knowledge of the 
 43.8   lines of insurance, policies, and transactions to be handled 
 43.9   under the class of license applied for, of the duties and 
 43.10  responsibilities of the licensee, and pertinent insurance laws 
 43.11  of this state. 
 43.12     (d) The examination shall be given only after the applicant 
 43.13  has completed a program of classroom studies in a school, which 
 43.14  shall not include a school sponsored by, offered by, or 
 43.15  affiliated with an insurance company or its agents; except that 
 43.16  this limitation does not preclude a bona fide professional 
 43.17  association of agents, not acting on behalf of an insurer, from 
 43.18  offering courses.  The course of study shall consist of 30 hours 
 43.19  of classroom study devoted to the basic fundamentals of 
 43.20  insurance for those seeking a Minnesota license for the first 
 43.21  time~~,~~; three hours devoted to state laws, regulations, and rules 
 43.22  applicable to the line or lines of insurance for which licensure 
 43.23  is being applied; 15 hours devoted to specific life and health 
 43.24  topics for those seeking a life and health license~~,~~; and 15 
 43.25  hours devoted to specific property and casualty topics for those 
 43.26  seeking a property and casualty license.  The program of studies 
 43.27  or study course shall have been approved by the commissioner in 
 43.28  order to qualify under this paragraph.  If the applicant has 
 43.29  been previously licensed for the particular line of insurance in 
 43.30  the state of Minnesota, the requirement of a program of studies 
 43.31  or a study course shall be waived.  A certification of 
 43.32  compliance by the organization offering the course shall 
 43.33  accompany the applicant's license application.  This program of 
 43.34  studies in a school or a study course shall not apply to farm 
 43.35  property perils and farm liability applicants, or to agents 
 43.36  writing such other lines of insurance as the commissioner may 
 44.1   exempt from examination by order. 
 44.2      (e) The applicant must pass the examination with a grade 
 44.3   determined by the commissioner to indicate satisfactory 
 44.4   knowledge and understanding of the class or classes of insurance 
 44.5   for which the applicant seeks qualification.  The commissioner 
 44.6   shall inform the applicant as to whether or not the applicant 
 44.7   has passed.  Examination results are valid for a period of three 
 44.8   years from the date of the examination.  The applicant must pass 
 44.9   the examination with a grade determined by the commissioner. 
 44.10     (f) An applicant who has failed to pass an examination may 
 44.11  take subsequent examinations.  Examination fees for subsequent 
 44.12  examinations shall not be waived. 
 44.13     (g) Any applicant for a license covering the same class or 
 44.14  classes of insurance for which the applicant was licensed under 
 44.15  a similar license in this state, other than a temporary license, 
 44.16  within the three years preceding the date of the application 
 44.17  shall be exempt from the requirement of a written examination, 
 44.18  unless the previous license was revoked or suspended by the 
 44.19  commissioner.  An applicant whose license is not renewed under 
 44.20  section 60K.12 is exempt from the requirement of a written 
 44.21  examination.  
 44.22     Sec. 38.  Minnesota Statutes 1996, section 60K.03, 
 44.23  subdivision 3, is amended to read: 
 44.24     Subd. 3.  [NONRESIDENT AGENT.] The commissioner shall issue 
 44.25  a nonresident insurance agent's license to a qualified person 
 44.26  who is a resident of another state or country as follows: 
 44.27     (a) A person may qualify for a license under this section 
 44.28  as a nonresident only if that person holds a license in another 
 44.29  state, province of Canada, or other foreign country which, in 
 44.30  the opinion of the commissioner, qualifies that person for the 
 44.31  same activity as that for which a license is sought. 
 44.32     (b) The commissioner shall not issue a license to a 
 44.33  nonresident applicant until that person files with the 
 44.34  commissioner a designation of the commissioner and the 
 44.35  commissioner's successors in office as the applicant's true and 
 44.36  lawful attorney upon whom may be served all lawful process in an 
 45.1   action, suit, or proceeding instituted by or on behalf of an 
 45.2   interested person arising out of the applicant's insurance 
 45.3   business in this state.  This designation constitutes an 
 45.4   agreement that this service of process is of the same legal 
 45.5   force and validity as personal service of process in this state 
 45.6   upon that applicant.  
 45.7      Service of process upon a licensee in an action or 
 45.8   proceeding begun in a court of competent jurisdiction of this 
 45.9   state may be made in compliance with section 45.028, subdivision 
 45.10  2.  
 45.11     (c) A nonresident agent shall be held to the same knowledge 
 45.12  of insurance law, regulations, and rules as that required of a 
 45.13  resident agent according to subdivision 2, paragraph (d). 
 45.14     ~~(c)~~ (d) A nonresident license terminates automatically when 
 45.15  the resident license for that class of license in the state, 
 45.16  province, or foreign country in which the licensee is a resident 
 45.17  is terminated for any reason.  
 45.18     Sec. 39.  Minnesota Statutes 1996, section 60K.08, is 
 45.19  amended to read: 
 45.20     60K.08 [BROKERAGE BUSINESS.] 
 45.21     (a) Every insurance agent duly licensed to transact 
 45.22  business in this state shall have the right to procure the 
 45.23  insurance of risks, or parts of risks, in the class or classes 
 45.24  of insurance for which the agent is licensed in other insurers 
 45.25  duly authorized to transact business in this state, but the 
 45.26  insurance shall only be consummated through a duly 
 45.27  appointed ~~resident~~ agent of the insurer taking the risk. 
 45.28     (b) If the law of another state imposes on a nonresident 
 45.29  agent who is a resident agent of Minnesota any obligation of 
 45.30  countersignature by a resident agent of that state, then any 
 45.31  licensed nonresident agent of that state will be obliged to have 
 45.32  the same kind of policies countersigned by a resident agent of 
 45.33  Minnesota. 
 45.34     (c) If the law of another state requires a nonresident 
 45.35  agent who is a resident agent of Minnesota to pay a portion of 
 45.36  the premium to or share commissions with a licensed resident 
 46.1   agent of that state, then ~~the~~ in the same cases a licensed 
 46.2   resident agent of Minnesota ~~when consummating and countersigning~~ 
 46.3   shall be required to countersign the policies for a licensed 
 46.4   nonresident agent of that state and shall receive ~~five percent~~ 
 46.5   ~~of the total premium or 25 percent of the commission, whichever~~ 
 46.6   ~~is less~~ the same portion of the premium or share of the 
 46.7   commission as required by the laws of the nonresident agent's 
 46.8   state. 
 46.9      Sec. 40.  Minnesota Statutes 1996, section 60K.14, 
 46.10  subdivision 4, is amended to read: 
 46.11     Subd. 4.  [SUITABILITY OF INSURANCE.] In recommending the 
 46.12  purchase of any life, endowment, individual accident and 
 46.13  sickness, long-term care, annuity, life-endowment, or Medicare 
 46.14  supplement insurance to a customer, an agent must have 
 46.15  reasonable grounds for believing that the recommendation is 
 46.16  suitable for the customer and must make reasonable inquiries to 
 46.17  determine suitability.  The suitability of a recommended 
 46.18  purchase of insurance will be determined ~~by reference to the~~ 
 46.19  ~~totality of the particular customer's circumstances~~ upon the 
 46.20  basis of the facts disclosed by the customer as to the 
 46.21  customer's other insurance and financial situation and needs, 
 46.22  including, but not limited to, the customer's ~~income~~ financial 
 46.23  status, the customer's need for insurance, and the values, 
 46.24  benefits, and costs of the customer's existing insurance 
 46.25  program, if any, when compared to the values, benefits, and 
 46.26  costs of the recommended policy or policies. 
 46.27     Sec. 41.  Minnesota Statutes 1996, section 60K.19, 
 46.28  subdivision 7, is amended to read: 
 46.29     Subd. 7.  [CRITERIA FOR COURSE ACCREDITATION.] (a) The 
 46.30  commissioner may accredit a course only to the extent it is 
 46.31  designed to impart substantive and procedural knowledge of the 
 46.32  insurance field.  The burden of demonstrating that the course 
 46.33  satisfies this requirement is on the individual or organization 
 46.34  seeking accreditation.  The commissioner shall approve any 
 46.35  educational program approved by Minnesota Continuing Legal 
 46.36  Education relating to the insurance field.  The commissioner is 
 47.1   authorized to establish a procedure for renewal of course 
 47.2   accreditation. 
 47.3      (b) The commissioner shall approve or disapprove 
 47.4   professional designation examinations that are recommended for 
 47.5   approval by the advisory task force.  In order for an agent to 
 47.6   receive full continuing education credit for a professional 
 47.7   designation examination, the agent must pass the examination.  
 47.8   An agent may not receive credit for classroom instruction 
 47.9   preparing for the professional designation examination and also 
 47.10  receive continuing education credit for passing the professional 
 47.11  designation examination. 
 47.12     (c) The commissioner may not accredit a course:  
 47.13     (1) that is designed to prepare students for a license 
 47.14  examination; 
 47.15     (2) in mechanical office or business skills, including 
 47.16  typing, speedreading, use of calculators, or other machines or 
 47.17  equipment; 
 47.18     (3) in sales promotion, including meetings held in 
 47.19  conjunction with the general business of the licensed agent; 
 47.20     (4) in motivation, the art of selling, psychology, or time 
 47.21  management; or 
 47.22     (5) which can be completed by the student at home or 
 47.23  outside the classroom without the supervision of an instructor 
 47.24  approved by the department of commerce, except that home-study 
 47.25  courses may be accredited by the commissioner if the student is 
 47.26  a nonresident agent residing in a state which is not contiguous 
 47.27  to Minnesota.  
 47.28     (d) The commissioner has discretion to establish a pilot 
 47.29  program to explore delivery of accredited courses using new 
 47.30  delivery technology, including interactive technology.  This 
 47.31  pilot program expires August 1, 2000. 
 47.32     Sec. 42.  Minnesota Statutes 1996, section 60K.19, 
 47.33  subdivision 8, is amended to read: 
 47.34     Subd. 8.  [MINIMUM EDUCATION REQUIREMENT.] Each person 
 47.35  subject to this section shall complete a minimum of 30 credit 
 47.36  hours of courses accredited by the commissioner during each 
 48.1   24-month licensing period ~~after the expiration of the person's~~ 
 48.2   ~~initial licensing period~~, two hours of which must be devoted to 
 48.3   state law, regulations, and rules applicable to the line or 
 48.4   lines of insurance for which the agent is licensed.  At least 15 
 48.5   of the 30 credit hours must be completed during the first 12 
 48.6   months of the 24-month licensing period.  Any person whose 
 48.7   initial licensing period extends more than six months shall 
 48.8   complete 15 hours of courses accredited by the commissioner 
 48.9   during the initial license period.  Any person teaching or 
 48.10  lecturing at an accredited course qualifies for 1-1/2 times the 
 48.11  number of credit hours that would be granted to a person 
 48.12  completing the accredited course.  No more than 15 credit hours 
 48.13  per licensing period may be credited to a person for courses 
 48.14  sponsored by, offered by, or affiliated with an insurance 
 48.15  company or its agents.  Courses sponsored by, offered by, or 
 48.16  affiliated with an insurance company or agent may restrict its 
 48.17  students to agents of the company or agency. 
 48.18     Sec. 43.  Minnesota Statutes 1996, section 61A.28, 
 48.19  subdivision 6, is amended to read: 
 48.20     Subd. 6.  [STOCKS, OBLIGATIONS, AND OTHER INVESTMENTS.] (a) 
 48.21  Common stocks, common stock equivalents, or securities 
 48.22  convertible into common stock or common stock equivalents of a 
 48.23  business entity organized under the laws of the United States or 
 48.24  any state thereof, or the Dominion of Canada or any province 
 48.25  thereof, if the net earnings of the business entity after the 
 48.26  elimination of extraordinary nonrecurring items of income and 
 48.27  expense and before income taxes and fixed charges over the five 
 48.28  immediately preceding completed fiscal years, or its period of 
 48.29  existence if less than five years, has averaged not less than 
 48.30  1-1/4 times its average annual fixed charges applicable to the 
 48.31  period.  
 48.32     (b) Preferred stock of, or common or preferred stock 
 48.33  guaranteed as to dividends by a business entity organized under 
 48.34  the laws of the United States or any state thereof, or the 
 48.35  Dominion of Canada or any province thereof, under the following 
 48.36  conditions:  (1) No investment may be made under this paragraph 
 49.1   in a stock upon which any dividend, current or cumulative, is in 
 49.2   arrears; (2) the company may not invest in stocks under this 
 49.3   paragraph and in common stocks under paragraph (a) if the 
 49.4   investment causes the company's aggregate investments in the 
 49.5   common or preferred stocks to exceed 25 percent of the company's 
 49.6   total admitted assets, provided that no more than 20 percent of 
 49.7   the company's admitted assets may be invested in common stocks 
 49.8   under paragraph (a); and (3) the company may not invest in any 
 49.9   preferred stock or common stock guaranteed as to dividends, 
 49.10  which is rated in the four lowest categories established by the 
 49.11  securities valuation office of the National Association of 
 49.12  Insurance Commissioners, if the investment causes the company's 
 49.13  aggregate investment in the lower rated preferred or common 
 49.14  stock guaranteed as to dividends to exceed five percent of its 
 49.15  total admitted assets.  
 49.16     (c) Warrants, options, and rights to purchase stock if the 
 49.17  stock, at the time of the acquisition of the warrant, option, or 
 49.18  right to purchase, would qualify as an investment under 
 49.19  paragraph (a) or (b), whichever is applicable.  A company shall 
 49.20  not invest in a warrant, option, or right to purchase stock if, 
 49.21  upon purchase and immediate exercise thereof, the acquisition of 
 49.22  the stock violates any of the concentration limitations 
 49.23  contained in paragraphs (a) and (b).  
 49.24     (d) In addition to amounts that may be invested under 
 49.25  subdivision 8 and without regard to the percentage limitation 
 49.26  applicable to stocks, warrants, options, and rights to purchase, 
 49.27  the securities of any face amount certificate company, unit 
 49.28  investment trust, or management type investment company, 
 49.29  registered or in the process of registration under the 
 49.30  Investment Company Act of 1940 as from time to time amended.  In 
 49.31  addition, the company may transfer assets into one or more of 
 49.32  its separate accounts for the purpose of establishing, or 
 49.33  supporting its contractual obligations under, the accounts in 
 49.34  accordance with the provisions of sections 61A.13 to 61A.21.  A 
 49.35  company may not invest in a security authorized under this 
 49.36  paragraph if the investment causes the company's aggregate 
 50.1   investments in the securities to exceed five percent of its 
 50.2   total admitted assets, except that for a health service plan 
 50.3   corporation operating under chapter 62C, and for a health 
 50.4   maintenance organization operating under chapter 62D, the 
 50.5   company's aggregate investments may not exceed 20 percent of its 
 50.6   total admitted assets.  No more than five percent of the allowed 
 50.7   investment by health service plan corporations or health 
 50.8   maintenance organizations may be invested in funds that invest 
 50.9   in assets not backed by the federal government.  When investing 
 50.10  in money market mutual funds, nonprofit health service plans 
 50.11  regulated under chapter 62C, and health maintenance 
 50.12  organizations regulated under chapter 62D, shall establish a 
 50.13  trustee custodial account for the transfer of cash into the 
 50.14  money market mutual fund. 
 50.15     (e) Investment grade obligations that are:  
 50.16     (1) bonds, obligations, notes, debentures, repurchase 
 50.17  agreements, or other evidences of indebtedness of a business 
 50.18  entity, organized under the laws of the United States or any 
 50.19  state thereof, or the Dominion of Canada or any province 
 50.20  thereof; and 
 50.21     (2) rated in one of the four highest rating categories by 
 50.22  at least one nationally recognized statistical rating 
 50.23  organization, or are rated in one of the two highest categories 
 50.24  established by the securities valuation office of the National 
 50.25  Association of Insurance Commissioners. 
 50.26     (f) Noninvestment grade obligations:  A company may acquire 
 50.27  noninvestment grade obligations as defined in subclause (i) 
 50.28  (hereinafter noninvestment grade obligations) which meet the 
 50.29  earnings test set forth in subclause (ii).  A company may not 
 50.30  acquire a noninvestment grade obligation if the acquisition will 
 50.31  cause the company to exceed the limitations set forth in 
 50.32  subclause (iii). 
 50.33     (i) A noninvestment grade obligation is an obligation of a 
 50.34  business entity, organized under the laws of the United States 
 50.35  or any state thereof, or the Dominion of Canada or any province 
 50.36  thereof, that is not rated in one of the four highest rating 
 51.1   categories by at least one nationally recognized statistical 
 51.2   rating organization, or is not rated in one of the two highest 
 51.3   categories established by the securities valuation office of the 
 51.4   National Association of Insurance Commissioners. 
 51.5      (ii) Noninvestment grade obligations authorized by this 
 51.6   subdivision may be acquired by a company if the business entity 
 51.7   issuing or assuming the obligation, or the business entity 
 51.8   securing or guaranteeing the obligation, has had net earnings 
 51.9   after the elimination of extraordinary nonrecurring items of 
 51.10  income and expense and before income taxes and fixed charges 
 51.11  over the five immediately preceding completed fiscal years, or 
 51.12  its period of existence of less than five years, has averaged 
 51.13  not less than 1-1/4 times its average annual fixed charges 
 51.14  applicable to the period; provided, however, that if a business 
 51.15  entity issuing or assuming the obligation, or the business 
 51.16  entity securing or guaranteeing the obligation, has undergone an 
 51.17  acquisition, recapitalization, or reorganization within the 
 51.18  immediately preceding 12 months, or will use the proceeds of the 
 51.19  obligation for an acquisition, recapitalization, or 
 51.20  reorganization, then such business entity shall also have, on a 
 51.21  pro forma basis, for the next succeeding 12 months, net earnings 
 51.22  averaging 1-1/4 times its average annual fixed charges 
 51.23  applicable to such period after elimination of extraordinary 
 51.24  nonrecurring items of income and expense and before taxes and 
 51.25  fixed charges; no investment may be made under this section upon 
 51.26  which any interest obligation is in default. 
 51.27     (iii) Limitation on aggregate interest in noninvestment 
 51.28  grade obligations.  A company may not invest in a noninvestment 
 51.29  grade obligation if the investment will cause the company's 
 51.30  aggregate investments in noninvestment grade obligations to 
 51.31  exceed the applicable percentage of admitted assets set forth in 
 51.32  the following table:  
 51.33                                          Percentage of
 51.34              Effective Date              Admitted Assets
 51.35              January 1, 1992                  20
 51.36              January 1, 1993                  17.5
 52.1               January 1, 1994                  15
 52.2      Nothing in this paragraph limits the ability of a company 
 52.3   to invest in noninvestment grade obligations as provided under 
 52.4   subdivision 12. 
 52.5      (g) Obligations for the payment of money under the 
 52.6   following conditions:  (1) The obligation must be secured, 
 52.7   either solely or in conjunction with other security, by an 
 52.8   assignment of a lease or leases on property, real or personal; 
 52.9   (2) the lease or leases must be nonterminable by the lessee or 
 52.10  lessees upon foreclosure of any lien upon the leased property; 
 52.11  (3) the rents payable under the lease or leases must be 
 52.12  sufficient to amortize at least 90 percent of the obligation 
 52.13  during the primary term of the lease; and (4) the lessee or 
 52.14  lessees under the lease or leases, or a governmental entity or 
 52.15  business entity, organized under the laws of the United States 
 52.16  or any state thereof, or the Dominion of Canada, or any province 
 52.17  thereof, that has assumed or guaranteed any lessee's performance 
 52.18  thereunder, must be a governmental entity or business entity 
 52.19  whose obligations would qualify as an investment under 
 52.20  subdivision 2 or paragraph (e) or (f).  A company may acquire 
 52.21  leases assumed or guaranteed by a noninvestment grade lessee 
 52.22  unless the value of the lease, when added to the other 
 52.23  noninvestment grade obligations owned by the company, exceeds 15 
 52.24  percent of the company's admitted assets.  
 52.25     (h) A company may sell ~~exchange-traded~~ call options against 
 52.26  stocks or other securities owned by the company and may purchase 
 52.27  ~~exchange-traded~~ call options in a closing transaction against a 
 52.28  call option previously written by the company.  In addition to 
 52.29  the authority granted by paragraph (c), to the extent and on the 
 52.30  terms and conditions the commissioner determines to be 
 52.31  consistent with the purposes of this chapter, a company may 
 52.32  purchase or sell other exchange-traded call options, and may 
 52.33  sell or purchase exchange-traded put options.  
 52.34     (i) A company may not invest in a security or other 
 52.35  obligation authorized under this subdivision if the investment, 
 52.36  valued at cost at the date of purchase, causes the company's 
 53.1   aggregate investment in any one business entity to exceed two 
 53.2   percent of the company's admitted assets.  
 53.3      (j) For nonprofit health service plan corporations 
 53.4   regulated under chapter 62C, and for health maintenance 
 53.5   organizations regulated under chapter 62D, a company may invest 
 53.6   in commercial paper rated in one of the two highest rating 
 53.7   categories by at least one nationally recognized statistical 
 53.8   rating organization, or rated in one of the two highest 
 53.9   categories established by the securities valuation office of the 
 53.10  National Association of Insurance Commissioners, if the 
 53.11  investment, valued at cost at the date of purchase, does not 
 53.12  cause the company's aggregate investment in any one business 
 53.13  entity to exceed six percent of the company's admitted assets. 
 53.14     Sec. 44.  Minnesota Statutes 1996, section 61A.28, 
 53.15  subdivision 9a, is amended to read: 
 53.16     Subd. 9a.  [HEDGING.] A domestic life insurance company may 
 53.17  enter into financial transactions solely for the purpose of 
 53.18  ~~managing~~ reducing the ~~interest rate~~ risk associated with ~~the~~ 
 53.19  ~~company's~~ assets and liabilities that the company has acquired 
 53.20  or incurred or has legally contracted to acquire or incur, and 
 53.21  not for speculative or other purposes.  For purposes of this 
 53.22  subdivision, "financial transactions"  include, but are not 
 53.23  limited to, futures, options to buy or sell fixed income 
 53.24  securities, repurchase and reverse repurchase agreements, and 
 53.25  interest rate swaps, caps, and floors.  This authority is in 
 53.26  addition to any other authority of the insurer.  
 53.27     Sec. 45.  Minnesota Statutes 1996, section 61A.28, 
 53.28  subdivision 12, is amended to read: 
 53.29     Subd. 12.  [ADDITIONAL INVESTMENTS.] Investments of any 
 53.30  kind, without regard to the categories, conditions, standards, 
 53.31  or other limitations set forth in the foregoing subdivisions and 
 53.32  section 61A.31, subdivision 3, except that the prohibitions in 
 53.33  clause (d) of subdivision 3 remains applicable, may be made by a 
 53.34  domestic life insurance company in an amount not to exceed the 
 53.35  lesser of the following: 
 53.36     (1) Five percent of the company's total admitted assets as 
 54.1   of the end of the preceding calendar year, or 
 54.2      (2) Fifty percent of the amount by which its capital and 
 54.3   surplus as of the end of the preceding calendar year exceeds 
 54.4   $675,000.  Except as provided in section 61A.281, a company's 
 54.5   total investment under this section in the common stock of any 
 54.6   corporation, other than the stock of the types of corporations 
 54.7   specified in section 61A.284, may not exceed ten percent of the 
 54.8   common stock of the corporation.  No investment may be made 
 54.9   under the authority of this clause or clause (1) by a company 
 54.10  that has not completed five years of actual operation since the 
 54.11  date of its first certificate of authority.  
 54.12     If, subsequent to being made under the provisions of this 
 54.13  subdivision, an investment is determined to have become 
 54.14  qualified or eligible under any of the other provisions of this 
 54.15  chapter, the company may consider the investment as being held 
 54.16  under the other provision and the investment need no longer be 
 54.17  considered as having been made under the provisions of this 
 54.18  subdivision.  
 54.19     In addition to the investments authorized by this 
 54.20  subdivision, with the written order of the commissioner, a 
 54.21  domestic life insurance company may make qualified investments 
 54.22  in any ~~additional securities or property of the type authorized~~ 
 54.23  ~~by subdivision 6, paragraph (e), (f), or (g), with the written~~ 
 54.24  ~~order of the commissioner~~ other type of investment or exceed any 
 54.25  limitations of quality, quantity, or percentage of admitted 
 54.26  assets contained in this section, section 61A.29 or 61A.31, or 
 54.27  other provision governing the investments of a domestic life 
 54.28  insurance company.  This approval is at the discretion of the 
 54.29  commissioner, provided that the additional investments allowed 
 54.30  by the commissioner's written order may not exceed five percent 
 54.31  of the company's admitted assets.  ~~This authorization does not~~ 
 54.32  ~~negate or reduce the investment authority granted in subdivision~~ 
 54.33  ~~6, paragraph (e), (f), or (g), or this subdivision.~~ 
 54.34     Sec. 46.  Minnesota Statutes 1996, section 61A.32, is 
 54.35  amended to read: 
 54.36     61A.32 [DOMESTIC MUTUAL AND STOCK AND MUTUAL COMPANIES; 
 55.1   VOTING RIGHTS OF MEMBERS.] 
 55.2      Every person insured by a domestic mutual life insurance 
 55.3   company, and every participating policyholder of a domestic 
 55.4   stock and mutual life insurance company as defined in sections 
 55.5   61A.33 to 61A.36, shall be a member, entitled to one vote and 
 55.6   one vote additional for each $1,000 of insurance in excess of 
 55.7   the first $1,000; provided, that no member shall be entitled to 
 55.8   more than 100 votes; and, provided, further, that in the case of 
 55.9   group insurance on employees such group shall be deemed to be a 
 55.10  single member and the employer shall be deemed to be such member 
 55.11  for the purpose of voting, having not to exceed 100 votes, 
 55.12  provided, that in cases where the employees pay all or any part 
 55.13  of the premium, either directly or by payroll deductions, the 
 55.14  employees shall be allowed to choose their representative, who 
 55.15  shall exercise a voting power in proportion to the percentage of 
 55.16  premium paid by such employees.  Every member shall be notified 
 55.17  of its annual meetings by a written notice mailed to the 
 55.18  member's address, or by an imprint on the back of the policy, 
 55.19  premium notice, receipt or certificate of renewal, as follows: 
 55.20     "The insured is hereby notified that by virtue of this 
 55.21  policy the insured is a member of the .......... Insurance 
 55.22  Company, and that the annual meetings of said company are held 
 55.23  at its home office on the ..... day of ..... in each year, at 
 55.24  .......... o'clock."  
 55.25     The blanks shall be duly filled in print.  Any such member 
 55.26  may vote by proxy by filing written proxy appointment with the 
 55.27  secretary of the company at its home office at least five days 
 55.28  before the first meeting at which it is to be used.  Such proxy 
 55.29  appointment may be for a specified period of time not to exceed 
 55.30  one year.  A proxy may be revoked by a member at any time by 
 55.31  written notice to the secretary of the company or by executing a 
 55.32  new proxy appointment and filing it as required herein:  
 55.33  provided, however, that any member may always appear personally 
 55.34  and exercise rights as a member at any meeting of the company.  
 55.35     No person or group of persons other than the chief 
 55.36  executive officer of a domestic mutual life insurance company, 
 56.1   or the officer's designee, shall seek to obtain proxies from the 
 56.2   members of the domestic mutual life insurance company for the 
 56.3   purposes of affecting a change of control of the domestic mutual 
 56.4   life insurance company unless that person or group has filed 
 56.5   with the commissioner and has sent to the domestic mutual life 
 56.6   insurance company a statement containing the information 
 56.7   required by section 60D.17.  Section 60D.17, subdivisions 2 to 
 56.8   7, apply in the event of any such solicitation.  
 56.9      A domestic mutual life insurance company may by its 
 56.10  articles of incorporation or bylaws provide for a representative 
 56.11  system of voting in any meeting of members.  The articles or 
 56.12  bylaws may provide for the selection of representatives from 
 56.13  districts as therein specified, such representatives to 
 56.14  represent approximately equal numbers of members with power to 
 56.15  exercise all the voting powers, rights and privileges of the 
 56.16  members they represent with the same force and effect as might 
 56.17  be exercised by the members themselves.  In such a 
 56.18  representative system the votes cast by the representative shall 
 56.19  be one vote for each member, notwithstanding the amount of 
 56.20  insurance carried, and proxy voting shall not be permitted; 
 56.21  provided, however, that any member may always appear personally 
 56.22  and exercise rights as a member of the company at any meeting of 
 56.23  the membership. 
 56.24     Sec. 47.  Minnesota Statutes 1996, section 61A.60, 
 56.25  subdivision 1, is amended to read: 
 56.26     Subdivision 1.  [NOTICE FORM; AGENT SALES.] The notice 
 56.27  required where sections 61A.53 to 61A.60 refer to this 
 56.28  subdivision is as follows: 
 56.29                          IMPORTANT NOTICE 
 56.30  
 56.31  DEFINITION   REPLACEMENT is any transaction where, in connection
 56.32               with the purchase of New Insurance or a New 
 56.33               Annuity, you LAPSE, SURRENDER, CONVERT to 
 56.34               Paid-up Insurance, Place on Extended Term, 
 56.35               or BORROW all or part of the policy loan 
 56.36               values on an existing insurance policy or an 
 57.1                annuity.  (See reverse side for DEFINITIONS.) 
 57.4   IF YOU       In connection with the purchase of this insurance 
 57.5   INTEND TO    or annuity, if you have REPLACED or intend to 
 57.6   REPLACE      REPLACE your present life insurance coverage 
 57.7   COVERAGE     or annuity(ies), you should be certain that you   
 57.8                understand all the relevant factors involved.
 57.10               You should BE AWARE that you may be required to
 57.11               provide <h>EVIDENCE OF INSURABILITY</h> and 
 57.13               (1)  If your HEALTH condition has CHANGED since 
 57.14               the application was taken on your present 
 57.15               policies, you may be required to pay ADDITIONAL 
 57.16               PREMIUMS under the NEW POLICY, or be DENIED 
 57.17               coverage. 
 57.19               (2)  Your present occupation or activities <h>may not</h>
 57.20  <h>             be covered or could require additional premiums. </h> 
 57.22               (3)  The INCONTESTABLE and SUICIDE CLAUSE will 
 57.23               begin anew in a new policy.  This could RESULT 
 57.24               in a <h>CLAIM under the new policy BEING DENIED</h> 
 57.25               that would otherwise have been paid.
 57.27               (4)  Current law ~~DOES~~ MAY NOT REQUIRE your present 
 57.28               insurer(s) to REFUND any premiums.
 57.30               (5)  It is to your advantage to OBTAIN INFORMATION
 57.31               regarding your existing policies or annuity 
 57.32               contracts  [FROM THE INSURER OR AGENT FROM WHOM 
 57.33               YOU PURCHASED THE POLICY OR ANNUITY CONTRACT.] 
 57.35               (If you are purchasing an annuity, clauses (1), 
 57.36               (2), and (3) above would not apply to the new 
 58.1                annuity contract.)
 58.3                THE INSURANCE OR ANNUITY I INTEND TO PURCHASE FROM 
 58.4                _______________________________________INSURANCE CO.
 58.5                MAY REPLACE OR ALTER EXISTING LIFE INSURANCE 
 58.6                POLICY(IES) OR ANNUITY CONTRACT(S). 
 58.8                The following policy(ies) or annuity contract(s) 
 58.9                may be replaced as a result of this transaction:
 58.11           <h> Insurer</h>                              <h> Insured</h> 
 58.12   <h>as it appears on the policy        as it appears on the policy</h> 
 58.13  <h> or contract </h>                       <h>or contract </h> 
 58.14  ______________________________     ______________________________
 58.15  ______________________________     ______________________________
 58.16  ______________________________     ______________________________
 58.17  ______________________________     ______________________________
 58.18   <h> Policy or contract number </h>             <h> Insured birthdate </h>
 58.19  ______________________________     ______________________________
 58.20  ______________________________     ______________________________
 58.21  ______________________________     ______________________________
 58.22  ______________________________     ______________________________
 58.23          The proposed policy or contract is:
 58.24          ______________________________________  $_______________
 58.25          type of policy- or contract-generic name   face amount
 58.27          ________________________________________________________
 58.28          signature of applicant                   date
 58.30          ________________________________________________________
 58.31          address of applicant        city              state
 58.33          I certify that this form was given to and completed by 
 58.35          ________________________________________________________
 58.36                      (applicant-please print or type)
 58.38          prior to taking an application and that I am leaving a 
 58.39          signed copy for the applicant.
 58.41               ___________________________________________________
 58.42               agent's signature                    date
 58.44               ___________________________________________________
 58.45                                address
 58.47               ___________________________________________________
 58.48                       city                       state
 59.1             <h>Note important statement on reverse side </h>
 59.2      Sec. 48.  Minnesota Statutes 1996, section 61B.19, 
 59.3   subdivision 3, is amended to read: 
 59.4      Subd. 3.  [LIMITATION OF COVERAGE.] Sections 61B.18 to 
 59.5   61B.32 do not provide coverage for: 
 59.6      (1) a portion of a policy or contract under which the 
 59.7   investment risk is borne by the policy or contract holder; 
 59.8      (2) a policy or contract of reinsurance, unless assumption 
 59.9   certificates have been issued and the insured has consented to 
 59.10  the assumption as provided under section 60A.09, subdivision 4a; 
 59.11     (3) a policy or contract issued by an assessment benefit 
 59.12  association operating under section 61A.39, or a fraternal 
 59.13  benefit society operating under chapter 64B; 
 59.14     (4) any obligation to nonresident participants of a covered 
 59.15  retirement plan or to the plan sponsor, employer, trustee, or 
 59.16  other party who owns the contract; in these cases, the 
 59.17  association is obligated under this chapter only to participants 
 59.18  in a covered plan who are residents of the state of Minnesota on 
 59.19  the date of impairment or insolvency; 
 59.20     (5) an annuity contract issued in connection with and for 
 59.21  the purpose of funding a structured settlement of a liability 
 59.22  claim, where the liability insurer remains liable; 
 59.23     (6) a portion of an unallocated annuity contract which is 
 59.24  not issued to or in connection with a specific employee, union, 
 59.25  or association of natural persons benefit plan or a governmental 
 59.26  lottery, including but not limited to, a contract issued to, or 
 59.27  purchased at the direction of, any governmental bonding 
 59.28  authority, such as a municipal guaranteed investment contract; 
 59.29     (7) a plan or program of an employer, association, or 
 59.30  similar entity to provide life, health, or annuity benefits to 
 59.31  its employees or members to the extent that the plan or program 
 59.32  is self-funded or uninsured, including benefits payable by an 
 59.33  employer, association, or similar entity under: 
 59.34     (i) a multiple employer welfare arrangement as defined in 
 59.35  the Employee Retirement Income Security Act of 1974, United 
 60.1   States Code, title 29, section 1002(40)(A), as amended; 
 60.2      (ii) a minimum premium group insurance plan; 
 60.3      (iii) a stop-loss group insurance plan; or 
 60.4      (iv) an administrative services only contract; 
 60.5      (8) any policy or contract issued by an insurer at a time 
 60.6   when it was not licensed or did not have a certificate of 
 60.7   authority to issue the policy or contract in this state; 
 60.8      (9) an unallocated annuity contract issued to an employee 
 60.9   benefit plan protected under the federal Pension Benefit 
 60.10  Guaranty Corporation; ~~and~~ 
 60.11     (10) a portion of a policy or contract to the extent that 
 60.12  it provides dividends or experience rating credits except to the 
 60.13  extent the dividends or experience rating credits have actually 
 60.14  become due and payable or have been credited to the policy or 
 60.15  contract before the date of impairment or insolvency, or 
 60.16  provides that a fee or allowance be paid to a person, including 
 60.17  the policy or contract holder, in connection with the service 
 60.18  to, or administration of, the policy or contract~~.~~; and 
 60.19     (11) a contractual agreement that establishes the member 
 60.20  insurer's obligations to provide a book value accounting 
 60.21  guaranty for defined contribution benefit plan participants by 
 60.22  reference to a portfolio of assets that is owned by the benefit 
 60.23  plan or its trustee, which in each case is not an affiliate of 
 60.24  the member insurer. 
 60.25     Sec. 49.  Minnesota Statutes 1996, section 62A.04, 
 60.26  subdivision 3, is amended to read: 
 60.27     Subd. 3.  [OPTIONAL PROVISIONS.] Except as provided in 
 60.28  subdivision 4, no such policy delivered or issued for delivery 
 60.29  to any person in this state shall contain provisions respecting 
 60.30  the matters set forth below unless such provisions are in the 
 60.31  words in which the same appear in this section.  The insurer 
 60.32  may, at its option, use in lieu of any such provision a 
 60.33  corresponding provision of different wording approved by the 
 60.34  commissioner which is not less favorable in any respect to the 
 60.35  insured or the beneficiary.  Any such provision contained in the 
 60.36  policy shall be preceded individually by the appropriate caption 
 61.1   appearing in this subdivision or, at the option of the insurer, 
 61.2   by such appropriate individual or group captions or subcaptions 
 61.3   as the commissioner may approve. 
 61.4      (1) A provision as follows: 
 61.5      CHANGE OF OCCUPATION:  If the insured be injured or 
 61.6   contract sickness after having changed occupations to one 
 61.7   classified by the insurer as more hazardous than that stated in 
 61.8   this policy or while doing for compensation anything pertaining 
 61.9   to an occupation so classified, the insurer will pay only such 
 61.10  portion of the indemnities provided in this policy as the 
 61.11  premiums paid would have purchased at the rates and within the 
 61.12  limits fixed by the insurer for such more hazardous occupation.  
 61.13  If the insured changes occupations to one classified by the 
 61.14  insurer as less hazardous than that stated in this policy, the 
 61.15  insurer, upon receipt of proof of such change of occupation will 
 61.16  reduce the premium rate accordingly, and will return the excess 
 61.17  pro rata unearned premium from the date of change of occupation 
 61.18  or from the policy anniversary date immediately preceding 
 61.19  receipt of such proof, whichever is the more recent.  In 
 61.20  applying this provision, the classification of occupational risk 
 61.21  and the premium rates shall be such as have been last filed by 
 61.22  the insurer prior to the occurrence of the loss for which the 
 61.23  insurer is liable or prior to date of proof of change in 
 61.24  occupation with the state official having supervision of 
 61.25  insurance in the state where the insured resided at the time 
 61.26  this policy was issued; but if such filing was not required, 
 61.27  then the classification of occupational risk and the premium 
 61.28  rates shall be those last made effective by the insurer in such 
 61.29  state prior to the occurrence of the loss or prior to the date 
 61.30  of proof of change of occupation. 
 61.31     (2) A provision as follows: 
 61.32     MISSTATEMENT OF AGE:  If the age of the insured has been 
 61.33  misstated, all amounts payable under this policy shall be such 
 61.34  as the premium paid would have purchased at the correct age. 
 61.35     (3) A provision as follows: 
 61.36     OTHER INSURANCE IN THIS INSURER:  If an accident or 
 62.1   sickness or accident and sickness policy or policies previously 
 62.2   issued by the insurer to the insured be in force concurrently 
 62.3   herewith, making the aggregate indemnity for ..... (insert type 
 62.4   of coverage or coverages) in excess of $..... (insert maximum 
 62.5   limit of indemnity or indemnities) the excess insurance shall be 
 62.6   void and all premiums paid for such excess shall be returned to 
 62.7   the insured or to the insured's estate, or, in lieu thereof: 
 62.8      Insurance effective at any one time on the insured under a 
 62.9   like policy or policies in this insurer is limited to the one 
 62.10  such policy elected by the insured, or the insured's beneficiary 
 62.11  or estate, as the case may be, and the insurer will return all 
 62.12  premiums paid for all other such policies. 
 62.13     (4) A provision as follows: 
 62.14     INSURANCE WITH OTHER INSURERS:  If there be other valid 
 62.15  coverage, not with this insurer, providing benefits for the same 
 62.16  loss on a provision of service basis or on an expense incurred 
 62.17  basis and of which this insurer has not been given written 
 62.18  notice prior to the occurrence or commencement of loss, the only 
 62.19  liability under any expense incurred coverage of this policy 
 62.20  shall be for such proportion of the loss as the amount which 
 62.21  would otherwise have been payable hereunder plus the total of 
 62.22  the like amounts under all such other valid coverages for the 
 62.23  same loss of which this insurer had notice bears to the total 
 62.24  like amounts under all valid coverages for such loss, and for 
 62.25  the return of such portion of the premiums paid as shall exceed 
 62.26  the pro rata portion for the amount so determined.  For the 
 62.27  purpose of applying this provision when other coverage is on a 
 62.28  provision of service basis, the "like amount" of such other 
 62.29  coverage shall be taken as the amount which the services 
 62.30  rendered would have cost in the absence of such coverage. 
 62.31     If the foregoing policy provision is included in a policy 
 62.32  which also contains the next following policy provision there 
 62.33  shall be added to the caption of the foregoing provision the 
 62.34  phrase "EXPENSE INCURRED BENEFITS."  The insurer may, at its 
 62.35  option, include in this provision a definition of "other valid 
 62.36  coverage," approved as to form by the commissioner, which 
 63.1   definition shall be limited in subject matter to coverage 
 63.2   provided by organizations subject to regulation by insurance law 
 63.3   or by insurance authorities of this or any other state of the 
 63.4   United States or any province of Canada, and by hospital or 
 63.5   medical service organizations, and to any other coverage the 
 63.6   inclusion of which may be approved by the commissioner.  In the 
 63.7   absence of such definition such term shall not include group 
 63.8   insurance, automobile medical payments insurance, or coverage 
 63.9   provided by hospital or medical service organizations or by 
 63.10  union welfare plans or employer or employee benefit 
 63.11  organizations.  For the purpose of applying the foregoing policy 
 63.12  provision with respect to any insured, any amount of benefit 
 63.13  provided for such insured pursuant to any compulsory benefit 
 63.14  statute (including any workers' compensation or employer's 
 63.15  liability statute) whether provided by a governmental agency or 
 63.16  otherwise shall in all cases be deemed to be "other valid 
 63.17  coverage" of which the insurer has had notice.  In applying the 
 63.18  foregoing policy provision no third party liability coverage 
 63.19  shall be included as "other valid coverage." 
 63.20     (5) A provision as follows: 
 63.21     INSURANCE WITH OTHER INSURERS:  If there be other valid 
 63.22  coverage, not with this insurer, providing benefits for the same 
 63.23  loss on other than an expense incurred basis and of which this 
 63.24  insurer has not been given written notice prior to the 
 63.25  occurrence or commencement of loss, the only liability for such 
 63.26  benefits under this policy shall be for such proportion of the 
 63.27  indemnities otherwise provided hereunder for such loss as the 
 63.28  like indemnities of which the insurer had notice (including the 
 63.29  indemnities under this policy) bear to the total amount of all 
 63.30  like indemnities for such loss, and for the return of such 
 63.31  portion of the premium paid as shall exceed the pro rata portion 
 63.32  for the indemnities thus determined. 
 63.33     If the foregoing policy provision is included in a policy 
 63.34  which also contains the next preceding policy provision there 
 63.35  shall be added to the caption of the foregoing provision the 
 63.36  phrase -- "OTHER BENEFITS."  The insurer may, at its option, 
 64.1   include in this provision a definition of "other valid 
 64.2   coverage," approved as to form by the commissioner, which 
 64.3   definition shall be limited in subject matter to coverage 
 64.4   provided by organizations subject to regulation by insurance law 
 64.5   or by insurance authorities of this or any other state of the 
 64.6   United States or any province of Canada, and to any other 
 64.7   coverage the inclusion of which may be approved by the 
 64.8   commissioner.  In the absence of such definition such term shall 
 64.9   not include group insurance, or benefits provided by union 
 64.10  welfare plans or by employer or employee benefit organizations.  
 64.11  For the purpose of applying the foregoing policy provision with 
 64.12  respect to any insured, any amount of benefit provided for such 
 64.13  insured pursuant to any compulsory benefit statute (including 
 64.14  any workers' compensation or employer's liability statute) 
 64.15  whether provided by a governmental agency or otherwise shall in 
 64.16  all cases be deemed to be "other valid coverage" of which the 
 64.17  insurer has had notice.  In applying the foregoing policy 
 64.18  provision no third party liability coverage shall be included as 
 64.19  "other valid coverage." 
 64.20     (6) A provision as follows: 
 64.21     RELATION OF EARNINGS TO INSURANCE:  If the total monthly 
 64.22  amount of loss of time benefits promised for the same loss under 
 64.23  all valid loss of time coverage upon the insured, whether 
 64.24  payable on a weekly or monthly basis, shall exceed the monthly 
 64.25  earnings of the insured at the time disability commenced or the 
 64.26  insured's average monthly earnings for the period of two years 
 64.27  immediately preceding a disability for which claim is made, 
 64.28  whichever is the greater, the insurer will be liable only for 
 64.29  such proportionate amount of such benefits under this policy as 
 64.30  the amount of such monthly earnings or such average monthly 
 64.31  earnings of the insured bears to the total amount of monthly 
 64.32  benefits for the same loss under all such coverage upon the 
 64.33  insured at the time such disability commences and for the return 
 64.34  of such part of the premiums paid during such two years as shall 
 64.35  exceed the pro rata amount of the premiums for the benefits 
 64.36  actually paid hereunder; but this shall not operate to reduce 
 65.1   the total monthly amount of benefits payable under all such 
 65.2   coverage upon the insured below the sum of $200 or the sum of 
 65.3   the monthly benefits specified in such coverages, whichever is 
 65.4   the lesser, nor shall it operate to reduce benefits other than 
 65.5   those payable for loss of time. 
 65.6      The foregoing policy provision may be inserted only in a 
 65.7   policy which the insured has the right to continue in force 
 65.8   subject to its terms by the timely payment of premiums (1) until 
 65.9   at least age 50, or, (2) in the case of a policy issued after 
 65.10  age 44, for at least five years from its date of issue.  The 
 65.11  insurer may, at its option, include in this provision a 
 65.12  definition of "valid loss of time coverage," approved as to form 
 65.13  by the commissioner, which definition shall be limited in 
 65.14  subject matter to coverage provided by governmental agencies or 
 65.15  by organizations subject to regulation by insurance law or by 
 65.16  insurance authorities of this or any other state of the United 
 65.17  States or any province of Canada, or to any other coverage the 
 65.18  inclusion of which may be approved by the commissioner or any 
 65.19  combination of such coverages.  In the absence of such 
 65.20  definition such term shall not include any coverage provided for 
 65.21  such insured pursuant to any compulsory benefit statute 
 65.22  (including any workers' compensation or employer's liability 
 65.23  statute), or benefits provided by union welfare plans or by 
 65.24  employer or employee benefit organizations. 
 65.25     (7) A provision as follows: 
 65.26     UNPAID PREMIUM:  Upon the payment of a claim under this 
 65.27  policy, any premium then due and unpaid or covered by any note 
 65.28  or written order may be deducted therefrom. 
 65.29     (8) A provision as follows: 
 65.30     CANCELLATION:  The insurer may cancel this policy at any 
 65.31  time by written notice delivered to the insured or mailed to the 
 65.32  insured's last address as shown by the records of the insurer, 
 65.33  stating when, not less than five days thereafter, such 
 65.34  cancellation shall be effective; and after the policy has been 
 65.35  continued beyond its original term the insured may cancel this 
 65.36  policy at any time by written notice delivered or mailed to the 
 66.1   insurer, effective upon receipt or on such later date as may be 
 66.2   specified in such notice.  In the event of cancellation, the 
 66.3   insurer will return promptly the unearned portion of any premium 
 66.4   paid.  ~~If~~ Regardless of whether it is the insurer or the insured 
 66.5   who cancels, ~~the earned premium shall be computed by the use of~~ 
 66.6   ~~the short-rate table last filed with the state official having~~ 
 66.7   ~~supervision of insurance in the state where the insured resided~~ 
 66.8   ~~when the policy was issued.  If the insurer cancels,~~ the earned 
 66.9   premium shall be computed pro rata, unless the mode of payment 
 66.10  is monthly or less, or if the unearned amount is for more than 
 66.11  one month.  Cancellation shall be without prejudice to any claim 
 66.12  originating prior to the effective date of cancellation. 
 66.13     (9) A provision as follows: 
 66.14     CONFORMITY WITH STATE STATUTES:  Any provision of this 
 66.15  policy which, on its effective date, is in conflict with the 
 66.16  statutes of the state in which the insured resides on such date 
 66.17  is hereby amended to conform to the minimum requirements of such 
 66.18  statutes. 
 66.19     (10) A provision as follows: 
 66.20     ILLEGAL OCCUPATION:  The insurer shall not be liable for 
 66.21  any loss to which a contributing cause was the insured's 
 66.22  commission of or attempt to commit a felony or to which a 
 66.23  contributing cause was the insured's being engaged in an illegal 
 66.24  occupation. 
 66.25     (11) A provision as follows: 
 66.26     NARCOTICS:  The insurer shall not be liable for any loss 
 66.27  sustained or contracted in consequence of the insured's being 
 66.28  under the influence of any narcotic unless administered on the 
 66.29  advice of a physician. 
 66.30     Sec. 50.  Minnesota Statutes 1996, section 62A.135, 
 66.31  subdivision 5, is amended to read: 
 66.32     Subd. 5.  [~~SUPPLEMENT TO ANNUAL STATEMENTS~~ SUPPLEMENTAL 
 66.33  FILINGS.] Each insurer that has fixed indemnity policies in 
 66.34  force in this state shall, ~~as a supplement to the annual~~ 
 66.35  ~~statement required by section 60A.13~~ upon request by the 
 66.36  commissioner, submit, in a form prescribed by the 
 67.1   commissioner, ~~the~~ experience data ~~for the calendar year~~ showing 
 67.2   its incurred claims, earned premiums, incurred to earned loss 
 67.3   ratio, and the ratio of the actual loss ratio to the expected 
 67.4   loss ratio for each fixed indemnity policy form in force in 
 67.5   Minnesota.  The experience data must be provided on both a 
 67.6   Minnesota only and a national basis.  If in the opinion of the 
 67.7   company's actuary, the deviation of the actual loss ratio from 
 67.8   the expected loss ratio for a policy form is due to unusual 
 67.9   reserve fluctuations, economic conditions, or other nonrecurring 
 67.10  conditions, the insurer should also file that opinion with 
 67.11  appropriate justification.  
 67.12     If the data submitted does not confirm that the insurer has 
 67.13  satisfied the loss ratio requirements of this section, the 
 67.14  commissioner shall notify the insurer in writing of the 
 67.15  deficiency.  The insurer shall have 30 days from the date of 
 67.16  receipt of the commissioner's notice to file amended rates that 
 67.17  comply with this section or a request for an exemption with 
 67.18  appropriate justification.  If the insurer fails to file amended 
 67.19  rates within the prescribed time and the commissioner does not 
 67.20  exempt the policy form from the need for a rate revision, the 
 67.21  commissioner shall order that the insurer's filed rates for the 
 67.22  nonconforming policy be reduced to an amount that would have 
 67.23  resulted in a loss ratio that complied with this section had it 
 67.24  been in effect for the reporting period of the supplement.  The 
 67.25  insurer's failure to file amended rates within the specified 
 67.26  time of the issuance of the commissioner's order amending the 
 67.27  rates does not preclude the insurer from filing an amendment of 
 67.28  its rates at a later time. 
 67.29     Sec. 51.  Minnesota Statutes 1996, section 62A.316, is 
 67.30  amended to read: 
 67.31     62A.316 [BASIC MEDICARE SUPPLEMENT PLAN; COVERAGE.] 
 67.32     (a) The basic Medicare supplement plan must have a level of 
 67.33  coverage that will provide: 
 67.34     (1) coverage for all of the Medicare part A inpatient 
 67.35  hospital coinsurance amounts, and 100 percent of all Medicare 
 67.36  part A eligible expenses for hospitalization not covered by 
 68.1   Medicare, after satisfying the Medicare part A deductible; 
 68.2      (2) coverage for the daily copayment amount of Medicare 
 68.3   part A eligible expenses for the calendar year incurred for 
 68.4   skilled nursing facility care; 
 68.5      (3) coverage for the copayment amount of Medicare eligible 
 68.6   expenses under Medicare part B regardless of hospital 
 68.7   confinement, subject to the Medicare part B deductible amount; 
 68.8      (4) 80 percent of the hospital and medical expenses and 
 68.9   supplies incurred during travel outside the United States as a 
 68.10  result of a medical emergency; 
 68.11     (5) coverage for the reasonable cost of the first three 
 68.12  pints of blood, or equivalent quantities of packed red blood 
 68.13  cells as defined under federal regulations under Medicare parts 
 68.14  A and B, unless replaced in accordance with federal regulations; 
 68.15  ~~and~~ 
 68.16     (6) 100 percent of the cost of immunizations and routine 
 68.17  screening procedures for cancer screening including mammograms 
 68.18  and pap smears; and 
 68.19     (7) 80 percent of coverage for all physician prescribed 
 68.20  medically appropriate and necessary equipment and supplies used 
 68.21  in the management and treatment of diabetes.  Coverage must 
 68.22  include persons with gestational, type I, or type II diabetes. 
 68.23     (b) Only the following optional benefit riders may be added 
 68.24  to this plan: 
 68.25     (1) coverage for all of the Medicare part A inpatient 
 68.26  hospital deductible amount; 
 68.27     (2) a minimum of 80 percent of eligible medical expenses 
 68.28  and supplies not covered by Medicare part B, not to exceed any 
 68.29  charge limitation established by the Medicare program or state 
 68.30  law; 
 68.31     (3) coverage for all of the Medicare part B annual 
 68.32  deductible; 
 68.33     (4) coverage for at least 50 percent, or the equivalent of 
 68.34  50 percent, of usual and customary prescription drug expenses; 
 68.35     (5) coverage for the following preventive health services: 
 68.36     (i) an annual clinical preventive medical history and 
 69.1   physical examination that may include tests and services from 
 69.2   clause (ii) and patient education to address preventive health 
 69.3   care measures; 
 69.4      (ii) any one or a combination of the following preventive 
 69.5   screening tests or preventive services, the frequency of which 
 69.6   is considered medically appropriate: 
 69.7      (A) fecal occult blood test and/or digital rectal 
 69.8   examination; 
 69.9      (B) dipstick urinalysis for hematuria, bacteriuria, and 
 69.10  proteinuria; 
 69.11     (C) pure tone (air only) hearing screening test, 
 69.12  administered or ordered by a physician; 
 69.13     (D) serum cholesterol screening every five years; 
 69.14     (E) thyroid function test; 
 69.15     (F) diabetes screening; 
 69.16     (iii) any other tests or preventive measures determined 
 69.17  appropriate by the attending physician. 
 69.18     Reimbursement shall be for the actual charges up to 100 
 69.19  percent of the Medicare-approved amount for each service, as if 
 69.20  Medicare were to cover the service as identified in American 
 69.21  Medical Association current procedural terminology (AMA CPT) 
 69.22  codes, to a maximum of $120 annually under this benefit.  This 
 69.23  benefit shall not include payment for a procedure covered by 
 69.24  Medicare; 
 69.25     (6) coverage for services to provide short-term at-home 
 69.26  assistance with activities of daily living for those recovering 
 69.27  from an illness, injury, or surgery: 
 69.28     (i) For purposes of this benefit, the following definitions 
 69.29  apply: 
 69.30     (A) "activities of daily living" include, but are not 
 69.31  limited to, bathing, dressing, personal hygiene, transferring, 
 69.32  eating, ambulating, assistance with drugs that are normally 
 69.33  self-administered, and changing bandages or other dressings; 
 69.34     (B) "care provider" means a duly qualified or licensed home 
 69.35  health aide/homemaker, personal care aid, or nurse provided 
 69.36  through a licensed home health care agency or referred by a 
 70.1   licensed referral agency or licensed nurses registry; 
 70.2      (C) "home" means a place used by the insured as a place of 
 70.3   residence, provided that the place would qualify as a residence 
 70.4   for home health care services covered by Medicare.  A hospital 
 70.5   or skilled nursing facility shall not be considered the 
 70.6   insured's place of residence; 
 70.7      (D) "at-home recovery visit" means the period of a visit 
 70.8   required to provide at-home recovery care, without limit on the 
 70.9   duration of the visit, except each consecutive four hours in a 
 70.10  24-hour period of services provided by a care provider is one 
 70.11  visit; 
 70.12     (ii) Coverage requirements and limitations: 
 70.13     (A) at-home recovery services provided must be primarily 
 70.14  services that assist in activities of daily living; 
 70.15     (B) the insured's attending physician must certify that the 
 70.16  specific type and frequency of at-home recovery services are 
 70.17  necessary because of a condition for which a home care plan of 
 70.18  treatment was approved by Medicare; 
 70.19     (C) coverage is limited to: 
 70.20     (I) no more than the number and type of at-home recovery 
 70.21  visits certified as necessary by the insured's attending 
 70.22  physician.  The total number of at-home recovery visits shall 
 70.23  not exceed the number of Medicare-approved home care visits 
 70.24  under a Medicare-approved home care plan of treatment; 
 70.25     (II) the actual charges for each visit up to a maximum 
 70.26  reimbursement of $40 per visit; 
 70.27     (III) $1,600 per calendar year; 
 70.28     (IV) seven visits in any one week; 
 70.29     (V) care furnished on a visiting basis in the insured's 
 70.30  home; 
 70.31     (VI) services provided by a care provider as defined in 
 70.32  this section; 
 70.33     (VII) at-home recovery visits while the insured is covered 
 70.34  under the policy or certificate and not otherwise excluded; 
 70.35     (VIII) at-home recovery visits received during the period 
 70.36  the insured is receiving Medicare-approved home care services or 
 71.1   no more than eight weeks after the service date of the last 
 71.2   Medicare-approved home health care visit; 
 71.3      (iii) Coverage is excluded for: 
 71.4      (A) home care visits paid for by Medicare or other 
 71.5   government programs; and 
 71.6      (B) care provided by family members, unpaid volunteers, or 
 71.7   providers who are not care providers; and 
 71.8      (7) coverage for at least 50 percent, or the equivalent of 
 71.9   50 percent, of usual and customary prescription drug expenses to 
 71.10  a maximum of $1,200 paid by the issuer annually under this 
 71.11  benefit.  An issuer of Medicare supplement insurance policies 
 71.12  that elects to offer this benefit rider shall also make 
 71.13  available coverage that contains the rider specified in clause 
 71.14  (4). 
 71.15     Sec. 52.  Minnesota Statutes 1996, section 62A.50, 
 71.16  subdivision 3, is amended to read: 
 71.17     Subd. 3.  [DISCLOSURES.] No long-term care policy shall be 
 71.18  offered or delivered in this state, whether or not the policy is 
 71.19  issued in this state, and no certificate of coverage under a 
 71.20  group long-term care policy shall be offered or delivered in 
 71.21  this state, unless a statement containing at least the following 
 71.22  information is delivered to the applicant at the time the 
 71.23  application is made: 
 71.24     (1) a description of the benefits and coverage provided by 
 71.25  the policy and the differences between this policy, a 
 71.26  supplemental Medicare policy and the benefits to which an 
 71.27  individual is entitled under parts A and B of Medicare; 
 71.28     (2) a statement of the exceptions and limitations in the 
 71.29  policy including the following language, as applicable, in bold 
 71.30  print:  "THIS POLICY DOES NOT COVER ALL NURSING CARE FACILITIES 
 71.31  OR NURSING HOME, HOME CARE, OR ADULT DAY CARE EXPENSES AND DOES 
 71.32  NOT COVER RESIDENTIAL CARE.  READ YOUR POLICY CAREFULLY TO 
 71.33  DETERMINE WHICH FACILITIES AND EXPENSES ARE COVERED BY YOUR 
 71.34  POLICY."; 
 71.35     (3) a statement of the renewal provisions including any 
 71.36  reservation by the insurer of the right to change premiums; 
 72.1      (4) a statement that the outline of coverage is a summary 
 72.2   of the policy issued or applied for and that the policy should 
 72.3   be consulted to determine governing contractual provisions; 
 72.4      (5) an explanation of the policy's loss ratio including at 
 72.5   least the following language:  "This means that, on the average, 
 72.6   policyholders may expect that $........ of every $100 in premium 
 72.7   will be returned as benefits to policyholders over the life of 
 72.8   the contract."; 
 72.9      (6) a statement of the out-of-pocket expenses, including 
 72.10  deductibles and copayments for which the insured is responsible, 
 72.11  and an explanation of the specific out-of-pocket expenses that 
 72.12  may be accumulated toward any out-of-pocket maximum as specified 
 72.13  in the policy; 
 72.14     (7) the following language, in bold print:  "YOUR PREMIUMS 
 72.15  CAN BE INCREASED IN THE FUTURE.  THE RATE SCHEDULE THAT LISTS 
 72.16  YOUR PREMIUM NOW CAN CHANGE."; 
 72.17     ~~(8) the following language, if applicable, in bold print:~~  
 72.18  ~~"IF YOU ARE NOT HOSPITALIZED PRIOR TO ENTERING A NURSING HOME OR~~ 
 72.19  ~~NEEDING HOME CARE, YOU WILL NOT BE ABLE TO COLLECT ANY BENEFITS~~ 
 72.20  ~~UNDER THIS PARTICULAR POLICY.";~~ 
 72.21     ~~(9)~~ (8) the following language in bold print, with any 
 72.22  provisions that are inapplicable to the particular policy 
 72.23  omitted or crossed out:  "THIS POLICY HAS A WAITING PERIOD OF 
 72.24  ..... (CALENDAR OR BENEFIT) DAYS FOR NURSING CARE SERVICES AND A 
 72.25  WAITING PERIOD OF ..... (CALENDAR OR BENEFIT) DAYS FOR HOME CARE 
 72.26  SERVICES.  THIS MEANS THAT THIS POLICY WILL NOT COVER YOUR CARE 
 72.27  FOR THE FIRST ..... (CALENDAR OR BENEFIT) DAYS AFTER YOU ENTER A 
 72.28  NURSING HOME, OR THE FIRST ..... (CALENDAR OR BENEFIT) DAYS 
 72.29  AFTER YOU BEGIN TO USE HOME CARE SERVICES.  YOU WOULD NEED TO 
 72.30  PAY FOR YOUR CARE FROM OTHER SOURCES FOR THOSE WAITING 
 72.31  PERIODS."; and 
 72.32     ~~(10)~~ (9) a signed and completed copy of the application for 
 72.33  insurance is left with the applicant at the time the application 
 72.34  is made. 
 72.35     Sec. 53.  Minnesota Statutes 1996, section 62B.02, is 
 72.36  amended by adding a subdivision to read: 
 73.1      Subd. 8.  [ACTUAL NET DEBT.] "Actual net debt" means the 
 73.2   amount necessary to liquidate the actual unpaid indebtedness in 
 73.3   a single lump-sum payment, excluding all unearned interest and 
 73.4   other unearned finance charges, if any, but including any 
 73.5   prepayment penalty. 
 73.6      Sec. 54.  Minnesota Statutes 1996, section 62B.02, is 
 73.7   amended by adding a subdivision to read: 
 73.8      Subd. 9.  [SCHEDULED NET DEBT.] "Scheduled net debt" means 
 73.9   the amount necessary to liquidate the scheduled unpaid 
 73.10  indebtedness in a single lump-sum, excluding all unearned 
 73.11  interest and other unearned finance charges, if any, but 
 73.12  including any prepayment penalty, and assuming that all payments 
 73.13  have been made according to the terms of the contract of 
 73.14  indebtedness. 
 73.15     Sec. 55.  Minnesota Statutes 1996, section 62B.04, 
 73.16  subdivision 1, is amended to read: 
 73.17     Subdivision 1.  [CREDIT LIFE INSURANCE.] (1) The ~~initial~~ 
 73.18  amount of credit life insurance shall ~~not~~ at no time exceed the 
 73.19  ~~amount of principal repayable under the contract of indebtedness~~ 
 73.20  ~~plus an amount equal to one monthly payment.  Thereafter, if the~~ 
 73.21  ~~indebtedness is repayable in substantially equal installments~~ 
 73.22  ~~according to a predetermined schedule, the amount of insurance~~ 
 73.23  ~~on which the premium is calculated shall be equal to the~~ 
 73.24  ~~scheduled indebtedness plus one monthly payment~~ greater of the 
 73.25  actual net debt or the scheduled net debt.  If the coverage is 
 73.26  written on the actual net debt, then the amount payable at the 
 73.27  time of loss may not be less than the actual net debt less any 
 73.28  payments more than two months overdue.  If the coverage is 
 73.29  written on the scheduled net debt, then the amount payable at 
 73.30  the time of loss shall be: 
 73.31     (1) if the actual net debt is less than or equal to the 
 73.32  scheduled net debt, then the scheduled net debt; 
 73.33     (2) if the actual net debt is greater than the scheduled 
 73.34  net debt but less than or equal to the scheduled debt plus two 
 73.35  months of payments, then the actual net debt; or 
 73.36     (3) if the actual net debt is greater than the scheduled 
 74.1   net debt plus two months of payments, then the scheduled net 
 74.2   debt plus two months of payments.  If the contract of 
 74.3   indebtedness provides for a variable rate of finance charge or 
 74.4   interest, the initial rate or the scheduled rates based on the 
 74.5   initial index must be used in determining the scheduled amount 
 74.6   of indebtedness and subsequent changes to the rate must be 
 74.7   disregarded in determining whether the contract is repayable in 
 74.8   substantially equal installments according to a predetermined 
 74.9   schedule. 
 74.10     (2) Notwithstanding clause (1), the amount of credit life 
 74.11  insurance written in connection with credit transactions 
 74.12  repayable over a specified term exceeding 63 months shall not 
 74.13  exceed the greater of:  (i) the actual amount of unpaid 
 74.14  indebtedness as it exists from time to time; or (ii) where an 
 74.15  indebtedness is repayable in substantially equal installments 
 74.16  according to a predetermined schedule, the scheduled amount of 
 74.17  unpaid indebtedness, less any unearned interest or finance 
 74.18  charges, plus an amount equal to two monthly payments.  If the 
 74.19  credit transaction provides for a variable rate of finance 
 74.20  charge or interest, the initial rate or the scheduled rates 
 74.21  based on the initial index must be used in determining the 
 74.22  scheduled amount of unpaid indebtedness and subsequent changes 
 74.23  in the rate must be disregarded in determining whether the 
 74.24  contract is repayable in substantially equal installments 
 74.25  according to a predetermined schedule. 
 74.26     (3) Notwithstanding clauses (1) and (2), insurance on 
 74.27  educational, agricultural, and horticultural credit transaction 
 74.28  commitments may be written on a nondecreasing or level term plan 
 74.29  for the amount of the loan commitment. 
 74.30     (4) If the contract of indebtedness provides for a variable 
 74.31  rate of finance charge or interest, the initial rate or the 
 74.32  scheduled rates based on the initial index shall be used in 
 74.33  determining the scheduled amount of indebtedness, and subsequent 
 74.34  changes to the rate shall be disregarded in determining whether 
 74.35  the contract is repayable in substantially equal installments 
 74.36  according to a predetermined schedule. 
 75.1      Sec. 56.  Minnesota Statutes 1996, section 62B.04, 
 75.2   subdivision 2, is amended to read: 
 75.3      Subd. 2.  [CREDIT ACCIDENT AND HEALTH INSURANCE.] (a) The 
 75.4   total amount of periodic indemnity payable by credit accident 
 75.5   and health insurance in the event of disability, as defined in 
 75.6   the policy, shall not exceed the aggregate of the periodic 
 75.7   scheduled unpaid installments of the indebtedness; and the 
 75.8   amount of each periodic indemnity payment shall not exceed the 
 75.9   original indebtedness divided by the number of periodic 
 75.10  installments.  If the credit transaction provides for a variable 
 75.11  rate of finance charge or interest, the initial rate or the 
 75.12  scheduled rates based on the initial index must be used in 
 75.13  determining the aggregate of the periodic scheduled unpaid 
 75.14  installments of the indebtedness. 
 75.15     (b) If for any reason a policy of disability insurance will 
 75.16  not or may not provide the policyholder or certificate holder 
 75.17  with coverage for the total amount of indebtedness on the 
 75.18  related loan or debt in the event of any one instance of 
 75.19  disability, the following notice must be provided to the 
 75.20  applicant.  The disclosure must be on a separate 8-1/2 by 11 
 75.21  sheet of paper in 14 point bold face capital letters.  The 
 75.22  disclosure must state: 
 75.23     WARNING:  IF YOU BECOME DISABLED, THIS POLICY (WILL NOT/MAY 
 75.24  NOT) PROVIDE COVERAGE FOR THE FULL AMOUNT YOU OWE THE LENDER AS 
 75.25  A RESULT OF YOUR LOAN.  BEFORE SUBMITTING YOUR APPLICATION FOR 
 75.26  COVERAGE, YOU SHOULD MAKE SURE YOU FULLY UNDERSTAND THE 
 75.27  CIRCUMSTANCES UNDER WHICH YOU WOULD NOT BE ENTITLED TO FULL 
 75.28  COVERAGE.  IF YOU WANT COVERAGE FOR THE FULL AMOUNT OF YOUR 
 75.29  INDEBTEDNESS IN THE EVENT YOU BECOME DISABLED AND THE INSURER IS 
 75.30  UNABLE OR UNWILLING TO PROVIDE SUCH COVERAGE, YOU SHOULD 
 75.31  INVESTIGATE THE AVAILABILITY OF SUCH COVERAGE THROUGH OTHER 
 75.32  INSURERS. 
 75.33     This disclosure must be signed by the debtor and a copy 
 75.34  provided to the debtor at the time the debtor applies for 
 75.35  coverage.  A copy of the signed disclosure must also be 
 75.36  maintained by the insurer for at least the term of the policy if 
 76.1   coverage is issued. 
 76.2      (c) Any policy or certificate of disability insurance which 
 76.3   contains a critical period must for any single instance of 
 76.4   disability provide monthly indemnity benefit payments for the 
 76.5   term of the loan or 24 months, whichever is less.  For purposes 
 76.6   of this section, critical period means the period of time during 
 76.7   which benefits will be paid to the policyholder or certificate 
 76.8   holder as a result of any one instance of disability. 
 76.9      (d) Nothing in this section shall be deemed as requiring an 
 76.10  insurer to provide benefits equal to the net schedule 
 76.11  indebtedness of the policyholder or the certificate holder under 
 76.12  the related loan unless such benefits are specifically provided 
 76.13  by the policy. 
 76.14     Sec. 57.  Minnesota Statutes 1996, section 62E.12, is 
 76.15  amended to read: 
 76.16     62E.12 [MINIMUM BENEFITS OF COMPREHENSIVE HEALTH INSURANCE 
 76.17  PLAN.] 
 76.18     The association through its comprehensive health insurance 
 76.19  plan shall offer policies which provide the benefits of a number 
 76.20  one qualified plan and a number two qualified plan, except that 
 76.21  the maximum lifetime benefit on these plans shall be 
 76.22  ~~$1,500,000~~ $2,000,000, and an extended basic plan and a basic 
 76.23  Medicare plan as described in sections 62A.31 to 62A.44 and 
 76.24  62E.07.  The requirement that a policy issued by the association 
 76.25  must be a qualified plan is satisfied if the association 
 76.26  contracts with a preferred provider network and the level of 
 76.27  benefits for services provided within the network satisfies the 
 76.28  requirements of a qualified plan.  If the association uses a 
 76.29  preferred provider network, payments to nonparticipating 
 76.30  providers must meet the minimum requirements of section 72A.20, 
 76.31  subdivision 15.  They shall offer health maintenance 
 76.32  organization contracts in those areas of the state where a 
 76.33  health maintenance organization has agreed to make the coverage 
 76.34  available and has been selected as a writing carrier.  
 76.35  Notwithstanding the provisions of section 62E.06 and unless 
 76.36  those charges are billed by a provider that is part of the 
 77.1   association's preferred provider network, the state plan shall 
 77.2   exclude coverage of services of a private duty nurse other than 
 77.3   on an inpatient basis and any charges for treatment in a 
 77.4   hospital located outside of the state of Minnesota in which the 
 77.5   covered person is receiving treatment for a mental or nervous 
 77.6   disorder, unless similar treatment for the mental or nervous 
 77.7   disorder is medically necessary, unavailable in Minnesota and 
 77.8   provided upon referral by a licensed Minnesota medical 
 77.9   practitioner. 
 77.10     Sec. 58.  Minnesota Statutes 1996, section 62Q.16, is 
 77.11  amended to read: 
 77.12     62Q.16 [MIDMONTH TERMINATION PROHIBITED.] 
 77.13     ~~The termination of a person's coverage under any health~~ 
 77.14  ~~plan as defined in section 62A.011, subdivision 3, with the~~ 
 77.15  ~~exception of individual health plans, issued or renewed on or~~ 
 77.16  ~~after January 1, 1995, must provide coverage until the end of~~ 
 77.17  ~~the month in which coverage was terminated.~~  Any health plan as 
 77.18  defined in section 62A.011, subdivision 3, with the exception of 
 77.19  individual health plans, issued or renewed on or after January 
 77.20  1, 1995, must provide coverage until the end of the month in 
 77.21  which coverage was terminated, contingent on payment of premium 
 77.22  to the end of the month.  The responsibility for payment of the 
 77.23  premium to the end of the month is a matter between the person 
 77.24  and the person's employer or former employer.  An employer may 
 77.25  require the person to pay the premium on a pro rata basis to 
 77.26  extend coverage from the date employment terminated to the end 
 77.27  of that month. 
 77.28     Sec. 59.  Minnesota Statutes 1996, section 65A.01, 
 77.29  subdivision 3, is amended to read: 
 77.30     Subd. 3.  [POLICY PROVISIONS.] On said policy following 
 77.31  such matter as provided in subdivisions 1 and 2, printed in the 
 77.32  English language in type of such size or sizes and arranged in 
 77.33  such manner, as is approved by the commissioner of commerce, the 
 77.34  following provisions and subject matter shall be stated in the 
 77.35  following words and in the following sequence, but with the 
 77.36  convenient placing, if desired, of such matter as will act as a 
 78.1   cover or back for such policy when folded, with the blanks below 
 78.2   indicated being left to be filled in at the time of the issuing 
 78.3   of the policy, to wit: 
 78.4      (Space for listing the amounts of insurance, rates and 
 78.5   premiums for the basic coverages provided under the standard 
 78.6   form of policy and for additional coverages or perils provided 
 78.7   under endorsements attached.  The description and location of 
 78.8   the property covered and the insurable value(s) of any 
 78.9   building(s) or structure(s) covered by the policy or its 
 78.10  attached endorsements; also in the above space may be stated 
 78.11  whether other insurance is limited and if limited the total 
 78.12  amount permitted.) 
 78.13     In consideration of the provisions and stipulations herein 
 78.14  or added hereto and of the premium above specified this company, 
 78.15  for a term of ..... from ..... (At 12:01 a.m. Standard Time) to 
 78.16  ..... (At 12:01 a.m. Standard Time) at location of property 
 78.17  involved, to an amount not exceeding the amount(s) above 
 78.18  specified does insure .....  and legal representatives 
 78.19  ........................................... 
 78.20     (In above space may be stated whether other insurance is 
 78.21  limited.) (And if limited the total amount permitted.) 
 78.22     Subject to form No.(s) ..... attached hereto. 
 78.23     This policy is made and accepted subject to the foregoing 
 78.24  provisions and stipulations and those hereinafter stated, which 
 78.25  are hereby made a part of this policy, together with such 
 78.26  provisions, stipulations and agreements as may be added hereto 
 78.27  as provided in this policy. 
 78.28     The insurance effected above is granted against all loss or 
 78.29  damage by fire originating from any cause, except as hereinafter 
 78.30  provided, also any damage by lightning and by removal from 
 78.31  premises endangered by the perils insured against in this 
 78.32  policy, to the property described hereinafter while located or 
 78.33  contained as described in this policy, or pro rata for five days 
 78.34  at each proper place to which any of the property shall 
 78.35  necessarily be removed for preservation from the perils insured 
 78.36  against in this policy, but not elsewhere.  The amount of said 
 79.1   loss or damage, except in case of total loss on buildings, to be 
 79.2   estimated according to the actual value of the insured property 
 79.3   at the time when such loss or damage happens. 
 79.4      If the insured property shall be exposed to loss or damage 
 79.5   from the perils insured against, the insured shall make all 
 79.6   reasonable exertions to save and protect same. 
 79.7      This entire policy shall be void if, whether before a loss, 
 79.8   the insured has willfully, or after a loss, the insured has 
 79.9   willfully and with intent to defraud, concealed or 
 79.10  misrepresented any material fact or circumstance concerning this 
 79.11  insurance or the subject thereof, or the interests of the 
 79.12  insured therein. 
 79.13     This policy shall not cover accounts, bills, currency, 
 79.14  deeds, evidences of debt, money or securities; nor, unless 
 79.15  specifically named hereon in writing, bullion, or manuscripts. 
 79.16     This company shall not be liable for loss by fire or other 
 79.17  perils insured against in this policy caused, directly or 
 79.18  indirectly by:  (a) enemy attack by armed forces, including 
 79.19  action taken by military, naval or air forces in resisting an 
 79.20  actual or immediately impending enemy attack; (b) invasion; (c) 
 79.21  insurrection; (d) rebellion; (e) revolution; (f) civil war; (g) 
 79.22  usurped power; (h) order of any civil authority except acts of 
 79.23  destruction at the time of and for the purpose of preventing the 
 79.24  spread of fire, providing that such fire did not originate from 
 79.25  any of the perils excluded by this policy. 
 79.26     Other insurance may be prohibited or the amount of 
 79.27  insurance may be limited by so providing in the policy or an 
 79.28  endorsement, rider or form attached thereto. 
 79.29     Unless otherwise provided in writing added hereto this 
 79.30  company shall not be liable for loss occurring: 
 79.31     (a) while the hazard is increased by any means within the 
 79.32  control or knowledge of the insured; or 
 79.33     (b) while the described premises, whether intended for 
 79.34  occupancy by owner or tenant, are vacant or unoccupied beyond a 
 79.35  period of 60 consecutive days; or 
 79.36     (c) as a result of explosion or riot, unless fire ensue, 
 80.1   and in that event for loss by fire only. 
 80.2      Any other peril to be insured against or subject of 
 80.3   insurance to be covered in this policy shall be by endorsement 
 80.4   in writing hereon or added hereto. 
 80.5      The extent of the application of insurance under this 
 80.6   policy and the contributions to be made by this company in case 
 80.7   of loss, and any other provision or agreement not inconsistent 
 80.8   with the provisions of this policy, may be provided for in 
 80.9   writing added hereto, but no provision may be waived except such 
 80.10  as by the terms of this policy is subject to change. 
 80.11     No permission affecting this insurance shall exist, or 
 80.12  waiver of any provision be valid, unless granted herein or 
 80.13  expressed in writing added hereto.  No provision, stipulation or 
 80.14  forfeiture shall be held to be waived by any requirements or 
 80.15  proceeding on the part of this company relating to appraisal or 
 80.16  to any examination provided for herein. 
 80.17     This policy shall be canceled at any time at the request of 
 80.18  the insured, in which case this company shall, upon demand and 
 80.19  surrender of this policy, refund the excess of paid premium 
 80.20  above the customary short rates for the expired time.  This 
 80.21  policy may be canceled at any time by this company by giving to 
 80.22  the insured ~~30 days'~~ a written notice of cancellation with or 
 80.23  without tender of the excess of paid premium above the pro rata 
 80.24  premium for the expired time, which excess, if not tendered, 
 80.25  shall be refunded on demand.  Notice of cancellation shall state 
 80.26  that said excess premium (if not tendered) will be refunded on 
 80.27  demand. 
 80.28     If loss hereunder is made payable, in whole or in part, to 
 80.29  a designated mortgagee or contract for deed vendor not named 
 80.30  herein as insured, such interest in this policy may be canceled 
 80.31  by giving to such mortgagee or vendor a ten days' written notice 
 80.32  of cancellation. 
 80.33     Notwithstanding any other provisions of this policy, if 
 80.34  this policy shall be made payable to a mortgagee or contract for 
 80.35  deed vendor of the covered real estate, no act or default of any 
 80.36  person other than such mortgagee or vendor or the mortgagee's or 
 81.1   vendor's agent or those claiming under the mortgagee or vendor, 
 81.2   whether the same occurs before or during the term of this 
 81.3   policy, shall render this policy void as to such mortgagee or 
 81.4   vendor nor affect such mortgagee's or vendor's right to recover 
 81.5   in case of loss on such real estate; provided, that the 
 81.6   mortgagee or vendor shall on demand pay according to the 
 81.7   established scale of rates for any increase of risks not paid 
 81.8   for by the insured; and whenever this company shall be liable to 
 81.9   a mortgagee or vendor for any sum for loss under this policy for 
 81.10  which no liability exists as to the mortgagor, vendee, or owner, 
 81.11  and this company shall elect by itself, or with others, to pay 
 81.12  the mortgagee or vendor the full amount secured by such mortgage 
 81.13  or contract for deed, then the mortgagee or vendor shall assign 
 81.14  and transfer to the company the mortgagee's or vendor's 
 81.15  interest, upon such payment, in the said mortgage or contract 
 81.16  for deed together with the note and debts thereby secured. 
 81.17     This company shall not be liable for a greater proportion 
 81.18  of any loss than the amount hereby insured shall bear to the 
 81.19  whole insurance covering the property against the peril involved.
 81.20     In case of any loss under this policy the insured shall 
 81.21  give immediate written notice to this company of any loss, 
 81.22  protect the property from further damage, and a statement in 
 81.23  writing, signed and sworn to by the insured, shall within 60 
 81.24  days be rendered to the company, setting forth the value of the 
 81.25  property insured, except in case of total loss on buildings the 
 81.26  value of said buildings need not be stated, the interest of the 
 81.27  insured therein, all other insurance thereon, in detail, the 
 81.28  purposes for which and the persons by whom the building insured, 
 81.29  or containing the property insured, was used, and the time at 
 81.30  which and manner in which the fire originated, so far as known 
 81.31  to the insured. 
 81.32     The insured, as often as may be reasonably required, shall 
 81.33  exhibit to any person designated by this company all that 
 81.34  remains of any property herein described, and, after being 
 81.35  informed of the right to counsel and that any answers may be 
 81.36  used against the insured in later civil or criminal proceedings, 
 82.1   the insured shall, within a reasonable period after demand by 
 82.2   this company, submit to examinations under oath by any person 
 82.3   named by this company, and subscribe the oath.  The insured, as 
 82.4   often as may be reasonably required, shall produce for 
 82.5   examination all records and documents reasonably related to the 
 82.6   loss, or certified copies thereof if originals are lost, at a 
 82.7   reasonable time and place designated by this company or its 
 82.8   representatives, and shall permit extracts and copies thereof to 
 82.9   be made.  
 82.10     In case the insured and this company, except in case of 
 82.11  total loss on buildings, shall fail to agree as to the actual 
 82.12  cash value or the amount of loss, then, on the written demand of 
 82.13  either, each shall select a competent and disinterested 
 82.14  appraiser and notify the other of the appraiser selected within 
 82.15  20 days of such demand.  In case either fails to select an 
 82.16  appraiser within the time provided, then a presiding judge of 
 82.17  the district court of the county wherein the loss occurs may 
 82.18  appoint such appraiser for such party upon application of the 
 82.19  other party in writing by giving five days' notice thereof in 
 82.20  writing to the party failing to appoint.  The appraisers shall 
 82.21  first select a competent and disinterested umpire; and failing 
 82.22  for 15 days to agree upon such umpire, then a presiding judge of 
 82.23  the above mentioned court may appoint such an umpire upon 
 82.24  application of party in writing by giving five days' notice 
 82.25  thereof in writing to the other party.  The appraisers shall 
 82.26  then appraise the loss, stating separately actual value and loss 
 82.27  to each item; and, failing to agree, shall submit their 
 82.28  differences, only, to the umpire.  An award in writing, so 
 82.29  itemized, of any two when filed with this company shall 
 82.30  determine the amount of actual value and loss.  Each appraiser 
 82.31  shall be paid by the selecting party, or the party for whom 
 82.32  selected, and the expense of the appraisal and umpire shall be 
 82.33  paid by the parties equally. 
 82.34     It shall be optional with this company to take all of the 
 82.35  property at the agreed or appraised value, and also to repair, 
 82.36  rebuild or replace the property destroyed or damaged with other 
 83.1   of like kind and quality within a reasonable time, on giving 
 83.2   notice of its intention so to do within 30 days after the 
 83.3   receipt of the proof of loss herein required. 
 83.4      There can be no abandonment to this company of any property.
 83.5      The amount of loss for which this company may be liable 
 83.6   shall be payable 60 days after proof of loss, as herein 
 83.7   provided, is received by this company and ascertainment of the 
 83.8   loss is made either by agreement between the insured and this 
 83.9   company expressed in writing or by the filing with this company 
 83.10  of an award as herein provided.  It is moreover understood that 
 83.11  there can be no abandonment of the property insured to the 
 83.12  company, and that the company will not in any case be liable for 
 83.13  more than the sum insured, with interest thereon from the time 
 83.14  when the loss shall become payable, as above provided. 
 83.15     No suit or action on this policy for the recovery of any 
 83.16  claim shall be sustainable in any court of law or equity unless 
 83.17  all the requirements of this policy have been complied with, and 
 83.18  unless commenced within two years after inception of the loss. 
 83.19     This company is subrogated to, and may require from the 
 83.20  insured an assignment of all right of recovery against any party 
 83.21  for loss to the extent that payment therefor is made by this 
 83.22  company; and the insurer may prosecute therefor in the name of 
 83.23  the insured retaining such amount as the insurer has paid. 
 83.24     Assignment of this policy shall not be valid except with 
 83.25  the written consent of this company. 
 83.26     IN WITNESS WHEREOF, this company has executed and attested 
 83.27  these presents. 
 83.28   
 83.29   ........................         ........................
 83.30        (Signature)                     (Signature)         
 83.31   ........................         ........................
 83.32       (Name of office)                (Name of office)     
 83.33     Sec. 60.  Minnesota Statutes 1996, section 65A.01, is 
 83.34  amended by adding a subdivision to read: 
 83.35     Subd. 3c.  [TIME REQUIREMENTS.] (a) In the event of a 
 83.36  policy less than 60 days old that is not being renewed, or a 
 84.1   policy that it is being canceled for nonpayment of premium, the 
 84.2   notice must be mailed to the insured so that it is received at 
 84.3   least ten days before the effective cancellation date.  If a 
 84.4   policy is being canceled for underwriting considerations, the 
 84.5   insured must be informed of the source from which the 
 84.6   information was received. 
 84.7      (b) In the event of a mid-term cancellation, for reasons 
 84.8   listed in subdivision 3a, or according to policy provisions, the 
 84.9   insured must receive a 30-day notice. 
 84.10     (c) In the event of a nonrenewal, a 60-day notice must be 
 84.11  sent to the insured, containing the specific underwriting or 
 84.12  other reason for the indicated actions. 
 84.13     This subdivision does not apply to commercial policies 
 84.14  regulated under sections 60A.36 and 60A.37. 
 84.15     Sec. 61.  Minnesota Statutes 1996, section 65A.27, 
 84.16  subdivision 4, is amended to read: 
 84.17     Subd. 4.  "Homeowner's insurance" means insurance coverage, 
 84.18  as provided in section 60A.06, subdivision 1, clause (1)(c), 
 84.19  normally written by the insurer as a standard homeowner's 
 84.20  package policy or as a standard residential renter's package 
 84.21  policy.  This definition includes, but is not limited to, 
 84.22  policies that are generally described as homeowners' policies, 
 84.23  mobile/manufactured homeowners' policies, dwelling owner 
 84.24  policies, condominium owner policies, and tenant policies. 
 84.25     Sec. 62.  Minnesota Statutes 1996, section 65A.29, 
 84.26  subdivision 4, is amended to read: 
 84.27     Subd. 4.  [FORM REQUIREMENTS.] Any notice or statement 
 84.28  required by subdivisions 1 to 3, or any other notice canceling a 
 84.29  homeowner's insurance policy must be written in language which 
 84.30  is easily readable and understandable by a person of average 
 84.31  intelligence and understanding.  The statement of reason must be 
 84.32  sufficiently specific to convey, clearly and without further 
 84.33  inquiry, the basis for the insurer's refusal to renew or to 
 84.34  write the insurance coverage. 
 84.35     The notice or statement must also inform the insured of: 
 84.36     (1) the possibility of coverage through the Minnesota 
 85.1   property insurance placement facility under sections 65A.31 to 
 85.2   65A.42; 
 85.3      (2) the right to object to the commissioner under 
 85.4   subdivision 9; and 
 85.5      (3) the right to the return of unearned premium in 
 85.6   appropriate situations under subdivision 10. 
 85.7      Sec. 63.  Minnesota Statutes 1996, section 65B.48, 
 85.8   subdivision 5, is amended to read: 
 85.9      Subd. 5.  (a) Every owner of a motorcycle registered or 
 85.10  required to be registered in this state or operated in this 
 85.11  state by the owner or with the owner's permission shall provide 
 85.12  and maintain security for the payment of tort liabilities 
 85.13  arising out of the maintenance or use of the motorcycle in this 
 85.14  state.  Security may be provided by a contract of liability 
 85.15  insurance complying with section 65B.49, subdivision 3, or by 
 85.16  qualifying as a self insurer in the manner provided in 
 85.17  subdivision 3. 
 85.18     (b) At the time an application for motorcycle insurance 
 85.19  without personal injury protection coverage is completed, there 
 85.20  must be attached to the application a separate form containing a 
 85.21  written notice in at least 10-point bold type, if printed, or in 
 85.22  capital letters, if typewritten that states: 
 85.23     "Under Minnesota law, a policy of motorcycle coverage 
 85.24     issued in the State of Minnesota must provide liability 
 85.25     coverage only, and there is no requirement that the policy 
 85.26     provide personal injury protection (PIP) coverage in the 
 85.27     case of injury sustained by the insured.  No PIP coverage 
 85.28     provided by an automobile insurance policy you may have in 
 85.29     force will extend to provide coverage in the event of a 
 85.30     motorcycle accident." 
 85.31     Sec. 64.  [65B.492] [TOTAL DISABILITY; WAIVER OF WAGE LOSS 
 85.32  REIMBURSEMENT.] 
 85.33     A plan of reparation security issued to or renewed with a 
 85.34  person who is totally disabled may contain a waiver of wage loss 
 85.35  reimbursement coverage, provided that the rate for any plan for 
 85.36  which this coverage has been excluded or reduced must be reduced 
 86.1   accordingly.  For purposes of this section, the term "total 
 86.2   disability" means the inability of an insured who is ill or 
 86.3   injured to engage in any paid employment or work.  The 
 86.4   reparation obligor may request the insured to provide written 
 86.5   certification of the disability by a licensed practicing 
 86.6   physician so long as the written certification is required no 
 86.7   more frequently than on an annual basis.  This section applies 
 86.8   to self-insurance. 
 86.9      Sec. 65.  Minnesota Statutes 1996, section 65B.56, 
 86.10  subdivision 1, is amended to read: 
 86.11     Subdivision 1.  [MEDICAL EXAMINATIONS AND DISCOVERY OF 
 86.12  CONDITION OF CLAIMANT.] Any person with respect to whose injury 
 86.13  benefits are claimed under a plan of reparation security shall, 
 86.14  upon request of the reparation obligor from whom recovery is 
 86.15  sought, submit to a physical examination by a physician or 
 86.16  physicians selected by the obligor as may reasonably be required.
 86.17     The costs of any examinations requested by the obligor 
 86.18  shall be borne entirely by the requesting obligor.  Such 
 86.19  examinations shall be conducted within ~~the city, town, or~~ 
 86.20  ~~statutory city~~ 75 miles of the residence of the injured person.  
 86.21  If there is no qualified physician to conduct the examination 
 86.22  within ~~the city, town, or statutory city~~ 75 miles of the 
 86.23  residence of the injured person, then such examination shall be 
 86.24  conducted at another place of the closest proximity to the 
 86.25  injured person's residence.  Obligors are authorized to include 
 86.26  reasonable provisions in policies for mental and physical 
 86.27  examination of those injured persons. 
 86.28     If requested by the person examined, a party causing an 
 86.29  examination to be made shall deliver to the examinee a copy of 
 86.30  every written report concerning the examination rendered by an 
 86.31  examining physician to that person, at least one of which 
 86.32  reports must set out in detail the findings and conclusions of 
 86.33  such examining physician. 
 86.34     An injured person shall also do all things reasonably 
 86.35  necessary to enable the obligor to obtain medical reports and 
 86.36  other needed information to assist in determining the nature and 
 87.1   extent of the injured person's injuries and loss, and the 
 87.2   medical treatment received.  If the claimant refuses to 
 87.3   cooperate in responding to requests for examination and 
 87.4   information as authorized by this section, evidence of such 
 87.5   noncooperation shall be admissible in any suit or arbitration 
 87.6   filed for damages for such personal injuries or for the benefits 
 87.7   provided by sections 65B.41 to 65B.71. 
 87.8      The provisions of this section apply before and after the 
 87.9   commencement of suit. 
 87.10     Sec. 66.  Minnesota Statutes 1996, section 67A.231, is 
 87.11  amended to read: 
 87.12     67A.231 [DEPOSIT OF FUNDS; INVESTMENT; LIMITATIONS.] 
 87.13     The directors of any township mutual insurance company may 
 87.14  authorize the treasurer to invest any of its funds and 
 87.15  accumulations in:  
 87.16     (a) Bonds, notes, mortgages, or other obligations 
 87.17  guaranteed by the full faith and credit of the United States of 
 87.18  America and those for which the credit of the United States is 
 87.19  pledged to pay principal, interest or dividends, including 
 87.20  United States agency and instrumentality bonds, debentures, or 
 87.21  obligations; 
 87.22     (b) Bonds, notes, evidence of indebtedness, or other public 
 87.23  authority obligations guaranteed by this state; 
 87.24     (c) Bonds, notes, evidence of the indebtedness or other 
 87.25  obligations guaranteed by the full faith and credit of any 
 87.26  county, municipality, school district, or other duly authorized 
 87.27  political subdivision of this state; 
 87.28     (d) Bonds or other interest bearing obligations, payable 
 87.29  from revenues, provided that the bonds or other interest bearing 
 87.30  obligations are at the time of purchase rated among the highest 
 87.31  four quality categories used by a nationally recognized rating 
 87.32  agency for rating the quality of similar bonds or other interest 
 87.33  bearing obligations, and are not rated lower by any other such 
 87.34  agency; or obligations of a United States agency or 
 87.35  instrumentality that have been rated in one of the two highest 
 87.36  categories established by the Securities Valuation Office of the 
 88.1   National Association of Insurance Commissioners.  A company may 
 88.2   not invest more than 20 percent of its admitted assets in the 
 88.3   obligations of any one corporation.  This is not applicable to 
 88.4   bonds or other interest bearing obligations in default as to 
 88.5   principal; 
 88.6      (e) Investments in the obligations stated in paragraphs 
 88.7   (a), (b), (c), and (d), may be made either directly or in the 
 88.8   form of securities of, or other interests in, an investment 
 88.9   company registered under the Federal Investment Company Act of 
 88.10  1940.  Investment company shares authorized pursuant to this 
 88.11  subdivision shall not exceed 20 percent of the company's 
 88.12  surplus.  These obligations must be carried at the lower of cost 
 88.13  or market on the annual statement filed with the commissioner 
 88.14  and adjusted to market on an annual basis; 
 88.15     (f) Loans upon improved and unencumbered real property in 
 88.16  this state worth at least twice the amount loaned thereon, not 
 88.17  including buildings, unless insured by property insurance 
 88.18  policies payable to and held by the security holder; 
 88.19     (g) Real estate, including land, buildings and fixtures, 
 88.20  located in this state and used primarily as home office space 
 88.21  for the insurance company; 
 88.22     (h) Demand or time deposits or savings accounts in 
 88.23  federally insured depositories located in this state to the 
 88.24  extent that the deposit or investment is insured by the Federal 
 88.25  Deposit Insurance Corporation, Federal Savings and Loan 
 88.26  Corporation, or the National Credit Union Administration.  An 
 88.27  additional deposit not to exceed 50 percent of the township 
 88.28  mutual insurance company's policyholder surplus may be located 
 88.29  in these depositories if covered by private deposit insurance 
 88.30  written by an insurer licensed by the department of commerce; 
 88.31     (i) Guarantee fund certificates of a mutual insurer which 
 88.32  reinsures the business of the township mutual insurance 
 88.33  company.  The commissioner may by rule limit the amount of 
 88.34  guarantee fund certificates which the township mutual insurance 
 88.35  company may purchase and this limit may be a function of the 
 88.36  size of the township mutual insurance company; and 
 89.1      (j) Up to $1,500 in stock of an insurer which issues 
 89.2   directors and officers liability insurance to township mutual 
 89.3   insurance company directors and officers. 
 89.4      Sec. 67.  Minnesota Statutes 1996, section 72A.20, 
 89.5   subdivision 34, is amended to read: 
 89.6      Subd. 34.  [SUITABILITY OF INSURANCE FOR CUSTOMER.] In 
 89.7   recommending or issuing life, endowment, individual accident and 
 89.8   sickness, long-term care, annuity, life-endowment, or Medicare 
 89.9   supplement insurance to a customer, an insurer, either directly 
 89.10  or through its agent, must have reasonable grounds for believing 
 89.11  that the recommendation is suitable for the customer, upon the 
 89.12  basis of facts disclosed by the customer as to the customer's 
 89.13  other insurance and financial situation and needs, including, 
 89.14  but not limited to, the customer's financial status, the 
 89.15  customer's need for insurance, and the values, benefits, and 
 89.16  costs of the customer's existing insurance program, if any, when 
 89.17  compared to the values, benefits, and costs of the recommended 
 89.18  policy or policies.  
 89.19     In the case of group insurance marketed on a direct 
 89.20  response basis without the use of direct agent contact, this 
 89.21  subdivision is satisfied if the insurer has reasonable grounds 
 89.22  to believe that the insurance offered is generally suitable for 
 89.23  the group to whom the offer is made. 
 89.24     Sec. 68.  Minnesota Statutes 1996, section 72B.04, 
 89.25  subdivision 10, is amended to read: 
 89.26     Subd. 10.  [FEES.] A fee of $40 is imposed for each initial 
 89.27  license or temporary permit and $25 for each renewal thereof or 
 89.28  amendment thereto.  ~~A fee of $20 is imposed for each examination~~ 
 89.29  ~~taken.~~  A fee of $20 is imposed for the registration of each 
 89.30  nonlicensed adjuster who is required to register under section 
 89.31  72B.06.  All fees shall be transmitted to the commissioner and 
 89.32  shall be payable to the ~~state treasurer~~ department of commerce.  
 89.33  ~~If a fee is paid for an examination and if within one year from~~ 
 89.34  ~~the date of that payment no written request for a refund is~~ 
 89.35  ~~received by the commissioner or the examination for which the~~ 
 89.36  ~~fee was paid is not taken, the fee is forfeited to the state of~~ 
 90.1   ~~Minnesota.~~ 
 90.2      Sec. 69.  Minnesota Statutes 1996, section 79A.01, 
 90.3   subdivision 10, is amended to read: 
 90.4      Subd. 10.  [COMMON CLAIMS FUND.] "Common claims fund," with 
 90.5   respect to group self-insurers, means the cash, cash 
 90.6   equivalents, or investment accounts maintained by the ~~mutual~~ 
 90.7   self-insurance group to pay its workers' compensation 
 90.8   liabilities.  
 90.9      Sec. 70.  Minnesota Statutes 1996, section 79A.01, is 
 90.10  amended by adding a subdivision to read: 
 90.11     Subd. 11.  [DIMINUTIVE APPLICANTS.] "Diminutive applicants" 
 90.12  to group self-insurance means applicants to existing 
 90.13  self-insurance groups whose equity and premium are both less 
 90.14  than five percent of the total group's equity and premium. 
 90.15     Sec. 71.  Minnesota Statutes 1996, section 79A.02, 
 90.16  subdivision 1, is amended to read: 
 90.17     Subdivision 1.  [MEMBERSHIP.] For the purposes of assisting 
 90.18  the commissioner, there is established a workers' compensation 
 90.19  self-insurers' advisory committee of five members that are 
 90.20  employers authorized to self-insure in Minnesota.  Three of the 
 90.21  members and three alternates shall be elected by the 
 90.22  self-insurers' security fund board of trustees and two members 
 90.23  and two alternates shall be appointed by the commissioner.  
 90.24     Sec. 72.  Minnesota Statutes 1996, section 79A.02, 
 90.25  subdivision 4, is amended to read: 
 90.26     Subd. 4.  [RECOMMENDATIONS TO COMMISSIONER REGARDING 
 90.27  REVOCATION.] After each fifth anniversary from the date each 
 90.28  individual and group self-insurer becomes certified to 
 90.29  self-insure, the committee shall review all relevant financial 
 90.30  data filed with the department of commerce that is otherwise 
 90.31  available to the public and make a recommendation to the 
 90.32  commissioner about whether each self-insurer's certificate 
 90.33  should be revoked.  For group self-insurers who have been in 
 90.34  existence for five years or more and have been granted renewal 
 90.35  authority, a level of funding in the common claims fund must be 
 90.36  maintained at not less than the greater of either:  (1) one 
 91.1   year's claim losses paid in the most recent year; or (2) 
 91.2   one-third of the security deposit posted with the department of 
 91.3   commerce according to section 79A.04, subdivision 2.  This 
 91.4   provision supersedes any requirements under section 79A.03, 
 91.5   subdivision 10, and Minnesota Rules, part 2780.5000. 
 91.6      Sec. 73.  Minnesota Statutes 1996, section 79A.03, 
 91.7   subdivision 6, is amended to read: 
 91.8      Subd. 6.  [APPLICATIONS FOR GROUP SELF-INSURANCE.] (a) Two 
 91.9   or more employers may apply to the commissioner for the 
 91.10  authority to self-insure as a group, using forms available from 
 91.11  the commissioner.  This initial application shall be accompanied 
 91.12  by a copy of the bylaws or plan of operation adopted by the 
 91.13  group.  Such bylaws or plan of operation shall conform to the 
 91.14  conditions prescribed by law or rule.  The commissioner shall 
 91.15  approve or disapprove the bylaws within 60 days unless a 
 91.16  question as to the legality of a specific bylaw or plan 
 91.17  provision has been referred to the attorney general's office.  
 91.18  The commissioner shall make a determination as to the 
 91.19  application within 15 days after receipt of the requested 
 91.20  response from the attorney general's office. 
 91.21     (b) After the initial application and the bylaws or plan of 
 91.22  operation have been approved by the commissioner or at the time 
 91.23  of the initial application, the group shall submit the names of 
 91.24  employers that will be members of the group; an indemnity 
 91.25  agreement providing for joint and several liability for all 
 91.26  group members for any and all workers' compensation claims 
 91.27  incurred by any member of the group, as set forth in Minnesota 
 91.28  Rules, part 2780.9920, signed by an officer of each member; and 
 91.29  an accounting review performed by a certified public 
 91.30  accountant.  A certified financial audit may be filed in lieu of 
 91.31  an accounting review.  
 91.32     (c) When a group has obtained its authority to self-insure, 
 91.33  additional applicants who wish to join the group must apply for 
 91.34  approval by submitting:  (1) an application; (2) an indemnity 
 91.35  agreement providing for joint and several liability as set forth 
 91.36  in Minnesota Rules, part 2780.9920, signed by an officer of the 
 92.1   applicant; and (3) a certified financial audit performed by a 
 92.2   certified public accountant at least 45 days before joining the 
 92.3   group.  An accounting review performed by a certified public 
 92.4   accountant may be filed in lieu of a certified audit. 
 92.5      New diminutive applicants to the group, as defined in 
 92.6   section 79A.01, subdivision 11, applying for membership in 
 92.7   groups in existence longer than one year, who have a combined 
 92.8   equity of all group members in excess of 15 times the last 
 92.9   retention limit selected by the group with the workers' 
 92.10  compensation reinsurance association, and have posted 125 
 92.11  percent of the group's total estimated future liability, must 
 92.12  submit the items in this paragraph at least ten days before 
 92.13  joining the group. 
 92.14     If the cumulative total of premium added to the group by 
 92.15  diminutive new members is greater than 50 percent in a fiscal 
 92.16  year of the group, all subsequent new members' applications must 
 92.17  be submitted at least 45 days before joining the group. 
 92.18     In all cases of new membership, evidence that cash premiums 
 92.19  equal to not less than 20 percent of the current year's modified 
 92.20  premium of each applicant have been paid into a common claims 
 92.21  fund, maintained by the group in a designated depository must be 
 92.22  filed with the department at least ten days before joining the 
 92.23  group. 
 92.24     Sec. 74.  Minnesota Statutes 1996, section 79A.03, 
 92.25  subdivision 7, is amended to read: 
 92.26     Subd. 7.  [FINANCIAL STANDARDS.] A self-insurer group 
 92.27  ~~proposing to self-insure~~ shall have and maintain: 
 92.28     (a) A combined net worth of all of the members of an amount 
 92.29  at least equal to the greater of ten times the retention 
 92.30  selected with the workers' compensation reinsurance association 
 92.31  or one-third of the current annual modified premium of the 
 92.32  members.  
 92.33     (b) Sufficient assets, net worth, and liquidity to promptly 
 92.34  and completely meet all obligations of its members under chapter 
 92.35  176 or this chapter.  In determining whether a group is in sound 
 92.36  financial condition, consideration shall be given to the 
 93.1   combined net worth of the member companies; the consolidated 
 93.2   long-term and short-term debt to equity ratios of the member 
 93.3   companies; any excess insurance other than reinsurance with the 
 93.4   workers' compensation reinsurance association, purchased by the 
 93.5   group from an insurer licensed in Minnesota or from an 
 93.6   authorized surplus line carrier; other financial data requested 
 93.7   by the commissioner or submitted by the group; and the combined 
 93.8   workers' compensation experience of the group for the last four 
 93.9   years. 
 93.10     Sec. 75.  Minnesota Statutes 1996, section 79A.03, 
 93.11  subdivision 9, is amended to read: 
 93.12     Subd. 9.  [FILING REPORTS.] (a) Incurred losses, paid and 
 93.13  unpaid, specifying indemnity and medical losses by 
 93.14  classification, payroll by classification, and current estimated 
 93.15  outstanding liability for workers' compensation shall be 
 93.16  reported to the commissioner by each self-insurer on a calendar 
 93.17  year basis, in a manner and on forms available from the 
 93.18  commissioner.  Payroll information must be filed by April 1 of 
 93.19  the following year~~, and loss information and total workers'~~ 
 93.20  ~~compensation liability must be filed by August 1 of the~~ 
 93.21  ~~following year~~.  
 93.22     (b) Each self-insurer shall, under oath, attest to the 
 93.23  accuracy of each report submitted pursuant to paragraph (a).  
 93.24  Upon sufficient cause, the commissioner shall require the 
 93.25  self-insurer to submit a certified audit of payroll and claim 
 93.26  records conducted by an independent auditor approved by the 
 93.27  commissioner, based on generally accepted accounting principles 
 93.28  and generally accepted auditing standards, and supported by an 
 93.29  actuarial review and opinion of the future contingent 
 93.30  liabilities.  The basis for sufficient cause shall include the 
 93.31  following factors:  where the losses reported appear 
 93.32  significantly different from similar types of businesses; where 
 93.33  major changes in the reports exist from year to year, which are 
 93.34  not solely attributable to economic factors; or where the 
 93.35  commissioner has reason to believe that the losses and payroll 
 93.36  in the report do not accurately reflect the losses and payroll 
 94.1   of that employer.  If any discrepancy is found, the commissioner 
 94.2   shall require changes in the self-insurer's or workers' 
 94.3   compensation service company record keeping practices. 
 94.4      (c) ~~With the~~ An annual ~~loss~~ status report due August 1, 
 94.5   by each self-insurer shall ~~report to the commissioner any~~ 
 94.6   ~~workers' compensation claim from the previous year where the~~ 
 94.7   ~~full, undiscounted value is estimated to exceed $50,000,~~ be 
 94.8   filed in a manner and on forms prescribed by the commissioner.  
 94.9      (d) Each individual self-insurer shall, within four months 
 94.10  after the end of its fiscal year, annually file with the 
 94.11  commissioner its latest 10K report required by the Securities 
 94.12  and Exchange Commission.  If an individual self-insurer does not 
 94.13  prepare a 10K report, it shall file an annual certified 
 94.14  financial statement, together with such other financial 
 94.15  information as the commissioner may require to substantiate data 
 94.16  in the financial statement.  
 94.17     (e) Each member of the group shall, within four months 
 94.18  after the end of each fiscal year for that group, file the most 
 94.19  recent annual financial statement, reviewed by a certified 
 94.20  public accountant in accordance with the Statements on Standards 
 94.21  for Accounting and Review Services, Volume 2, the American 
 94.22  Institute of Certified Public Accountants Professional 
 94.23  Standards, or audited in accordance with generally accepted 
 94.24  auditing standards, together with such other financial 
 94.25  information the commissioner may require.  In addition, the 
 94.26  group shall file, within four months after the end of each 
 94.27  fiscal year for that group, combining financial statements of 
 94.28  the group members, compiled by a certified public accountant in 
 94.29  accordance with the Statements on Standards for Accounting and 
 94.30  Review Services, Volume 2, the American Institute of Certified 
 94.31  Public Accountants Professional Standards.  The combining 
 94.32  financial statements shall include, but not be limited to, a 
 94.33  balance sheet, income statement, statement of changes in net 
 94.34  worth, and statement of cash flow.  Each combining financial 
 94.35  statement shall include a column for each individual group 
 94.36  member along with a total column.  
 95.1      Where a group has 50 or more members, the group shall file, 
 95.2   in lieu of the combining financial statements, a combined 
 95.3   financial statement showing only the total column for the entire 
 95.4   group's balance sheet, income statement, statement of changes in 
 95.5   net worth, and statement of cash flow.  Additionally, the group 
 95.6   shall disclose, for each member, the total assets, net worth, 
 95.7   revenue, and income for the most recent fiscal year.  The 
 95.8   combining and combined financial statements may omit all 
 95.9   footnote disclosures. 
 95.10     (f) In addition to the financial statements required by 
 95.11  paragraphs (d) and (e), interim financial statements or 10Q 
 95.12  reports required by the Securities and Exchange Commission may 
 95.13  be required by the commissioner upon an indication that there 
 95.14  has been deterioration in the self-insurer's financial 
 95.15  condition, including a worsening of current ratio, lessening of 
 95.16  net worth, net loss of income, the downgrading of the company's 
 95.17  bond rating, or any other significant change that may adversely 
 95.18  affect the self-insurer's ability to pay expected losses.  Any 
 95.19  self-insurer that files an 8K report with the Securities and 
 95.20  Exchange Commission shall also file a copy of the report with 
 95.21  the commissioner within 30 days of the filing with the 
 95.22  Securities and Exchange Commission. 
 95.23     Sec. 76.  Minnesota Statutes 1996, section 79A.03, 
 95.24  subdivision 10, is amended to read: 
 95.25     Subd. 10.  [ANNUAL AUDIT AND REFUNDS.] (a) The accounts and 
 95.26  records of the group self-insurer's fund shall be audited 
 95.27  annually.  Audits shall be made by certified public accountants, 
 95.28  based on generally accepted accounting principles and generally 
 95.29  accepted auditing standards, and supported by actuarial review 
 95.30  and opinion of the future contingent liabilities, in order to 
 95.31  determine the solvency of the self-insurer's fund.  All audits 
 95.32  required by this subdivision shall be filed with the 
 95.33  commissioner 90 days after the close of the fiscal year for the 
 95.34  group self-insurer.  The commissioner may require a special 
 95.35  audit to be made at other times if the financial stability of 
 95.36  the fund or the adequacy of its monetary reserves is in question.
 96.1      (b) One hundred percent of any surplus money for a fund 
 96.2   year in excess of 125 percent of the amount necessary to fulfill 
 96.3   all obligations under chapter 176 for that fund year may be 
 96.4   declared refundable to a member at any time after 18 months 
 96.5   following the end of such fund year.  There can be no more than 
 96.6   one refund in any 12-month period.  When all claims of any one 
 96.7   fund year have been fully paid, as certified by an actuary, all 
 96.8   surplus money from that fund year may be declared refundable. 
 96.9      Sec. 77.  Minnesota Statutes 1996, section 79A.03, is 
 96.10  amended by adding a subdivision to read: 
 96.11     Subd. 13.  [ANNUAL REQUIREMENTS.] The financial 
 96.12  requirements set forth in subdivisions 3, 4, 5, and 7 must be 
 96.13  met on an annual basis. 
 96.14     Sec. 78.  Minnesota Statutes 1996, section 79A.06, 
 96.15  subdivision 5, is amended to read: 
 96.16     Subd. 5.  [PRIVATE EMPLOYERS WHO HAVE CEASED TO BE 
 96.17  SELF-INSURED.] Private employers who have ceased to be private 
 96.18  self-insurers shall discharge their continuing obligations to 
 96.19  secure the payment of compensation which is accrued during the 
 96.20  period of self-insurance, for purposes of Laws 1988, chapter 
 96.21  674, sections 1 to 21, by compliance with all of the following 
 96.22  obligations of current certificate holders: 
 96.23     (1) Filing reports with the commissioner to carry out the 
 96.24  requirements of this chapter; 
 96.25     (2) Depositing and maintaining a security deposit for 
 96.26  accrued liability for the payment of any compensation which may 
 96.27  become due, pursuant to chapter 176.  However, if a private 
 96.28  employer who has ceased to be a private self-insurer purchases 
 96.29  an insurance policy from an insurer authorized to transact 
 96.30  workers' compensation insurance in this state which provides 
 96.31  coverage of all claims for compensation arising out of injuries 
 96.32  occurring during the period the employer was self-insured, 
 96.33  whether or not reported during that period, the policy will 
 96.34  discharge the obligation of the employer to maintain a security 
 96.35  deposit for the payment of the claims covered under the policy.  
 96.36  The policy may not be issued by an insurer unless it has 
 97.1   previously been approved as to form and substance by the 
 97.2   commissioner; and 
 97.3      (3) Paying within 30 days all assessments of which notice 
 97.4   is sent by the security fund, for a period of seven years from 
 97.5   the last day its certificate of self-insurance was in effect.  
 97.6   Thereafter, the private employer who has ceased to be a private 
 97.7   self-insurer may either:  (a) continue to pay within 30 days all 
 97.8   assessments of which notice is sent by the security fund until 
 97.9   it has no incurred liabilities for the payment of compensation 
 97.10  arising out of injuries during the period of self-insurance; or 
 97.11  (b) pay the security fund a cash payment equal to four percent 
 97.12  of the net present value of all remaining incurred liabilities 
 97.13  for the payment of compensation under sections 176.101 and 
 97.14  176.111 as certified by a member of the casualty actuarial 
 97.15  society.  Assessments shall be based on the benefits paid by the 
 97.16  employer during the calendar year immediately preceding the 
 97.17  calendar year in which the employer's right to self-insure is 
 97.18  terminated or withdrawn. 
 97.19     (4) With respect to a self-insurer who terminates its 
 97.20  self-insurance authority after the effective date of this 
 97.21  clause, that member shall obtain and file with the commissioner 
 97.22  an actuarial opinion of its outstanding liabilities as 
 97.23  determined by an associate or fellow of the Casualty Actuarial 
 97.24  Society.  The opinion must separate liability for indemnity 
 97.25  benefits from liability from medical benefits, and must discount 
 97.26  each up to four percent per annum to net present value.  Within 
 97.27  30 days after notification of approval of the actuarial opinion 
 97.28  by the commissioner, the member shall pay to the security fund 
 97.29  an amount equal to 120 percent of that discounted outstanding 
 97.30  indemnity liability, multiplied by the greater of the average 
 97.31  annualized assessment rate since inception of the security fund 
 97.32  or the annual rate at the time of the most recent assessment 
 97.33  before termination. 
 97.34     (5) A former member who terminated its self-insurance 
 97.35  authority before the effective date of this clause who has paid 
 97.36  assessments to the self-insurers' security fund for seven years, 
 98.1   and whose annualized assessment is $500 or less, may buy out of 
 98.2   its outstanding liabilities to the self-insurers' security fund 
 98.3   by an amount calculated as follows:  1.35 multiplied by the 
 98.4   indemnity case reserves at the time of the calculation, 
 98.5   multiplied by the then current self-insurers' security fund 
 98.6   annualized assessment rate. 
 98.7      (6) A former member who terminated its self-insurance 
 98.8   authority before the effective date of this clause, and who is 
 98.9   paying assessments within the first seven years after ceasing to 
 98.10  be self-insured under clause (3), may elect to buy out its 
 98.11  outstanding liabilities to the self-insurers' security fund by 
 98.12  obtaining and filing with the commissioner an actuarial opinion 
 98.13  of its outstanding liabilities as determined by an associate or 
 98.14  fellow of the Casualty Actuarial Society.  The opinion must 
 98.15  separate liability for indemnity benefits from liability from 
 98.16  medical benefits, and must discount each up to four percent per 
 98.17  annum to net present value.  Within 30 days after notification 
 98.18  of approval of the actuarial opinion by the commissioner, the 
 98.19  member shall pay to the security fund an amount equal to 120 
 98.20  percent of that discounted outstanding indemnity liability, 
 98.21  multiplied by the greater of the average annualized assessment 
 98.22  rate since inception of the security fund or the annual rate at 
 98.23  the time of the most recent assessment. 
 98.24     (7) A former member who has paid the security fund 
 98.25  according to clauses (4) to (6) and subsequently receives 
 98.26  authority from the commissioner to again self-insure shall be 
 98.27  assessed under section 79A.12, subdivision 2, only on indemnity 
 98.28  benefits paid on injuries that occurred after the former member 
 98.29  received authority to self-insure again; provided that the 
 98.30  member furnishes verified data regarding those benefits to the 
 98.31  security fund. 
 98.32     In addition to proceedings to establish liabilities and 
 98.33  penalties otherwise provided, a failure to comply may be the 
 98.34  subject of a proceeding before the commissioner.  An appeal from 
 98.35  the commissioner's determination may be taken pursuant to the 
 98.36  contested case procedures of chapter 14 within 30 days of the 
 99.1   commissioner's written determination. 
 99.2      Any current or past member of the self-insurers' security 
 99.3   fund is subject to service of process on any claim arising out 
 99.4   of chapter 176 or this chapter in the manner provided by section 
 99.5   5.25, or as otherwise provided by law.  The issuance of a 
 99.6   certificate to self-insure to the private self-insured employer 
 99.7   shall be deemed to be the agreement that any process which is 
 99.8   served in accordance with this section shall be of the same 
 99.9   legal force and effect as if served personally within this state.
 99.10     Sec. 79.  Minnesota Statutes 1996, section 79A.21, 
 99.11  subdivision 2, is amended to read: 
 99.12     Subd. 2.  [REQUIRED DOCUMENTS.] All first year applications 
 99.13  must be accompanied by the following: 
 99.14     (a) A detailed business plan including the risk profile of 
 99.15  the proposed membership, underwriting guidelines, marketing 
 99.16  plan, minimum financial criteria for each member, and financial 
 99.17  projections for the first year of operation.  
 99.18     (b) A plan describing the method in which premiums are to 
 99.19  be charged to the employer members.  The plan shall be 
 99.20  accompanied by copies of the member's workers' compensation 
 99.21  insurance policies in force at the time of application.  In 
 99.22  developing the premium for the group, the commercial 
 99.23  self-insurance group shall base its premium on the Minnesota 
 99.24  workers' compensation insurers association's manual of rules, 
 99.25  loss costs, and classifications approved for use in Minnesota by 
 99.26  the commissioner.  Each member applicant shall, on a form 
 99.27  approved by the commissioner, complete estimated payrolls for 
 99.28  the first 12-month period that the applicant will be 
 99.29  self-insured.  Premium volume discounts per the plan will be 
 99.30  permitted if they can be shown to be consistent with actuarial 
 99.31  standards.  
 99.32     (c) A schedule indicating actual or anticipated operational 
 99.33  expenses of the commercial self-insurance group.  No authority 
 99.34  to self-insure will be granted unless, over the term of the 
 99.35  policy year, at least 65 percent of total revenues from all 
 99.36  sources for the year are available for the payment of its claim 
100.1   and assessment obligations.  For purposes of this calculation, 
100.2   claim and assessment obligations include the cost of allocated 
100.3   loss expenses as well as special compensation fund and 
100.4   commercial self-insurance group security fund assessments but 
100.5   exclude the cost of unallocated loss expenses. 
100.6      (d) An indemnity agreement from each member who will 
100.7   participate in the commercial self-insurance group, signed by an 
100.8   officer of each member, providing for joint and several 
100.9   liability for all claims and expenses of all of the members of 
100.10  the commercial self-insurance group arising in any fund year in 
100.11  which the member was a participant on a form approved by the 
100.12  commissioner.  The indemnity agreement shall provide for 
100.13  assessments according to the group's bylaws on an individual and 
100.14  proportionate basis. 
100.15     (e) A copy of the commercial self-insurance group bylaws. 
100.16     (f) Evidence of the security deposit required under section 
100.17  79A.24, accompanied by the actuarial certification study for the 
100.18  minimum security deposit as required under section 79A.24.  
100.19     (g) Each initial member of the commercial self-insurance 
100.20  group shall submit to the commercial self-insurance group 
100.21  accountant its most recent annual financial statement.  
100.22  Financial statements for a period ending more than six months 
100.23  prior to the date of the application must be accompanied by an 
100.24  affidavit, signed by a company officer under oath, stating that 
100.25  there has been no material lessening of the net worth nor other 
100.26  adverse changes in its financial condition since the end of the 
100.27  period.  Individual group members constituting at least 75 
100.28  percent of the group's annual premium shall submit reviewed or 
100.29  audited financial statements.  The remaining members may submit 
100.30  compilation level statements.  Statements for a period ending 
100.31  more than 12 months prior to the date of application cannot be 
100.32  accepted. 
100.33     (h) A compiled combined financial statement of all group 
100.34  members prepared by the commercial self-insurance group's 
100.35  accountant and a list of members included in such statements.  
100.36     (i) A copy of each member's accountant's report letter from 
101.1   the reports used in compiling the combined financial statements. 
101.2      (j) A list of all members and the percentage of premium 
101.3   each represents to the total group's annual premium for the 
101.4   policy year.  
101.5      Sec. 80.  Minnesota Statutes 1996, section 79A.22, 
101.6   subdivision 7, is amended to read: 
101.7      Subd. 7.  [INVESTMENTS.] (a) Any securities purchased by 
101.8   the common claims fund shall be in such denominations and with 
101.9   dates of maturity to ensure securities may be redeemable at 
101.10  sufficient time and in sufficient amounts to meet the fund's 
101.11  current and long-term liabilities. 
101.12     ~~(b) Cash assets of the common claims fund may be invested~~ 
101.13  ~~in the following securities:~~ 
101.14     ~~(1) direct obligations of the United States government,~~ 
101.15  ~~except mortgage-backed securities of the Government National~~ 
101.16  ~~Mortgage Association;~~ 
101.17     ~~(2) bonds, notes, debentures, and other instruments which~~ 
101.18  ~~are obligations of agencies and instrumentalities of the United~~ 
101.19  ~~States including, but not limited to, the federal National~~ 
101.20  ~~Mortgage Association, the federal Home Loan Mortgage~~ 
101.21  ~~Corporation, the federal Home Loan Bank, the Student Loan~~ 
101.22  ~~Marketing Association, and the Farm Credit System, and their~~ 
101.23  ~~successors, but not including collateralized mortgage~~ 
101.24  ~~obligations or mortgage pass-through instruments;~~ 
101.25     ~~(3) bonds or securities that are issued by the state of~~ 
101.26  ~~Minnesota and that are secured by the full faith and credit of~~ 
101.27  ~~the state;~~ 
101.28     ~~(4) certificates of deposit which are insured by the~~ 
101.29  ~~federal Deposit Insurance Corporation and are issued by a~~ 
101.30  ~~Minnesota depository institution;~~ 
101.31     ~~(5) obligations of, or instruments unconditionally~~ 
101.32  ~~guaranteed by, Minnesota depository institutions whose long-term~~ 
101.33  ~~debt rating is at least AA-, or Aa3, or their equivalent by at~~ 
101.34  ~~least two nationally recognized rating agencies.~~ 
101.35     (b) Cash assets of the self-insurer's fund may be invested 
101.36  as provided in section 60A.11 for a casualty insurance company, 
102.1   provided that investment in real estate of or indebtedness from 
102.2   any member company or affiliates prohibited.  In addition, 
102.3   investment in the following is allowed: 
102.4      (1) savings accounts or certificates of deposit in a duly 
102.5   chartered commercial bank located within the state of Minnesota 
102.6   and insured through the Federal Deposit Insurance Corporation; 
102.7      (2) share accounts or savings certificates in a duly 
102.8   chartered savings and loan association located within the state 
102.9   of Minnesota and insured through the Federal Savings and Loan 
102.10  Insurance Corporation; 
102.11     (3) direct obligations of the United States Treasury, such 
102.12  as notes, bonds, or bills; 
102.13     (4) a bond or security issued by the state of Minnesota and 
102.14  backed by the full faith and credit of the state; 
102.15     (5) a credit union where the employees of the self-insurer 
102.16  are members if the credit union is located in Minnesota, 
102.17  licensed by the state of Minnesota, and insured through the 
102.18  Federal Deposit Insurance Corporation; or 
102.19     (6) real estate, common stock, preferred stock, or 
102.20  corporate bonds listed on the New York, American Stock Exchange 
102.21  or NASDAQ Stock Market, so long as these investments are not 
102.22  issued by any member company or affiliate and the total in all 
102.23  other allowable categories make up at least 75 percent of the 
102.24  total required in the common claims fund. 
102.25     Sec. 81.  Minnesota Statutes 1996, section 79A.22, is 
102.26  amended by adding a subdivision to read: 
102.27     Subd. 13.  [COMMON CLAIMS FUND; FIVE-YEAR EXCEPTION.] For 
102.28  commercial group self-insurers who have been in existence for 
102.29  five years or more, a level of funding in the common claims fund 
102.30  must be maintained at not less than the greater of either: 
102.31     (1) one year's claim losses paid in the most recent year; 
102.32  or 
102.33     (2) one-third of the security deposit posted with the 
102.34  department of commerce according to section 79A.24, subdivision 
102.35  2.  
102.36     This provision supersedes any requirements under 
103.1   subdivisions 11 and 12 and Minnesota Rules, part 2780.5000. 
103.2      Sec. 82.  Minnesota Statutes 1996, section 79A.23, 
103.3   subdivision 1, is amended to read: 
103.4      Subdivision 1.  [REQUIRED REPORTS TO COMMISSIONER.] Each 
103.5   commercial self-insurance group shall submit the following 
103.6   documents to the commissioner.  
103.7      (a) An annual report shall be submitted by April 1 showing 
103.8   the incurred losses, paid and unpaid, specifying indemnity and 
103.9   medical losses by classification, payroll by classification, and 
103.10  current estimated outstanding liability for workers' 
103.11  compensation on a calendar year basis, in a manner and on forms 
103.12  available from the commissioner.  In addition each group will 
103.13  submit a quarterly interim loss report showing incurred losses 
103.14  for all its membership. 
103.15     (b) Each commercial self-insurance group shall submit 
103.16  within 45 days of the end of each quarter:  
103.17     (1) a schedule showing all the members who participate in 
103.18  the group, their date of inception, and date of withdrawal, if 
103.19  applicable; 
103.20     (2) a separate section identifying which members were added 
103.21  or withdrawn during that quarter; and 
103.22     (3) an internal financial statement and copies of the 
103.23  fiscal agent's statements supporting the balances in the common 
103.24  claims fund. 
103.25     (c) The commercial self-insurance group shall submit an 
103.26  annual certified financial audit report of the commercial 
103.27  self-insurance group fund by April 1 of the following year.  The 
103.28  report must be accompanied by an expense schedule showing the 
103.29  commercial self-insurance group's operational costs for the same 
103.30  year including service company charges, accounting and actuarial 
103.31  fees, fund administration charges, reinsurance premiums, 
103.32  commissions, and any other costs associated with the 
103.33  administration of the group program. 
103.34     (d) An officer of the commercial self-insurance group 
103.35  shall, under oath, attest to the accuracy of each report 
103.36  submitted under paragraphs (a), (b), and (c).  Upon sufficient 
104.1   cause, the commissioner shall require the commercial 
104.2   self-insurance group to submit a certified audit of payroll and 
104.3   claim records conducted by an independent auditor approved by 
104.4   the commissioner, based on generally accepted accounting 
104.5   principles and generally accepted auditing standards, and 
104.6   supported by an actuarial review and opinion of the future 
104.7   contingent liabilities.  The basis for sufficient cause shall 
104.8   include the following factors: 
104.9      (1) where the losses reported appear significantly 
104.10  different from similar types of groups; 
104.11     (2) where major changes in the reports exist from year to 
104.12  year, which are not solely attributable to economic factors; or 
104.13     (3) where the commissioner has reason to believe that the 
104.14  losses and payroll in the report do not accurately reflect the 
104.15  losses and payroll of the commercial self-insurance group.  
104.16  If any discrepancy is found, the commissioner shall require 
104.17  changes in the commercial self-insurance group's business plan 
104.18  or service company recordkeeping practices. 
104.19     (e) Each commercial self-insurance group shall submit by 
104.20  ~~August~~ September 15 a copy of the group's annual federal and 
104.21  state income tax returns or provide proof that it has received 
104.22  an exemption from these filings. 
104.23     (f) With the annual loss report each commercial 
104.24  self-insurance group shall report to the commissioner any 
104.25  worker's compensation claim where the full, undiscounted value 
104.26  is estimated to exceed $50,000, in a manner and on forms 
104.27  prescribed by the commissioner. 
104.28     (g) Each commercial self-insurance group shall submit by 
104.29  May 1 a list of all members and the percentage of premium each 
104.30  represents to the total group's premium for the previous 
104.31  calendar year.  
104.32     (h) Each commercial self-insurance group shall submit by 
104.33  May 1 the following documents prepared by the group's certified 
104.34  public accountant:  
104.35     (1) a compiled combined financial statement of group 
104.36  members and a list of members included in this statement; and 
105.1      (2) a report that the statements which were combined have 
105.2   met the requirements of subdivision 2.  
105.3      (i) If any group member comprises over 25 percent of total 
105.4   group premium, that member's financial statement must be 
105.5   reviewed or audited, and ~~must be submitted to the commissioner~~, 
105.6   at the commissioner's option, must be filed with the department 
105.7   of commerce by May 1 of the following year. 
105.8      (j) Each commercial self-insurance group shall submit a 
105.9   copy of each member's accountant's report letter from the 
105.10  reports used in compiling the combined financial statements.  
105.11     Sec. 83.  Minnesota Statutes 1996, section 79A.23, 
105.12  subdivision 2, is amended to read: 
105.13     Subd. 2.  [REQUIRED REPORTS FROM MEMBERS TO GROUP.] Each 
105.14  member of the commercial self-insurance group shall, by April 1, 
105.15  submit to the group its most recent annual financial statement, 
105.16  together with other financial information the group may 
105.17  require.  These financial statements submitted must not have a 
105.18  fiscal year end date older than January 15 of the group's 
105.19  calendar year end.  Individual group members constituting at 
105.20  least ~~75~~ 50 percent of the group's annual premium shall submit 
105.21  to the group reviewed or audited financial statements.  The 
105.22  remaining members may submit compilation level statements. 
105.23     Sec. 84.  Minnesota Statutes 1996, section 79A.24, 
105.24  subdivision 1, is amended to read: 
105.25     Subdivision 1.  [ANNUAL SECURING OF LIABILITY.] Each year 
105.26  every commercial self-insurance group shall secure its estimated 
105.27  future ~~incurred liabilities~~ liability for the payment of 
105.28  compensation and the performance of the obligations of its 
105.29  membership imposed under chapter 176.  A new deposit must be 
105.30  posted within 30 days of the filing of the commercial 
105.31  self-insurance group's annual actuarial report with the 
105.32  commissioner. 
105.33     Sec. 85.  Minnesota Statutes 1996, section 79A.24, 
105.34  subdivision 2, is amended to read: 
105.35     Subd. 2.  [MINIMUM DEPOSIT.] The minimum deposit is 150 
105.36  percent of the commercial self-insurance group's estimated 
106.1   future ~~incurred liabilities~~ liability for the payment of 
106.2   compensation as determined by an actuary.  If all the members of 
106.3   the commercial self-insurance group have submitted reviewed or 
106.4   audited financial statements to the group's accountant, this 
106.5   minimum deposit shall be 110 percent of the commercial 
106.6   self-insurance group's estimated future ~~incurred~~ 
106.7   ~~liabilities~~ liability for the payment of workers' compensation 
106.8   as determined by an actuary.  The group must file a letter with 
106.9   the commissioner from the group's accountant which confirms that 
106.10  the compiled combined financial statements were prepared from 
106.11  members reviewed or audited financial statements only before the 
106.12  lower security deposit is allowed.  Each actuarial study shall 
106.13  include a projection of future losses during a one-year period 
106.14  until the next scheduled actuarial study, less payments 
106.15  anticipated to be made during that time.  Deduction should be 
106.16  made for the total amount which is estimated to be returned to 
106.17  the commercial self-insurance group from any specific excess 
106.18  insurance coverage, aggregate excess insurance coverage, and any 
106.19  supplementary benefits which are estimated to be reimbursed by 
106.20  the special compensation fund.  Supplementary benefits will not 
106.21  be reimbursed by the special compensation fund unless the 
106.22  special compensation fund assessment pursuant to section 176.129 
106.23  is paid and the required reports are filed with the special 
106.24  compensation fund.  In the case of surety bonds, bonds shall 
106.25  secure administrative and legal costs in addition to the 
106.26  liability for payment of compensation reflected on the face of 
106.27  the bond.  In no event shall the security be less than the 
106.28  group's selected retention limit of the workers' compensation 
106.29  reinsurance association.  The posting or depositing of security 
106.30  under this section shall release all previously posted or 
106.31  deposited security from any obligations under the posting or 
106.32  depositing and any surety bond so released shall be returned to 
106.33  the surety.  Any other security shall be returned to the 
106.34  depositor or the person posting the bond. 
106.35     Sec. 86.  Minnesota Statutes 1996, section 79A.24, 
106.36  subdivision 4, is amended to read: 
107.1      Subd. 4.  [CUSTODIAL ACCOUNTS.] (a) All surety bonds, 
107.2   irrevocable letters of credit, and documents showing issuance of 
107.3   any irrevocable letter of credit shall be deposited in 
107.4   accordance with the provisions of section 79A.071.  
107.5      (b) Upon the commissioner sending a request to renew, 
107.6   request to post, or request to increase a security deposit, a 
107.7   perfected security interest is created in the commercial 
107.8   self-insurance group's and member's assets in favor of the 
107.9   commissioner to the extent of any then unsecured portion of the 
107.10  commercial self-insurance group's incurred liabilities.  The 
107.11  perfected security interest is transferred to any cash or 
107.12  securities thereafter posted by the commercial self-insurance 
107.13  group with the state treasurer and is released only upon either 
107.14  of the following: 
107.15     (1) the acceptance by the commissioner of a surety bond or 
107.16  irrevocable letter of credit for the full amount of the incurred 
107.17  liabilities for the payment of compensation; or 
107.18     (2) the return of cash or securities by the commissioner.  
107.19  The commercial self-insurance group loses all right, title, and 
107.20  interest in and any right to control all assets or obligations 
107.21  posted or left on deposit as security.  In the event of a 
107.22  declaration of bankruptcy or insolvency by a court of competent 
107.23  jurisdiction, or in the event of the issuance of a certificate 
107.24  of default by the commissioner, the commissioner shall liquidate 
107.25  the deposit as provided in this chapter, and transfer it to the 
107.26  commercial self-insurance group security fund for application to 
107.27  the commercial self-insurance group's incurred liability. 
107.28     (c) No securities in physical form on deposit with the 
107.29  state treasurer or the commissioner or custodial accounts 
107.30  assigned to the state shall be released or exchanged without an 
107.31  order from the commissioner.  No security can be exchanged more 
107.32  than once every 90 days. 
107.33     (d) Any securities deposited with the state treasurer or 
107.34  with a custodial account assigned to the state treasurer or 
107.35  letters of credit or surety bonds held by the commissioner may 
107.36  be exchanged or replaced by the depositor with any other 
108.1   acceptable securities or letters of credit or surety bond of 
108.2   like amount so long as the market value of the securities or 
108.3   amount of the surety bonds or letter of credit equals or exceeds 
108.4   the amount of the deposit required.  If securities are replaced 
108.5   by surety bond, the commercial self-insurance group must 
108.6   maintain securities on deposit in an amount sufficient to meet 
108.7   all outstanding workers' compensation liability arising during 
108.8   the period covered by the deposit of the replaced securities. 
108.9      ~~(e) The commissioner shall return on an annual basis to the~~ 
108.10  ~~commercial self-insurance group all amounts of security~~ 
108.11  ~~determined by the commissioner to be in excess of the statutory~~ 
108.12  ~~requirements for the group to self-insure, including that~~ 
108.13  ~~necessary for administrative costs, legal fees, and the payment~~ 
108.14  ~~of any future workers' compensation claims.~~ 
108.15     Sec. 87.  Minnesota Statutes 1996, section 79A.26, 
108.16  subdivision 2, is amended to read: 
108.17     Subd. 2.  [BOARD OF TRUSTEES.] The commercial security fund 
108.18  shall be governed by a board consisting of a minimum of three 
108.19  and maximum of five trustees.  The trustees shall be 
108.20  representatives of commercial self-insurance groups who shall be 
108.21  elected by the participants of the commercial security fund, 
108.22  each group having one vote.  The trustees initially elected by 
108.23  the participants shall serve staggered terms of either two or 
108.24  three years.  Thereafter, trustees shall be elected to 
108.25  three-year terms and shall serve until their successors are 
108.26  elected and assume office pursuant to the bylaws of the 
108.27  commercial security fund.  Two additional trustees shall be 
108.28  appointed by the commissioner.  ~~These trustees shall serve~~ 
108.29  ~~four-year terms.~~  Initially, one of these trustees shall serve a 
108.30  two-year term.  Thereafter, the trustees shall be appointed to 
108.31  four-year terms, and shall serve until their successors are 
108.32  appointed and assume office according to the bylaws of the 
108.33  commercial security fund.  In addition to the trustees elected 
108.34  by the participants or appointed by the commissioner, the 
108.35  commissioner of labor and industry or the commissioner's 
108.36  designee shall be an ex officio, nonvoting member of the board 
109.1   of trustees.  A member of the board of trustees may designate 
109.2   another person to act in the member's place as though the member 
109.3   were acting and the designee's actions shall be deemed those of 
109.4   the member. 
109.5      Sec. 88.  Minnesota Statutes 1996, section 79A.31, 
109.6   subdivision 1, is amended to read: 
109.7      Subdivision 1.  [WITHDRAWAL.] Any group self-insurer that 
109.8   is a member ~~as of August 1, 1995,~~ of the self-insurers' security 
109.9   fund established under section 79A.09, may ~~until January 1,~~ 
109.10  ~~1996,~~ elect to withdraw from that fund and become a member of 
109.11  the commercial self-insurance group security fund established 
109.12  under section 79A.26.  The transferring group shall be subject 
109.13  to the provisions and requirements of sections 79A.19 to 79A.32 
109.14  as of the date of transfer.  Additional security may be required 
109.15  pursuant to section 79A.24.  Group self-insurers electing to 
109.16  transfer to the commercial self-insurance group fund shall not 
109.17  be subject to the provisions of section 79A.06, subdivision 5, 
109.18  including, but not limited to, assessments by the self-insurers' 
109.19  security fund.  Notice of transfer must be filed by November 1 
109.20  for all transfers that must be effective at midnight on December 
109.21  31. 
109.22     Sec. 89.  [WARRANTY PRODUCTS AND EXTENDED SERVICE 
109.23  CONTRACTS; STUDY.] 
109.24     The commissioner of commerce shall conduct a study to 
109.25  determine the appropriate regulatory framework for warranty 
109.26  products and extended service contracts offered for sale in 
109.27  Minnesota. 
109.28     The commissioner shall make a written report to the 
109.29  legislature on or before February 15, 1998, discussing the types 
109.30  of warranty and extended service contracts available to 
109.31  Minnesota consumers.  The report must also include 
109.32  recommendations as to how these products should be regulated in 
109.33  Minnesota, including a discussion as to when these products 
109.34  should be regulated as insurance.  In examining these issues, 
109.35  the commissioner may seek the advice of representatives from the 
109.36  attorney general's office, the retail merchants industry, public 
110.1   utilities, and the insurance industry. 
110.2      Sec. 90.  [APPLICATION.] 
110.3      (a) Section 27, subdivision 2, applies to a suit based in 
110.4   whole or in part on an alleged act, error, or omission that 
110.5   takes place on or after the effective date of the section. 
110.6      (b) No legal action lies against the receiver or any 
110.7   employee based in whole or in part on any alleged act, error, or 
110.8   omission that took place before the effective date of the 
110.9   section, unless suit is filed and valid service of process is 
110.10  obtained within 12 months after the effective date of the 
110.11  section. 
110.12     (c) Section 27, subdivisions 3 to 5, apply to a suit that 
110.13  is pending on or filed after the effective date of the section 
110.14  without regard to when the alleged act, error, or omission took 
110.15  place. 
110.16     (d) Section 30 applies to all contracts entered into, 
110.17  renewed, extended, or amended on or after its effective date and 
110.18  to obligations arising from any business written or transaction 
110.19  occurring covered by reinsurance after the effective date 
110.20  according to any contract including those in existence before 
110.21  the effective date. 
110.22     Sec. 91.  [REPEALER.] 
110.23     Minnesota Statutes 1996, sections 60A.11, subdivision 24a; 
110.24  60B.36; 60B.44, subdivision 3; 65A.29, subdivision 12; and 
110.25  79A.04, subdivision 8, are repealed. 
110.26     Sec. 92.  [EFFECTIVE DATE.] 
110.27     Sections 1, 2, 25, 36, 41, 47, 49, 52, 59, 61, 68, and 87 
110.28  are effective the day after final enactment. 
110.29     Sections 37, 38, and 42 are effective January 1, 1998.