2005 Minnesota Statutes

CHAPTER 66A. Mutual companies

     66A.01 Scope of chapter. 

    This chapter shall apply to mutual insurance companies 
 other than:  assessment benefit associations, fraternal benefit 
 societies, township mutual insurance companies and title 
 insurance companies.  Sections 66A.08 to 66A.31 and 66A.20 do 
 not apply to mutual life insurance companies. 

    Sections 60A.07, subdivision 1, clauses (1) and (2); 
 61A.26; 61A.321; 61A.33; 61A.34; 61A.35; and 61A.36, do not 
 apply to mutual property and casualty insurance companies. 

    HIST: 1967 c 395 art 7 s 1; 1992 c 564 art 1 s 54; 2005 c 69 
 art 2 s 11 

*   NOTE:  The amendment to this section by Laws 2005, chapter 
*69, article 2, section 11, is effective August 1, 2006.  Laws 
*2005, chapter 69, article 4, section 2.

ORGANIZATION

     66A.02 Applicability of business corporation statutes. 

    Subdivision 1.    General.  Chapter 302A shall apply to 
 domestic mutual insurance companies except to the extent 
 inconsistent with any provisions in this chapter or section 
 60A.07, or otherwise in conflict with any provisions in chapters 
 60A to 79A.  Provisions of chapter 302A relating to share 
 certificates, classes of shares, share values, or any other 
 provisions relevant only to stock companies do not apply to 
 mutual insurance companies.  

    Subd. 2.    Mutual holding companies.  For purposes of 
 sections 66A.01 to 66A.07 and 66A.21, the term "domestic mutual 
 insurance company" is deemed to include domestic mutual 
 insurance holding companies organized under section 60A.077 and 
 the term "member" is deemed to include members of a domestic 
 mutual insurance holding company as specified in section 
 60A.077, subdivision 1, paragraph (b).  For purposes of section 
 60A.07, subdivisions 1, 1a, 1b, 1c, 1d, and 1e, a domestic 
 mutual insurance holding company is deemed to be an insurance 
 corporation. 

    Subd. 3.    Terms.  For purposes of applying chapter 
 302A to domestic mutual insurance companies, members of a 
 domestic mutual insurance company must be treated in the same 
 manner as shareholders of a stock corporation, except as 
 otherwise provided in this chapter.  Every member of the mutual 
 insurance company shall be deemed to hold one share of the 
 company for purposes of applying provisions of chapter 302A 
 relating to voting.  Mutual insurance companies are not included 
 in the definitions of "closely held corporation," "publicly held 
 corporation," or "issuing public corporation."  The term 
 "distribution" does not include dividends paid on participating 
 policies issued by the mutual insurance company or any insurance 
 company subsidiary in the case of a mutual insurance holding 
 company. 

    Subd. 4.    Exceptions.  The following provisions of 
 chapter 302A do not apply to domestic mutual insurance companies:
 sections 302A.011, subdivisions 2, 6, 6a, 7, 10, 20, 21, 25, 26, 
 27, 28, 29, 31, 32, and 37 to 59; 302A.105; 302A.137; 302A.161, 
 subdivision 19; 302A.201, subdivision 2; 302A.401 to 302A.429; 
 302A.433, subdivisions 1, paragraphs (a), (b), (c), and (e), and 
 2; 302A.437, subdivision 2; 302A.445, subdivisions 3 to 6; 
 302A.449, subdivision 7; 302A.453 to 302A.457; 302A.461; 
 302A.463; 302A.471 to 302A.473; 302A.553; 302A.601 to 302A.651; 
 302A.671 to 302A.675; 302A.681 to 302A.691; and 302A.701 to 
 302A.791.  Those clauses of section 302A.111 that refer to any 
 of the sections previously referenced in this subdivision do not 
 apply to domestic mutual insurance companies.  The following 
 sections of chapter 302A are modified in their application to 
 domestic mutual insurance companies in the manner indicated: 

    (1) with regard to section 302A.133, the articles may be 
 amended pursuant to section 302A.171 by the incorporators or by 
 the board before the issuance of any policies by the company; 

    (2) with regard to section 302A.135, subdivision 2, a 
 resolution proposing an amendment to the certificate of 
 authority must be filed with the corporate secretary no less 
 than 30 days before the meeting to consider the proposed 
 amendment; 

    (3) with regard to section 302A.161, subdivision 19 of that 
 section does not apply, except this must not be construed to 
 limit the power of a mutual insurance company from issuing 
 securities other than stock; 

    (4) with regard to section 302A.201, the references in 
 subdivision 1 of that section to "subdivision 2" and "section 
 302A.457" do not apply; 

    (5) with regard to section 302A.203, the board shall 
 consist of no less than five directors; 

    (6) with regard to section 302A.215, subdivisions 2 and 3 
 of that section only apply if the corporation's certificate of 
 incorporation provides cumulative voting; 

    (7) with regard to section 302A.433, subdivision 1 of that 
 section, special meetings of the members may be called for any 
 purpose or purposes at any time by a person or persons 
 authorized in the articles or bylaws to call special meetings, 
 and with regard to subdivision 3 of that section, special 
 meetings must be held on the date and at the time and place 
 fixed by a person or persons authorized by the articles or 
 bylaws to call a meeting; and 

    (8) with regard to section 302A.435, if the company 
 complies substantially and in good faith with the notice 
 requirements of section 302A.435, the company's failure to give 
 any member or members the required notice does not impair the 
 validity of any action taken at the members' meeting. 

    HIST: 1967 c 395 art 7 s 2; 2005 c 69 art 2 s 12; 1Sp2005 c 7 
 s 2 

*   NOTE:  The amendment to this section by Laws 2005, chapter 
*69, article 2, section 12, is effective August 1, 2006.  Laws 
*2005, chapter 69, article 4, section 2.

     66A.03 Incorporation. 

    Domestic mutual insurance companies must be incorporated in 
 accordance with the provisions of section 60A.07, subdivision 1. 

    HIST: 1967 c 395 art 7 s 3; 1994 c 426 s 13; 2005 c 69 art 2 s 
 13 

*   NOTE:  The amendment to this section by Laws 2005, chapter 
*69, article 2, section 13, is effective August 1, 2006.  Laws 
*2005, chapter 69, article 4, section 2.

     66A.04 Amendment of certificate or articles of 
  incorporation.  

    The procedure for amendment of certificate or articles of 
 incorporation is governed by section 60A.07, subdivision 8, 
 clause (1). 

    HIST: 1967 c 395 art 7 s 4 

     66A.05 Bylaws; adoption; amendment.  

    The procedure for adoption and amendment of bylaws is 
 governed by section 60A.07, subdivision 8, clause (3). 

    HIST: 1967 c 395 art 7 s 5 

     66A.06 Renewal of corporate existence. 

    Any domestic mutual insurance company, heretofore or 
 hereafter organized and existing under the laws of this state, 
 whose period of duration has expired or is about to expire, may, 
 on or before the date of the expiration, or within six months 
 after the date of expiration, renew its corporate existence from 
 the date of the expiration for any period permitted by the laws 
 of this state, by the adoption of a resolution to that effect by 
 the affirmative vote of three-fourths of the members present, in 
 person or by proxy, at a regular meeting of the members, or at 
 any special meeting called for that expressly stated purpose, 
 and by causing the resolution to be embraced in a certificate 
 duly executed by its president and secretary or other presiding 
 and recording officers, under its corporate seal, and approved, 
 filed, recorded, and published in the manner prescribed by law 
 for the execution, approval, filing, recording, and publishing 
 of an original certificate of incorporation or articles of 
 association. 

    HIST: 1967 c 395 art 7 s 6; 2005 c 69 art 2 s 14 

*   NOTE:  The amendment to this section by Laws 2005, chapter 
*69, article 2, section 14, is effective August 1, 2006.  Laws 
*2005, chapter 69, article 4, section 2.

     66A.07 Membership; meetings; notices; voting. 

    Subdivision 1.    Property/casualty companies.  Every 
 policyholder in a mutual insurance company, other than a life 
 insurance company, shall be a member thereof while the policy is 
 in force, entitled to one vote for each policy held, and 
 notified of the time and place of holding its meetings either 
 personally or by imprint upon the front or back of every policy, 
 or in the premium notice, receipt or certificate of renewal, 
 substantially as follows: 

                    "NOTICE OF ANNUAL MEETING 

    The policyholder named herein is hereby notified:  while 
 this policy is in force you are by virtue thereof a member of 
 the (name of company) and that the annual meeting of said 
 company is held at its home office at (address) on the ..... day 
 of ..... each year at .....  o'clock ...... m."  

    Notice given in this manner is deemed to comply with the 
 requirements of section 302A.435. 

    Subd. 2.    Life insurance companies.  (a) Unless 
 otherwise approved by the commissioner of commerce, a domestic 
 mutual life insurance company member is any person who is listed 
 on the records of the company as the owner of an in-force 
 policy, and each member is entitled to one vote regardless of 
 the number of policies owned by the member or the amounts of 
 coverage provided to the member.  "Policy" means a policy or 
 contract of insurance, including an annuity contract issued by 
 the company.  Except as otherwise provided in the company's 
 certificate or bylaws, a person insured under a group policy is 
 not a member by virtue of such coverage, unless (1) the person 
 is insured or covered under a group life policy or group annuity 
 contract under which funds are accumulated and allocated to the 
 respective covered persons; (2) the person has the right to 
 direct the application of the funds so allocated; (3) the group 
 policyholder makes no contribution to the premiums or deposits 
 for the policy or contract; and (4) the company has the names 
 and addresses of the persons covered under the group life policy 
 or group annuity contract. 

    (b) Every member must be notified of its annual meetings by 
 a written notice mailed to the member's address, or by an 
 imprint on the front or back of the policy, premium notice, 
 receipt, or certificate of renewal, substantially as follows: 

    "The policyowner is hereby notified that by virtue of his 
 or her ownership of this policy, the policyowner is a member of 
 the .......... Insurance Company, and that the annual meetings 
 of said company are held at its home office on the .... day of 
 .... in each year, at .... o'clock." 

    For mutual insurance holding companies, the notice of the 
 annual meeting may be modified to reflect that the policyowner, 
 by virtue of his or her ownership of a policy issued by a 
 subsidiary insurance company reorganized under section 60A.077, 
 is a member of the mutual insurance holding company.  Notice 
 given in this manner is deemed to comply with the requirements 
 of section 302A.435. 

    Subd. 3.    Proxies.  (a) Except as otherwise provided 
 in paragraphs (b) and (c), proxies for voting at meetings of 
 members of domestic mutual insurance companies are governed by 
 the provisions of section 302A.449, subdivisions 1 to 6 and 8.  

    (b) A member may vote by proxy at any regular or special 
 meeting of the members by filing a written proxy appointment 
 with the secretary of the company at its home office at least 
 five days before the first meeting at which it is to be used, 
 unless a different time period is specified in the company's 
 bylaws. 

    (c) A member may cast or authorize the casting of a vote by 
 telephonic transmission or authenticated electronic 
 communication, in accordance with section 302A.449, if permitted 
 by the bylaws of the company. 

    Subd. 4.    Membership interest.  A domestic mutual 
 insurance company must keep a list of members as part of its 
 books and records.  Membership interest in a domestic mutual 
 insurance company must be uncertificated.  A membership interest 
 in a domestic mutual insurance company does not constitute a 
 security as defined in section 80A.14, subdivision 18.  No 
 member of a mutual insurance company may transfer or pledge 
 membership in the mutual insurance company or any right arising 
 from the membership except as attendant to the valid transfer or 
 assignment of the member's policy issued by the mutual insurance 
 company.  A member of a mutual insurance company is not, as a 
 member, personally liable for the acts, debts, liabilities, or 
 obligations of the company.  No assessments of any kind may be 
 imposed upon the members of a mutual insurance company by the 
 directors or members, or because of any liability of any company 
 owned or controlled by the mutual insurance company or because 
 of any act, debt, or liability of the mutual insurance company, 
 except as may otherwise be provided in the company's articles or 
 bylaws.  A member's interest in the mutual insurance company 
 shall automatically terminate upon cancellation, nonrenewal, 
 expiration, or termination of the member's policy with the 
 insurance company that gave rise to the member's membership 
 interest. 

    HIST: 1967 c 395 art 7 s 7; 1986 c 444; 2005 c 69 art 2 s 15 

*   NOTE:  The amendment to this section by Laws 2005, chapter 
*69, article 2, section 15, is effective August 1, 2006.  Laws 
*2005, chapter 69, article 4, section 2.

     66A.075 Conversion to stock insurance company.  

    The procedure for conversion of a domestic mutual 
 corporation into a stock insurance corporation is governed by 
 section 60A.07, subdivision 8, clause (4).  

    HIST: 1969 c 598 s 2 

REGULATION

     66A.08 Requirements. 

    Subdivision 1.    Casualty lines.  No mutual insurance 
 company hereafter organized shall be licensed to transact any of 
 the kinds of business specified in section 60A.06, subdivision 
 1, clause (3), (5), (6), (8), (9), (10), (12), (13), (14), or 
 (15), except upon compliance with the following conditions: 

    (1) It shall have not less than 300 bona fide applications 
 for policies of insurance of each kind sought to be written, 
 signed by at least 300 members, covering at least 300 separate 
 risks, each risk, within the maximum net single risk described 
 in clause (2) and one year's premiums thereon paid in cash, and 
 admitted assets of not less than $100,000, which admitted assets 
 shall not be less than five times the maximum net single risk, 
 and shall have on deposit with the commissioner in accordance 
 with section 60A.10, subdivision 4, as security for all of its 
 policyholders, stock or bonds of this state or of the United 
 States or bonds of any of the municipalities of this state, or 
 personal obligations secured by first mortgage on real estate 
 within this state worth, exclusive of buildings, the amount of 
 the lien, and bearing interest of not less than three percent 
 per annum, to an amount the actual market value of which, 
 exclusive of interest, shall never be less than $100,000; 

    (2) It shall not expose itself to any loss on any one risk 
 or hazard, except as provided in this clause, in an amount 
 exceeding ten percent of its net assets, actual and contingent.  
 For the purposes of this section contingent assets mean the 
 aggregate amount of the contingent liability of its members for 
 the payment of loss and expenses not provided for by its cash 
 funds.  Contingent liability, for the purposes of this section, 
 means an amount not to exceed one annual premium as stated in 
 the policy.  No portion of any risk or hazard which has been 
 reinsured, as authorized by the laws of this state, shall be 
 included in determining the limitation of risk prescribed by 
 this section.  For the purpose of transacting employers' 
 liability and workers' compensation insurance, each employee 
 shall be considered a separate risk for determining the maximum 
 single risk; 

    (3) It shall maintain unearned premiums and other reserves, 
 separately for each kind of business, upon the same basis as 
 that required of domestic stock insurance companies transacting 
 the same kind of business; 

    (4) Except as expressly provided in this chapter, it shall 
 comply with all the provisions of the laws of this state 
 relating to the organization and internal management of mutual 
 fire insurance companies in so far as the same may be applicable 
 and not inconsistent with chapter 66A. 

    Subd. 2.    Fire lines.  (1)   General.  No policy 
 shall be issued by a mutual fire insurance company hereafter 
 organized until not less than $750,000 of insurance, in not less 
 than 300 separate risks, upon property located in this state, 
 has been subscribed for and entered upon the books and the 
 premiums thereon for one year paid in cash, which premiums shall 
 aggregate not less than $7,500 in cash. 

    (2)   Exceptions.  When the mutual insurance company is 
 organized to issue policies exclusively upon one of the 
 specified lines of business listed below, it may issue policies 
 insuring such risks by complying with the following requirements:

    (a) Those organized to insure creamery and cheese factory 
 buildings, their contents and equipments, and the dwelling house 
 and contents, and barn, livestock, and vehicles of the owner of 
 the creamery or factory, may issue policies when not less than 
 $50,000 of insurance, in not less than 25 separate risks, upon 
 these buildings and contents in this state, has been subscribed 
 for and so entered and the premiums thereon for one year paid in 
 cash, which premiums shall aggregate not less than $1,000 in 
 cash; and the name of every such company shall include the words 
 "Mutual creamery fire insurance company," and it shall issue no 
 policy except upon the class of risks aforesaid. 

    Any company heretofore organized and doing business under 
 this clause, which for 15 years prior to the passage of Laws 
 1935, chapter 97, has insured creamery and cheese factory 
 buildings, their contents and equipments, and the dwelling 
 houses and contents and barn, livestock, and vehicles of the 
 owner of the creamery or factory, and which has assets of 
 $100,000, may issue policies in addition thereto to cover 
 farmers' elevators, cooperatively owned warehouses, cooperative 
 filling stations, cooperative oil companies, and all 
 cooperatively owned or organized enterprises; 

    (b) Those organized to insure the stock in trade, tools, 
 and fixtures of retail hardware dealers, the buildings 
 containing the same, and the dwelling house and its contents, 
 barns, livestock, and vehicles owned by these dealers, may issue 
 policies when not less than $500,000 of insurance, in not less 
 than 200 separate risks, upon such property in this state, has 
 been subscribed for and entered upon its books and the premiums 
 thereon for one year paid in cash, which premiums shall 
 aggregate not less than $5,000 in cash; and the name of every 
 such company shall include the words "Mutual retail hardware 
 fire insurance company," and it shall issue no policy except as 
 above specified; 

    (c) Those organized to insure dwelling houses, their 
 contents, barns, livestock, and vehicles, exclusively, may issue 
 policies when not less than $250,000 of insurance, in not less 
 than 200 separate risks, upon such property located within this 
 state, has been subscribed for and entered upon their books and 
 the premiums thereon for one year paid in cash, which premiums 
 shall aggregate not less than $2,500 in cash; and the name of 
 every such company shall include the words "Mutual dwelling 
 house fire insurance company," and it shall issue no policy 
 except upon the class of risks aforesaid; 

    (d) Those organized to insure printing material, machinery, 
 and stock in trade of newspaper publishers and printers, the 
 buildings containing the same, and the dwelling house and its 
 contents, barns, livestock, and vehicles, when such buildings 
 and contents are owned and occupied by the owner of the printing 
 material, machinery, and stock in trade may issue policies when 
 not less than $200,000 of insurance, in not less than 200 
 separate risks, upon such property located in this state, has 
 been subscribed for and entered upon such companies' books and 
 the premiums thereon for one year paid in cash, which premiums 
 shall aggregate not less than $2,000 in cash; and the name of 
 every such company shall include the words "Mutual publishers' 
 fire insurance company," and it shall issue no policy except 
 upon the class of risks aforesaid; 

    (e) Those organized to insure grain elevators, warehouses 
 and cribs, machinery, grain, sacks, and tools appurtenant to or 
 contained in such elevators, warehouses, and cribs, and dwelling 
 house and contents, barns, livestock, and vehicles when such 
 buildings and contents are owned and occupied by the owner of 
 the grain elevator, may issue such policies when not less than 
 $100,000 of insurance, in not less than 50 separate risks, upon 
 such property in this state, has been subscribed for and entered 
 upon the books of such companies and the premiums thereon for 
 one year paid in cash, which premiums shall aggregate not less 
 than $1,000 in cash; and the name of the company shall include 
 the words "Mutual grain dealers' fire insurance company," and it 
 shall issue no policy except upon the class of risks aforesaid; 
 and 

    (f) Those organized to insure exclusively the property of 
 any one church or any one religious denomination, and the church 
 property and equipment and furnishings thereof of any one church 
 or any one religious denomination may issue policies when not 
 less than $100,000, in not less than 50 separate risks, upon 
 these properties, has been subscribed for and so entered, and 
 the premiums thereon for one year paid in cash, which premiums 
 shall aggregate not less than $1,000 in cash; and the name of 
 every such company shall include the words "Mutual 
 denominational fire insurance company," and it shall issue no 
 policy except upon the class of risks aforesaid.  This section 
 shall not be construed as a repeal of section 66A.20. 

    Subd. 3.    Marine lines.  (1)   Requirements.  
 Every mutual marine company, before issuing any policy, shall 
 have an agreement duly executed by solvent subscribers to the 
 amount of at least $300,000, substantially as follows:  "We, the 
 subscribers, severally agree to pay to the (name of company), on 
 demand, the whole or such part of the amounts set opposite our 
 names, respectively, as may be called, from time to time, for 
 its use, to pay losses and expenses not otherwise provided for"; 
 and this agreement, endorsed with the certificate of the 
 president and a majority of the directors that these subscribers 
 are known to them and that they believe each to be solvent, 
 shall be filed with and approved by the commissioner. 

    When from death or other cause a deficiency exists in the 
 subscription fund, the same shall be made good by new 
 subscriptions certified in the same manner as the original. 
 Subscribers shall be entitled to annual dividends of two percent 
 upon the amount of their subscriptions from the profits of the 
 company and reimbursed from future profits for all money they 
 shall pay to the company for its uses under their agreement, 
 with interest thereon. 

    (2)   Dividends and retirement of subscriptions.  The 
 net profits or dividend surplus of every such company shall be 
 annually divided among the insured whose policies terminated 
 during the year, in proportion to their contribution thereto.  
 These dividends shall be made only in scrip certificates payable 
 out of the accumulated profits or surplus, and this accumulation 
 shall be kept and invested as a separate fund in trust for the 
 redemption of these certificates and for losses and expenses, as 
 herein provided.  Until redeemed, these certificates shall be 
 subject to future losses and expenses and reduced in case the 
 redemption fund is drawn upon for payment of these losses and 
 expenses, but no part of this fund shall be used for payment of 
 losses or expenses, except when and to the extent that the cash 
 assets are insufficient therefor; and when any portion thereof 
 is so used the outstanding certificates shall be reduced 
 proportionately so that the fund shall at all times equal the 
 unredeemed certificates. The net income of the redemption fund 
 shall be divided annually among the holders of its certificates, 
 or it may make such certificates with a special rate of interest 
 payable from the income of its invested funds.  As these profits 
 accumulate and are invested, subscriptions of an equal amount 
 shall be canceled.  The maximum of accumulations and profits 
 shall be $300,000 and all excess of profits beyond that amount 
 shall be applied annually to the payment of the certificates in 
 the order of their issue. The certificates shall be forthwith 
 payable when the company ceases to issue policies and the fund 
 is no longer liable to be drawn upon for the payment of losses. 

    (3)   Government; liability of officers and directors.  
 Every domestic mutual marine company shall be governed by the 
 provisions applicable to mutual fire companies and each 
 subscriber to the subscription fund shall be a member during the 
 term of subscription and entitled to one vote.  If a subscriber 
 fails to pay the subscription or any assessment thereon and it 
 is shown that any director or officer knowingly certified 
 falsely as to that subscriber, the person so certifying shall be 
 liable for the amount thereof.  If any such company is at any 
 time liable for losses beyond the amount of its net assets, the 
 president and directors shall be personally liable for all 
 losses on insurance effected while the company remains in such 
 condition. 

    Subd. 4.    Employers' liability and workers' 
 compensation.  (1)   Organization.  (a)   Subscribers and 
 articles of incorporation.  Twenty or more persons may form an 
 incorporated mutual employers' liability insurance association 
 for the purpose of insuring themselves and such other persons, 
 firms, or corporations as may become subscribers to the 
 association against liability for compensation payable under the 
 terms of the workers' compensation law and for the purpose of 
 insuring against loss or damage by the sickness, bodily injury, 
 or death by accident of any person employed by the insured or 
 for whose injury or death the insured is responsible. 

    They shall subscribe and acknowledge a certificate 
 specifying: 

    (i) the name, general nature of its business, and the 
 principal place of transacting the same; (such name shall 
 distinguish it from all other corporations, domestic or foreign, 
 authorized to do business in this state and end with "company," 
 "corporation," "association," or the word "incorporated"); 

    (ii) the period of its duration; 

    (iii) the names and places of residence of the 
 incorporators; 

    (iv) in what board its management shall be vested and the 
 names and addresses of those composing the board until the first 
 election, a majority of whom shall always be residents of the 
 state; 

    (v) the highest amount of indebtedness or liability to 
 which the corporation shall at any time be subject; and 

    (vi) the territory within which the association may do 
 business. 

    It may contain any other lawful provisions defining and 
 regulating the powers or business of the corporation, its 
 officers, directors, trustees, and members. 

    The certificate of incorporation of every such corporation 
 shall be submitted to the commissioner for approval and, if 
 approved, one copy thereof shall be filed with the secretary of 
 state and one copy with the commissioner.  

    (b)   Bylaws and seal.  Such association shall have the 
 power to make bylaws for the government of its officers and the 
 conduct of its affairs, to alter and amend the same, and to 
 adopt a common seal. 

    (c)   Annual meeting; voting rights.  The annual meeting 
 for the election of directors shall be held at such time as the 
 bylaws of the association may direct.  Of the time and place of 
 the meeting at least 30 days previous written or printed notice 
 shall be given to the subscribers, or the notice may be given by 
 publication, not less than three times, in at least two daily or 
 weekly newspapers published in the city or county wherein the 
 association has its principal office and in the legal 
 periodical, if any, designated by the rules of court of the 
 proper county for the publication of legal notices.  Subscribers 
 who, during the preceding calendar year, have paid into the 
 treasury of the association premiums amounting to more than 
 one-half of the total premiums received by it during that year, 
 shall constitute a quorum.  At this annual meeting the 
 subscribers shall elect, by ballot, from their own number, not 
 less than five directors, a majority of whom shall be residents 
 of this state, to serve for at least one year and until their 
 successors are duly chosen.  The association may provide in its 
 bylaws for the division of its board of directors into two, 
 three, or four classes, and for the election thereof at its 
 annual meetings in such manner that the members of one class 
 only shall retire and their successors be chosen each year.  
 Vacancies may be filled by election by the board until the next 
 annual meeting.  In the choice of directors and in all meetings 
 of the association, each subscriber shall be entitled to one 
 vote for every $100, or any fraction thereof, paid by the 
 subscriber in premiums into the treasury of the association 
 during the preceding calendar year.  Subscribers may vote by 
 proxy and the record of all votes shall be made by the secretary 
 and show whether the same were cast in person or by proxy and 
 shall be evidence of all these elections.  Not less than three 
 directors shall constitute a quorum.  The directors shall 
 annually choose by ballot a president, who shall be a member of 
 the board; a secretary; a treasurer, who may be either the 
 president or secretary; and such other officers as the bylaws 
 may provide; and fix the salaries of the president and the 
 secretary, as well as the salaries or compensation of such other 
 officers and agents as the bylaws prescribe.  Vacancies in any 
 office may be filled by the directors or by the subscribers, as 
 the bylaws shall prescribe. 

    (2)   Requirements.  (a)   Number of risks to qualify. 
  These associations shall not begin to issue policies until a 
 list of subscribers with the number of employees of each which, 
 in the aggregate, must number not less than 5,000, together with 
 such other information as the commissioner may require, shall 
 have been filed at the Department of Commerce, nor until the 
 president and secretary of the association shall have certified 
 under oath that every subscription in the list so filed is 
 genuine and made with an agreement of all the subscribers that 
 they will take the policies subscribed for within 30 days of the 
 granting of a license by the commissioner.  In case of 
 associations organized exclusively for the purpose of insuring 
 creameries, cheese factories, and livestock shipping 
 associations, these associations may begin to issue policies 
 when the number of employees insured aggregates 300. 

    Upon the filing of the certificate provided for in this 
 section, the commissioner shall make such investigations as 
 deemed proper and, if the findings warrant it, grant a license 
 to the association to issue policies. 

    (b)   Number of risks required to continue in business.  
 If at any time the number of subscribers falls below 20, or the 
 number of subscribers' employees within the state falls below 
 5,000, no further policies shall be issued until the total 
 number of subscribers amounts to not less than 20, whose 
 employees within the state are not less than 5,000.  In case of 
 associations organized for the purpose of insuring creameries, 
 cheese factories, and livestock shipping associations, the 
 number of subscribers must not fall below 200, nor the number of 
 subscribers' employees within the state below 300. 

    (3)   Additional powers.  (a)   May write automobile 
 insurance.  Any such company authorized to write workers' 
 compensation or liability insurance under this subdivision, when 
 its articles of incorporation so provide, shall be permitted to 
 insure against loss or damage to automobiles or other vehicles 
 and their contents by collision, fire, burglary, or theft, and 
 other perils of operation, and against liability for damage to 
 persons or property of others by collision with such vehicles, 
 and to insure against any loss or hazard incident to the 
 ownership, operation, or use of motor or other vehicles, as 
 specified in section 60A.06, subdivision 1, clause (12). 

    (b)   May write glass insurance.  Any company authorized 
 to write workers' compensation or liability insurance under this 
 subdivision when its articles of incorporation so provide shall 
 be permitted to insure against loss or damage by breakage of 
 glass located or in transit. 

    (c)   Special powers.  Any company organized under this 
 subdivision which, for 15 years prior to the passage of Laws 
 1935, chapter 136, has exclusively insured creameries, cheese 
 factories, and livestock shipping associations, and which has 
 assets of $100,000 or more, may write public liability and 
 compensation insurance coverage of creameries, cheese factories, 
 shipping associations, farmers' elevators, cooperatively owned 
 warehouses, cooperative filling stations, cooperative oil 
 companies and all cooperatively owned or organized enterprises. 

    (4)   Internal operation.  (a)   Policies.  Policies 
 of insurance issued by any such association may be made either 
 with or without the seal thereof and they shall be signed by the 
 president, or such other officers as may be designated by the 
 directors for that purpose, and attested by the secretary. 

    (b)   Classification of risks.  The board of directors 
 may divide the subscribers into groups in accordance with the 
 nature of their business and the probable risk of injury 
 therein.  In such case they shall fix all premiums, make all 
 assessments, and determine and pay all dividends by and for each 
 group in accordance with the experience thereof, but all funds 
 of the association and the contingent liability of all 
 subscribers shall be available for the payment of any claim 
 against the association; provided, that (as between the 
 association and its subscribers) until the whole of the 
 contingent liability of the members of any group shall be 
 exhausted, the general funds of the association and the 
 contingent liability of the members of other groups shall not be 
 available for the payment of losses and expenses incurred by 
 such group in excess of the earned premiums paid by the members 
 thereof. 

    (c)   Classification to be filed.  A statement of any 
 proposed distribution of subscribers into groups shall be filed 
 with the Department of Commerce. 

    (d)   Rates.  The board of directors shall determine the 
 amount of premiums which the subscribers of the association 
 shall pay for their insurance in accordance with the nature of 
 the business in which the subscribers are engaged and the 
 probable risk of injury to their employees under existing 
 conditions, and it shall fix premiums at such amounts as in its 
 judgment shall be sufficient to enable the association to pay to 
 its subscribers all sums which may become due and payable to 
 their employees under provisions of law and the expenses of 
 conducting the business of the association.  In fixing the 
 premium payable by any subscriber, the board of directors may 
 take into account the condition of the plant, workroom, shop, 
 farm, or premises of the subscriber in respect to the safety of 
 those employed therein as shown by the report of any inspector 
 appointed by the board and it may from time to time change the 
 amount of premiums payable by any of the subscribers as 
 circumstances may require and the condition of the plant, 
 workroom, shop, farm, or premises of the subscribers in respect 
 to the safety of their employees may justify and may increase 
 the premiums of any subscriber neglecting to provide safety 
 devices required by law, or disobeying the rules or regulations 
 made by the board of directors in accordance with the provisions 
 of clause (4)(g).  

    (e)   Premiums; contingent liability.  Every such 
 company shall charge and collect on each policy a premium equal 
 to one year's premium on the policy issued and state in the 
 policy the estimated annual premium and provide in its bylaws 
 for the determination of the actual premium and for the payment 
 of same when determined.  The premium thus determined shall be 
 known as the annual premium on the policy.  The company shall 
 provide in its bylaws and specify in its policies the maximum 
 contingent mutual liability of its members for the payment of 
 losses and expenses not provided for by its cash fund.  The 
 contingent liability of a member shall not be less than a sum 
 equal and in addition to one annual premium, nor more than a sum 
 equal to five times the amount of the annual premium or, in case 
 of a policy written for less than one year, the contingent 
 liability shall not be less than the proportionate fractional 
 part of the annual premium, nor more than five times the 
 proportionate fractional part of the annual premium.  The 
 contingent liability of the policyholder shall be plainly and 
 legibly stated in each policy as follows:  "The maximum 
 contingent liability of the policyholder under this policy shall 
 be a sum equal to ..... annual premium (or premiums)." 

    (f)   Assessments.  When the liabilities, including 
 unearned premiums and such other reserves as are or may be 
 required by law and the commissioner, are in excess of the 
 admitted assets computed on the basis allowed for its annual 
 statement, it shall make an assessment upon its policyholders 
 based upon the amount of one annual premium as written in the 
 policy and not to exceed the amount of five annual premiums. 

    If it becomes necessary to levy the assessment, as provided 
 by this section, no policies shall be issued until the admitted 
 assets of the association are in excess of its liabilities. 

    (g)   Power of board of directors.  The board of 
 directors shall be entitled to inspect the plant, workroom, 
 shop, farm, or premises of any subscriber and for this purpose 
 to appoint inspectors, who shall have free access to all such 
 premises during regular working hours, and the board of 
 directors shall likewise from time to time be entitled to 
 examine by their auditor or other agent the books, records, and 
 payrolls of any subscribers for the purpose of determining the 
 amount of premium chargeable to the subscriber. 

    The board of directors shall make reasonable rules and 
 regulations for the prevention of injuries upon the premises of 
 subscribers; and may refuse to insure, or may terminate the 
 insurance of, any subscriber who refuses to permit these 
 examinations and disregards such rules or regulations, and 
 forfeit all premiums previously paid, but the termination of the 
 insurance of any subscriber shall not release the subscriber 
 from liability for the payment of assessments then or thereafter 
 made by the board of directors to make up deficiencies existing 
 at the termination of the insurance. 

    (h)   Investments.  The association shall invest and 
 keep invested all its funds of every description, excepting such 
 cash as may be required in the transaction of its business, in 
 accordance with the laws of this state or relating to the 
 investment of funds of domestic insurance companies. 

    No such association shall purchase, hold, or convey real 
 estate except as provided by section 60A.11, subdivision 6. 

    (i)   Withdrawal of subscriber.  Any subscriber of the 
 association who has complied with all its rules and regulations 
 may withdraw therefrom by written notice to that effect sent by 
 the subscriber by certified mail to the association and this 
 withdrawal shall become effective on the first day of the month 
 immediately following the tenth day after the receipt of the 
 notice, but the withdrawal shall not release the subscriber from 
 liability for the payment of assessments thereafter made by the 
 board of directors to make up deficiencies existing at the date 
 of withdrawal and the subscriber shall be entitled to the 
 subscriber's share of any dividends earned at the date of 
 withdrawal. 

    (5)   Miscellaneous.  (a)   Perjury by officer.  Any 
 officer of the association who shall falsely make oath to any 
 certificate required to be filed with the commissioner shall be 
 guilty of perjury. 

    (b)   Foreign mutual employers' liability association.  
 Any mutual employers' liability insurance association of another 
 state, upon compliance with all laws governing such corporations 
 in general and the provisions of this subdivision may be 
 admitted to transact business in this state.  These associations 
 shall pay to the Department of Commerce the fees prescribed by 
 section 60A.14, subdivision 1. 

    (c)   Winding up affairs.  When the contracts of 
 insurance issued by these associations shall cover in the 
 aggregate less than 5,000 employees or, in the case of 
 associations organized for the purpose of insuring creameries, 
 cheese factories, and livestock shipping associations, less than 
 300 employees, the association shall forthwith notify the 
 commissioner of that fact and if, at the expiration of six 
 months from the notice, the aggregate number of employees 
 covered by the contracts of insurance shall be less than 5,000, 
 or, in the case of associations organized for the purpose of 
 insuring creameries, cheese factories, and livestock shipping 
 associations, less than 300 employees, the commissioner shall 
 proceed under the provisions of chapter 60B. 

    HIST: 1967 c 395 art 7 s 8; 1969 c 708 s 63; 1974 c 425 s 8; 
 1975 c 359 s 23; 1976 c 181 s 2; 1978 c 465 s 11; 1978 c 674 s 
 60; 1983 c 289 s 114 subd 1; 1984 c 618 s 2; 1984 c 655 art 1 s 
 92; 1985 c 234 s 1; 1986 c 444; 2005 c 69 art 2 s 16 

*   NOTE:  The amendment to subdivision 1 by Laws 2005, chapter 
*69, article 2, section 16, is effective August 1, 2006.  Laws 
*2005, chapter 69, article 4, section 2.

     66A.09 Kinds of business authorized. 

    Nothing in this chapter shall be deemed to authorize or 
 permit mutual insurance companies to engage in any kind of 
 insurance not included in section 60A.06, subdivision 1, clauses 
 (1) to (15) or authorized under section 60A.06, subdivision 2. 

    HIST: 1967 c 395 art 7 s 9; 1978 c 465 s 12 

     66A.10 Additional requirements. 

    When the articles of incorporation of any mutual insurance 
 company not having a guaranty fund of the amount required by 
 section 66A.16, subdivision 2, provide, it may transact any and 
 all kinds of business as set forth in section 60A.06, 
 subdivision 1, clauses (1) to (15), and as authorized under 
 section 60A.06, subdivision 2, subject to the conditions and 
 restrictions as to the kinds of insurance which may be combined 
 by a like stock insurance company and subject to the 
 restrictions contained in the laws of this state with reference 
 to general writing mutual insurance companies transacting the 
 same kinds of business.  Nothing in this section shall be 
 construed as prohibiting a company issuing policies with a 
 contingent liability from creating a guaranty fund as authorized 
 by section 66A.16, subdivision 3.  Any mutual company, however 
 organized, may amend its articles to provide for the doing of 
 two or more kinds of business specified in section 60A.06, 
 subdivision 1, clauses (1) to (15) or authorized under section 
 60A.06, subdivision 2. 

    HIST: 1967 c 395 art 7 s 10; 1978 c 465 s 13 

     66A.11 Revocation of license.  

    In case of the failure of any insurance company to comply 
 with any of the provisions of sections 66A.08, 66A.09, 66A.10, 
 66A.14, 66A.15, and 66A.16, subdivisions 1 and 2, its right to 
 transact insurance business in this state shall cease and it 
 shall be the duty of the commissioner to immediately proceed 
 under chapter 60B or declare its license revoked and, in case of 
 such revocation, the company shall not be again licensed to 
 transact business in this state for a period of one year from 
 the date of the revocation.  

    HIST: 1967 c 395 art 7 s 11; 1969 c 708 s 63 

INTERNAL OPERATIONS

     66A.12 Mutual fire companies; premiums; contingent 
  liability.  

    Every mutual fire company shall charge and collect on each 
 policy a premium, in cash or in notes absolutely payable, or it 
 may accept a deposit of cash equal to one year's premium on the 
 policy issued and while the deposit remains intact collect all 
 future premiums on the policy by assessments thereon, and shall 
 also provide in its bylaws, and specify in its policies, the 
 maximum contingent mutual liability of its members for payment 
 of losses and expenses not provided for by its cash fund.  The 
 contingent liability of a member shall not be less than a sum 
 equal to and in addition to one annual premium, nor more than a 
 sum equal to five times the amount of such annual premium or, in 
 case of a policy written for less than one year, the contingent 
 liability shall not exceed the amount of premium written in the 
 policy.  The total amount of the liability of the policyholder 
 shall be plainly and legibly stated upon each policy.  When any 
 reduction shall be made in the contingent liability of members, 
 such reduction shall apply proportionally to all policies in 
 force.  Mutual insurance companies complying with section 
 66A.16, subdivision 3, may issue policies without a contingent 
 liability; but the fact that there is no contingent liability 
 must be plainly and legibly stated in the policies.  

    HIST: 1967 c 395 art 7 s 12 

     66A.13 Mutual fire companies; requirements when note 
  given.  

    Except as provided in section 66A.12, when a note or other 
 written evidence of indebtedness is given for any premium due, 
 or to become due, upon any insurance of property, except marine, 
 the same shall be full payment therefor and operate to continue 
 the same in full force during the term thereof, except that when 
 any such note or other written evidence of indebtedness is not 
 paid at maturity the policy for which the same was premium, in 
 whole or in part, may be canceled upon notice and in the same 
 manner as though the premium was paid in cash and the surrender 
 of the note or other written evidence of indebtedness shall 
 constitute a return or payment of the unearned portion of 
 premium, and in such event the parties liable on the note or 
 evidence of indebtedness shall be liable for and shall pay the 
 premium earned prior to the cancellation and no more.  In case 
 of any cancellation of a policy, any note or notes, or written 
 evidence of indebtedness given for whole or part of the premium 
 thereon may be by insurer returned to the insured in lieu of 
 cash to the extent of the unpaid amount thereof, plus accrued 
 interest.  No note given for premiums or deposit for assessment, 
 or both, or for any part of either, shall be negotiable and 
 every assignment thereof shall be subject to all existing 
 defenses.  Nor shall any such notes be valid for any purpose 
 unless the words "not negotiable" are plainly and legibly 
 written or printed across the face thereof.  

    HIST: 1967 c 395 art 7 s 13 

     66A.14 Dividends.  

    The board of directors of any mutual insurance company may 
 from time to time fix and determine the amounts to be paid 
 during the year as dividends or a refund of savings and gains to 
 policyholders; provided, that no dividend or refund shall 
 discriminate between members of the same class and no dividend 
 or refund shall be declared or distributed except out of the net 
 divisible surplus of the company, and no company shall pay or 
 credit a policyholder any sum in anticipation of a future 
 dividend or refund.  

    HIST: 1967 c 395 art 7 s 14 

     66A.15 Assessments.  

    Subdivision 1.    Mutual fire insurance companies.  
 When the net assets of any mutual insurance company are 
 insufficient for the payment of incurred losses and expenses 
 above its unearned premium reserve, as provided by law, it shall 
 make an assessment for the amount required ratably upon its 
 members liable thereto.  The order for assessment shall be duly 
 entered upon its records, with a statement of its condition at 
 the date thereof, including all cash assets, deposit notes, and 
 contingent amount liable to the assessment, the amount of the 
 assessment, and the particular losses or other liabilities for 
 which it is made.  This record shall be signed by each director 
 voting for the order before any part of the assessment is 
 collected and any person liable thereto may inspect and take a 
 copy thereof.  

    The commissioner may by written order relieve the company 
 from an assessment or other proceedings to restore the assets 
 during the time fixed in the order, when the deficiency does not 
 exceed ten percent of its admitted assets.  

    When, by reason of depreciation, loss, or otherwise, the 
 net assets, after providing for other debts, are less than the 
 required premium reserve upon policies the deficiency shall be 
 restored by assessment, as provided in this subdivision, notice 
 of which shall be filed with the commissioner.  When the board 
 of directors or the commissioner shall be of the opinion that 
 the insolvency of any company is probable, the board or, upon 
 its failure so to do, the commissioner may order two assessments 
 made, the first to determine what each policyholder should 
 equitably pay or receive in case of withdrawal from the company 
 and cancellation of the policy; the second, such further sum as 
 each should pay to reinsure the unexpired term at the same rate 
 as the first insurance.  The directors shall forthwith cause 
 written notice and demand of payment to be served personally or 
 by mail upon each policyholder subject thereto.  

    After adjustment of the first assessment, every policy upon 
 which the second assessment shall not be paid shall be canceled; 
 but in no case shall there be credited upon a policy more than 
 if canceled by the board of directors under the bylaws.  If, 
 within two months after the last assessment is payable, the 
 amount of the policies whose holders have paid the same is less 
 than $500,000, all other policies shall be void and the company 
 shall continue only for the purpose of adjusting the deficiency 
 or excess of premiums and settling outstanding claims.  No 
 assessment shall be valid against a policyholder who has not 
 been duly notified thereof in writing within one year after the 
 expiration or cancellation of the policy.  

    Subd. 2.    Casualty companies.  All policies issued by 
 such companies shall provide for a premium or premium deposit 
 payable in cash and, except as herein provided, for a contingent 
 liability of the members at least equal to the premium or 
 premium deposit as adjusted by audit, if any.  If at any time 
 the admitted assets are less than the reserves and other 
 liabilities, the company shall immediately collect upon policies 
 with a contingent liability a sufficient proportionate part 
 thereof to restore such assets and the commissioner may, when 
 such deficiency does not exceed ten percent of its admitted 
 assets, by written order direct that proceedings to restore such 
 assets be deferred during the period of time fixed in such 
 order.  The contingent liabilities, if any, of the policyholders 
 shall be plainly and legibly stated in every policy in terms of 
 either dollars or premiums.  

    HIST: 1967 c 395 art 7 s 15; 1986 c 444 

     66A.16 Guaranty funds. 

    Subdivision 1.    Mutual fire insurance companies.  A 
 mutual fire insurance company may be formed with, or an existing 
 fire insurance company may establish, a guaranty fund divided 
 into certificates of $10 each, or multiples thereof, and this 
 guaranty fund shall be invested in the same manner as is 
 provided for the investment of capital stock of insurance 
 companies.  The certificate holders of the guaranty fund shall 
 be entitled to an annual dividend of not more than ten percent 
 on their respective certificates, if the net profits or unused 
 premiums left after all losses, expenses, or liabilities then 
 incurred, with reserves for reinsurance, are provided for shall 
 be sufficient to pay the same; and, if the dividends in any one 
 year are less than ten percent, the difference may be made up in 
 any subsequent year or years from the net profits.  Approval of 
 the commissioner must be obtained before accrual for or payment 
 of the dividend, or any repayment of principal.  

    The guaranty fund shall be applied to the payment of losses 
 and expenses when necessary and, if the guaranty fund be 
 impaired, the directors may make good the whole or any part of 
 the impairment from future profits of the company, but no 
 dividend shall be paid on guaranty fund certificates while the 
 guaranty fund is impaired. 

    The holder of the guaranty fund certificate shall not be 
 liable for any more than the amount of the certificate which has 
 not been paid in and this amount shall be plainly and legibly 
 stated on the face of the certificate. 

    Each certificate holder of record shall be entitled to one 
 vote in person or by proxy in any meeting of the members of the 
 company for each $10 investment in guaranty fund certificates.  
 The guaranty fund may be reduced or retired by vote of the 
 policyholders of the company and the assent of the commissioner, 
 if the net assets of the company above its reinsurance reserve 
 and all other claims and obligations and the amount of its 
 guaranty fund certificates and interest thereon for two years 
 last preceding and including the date of its last annual 
 statement shall not be less than 50 percent of the premiums in 
 force. 

    Due notice of this proposed action on the part of the 
 company shall be mailed to each policyholder of the company not 
 less than 30 days before the meeting when the action may be 
 taken. 

    In mutual fire insurance companies with a guaranty fund, 
 the certificate holders shall be entitled to choose and elect 
 from among their own number or from among the policyholders at 
 least one-half of the total number of directors. 

    If any mutual fire insurance company with a guaranty fund 
 ceases to do business, it shall not divide among its certificate 
 holders any part of its assets or guaranty fund until all its 
 debts and obligations have been paid or canceled. 

    Foreign mutual fire insurance companies having a guaranty 
 fund shall not be required to make their certificate of guaranty 
 fund conform to the provisions of this section, but when the 
 certificates do not conform therewith the amount thereof shall 
 be charged as a liability. 

    Subd. 2.    Mutual casualty companies.  Any mutual 
 insurance company which establishes and maintains, over and 
 above its liabilities and the reserves required by law of a like 
 stock insurance company, a guaranty fund available for the 
 payment of losses and expenses at least equal to the capital 
 stock required of a like stock insurance company may issue 
 policies of insurance without contingent liability, and when the 
 articles of incorporation of any mutual insurance company having 
 this guaranty fund provide, the company may transact any and all 
 of the kinds of business as set forth in section 60A.06, 
 subdivision 1, clauses (1) to (15) subject to the restrictions 
 and limitations imposed by law on a like stock insurance 
 company, and any domestic mutual company having a guaranty fund 
 equal to the amount of capital stock required of a like stock 
 insurance company may insure the same kinds of property and 
 conduct and carry on its business, subject only to the 
 restrictions and limitations applicable to like domestic stock 
 insurance companies. 

    Subdivision 1 shall not apply to this guaranty fund except 
 that the guaranty fund of the company shall be invested in the 
 same manner as is provided by law for the investment of its 
 other funds.  Every such company shall in its annual statement 
 show as separate items the amount of the guaranty fund and the 
 remaining divisible surplus, and the aggregate of these items 
 shall be shown as surplus to policyholders. 

    A guaranty fund may be created, in whole or in part, in 
 either or both of the following ways: 

    (1) where an existing mutual company has a surplus, the 
 members of the company may at any regular or special meeting set 
 aside from and out of its surplus such sum as shall be fixed by 
 resolution to be transferred to and thereafter constitute, in 
 whole or in part, the guaranty fund of the company; or 

    (2) by the issuance of guaranty fund certificates, as 
 specified in this subdivision, the same to be issued upon the 
 conditions and subject to the rights and obligations specified 
 in this subdivision. 

    Any such company establishing a guaranty fund, as provided 
 in this subdivision, may, subject to the restrictions and 
 limitations imposed by law as to a like stock insurance company, 
 amend its articles to provide for the doing by it of one or more 
 of the kinds of insurance business specified in section 60A.06, 
 subdivision 1, clauses (1) to (15). 

    The policy liability of any such mutual company issuing 
 policies without a contingent liability shall, as to these 
 policies, be computed upon the same basis as is applicable to 
 like policies issued by stock insurance companies.  Where any 
 such company shall issue five-year term policies, wherein the 
 premiums shall be payable in annual or biennial installments and 
 no premium note is taken by the company as payment of the full 
 term premium, the company then shall be required to maintain a 
 reserve fund on only the portion of premiums actually collected 
 from time to time under these term policies and no company so 
 creating a guaranty fund shall issue policies without a 
 contingent liability after the guaranty fund shall be impaired 
 or reduced below the capital required of a like stock insurance 
 company doing the same kind or kinds of insurance.  Any company 
 having a guaranty fund may insure, without a contingent 
 liability, any kind or class of property which a like stock 
 company may insure. 

    Any director, officer, or member of any mutual insurance 
 company, or any other person, may advance to the company any sum 
 of money necessary for the purposes of its business or to enable 
 it to comply with any of the requirements of the law, including 
 the creation, in whole or in part, of a guaranty fund to enable 
 it to do one or more of the kinds of business specified in this 
 subdivision, and for the creation by a company issuing policies 
 with a contingent liability of a guaranty fund, in such amount 
 as the board of directors shall determine, for the protection of 
 policyholders of the company, and the moneys, together with the 
 interest thereon as may have been agreed upon, not exceeding ten 
 percent per annum, shall be repaid only out of the surplus 
 remaining after providing for all reserves, if any, and other 
 liability, and which shall not otherwise be a liability or claim 
 against the company or any of its assets. No commission or 
 promotion expenses shall be paid in connection with the advance 
 of any money to the company, and the amount of the advance 
 remaining unpaid shall be reported in each annual statement. 

    The company shall issue to each person advancing money for 
 the creation of a guaranty fund a certificate or certificates 
 specifying the amount advanced.  These certificates may be 
 assigned by the holder and the transfer recorded upon the books 
 of the company.  The holders of the guaranty fund certificates 
 shall be entitled to annual interest thereon at the rate agreed 
 upon, if the net profits of the company, after all losses, 
 expenses, liabilities, and legal reserves, if any, have been 
 paid or provided for, are sufficient to pay the same.  If the 
 net profits of the company in any year are insufficient to pay 
 the full amount of interest agreed upon, the difference may be 
 paid in any subsequent year from the net profits of the 
 subsequent years, if approval of the commissioner is obtained 
 before accrual for or payment of the interest. 

    The guaranty fund shall be applied to the payment of losses 
 and expenses when necessary and, if the guaranty fund be 
 impaired, the directors may make good the whole or any part of 
 the impairment from future net profits of the company or by the 
 issue and sale of additional guaranty fund certificates, but no 
 interest shall be paid on the guaranty fund certificates while 
 the guaranty fund is impaired.  No certificate shall be issued 
 except for money actually paid to the company, which amount 
 shall be plainly and legibly stated therein.  The company shall 
 issue certificates only in sums of $10, or multiples thereof; it 
 shall keep a record of the name and address of the person to 
 whom issued and of all assignments thereof.  Upon surrender of a 
 certificate duly assigned in writing, the company shall cancel 
 the same and issue a new certificate to the assignee. 

    Each certificate holder of record shall be entitled to one 
 vote in person or by proxy at any meeting of the members of the 
 company, for each $10 investment in the guaranty fund 
 certificates. 

    The guaranty fund may be reduced or retired by vote of the 
 board of directors of the company and the assent of the 
 commissioner, if the net assets of the company, above its legal 
 reserves, if any, and all other claims and obligations are 
 sufficient therefor.  The certificate holders shall be entitled 
 to choose and elect from among their own members or from among 
 the policyholders at least one-half of the total number of 
 directors. 

    In case the members of any company by resolution adopted at 
 any regular meeting or special meeting called for that purpose 
 shall determine to wind up and liquidate the business of any 
 such company, the assets thereof shall be applied (1) to the 
 payment of the expense of the liquidation; (2) to the payment of 
 any accrued liability, including losses, if any; (3) to the 
 payment of any unearned premiums on policies in force at the 
 time of the liquidation; (4) to the payment of guaranty fund 
 certificates, if any, together with accrued interest thereon, if 
 any; and (5) the residue shall be distributed according to the 
 provisions of chapter 60B. 

    Subd. 3.    All mutual companies except those excluded 
 under section 66A.01.  Any mutual company authorized to 
 transact business in this state which establishes and maintains, 
 over and above its liabilities and the reserves required by law 
 of like stock insurance companies, a guaranty fund available for 
 the payment of losses and expenses at least equal to the capital 
 stock required of a like stock insurance company may issue 
 policies of insurance without contingent liability. 

    Subd. 4.    Conversion of certain mutuals.  (a) Any 
 domestic mutual company qualified to issue policies of insurance 
 without contingent liability as provided by subdivision 3 with 
 surplus of $1,000,000 or less may adopt a plan of conversion to 
 a stock company pursuant to section 60A.07, subdivision 8, 
 clause (4), which authorizes holders of guaranty fund 
 certificates to exchange the certificates for shares of the 
 stock company.  Shares of the stock company being formed may be 
 issued during the conversion in exchange for such guaranty fund 
 certificates. 

    (b) The plan of conversion shall establish the price of the 
 shares to be issued in exchange for the guaranty fund 
 certificates.  The price shall be established by an appraisal of 
 the mutual company as an operating company.  The appraisal shall 
 be made by an independent certified public accountant.  The 
 plan, including the price, shall not be unfair or inequitable to 
 the mutual company policyholders and shall not become effective 
 until approved by the commissioner of commerce. 

    HIST: 1967 c 395 art 7 s 16; 1969 c 7 s 27; 1969 c 708 s 63; 
 1978 c 465 s 14; 1978 c 582 s 1; 1983 c 289 s 114 subd 1; 1984 c 
 655 art 1 s 92; 1986 c 444; 2000 c 350 s 9,10 

CONTRACT PROVISIONS

     66A.17 Mutual fire insurance companies; provisions as to 
  policies lapsing.  

    Any mutual company insuring property may provide by its 
 certificate or bylaws that upon failure by any member for 60 
 days after notification thereof to pay any premium or assessment 
 made upon the member's policy such policy shall lapse and become 
 void without notice or further act by or on behalf of the 
 company.  The condition shall be plainly and legibly specified 
 in each policy.  Whereupon the company may recover the amount of 
 earned premium or assessment, or both, but no more.  Nothing 
 herein contained shall prevent the reinstatement of the lapsed 
 policy by voluntary acceptance of any delinquent assessment 
 before suit. 

    HIST: 1967 c 395 art 7 s 17; 1986 c 444 

     66A.18 Voting and notice.  

    Required contract provisions concerning voting and notice 
 are contained in section 66A.07.  

    HIST: 1967 c 395 art 7 s 18 

     66A.19 Contingent liability.  

    Required contract provisions concerning contingent 
 liability of the policyholder are contained in sections 66A.12 
 and 66A.15, subdivision 2.  

    HIST: 1967 c 395 art 7 s 19 

MISCELLANEOUS

     66A.20 Exemption; fire, hail, and tornado associations 
  maintained by members of one religious denomination.  

    The members of any one church, or of any one religious 
 denomination, may maintain for the exclusive benefit of the 
 members thereof an unincorporated association for the mutual 
 insurance of the property of the members against loss or damage 
 by fire, lightning, hail, or tornado, or all of them.  The 
 association shall furnish no insurance except upon the property 
 of an actual member of the church or denomination.  It may 
 conduct its business upon the plan and method adopted by it and 
 shall not be required to be licensed by or report to the 
 commissioner.  

    HIST: 1967 c 395 art 7 s 20 

     66A.21 Domestic mutual insurance companies, separation 
  of assessable and nonassessable businesses. 

    Subdivision 1.    Choice of methods.  Any domestic 
 mutual insurance corporation which transacts its business partly 
 on an assessable basis and partly on a nonassessable basis, may 
 separate one plan from the other by either of the following 
 methods: 

    (1) By transferring its nonassessable policies, and all 
 assets and liabilities attributable thereto to another existing 
 domestic mutual insurance corporation or to a new domestic 
 mutual insurance corporation formed for that specific purpose, 
 provided that in either case, the corporation assuming the risks 
 shall have all its policies on a nonassessable basis; or 

    (2) By transferring its assessable policies, and all assets 
 and liabilities attributable thereto, to another existing 
 domestic mutual insurance corporation or to a new domestic 
 mutual insurance corporation formed for that specific purpose, 
 provided that in either case, the corporation assuming the risks 
 shall have all its policies on the assessable basis.  

    Subd. 2.    Existing domestic mutual insurance companies, 
 joint agreement; approval.  The separation can be effected 
 only as a result of a joint agreement entered into, approved and 
 filed as follows: 

    (1) The board of directors of the ceding and assuming 
 corporations shall, by majority vote, enter into a joint 
 agreement, prescribing the terms and conditions of the 
 separation and the mode of carrying the same into effect, with 
 such other details and provisions as they deem necessary.  The 
 agreement shall provide for an adjustment of final figures as 
 may be necessary after a verifying examination of the 
 corporation by the commissioner of commerce as hereinafter 
 provided.  

    (2) The agreement shall be submitted to the members of the 
 ceding corporation, at a special meeting duly called for the 
 purpose of considering and acting upon the agreement.  Notice 
 for such special meeting shall be deemed sufficient if mailed to 
 the policyholders' last known address as shown on the policy 
 records of the corporation.  If the holders of two-thirds of the 
 voting power of the members present or represented at the 
 meeting shall vote for the adoption of the agreement, then that 
 fact shall be certified on the agreement by the secretary of the 
 corporation and the agreement so adopted and certified shall be 
 signed and acknowledged by the president and secretary of both 
 the ceding and assuming corporations.  

    (3) The agreement so adopted, certified and acknowledged 
 shall be delivered to the commissioner of commerce.  It shall be 
 the duty of the commissioner to determine, after a verifying 
 examination, if the provisions thereof are fair and equitable to 
 all concerned and to verify the reasonableness and accuracy of 
 the apportionment of assets, liabilities, and surplus provided 
 for in the agreement.  

    If the commissioner is satisfied that the agreement is fair 
 and reasonable and that its provisions relating to transfers of 
 assets and assumption of liabilities are equitable to claimants 
 and policyholders, the commissioner shall place a certificate of 
 approval on the agreement and shall file it in the 
 commissioner's office.  A copy of the agreement, certified by 
 the commissioner of commerce shall be filed for record in the 
 Office of the Secretary of State and recorded in the office of 
 the county recorder of the counties in this state in which any 
 of the corporate parties to the agreement have their home 
 offices and of any counties in which any of the corporate 
 parties have land, title to which will be transferred under the 
 terms of the agreement. 

    Subd. 3.    New domestic mutual companies; joint 
 agreement; approval.  (1) If the joint agreement provides for 
 a new domestic mutual insurance corporation to be formed to 
 assume the business ceded, the articles of incorporation for 
 such new corporation shall be prepared and delivered to the 
 commissioner of commerce for approval, together with the 
 agreement as provided in subdivision 2. 

    (2) Such articles shall be prepared, executed, approved, 
 filed and recorded in the form and manner prescribed in, or 
 applicable to, the particular law or laws under which the new 
 insurance corporation is to be formed. 

    (3) The Department of Commerce shall grant and the 
 commissioner of commerce shall issue to such new corporation a 
 certificate of authority immediately upon its assumption of the 
 business ceded and upon its making the deposit of securities 
 with the commissioner of commerce, as required by law. 

    Subd. 4.    Effective date.  The separation shall be 
 effective on the agreed date stated in the joint agreement, upon 
 filing of the same as herein provided. 

    HIST: 1967 c 395 art 7 s 21; 1976 c 181 s 2; 1983 c 289 s 114 
 subd 1; 1984 c 655 art 1 s 92; 1986 c 444; 2005 c 4 s 12 

     66A.215 Special provisions relating to hail, tornado, 
  and cyclone companies. 

    Sections 66A.22 to 66A.31 apply only to hail, tornado, and 
 cyclone companies. 

    HIST: 2005 c 69 art 2 s 17 

*   NOTE:  This section, as added by Laws 2005, chapter 69, 
*article 2, section 17, is effective August 1, 2006.  Laws 2005, 
*chapter 69, article 4, section 2.

     66A.22 Organization.  

    Subdivision 1.    Initial requirements.  No company for 
 insurance against loss or damage by hail, tornadoes, cyclones, 
 and hurricanes, or any of these causes, shall issue any policy 
 until at least $200,000 of insurance, in not less than 400 
 separate risks, upon property located in not less than ten 
 counties, and upon not more than 15 risks of 160 acres each in 
 any one township, have been actually subscribed for and entered 
 on its books and each subscriber has paid a membership fee of $3 
 for which duplicate receipts have been executed, conditioned for 
 the return thereof at the end of one year if the company has not 
 then completed its organization.  Immediately thereafter one of 
 these duplicates shall be delivered to the member and the other, 
 together with the fee, deposited in a solvent bank approved by 
 the commissioner, where the fee shall remain until the company 
 has been licensed to do business, not exceeding such year, when 
 it shall be delivered to it; otherwise to the member.  The 
 duplicate and a certificate of the deposit shall be filed with 
 the commissioner within 90 days after deposit.  

    Subd. 2.    Liability for ratable assessments.  In 
 addition to the premium, every policyholder, in its hail 
 department, shall be liable to a ratable assessment for all 
 losses and expenses incurred while a member in a sum equal to 
 such premium but not exceeding in any one year five percent of 
 the policyholder's insurance, if notified thereof within 90 days 
 after the expiration or cancellation of the policy; or if such 
 policy be for more than one year, within 90 days after the 
 expiration of the year in which assessment is made thereunder.  

    HIST: 1967 c 395 art 7 s 22; 1986 c 444 

     66A.23 Assessments; notice; payments; collection.  

    When any assessment has been completed the secretary shall 
 immediately notify each member by mail directed to the member's 
 last known address of the purpose and amount of such assessment 
 and of the member's share thereof, and the person to whom and 
 the time when such payment must be made, which shall not be less 
 than 30, nor more than 90, days thereafter; and such person, if 
 the bylaws so provide, may collect a commission of not more than 
 two percent of each amount in addition thereto.  

    HIST: 1967 c 395 art 7 s 23; 1986 c 444 

     66A.24 Officers; duties; compensation; bonds.  

    The officers shall perform such duties, receive such 
 compensation, and give such bonds as shall be provided in the 
 bylaws or fixed by the directors; but no salary, past or future, 
 shall be increased except by majority vote of all members 
 present and represented at an annual meeting and no officer or 
 director shall receive any commission, except upon business 
 personally solicited and written by the officer.  

    HIST: 1967 c 395 art 7 s 24 

     66A.25 Proxies; restrictions.  

    No proxy shall be received unless dated and actually 
 executed within the preceding 30 days and filed with the 
 secretary at least ten days before the meeting, nor if made to 
 any director or officer.  

    HIST: 1967 c 395 art 7 s 25 

     66A.26 Property insurable.  

    No such company shall insure any other property than 
 country churches and school houses, farm dwellings, mutual or 
 cooperative creameries, cheese factories, barns, and other 
 buildings, and hay, grain, and other farm products therein, or 
 stored or growing on the premises, bedding, wearing apparel, 
 printed books, pictures and frames, household furniture, family 
 stores and provisions while therein or in the cellar beneath, 
 farm implements, vehicles, and machinery on or off the premises, 
 threshing machines, or livestock thereon or running at large, 
 and any and all property of any kind which may be insured by a 
 township mutual fire insurance company, organized under the 
 provisions of sections 67A.01 and 67A.02.  No company, in its 
 hail department, shall insure more than 3,200 acres in any one 
 township; there shall be at least one-half mile between each 
 risk assumed by the company, except that risks may be assumed 
 which cover the growing crops upon not more than 320 acres of 
 contiguous or immediately adjacent lands.  

    HIST: 1967 c 395 art 7 s 26 

     66A.27 Limitation on expenses.  

    No such company shall incur, lay out, or expend, in any one 
 calendar year, as and for the expenses of conducting this 
 business, more than its application or survey fees and 40 
 percent of its total premiums or assessments actually 
 collected.  No company shall be required to limit its annual 
 expenses to less than $1,000.  

    HIST: 1967 c 395 art 7 s 27 

     66A.28 Reports; delinquency; powers of commissioner.  

    The commissioner shall demand a report of any such company 
 when in the commissioner's judgment the interest of the public 
 or policyholders so require; and the proper officers of the 
 company shall make prompt reply to the demand and answer fully 
 all interrogations regarding its business methods, financial 
 condition, and other matters pertaining to its business.  The 
 provisions of chapter 60B shall apply to such companies.  

    HIST: 1967 c 395 art 7 s 28; 1969 c 708 s 63; 1986 c 444 

     66A.29 Arbitration required. 

    Every policy must provide as follows:  "In case of loss 
 under this policy and failure of the parties to agree as to the 
 amount of the loss, it is mutually agreed that, on written 
 demand of either party, the company and the insured each shall 
 select a competent appraiser and notify the other of the 
 appraiser selected within ten days of the demand.  The 
 appraisers shall first select a competent and disinterested 
 umpire; and, failing for ten days to agree upon the umpire, 
 then, on request of either appraiser, the umpire shall be 
 selected by a judge of a court of record in the state in which 
 the property covered is located.  By mutual agreement the two 
 appraisers may agree to have the umpire selected by a judge of a 
 court of record and waive the ten-day provision.  

    The appraisers and the umpire shall then appraise the 
 loss.  A written award of any two of these persons determines 
 the amount of loss.  The written award of a majority of these 
 referees is final and conclusive upon the parties as to the 
 amount of loss, and this selection, unless waived by the 
 parties, is a condition precedent to any right of action to 
 recover for a loss.  No suit for the recovery of any claim by 
 virtue of this policy may be sustained unless commenced within 
 six months after the loss occurred."  The policy must also 
 provide the form, manner, and length of notice to be given to 
 the company by the insured of any loss sustained. 

    HIST: 1967 c 395 art 7 s 29; 1974 c 161 s 5; 1983 c 208 s 3 

     66A.30 Transfer of risks and reinsurance.  

    Every company may transfer its risks to, or reinsure them 
 in, any other domestic or foreign company at the time authorized 
 to do such business in this state, on the mutual or stock plan, 
 by a contract of transfer or reinsurance approved by the 
 commissioner, and by a two-thirds vote of the members present or 
 duly represented and voting at a meeting of the company.  

    HIST: 1967 c 395 art 7 s 30 

     66A.31 Merger and consolidation.  

    Any such mutual company may at any time merge or 
 consolidate with other companies as provided under section 
 60A.16.  

    HIST: 1967 c 395 art 7 s 31