June 18, 2015, Introduced by Reps. Derek Miller, Howrylak, Johnson, Forlini, Lucido, Glenn, Canfield, Graves, Dianda, LaFontaine, Outman, Pagel, Bizon, Callton, Runestad, Chirkun, Jacobsen, Kelly, Tedder, Clemente, Maturen, Garcia, Wittenberg, LaVoy, Yanez, Faris, Brinks, Gay-Dagnogo, Plawecki, Hovey-Wright, Kivela, Sarah Roberts, Schor, Moss, Guerra, Rutledge, Smiley, Liberati, Brunner, Kosowski, Byrd, Greig, Pagan, Robinson, Potvin, Lane, Chang, Santana, Darany, Geiss, Neeley, Singh, McBroom and Greimel and referred to the Committee on Insurance.
A bill to amend 1956 PA 218, entitled
"The insurance code of 1956,"
by amending section 3104 (MCL 500.3104), as amended by 2002 PA 662.
THE PEOPLE OF THE STATE OF MICHIGAN ENACT:
catastrophic claims association is
as an unincorporated, nonprofit
to be known as
catastrophic claims association, hereinafter referred to as the
is created. Each insurer engaged in
coverages that provide the security required by section 3101(1)
within this state, as a condition of its authority to transact
insurance in this state, shall be a member of the association and
be is bound by the plan of operation of the association.
insurer engaged in writing insurance coverages that provide the
security required by section 3103(1) within this state, as a
condition of its authority to transact insurance in this state,
be is considered a member of the association, but only for
purposes of premiums under subsection (7)(d). Except as expressly
provided in this section, the association is not subject to any
laws of this state with respect to insurers, but in all other
respects the association is subject to the laws of this state to
the extent that the association would be if it were an insurer
organized and subsisting under chapter 50.
(2) The association shall provide and each member shall accept
indemnification for 100% of the amount of ultimate loss sustained
under personal protection insurance coverages in excess of the
following amounts in each loss occurrence:
(a) For a motor vehicle accident policy issued or renewed
before July 1, 2002, $250,000.00.
(b) For a motor vehicle accident policy issued or renewed
during the period July 1, 2002 to June 30, 2003, $300,000.00.
(c) For a motor vehicle accident policy issued or renewed
during the period July 1, 2003 to June 30, 2004, $325,000.00.
(d) For a motor vehicle accident policy issued or renewed
during the period July 1, 2004 to June 30, 2005, $350,000.00.
(e) For a motor vehicle accident policy issued or renewed
during the period July 1, 2005 to June 30, 2006, $375,000.00.
(f) For a motor vehicle accident policy issued or renewed
during the period July 1, 2006 to June 30, 2007, $400,000.00.
(g) For a motor vehicle accident policy issued or renewed
during the period July 1, 2007 to June 30, 2008, $420,000.00.
(h) For a motor vehicle accident policy issued or renewed
during the period July 1, 2008 to June 30, 2009, $440,000.00.
(i) For a motor vehicle accident policy issued or renewed
during the period July 1, 2009 to June 30, 2010, $460,000.00.
(j) For a motor vehicle accident policy issued or renewed
during the period July 1, 2010 to June 30, 2011, $480,000.00.
(k) For a motor vehicle accident policy issued or renewed
during the period July 1, 2011 to June 30, 2013, $500,000.00.
July 1, 2013, this $500,000.00 amount
shall must be
increased biennially on July 1 of each odd-numbered year, for
policies issued or renewed before July 1 of the following odd-
numbered year, by the lesser of 6% or the consumer price index, and
to the nearest $5,000.00.
this biennial adjustment
calculated by the
by January 1 of the year of its
July 1 effective date.
(3) An insurer may withdraw from the association only upon
ceasing to write insurance that provides the security required by
section 3101(1) in this state.
(4) An insurer whose membership in the association has been
shall continue continues
to be bound by
the plan of operation, and upon withdrawal, all unpaid premiums
that have been charged to the withdrawing member are payable as of
the effective date of the withdrawal.
(5) An unsatisfied net liability to the association of an
shall must be assumed by and apportioned among the
remaining members of the association as provided in the plan of
operation. The association has all rights allowed by law on behalf
of the remaining members against the estate or funds of the
sums money due the association.
(6) If a member has been merged or consolidated into another
insurer or another insurer has reinsured a member's entire business
that provides the security required by section 3101(1) in this
state, the member and successors in interest of the member remain
liable for the member's obligations.
(7) The association shall do all of the following on behalf of
the members of the association:
(a) Assume 100% of all liability as provided in subsection
Establish procedures by which members
shall must promptly
report to the association each claim that, on the basis of the
injuries or damages sustained, may reasonably be anticipated to
involve the association if the member is ultimately held legally
liable for the injuries or damages. Solely for the purpose of
reporting claims, the member shall in all instances consider itself
legally liable for the injuries or damages. The member shall also
advise the association of subsequent developments likely to
materially affect the interest of the association in the claim.
(c) Maintain relevant loss and expense data relative to all
liabilities of the association and require each member to furnish
statistics, in connection with liabilities of the association, at
times and in the form and detail as
may be required by the plan
(d) In a manner provided for in the plan of operation,
calculate and charge to members of the association a total premium
sufficient to cover the expected losses and expenses of the
association that the association will likely incur during the
for which the premium is applicable. The premium
include an amount to cover incurred but not reported losses for the
period and may be adjusted for any excess or deficient premiums
from previous periods. Excesses or deficiencies from previous
periods may be fully adjusted in a single period or may be adjusted
over several periods in a manner provided for in the plan of
shall must be charged an amount equal to
that member's total written car years of insurance providing the
security required by section 3101(1) or 3103(1), or both, written
in this state during the period to which the premium applies,
multiplied by the average premium per car. The average premium per
shall be is the total premium calculated divided by the total
written car years of insurance providing the security required by
section 3101(1) or 3103(1) written in this state of all members
the period to which the premium applies. A member
be charged a premium for a historic vehicle that is insured with
the member of 20% of the premium charged for a car insured with the
member. As used in this subdivision:
(i) "Car" includes a motorcycle but does not include a
(ii) "Historic vehicle" means a vehicle that is a registered
historic vehicle under section 803a or 803p of the Michigan vehicle
code, 1949 PA 300, MCL 257.803a and 257.803p.
(e) Require and accept the payment of premiums from members of
the association as provided for in the plan of operation. The
association shall do either of the following:
(i) Require payment of the premium in full within 45 days
after the premium charge.
(ii) Require payment of the premiums to be made periodically
to cover the actual cash obligations of the association.
Receive and distribute all
required by the
operation of the association.
(g) Establish procedures for reviewing claims procedures and
practices of members of the association. If the claims procedures
or practices of a member are considered inadequate to properly
service the liabilities of the association, the association may
undertake or may contract with another person, including another
member, to adjust or assist in the adjustment of claims for the
member on claims that create a potential liability to the
association and may charge the cost of the adjustment to the
(8) In addition to other powers granted to it by this section,
the association may do all of the following:
(a) Sue and be sued in the name of the association. A judgment
not create any direct liability
against the individual members of the association. The association
may provide for the indemnification of its members, members of the
board of directors of the association, and officers, employees, and
other persons lawfully acting on behalf of the association.
(b) Reinsure all or any portion of its potential liability
with reinsurers licensed to transact insurance in this state or
of the department.
(c) Provide for appropriate housing, equipment, and personnel
may be necessary to assure the efficient operation of the
(d) Pursuant to the plan of operation, adopt reasonable rules
for the administration of the association, enforce those rules, and
delegate authority, as the board considers necessary to assure the
proper administration and operation of the association consistent
with the plan of operation.
(e) Contract for goods and services, including independent
claims management, actuarial, investment, and legal services, from
within in or without outside of this state to
efficient operation of the association.
(f) Hear and determine complaints of a company or other
interested party concerning the operation of the association.
(g) Perform other acts not specifically enumerated in this
section that are necessary or proper to accomplish the purposes of
the association and that are not inconsistent with this section or
the plan of operation.
A board of directors is created
, hereinafter referred to
the board, which shall be responsible for the operation of and
shall operate the association consistent with the plan of operation
and this section.
(10) The plan of operation shall provide for all of the
(a) The establishment of necessary facilities.
(b) The management and operation of the association.
(c) Procedures to be utilized in charging premiums, including
adjustments from excess or deficient premiums from prior periods.
(d) Procedures governing the actual payment of premiums to the
(e) Reimbursement of each member of the board by the
association for actual and necessary expenses incurred on
(f) The investment policy of the association.
(g) Any other matters required by or necessary to effectively
implement this section.
Each The board shall must include members that
contribute a total of not less than 40% of the total premium
pursuant to subsection (7)(d). Each director
shall be is
to 1 vote. The initial term of office of a director
is 2 years.
(12) As part of the plan of operation, the board shall adopt
providing for the composition
and term of successor boards to
initial board and the
terms of board members, consistent with
the membership composition requirements in subsections (11) and
Terms of the directors
be staggered so that the
terms of all the directors do not expire at the same time and so
that a director does not serve a term of more than 4 years.
shall must consist of 5 directors , and the
director of the department,
who shall be serve as an
ex officio member of the board without vote.
Each director The director
of the department shall be
by the commissioner and appoint
the directors. A director
that member's his
or her successor is selected
and qualified. The board shall elect the chairperson of the board.
be elected by the board. A The
director of the department
fill any vacancy on the board
be filled by the
consistent with the plan of
After the board is appointed, the The board shall meet as
as the chairperson, the
commissioner, director of the
or the plan of operation
require, requires, or at
request of any 3 members of the board. The chairperson
the right to may vote on all issues. Four members of the
board constitute a quorum.
An The board shall furnish
to each member an annual
report of the operations of the association in a form and detail as
be determined by the board. shall
be furnished to each member.
Not more than 60 days after the initial organizational
of the board, the board shall submit to the commissioner
approval a proposed plan of operation consistent with the
and provisions of this section, which shall provide for
economical, fair, and nondiscriminatory administration of the
and for the prompt and efficient provision of
If a plan is not submitted within this 60-day period,
the commissioner, after consultation with the board, shall
and place into effect a plan consistent with this
The plan of operation, unless approved sooner in writing,
be considered to meet the requirements of this section if it
not disapproved by written order of the commissioner within 30
after the date of its submission. Before disapproval of all or
part of the proposed plan of operation, the commissioner shall
the board in what respect the plan of operation fails to
the requirements and objectives of this section. If the board
to submit a revised plan of operation that meets the
and objectives of this section within the 30-day
the commissioner shall enter an order accordingly and shall
formulate and place into effect a plan consistent with
requirements and objectives of this section.
The proposed plan of operation or Any
the plan of operation of the association are subject to majority
by the board,
by a majority of the
membership having a vote, with voting rights being apportioned
to the premiums charged in subsection (7)(d), and
to approval by the commissioner.director of the department.
Upon approval by the commissioner and ratification
the members of the plan submitted, or upon the promulgation of a
by the commissioner, each An insurer authorized to write
insurance providing the security required by section 3101(1) in
this state, as provided in this section, is bound by and shall
subscribe to and participate in the plan
operation as a condition of maintaining its authority to transact
insurance in this state.
The association is subject to all
reserve, and investment requirements of the
of the department to the same extent as
would a member are
the members of the association.
Premiums charged members by the
must be recognized in the rate-making procedures for insurance
rates in the same manner that expenses and premium taxes are
The commissioner director of the department or an
representative of the
commissioner director of the
department may visit the association at any time and examine any
and all of the association's affairs.
The association does not have
liability for losses
occurring before July 1, 1978.
(23) Annually, within 15 days after the association charges
members the total premium under subsection (7)(d), the association
shall disclose to the public on its website all data used in
computing the premium and expected losses and expenses, including
the amount that covers incurred but not reported losses for the
period and any adjustment for any excess or deficient premiums from
previous periods and the actuarial computation used in making these
determinations, including estimates and assumptions. The disclosure
must include, but not be limited to, all of the following:
(a) The actuarial computation used in making determinations of
unpaid losses and loss adjustment expenses.
(b) All documents used in establishing the following:
(i) The calculation of the present value of disbursements
expected to be made in the ultimate settlement of the claims
(ii) The actuarial tables used to reflect the probabilities of
each claimant surviving to incur the costs projected.
(iii) The calculation of incurred but not reported losses.
(iv) The actuarial assumptions and calculations used in
producing the short-term discount rate and the long-term discount
(v) The forecasts producing the economic assumptions for claim
cost inflation and investment returns used.
(vi) The current economic data and historical long-term
consumer price index data for any cost component categories used in
producing inflation assumptions.
(vii) The loss development analysis undertaken in connection
with the provision for unpaid losses and loss adjustment expenses.
(viii) The trend analysis for both frequency and severity
undertaken in connection with the provision for unpaid losses and
loss adjustment expenses.
(c) The annual actuarial evaluation used in establishing the
(d) The annual assessment reports of members used in
establishing the premium.
(e) The annuity model used by the opining actuary in his or
her actuarial opinion projecting future payment streams at the
claimant level and the mortality adjustment applied.
(f) Any explanatory memorandum explaining the various
components of the premium and the judgments made to produce the
As used in this section:
(a) "Association" means the catastrophic claims association
created in subsection (1).
(b) "Board" means the board of directors of the association
created in subsection (9).
"Consumer price index"
means the percentage of change
in the consumer price index for all urban consumers in the United
city average for all items for the 24 months
prior to before
1 of the year
prior to before
the July 1 effective date of
the biennial adjustment under subsection (2)(k) as reported by the
department of labor, bureau of labor statistics,
Department of Labor, Bureau of Labor Statistics, and as certified
of the department.
"Motor vehicle accident
policy" means a policy
providing the coverages required under section 3101(1).
"Ultimate loss" means the
actual loss amounts that a
member is obligated to pay and that are paid or payable by the
member, and do not include claim expenses. An ultimate loss is
incurred by the association on the date that the loss occurs.