April 28, 2015, Introduced by Reps. Lyons, LaFontaine and Franz and referred to the Committee on Insurance.
A bill to amend 1956 PA 218, entitled
"The insurance code of 1956,"
by amending sections 115, 416, 451, 505, 1829, 1902, 1903, 1905,
1906, 1910, 1911, 1912, 1915, 1916, 1920, 1922, 1930, 1940, 1951,
2091, and 2093 (MCL 500.115, 500.416, 500.451, 500.505, 500.1829,
500.1902, 500.1903, 500.1905, 500.1906, 500.1910, 500.1911,
500.1912, 500.1915, 500.1916, 500.1920, 500.1922, 500.1930,
500.1940, 500.1951, 500.2091, and 500.2093), section 115 as amended
and section 505 as added by 2001 PA 24, section 416 as amended by
1992 PA 182, sections 451, 1920, and 1951 as amended by 1994 PA
228, section 1829 as added by 1989 PA 214, sections 1902, 1906,
1911, 1912, 1916, 1922, 1930, and 1940 as added by 1980 PA 341,
section 1903 as amended by 1994 PA 226, section 1905 as amended by
2001 PA 228, section 1910 as amended by 2012 PA 204, and section
1915 as amended by 2006 PA 644; and to repeal acts and parts of
acts.
THE PEOPLE OF THE STATE OF MICHIGAN ENACT:
Sec. 115. As used in this act unless the context clearly
indicates otherwise:
(a) "Affiliate" or a person "affiliated" with a specific
person means a person that directly, or indirectly through 1 or
more intermediaries, controls, is controlled by, or is under common
control with the person specified.
(b) "Control" including the terms "controlling", "controlled
by", and "under common control with" mean the following:
(i) Except as otherwise provided in section 1903 or
subparagraph (ii), the possession or the contingent or noncontingent
right to acquire possession, direct or indirect, of the power to
direct or cause the direction of the management and policies of a
person, whether through the ownership of voting securities, by
contract including acquisition of assets or bulk reinsurance, other
than a commercial contract for goods or nonmanagement services, by
pledge of securities, or otherwise, unless the power is the result
of an official position with or corporate office held by the
person. Control is presumed to exist if any person, by formal or
informal arrangement, device, or understanding, directly or
indirectly, owns, controls, holds with the power to vote, or holds
proxies representing 10% or more of the voting securities of any
other person or for a mutual insurer owns 10% or more of the
insurer's surplus through surplus notes, guarantee fund
certificates, or other evidence of indebtedness issued by the
insurer.
This The presumption in
this subparagraph may be rebutted
by a showing made in the manner provided by section 1332 that
control
does not in fact exist. The commissioner director may
determine after furnishing to all persons in interest notice and an
opportunity to be heard and making specific findings of fact to
support the determination that control in fact exists
notwithstanding the absence of a presumption to that effect.
(ii) "Control", for the purpose of section 1243 and chapter 5
only, means 1 or more of the following:
(A) Ownership, control, or power to vote 25% or more of the
outstanding shares of any class of voting security of the company,
directly or indirectly, or acting through 1 or more other persons.
(B) Control in any manner over the election of a majority of
the directors, trustees, or general partners or individuals
exercising similar functions of the company.
(C) The power to exercise, directly or indirectly, a
controlling influence over the management or policies of the
company,
as the commissioner director
determines.
(c) "Insurance holding company system" means 2 or more
affiliated persons, 1 or more of which is an insurer.
(d) "Securityholder" of a specified person means a person who
owns any security of the person, including common stock, preferred
stock, debt obligations, and any other security convertible into or
evidencing the right to acquire any of the foregoing.
(e) "Subsidiary" of a specified person means an affiliate
controlled by that person directly or indirectly through 1 or more
intermediaries.
(f) "Voting security" includes any security convertible into
or evidencing a right to acquire a voting security.
Sec. 416. As a condition of qualifying for and maintaining
authority
to transact insurance in this state, or for qualifying as
an
eligible unauthorized insurer, the commissioner
director may
require an authorized insurer to maintain a special deposit with
the
state treasurer in such an
amount as the commissioner director
considers
necessary for the protection of Michigan policyholders
and claimants in this state. The special deposit is subject to
special
deposit claims pursuant to under
section 8141a.
Sec.
451. (1) Any Except
as otherwise provided in subsection
(2),
an unauthorized insurer transacting
insurance in this state
shall
be is subject to a tax of 2% of premiums written in this
state and to an additional regulatory fee of 0.5% on premiums
written
in this state. The tax required by this section shall must
be
considered delinquent if not paid within 30 days after a copy of
the
computation of the tax by the commissioner is delivered to the
insurer
in the manner prescribed by law for the service of
process.paid as provided under sections 1920 and 1951.
(2) A nonadmitted insurer is subject to a tax of 2% of
premiums for nonadmitted insurance policies if this state is the
home state of the insured and to an additional regulatory fee of
0.5% on premiums for nonadmitted insurance policies if this state
is the home state of the insured paid as provided under sections
1920 and 1951.
(3) As used in this section:
(a) "Home state of the insured" means that term as defined in
section 1903.
(b) "Nonadmitted insurance" means any property and casualty
insurance permitted to be placed directly or through a surplus
lines broker with a nonadmitted insurer eligible to accept the
insurance.
(c) "Nonadmitted insurer" means an unauthorized insurer but
does not include a risk retention group as defined in section 1801.
(d) "Surplus lines broker" means a person licensed under
chapter 19 to sell, solicit, or negotiate insurance on properties,
risks, or exposures located or to be performed in this state with
nonadmitted insurers.
Sec. 505. (1) A licensee is not required to provide the notice
and opt out requirements for nonpublic personal financial
information under this chapter if the licensee is an employee,
agent, or other representative of a principal and all of the
following are met:
(a) The principal is another licensee.
(b) The principal otherwise complies with and provides the
notices required by this chapter.
(c) The licensee does not disclose any nonpublic personal
information to any person other than the principal or its
affiliates as provided in this chapter.
(2)
A surplus lines broker or surplus lines insurer licensed
under chapter 19 or an unauthorized insurer under chapter 19 is
considered
to be in compliance with the notice
and opt out
requirements for nonpublic personal financial information under
this chapter if all of the following are met:
(a) The broker or unauthorized insurer does not disclose
nonpublic personal information of a consumer or a customer to
nonaffiliated third parties for any purpose, including joint
servicing or marketing under section 535, except as permitted by
section 537 or 539.
(b) The broker or unauthorized insurer delivers a notice to
the consumer at the time a customer relationship is established on
which the following is printed in 16-point type:
PRIVACY NOTICE
"Neither the U.S. brokers that handled this insurance nor the
insurers that have underwritten this insurance will disclose
nonpublic personal information concerning the buyer to
nonaffiliates of the brokers or insurers except as permitted by
law.".
Sec. 1829. (1) A purchasing group doing business in this state
may purchase insurance for risks resident or located in this state
only from a risk retention group chartered in a state, from an
insurer
authorized in this state, or from an eligible unauthorized
surplus
lines insurer pursuant to under chapter
19.
(2)
A purchasing group which that
obtains liability insurance
from
an insurer not authorized in this state unauthorized insurer
under chapter 19 or a risk retention group shall inform in writing
each
of the members of the group which that have a risk resident or
located in this state that the risk is not protected by an
insurance insolvency guaranty fund in this state and that the risk
retention group or the unauthorized insurer under chapter 19 may
not be subject to all insurance laws and regulations of this state.
(3) A purchasing group shall not purchase insurance providing
for a deductible or self-insured retention, unless the deductible
or self-insured retention is the sole responsibility of each
individual member of the purchasing group.
Sec.
1902. This chapter shall must
be liberally construed and
applied to promote its underlying purposes, which include:
(a) Protecting persons seeking insurance in this state.
(b)
Permitting stable and reputable insurers to write surplus
lines
insurance in to be placed
with or procured from reputable and
financially sound unauthorized insurers and exported from this
state.
(c)
Establishing a system of regulation which that will permit
an orderly access to surplus lines insurance in this state.
Sec. 1903. (1) As used in this chapter:
(a)
"Eligible unauthorized insurer" means an insurer not
authorized
to transact insurance in this state but eligible to
write
insurance business under this chapter."Affiliated group"
means a group of 2 or more entities in which each entity is an
affiliate of the other.
(b) "Association" means an association registered under
section 1930.
(c) "Consumer price index" means the consumer price index for
all urban consumers published by the Bureau of Labor Statistics of
the United States Department of Labor and as certified by the
director in an administrative bulletin.
(d) "Control" means 1 or more of the following:
(i) Ownership, control, or power to vote 25% or more of the
outstanding shares of any class of voting security of an entity,
directly or indirectly, or acting through 1 or more other persons.
(ii) Control in any manner over the election of a majority of
the directors, trustees, or other individuals exercising similar
functions of an entity.
(e) "Home state of the insured" means all of the following for
an insured person under an insurance contract with an unauthorized
insurer:
(i) If the insured person is an individual and subparagraph
(iii) does not apply, the state in which the principal residence of
the individual is located if some or all of the insured risk is
located in that state. If all of the insured risk is located
outside of that state, the state to which the greatest percentage
of the taxable premium for the insurance contract is allocated.
(ii) If the insured person is not an individual and
subparagraph (iii) does not apply to the insured person, the state in
which the principal place of business of the person is located if
some or all of the insured risk is located in that state. If all of
the insured risk is located outside of that state, the state to
which the greatest percentage of the taxable premium for the
insurance contract is allocated.
(iii) If more than 1 insured person within an affiliated group
is a named insured under a single contract, 1 of the following:
(A) If the insured person within the affiliated group with the
largest percentage of premium attributable to the insured person
under the insurance contract is an individual, the state in which
the principal residence of the individual is located if some or all
of the insured risk is located in that state. If all of the insured
risk is located outside of that state, the state to which the
greatest percentage of the insurance premium for the insurance
contract is allocated.
(B) If the insured person within the affiliated group with the
largest percentage of premium attributable to the insured person
under the insurance contract is a person other than an individual,
the state in which the principal place of business of the person is
located if some or all of the insured risk is located in that
state. If all of the insured risk is located outside of that state,
the state to which the greatest percentage of the taxable premium
for the insurance contract is allocated.
(f) (c)
"Licensee" means a person
licensed under this chapter.
(g) "Principal place of business" means the state in which a
person other than an individual maintains its headquarters and
where the person's high-level officers direct, control, and
coordinate the business activities of the person.
(h) "State" means this state, another state of the United
States, the District of Columbia, the Commonwealth of Puerto Rico,
Guam, the Northern Mariana Islands, the Virgin Islands, and
American Samoa.
(i) (d)
"Surplus lines insurance"
means insurance in as to
which this state is the home state of the insured and that is
procured
from, placed with, or continued or renewed with an
unauthorized
a nonadmitted insurer. and includes all of the
following,
whether effected by mail or otherwise:
(i) Insurance for which applications are solicited
from persons
resident
or located in this state.
(ii) Insurance for which contracts of insurance are
issued or
delivered
to persons resident or located in this state.
(iii) Insurance that is procured through negotiations or
by an
application
occurring in whole or in part in this state or made
within
or from within this state.
(iv) Insurance for which premiums, in whole or in part,
are
remitted
directly or indirectly within or from within this state.
(j) "Unauthorized insurer" means that term as defined in
section 108 but does not include a risk retention group as defined
in section 1801.
(2) The definitions contained in subsection (1), unless the
context
otherwise requires, shall apply to the use of the defined
terms
in this chapter and shall control in the interpretation of
this chapter.
(3) The definitions contained in other chapters of this act
shall
apply to the terms used in this
chapter unless otherwise
specifically provided in this chapter.
(4)
Nothing contained in this This
section shall does not
supersede
the provisions of section 402b, and in the event of if
there
is a conflict between the provision
herein this section and
section
402b, the latter shall govern.section
402b controls for
policies if this state is the home state of the insured.
Sec. 1905. (1) A person shall not solicit insurance, sell
insurance, negotiate with an insured, bind coverage, or in any
other manner act as an agent or broker in the transaction of
surplus lines insurance if this state is the home state of the
insured unless licensed under this chapter and section 1206a.
(2)
A person shall not offer, solicit, make a quotation on,
quote, sell, negotiate with an insured, or issue a policy of
insurance, binder, or any other evidence of insurance with an
unauthorized
insurer except in compliance if this state is the home
state of the insured unless the person complies with this chapter.
(3)
To obtain a surplus lines license under subsection (1), a
person shall do all of the following:
(a) File an application in the form and with the information
as
the commissioner director may reasonably require to determine
the ability of the applicant to satisfactorily act in accordance
with this chapter.
(b) Complete an examination testing the applicant's
understanding of this chapter, the surplus lines insurance
business, and other chapters of this act, if required by the
commissioner.
director. The commissioner director may
waive the
examination requirements for a person who has been licensed as a
surplus
lines licensee under subsection (1) within the preceding 12
months.
(c) Comply with sections 1204 to 1206.
(d)
Agree to file with the commissioner, director, not later
than February 15 and August 15 annually, a sworn statement of the
charges for insurance procured or placed, and the amounts returned
on the insurance canceled, under the license, for the preceding 6-
month period ending December 31 and June 30, respectively; and at
the
time of filing the statement, paying to the commissioner
director the 2% tax on premiums written and, instead of the costs
and
expenses that may be imposed by the commissioner pursuant to
director under this chapter, a 0.5% regulatory fee on premiums
written as required by section 451.
(4)
A surplus lines If this
state is the home state of the
insured,
a licensee may do any or all 1 or more of the following:
(a) Place insurance on risks in this state with eligible
unauthorized insurers.
(b) Act in the capacity of an agent or broker, as determined
by the contractual relationship with the eligible unauthorized
insurer or that insurer's legal representative.
(c)
Place insurance on risks in this state, with unauthorized
insurers
that are not eligible unauthorized insurers, in strict
compliance
with section 1950. If the insurance is provided through
the
participation of several insurers and the licensee has reason
to
believe that a substantial portion of the insurance would be
assumed
by authorized or eligible unauthorized insurers, then, with
respect
to the unauthorized insurers not eligible, the insured or
the
insured's representative shall be informed as provided in
section
1950(a).
(c) (d)
Engage in any other acts expressly
and implicitly
authorized by this chapter and this act.
(5)
Before If this state is
the home state of the insured,
before placement of insurance with an eligible unauthorized
insurer, a licensee shall inform an insured or the insured's
representative that coverage is being placed with an insurer not
licensed in this state and not subject to regulation and
enforcement that applies to authorized insurers and that payment of
loss may not be guaranteed in the event of insolvency of the
eligible unauthorized insurer.
(6) Consistent with the requirements of this chapter, the
director may participate in a national insurance producer database
of the National Association of Insurance Commissioners or any other
equivalent uniform database for the licensure and renewal of
licenses under this chapter.
Sec.
1906. If the commissioner director
considers it
necessary,
he or she may examine the books and records of a surplus
lines
licensee to determine whether if the
licensee is conducting
its business in accordance with this chapter. For the purpose of
facilitating the examination, the licensee shall allow the
commissioner
director free access, at reasonable times, to all of
the licensee's books and records relating to transactions to which
this chapter applies.
Sec.
1910. (1) Insurance Except
as provided in subsection (5)
and section 1920, both of the following apply:
(a)
A licensee shall not be placed by a
licensee procure
surplus lines insurance from or place surplus lines insurance with
an unauthorized insurer if coverage is available from an authorized
insurer.
(b) If coverage is not available from an authorized insurer
under subdivision (a), and subject to this subdivision, a licensee
may procure surplus lines insurance from or place surplus lines
insurance with an unauthorized insurer if the nonadmitted insurer
is an eligible unauthorized insurer. Before placing the insurance
with an eligible unauthorized insurer under this subdivision, the
licensee shall certify to the director on a form prescribed by the
director that the licensee first attempted to place the insurance
with an authorized insurer before placing the insurance with an
eligible unauthorized insurer. If the insurance is placed with an
eligible unauthorized insurer under this subdivision, on obtaining
coverage, the licensee shall mail or deliver to the insured the
following notice: "This insurance has been placed with an insurer
not licensed by the state of Michigan. If there is a dispute
relative to the terms or conditions of the policy or the practices
of the insurer, the department of insurance and financial services
may not be able to assist in the dispute. If the insurer is
insolvent, payment of claims is not guaranteed.". The licensee
shall file the notice required under this subdivision with the
director.
(2) There is a rebuttable presumption that the following
coverages are available from an authorized insurer:
(a) No-fault automobile insurance, as required by section
3101,
which that is not written for a person who is self-insuring
motor vehicles under section 3101d.
(b) Private passenger automobile physical damage coverage.
(c) Homeowners and property insurance on owner-occupied
dwellings, the value of which is less than the maximum limits of
coverage that are available for the property under the general
rules of the Michigan basic property insurance association.
(d) Any coverage readily available from 3 or more authorized
insurers, unless the authorized insurers quote a premium and terms
not competitive with the premium and terms quoted by an
unauthorized insurer.
(e) Worker's compensation insurance that is not written for an
employer that is partially self-insured under section 611 of the
worker's disability compensation act of 1969, 1969 PA 317, MCL
418.611.
(3) There is a rebuttable presumption that the following
coverages are unavailable from an authorized insurer:
(a) Coverages with respect to which 1 portion of the risk is
acceptable to authorized insurers, but another portion of the same
risk is not acceptable. The entire coverage may be placed with
eligible unauthorized insurers if it can be shown that eligible
unauthorized insurers will accept the entire coverage but not the
rejected portion alone.
(b) Any coverage that the licensee is unable to procure after
diligent search among authorized insurers.
(4)
The commissioner director shall maintain, on a current
basis, a list of those lines of insurance for which coverages are
determined
by the commissioner director
to be generally unavailable
in
the authorized insurance market. Any A person may request in
writing
that the commissioner director
add or remove a coverage
from
the current list. The commissioner director shall grant or
deny a request within 30 days after receiving the written request.
The
commissioner director shall encourage dissemination of
information regarding the availability of coverages for which the
public interest necessitates additions to or deletions from the
list.
The director shall publish the list shall be published at
least
quarterly and shall be revised revise
the list as required
under
this subsection. The commissioner director shall
make the
list available to all licensees and other members of the public,
upon request.
(5) Subsection (1)(a) does not apply to a licensee seeking to
procure surplus lines insurance from or place surplus lines
insurance with an unauthorized insurer on behalf of an exempt
commercial purchaser if both of the following apply:
(a) The licensee procuring or placing the surplus lines
insurance discloses to the exempt commercial purchaser that the
insurance may be available from an authorized insurer that may
provide greater protection with greater regulatory oversight.
(b) After disclosure under subdivision (a), the exempt
commercial purchaser requests in writing that the licensee procure
the surplus lines insurance from or place the surplus lines
insurance with an unauthorized insurer.
(6) As used in this section:
(a) "Exempt commercial purchaser" means a person purchasing
commercial insurance that at the time of placement of the insurance
satisfies all of the following:
(i) The person employs or retains a qualified risk manager to
negotiate insurance coverage.
(ii) The person has paid aggregate nationwide commercial
property and casualty insurance premiums in excess of $100,000.00
in the immediate preceding 12 months.
(iii) The person satisfies 1 or more of the following:
(A) The person possesses a qualified net worth.
(B) The person generates qualified annual revenues.
(C) The person employs more than 500 full-time employees or
full-time equivalent employees per individual insured or is a
member of an affiliated group employing more than 1,000 employees.
(D) The person is a nonprofit organization or public entity
generating qualified annual budget expenditures.
(E) The person is a municipality with a population of more
than 50,000.
(b) "Qualified annual budget expenditures" means annual budget
expenditures of at least the following amounts:
(i) Before January 1, 2015, $30,000,000.00.
(ii) After December 31, 2014 and before January 1, 2020,
$30,000,000.00 increased or decreased by the percentage change in
the consumer price index during the 5-year period beginning on
January 1, 2010.
(iii) Beginning on January 1, 2020 and each following January 1
after the expiration of a 5-year period, the amount of qualified
annual budget expenditures on the immediately prior December 31
increased or decreased by the percentage change in the consumer
price index during the prior 5 years.
(c) "Qualified annual revenues" means annual revenues
exceeding the following amounts:
(i) Before January 1, 2015, $50,000,000.00.
(ii) After December 31, 2014 and before January 1, 2020,
$50,000,000.00 increased or decreased by the percentage change in
the consumer price index during the 5-year period beginning on
January 1, 2010.
(iii) Beginning on January 1, 2020 and each following January 1
after the expiration of a 5-year period, the amount of qualified
annual revenues on the immediately prior December 31 increased or
decreased by the percentage change in the consumer price index
during the prior 5 years.
(d) "Qualified net worth" means a net worth exceeding at least
the following amounts:
(i) Before January 1, 2015, $20,000,000.00.
(ii) After December 31, 2014 and before January 1, 2020,
$20,000,000.00 increased or decreased by the percentage change in
the consumer price index during the 5-year period beginning on
January 1, 2010.
(iii) Beginning on January 1, 2020 and each following January 1
after the expiration of a 5-year period, the amount of qualified
net worth on the immediately prior December 31 increased or
decreased by the percentage change in the consumer price index
during the prior 5 years.
(e) "Qualified risk manager" means a person who meets all of
the following:
(i) Is an employee of, or third-party consultant retained by, a
person purchasing commercial insurance.
(ii) Provides skilled services in loss prevention, loss
reduction, or risk and insurance coverage analysis, and purchase of
insurance.
(iii) Has a bachelor's degree or higher from an accredited
college or university in risk management, business administration,
finance, economics, or any other field determined by a state
insurance commissioner, state insurance department director, or
other state regulatory official or entity to demonstrate minimum
competence in risk management.
(iv) Has 3 years of experience in risk financing, claims
administration, loss prevention, risk and insurance analysis, or
purchasing commercial lines of insurance; or has any 1 of the
following:
(A) Designation as a chartered property and casualty
underwriter issued by the American Institute for CPCU/Insurance
Institute of America.
(B) Designation as an associate in risk management issued by
the American Institute for CPCU/Insurance Institute of America.
(C) Designation as a certified risk manager issued by the
National Alliance for Insurance Education and Research.
(D) Designation as a rims fellow issued by the Global Risk
Management Institute.
(E) Any other designation, certification, or license
determined by the director to demonstrate minimum competency in
risk management.
(v) Has at least 7 years of experience in risk financing,
claims administration, loss prevention, risk and insurance coverage
analysis, or purchasing commercial lines of insurance; and has any
1 of the designations specified in subparagraph (iv) or has at least
10 years of experience in risk financing, claims administration,
loss prevention, risk and insurance coverage analysis, or
purchasing commercial lines of insurance; or has a graduate degree
from an accredited college or university in risk management,
business administration, finance, economics, or any other field
determined by the director to demonstrate minimum competence in
risk management.
Sec.
1911. (1) Only a licensee shall may
issue evidence of
placement of insurance with an eligible unauthorized insurer. A
licensee shall not issue that evidence, cause or purport to cause
any risk to be insured by an eligible unauthorized insurer, or
advise any insured or applicant for insurance or the representative
of the insured or applicant that insurance has been or will be
obtained from an eligible unauthorized insurer unless at least 1 of
the following conditions is met:
(a) The licensee has prior written authority from the eligible
unauthorized insurer to cause the risk to be insured.
(b) The licensee has received a written or oral communication
in the ordinary course of business that the coverage has been
obtained.
(c) A policy of insurance covering the insured for the risk
has actually been issued by the eligible unauthorized insurer and
has been delivered to the insured or the insured's representative.
(2) A prior written authority, a communication showing that
insurance has been obtained, or a policy of insurance prescribed in
subsection
(1) shall must identify entities directly assuming any
risk of loss. If there is more than 1 insurer, any document issued
or
certified by the licensee pursuant to under section 1912 shall
must specify whether the obligation is joint or several, and if the
obligation is several, the proportion of the obligation assumed by
those insurers, if known.
Sec.
1912. If the surplus lines a
licensee acts in reliance on
prior written authority from an eligible unauthorized insurer in
accordance with section 1911(1)(a), or on a written or oral
communication received in accordance with section 1911(1)(b), the
licensee, within 30 days after the date on which the risk was bound
or the insured or applicant was advised that coverage has been or
will be obtained, shall deliver a policy, a written binder, a
certificate, or other written evidence of the insurance, to the
insured or the insured's representative.
Sec. 1915. (1) A licensee may not charge, in addition to the
premium charged by an unauthorized insurer, a fee to cover the
costs
incurred in the placement of the indemnity which that exceeds
$50.00, unless all of the following conditions are met:
(a)
The fee in excess of $50.00 is filed with the commissioner
director
and not disapproved by the commissioner
director within 30
days
of the date it is filed with the commissioner.director.
(b) The fee exceeds $50.00 only to the extent that the actual
additional costs incurred for services performed by persons or
entities unrelated to the licensee exceed that amount.
(2)
A fee charged pursuant to under
subsection (1) shall must
not be excessive or discriminatory. The licensee shall maintain
complete
documentation of all fees charged pursuant to under
subsection
(1)(b). Those fees shall must
not be included as a part
of the policy premium in the computation of premium taxes.
(3)
The $50.00 fee prescribed provided
in subsection (1) shall
must be adjusted June 1, 2008 and annually thereafter to reflect
the percentage of change in the consumer price index.
(4)
As used in this section, "consumer price index" means the
consumer
price index for all urban consumers in the United States
city
average for all items, as most recently reported by the United
States
department of labor, bureau of labor statistics, and as
certified
by the commissioner in an administrative bulletin.
Sec. 1916. A licensee may be compensated by an unauthorized
insurer and the licensee may compensate a licensed resident agent
in this state for obtaining surplus lines insurance business. The
licensed resident agent authorized by the licensee may collect a
premium
on behalf of a surplus lines licensee and, as between the
insured
and the licensee, the licensee shall be is considered to
have received the premium if the premium payment has been made to
the agent.
Sec.
1920. (1) A licensee shall offer surplus lines insurance
only
to insurers that are in a stable and unimpaired financial
condition. An
insurer recognized by the commissioner as an eligible
surplus
lines insurer pursuant to subsection (2) shall be
considered
to meet the requirements of this subsection. Recognition
as
an eligible surplus lines insurer shall be conditioned upon the
insurer's
continued compliance with this chapter and rules
promulgated
under this chapter.may
procure or place surplus lines
insurance with an unauthorized insurer only if all of the following
are satisfied:
(a) For an unauthorized insurer domiciled in a state, the
unauthorized insurer is authorized to provide the insurance in the
state in which it is domiciled.
(b) For an unauthorized insurer domiciled in a state, the
unauthorized insurer has capital and surplus that satisfy 1 of the
following:
(i) The capital and surplus of the unauthorized insurer or the
equivalent of capital and surplus under the laws of the state in
which the unauthorized insurer is domiciled are equal to or more
than $15,000,000.00 or the minimum capital and surplus requirements
otherwise applicable under the laws of this state, whichever is
greater.
(ii) The capital and surplus of the unauthorized insurer are
less than the capital and surplus requirements under subparagraph
(i) but the unauthorized insurer has requested and the director has
issued an affirmative finding that the capital and surplus of the
unauthorized insurer are acceptable based upon quality of
management of the unauthorized insurer, capital and surplus of any
parent company of the unauthorized insurer, underwriting profit and
investment income trends of the unauthorized insurer, market
availability of the insurance, and the record and reputation of the
unauthorized insurer within the industry. If the capital and
surplus of the unauthorized insurer are less than $4,500,000.00,
the director shall not issue an affirmative finding of
acceptability under this subparagraph.
(c) For an unauthorized insurer not domiciled in a state, the
unauthorized insurer is listed on the most recent quarterly listing
of alien insurers maintained by the International Insurers
Department of the National Association of Insurance Commissioners
and meets additional requirements regarding the use of the list
established by the director.
(2) An unauthorized insurer may apply for recognition as an
eligible
surplus lines unauthorized
insurer by filing an
application in the form and with the information as reasonably
required
by the commissioner director
regarding the insurer's
financial
stability, reputation, and integrity. requirements of
this
chapter. The commissioner director may
delegate to an
association the power to process and to make recommendations on
applications
for recognition as an eligible surplus lines
unauthorized insurer under this subsection. Notwithstanding a
delegation
by the commissioner, director,
an applicant may file an
application for recognition directly with the
commissioner.director.
(3)
The commissioner shall recognize an insurer making an
application
in accordance with subsection (2) as an eligible
surplus
lines insurer if he or she is satisfied that the insurer is
in
a stable and unimpaired financial condition and that the insurer
is
qualified to provide coverage in compliance with this chapter.
If
filed an unauthorized
insurer files an application under
subsection (2) with full supporting documentation before July 1 of
any
year, an application submitted under subsection (2) shall be
acted
upon by the commissioner director shall act on the
application
before December 31 of the year of
submission.the
application is filed.
(4)
The commissioner shall not recognize an insurer as an
eligible
surplus lines insurer unless the insurer continuously
maintains
capital and surplus of at least $1,500,000.00, and is
safe,
reliable, and entitled to public confidence. This subsection
shall
not be construed to require an alien insurer to file
financial
statements in the form required of authorized insurers
under
section 438. However, each alien applicant shall have current
financial
data filed with the national association of insurance
commissioners.
(4) (5)
If the commissioner considers it necessary, he or she
The director may request information about or examine the affairs
of any eligible unauthorized insurer, at the expense of the insurer
except as provided in sections 1905 and 1951, to determine whether
the insurer should continue to remain on the list of eligible
surplus
lines unauthorized insurers
under this section. If the
commissioner
director finds that it is in the public interest to
remove an insurer from the list because the insurer is in unsound
financial condition, no longer meets the requirements of this
chapter or is no longer qualified or eligible to provide coverage
under this chapter, has engaged in a pattern of willfully violating
the laws of this state, or has engaged in a pattern of not paying
valid
claims in a timely manner, the commissioner
director shall do
so without the necessity of a hearing. If the director finds that
an insurer should be removed from the list under this subsection,
the director shall notify the insurer. The director may maintain
and make public a list of eligible unauthorized insurers and
insurers designated as ineligible under this subsection.
(5) If surplus lines insurance is placed under this chapter
with an unauthorized insurer and this state is the home state of
the insured, upon obtaining coverage, the licensee shall do all of
the following:
(a) Transmit to the insured the following notice: "This
insurance has been placed with an insurer not authorized by the
state of Michigan. If there is a dispute relative to the terms or
conditions of the policy or the practices of the insurer, the
Michigan department of insurance and financial services may not be
able to assist in the dispute. If the insurer is insolvent, payment
of claims or protection of assets may not be guaranteed.". The
licensee shall file a copy of the notice with the director.
(b) Submit within 30 days after the date the insurance was
procured, continued, or renewed, a report regarding the insurance
with the director on a form prescribed by the director. The report
must be accompanied by the 2% tax on premiums under section 451
and, instead of the costs and expenses that may be imposed by the
director under this chapter, the 0.5% regulatory fee on premiums
under section 451. The report must show all of the following:
(i) The name and address of the insured.
(ii) The home state of the insured.
(iii) The name and address of the insurer.
(iv) The subject of the insurance.
(v) A general description of the coverage.
(vi) The amount of premium currently charged for the insurance.
(vii) Any additional pertinent information, reasonably
requested by the director. If the insured fails to pay the taxes
when due, the insured is subject to a civil fine of not more than
$1,000.00, plus accrued interest from the inception of the
insurance.
(6) The director may require an unauthorized insurer or a
licensee under this chapter to annually file tax allocation reports
detailing the portion of unauthorized insurance premium
attributable to properties, risks, or exposures located in each
state and for the payment of taxes and fees under this section and
section 451.
(7) As used in this section:
(a) "Capital" means funds paid for in stock or other evidence
of ownership.
(b) "Surplus" means funds over and above liabilities and
capital of an insurer for the protection of policyholders.
Sec.
1922. Each If this state
is the home state of the
insured, each policy, cover note, or other instrument evidencing
surplus
lines insurance which that
is to be delivered to an insured
or
a representative of an insured shall must have printed, typed,
or stamped in red ink upon its face, in not less than 10-point
type, the following notice: "This insurance has been placed with an
unauthorized
insurer that is not licensed authorized by the state
of
Michigan. In case of insolvency, The insurer is not subject to
the regulation and enforcement that apply to authorized insurers.
If the insurer is insolvent, payment of claims or protection of
assets
may not be guaranteed.". This
notice shall must not be
covered
over or concealed. in any manner.
Sec. 1930. (1) Licensees may associate within an association,
and
the commissioner director may register an association for 1 or
more of the following purposes:
(a)
Advising the commissioner director
as to the availability
of surplus lines coverage and market practices and standards for
surplus lines insurers and licensees.
(b) Collecting and furnishing records, statistics, and
accounts.
(c) Submitting recommendations regarding administration of
this chapter.
(2)
Each association shall file with the commissioner,
director, for approval, all of the following:
(a) A copy of the association's constitution and articles of
agreement or association, or the association's certificate of
incorporation and bylaws, and any rules or regulations governing
the association's activities.
(b) An agreement that, as a condition of continued
registration
under subsection (1), the commissioner director may
examine the association.
(3)
Each association shall file with the commissioner director
and keep current all of the following:
(a) A list of members.
(b)
The name and address of a resident of this state upon on
whom
notices or orders of the commissioner director or process
issued
by the commissioner director
may be served.
(4)
The commissioner director may refuse to register, or may
suspend or revoke the registration of, an association for any of
the following reasons:
(a) It reasonably appears that the association will not be
able to carry out the purposes of this chapter.
(b)
The association fails to maintain and enforce rules which
that can reasonably be anticipated to assure that members of the
association and persons associated with those members comply with
this
chapter, other applicable chapters of this code, act, and
rules promulgated under either.
(c) The rules of the association do not assure a fair
representation of its members in the selection of directors and in
the administration of its affairs.
(d) The rules of the association do not provide for an
equitable allocation of reasonable dues, fees, and other charges
among members.
(e) The rules of the association impose a burden on
competition not necessary or appropriate to the purposes of this
chapter.
(f) The association fails to meet other applicable
requirements prescribed in this chapter.
(5) An association shall deny membership to any person who is
not a licensee.
Sec.
1940. The An association may submit reports and make
recommendations
to the commissioner director
regarding the
financial
condition of any eligible unauthorized insurer. These The
reports
and recommendations shall described
in this section are not
be
considered to be public documents.
There shall not be liability
on the part of, and a cause of action of any nature shall not arise
against, eligible unauthorized insurers, the association or its
agents
or employees, the directors, or the commissioner director or
authorized
representatives of the commissioner, director for
statements made by them in any reports or recommendations made
under this section.
Sec.
1951. An If the home state
of the insured is this state,
an
insured in this state who ,
on behalf of himself or herself, or
an
employee in this state who, on behalf of his or her employer,
procures, causes to be procured, or continues or renews insurance
with
an unauthorized insurer, or a self-insurer in if this
state is
the home state of the insured who procures or continues excess
loss, catastrophe, or other insurance with an unauthorized insurer,
upon
a subject of insurance resident, located, or to be performed
within
this state, other than insurance
procured pursuant to under
section
1905 or 1950, within 1920,
shall, within 30 days after the
date
the insurance was procured, continued, or renewed, shall file
a
written report regarding the insurance with the commissioner
director
on forms a form prescribed
by the commissioner and
furnished
to the insured upon request. director.
The report shall
must
be accompanied by a the 2%
tax on premiums written under
section 451 and, instead of the costs and expenses that may be
imposed
by the commissioner pursuant to director
under this
chapter,
a the 0.5% regulatory fee on premiums written. under
section 451. If the insured fails to pay the taxes when due, the
insured is subject to a civil fine of not more than $1,000.00, plus
accrued interest from the inception of the insurance. The report
shall
must show all of the following:
(a)
The name and address of the insured. or insureds.
(b) The home state of the insured.
(c) (b)
The name and address of the
insurer.
(d) (c)
The subject of the insurance.
(e) (d)
A general description of the
coverage.
(f) (e)
The amount of premium currently
charged for the
insurance.
(g) (f)
Any additional pertinent
information, reasonably
requested
by the commissioner.director.
Sec.
2091. No A foreign or
alien unauthorized foreign or alien
insurer shall not make, issue, circulate, or cause to be made,
issued, or
circulated to residents of this state any an estimate,
illustration, circular, pamphlet, or letter, or cause to be made in
any
a newspaper, magazine, or other publication, or
over any a
radio
or television station, any an
announcement or statement to
such
residents of this state misrepresenting its financial
condition
or the terms of any contracts a
contract issued or to be
issued
or the benefits or advantages promised thereby, by the
contract, or the dividends or share of the surplus to be received
thereon
from the contract in violation of sections 2001 to 2050. of
this
act, and whenever the commissioner has reason to believe If
the
director believes that any such the insurer
is engaging in
unlawful
advertising, he the
director shall give notice of such
fact
his or her belief by certified mail to the insurer and to the
insurance supervisory official of the domiciliary state of the
insurer. For the purpose of this section, the domiciliary state of
an alien insurer is the state of entry or the state of the
principal office in the United States.
Sec.
2093. (1) (a) Any
of the following acts in this state,
effected
by mail or otherwise, by any a
foreign or alien
unauthorized
foreign or alien insurer
is considered an appointment
by the insurer of the director as agent for service of process for
an action arising out of a violation of section 2091:
(a)
(1) the The issuance
or delivery of contracts or insurance
to
residents of this state. , (2) the
(b)
The solicitation of applications for such
insurance
contracts. ,
(3) the
(c) The collection of premiums, membership fees, assessments,
or
other considerations for such insurance
contracts. , or (4) any
(d)
Any other transaction of insurance
business. , is
equivalent
to and shall constitute an appointment by the insurer of
the
commissioner to be its true and lawful attorney, upon whom may
be
served all statements of charges, notices and lawful process in
any
proceeding instituted in respect to the misrepresentations set
forth
in section 2091 under the provisions of sections 2001 to
2050,
or in any action, suit or proceeding for the recovery of any
penalty
therein provided, and any such act shall be signification
of
its agreement that such service of statement of charges, notices
or
process is of the same legal force and validity as personal
service
of the statement of charges, notices or process in this
state,
upon the insurer.
(2) (b)
Service of a statement of charges and notices under
sections
2001 to 2050 shall be made by any deputy or employee of
the
department delivering to and leaving with the commissioner, or
some
person in apparent charge of his office, 2 copies thereof.
Service
of process issued by any court in any action, suit or
proceeding
to collect any penalty provided under sections 2001 to
2050,
shall be made by delivering and leaving with the
commissioner,
or some person in apparent charge of his office, 2
copies
thereof. Two copies of a
process described in subsection (1)
must
be served on the director. The commissioner
director shall
forthwith
cause to be mailed transmit by certified mail 1 of the
copies
of the statement of charges, notices or process copy of the
process to the defendant at its last known principal place of
business. ,
and The director shall keep a record of all statement
of
charges, notices, and process so served under this section. The
service
of statement of charges, notices, or process shall be is
sufficient if they have been so mailed and the defendant's receipt,
or receipt issued by the post office with which the letter is
certified, or showing the name of the sender of the letter and the
name and address of the person to whom the letter is addressed, and
the
affidavit of the person mailing the letter showing a compliance
herewith
with this subsection are filed with the commissioner in
the
case of director for any statement of charges or notices, or
with
the clerk of the court in which the action is pending in the
case
of for any process, on or before the date the defendant is
required
to appear or within such any
further time as may be
allowed.
(3) (c)
Service of statement of charges, notices and process
in
any such proceeding, action or suit shall in In addition to the
manner
provided in subsection (b) of this section be (2), service
of
process is valid if served upon any on a person
within this
state
who on behalf of such the insurer is:does any of the
following:
(a) (1)
Soliciting Solicits insurance.
, or
(b) (2)
Making, issuing or delivering any Makes,
issues, or
delivers
a contract of insurance. ,
or
(c) (3)
Collecting or receiving Collects
and receives in this
state
any a premium for insurance; and a copy of such the statement
of
charges, notices, or process is sent within 10 days thereafter
after the service by certified mail by or on behalf of the
commissioner
director to the defendant at the last known principal
place of business of the defendant, and the defendant's receipt, or
the receipt issued by the post office with which the letter is
certified, showing the name of the sender of the letter, the name
and address of the person to whom the letter is addressed, and the
affidavit
of the person mailing the same letter
showing a
compliance
herewith, with this
subdivision, are filed with the
commissioner
in the case of director for any statement of charges
or
notices, or with the clerk of the court in which such the action
is
pending in the case of for
any process, on or before the date
the
defendant is required to appear or within such any further
time
as
that the court may allow.allows.
(4) (d)
No The court shall not issue
a cease or desist order
or enter a judgment by default or a judgment pro confesso under
this
section shall be entered until the expiration of 30 days from
after the date of the filing of the affidavit of compliance.
(5) (e)
Service of process and notice under
the provisions of
this
act shall be is in addition to all other methods of service
provided
by law, and nothing in this section shall does not limit
or prohibit the right to serve any statement of charges, notices,
or
process upon any on an insurer in any other manner now or
hereafter
permitted provided by law.
Enacting section 1. Sections 1921 and 1950 of the insurance
code of 1956, 1956 PA 218, MCL 500.1921 and 500.1950, are repealed.
Enacting section 2. This amendatory act takes effect 90 days
after the date it is enacted into law.