June 18, 2015, Introduced by Senators KNOLLENBERG and MARLEAU 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:
Sec.
3104. (1) An The
catastrophic claims association is
created
as an unincorporated, nonprofit
association. to be known as
the
catastrophic claims association, hereinafter referred to as the
association,
is created. Each insurer engaged in
writing insurance
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
shall
be is bound by the plan of operation of the association.
Each
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,
shall
be is considered to
be 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.
Beginning July 1, 2013, this $500,000.00 amount shall 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 rounded to the
nearest $5,000.00. This biennial adjustment shall be calculated by
the association 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
terminated by withdrawal shall continue 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
insolvent member shall 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
insolvent
member for 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
(2).
(b) Establish procedures by which members shall 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
the times and in the form and detail as may be required by the plan
of operation.
(d) In a manner provided for in the plan of operation,
calculate
and charge to members of the association a total premium
amount sufficient to cover the expected losses and expenses of the
association that the association will likely incur during the
calculation
period. for which the premium
is applicable. The
premium
calculated amount shall include an amount to cover incurred
but
not reported losses for the period and may be adjusted for any
if premiums paid for or any amount calculated for a previous period
resulted
in an excess or deficient premiums
from previous periods.
deficiency. 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 operation. Each
member
shall be charged an The
association shall then divide the
total
amount equal to that member's by the total
written car years
of
insurance providing the security required by section sections
3101(1)
or and 3103(1)
, or both, written in this state during the
calculated
period to which the premium total amount applies,
multiplied
by to determine the state
average premium per car. The
average
premium per car shall be 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 during the period to which the premium
applies.
A member shall be charged a The
association shall also
calculate
a state average premium for a historic
vehicle that is
insured
with the member of vehicles
that is 20% of the state
average
premium charged for a car insured
with the member. cars. As
used in this subdivision:
(i) "Car" includes a motorcycle but does not include a
historic vehicle.
(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.
(e) Annually, advise the secretary of state of the state
average premium and state average premium for historic vehicles
calculated under subdivision (d) and accept payment of the premiums
collected by the secretary of state.
(f)
Receive and distribute all sums money
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
member.
(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
against the association shall 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
approved
by the commissioner.director
of the department.
(c) Provide for appropriate housing, equipment, and personnel
as may be necessary to assure the efficient operation of the
association.
(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
others within or without this state to assure the 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.
(9)
A board of directors is created , hereinafter referred to
as
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
following:
(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.for making the calculations under subsection
(7)(d).
(d)
Procedures governing the actual payment of for receiving
premiums
to the association.from
the secretary of state.
(e) Reimbursement of each member of the board by the
association for actual and necessary expenses incurred on
association business.
(f) The investment policy of the association.
(g) Any other matters required by or necessary to effectively
implement this section.
(11)
Each The board shall include members that would
contribute
insure a number of vehicles
for which a total of not
less
than 40% of the total premium amount
calculated pursuant to
under
subsection (7)(d) would be paid. Each director shall be is
entitled
to 1 vote. The initial term of office of a director shall
be
is 2 years.
(12) As part of the plan of operation, the board shall adopt
rules providing for the composition and term of successor boards to
the initial board, consistent with the membership composition
requirements in subsections (11) and (13). Terms of the directors
shall 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.
(13) The board shall consist of 5 directors, and the
commissioner
director of the department shall be an ex officio
member of the board without vote.
(14)
Each director shall be appointed by the commissioner
director of the department and shall serve until that member's
successor is selected and qualified. The chairperson of the board
shall be elected by the board. A vacancy on the board shall be
filled
by the commissioner director
of the department consistent
with the plan of operation.
(15)
After the board is appointed, the The board shall meet as
often
as the chairperson, the commissioner, director of the
department,
or the plan of operation shall
require, requires, or at
the
request of any 3 members of the board. The chairperson shall
retain
the right to may vote on all issues. Four members of the
board constitute a quorum.
(16) An annual report of the operations of the association in
a
form and detail as may be determined by the board shall be
furnished to each member.
(17)
Not more than 60 days after the initial organizational
meeting
of the board, the board shall submit to the commissioner
for
approval a proposed plan of operation consistent with the
objectives
and provisions of this section, which shall provide for
the
economical, fair, and nondiscriminatory administration of the
association
and for the prompt and efficient provision of
indemnity.
If a plan is not submitted within this 60-day period,
then
the commissioner, after consultation with the board, shall
formulate
and place into effect a plan consistent with this
section.
(18)
The plan of operation, unless approved sooner in writing,
shall
be considered to meet the requirements of this section if it
is
not disapproved by written order of the commissioner within 30
days
after the date of its submission. Before disapproval of all or
any
part of the proposed plan of operation, the commissioner shall
notify
the board in what respect the plan of operation fails to
meet
the requirements and objectives of this section. If the board
fails
to submit a revised plan of operation that meets the
requirements
and objectives of this section within the 30-day
period,
the commissioner shall enter an order accordingly and shall
immediately
formulate and place into effect a plan consistent with
the
requirements and objectives of this section.
(17) (19)
The proposed plan of operation or Any
amendments to
the plan of operation of the association are subject to majority
approval
by the board, ratified and
ratification by a majority of
the membership having a vote, with voting rights being apportioned
according
to the premiums charged in total
written car years of
insurance by each member determined in accordance with subsection
(7)(d)
and are subject to approval by the commissioner.director of
the department.
(18) (20)
Upon approval by the commissioner and ratification
by
the members of the plan submitted, or upon the promulgation of a
plan
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
formally
subscribe to and participate in the plan approved of
operation as a condition of maintaining its authority to transact
insurance in this state.
(19) (21)
The association is subject to all
the reporting,
loss
reserve, and investment requirements of the commissioner
director
of the department to the same extent as
would a member are
the members of the association.
(20) (22)
Premiums charged to members
by the association shall
be
recognized in the rate-making procedures for insurance rates in
the
same manner that expenses and premium taxes are
recognized.under this section and due on the effective
date of the
amendatory act that removed the requirement that members pay
premiums to the association must be paid immediately.
(21) (23)
The commissioner director of the department or an
authorized
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.
(22) (24)
The association does not have
liability for losses
occurring before July 1, 1978.
(23) (25)
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).
(c) (a)
"Consumer price index"
means the percentage of change
in the consumer price index for all urban consumers in the United
States
city average for all items for the 24 months prior to before
October
1 of the year prior to before
the July 1 effective date of
the biennial adjustment under subsection (2)(k), as reported by the
United
States department of labor, bureau of labor statistics,
Department of Labor, Bureau of Labor Statistics, and as certified
by
the commissioner.director
of the department.
(d) (b)
"Motor vehicle accident
policy" means a policy
providing the coverages required under section 3101(1).
(e) (c)
"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.
Enacting section 1. This amendatory act takes effect 90 days
after the date it is enacted into law.
Enacting section 2. This amendatory act does not take effect
unless Senate Bill No. 413
of the 98th Legislature is enacted into law.