PRIOR PRINTER'S NO. 1048 PRINTER'S NO. 2891
No. 951 Session of 1987
INTRODUCED BY DAWIDA, O'DONNELL, MANDERINO, GAMBLE, MURPHY,
VAN HORNE, MICHLOVIC, MARKOSEK, LEVDANSKY, KOSINSKI, BALDWIN,
KUKOVICH, SEVENTY, RITTER AND ITKIN, MARCH 18, 1987
AS REPORTED FROM COMMITTEE ON INSURANCE, HOUSE OF
REPRESENTATIVES, AS AMENDED, FEBRUARY 23, 1988
AN ACT
1 Amending the act of May 17, 1921 (P.L.682, No.284), entitled "An
2 act relating to insurance; amending, revising, and
3 consolidating the law providing for the incorporation of
4 insurance companies, and the regulation, supervision, and
5 protection of home and foreign insurance companies, Lloyds
6 associations, reciprocal and inter-insurance exchanges, and
7 fire insurance rating bureaus, and the regulation and
8 supervision of insurance carried by such companies,
9 associations, and exchanges, including insurance carried by
10 the State Workmen's Insurance Fund; providing penalties; and
11 repealing existing laws," providing for experience rating,
12 for reporting of certain insurance data, for a liability
13 underwriting services plan, for a standby joint underwriting
14 association for general liability insurance, for procedure
15 for review of rate filings and for a notice of intent to
16 withdraw; and making repeals.
17 The General Assembly of the Commonwealth of Pennsylvania
18 hereby enacts as follows:
19 Section 1. The act of May 17, 1921 (P.L.682, No.284), known
20 as The Insurance Company Law of 1921, is amended by adding
21 articles to read:
22 ARTICLE X-A. <--
23 EXPERIENCE RATING.
1 Section 1001-A. Submission, Approval and Use of Plan.--No
2 later than July 1, 1987, each insurer required to report data
3 pursuant to Article X-B shall develop and submit to the
4 department an experience rating plan which provides that the
5 premium for each policyholder within a class shall be based upon
6 the policyholder's loss experience. This plan shall be subject
7 to the approval or disapproval of the Insurance Department. If
8 the plan is not approved or disapproved within ninety (90) days
9 of its filing it shall be deemed approved, subject to review by
10 the Insurance Department. Such plan, once approved or deemed
11 approved, shall be put into effect and used by insurers in
12 determining premiums.
13 ARTICLE X-B.
14 DISCLOSURE.
15 Section 1001-B. Reporting of Insurance Data.--No later than
16 July 1, 1987, the Insurance Department shall promulgate rules
17 and regulations which shall require each insurer licensed to
18 write property or casualty insurance in this Commonwealth to
19 record and report its loss and expense experience and other data
20 as may be necessary to determine whether rates are excessive,
21 inadequate or unfairly discriminatory. The department may
22 designate one or more rate service organizations or advisory
23 organizations to gather and compile such experience and data,
24 provided the data is reported separately for each company. The
25 department shall require each insurer licensed to write property
26 or casualty insurance in this Commonwealth, as a supplement to
27 Schedule T of its annual statement to submit a report, on a form
28 furnished by the department, showing its direct writings in this
29 Commonwealth and the United States.
30 Section 1002-B. Types of Insurance.--The supplemental report
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1 required by section 1001-B shall include, but not be limited to,
2 the following specific types of insurance (which shall be shown
3 separately) written by such insurer:
4 (1) political subdivision liability insurance reported
5 separately in the following categories:
6 (i) municipalities;
7 (ii) school districts; and
8 (iii) authorities;
9 (2) public official liability insurance;
10 (3) dram shop liability insurance;
11 (4) day care center liability insurance;
12 (5) errors and omissions liability insurance;
13 (6) officers and directors liability insurance reported
14 separately as follows:
15 (i) nonprofit entities; and
16 (ii) for-profit entities;
17 (7) products liability insurance;
18 (8) medical malpractice insurance;
19 (9) attorneys malpractice insurance;
20 (10) architects and engineers malpractice insurance; and
21 (11) motor vehicle insurance reported separately for
22 commercial and private passenger vehicles as follows:
23 (i) motor vehicle liability insurance first party benefits;
24 (ii) motor vehicle bodily injury liability insurance;
25 (iii) motor vehicle property liability insurance;
26 (iv) uninsured motorist insurance; and
27 (v) underinsured motorist insurance.
28 Section 1003-B. Data Required.--(a) The supplemental report
29 shall include the following data, both specific to this
30 Commonwealth and also to the United States, by the type of
19870H0951B2891 - 3 -
1 insurance for the previous year ending on the thirty-first day
2 of December:
3 (1) direct premiums written;
4 (2) net premiums written;
5 (3) direct premiums earned;
6 (4) net premiums earned;
7 (5) net investment income, including realized capital gains
8 and losses (which shall be shown separately) but excluding
9 unrealized capital gains and losses, using estimates where
10 necessary;
11 (6) net investment income, including realized capital gains
12 and losses (which shall be shown separately) and including
13 unrealized capital gains and losses (which shall be shown
14 separately), using estimates where necessary;
15 (7) incurred claims developed as the sum of each of the
16 following which shall be shown separately:
17 (i) dollar amount of claims paid; plus
18 (ii) reserves for reported claims at the end of current
19 year; minus
20 (iii) reserves for reported claims at the end of the
21 previous year; plus
22 (iv) reserves for incurred but not reported claims at the
23 end of the current year; minus
24 (v) reserves for incurred but not reported claims at the end
25 of the previous year; plus
26 (vi) loss adjustment expenses paid; plus
27 (vii) reserves for loss adjustment expenses at the end of
28 the current year; minus
29 (viii) reserves for loss adjustment expenses at the end of
30 the previous year;
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1 (8) actual incurred expenses, including commissions, other
2 acquisition costs, general expenses, taxes, licenses and fees,
3 all of which shall be shown separately;
4 (9) net underwriting gain or loss;
5 (10) net operating gain or loss, including net realized
6 investment income but excluding unrealized investment income;
7 (11) the sum of the value of closed claims and a
8 distribution by size of claim for each of the following
9 categories arising out of the course of business:
10 (i) for uncontested claims;
11 (ii) under a judgment entered by a court based upon a
12 verdict;
13 (iii) in settlements relating to and completed after
14 institution of judicial proceedings but prior to a verdict; and
15 (iv) in settlements relating to and completed after
16 institution of judicial proceedings and after a verdict has been
17 rendered in a judicial proceeding;
18 (12) the sum of the legal costs incurred while settling
19 claims which result in awards or payments of money, broken down
20 by attorney fees and other legal costs for each of the following
21 categories arising out of the course of business:
22 (i) for uncontested claims;
23 (ii) under a judgment entered by a court based upon a
24 verdict;
25 (iii) in settlements relating to and completed after
26 institution of judicial proceedings but prior to a verdict; and
27 (iv) in settlements relating to and completed after
28 institution of judicial proceedings and after a verdict has been
29 rendered in a judicial proceeding;
30 (13) the sum of the legal costs incurred while settling
19870H0951B2891 - 5 -
1 claims which do not result in awards or payments of money,
2 broken down by attorney fees and other legal costs for each of
3 the following categories arising out of the course of business:
4 (i) for uncontested claims;
5 (ii) under a judgment entered by a court based upon a
6 verdict; and
7 (iii) in settlements relating to and completed after
8 institution of judicial proceedings but prior to a verdict;
9 (14) the number and dollar amount of each claim closed with
10 payment and the dollar amount initially reserved for each claim,
11 by year incurred;
12 (15) the number and total dollar amount for all claims
13 closed with payment and the total dollar amount initially
14 reserved, by year incurred;
15 (16) the claims closed without payment and the dollar amount
16 initially reserved for each claim, by year incurred;
17 (17) the number of claims closed without payment and the
18 total dollar amount initially reserved, by year incurred;
19 (18) the claims pending at the end of each year and the
20 dollar amount reserved for each claim;
21 (19) the number of claims pending at the end of each year
22 and the total dollar amount reserved;
23 (20) the name and address of any company, association or
24 exchange which reinsures any part of the coverage it issues; the
25 coverage provided, restrictions, loss retention per risk if
26 applicable and cost of such reinsurance; and
27 (21) any other information requested by the department.
28 (b) The commissioner shall develop rules and regulations to
29 implement the reporting requirements of this chapter that shall
30 include:
19870H0951B2891 - 6 -
1 (1) provisions to assure the confidentiality of the data
2 with regard to information relevant to individual claims; and
3 (2) standard and uniform definitions for information
4 required to be submitted to the department pursuant to this
5 article that shall be consistent with generally accepted
6 accounting principles, unless no generally accepted standard
7 definitions exist.
8 Section 1004-B. Actuarial Impact Statement Regarding
9 Judicial Decisions.--Any insurance company, or rating
10 organization acting on behalf of more than one insurance
11 company, may file annually, at the same time that the annual
12 statement is due, an actuarial study detailing the impact of any
13 appellate judicial decision rendered during the calendar year
14 reported in the annual statement due at that time which it
15 believes will have a significant impact on the price or
16 availability of insurance.
17 Section 1005-B. Review by Department.--It shall be the duty
18 of the department to annually compile and review all such
19 reports submitted by insurers pursuant to this article and to
20 utilize such reports in determining whether the rates or rating
21 plans and any subsequent modifications thereof for property and
22 casualty insurance in this Commonwealth are excessive,
23 inadequate or unfairly discriminatory. All information collected
24 by the department shall be made available to any interested
25 insured or citizen.
26 Section 1006-B. Requirement for Doing Business.--Each
27 insurance company shall file all of the information required
28 under this article with the Insurance Department as a
29 prerequisite to obtaining permission to write coverage, to
30 continue to do business or to file for rate increases.
19870H0951B2891 - 7 -
1 Section 1007-B. Penalty.--Each insurer who fails to comply
2 with the terms of section 1001-B, 1002-B or 1003-B of this
3 article shall pay a civil penalty of a fine of ten thousand
4 dollars ($10,000) and thereafter a fine of two hundred dollars
5 ($200) daily until this article is complied with.
6 ARTICLE X-A. <--
7 DATA DISCLOSURE.
8 SECTION 1001-A. REPORTING OF INSURANCE DATA.--NO LATER THAN
9 JULY 1, 1988, THE INSURANCE DEPARTMENT SHALL ORDER BY NOTICE IN
10 THE PENNSYLVANIA BULLETIN EACH INSURER LICENSED TO WRITE
11 PROPERTY OR CASUALTY INSURANCE IN THIS COMMONWEALTH TO RECORD
12 AND REPORT ITS LOSS AND EXPENSE EXPERIENCE AS PROVIDED IN THIS
13 ACT AND OTHER DATA AS MAY BE REQUIRED BY THE INSURANCE
14 DEPARTMENT. THE DEPARTMENT MAY DESIGNATE ONE OR MORE RATE-
15 SERVICE ORGANIZATIONS TO GATHER AND COMPILE SUCH EXPERIENCE AND
16 DATA, PROVIDED THE DATA ARE REPORTED SEPARATELY FOR EACH
17 COMPANY. THE DEPARTMENT SHALL REQUIRE EACH INSURER LICENSED TO
18 WRITE PROPERTY OR CASUALTY INSURANCE IN THIS COMMONWEALTH TO
19 PROVIDE THE DATA IN A DATA PROCESSING FORMAT PRESCRIBED BY THE
20 DEPARTMENT.
21 SECTION 1002-A. TYPES OF INSURANCE.--THE REPORT REQUIRED BY
22 SECTION 1001-A SHALL INCLUDE, BUT NOT BE LIMITED TO, THE
23 FOLLOWING SPECIFIC TYPES OF INSURANCE (WHICH SHALL BE SHOWN
24 SEPARATELY) WRITTEN BY EACH INSURER:
25 (1) POLITICAL SUBDIVISION LIABILITY INSURANCE REPORTED
26 SEPARATELY IN THE FOLLOWING CATEGORIES:
27 (I) MUNICIPALITIES;
28 (II) SCHOOL DISTRICTS; AND
29 (III) AUTHORITIES AND OTHER POLITICAL SUBDIVISIONS.
30 (2) PUBLIC OFFICIAL LIABILITY INSURANCE;
19870H0951B2891 - 8 -
1 (3) DRAM SHOP LIABILITY INSURANCE;
2 (4) DAY-CARE CENTER LIABILITY INSURANCE;
3 (5) PRODUCTS LIABILITY INSURANCE;
4 (6) MEDICAL MALPRACTICE INSURANCE;
5 (7) ATTORNEYS' MALPRACTICE INSURANCE;
6 (8) ARCHITECTS AND ENGINEERS MALPRACTICE INSURANCE; AND
7 (9) OFFICERS AND DIRECTORS LIABILITY INSURANCE REPORTED
8 SEPARATELY AS FOLLOWS:
9 (I) NONPROFIT ENTITIES; AND
10 (II) FOR-PROFIT ENTITIES;
11 (10) MOTOR VEHICLE INSURANCE REPORTED SEPARATELY FOR
12 VOLUNTARY AND INVOLUNTARY COMMERCIAL AND VOLUNTARY AND
13 INVOLUNTARY PRIVATE PASSENGER VEHICLES AS FOLLOWS:
14 (I) FIRST PARTY BENEFITS INSURANCE;
15 (II) BODILY INJURY LIABILITY INSURANCE;
16 (III) PROPERTY DAMAGE LIABILITY INSURANCE;
17 (IV) UNINSURED AND UNDERINSURED MOTORIST INSURANCE;
18 (V) COLLISION INSURANCE; AND
19 (VI) COMPREHENSIVE INSURANCE.
20 SECTION 1003-A. DATA REQUIRED.--(A) THE REQUIRED REPORT
21 SHALL INCLUDE THE FOLLOWING DATA BY TYPE OF INSURANCE, BOTH
22 SPECIFIC TO THIS COMMONWEALTH AND ALSO TO THE UNITED STATES, FOR
23 THE PREVIOUS CALENDAR/ACCIDENT YEAR ENDING ON THE 31ST DAY OF
24 DECEMBER, EVALUATED AS OF MARCH 31 OF THE FOLLOWING YEAR:
25 (1) DIRECT WRITTEN PREMIUMS AT COLLECTED AND CURRENT RATE
26 LEVELS;
27 (2) NET WRITTEN PREMIUMS AT COLLECTED AND CURRENT RATE
28 LEVELS;
29 (3) DIRECT EARNED PREMIUMS AT COLLECTED AND CURRENT RATE
30 LEVELS;
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1 (4) NET EARNED PREMIUMS AT COLLECTED AND CURRENT RATE
2 LEVELS;
3 (5) WRITTEN EXPOSURES;
4 (6) EARNED EXPOSURES;
5 (7) NET INVESTMENT INCOME, EXCLUDING BOTH REALIZED AND
6 UNREALIZED CAPITAL GAINS AND LOSSES, USING ESTIMATES WHERE
7 NECESSARY, BROKEN DOWN BY LINE IN ACCORDANCE WITH THE NAIC
8 EXPENSE EXHIBIT METHOD;
9 (8) NET INVESTMENT INCOME, INCLUDING REALIZED CAPITAL GAINS
10 AND LOSSES (WHICH SHALL BE SHOWN SEPARATELY) BUT EXCLUDING
11 UNREALIZED CAPITAL GAINS AND LOSSES, USING ESTIMATES WHERE
12 NECESSARY, BROKEN DOWN BY LINE IN ACCORDANCE WITH THE NAIC
13 EXPENSE EXHIBIT METHOD;
14 (9) NET INVESTMENT INCOME, INCLUDING REALIZED CAPITAL GAINS
15 AND LOSSES (WHICH SHALL BE SHOWN SEPARATELY) AND INCLUDING
16 UNREALIZED CAPITAL GAINS AND LOSSES (WHICH SHALL BE SHOWN
17 SEPARATELY), USING ESTIMATES WHERE NECESSARY, BROKEN DOWN BY
18 LINE IN ACCORDANCE WITH THE NAIC INSURANCE EXPENSE EXHIBIT
19 METHOD;
20 (10) INCURRED LOSS DEVELOPMENT, ON A CALENDAR/ACCIDENT YEAR
21 BASIS, FOR ALL YEARS BEGINNING WITH 1980 AND DETERMINED AS THE
22 SUM OF THE FOLLOWING DEVELOPMENTS, WHICH SHALL BE SHOWN
23 SEPARATELY:
24 (I) DOLLAR AMOUNT OF CLAIMS PAID; PLUS
25 (II) RESERVES FOR REPORTED CLAIMS; PLUS
26 (III) RESERVES FOR INCURRED BUT NOT REPORTED CLAIMS; PLUS
27 (IV) ALLOCATED LOSS ADJUSTMENT EXPENSES PAID; PLUS
28 (V) RESERVES FOR ALLOCATED LOSS ADJUSTMENT EXPENSES.
29 (11) INCURRED CLAIMS COUNT DEVELOPMENT, ON A
30 CALENDAR/ACCIDENT YEAR BASIS, FOR ALL YEARS BEGINNING WITH 1980
19870H0951B2891 - 10 -
1 AND DETERMINED AS THE SUM OF THE FOLLOWING DEVELOPMENTS, WHICH
2 SHALL BE SHOWN SEPARATELY:
3 (I) NUMBER OF CLAIMS CLOSED WITH PAYMENT; PLUS
4 (II) NUMBER OF CLAIMS CLOSED WITHOUT PAYMENT; PLUS
5 (III) NUMBER OF CLAIMS PENDING.
6 (12) ACTUAL INCURRED EXPENSES, INCLUDING COMMISSIONS, OTHER
7 ACQUISITION COSTS, GENERAL EXPENSES, UNALLOCATED LOSS ADJUSTMENT
8 EXPENSES, TAXES, LICENSES AND FEES, ALL OF WHICH SHALL BE SHOWN
9 SEPARATELY;
10 (13) NET UNDERWRITING GAIN OR LOSS;
11 (14) NET OPERATING GAIN OR LOSS, INCLUDING NET REALIZED
12 INVESTMENT INCOME BUT EXCLUDING UNREALIZED INVESTMENT INCOME;
13 (15) THE TOTAL NUMBER OF CLOSED CLAIMS AND CORRESPONDING
14 LOSSES AND LOSS DISTRIBUTIONS ON A CALENDAR/ACCIDENT YEAR BASIS,
15 BROKEN DOWN INTO COMPONENTS OF ECONOMIC LOSS, PAIN AND
16 SUFFERING, AND PUNITIVE DAMAGES, FOR EACH OF THE FOLLOWING
17 CATEGORIES:
18 (I) UNCONTESTED CLAIMS;
19 (II) CLAIMS UNDER A JUDGMENT ENTERED BY A COURT BASED UPON A
20 VERDICT;
21 (III) CLAIMS IN SETTLEMENTS RELATING TO AND COMPLETED AFTER
22 INSTITUTION OF JUDICIAL PROCEEDINGS BUT PRIOR TO A VERDICT;
23 (IV) CLAIMS IN SETTLEMENTS RELATING TO AND COMPLETED AFTER
24 INSTITUTION OF JUDICIAL PROCEEDINGS AND AFTER A VERDICT HAS BEEN
25 RENDERED IN A JUDICIAL PROCEEDING; AND
26 (V) TOTAL CLAIMS.
27 (16) NAMES AND ADDRESSES OF REINSURANCE AGREEMENTS,
28 INCLUDING, BUT NOT LIMITED TO, THE PREMIUMS PAID FOR THE
29 REINSURANCE COVERAGE, COVERAGE PROVIDED, RESTRICTIONS AND LOSS
30 RETENTION PER RISK, IF APPLICABLE. THE DATA SUBMITTED SHALL BE
19870H0951B2891 - 11 -
1 CONFIDENTIAL. HOWEVER, A SUMMARY STATEMENT OF THE COST AND
2 AVAILABILITY OF REINSURANCE SHALL BE MADE PART OF THE REPORT
3 REQUIREMENT OF SECTION 1005-A;
4 (17) ANY OTHER INFORMATION REQUESTED BY THE INSURANCE
5 DEPARTMENT.
6 (B) THE INSURANCE DEPARTMENT SHALL PUBLISH PROCEDURES IN THE
7 PENNSYLVANIA BULLETIN TO IMPLEMENT THE REPORTING REQUIREMENTS OF
8 THIS SECTION THAT SHALL INCLUDE, BUT NOT BE LIMITED TO:
9 (1) PROVISIONS TO GUARANTEE CONFIDENTIALITY OF THE DATA WITH
10 REGARD TO INFORMATION RELEVANT TO INDIVIDUAL CLAIMS; AND
11 (2) STANDARD AND UNIFORM DEFINITIONS FOR INFORMATION
12 REQUIRED TO BE SUBMITTED TO THE DEPARTMENT PURSUANT TO THIS
13 ARTICLE THAT SHALL BE CONSISTENT WITH GENERALLY ACCEPTED
14 ACTUARIAL PRINCIPALS.
15 SECTION 1004-A. ACTUARIAL IMPACT STATEMENT REGARDING
16 JUDICIAL DECISIONS.--ANY INSURANCE COMPANY OR RATING
17 ORGANIZATION ACTING ON BEHALF OF MORE THAN ONE INSURANCE COMPANY
18 MAY FILE AN ACTUARIAL STUDY DETAILING THE IMPACT OF ANY
19 APPELLATE JUDICIAL DECISION IT BELIEVES WILL HAVE A SIGNIFICANT
20 IMPACT ON THE PRICE OR AVAILABILITY OF INSURANCE, WITHIN ONE
21 CALENDAR YEAR AFTER THE DECISION IS RENDERED.
22 SECTION 1005-A. DEPARTMENT UTILIZATION.--THE INSURANCE
23 DEPARTMENT SHALL UTILIZE THE REPORTS SUBMITTED BY INSURERS
24 PURSUANT TO THIS ARTICLE, OR ANY PORTIONS OF THESE REPORTS, IN
25 DETERMINING WHETHER THE RATES OR RATING PLANS, OR ANY SUBSEQUENT
26 MODIFICATIONS THEREOF, FOR PROPERTY OR CASUALTY INSURANCE IN
27 THIS COMMONWEALTH, ARE EXCESSIVE, INADEQUATE OR UNFAIRLY
28 DISCRIMINATORY, OR FOR ANY OTHER PURPOSE. THE DEPARTMENT SHALL
29 ANNUALLY SUMMARIZE THE DATA COMPILED PURSUANT TO THIS ACT. THE
30 DEPARTMENT SHALL FILE A REPORT AND FINDINGS WITH THE STANDING
19870H0951B2891 - 12 -
1 COMMITTEES OF THE GENERAL ASSEMBLY HAVING JURISDICTION OVER
2 INSURANCE AFFAIRS. THE DEPARTMENT SHALL BE AUTHORIZED TO AUDIT
3 AT ITS DISCRETION ANY OF THE DATA SUBMITTED UNDER ARTICLE X-A.
4 SECTION 1006-A. REQUIREMENT FOR DOING BUSINESS.--EACH
5 INSURANCE COMPANY SHALL FILE ALL OF THE INFORMATION REQUIRED
6 UNDER THIS ARTICLE WITH THE INSURANCE DEPARTMENT AS A
7 PREREQUISITE TO OBTAINING PERMISSION TO WRITE COVERAGE, TO
8 CONTINUE TO DO BUSINESS OR TO FILE FOR RATE INCREASES.
9 SECTION 1007-A. PENALTY.--EACH INSURER WHO FAILS TO COMPLY
10 WITH THE TERMS OF SECTIONS 1001-A, 1102-A AND 1003-A OF THIS
11 ARTICLE SHALL PAY A CIVIL PENALTY OF A FINE OF TEN THOUSAND
12 DOLLARS ($10,000) AND THEREAFTER A FURTHER CIVIL PENALTY OF TWO
13 HUNDRED DOLLARS ($200) DAILY UNTIL THOSE SECTIONS ARE COMPLIED
14 WITH.
15 ARTICLE X-C. <--
16 ARTICLE X-B. <--
17 PENNSYLVANIA LIABILITY UNDERWRITING SERVICES PLAN.
18 Section 1001-C 1001-B. Definitions.--The following words and <--
19 phrases when used in this article shall have the meanings given
20 to them in this section, unless the context clearly indicates
21 otherwise:
22 (1) "Board," means the board of directors of the plan.
23 (2) "Commercial liability insurance," means insurance
24 coverage against the legal liability of the insured against
25 loss, damage or expense incident to a claim arising out of the
26 death or injury of any person or property damage as the result
27 of or incident to the lawful conduct of a business enterprise or
28 public purpose. The term includes such insurance coverage of
29 governmental entities, including political subdivisions as
30 specified in section 1002-B 1002-A(1)(i), (ii) and (iii). <--
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1 (3) "Commissioner," means the Insurance Commissioner of the
2 Commonwealth.
3 (4) "Department," means the Insurance Department of the
4 Commonwealth.
5 (5) "Plan," means the Pennsylvania Liability Underwriting
6 Services Plan.
7 (6) "Surplus lines agent," means an individual, partnership
8 or corporation that is duly licensed as such by the commissioner
9 to effect placement of insurance coverage with an unlicensed
10 insurer, and who may receive a commission therefor.
11 Section 1002-C 1002-B. Creation of Plan.--The Pennsylvania <--
12 Liability Underwriting Services Plan is created as a legal
13 entity with all the rights which are reasonable and necessary to
14 fulfill its purpose, including, but not limited to, the
15 following:
16 (1) To own property.
17 (2) To enter into contracts.
18 (3) To sue and be sued, provided that no judgment against
19 the Plan shall create any liability in the individual members.
20 Section 1003-C 1003-B. Purpose.--The Plan shall assist in <--
21 the placement of commercial liability insurance for eligible
22 Pennsylvania commercial risks and public entities that have
23 tried and failed to find such coverage.
24 Section 1004-C 1004-B. Membership.--Every commercial <--
25 liability insurer admitted to do business in this Commonwealth
26 shall, as a condition of its authority to write such kinds of
27 insurance within this Commonwealth, be a member of the Plan and
28 have the rights and obligations as hereinafter described. The
29 commissioner may require that the surplus lines insurance
30 companies participate in the Plan.
19870H0951B2891 - 14 -
1 Section 1005-C 1005-B. Participation.--Each member of the <--
2 Plan shall participate in funding the administrative costs of
3 the plan, to the extent that application fees do not defray
4 those costs, and in the review of applications for insurance.
5 Each member's share of participation obligations shall be
6 equitable and set forth in the plan of operation. However,
7 members of the Plan shall not be required to review application
8 of eligible commercial risks or public entities where the member
9 has not underwritten such coverage for two consecutive years
10 preceding the effective date of this section.
11 Section 1006-C 1006-B. Board of Directors.--The Plan shall <--
12 be governed by nine directors and the Insurance Commissioner,
13 who shall serve as a non-voting ex officio chairman. The nine
14 directors shall be appointed to the board as voting members, by
15 the commissioner, each to serve a term of two years. Five
16 members shall be representatives of insurance companies, two
17 members shall be licensed insurance agents or brokers and two
18 members shall be consumers of commercial insurance. Members
19 shall serve as representatives of their employers, who may have
20 the right to substitute individuals with the prior approval of
21 the commissioner.
22 Section 1007-C 1007-B. Voting Rights.--Whenever so <--
23 designated by the board pursuant to its plan of operation, each
24 commercial liability insurer shall be allotted votes in
25 proportion to its share of the Statewide total written premium
26 during the prior year relating to general liability coverage,
27 plus the liability portion, as determined by the commissioner,
28 of commercial multi-peril coverage.
29 Section 1008-C 1008-B. Organization.--(a) Within sixty (60) <--
30 days following the issuance of an order by the commissioner to
19870H0951B2891 - 15 -
1 establish a plan the board shall submit to the commissioner, for
2 his review, a proposed plan of operation of the Plan, consistent
3 with the provisions of this act, which shall provide for the
4 formation of the Plan and the economical and efficient
5 administration of the Plan, including, but not limited to,
6 management of the Plan, preliminary assessment of all members
7 for initial expenses necessary to commence operations,
8 establishment of necessary facilities within this Commonwealth,
9 assessment of members to defray continuing expenses, limits of
10 liability, eligibility requirements, procedures for securing
11 timely referrals and quotes on insurance applications and
12 governance of the Plan.
13 (b) The plan of operation shall be subject to approval by
14 the commissioner and shall take effect ten (10) days after
15 having been approved by him. If the commissioner disapproves the
16 proposed plan of operation, the commissioner shall specify his
17 objections and how the plan of operation may be made acceptable.
18 Following the receipt of objections from the commissioner, the
19 Plan shall, within fifteen (15) days, submit for review an
20 appropriately revised plan of operation, and, if the Plan fails
21 to do so or if the revised Plan so filed is unacceptable, the
22 commissioner shall promulgate a plan of operation.
23 (c) The Plan may, by its own initiative, subject to prior
24 approval by the commissioner, amend the plan of operation.
25 Section 1009-C 1009-B. Application Fees.--Subject to <--
26 approval by the commissioner, the Plan shall require
27 applications to be accompanied by reasonable application fees,
28 which may vary for different classes of applicants. Initially,
29 application fees should not exceed one hundred dollars ($100)
30 nor be less than ten dollars ($10) for any class of insured and
19870H0951B2891 - 16 -
1 shall be reviewed annually by the commissioner. The application
2 fee is non-refundable if the applicant is determined to be
3 eligible for coverage, regardless of whether coverage is found
4 for the applicant through the Plan.
5 Section 1010-C 1010-B. Eligibility.--All applications for <--
6 commercial liability coverage may be eligible for consideration
7 by the Plan if they are accompanied by the application fee
8 appropriate to that class of risk, three refusals of coverage
9 from admitted Pennsylvania commercial lines writers and one
10 refusal of coverage from a licensed surplus lines agent, and a
11 completed questionnaire as shall be supplied to the applicant by
12 the Plan and approved by the commissioner, except for
13 applications relating to:
14 (1) Insurance on motor vehicles.
15 (2) Insurance for pollution or environmental impairment.
16 (3) Insurance for workers' compensation and employers'
17 liability.
18 (4) Insurance for medical malpractice professional
19 liability.
20 (5) Insurance on activities conducted substantially outside
21 this Commonwealth unless the insurance is required by
22 Pennsylvania or Federal statute.
23 (6) Other risks as may be excluded by the Plan and approved
24 by the commissioner.
25 Section 1011-C 1011-B. Immunity.--There shall be no <--
26 liability or cause of action against any member of the Plan or
27 its agents or employes, the Plan or its agents or employes,
28 members of the board of directors or the department or its
29 representatives for any action taken by or statement made by
30 them in the performance of their powers and duties under this
19870H0951B2891 - 17 -
1 article.
2 Section 1012-C 1012-B. Funds.--All fees, assessments and <--
3 other moneys received by the Plan shall be deposited into a
4 restricted revenue account within the General Fund and are
5 hereby appropriated to the board for the purposes set forth in
6 this article.
7 ARTICLE X-D. <--
8 STANDBY JOINT UNDERWRITING ASSOCIATION
9 FOR GENERAL LIABILITY INSURANCE.
10 Section 1001-D. Definitions.--The following words and
11 phrases when used in this article shall have the meanings given
12 to them in this section, unless the context clearly indicates
13 otherwise:
14 (a) "Association," means the Standby Joint Underwriting
15 Association for General Liability Insurance.
16 (b) "Board," means the board of directors of the
17 association.
18 (c) "Department," means the Insurance Department of the
19 Commonwealth.
20 (d) "General liability insurance," means commercial
21 liability insurance, including policies sold separately or as
22 part of a package, but not including medical malpractice
23 insurance, private passenger motor vehicle insurance or
24 environmental impairment liability insurance. The term includes
25 such insurance coverage of governmental entities, including
26 political subdivisions as specified in section 1002-B(1)(i),
27 (ii) and (iii).
28 Section 1002-D. Creation of Association.--The Standby Joint
29 Underwriting Association for General Liability Insurance is
30 created as a legal entity with all the rights which are
19870H0951B2891 - 18 -
1 reasonable and necessary to fulfill its purpose, including, but
2 not limited to, the following:
3 (1) To own property.
4 (2) To enter into contracts.
5 (3) To sue and be used.
6 (4) To require insurance companies and the department to
7 provide information in a timely fashion.
8 (5) To require the department to collect information.
9 Section 1003-D. Administration.--The association shall be
10 administered by the board.
11 Section 1004-D. Board.--(a) The board shall consist of
12 thirteen voting members, plus a chairperson, composed of and
13 appointed in accordance with the following:
14 (1) Six representatives of commercial insurance carriers,
15 one of which shall be appointed by the Majority Leader of the
16 House of Representatives; one of which shall be appointed by the
17 Minority Leader of the House of Representatives; one of which
18 shall be appointed by the Majority Leader of the Senate; one of
19 which shall be appointed by the Minority Leader of the Senate;
20 and two of which shall be appointed by the Governor.
21 (2) Six representatives of purchasers of insurance for which
22 the association may write insurance coverage, none of which
23 shall be associated with commercial insurance carriers or the
24 insurance industry, one of which shall be appointed by the
25 Majority Leader of the House of Representatives; one of which
26 shall be appointed by the Minority Leader of the House of
27 Representatives; one of which shall be appointed by the Majority
28 Leader of the Senate; one of which shall be appointed by the
29 Minority Leader of the Senate; and two of which shall be
30 appointed by the Governor.
19870H0951B2891 - 19 -
1 (3) One independent insurance agent, appointed by the
2 Governor.
3 (4) The Insurance Commissioner, who shall serve ex officio
4 and who shall chair the board, but who may vote only in the case
5 of a tie.
6 (b) Seven members of the board, not including the Insurance
7 Commissioner, a majority of which in any combination shall be
8 made up of members other than representatives of commercial
9 insurance carriers, shall constitute a quorum.
10 (c) Board members shall not receive a salary or per diem
11 allowance for serving as members but shall be reimbursed for
12 actual and necessary expenses incurred in the performance of
13 their duties. Said expenses may include reimbursement for travel
14 and living expenses while engaged in board business.
15 (d) Each board member shall serve a term of three years, and
16 shall continue to serve thereafter until a successor is
17 appointed, except that of the members first appointed:
18 (1) The two members representing commercial insurance
19 carriers appointed by the Governor, and the member representing
20 the independent insurance agent shall serve for a term of one
21 year.
22 (2) The four members representing purchasers of insurance
23 appointed by the Majority and Minority Leaders of the House of
24 Representatives and the Senate shall serve for terms of two
25 years.
26 No member shall be eligible to serve more than two full
27 consecutive terms of three years. Vacancies on the board shall
28 be filled in the same manner in which they were originally
29 designated under subsection (a), within sixty (60) days of the
30 vacancy. A member may be removed for just cause by the
19870H0951B2891 - 20 -
1 appointing authority after recommendation by a vote of at least
2 nine members of the board.
3 (e) Within ninety (90) days of the effective date of this
4 article, the Governor, the Majority and Minority Leaders of the
5 House of Representatives and the Majority and Minority Leaders
6 of the Senate shall make all of the appointments called for
7 under this article.
8 (f) On or before September 1, 1987, the board shall meet, at
9 the call of the chair. Thereafter, the board shall meet at least
10 annually, to determine if the conditions for association action
11 under section 1006-D exist. The Insurance Commissioner shall
12 have the power to call a meeting of the board and any six
13 members of the board, upon a written letter to the chairman,
14 shall have the power to call a meeting of the board.
15 (g) All meetings of the board shall be advertised and
16 conducted pursuant to the act of July 3, 1986 (P.L.388, No.84),
17 known as the "Sunshine Act," except that the board may provide
18 for executive sessions of the board on subjects permitted to be
19 discussed in such sessions under the "Sunshine Act." No act of
20 the board shall be taken in executive session.
21 (h) The Insurance Department shall provide whatever
22 personnel services may be necessary for the board to fulfill its
23 responsibilities under this article.
24 Section 1005-D. Funding.--Where necessary, administrative
25 costs of the association, including startup expenses, shall be
26 funded by an assessed prorated contribution of all general
27 liability insurance companies licensed to do business in this
28 Commonwealth based on premiums written by the association in
29 this Commonwealth. Such costs shall be recoverable from premiums
30 written by the association. The contribution system shall be
19870H0951B2891 - 21 -
1 established by regulation of the department under section 1009-
2 D.
3 Section 1006-D. Insurance.--(a) The association shall write
4 general liability insurance policies, at the board's direction,
5 when the board determines that more than five percentum (5%) of
6 standard risks in any line or subline or classification of
7 general liability insurance cannot obtain coverage through the
8 voluntary market at standard rates or the market assistance plan
9 pursuant to Article X-C. If the board determines that coverage
10 has been available to ninety-five percentum (95%) or more of the
11 standard risks in any line or subline of insurance, for at least
12 six consecutive months, the association shall cease to write any
13 new policies in that line or subline of insurance and shall not
14 renew any policies in force at that time. No coverage shall be
15 nonrenewed without providing the insured with at least sixty
16 (60) days' notice. The association, at the board's direction,
17 may facilitate pooling arrangements wherever appropriate
18 notwithstanding any law to the contrary.
19 (b) Any standard risk person unable to obtain coverage may
20 petition the board to write insurance in a certain line or
21 subline and the board, after consideration of the extent of the
22 problem based on data obtained from the department and any other
23 appropriate sources, shall render a decision based on the
24 petition within forty-five (45) days.
25 (c) The initial areas to be considered under subsection (a)
26 are political subdivisions of the Commonwealth, commercial motor
27 vehicles, dram shops, day-care centers and nonprofit
28 organizations.
29 (d) The board may not consider coverage from the
30 associations for medical malpractice insurance, private
19870H0951B2891 - 22 -
1 passenger motor vehicle insurance or environmental impairment
2 liability insurance.
3 (e) The board shall at its discretion create separate
4 associations or accounts for each line or subline of insurance
5 that it writes and shall not commingle funds.
6 Section 1007-D. Risk Management Program.--The board shall
7 require each insured to adopt a program for risk management to
8 be offered coverage from the association. Approval by the board
9 and compliance with such risk management program shall be a
10 condition precedent to obtaining and maintaining coverage from
11 the association.
12 Section 1008-D. Risk Apportionment.--(a) The board shall,
13 after consultation with property and casualty insurers
14 transacting business in this Commonwealth, adopt a plan or plans
15 for the equitable apportionment among such insurers of general
16 liability insurance coverage for individuals or groups who are
17 standard risks, but are unable to procure such coverage through
18 the voluntary market at standard rates or the market assistance
19 plan pursuant to Article X-C. The board may adopt a joint
20 underwriting plan which shall provide for one or more designated
21 insurers able and willing to provide policyholder and claim
22 services, including the issuance of insurance policies, to act
23 on behalf of all other insurers required to participate in the
24 joint underwriting plan. Any joint underwriting plan adopted
25 shall provide for the equitable apportionment of any profits
26 realized, or of losses and expenses incurred, among
27 participating insurers. The plan shall include, but not be
28 limited to:
29 (1) Rules for the classification of risks and rates which
30 reflect to the maximum extent possible the past loss experience
19870H0951B2891 - 23 -
1 and prospective loss experience in different geographic areas
2 within this Commonwealth.
3 (2) A rating plan which reasonably reflects the prior claims
4 experience of the insureds.
5 (3) Excess coverage by insurers if the board, in its
6 discretion, requires such coverage by insurers participating in
7 the joint underwriting plan.
8 (b) In the event an underwriting deficit exists at the end
9 of the year the plan is in effect, each policyholder shall pay
10 to the joint underwriting plan a premium contingency assessment
11 not to exceed one-fifth of the premium payment paid by the
12 policyholder for that year. The joint underwriting plan shall
13 pay no further claims on any policy for which the policyholder
14 fails to pay the premium contingency assessment.
15 (c) Any deficit sustained under the plan shall first be
16 recovered through a premium contingency assessment.
17 Concurrently, the rates for insureds shall be adjusted for the
18 next year so as to be actuarially sound in conformance with
19 rules of the department.
20 (d) If there is any remaining deficit under the plan after
21 maximum collection of the premium contingency assessment, this
22 deficit shall be recovered from the companies participating in
23 the plan in the proportion that the net direct premiums of each
24 such member written during the preceding calendar year bears to
25 the aggregate net direct premiums written in this Commonwealth
26 by all members of the joint underwriting plan. It shall not be
27 permissible to use such deficit to increase automobile or
28 homeowners insurance premiums.
29 (e) Upon adoption of a plan, all general liability insurers
30 shall subscribe thereto and participate therein as a condition
19870H0951B2891 - 24 -
1 of doing business in this Commonwealth.
2 Section 1009-D. Regulations.--The board shall promulgate
3 regulations to insure that:
4 (1) The association provides liability insurance as required
5 by this act.
6 (2) There is a procedure for petitioning the board to act
7 under section 1006-D(c) and that there is a definition of
8 "standard risk."
9 (3) Losses and profits are assigned equitably under section
10 1008-D.
11 (4) Coverage is made available through licensed agents and
12 that a reasonable commission is paid.
13 (5) The cost of operating the association is reasonable in
14 relation to the service it provides to the insurance business of
15 this Commonwealth.
16 ARTICLE X-E. <--
17 ARTICLE X-C.
18 REVIEW OF RATE FILINGS.
19 Section 1001-E 1001-C. Procedure.--The commissioner shall <--
20 promulgate rules and regulations establishing, THROUGH NOTICE IN <--
21 THE PENNSYLVANIA BULLETIN, ORDER THE ESTABLISHMENT OF procedures
22 for the review of rules, rates and rating plans for property and
23 casualty insurance.
24 (b) These rules and regulations shall include, but not be
25 limited to:
26 (1) Uniform definitions.
27 (2) Information required to accompany STANDARD FORMAT AND <--
28 STANDARD METHODOLOGIES FOR the submission or modification of
29 rules, rates and rating plans.
30 (3) Public notice of any public hearing or other
19870H0951B2891 - 25 -
1 opportunities of any interested party or person to present
2 information.
3 (4) Requiring that all information filed or presented to the
4 department at any time shall be part of the public record.
5 (5) That all decisions of the department shall be based
6 solely on the evidence in the record.
7 (6) Prohibition of communication by employes of the <--
8 Insurance Department with any party to a rate filing that is not
9 on the record.
10 (6) THE PROCEDURE BY WHICH THE DEPARTMENT SHALL, AT ITS <--
11 DISCRETION, AUDIT RATEMAKING DATA.
12 ARTICLE X-F. <--
13 ARTICLE X-D <--
14 NOTICE OF INTENT TO WITHDRAW.
15 Section 1001-F 1001-D. Notice Required.--(a) Whenever an <--
16 insurer licensed to write property and casualty insurance as
17 described in section 1001-B 1001-A decides to withdraw from any <--
18 line, subline or classification of business, the insurance
19 company shall file with the Insurance Department a notice
20 detailing the intent to withdraw. The notice shall include, but
21 not be limited to, the reasons for withdrawal, the number of
22 policyholders affected, the effective date of the withdrawal, if
23 the withdrawal is Statewide or national, and a listing of
24 potential sources for replacement coverage for insureds. This
25 notice of withdrawal by insurers shall be filed at least sixty
26 days prior to the effective date of the withdrawal.
27 (b) The Insurance Department shall use this information to
28 assist in determining market conditions.
29 (c) The department shall not permit any insurer licensed to
30 write property and casualty insurance to withdraw from any line
19870H0951B2891 - 26 -
1 or classification of business without complying with the
2 provisions of this article.
3 ARTICLE X-E. <--
4 REQUESTS FOR DATA AND INFORMATION; COMPLIANCE.
5 SECTION 1001-E. REQUESTS FOR DATA AND INFORMATION.--(A) ANY
6 PERSON OR ENTITY LICENSED OR OTHERWISE AUTHORIZED TO ENGAGE IN
7 THE BUSINESS OF INSURANCE IN THIS COMMONWEALTH SHALL COMPLY WITH
8 CALLS FOR DATA AND ANY OTHER INFORMATION THAT MAY BE MADE BY THE
9 INSURANCE DEPARTMENT. COMPLIANCE WITH SUCH CALLS, RELATING TO
10 THE CONDUCT OF THE BUSINESS OF INSURANCE, SHALL INCLUDE THE
11 FOLLOWING ACTIONS:
12 (1) THE PROVISION OF ALL DATA OR INFORMATION REQUESTED
13 WITHIN THIRTY (30) CALENDAR DAYS OF THE DATE THAT THE REQUEST IS
14 FIRST RECEIVED UNLESS A DIFFERENT TIME TO RESPOND IS PROVIDED BY
15 THE DEPARTMENT OR GRANTED AS A RESULT OF A FORMAL REQUEST BY THE
16 ENTITY TO WHICH THE REQUEST IS MADE. WHERE DATA OR INFORMATION
17 IS NOT READILY AVAILABLE IN THE FORM OR FORMAT IN WHICH IT IS
18 REQUESTED, SUCH DATA AND INFORMATION SHALL BE GENERATED,
19 ORGANIZED AND PRESENTED IN THE FORM OR FORMAT REQUESTED BY THE
20 DEPARTMENT.
21 (2) THE PROVISION OF COPIES OF ACTUAL RECORDS AND DOCUMENTS
22 REQUESTED, INCLUDING, BUT NOT LIMITED TO, LETTERS, GUIDELINES,
23 LISTS, MEMORANDA, DIRECTIVES, NOTICES AND ANY FORM OF
24 COMMUNICATION WHICH RELATE TO DATA OR INFORMATION REQUESTED.
25 SECTION 1002-E. PENALTIES.--ANY PERSON OR ENTITY WHICH FAILS
26 TO COMPLY WITH THIS ARTICLE SHALL PAY UP TO A MAXIMUM CIVIL
27 PENALTY OF TEN THOUSAND DOLLARS ($10,000) AND BE SUBJECT TO A
28 FURTHER CIVIL PENALTY OF TWO HUNDRED DOLLARS ($200) DAILY UNTIL
29 FULL COMPLIANCE OCCURS.
30 Section 2. Any investments properly made pursuant to
19870H0951B2891 - 27 -
1 applicable provisions of this act prior to the effective date of
2 this amendatory act shall continue as permitted investments
3 under this act.
4 Section 3. This act is not intended to repeal section 641 of
5 the act of May 17, 1921 (P.L.789, No.285), known as The
6 Insurance Department Act of one thousand nine hundred and
7 twenty-one or its application as provided in the act of December
8 30, 1974 (P.L.1148, No.365), entitled "An act amending the act
9 of May 17, 1921 (P.L.789, No.285), entitled, as amended, 'An act
10 relating to insurance; establishing an insurance department; and
11 amending, revising, and consolidating the law relating to the
12 licensing, qualification, regulation, examination, suspension,
13 and dissolution of insurance companies, Lloyds associations,
14 reciprocal and inter-insurance exchanges, and certain societies
15 and orders, the examination and regulation of fire insurance
16 rating bureaus, and the licensing and regulation of insurance
17 agents, and brokers; the service of legal process upon foreign
18 insurance companies, associations or exchanges; providing
19 penalties, and repealing existing laws,' prohibiting the
20 licensing of lending institutions, public utilities and holding
21 companies except for the sale of certain types of insurance."
22 Section 4. Section 618(B)(11) of the act of May 17, 1921
23 (P.L.682, No.284), known as The Insurance Company Law of 1921,
24 is repealed insofar as it is inconsistent with this act.
25 Section 5. This act shall take effect as follows: <--
26 (1) As much of section 1 as relates to Article X-A shall
27 take effect in 30 days.
28 (2) The remainder of this act shall take effect
29 immediately.
30 SECTION 5. THIS ACT SHALL TAKE EFFECT AS FOLLOWS: <--
19870H0951B2891 - 28 -
1 (1) ARTICLE X-E OF THE ACT SHALL TAKE EFFECT
2 IMMEDIATELY.
3 (2) THE REMAINDER OF THIS ACT SHALL TAKE EFFECT IN 60
4 DAYS.
C11L40DGS/19870H0951B2891 - 29 -