PRINTER'S NO. 2662
No. 2030 Session of 1989
INTRODUCED BY YANDRISEVITS, BILLOW, MICHLOVIC, MELIO, PESCI,
BORTNER, COY, PRESSMANN, COLAIZZO, TRELLO AND PRESTON,
OCTOBER 23, 1989
REFERRED TO COMMITTEE ON INSURANCE, OCTOBER 23, 1989
AN ACT
1 Implementing the Federal Liability Risk Retention Act of 1986;
2 providing for regulation by the Insurance Department of risk
3 retention groups and risk purchasing groups doing business in
4 this Commonwealth; and further providing for the taxation of
5 risk retention groups and risk purchasing groups.
6 TABLE OF CONTENTS
7 Section 1. Short title.
8 Section 2. Statement of purpose.
9 Section 3. Definitions.
10 Section 4. Risk retention groups chartered in this
11 Commonwealth.
12 Section 5. Risk retention groups not chartered in this
13 Commonwealth.
14 Section 6. Risk retention groups; notice, prohibited
15 solicitation and ownership.
16 Section 7. Guaranty funds and compulsory associations.
17 Section 8. Countersignatures not required.
18 Section 9. Purchasing groups; exemption from certain laws
19 relating to the group purchase of insurance.
1 Section 10. Notice and registration requirements of
2 purchasing groups.
3 Section 11. Restrictions on insurance purchased by purchasing
4 groups.
5 Section 12. Insurance company interest in purchasing groups
6 doing business in this Commonwealth prohibited.
7 Section 13. Taxation of premiums paid by purchasing groups.
8 Section 14. Administrative and procedural authority regarding
9 risk retention groups and purchasing groups.
10 Section 15. Duty of agent or broker to obtain license.
11 Section 16. Financial responsibility.
12 Section 17. Binding effect of orders issued in United States
13 District Court.
14 Section 18. Rules and regulations.
15 Section 19. Severability.
16 Section 20. Effective date.
17 The General Assembly of the Commonwealth of Pennsylvania
18 hereby enacts as follows:
19 Section 1. Short title.
20 This act shall be known and may be cited as the Pennsylvania
21 Risk Retention Act.
22 Section 2. Statement of purpose.
23 The purpose of this act is to regulate the formation and
24 operation of risk retention groups and risk purchasing groups in
25 this Commonwealth formed pursuant to the provisions of the
26 Liability Risk Retention Act of 1986 (Public Law 99-563, 15
27 U.S.C. § 3901 et seq.) to the extent permitted by such law.
28 Section 3. Definitions.
29 The following words and phrases when used in this act shall
30 have the meanings given to them in this section unless the
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1 context clearly indicates otherwise:
2 "Admitted insurer." An insurer with a valid certificate of
3 authority to do insurance business in this Commonwealth.
4 "Commissioner." The Insurance Commissioner of the
5 Commonwealth.
6 "Completed operations liability." Liability arising out of
7 the installation, maintenance or repair of any product at a site
8 which is not owned or controlled by:
9 (1) any person who performs that work; or
10 (2) any person who hires an independent contractor to
11 perform that work;
12 but shall include liability for activities which are completed
13 or abandoned before the date of the occurrence giving rise to
14 the liability.
15 "Doing business." The acts which constitute the doing of
16 insurance business in this Commonwealth as set forth in section
17 208(b) of the act of May 17, 1921 (P.L.789, No.285), known as
18 The Insurance Department Act of one thousand nine hundred and
19 twenty-one, except that risk retention groups and risk
20 purchasing groups are not doing business when responding to a
21 request for coverage received directly from a Pennsylvania
22 resident and not as a result of solicitation.
23 "Domicile." For purposes of determining the state in which a
24 purchasing group is domiciled, the term means:
25 (1) For a corporation, the state in which the purchasing
26 group is incorporated.
27 (2) For an unincorporated entity, the state of its
28 principal place of business.
29 "Eligible surplus lines insurer." A non-admitted insurer
30 doing business in this Commonwealth in conformance with section
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1 7 of the act of January 24, 1966 (1965 P.L.1509, No.531),
2 referred to as the Surplus Lines Insurance Law.
3 "Hazardous financial condition." A condition in which, based
4 on its present or reasonably anticipated financial condition, a
5 risk retention group, although not yet financially impaired or
6 insolvent, is unlikely to be able:
7 (1) to meet obligations to policyholders with respect to
8 known claims and reasonably anticipated claims; or
9 (2) to pay other obligations in the normal course of
10 business.
11 "Insurance." Primary insurance, excess insurance,
12 reinsurance, surplus lines insurance and any other arrangement
13 for shifting and distributing risk which is determined to be
14 insurance under the laws of this Commonwealth.
15 "Liability."
16 (1) The term means legal liability for damages
17 (including costs of defense, legal costs and fees, and other
18 claims expenses) because of injuries to other persons, damage
19 to their property, or other damage or loss to such other
20 persons resulting from or arising out of:
21 (i) any business (whether profit or nonprofit),
22 trade, product, services (including professional
23 services), premises or operations; or
24 (ii) any activity of any state or local government,
25 or any agency or political subdivision thereof.
26 (2) The term does not include personal risk liability
27 and an employer's liability with respect to its employees
28 other than legal liability under the Employers' Liability Act
29 (45 U.S.C. § 51 et seq.).
30 "Located." A purchasing group that is doing business in this
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1 Commonwealth.
2 "Non-admitted insurer." An insurer that does not have a
3 certificate of authority to do insurance business in this
4 Commonwealth. The term includes insurance exchanges authorized
5 under laws of various states.
6 "Personal risk liability." Liability for damages because of
7 injury to any person, damage to property or other loss or damage
8 resulting from any personal, familial or household
9 responsibilities or activities, rather than from
10 responsibilities or activities referred to in the definition of
11 "liability."
12 "Plan of operation or a feasibility study." An analysis
13 which presents the expected activities and results of a risk
14 retention group, including, at a minimum, all of the following:
15 (1) Information sufficient to verify that its members
16 are engaged in businesses or activities similar or related
17 with respect to the liability to which such members are
18 exposed by virtue of any related, similar or common business,
19 trade, product, services, premises or operations.
20 (2) For each state in which it intends to operate, the
21 coverages, deductibles, coverage limits, rates and rating
22 classification systems for each kind of liability insurance
23 the group intends to offer.
24 (3) Historical and expected loss experience of the
25 proposed members and national experience of similar exposures
26 to the extent that this experience is reasonably available.
27 (4) Pro forma financial statements and projections.
28 (5) Appropriate opinions by a qualified, independent
29 casualty actuary, including a determination of minimum
30 premium or participation levels required to commence
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1 operations and to prevent a hazardous financial condition.
2 (6) Identification of management, underwriting and
3 claims procedures, marketing methods, managerial oversight
4 methods, investment policies and reinsurance agreements.
5 (7) The states in which the risk retention group intends
6 to operate or is currently operating.
7 (8) Such other matters as may be prescribed by the
8 commissioner for liability insurance companies authorized by
9 the insurance laws of the state in which the risk retention
10 group is chartered.
11 "Product liability." Liability for damages because of any
12 personal injury, death, emotional harm, consequential economic
13 damage or property damage (including damages resulting from the
14 loss of use of property) arising out of the manufacture, design,
15 importation, distribution, packaging, labeling, lease or sale of
16 a product. The term does not include the liability of any person
17 for these damages if the product involved was in the possession
18 of such a person when the incident giving rise to the claim
19 occurred.
20 "Purchasing group." Any group which:
21 (1) has as one of its purposes the purchase of liability
22 insurance on a group basis;
23 (2) purchases such insurance only for its group members
24 and only to cover their similar or related liability
25 exposure, as described in paragraph (3);
26 (3) is composed of members whose businesses or
27 activities are similar or related with respect to the
28 liability to which members are exposed by virtue of any
29 related, similar or common business, trade, product,
30 services, premises or operations; and
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1 (4) is domiciled in any state.
2 "Risk retention group." Any corporation or other limited
3 liability association:
4 (1) whose primary activity consists of assuming and
5 spreading all, or any portion, of the liability exposure of
6 its group members;
7 (2) which is organized for the primary purpose of
8 conducting the activity described under paragraph (1);
9 (3) which:
10 (i) is chartered and licensed as an insurance
11 company to write liability insurance and authorized to
12 engage in the business of insurance under the laws of any
13 state; or
14 (ii) before January 1, 1985, was chartered or
15 licensed and authorized to engage in the business of
16 insurance under the laws of Bermuda or the Cayman Islands
17 and, before such date, had certified to the insurance
18 commissioner of at least one state that it satisfied the
19 capitalization requirements of such state, except that
20 any such group shall be considered to be a risk retention
21 group only if it has been engaged in business
22 continuously since such date and only for the purpose of
23 continuing to provide insurance to cover product
24 liability or completed operations liability, as such
25 terms were defined in the Product Liability Risk
26 Retention Act of 1981 (Public Law 97-45, 95 Stat. 949),
27 before the date of the enactment of the Liability Risk
28 Retention Act of 1986 (Public Law 99-563, 15 U.S.C. §
29 3901 et seq.);
30 (4) which does not exclude any person from membership in
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1 the group solely to provide for members of such a group a
2 competitive advantage over such a person;
3 (5) which:
4 (i) has as its owners only persons who comprise the
5 membership of the risk retention group and who are
6 provided insurance by such group; or
7 (ii) has as its sole owner an organization which has
8 as its members only persons who comprise the membership
9 of the risk retention group and which organization has as
10 its owners only persons who comprise the membership of
11 the risk retention group and who are provided insurance
12 by the risk retention group.
13 (6) whose members are engaged in businesses or
14 activities similar or related with respect to the liability
15 of which such members are exposed by virtue of any related,
16 similar or common business trade, product, services, premises
17 or operations; and
18 (7) whose activities do not include the provision of
19 insurance other than:
20 (i) liability insurance for assuming and spreading
21 all or any portion of the liability of its group members;
22 and
23 (ii) reinsurance with respect to the liability of
24 any other risk retention group (or any members of such
25 other risk retention group) which is engaged in
26 businesses or activities so that the group or member
27 meets the requirement described in paragraph (6) from
28 membership in the risk retention group which provides
29 such reinsurance; and
30 (8) the name of which includes the phrase "Risk
19890H2030B2662 - 8 -
1 Retention Group."
2 "State." Any state of the United States or the District of
3 Columbia.
4 Section 4. Risk retention groups chartered in this
5 Commonwealth.
6 (a) General rule.--A domestic risk retention group shall,
7 pursuant to the provisions of the act of May 17, 1921 (P.L.682,
8 No.284), known as The Insurance Company Law of 1921, and the act
9 of May 17, 1921 (P.L.789, No.285), known as The Insurance
10 Department Act of one thousand nine hundred and twenty-one, be
11 chartered and licensed as a domestic fire or casualty insurance
12 company to write only liability insurance pursuant to this act
13 and, except as provided elsewhere in this act, shall comply with
14 all the laws, rules, regulations and requirements applicable to
15 such insurers chartered and licensed in this Commonwealth and
16 with section 5 to the extent that such requirements are not a
17 limitation of laws, rules, regulations or requirements of this
18 Commonwealth.
19 (b) Plan of operation or feasibility study.--Before it may
20 offer insurance in any state, each domestic risk retention group
21 shall also submit for approval to the commissioner a plan of
22 operation or a feasibility study. In the event of any subsequent
23 material change in any item of the plan of operation or
24 feasibility study, the risk retention group shall submit an
25 appropriate revision within ten days of any such change. The
26 group shall not offer any additional kinds of liability
27 insurance in this Commonwealth or in any other state until a
28 revision of such plan or study is approved by the commissioner.
29 (c) Exception to plan or study requirement.--The provisions
30 of subsection (b), relating to the submission of a plan of
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1 operation or feasibility study, shall not apply with respect to
2 any kind or classification of liability insurance which:
3 (1) was defined in the Product Liability Risk Retention
4 Act of 1981 (Public Law 97-45, 95 Stat. 949), before October
5 27, 1986; and
6 (2) was offered before such date by any risk retention
7 group which had been chartered and operating for not less
8 than three years before such date.
9 (d) Information in application.--At the time of filing its
10 application for charter, the risk retention group shall provide
11 to the commissioner in summary form the following information:
12 (1) The identity of the initial members of the group.
13 (2) The identity of those individuals who organized the
14 group or who will provide administrative services or
15 otherwise influence or control the activities of the group.
16 (3) The amount and nature of initial capitalization.
17 (4) The coverages to be afforded.
18 (5) The states in which the group intends to operate.
19 Section 5. Risk retention groups not chartered in this
20 Commonwealth.
21 (a) General rule.--A risk retention group chartered and
22 licensed in a state other than this Commonwealth and seeking to
23 do business as a risk retention group in this Commonwealth shall
24 comply with the laws of this Commonwealth, as provided in this
25 section.
26 (b) Notice of operations and designation of commissioner as
27 agent.--Before offering insurance in this Commonwealth, a risk
28 retention group shall submit to the commissioner all of the
29 following:
30 (1) A statement identifying the state or states in which
19890H2030B2662 - 10 -
1 the risk retention group is chartered and licensed as an
2 insurance company to write liability insurance, the charter
3 date, its principal place of business and such other
4 information, including information on its membership, as the
5 commissioner may require to verify that the risk retention
6 group is qualified under the definition of "risk retention
7 group" in section 3.
8 (2) A copy of its plan of operations or a feasibility
9 study and copies of all revisions of such plan or study
10 submitted to the state in which the risk retention group is
11 chartered and licensed, provided that the provision relating
12 to the submission of a plan of operation or a feasibility
13 study shall not apply with respect to any kind or
14 classification of liability insurance which:
15 (i) was defined in the Product Liability Risk
16 Retention Act of 1981 (Public Law 97-45, 95 Stat. 949 et
17 seq.) before October 27, 1986; and
18 (ii) was offered before such date by any risk
19 retention group which had been chartered and was
20 operating for not less than three years before such date.
21 (3) A copy of the most recent annual statement as
22 described in subsection (d)(1).
23 (4) A statement of registration for which a filing fee
24 shall be imposed, which statement appoints the commissioner
25 as its agent for the purpose of receiving service of legal
26 documents or process.
27 (i) The appointment of the commissioner shall be
28 accompanied by written designation of the name and
29 address of the officer, agent or other person to whom
30 such process shall be forwarded by the commissioner or
19890H2030B2662 - 11 -
1 his deputy on behalf of such risk retention group. In the
2 event such designation is changed, a new certificate of
3 designation shall be filed with the commissioner within
4 ten days of such change.
5 (ii) Service of process upon a risk retention group
6 pursuant to this paragraph shall be made by serving the
7 commissioner, or any deputy commissioner or any salaried
8 employee of the department whom the commissioner
9 designates for such purpose, with two copies thereof and
10 the payment of a fee to be published by notice in the
11 Pennsylvania Bulletin. The commissioner shall forward a
12 copy of such process by registered or certified mail to
13 the risk retention group at the address given in its
14 written certificate of designation and shall keep a
15 record of all process so served upon him. Service of
16 process so made shall be deemed made within the
17 territorial jurisdiction of any court in this
18 Commonwealth.
19 (c) Revision of plan or study.--The risk retention group
20 shall submit a copy of any revision to its plan of operation or
21 feasibility study required by section 4(b) at the same time that
22 such revision is submitted to the commissioner of its chartering
23 state.
24 (d) Financial condition.--Any risk retention group doing
25 business in this Commonwealth shall submit annually to the
26 commissioner, on or before March 1, all of the following:
27 (1) A copy of the group's financial statement submitted
28 to the state in which the risk retention group is chartered
29 and licensed, which shall be certified by an independent
30 public accountant and shall contain a statement of opinion on
19890H2030B2662 - 12 -
1 loss and loss adjustment expense reserves made by a member of
2 the American Academy of Actuaries or a qualified loss reserve
3 specialist.
4 (2) A copy of the most recent examination of the risk
5 retention group as certified by the commissioner or public
6 official conducting the examination.
7 (3) Upon request by the commissioner, a copy of any
8 information or document pertaining to any outside audit
9 performed with respect to the risk retention group.
10 (4) Such information as may be required to verify its
11 continuing qualification as a risk retention group, as
12 defined in section 3.
13 (e) Notice of order of financial impairment.--If a risk
14 retention group is found to be in a hazardous financial
15 condition by any court of competent jurisdiction, the risk
16 retention group shall submit a copy of the court order to the
17 commissioner within ten days of the date of the order.
18 (f) Penalties.--A risk retention group shall be liable for a
19 fine of $100 per day of delinquency for either of the following:
20 (1) Failure to file the annual statement as provided by
21 law on the first day of March, except that, for good cause
22 shown, the commissioner may grant, after written request, a
23 reasonable extension of time within which such statement may
24 be filed.
25 (2) Failure to submit to the commissioner a copy of the
26 order of a court of competent jurisdiction finding the risk
27 retention group to be in a hazardous financial condition or
28 financially impaired within ten days of the date of such
29 order.
30 (g) Taxation of risk retention groups.--
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1 (1) Each risk retention group shall be liable for the
2 payment of premium taxes and taxes on premiums of direct
3 business for risks resident or located within this
4 Commonwealth and shall report to the commissioner the gross
5 direct premiums, less returns thereon, written for risks
6 resident or located within this Commonwealth. Such risk
7 retention group shall be subject to taxation and any
8 applicable fines and penalties related thereto on the same
9 basis as a foreign admitted insurer, pursuant to section 902
10 of the act of March 4, 1971 (P.L.6, No.2), known as the Tax
11 Reform Code of 1971.
12 (2) To the extent that licensed agents, brokers or
13 surplus lines agents with Pennsylvania licenses are utilized
14 pursuant to section 6, they shall report to the commissioner
15 the premiums for direct business for risks resident or
16 located within this Commonwealth which such licensees have
17 placed with or on behalf of a risk retention group not
18 chartered and licensed in this Commonwealth.
19 (h) Compliance with Unfair Insurance Practices Act.--Any
20 risk retention group and its agents and representatives shall
21 comply with the act of July 22, 1974 (P.L.589, No.205), known as
22 the Unfair Insurance Practices Act, insofar as its provisions
23 apply to unfair claims practices and deceptive, false or
24 fraudulent practices. However, if the commissioner seeks an
25 injunction regarding such conduct, the injunction must be
26 obtained from a court of competent jurisdiction.
27 (i) Examination regarding financial condition.--Any risk
28 retention group shall submit to an examination by the Insurance
29 Commissioner of the Commonwealth to determine its financial
30 condition if the commissioner of the jurisdiction in which the
19890H2030B2662 - 14 -
1 group is chartered and licensed has not initiated an examination
2 or does not initiate an examination within 60 days after a
3 request by the Insurance Commissioner of the Commonwealth. Any
4 such examination shall be coordinated with other jurisdictions
5 to the extent feasible in order to avoid unjustified repetition
6 and shall be conducted in an expeditious manner and in
7 accordance with the National Association of Insurance
8 Commissioners' Examination Handbook.
9 (j) Prohibited coverage.--The terms of any insurance policy
10 issued by such risk retention group shall not provide or be
11 construed to provide insurance policy coverage prohibited
12 generally by state statute or declared unlawful by the highest
13 court of the state whose law applies to such policy.
14 (k) Delinquency proceedings.--A risk retention group doing
15 business in this Commonwealth shall comply with a lawful order
16 issued in a voluntary dissolution proceeding or in a delinquency
17 proceeding commenced by a state insurance commissioner if there
18 has been a finding of hazardous financial condition or financial
19 impairment after an examination under subsection (i).
20 (l) Operation prior to enactment of this act.--Any risk
21 retention groups doing business in this Commonwealth prior to
22 the enactment of this act shall, within 30 days after the
23 effective date of this act, comply with the provisions of this
24 section.
25 (m) Penalties.--A risk retention group which violates any
26 provision of this act shall be subject to fines and penalties
27 applicable to admitted insurers generally, including revocation
28 of its right to do business in this Commonwealth.
29 Section 6. Risk retention groups; notice, prohibited
30 solicitation and ownership.
19890H2030B2662 - 15 -
1 (a) Notice to purchasers.--Every application form for
2 insurance from a risk retention group and every policy issued by
3 a risk retention group shall contain, in ten-point type on the
4 front page and the declaration page, the following notice:
5 NOTICE
6 This policy is issued by your risk retention group. Your
7 risk retention group may not be subject to all of the
8 insurance laws and regulations of your state. State
9 insurance insolvency guaranty funds are not available for
10 your risk retention group.
11 (b) Prohibited acts regarding solicitation or sale.--The
12 following acts by a risk retention group are hereby prohibited:
13 (1) The solicitation or sale of insurance by a risk
14 retention group to any person who is not eligible for
15 membership in such group.
16 (2) The solicitation or sale of insurance by, or
17 operation of, a risk retention group that has been found by a
18 court of competent jurisdiction to be in a hazardous
19 financial condition or financially impaired.
20 (c) Prohibition on ownership by an insurance company.--No
21 risk retention groups shall be allowed to do business in this
22 Commonwealth if an insurance company is directly or indirectly a
23 member or owner of such risk retention group, other than in the
24 case of a risk retention group all of whose members are
25 insurance companies.
26 Section 7. Guaranty funds and compulsory associations.
27 (a) Prohibition.--No risk retention group shall be required
28 or permitted to join or contribute financially to any insurance
29 insolvency guaranty fund, or similar mechanism, in this
30 Commonwealth, nor shall any risk retention group, or its
19890H2030B2662 - 16 -
1 insureds or claimants against its insureds, receive any benefit
2 from any such fund for claims arising under the insurance
3 policies issued by such risk retention group.
4 (b) Risks not covered.--When a purchasing group obtains
5 insurance covering its members' risks from an insurer not
6 admitted in this Commonwealth or from a risk retention group, no
7 such risks, wherever resident or located, shall be covered by
8 any insurance guaranty fund or similar mechanism in this
9 Commonwealth.
10 (c) Limitation on claims covered.--When a purchasing group
11 obtains insurance covering its members' risks from an admitted
12 insurer, only covered claims as defined in the act of November
13 25, 1970 (P.L.716, No.232), known as The Pennsylvania Insurance
14 Guaranty Association Act, shall be covered by the State guaranty
15 fund.
16 (d) Apportionment of losses and expenses.--The commissioner
17 may require risk retention groups not chartered in this
18 Commonwealth to participate, and may exempt domestic risk
19 retention groups from participation, in any mechanism
20 established or authorized under the laws of this Commonwealth
21 for the equitable apportionment among insurers of liability
22 insurance losses and expenses incurred on policies written
23 through such mechanism; and such risk retention groups shall
24 submit sufficient information to the commissioner to enable the
25 commissioner to apportion on a nondiscriminatory basis the risk
26 retention group's proportionate share of such losses and
27 expenses.
28 Section 8. Countersignatures not required.
29 A policy of insurance issued by a risk retention group to any
30 member of that group shall not be required to be countersigned
19890H2030B2662 - 17 -
1 by an insurance agent or broker residing in this Commonwealth.
2 Section 9. Purchasing groups; exemption from certain laws
3 relating to the group purchase of insurance.
4 (a) General rule.--A purchasing group and its insurer or
5 insurers shall be subject to all applicable laws of this
6 Commonwealth, except that the purchasing group and its insurer
7 or insurers shall be exempt, in regard to liability insurance
8 for the purchasing group, from any law that would do any of the
9 following:
10 (1) Prohibit the establishment of a purchasing group.
11 (2) Make it unlawful for an insurer to provide or offer
12 to provide insurance on a basis providing, to a purchasing
13 group or its members, advantages, based on their loss and
14 expense experience, not afforded to other persons with
15 respect to rates, policy forms, coverages or other matters.
16 (3) Prohibit a purchasing group or its members from
17 purchasing insurance on a group basis described in paragraph
18 (2).
19 (4) Prohibit a purchasing group from obtaining insurance
20 on a group basis because the group has not been in existence
21 for a minimum period of time or because any member has not
22 belonged to the group for a minimum period of time.
23 (5) Require that a purchasing group must have a minimum
24 number of members, common ownership or affiliation, or a
25 certain legal form.
26 (6) Require that a certain percentage of a purchasing
27 group must obtain insurance on a group basis.
28 (7) Otherwise discriminate against a purchasing group or
29 any of its members.
30 (b) Additional exemption.--An insurer shall be exempt from
19890H2030B2662 - 18 -
1 any laws of this Commonwealth which prohibits providing or
2 offering to provide, to a purchasing group or its members,
3 advantages, based on their loss and expense experience, not
4 afforded to other persons with respect to rates, policy forms,
5 coverages or other matters.
6 Section 10. Notice and registration requirements of purchasing
7 groups.
8 (a) Notice.--A purchasing group which intends to do business
9 in this Commonwealth shall, prior to doing such business,
10 furnish notice to the commissioner which shall do all of the
11 following:
12 (1) Identify the state in which the group is domiciled.
13 (2) Identify the principal place of business of the
14 group.
15 (3) Identify all other states in which the group intends
16 to do business or is doing business.
17 (4) Specify the kinds and classifications of liability
18 insurance which the purchasing group intends to purchase.
19 (5) Specify the method by which, and the person or
20 persons, if any, through whom, insurance will be offered to
21 its members whose risks are resident or located in this
22 Commonwealth.
23 (6) Identify the names and chartering jurisdictions of
24 the insurance company or companies from which the group
25 intends to purchase its insurance.
26 (7) Confirm that the insurer from which the purchasing
27 group intends to purchase insurance has filed with the
28 department, pursuant to section 354 of the act of May 17,
29 1921 (P.L.682, No.284), known as The Insurance Company Law of
30 1921, and all other provisions of insurance laws, rules and
19890H2030B2662 - 19 -
1 regulations governing policy form and rate standards, with
2 the rates and forms it intends to use to provide coverage for
3 the risks resident in this Commonwealth.
4 (8) Provide such other information as may be required by
5 the commissioner to verify that the purchasing group is
6 qualified under the definition of "purchasing group" in
7 section 3.
8 (b) Changes.--A purchasing group shall notify the
9 commissioner within ten days as to any subsequent changes in any
10 of the items set forth in subsection (a).
11 (c) Additional information.--Each purchasing group which is
12 required to give notice pursuant to subsection (a) shall also
13 furnish such information as may be required by the commissioner
14 to do any of the following:
15 (1) Verify that the entity qualifies as a purchasing
16 group.
17 (2) Determine the location of the purchasing group.
18 (3) Determine appropriate tax treatment.
19 (d) Statement of registration.--The purchasing group shall
20 submit a statement of registration, for which a filing fee shall
21 be imposed, which designates the commissioner as its agent
22 solely for the purpose of receiving service of legal documents
23 or process.
24 (1) The designation of the commissioner shall be
25 accompanied by written designation of the name and address of
26 the officer, agent or other person to whom such process shall
27 be forwarded by the commissioner or his deputy on behalf of
28 such purchasing group. In the event such designation is
29 changed, a new certificate of designation shall be filed with
30 the commissioner within ten days of such change.
19890H2030B2662 - 20 -
1 (2) Service of process upon a purchasing group pursuant
2 to this subsection shall be made by serving the commissioner,
3 any deputy commissioner or any salaried employee of the
4 department whom the commissioner designates for such purpose
5 with two copies thereof and the payment of a fee to be
6 published by notice in the Pennsylvania Bulletin. The
7 commissioner shall forward a copy of such process by
8 registered or certified mail to the purchasing group at the
9 address given in its written certificate of designation, and
10 shall keep a record of all process so served upon him.
11 Service of process so made shall be deemed made within the
12 territorial jurisdiction of any court in this Commonwealth.
13 (3) Such requirements shall not apply in the case of a
14 purchasing group which only purchases insurance that was
15 authorized under the Products Liability Risk Retention Act of
16 1981 (Public Law 97-45, 95 Stat. 949); and
17 (i) which in any state of the United States:
18 (A) was domiciled before April 1, 1986; and
19 (B) is domiciled on and after October 27, 1986;
20 and
21 (ii) which:
22 (A) before October 27, 1986, purchased insurance
23 from an insurance company licensed in any state;
24 (B) since October 27, 1986, purchased its
25 insurance from an insurance company licensed in any
26 state;
27 (C) was a purchasing group under the
28 requirements of the Product Liability Risk Retention
29 Act of 1981 before October 27, 1986; and
30 (D) does not purchase insurance that was not
19890H2030B2662 - 21 -
1 authorized for purposes of an exemption under that
2 act, as in effect before October 27, 1986.
3 (e) Prior business.--Any purchasing group which was doing
4 business in this Commonwealth prior to the enactment of this act
5 shall, within 30 days after the effective date of this act,
6 furnish notice to the commissioner pursuant to the provisions of
7 subsection (a) and furnish such information as may be required
8 pursuant to subsections (b), (c) and (d).
9 Section 11. Restrictions on insurance purchased by purchasing
10 groups.
11 (a) Purchase of liability insurance.--If a purchasing group
12 located in this Commonwealth purchases liability insurance for
13 its members from a risk retention group that is not chartered
14 and licensed in this Commonwealth or from a non-admitted
15 insurer, it may do so only through licensed brokers and surplus
16 lines agents acting pursuant to the act of January 24, 1966
17 (1965 P.L.1509, No.531), referred to as the Surplus Lines
18 Insurance Law, as set forth in section 15(b) of this act.
19 (b) Terms of liability insurance policy.--The terms of any
20 liability insurance policy obtained by a purchasing group shall
21 not provide or be construed to provide insurance coverage
22 prohibited generally by state statute or declared unlawful by
23 the highest court of the state whose law applies to such policy.
24 If the laws of this Commonwealth apply to an insurance policy
25 obtained by a purchasing group, the terms of that policy shall
26 not provide or be construed to provide insurance coverage
27 prohibited generally by state statute or declared unlawful by
28 the highest court of this Commonwealth which has construed such
29 coverage.
30 (c) Information to be furnished.--A purchasing group which
19890H2030B2662 - 22 -
1 obtains liability insurance from a non-admitted insurer that is
2 an eligible surplus lines insurer in this Commonwealth or from a
3 risk retention group shall inform each of the members of such
4 purchasing group which has a risk resident or located in this
5 Commonwealth that such risk is not protected by an insurance
6 insolvency guaranty fund in this Commonwealth, and that such
7 risk retention group or such non-admitted insurer may not be
8 subject to all insurance laws and regulations of this
9 Commonwealth.
10 (d) Limitation.--No purchasing group may purchase insurance
11 providing for a deductible or self-insured retention applicable
12 to the group as a whole; however, coverage may provide for a
13 deductible or self-insured retention applicable to individual
14 members.
15 (e) Standards.--Purchases of insurance by purchasing groups
16 are subject to the same standards regarding aggregate limits
17 which are applicable to all purchases of group insurance.
18 Section 12. Insurance company interest in purchasing groups
19 doing business in this Commonwealth prohibited.
20 No insurer, or director, officer or employee of an insurer,
21 may have any interest in a purchasing group doing business in
22 this Commonwealth. Prohibited interest includes, but is not
23 limited to, soliciting members for the purchasing group, and
24 belonging to the purchasing group as a member, provided that
25 nothing in this section will prohibit a purchasing group
26 composed entirely of insurers, or directors, officers or
27 employees of insurers, if coverage is obtained from a company
28 not related to the group members.
29 Section 13. Taxation of premiums paid by purchasing groups.
30 (a) Premiums subject to taxation.--
19890H2030B2662 - 23 -
1 (1) Premiums paid for coverage obtained from admitted
2 insurers and risk retention groups doing business in this
3 Commonwealth shall be taxed on the same basis as premiums
4 paid to admitted insurers under section 902 of the act of
5 March 4, 1971 (P.L.6, No.2), known as the Tax Reform Code of
6 1971.
7 (2) Premiums paid for coverage obtained from a non-
8 admitted insurer in compliance with this act shall be taxed
9 at the rate applicable to premiums paid to surplus lines
10 insurers pursuant to section 11(a) of the act of January 24,
11 1966 (1965 P.L.1509, No.531), referred to as the Surplus
12 Lines Insurance Law.
13 (b) Responsibility for remitting taxes.--
14 (1) To the extent that the purchasing group or its
15 members pay premiums for coverage of risks resident or
16 located within this Commonwealth to admitted insurers or risk
17 retention groups doing business in this Commonwealth, the
18 insurer or risk retention group receiving those premiums is
19 responsible for remitting the tax to the Department of
20 Revenue.
21 (2) To the extent that the purchasing group or its
22 members pay premiums for coverage of risks resident or
23 located within this Commonwealth to a non-admitted insurer,
24 the surplus lines agent who places the business shall collect
25 and remit the taxes for premiums.
26 (3) To the extent a surplus lines agent does not effect
27 coverage, the purchasing group shall collect and remit the
28 tax for coverage of risks resident or located in this
29 Commonwealth. To the extent the purchasing group does not
30 remit the tax, the purchasing group shall inform each member
19890H2030B2662 - 24 -
1 of the responsibility for individual remittance of the tax.
2 Section 14. Administrative and procedural authority regarding
3 risk retention groups and purchasing groups.
4 The commissioner is authorized to make use of any of the
5 powers established under the insurance laws of this Commonwealth
6 to enforce the laws of this Commonwealth not specifically
7 preempted by the Liability Risk Retention Act of 1986 (Public
8 Law 99-563, 15 U.S.C. § 3901 et seq.), including the
9 commissioner's administrative authority to investigate, issue
10 subpoenas, conduct depositions and hearings, issue orders,
11 impose penalties and seek injunctive relief. With regard to any
12 investigation, administrative proceedings or litigation, the
13 commissioner may rely on the procedural laws of this
14 Commonwealth. The injunctive authority of the commissioner in
15 regard to risk retention groups is restricted by the requirement
16 that any injunction be issued by a court of competent
17 jurisdiction.
18 Section 15. Duty of agent or broker to obtain license.
19 (a) Risk retention groups not chartered in this
20 Commonwealth.--
21 (1) No person, firm, association or corporation shall
22 act or aid in any manner in soliciting, negotiating or
23 procuring liability insurance in this Commonwealth from a
24 risk retention group not chartered in this Commonwealth
25 unless such person, firm, association or corporation is
26 licensed as a broker in accordance with section 622 of the
27 act of May 17, 1921 (P.L.789, No.285), known as The Insurance
28 Department Act of one thousand nine hundred and twenty-one.
29 (2) No authorized or acknowledged agent of a risk
30 retention group not chartered in this Commonwealth who acts
19890H2030B2662 - 25 -
1 as such in the solicitation of, negotiation for or
2 procurement of liability insurance, other than as a licensed
3 insurance broker, may act on behalf of a risk retention group
4 not chartered in this Commonwealth unless such agent is
5 licensed as an insurance agent in accordance with the law of
6 the state where the risk retention group is licensed.
7 (b) Purchasing groups.--
8 (1) No person, firm, association or corporation shall
9 act or aid in any manner in negotiating or procuring
10 liability insurance in this Commonwealth for a purchasing
11 group or for any of its members from an admitted insurer or a
12 domestic risk retention group unless such person, firm,
13 association or corporation is licensed either as an insurance
14 agent in accordance with section 603 of the act of May 17,
15 1921 (P.L.789, No.285), known as The Insurance Department Act
16 of one thousand nine hundred and twenty-one, or as an
17 insurance broker in accordance with section 622 of The
18 Insurance Department Act of thousand nine hundred and twenty-
19 one, or from a risk retention group chartered in a state
20 unless the person, firm, association or corporation has
21 complied with the provisions of paragraph (a)(1).
22 (2) No person, firm, association or corporation shall
23 act or aid in any manner in negotiating or procuring
24 liability insurance from a non-admitted insurer on behalf of
25 a purchasing group located in this Commonwealth unless such
26 person, firm, association or corporation is licensed as a
27 surplus lines agent in accordance with section 8 of the act
28 of January 24, 1966 (1965 P.L.1509, No.531), referred to as
29 the Surplus Lines Insurance Law.
30 (3) Notwithstanding the provisions of section 8(a) of
19890H2030B2662 - 26 -
1 the Surplus Lines Insurance Law, a nonresident of this
2 Commonwealth who acts in this Commonwealth solely on behalf
3 of a purchasing group located in this Commonwealth in
4 obtaining liability insurance with a non-admitted insurer is
5 exempt from the requirements of maintaining an office in this
6 Commonwealth in order to obtain a surplus lines agent's
7 license for the limited purpose of effecting coverage for
8 such purchasing group.
9 (c) Solicitation.--Nothing in this section shall prohibit
10 direct solicitation by officers or employees of risk retention
11 groups or risk purchasing groups of Pennsylvania residents.
12 (d) Information as to notice requirement.--Every person,
13 firm, association or corporation licensed pursuant to the
14 provisions of subsection (a) or (b) on business placed with risk
15 retention groups or written through a purchasing group shall
16 inform each prospective insured of the provisions of the notice
17 required by section 6(a) in the case of a risk retention group
18 and by section 11(c) in the case of a purchasing group.
19 Section 16. Financial responsibility.
20 (a) General rule.--Whenever, pursuant to the laws of this
21 Commonwealth or any local law, a demonstration of financial
22 responsibility is required as a condition for obtaining a
23 license or permit to undertake specified activities, if any such
24 requirement may be satisfied only by obtaining insurance
25 coverage from an admitted insurer or non-admitted insurer that
26 qualifies as an eligible surplus lines insurer, such requirement
27 may not be satisfied by purchasing insurance from a risk
28 retention group not chartered and licensed in this Commonwealth
29 or through a risk purchasing group which has purchased coverage
30 from a risk retention group not chartered and licensed in this
19890H2030B2662 - 27 -
1 Commonwealth.
2 (b) Applicability of Motor Vehicle Financial Responsibility
3 Law.--Any risk retention group and any insurer who transacts the
4 business of insurance in this Commonwealth with a purchasing
5 group or its members shall not be exempt from the policy form or
6 coverage requirements of 75 Pa.C.S. Ch. 17 (relating to
7 financial responsibility).
8 Section 17. Binding effect of orders issued in United States
9 District Court.
10 An order issued by any district court of the United States
11 enjoining a risk retention group from soliciting or selling
12 insurance, or operating in any state, or in all states or in any
13 territory or possession of the United States, upon a finding
14 that such a group is in a hazardous financial or financially
15 impaired condition shall be enforceable in the courts of this
16 Commonwealth.
17 Section 18. Rules and regulations.
18 The commissioner may establish and, from time to time, amend
19 such rules as may be necessary or desirable to carry out the
20 provisions of this act.
21 Section 19. Severability.
22 If any clause, sentence, paragraph, section or part of this
23 act, or the application thereof to any person or circumstances,
24 shall, for any reason, be adjudged by any court of competent
25 jurisdiction to be invalid, such judgment shall not affect,
26 impair or invalidate the remainder of this act, and the
27 application thereof to other persons or circumstances, but shall
28 be confined in its operation to the clause, sentence, paragraph,
29 section or part thereof directly involved in the controversy in
30 which such judgment shall have been rendered and to the person
19890H2030B2662 - 28 -
1 or circumstances involved.
2 Section 20. Effective date.
3 This act shall take effect immediately.
C17L40CHF/19890H2030B2662 - 29 -