PRIOR PRINTER'S NO. 651 PRINTER'S NO. 926
No. 589 Session of 1989
INTRODUCED BY CARN, WESTON, JOSEPHS, THOMAS, JAMES, ROEBUCK,
ACOSTA, COHEN, PRESTON, SALOOM, FOX, OLIVER, TIGUE, CAWLEY,
HARPER, DALEY, ROBINSON, BELARDI, RICHARDSON, EVANS, WILLIAMS
AND J. TAYLOR, FEBRUARY 15, 1989
AS REPORTED FROM COMMITTEE ON INSURANCE, HOUSE OF
REPRESENTATIVES, AS AMENDED, MARCH 14, 1989
AN ACT
1 To provide an optional automobile insurance plan to cover, at an
2 affordable rate, all responsible drivers in cities of the
3 first class; and creating the Philadelphia Automobile
4 Insurance Authority and defining its powers and duties; and <--
5 making an appropriation.
6 TABLE OF CONTENTS
7 Section 1. Short title.
8 Section 2. Definitions.
9 Section 3. Authority created.
10 Section 4. Rights, powers and purposes.
11 Section 5. Operating budgets.
12 Section 6. Governing board.
13 Section 7. Sovereign immunity.
14 Section 8. Moneys of authority.
15 Section 9. Additional Commonwealth pledge.
16 Section 10. Exemption from taxation.
17 Section 11. Appropriation.
18 Section 12. Effective date.
1 The General Assembly of the Commonwealth of Pennsylvania
2 hereby enacts as follows:
3 Section 1. Short title.
4 This act shall be known and may be cited as the Philadelphia
5 Automobile Insurance Authority Act.
6 Section 2. Definitions.
7 The following words and phrases when used in this act shall
8 have the meanings given to them in this section unless the
9 context clearly indicates otherwise:
10 "Authority" or "Philadelphia Automobile Insurance Authority."
11 An agency and public instrumentality of this Commonwealth and a
12 body politic and corporate created pursuant to this act.
13 "Board." The governing body of an authority.
14 "City." Any city or county of the first class.
15 "Commissioner." The Insurance Commissioner of the
16 Commonwealth.
17 "Federal agency" or "Federal Government." The United States,
18 the President of the United States and any department or
19 corporation, agency or instrumentality heretofore or hereafter
20 created, designated or established by the United States.
21 "Plan." The detailed proposals and recommendations issued by
22 the authority which would provide adequate and fair coverage to
23 all responsible drivers within cities of the first class and
24 which address the issues of fraud, high rates and other
25 insurance problems that plague large cities.
26 "Secretary." The Secretary of the Budget of the
27 Commonwealth.
28 "State public body." The Commonwealth and its agencies
29 (executive, administrative and independent), departments,
30 officers, boards, authorities, commissions and
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1 instrumentalities.
2 Section 3. Authority created.
3 A body corporate and politic, to be known as the Philadelphia
4 Automobile Insurance Authority, is hereby created as a public
5 authority and government instrumentality to have continuing
6 succession until its existence is terminated by law. The
7 exercise by the authority of the powers conferred by this act is
8 hereby declared to be and shall for all purposes be deemed and
9 held to be the performance of an essential public function. The
10 Philadelphia Automobile Insurance Authority is exempt from
11 participation in the Pennsylvania Insurance Guaranty Association
12 provided by the act of November 25, 1970 (P.L.716, No.232) known
13 as The Pennsylvania Insurance Guaranty Association Act.
14 Section 4. Rights, powers and purposes.
15 (a) General powers and purposes.--Every authority created by
16 this act shall be a public body, corporate and politic,
17 exercising public powers of the Commonwealth as an agency and
18 instrumentality thereof and shall be for the purpose, without
19 limitation, by itself or by agreement in cooperation with
20 others, of acquiring, providing, holding, managing, operating,
21 financing, insuring or guaranteeing assets for the purposes of
22 providing automobile insurance other motor vehicle insurance and
23 establishing automobile and other motor vehicle insurance rates
24 that are fair to most drivers in cities of the first class.
25 (b) Specific powers and purposes.--The authority is granted
26 all powers necessary or convenient for the carrying out of the
27 aforesaid purposes, including, without limiting the generality
28 of the foregoing, the following rights, powers and purposes:
29 (1) To implement a health care cost containment program
30 with set fees for services and a peer review process.
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1 (2) To require the use of anti-theft and anti-vandalism
2 techniques and devices and provide for discounts with their
3 use.
4 (3) To exempt participants in the authority's insurance
5 plan from established minimum required auto coverages to the
6 following minimum requirements:
7 (i) Bodily injury liability of $15,000 per person.
8 (ii) Bodily injury liability of $30,000 per
9 accident.
10 (iii) Property damage liability of $5,000.
11 (4) To contract with particular well managed, skilled
12 and low-cost body shops in order to provide special deduction
13 to individuals that use the services of these "preferred
14 shops."
15 (5) To provide collision and comprehensive coverages
16 with a $500 deductible or more.
17 (6) To require medical bills to exceed $10,000 or
18 injuries resulting in permanent disability or disfigurement
19 before a suit can be filed in court.
20 (7) To implement fraud control programs and other
21 activities.
22 (8) To have continuing succession.
23 (9) To sue and be sued, implead and be impleaded,
24 complain and defend in all courts.
25 (10) To adopt, use and alter, at will, a corporate seal.
26 (11) To acquire by gift or otherwise, purchase, hold,
27 receive, lease, sublease and use any license, franchise or
28 property, real, personal or mixed, tangible or intangible, or
29 any interest therein.
30 (12) To sell, transfer or dispose of any property or
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1 interest therein with adequate and fair consideration.
2 (13) To make bylaws for the management and regulation of
3 its affairs and issue rules, regulations and policies in
4 connection with the performance of its functions and duties.
5 (14) To appoint officers, agents, employees and
6 servants, to prescribe their duties and to fix their
7 compensation.
8 (15) To fix, alter, charge and collect insurance
9 premiums, payments, fees and other charges.
10 (16) To borrow money for the purpose of paying the costs
11 of any plan and to evidence the same.
12 (17) To make, enter into and award contracts of every
13 name and nature and to execute all instruments necessary or
14 convenient for the carrying out of its business.
15 (18) To borrow money and accept grants and to enter into
16 contracts, leases, subleases, licenses or other transactions
17 with any Federal agency, State public body, political
18 subdivision, person, association, partnership or corporation.
19 (19) To pledge, hypothecate or otherwise encumber any of
20 its property, real, personal or mixed, tangible or
21 intangible, and its revenues or receipts.
22 (20) To invest its money.
23 (21) To cooperate with any Federal agency, State public
24 body or political subdivision.
25 (22) To invest any funds held in reserve or sinking
26 funds, or any funds not required for immediate disbursements,
27 as authorized by section 13(d).
28 (23) To appoint all officers, agents and employees
29 required for the performance of its duties and fix and
30 determine their qualifications, duties and compensation and
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1 retain or employ other agents or consultants, including, but
2 not limited to, auditors, private counsel and private
3 consultants on a contract basis or otherwise for rendering
4 professional or technical services and advice.
5 (24) To enroll its employees in an existing retirement
6 system of the State, city or other governmental entity.
7 (25) To appoint and fix the compensation of chief
8 counsel and such assistant counsel to provide it with legal
9 assistance, for which purpose the authority shall not be
10 considered either an executive agency or an independent
11 agency for the purpose of the act of October 15, 1980
12 (P.L.950, No.164), known as the Commonwealth Attorneys Act,
13 but shall possess the same status for such purpose as the
14 Auditor General, State Treasurer and the Pennsylvania Public
15 Utility Commission, except that the provisions of section
16 204(b) and (f) of the Commonwealth Attorneys Act shall not
17 apply to the authority, and, notwithstanding the provisions
18 of 42 Pa.C.S. § 8525 (relating to legal assistance), the
19 authority through its counsel shall defend actions brought
20 against the authority and its officers and employees when
21 acting within the scope of their official duties.
22 (26) To maintain an office in the city.
23 (27) To appoint an executive director, who shall be the
24 chief executive officer of the authority, who shall devote
25 his full time during business hours to the duties of his
26 office and who shall receive compensation as the board shall
27 determine.
28 (28) To do all acts and things necessary or convenient
29 for the promotion of its purposes and the general welfare of
30 the authority and to carry out the powers granted to it by
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1 this act or any other acts.
2 (c) Limitation.--The authority shall have no power to pledge
3 the credit or taxing powers of any State public body, any
4 political subdivision or the city, nor shall any of its
5 obligations be deemed obligations of any State public body, any
6 political subdivision or the city, nor shall any State public
7 body, any political subdivision or the city, be liable for the
8 payment of principal or interest on such obligations.
9 (d) Affirmative action.--The authority shall develop and
10 implement an affirmative action plan to assure that all persons
11 are accorded equality of opportunity in treatment, employment
12 and contracting by the authority, its contractors,
13 subcontractors, assignees, lessees and agents.
14 Section 5. Operating budgets.
15 (a) Operating budget.--At least 90 days before the
16 commencing of the ensuing fiscal year of the authority, the
17 board shall cause to be prepared and submitted to it a
18 recommended operating budget. The operating budget shall set
19 forth the estimated receipts and revenues of the authority
20 during the next fiscal year. The board shall, at least 30 days
21 before the end of the fiscal year, adopt, by a majority vote of
22 its members, an operating budget for the next fiscal year.
23 (b) Insurance plan.--Notwithstanding any other provisions of
24 this law to the contrary, the design for any plan undertaken by
25 the authority shall be submitted to the commissioner for
26 approval. No such plan may be undertaken by the authority unless
27 and until approved by the commissioner. Upon approval, the
28 commissioner may issue a certificate of authority to do
29 business.
30 Section 6. Governing board.
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1 (a) Power.--The power of the authority shall be exercised by
2 a governing board (hereinafter called the "board") composed of
3 seven members.
4 (1) The Governor shall appoint two members who shall be
5 residents of counties of the first class. The members
6 initially appointed pursuant to this paragraph shall serve
7 two years. If any vacancy is created by any of the members
8 provided by this subsection, appointments shall be made by
9 the governor.
10 (2) The Governor shall appoint two members who shall
11 represent the Commonwealth at large, who shall not be members
12 of the same political party. The members initially appointed
13 pursuant to this paragraph shall serve for terms coincident
14 with the term of the Governor. The Governor shall appoint the
15 two members from each of two lists of at least four nominees,
16 each prepared and submitted to the Governor respectively by
17 the floor leaders of the Senate and the House of
18 Representatives who belong to the same political party. Each
19 floor leader may contribute at least two names to the
20 appropriate list and shall submit such nominees to the
21 Governor. The Governor shall select a member from each list
22 within 30 days of receipt of each list, or else may request
23 one substitute list of nominees from both or either group of
24 floor leaders. If both or either group of floor leaders fail
25 to submit a list of nominees within 30 days of a request to
26 do so by the Governor or fail to submit a receipt of a
27 request to do so, the Governor may appoint such member or
28 members, for which lists of nominees were not submitted, at
29 his discretion. In the event one of the two floor leaders
30 responsible for the submission of nominees for a list fails
19890H0589B0926 - 8 -
1 to submit such nominees, the Governor shall act upon the
2 nominees submitted by the other floor leader as if he had
3 received nominees from both floor leaders. If the Governor
4 fails to select a member from either list of nominees within
5 30 days of receipt of such list and fails to request a
6 substitute list, or fails to select a member from the
7 substitute list within 30 days of receipt of such list, the
8 floor leaders who prepared the list may appoint a member to
9 serve on the board. Whenever a vacancy occurs prior to the
10 completion of the term of office of a member appointed
11 pursuant to this subsection, the floor leaders belonging to
12 the same political party as the board member whose seat has
13 become vacant did at the time of appointment of such member
14 shall submit a list of nominees to replace such member to the
15 Governor. In the event of a vacancy in the office of an
16 initial gubernatorial appointee, a replacement member shall
17 be appointed pursuant to the procedures set forth in this
18 subsection.
19 (3) The chief executive officer of the city of the first
20 class shall appoint two members. The terms of office of such
21 members shall run concurrently with the term of office of
22 such appointing authority.
23 (4) The initial appointment of board members shall have
24 no force and effect unless and until the six members provided
25 by paragraphs (1), (2) and (3) have been appointed, which
26 event shall constitute the formation of the board.
27 (5) The six members so appointed shall appoint a seventh
28 member, who shall serve as chairman of the board, by a vote
29 of at least four members of the board. The initial term of
30 the chairman shall be for a term of four years. In the event
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1 that the members cannot agree on the initial seventh member
2 within 90 days of the creation of the authority, or the
3 members cannot agree upon the selection of a chairman in the
4 event the office of chairman becomes vacant within 90 days of
5 the occurrence of such vacancy, the Governor shall appoint
6 the member. The chairman may be removed and a new chairman
7 may be selected by the vote of five members of the board.
8 (6) If, at any time, the commissioner is not an
9 appointed member of the board, he shall serve as a nonvoting
10 ex officio member of the board.
11 (b) Terms and vacancies.--Except as otherwise provided,
12 initial board members shall serve until their successors have
13 been appointed and qualified. Thereafter, except as otherwise
14 provided, members shall serve a term from the date of their
15 appointment and until their successors have been appointed and
16 qualified. If a vacancy shall occur by means of the death,
17 disqualification, resignation or removal of a member or the
18 chairman, subject to the provisions of subsection (a), the
19 appointing authority shall appoint a successor to fill his
20 unexpired term.
21 (c) Compensation.--Subject to such aggregate per annum
22 limitation and any other rules and regulations as the board
23 shall determine, a member shall receive $125 per diem when
24 engaged in the exercise of his duties for the authority and
25 shall also be entitled to necessary expenses, including
26 traveling expenses, incurred in the discharge of his duties. In
27 addition, the chairman of the board of the authority shall be
28 entitled to receive such additional compensation as the board
29 shall determine. No other member of the board shall be entitled
30 to any additional compensation for extra service provided to the
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1 authority. The per diem amount may be increased by a vote of
2 five members of the board, but any such increase shall not apply
3 during the term of office of board members voting or eligible to
4 vote on such per diem increase.
5 (d) Organization.--The members of the board shall select
6 from among themselves a vice chairman and such other officers as
7 the board may determine. Except as otherwise provided, all
8 actions of the board shall be taken by a vote of at least four
9 members of the board, which shall constitute a majority of the
10 board, unless the bylaws of the authority shall provide for a
11 greater vote. The board shall have full authority to manage the
12 business of the authority and to prescribe, amend and repeal
13 bylaws, rules and regulations governing the manner in which the
14 business of the authority may be conducted and the powers
15 granted to it may be exercised and embodied. Notwithstanding any
16 other law, court decision, precedent or practice to the
17 contrary, no actions by or on behalf of the board shall be taken
18 by any officer of the board except upon the approval of a
19 majority of the board. The term "actions by or on behalf of the
20 board" means any action whatsoever of the board, including, but
21 not limited to, the hiring, appointment, removal, transfer,
22 promotion or demotion of any officers and employees, the
23 retention, use or remuneration of any advisors, counsel,
24 auditors or consultants, the initiation of any legal action, the
25 making of any contracts, agreements, notes or covenants, the
26 approval of requisitions, purchase orders, investments and
27 reinvestments, and the adoption, amendment, revision or
28 rescission of any rules and regulations, orders or other
29 directives. The chairman, vice chairman or any other officer,
30 committee or employee of the board may take actions by or on
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1 behalf of the board as authorized at least annually by a vote of
2 four members of the board and subject always to the supervision
3 and control of the board.
4 (e) Nonliability of members.--Members of the board shall not
5 be liable personally on obligations of the authority, and the
6 rights of creditors shall be solely against such authority. The
7 authority, itself or by contract, shall defend board members,
8 and the authority shall indemnify and hold harmless board
9 members, whether currently employed by the authority or not,
10 against and from any and all personal liabilities, actions,
11 causes of action, and any and all claims made against them for
12 whatever actions they perform within the scope of their duties
13 as board members.
14 Section 7. Sovereign immunity.
15 It is hereby declared to be the intent of the General
16 Assembly that the authority created pursuant to this act and its
17 officers, officials and employees shall enjoy sovereign and
18 official immunity, as provided in 1 Pa.C.S. § 2310 (relating to
19 sovereign immunity reaffirmed; specific waiver), and remain
20 immune from suit except as provided by and subject to the
21 provisions of 42 Pa.C.S. §§ 8501 (relating to definitions)
22 through 8528 (relating to limitations on damages).
23 Notwithstanding the provisions of 42 Pa.C.S. § 8525 (relating to
24 legal assistance), the authority through its counsel shall
25 defend actions brought against the authority and its officers
26 and employees when acting within the scope of their official
27 duties.
28 Section 8. Moneys of authority.
29 (a) Paid to treasurer.--All moneys of the authority, from
30 whatever source derived, shall be paid to the treasurer of the
19890H0589B0926 - 12 -
1 authority.
2 (b) Funds to be invested.--The board shall invest authority
3 funds consistent with sound business practice.
4 (c) Investment program.--The board shall provide for an
5 investment program subject to restrictions contained in this act
6 and in any other applicable statute and any rules and
7 regulations adopted by the board.
8 (d) Authorized types of investments.--Authorized types of
9 investments for authority funds shall be:
10 (1) Direct obligations of or obligations guaranteed by
11 the United States of America.
12 (2) Any bond, debenture, note, participation certificate
13 or other similar obligation issued by any one or combination
14 of the following agencies: Government National Mortgage
15 Corporation, Federal Land Banks, Federal Home Loan Banks,
16 Federal Intermediate Credit Banks, Banks for Cooperatives,
17 Tennessee Valley Authority, United States Postal Service,
18 Farmers Home Administration, the Student Loan Marketing
19 Association and Export-Import Bank of the United States.
20 (3) Any bond, debenture, note, participation certificate
21 or other similar obligation issued by the Federal National
22 Mortgage Corporation to the extent such obligations are
23 guaranteed by the Government National Mortgage Corporation or
24 issued by any other Federal agency and backed by the full
25 faith and credit of the United States of America.
26 (4) Deposits in interest-bearing time or demand
27 deposits, or certificates of deposit, fully insured by the
28 Federal Deposit Insurance Corporation, or its successors, or
29 the Federal Savings and Loan Insurance Corporation, or its
30 successor, or fully secured by any of the obligations
19890H0589B0926 - 13 -
1 described above to the extent not so insured.
2 (5) Repurchase agreements relating to, or investment
3 agreements secured by or providing for the acquisition of
4 and, if applicable, resale of, obligations described in
5 paragraphs (1) through (4) or obligations of Federal Home
6 Loan Mortgage Corporation or Federal National Mortgage
7 Association, with:
8 (i) banks or trust companies (which may include any
9 banking entity or depository);
10 (ii) brokers or broker-dealers registered under the
11 Securities Exchange Act of 1934 (48 Stat. 881, 15 U.S.C.
12 §§ 78a-78jj) acceptable to the authority; or
13 (iii) insurance companies rated A+ or better by
14 Best's having a net capital and surplus of at least
15 $25,000,000 or certificates of deposit with such banks or
16 trust companies fully secured as to principal and accrued
17 interest by obligations described in paragraphs (1)
18 through (4) deposited with or subject to the control of
19 the authority.
20 (6) Money market deposit accounts of banks or trust
21 companies having a net capital and surplus of at least
22 $25,000,000 (which may include any banking entity or
23 depository).
24 (7) The description of authorized investments as set
25 forth herein in paragraphs (5) and (6) shall only be met if
26 the agreements referenced therein provide for the repayment
27 of the principal amount invested at an amount not less than
28 that so invested. Whenever security is required as set forth
29 herein in paragraphs (4) through (6), such security shall be
30 deposited with the treasurer of the authority or be held by a
19890H0589B0926 - 14 -
1 trustee or agent satisfactory to the authority. Moneys of the
2 authority shall be paid out on the warrant or other order of
3 the chairman of the authority or of such other person or
4 persons as the authority may authorize to execute such
5 warrants or orders.
6 (e) Annual report to be filed; annual audits.--Every
7 authority shall file an annual report with the Department of
8 Insurance. The authority shall have its books, accounts and
9 records audited annually in accordance with generally accepted
10 auditing standards by an independent auditor who shall be a
11 certified public accountant or competent public accountant, and
12 a copy of his audit report shall be attached to and be made a
13 part of the aforesaid annual report. A concise financial
14 statement shall be published annually in the Pennsylvania
15 Bulletin. The Philadelphia Automobile Insurance Authority will
16 submit detailed information on claims, premiums, investment
17 income and losses to the Department of Insurance in a
18 computerized format so that the department may better represent
19 the interests of policyholders in reviewing rate requests.
20 Section 9. Additional Commonwealth pledge.
21 The Commonwealth does hereby pledge to and agree with any
22 person who, contracts an authority created pursuant to this act,
23 that the Commonwealth will not limit or alter the rights and
24 powers hereby vested in the authority or otherwise created by
25 this act in any manner which impairs the obligations of the
26 authority until all such obligations of the authority under such
27 lease or sublease are fully met and discharged.
28 Section 10. Exemption from taxation.
29 The effectuation of the authorized purposes of authorities
30 created under this act shall and will be in all respects for the
19890H0589B0926 - 15 -
1 benefit of the people of this Commonwealth, for the increase of
2 their commerce and prosperity and for the improvement of their
3 health and living conditions; and, since authorities will, as
4 public instrumentalities of the Commonwealth, be performing
5 essential governmental functions in effectuating such purposes,
6 such authorities shall not be required to pay any taxes or
7 assessments upon any insurance products, or any property <--
8 acquired or used or permitted to be used by them.
9 Section 11. Appropriation. <--
10 The sum of $5,000,000, or as much thereof as may be
11 necessary, is hereby appropriated to the Insurance Department to
12 be used to implement the provisions under section 4.
13 Section 12 11. Effective date. <--
14 This act shall take effect immediately.
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