Regular Session 2019-2020 House Bill 2106 P.N. 2991

PRINTER'S NO. 2991

THE GENERAL ASSEMBLY OF PENNSYLVANIA

HOUSE BILL

No.

2106

Session of

2019

INTRODUCED BY PUSKARIC, JAMES, BERNSTINE, ZIMMERMAN AND NEILSON,

DECEMBER 9, 2019

REFERRED TO COMMITTEE ON INSURANCE, DECEMBER 9, 2019

AN ACT

Amending the act of July 31, 1968 (P.L.738, No.233), entitled

"An act relating to establishment of an Industry Placement

Facility to make available basic property insurance against

fire and other perils for residential and business properties

located in certain areas of the Commonwealth of Pennsylvania

through the cooperative efforts of the Commonwealth and the

private property insurance industry; providing for a sharing

by the Commonwealth of insured losses resulting from riots

and other civil disorders through the formation of the

Pennsylvania Civil Disorder Authority; levying an assessment

on all policies of basic property insurance written in the

Commonwealth; and conferring powers and imposing duties upon

the Insurance Commissioner and upon certain property

insurers," repealing provisions relating to Pennsylvania

Civil Disorder Authority and to basic property insurance

assessment; and, in miscellaneous, further providing for

effective date.

The General Assembly of the Commonwealth of Pennsylvania

hereby enacts as follows:

Section 1. Articles III and IV of the act of July 31, 1968

(P.L.738, No.233), known as The Pennsylvania Fair Plan Act, are

repealed:

[ARTICLE III

Pennsylvania Civil Disorder Authority

Section 301. Formation of Authority.--In order to make

available to insurers which participate in the Industry

Placement Facility the reinsurance afforded by the Federal

reinsurance facility against losses resulting from riots and

civil disorders, there is hereby created a separate and distinct

body corporate and politic which shall be known as the

"Pennsylvania Civil Disorder Authority." The authority is hereby

constituted an instrumentality of the Commonwealth, and the

exercise by the authority of the powers conferred by this

article shall be deemed and held to be an essential governmental

function of the Commonwealth.

Section 302. Governing Body; Administration.--The powers of

the authority shall be exercised by a governing body (herein

called the "board") composed of the Attorney General of the

Commonwealth, the Secretary of Revenue, and the Insurance

Commissioner, who shall select from among themselves a chairman

and a vice-chairman. The Treasurer of the Commonwealth shall be

designated treasurer of the authority. The members of the board

shall not be liable personally on the bonds or other obligations

of the authority, and the rights of creditors shall be solely

against the authority. The members of the board shall receive no

compensation for their services as members but shall be entitled

to reimbursement for all necessary expenses incurred in

connection with the performance of their duties as members.

The authority may employ a secretary, an executive director,

its own counsel and legal staff, and such technical experts and

other agents and employes, permanent or temporary, as it may

require, and may determine the qualifications and fix the

compensation of such persons. The authority may delegate to one

or more of its agents or employes such of its powers as it shall

deem necessary to carry out the purposes of this act, subject

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always to the supervision and control of the authority.

Section 303. Powers of Authority.--The authority shall

exercise public powers of the Commonwealth as an agency thereof,

including the following powers in addition to those herein

otherwise granted:

(1) To cooperate with any government or municipality as

herein defined;

(2) To act as agent of any government agency for the public

purposes set out in this act;

(3) To borrow funds from private lenders or from the

Commonwealth or the Federal government, as may be necessary for

the operation and work of the authority, and to carry out the

purposes and provisions of this act;

(4) To invest any funds held in reserves or sinking funds or

any funds not required for immediate disbursement, in such

investments as may be lawful for executors, administrators,

guardians, trustees and other fiduciaries under the laws of this

Commonwealth;

(5) To sue and be sued;

(6) To adopt a seal and to alter the same at pleasure;

(7) To make and execute contracts and other instruments

necessary or convenient to the exercise of the powers of the

authority, and any contract or instrument when signed by the

chairman or vice-chairman of the authority, or by an authorized

use of their facsimile signatures, and by the secretary or

assistant secretary or treasurer or assistant treasurer of the

authority, or by an authorized use of their facsimile

signatures, shall be held to have been properly executed for and

on its behalf;

(8) To make, to amend, and to repeal bylaws, rules,

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regulations and resolutions;

(9) To do all acts and things necessary or convenient to

carry out the powers granted to it by this article or any other

acts: Provided, however, That the authority shall have no power,

at any time or in any manner, to pledge the credit or taxing

power of the Commonwealth, nor shall any of its obligations be

deemed to be obligations of the Commonwealth.

Section 304. Civil Disorder Authority Fund.--(a) The

authority shall establish a Civil Disorder Authority Fund

(hereinafter called "the Fund") which shall be available without

fiscal year limitation:

(1) To make such payments as may, from time to time, be

required by the Federal reinsurance facility;

(2) To pay proper administrative expenses of the authority;

and

(3) To repay such obligations of the authority, including

interest thereon, as may be incurred by the authority pursuant

to the provisions of this article.

(b) The fund shall be credited with:

(1) Such amounts as may be advanced to the fund from

whatever source in order to maintain the fund in a solvent

condition and able to satisfy its obligations;

(2) Interest which may be earned on investments of the fund;

(3) Moneys borrowed by the authority and deposited in the

fund; and

(4) Receipts from any other source which may, from time to

time, be credited to the fund.

shall be paid to the treasurer of the authority and deposited by

him in one or more banks or trust companies, in one or more

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special accounts, and each of such special accounts shall be

continuously secured by a pledge of direct obligations of the

United States of America or of the Commonwealth of Pennsylvania,

having an aggregate market value, exclusive of accrued interest,

at all times at least equal to the balance on deposit in such

account. Such securities shall either be deposited with the

treasurer or be held by a trustee or agent satisfactory to the

authority. All banks and trust companies are authorized to give

such security for such deposits. The moneys in said accounts

shall be paid out on the warrant or other order of the treasurer

of the authority or of such other person or persons as it may

authorize to execute such warrants or orders.

The Department of Revenue and the Auditor General of the

Commonwealth and their legally authorized representatives are

hereby authorized and empowered from time to time to examine the

accounts and books of the authority and any other matters

relating to its finances, operations and affairs.

Section 305. Reimbursement Payments to Federal Reinsurance

Facility; Necessity for Claim by Federal Reinsurance Facility;

Limitation on Amount of Payments.--(a) Payments under section

304(a)(1) hereof shall be made only upon direction of the

Treasurer of the Commonwealth and after receipt by him of a

claim from the Federal reinsurance facility. Prior to the making

of such payment the authority shall make such investigation as

it may deem appropriate in order to verify the correctness of

the claim made by the Federal reinsurance facility.

(b) The total amount of any such payments made during any

calendar year shall not exceed five per cent of the aggregate

property insurance premiums earned in the Commonwealth during

the preceding calendar year on those lines of insurance

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reinsured by the Federal reinsurance facility in the

Commonwealth during the current year.

Section 306. Bonds of Authority.--(a) Within thirty days

following receipt of a direction from the Treasurer of the

Commonwealth to make payment of a claim to the Federal

reinsurance facility, the authority shall offer to sell bonds,

the aggregate principal amount of which shall be adequate to pay

the total amount of the claim received from the Federal

reinsurance facility, subject to the limitation contained in

section 305(b) above, plus the reasonable expenses of the sale,

due consideration having been first given to the moneys at that

time in the fund and available for payment of the claim of the

Federal reinsurance facility.

(b) The proceeds of the sale of such bonds shall be paid

into the fund and shall be used to satisfy the claim of the

Federal reinsurance facility which occasioned the sale of such

bonds; any amount remaining after satisfaction of such claim

shall be held in the fund and may be used for any of the

purposes set forth in section 304.

resolution of the board or by and pursuant to an indenture of

trust and shall be of such series, bear such date or dates, be

stated to mature at such time or times, not exceeding thirty

years from their respective dates, be issued as serial or term

bonds, or as part serial and part term bonds, or any combination

thereof, or as a single bond payable in installments, bear

interest payable annually, semi-annually or quarterly, be in

such denominations, be in such form, either as negotiable

commercial paper, or as investment securities in bearer or

registered form, carry such registration, exchangeability and

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interchangeability privileges, be payable in such medium of

payment and at such place or places, be subject to such terms of

redemption at such prices not exceeding one hundred six per cent

of the principal amount thereof, and be entitled to such

priorities in the revenues or receipts of authority as such

resolution or indenture may provide. The bonds shall be signed

manually or by facsimile by such officers as the authority shall

determine, and coupon bonds shall have attached thereto interest

coupons bearing the facsimile signature of the treasurer of the

authority, all as may be prescribed in such resolution or

indenture. No bond shall be issued or delivered without at least

one manual signature, which may be that of an officer of the

fiscal agent or of the trustee under the relevant resolution or

indenture. Any such bonds may be issued and delivered

notwithstanding that one or more of the officers signing such

bonds, or the treasurer whose facsimile signature shall be upon

the coupons or any thereof, shall have ceased to be such officer

or officers at the time when such bonds shall actually be

delivered.

(d) Such bonds shall be sold to the highest responsible

bidder or bidders proposing the lowest net interest cost to the

authority, determined by computing the interest on the bonds to

their stated maturity dates and adding thereto the discount or

subtracting therefrom the premium specified in such bid, after

public notice, by two advertisements in not less than three nor

more than five newspapers of large general circulation in

different parts of the Commonwealth, the first advertisement to

be published not less than twenty days and the second not less

than five days before the day fixed for the opening of bids. No

bonds shall be sold if the net interest cost, computed to stated

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maturity dates of the bonds, of the money received for any issue

of such bonds shall exceed six per cent a year. The

advertisement of sale shall contain a general description of the

bonds, the manner, place and time of the sale, or the time limit

for the receipt of proposals, the name of the officer to whom,

or to whose designee, bids or proposals shall be delivered, and

a statement of the terms and conditions of sale: Provided,

however, That any of said bonds may be sold to the State

Employes' Retirement Board, or to any other custodial board or

fund, or to State Employes' Retirement Fund, or by private

placement with a group of not more than twenty-five ultimate

investors who purchase for investment and not with a view to

distribution, without advertisement or competitive bidding.

Pending the preparation of the definitive bonds, interim

receipts or temporary bonds may be issued to the purchaser or

purchasers of such bonds and may contain such terms and

conditions as the authority may determine.

(e) Any resolution or indenture authorizing any bonds may

contain provisions which shall be part of the contract with the

holders thereof as to:

(1) Pledging the full faith and credit of the authority (but

not of the Commonwealth or any political subdivision thereof)

for such bonds or restricting the same to all or any of the

revenues or receipts of the authority;

(2) The terms and provisions of the bonds;

(3) The setting aside of reserves or sinking funds and the

regulation and disposition thereof;

(4) Any terms and provisions for the security of the bonds

or under which the same may be issued;

(5) Any other or additional agreements with the holder of

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the bonds.

(f) The authority may enter into any indentures of trust, or

other agreements with any bank or trust company or other person

or persons in the United States having power to enter into the

same, or may designate any such as fiscal agent under a bond

resolution, in order to provide for the security for such bonds,

and may assign and pledge all or any of the revenues or receipts

of the authority thereunder. Such indenture, resolution, or

other agreement may contain such provisions as may be customary

in such instruments or as the authority may authorize, including

provisions as to:

(1) The application of funds and the safeguarding of funds

on hand, invested or on deposit;

(2) The rights and remedies of said trustees or fiscal agent

and the holders of the bonds (which may include restrictions

upon the individual right of action of such bondholders); and

(3) The terms and provisions of the bonds or the resolutions

or indentures authorizing the issuance of the same.

Section 307. Remedies of Bondholder.--(a) The rights and

the remedies herein conferred upon or granted to the bondholders

shall be in addition to and not in limitation of any rights and

remedies lawfully granted to such bondholders by the resolution

or indenture providing for the issuance of bond. If the

authority shall default in the payment of the interest on any of

the bonds after the same shall become due, and such default

shall continue for a period of thirty days, or if the authority

shall default in the payment of principal after the same shall

become due whether at maturity or upon any unrevoked call for

redemption, or if the authority shall fail or refuse to comply

with the provisions of this act or shall default in any

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agreement made with the holders of the bonds, the holders of

twenty-five per cent in aggregate principal amount of bonds then

outstanding under the indenture or bond resolution involved, by

instrument or instruments filed in the Office of the Recorder of

Deeds of the County of Dauphin and proved or acknowledged in the

same manner as a deed to be recorded, may (except as such right

may be limited under the provisions of any indenture or other

agreement as aforesaid) appoint a trustee to represent the

bondholders for the purposes herein provided. Such trustee or

any trustee under any indenture or the fiscal agent under any

resolution or other agreement may, and upon written request of

the holders of twenty-five per cent (or such other percentage as

may be specified in any resolution, indenture or other agreement

aforesaid) in principal amount of the bonds then outstanding

under such indenture or resolution shall, in his or its own

name--

(1) By mandamus or other suit, action or proceeding at law

or in equity, enforce all rights of the bondholders, including

the right to require the authority to carry out any agreement as

to, or pledge of, the revenues or receipts of the authority and

to require the authority to carry out any other agreements with,

or for the benefit of, the bondholders, and to perform its

duties under this act;

(2) Bring suit upon the bonds;

(3) By action or suit in equity, require the authority to

account as if it were the trustees of an express trust for the

bondholders;

(4) By action or suit in equity, enjoin any acts or things

which may be unlawful, or in violation of the rights of the

bondholders; or

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(5) By notice in writing to the authority, declare all bonds

due and payable and, if all defaults shall be made good, then

with the consent of the holders of twenty-five per cent (or such

other percentage as may be specified in any indenture,

resolution or other agreement aforesaid) of the principal amount

of the bonds then outstanding, to annul such declaration and its

consequences.

ARTICLE IV

Basic Property Insurance Assessment

Section 401. Basic Property Insurance Assessment.--In order

to provide for the payment of the principal of and interest on

bonds of the authority, issued pursuant to section 306 of this

act, an assessment is hereby levied on each insurer which is a

member of the Industry Placement Facility. The amount of such

assessment shall be two per cent of the aggregate gross premiums

received by such insurer for policies of basic property

insurance, or any component thereof, including homeowners and

commercial multiple peril policies, written within this

Commonwealth.

Section 402. Payment to Pennsylvania Civil Disorder

Authority.--Every insurer shall, on or before the fifteenth day

of April of each year, compute and pay to the Treasurer of the

Pennsylvania Civil Disorder Authority the aggregate assessments

due upon the gross premiums received by it for basic property

insurance written within the Commonwealth during the calendar

year immediately preceding said payment date. Said aggregate

assessments shall bear interest at the rate of six per cent per

annum from the date the same are due and payable to the

authority until payment is made.

Section 403. Reports and Statements.--The commissioner may

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at any time require any insurer to furnish him with such

information as he, in his discretion, may deem necessary in

order to determine whether or not such insurer is complying with

the provisions of this article.

Section 404. Effective Date.--The assessment provided for

herein shall be collectible on all policies of basic property

insurance, or any component thereof, including homeowners and

commercial multiple peril policies, written on and after the

thirtieth day following issuance by the authority of its bonds

pursuant to section 306 of this act.

Section 405. Termination of Assessment.--The assessment

imposed by this article shall remain in full force and effect

until all bonds issued by the Pennsylvania Civil Disorder

Authority have been retired, and shall thereafter terminate at

such time and upon such terms and conditions as shall be

specified by the board of the authority.]

Section 2. Section 502(b) of the act is amended to read:

Section 502. Effective Date.--* * *

(b) [(1)] Policies issued pursuant to the direction of and

other obligations incurred by the Industry Placement Facility

shall not be impaired by the termination of the Federal

reinsurance facility and such Industry Placement Facility shall

be continued for the purpose of servicing such policies and

performing such obligations.[;

(2) All bonds issued and other obligations incurred by the

Pennsylvania Civil Disorder Authority shall not be impaired by

the termination of the Federal reinsurance facility and such

authority shall be continued for the purpose of servicing such

bonds and performing such obligations; and

(3) The collection of the basic property insurance

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assessment shall terminate as provided in section 405 of this

act.]

Section 3. This act shall take effect in 60 days.

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