PRINTER'S NO. 2513
No. 1977 Session of 1987
INTRODUCED BY FOX, LINTON, TRELLO, MRKONIC, RAYMOND, MORRIS,
J. L. WRIGHT, MICOZZIE, SERAFINI, CIVERA, FISCHER, BOWSER,
BROUJOS, FLICK, BURD, E. Z. TAYLOR, COLAFELLA, CORNELL,
SIRIANNI, LUCYK, MELIO AND PETRONE, NOVEMBER 17, 1987
REFERRED TO COMMITTEE ON INSURANCE, NOVEMBER 17, 1987
AN ACT
1 Providing for liability insurance in areas where liability
2 insurance is difficult to obtain; creating the Property and
3 Casualty Insurance Joint Underwriting Association as a legal
4 entity and conferring upon it rights, obligations, powers and
5 duties; and imposing additional powers and duties on the
6 Insurance Department.
7 The General Assembly of the Commonwealth of Pennsylvania
8 hereby enacts as follows:
9 Section 1. Short title.
10 This act shall be known and may be cited as the Property and
11 Casualty Insurance Joint Underwriting Association Act.
12 Section 2. Definitions.
13 The following words and phrases when used in this act shall
14 have the meanings given to them in this section unless the
15 context clearly indicates otherwise:
16 "Association." The Property and Casualty Insurance Joint
17 Underwriting Association.
18 "Board." The board of directors of the association.
19 "Department." The Insurance Department of the Commonwealth.
1 Section 3. Creation of association.
2 There is hereby created an association to be known as the
3 Property and Casualty Insurance Joint Underwriting Association,
4 which shall be a legal entity with all the rights and
5 obligations necessary to fulfill its purpose, including, but not
6 limited to, the following:
7 (1) To enter into contracts.
8 (2) To sue and be sued.
9 (3) To require insurance companies and the department to
10 provide information in a timely fashion.
11 (4) To require the department to collect information.
12 (5) To require insurance companies or any group of
13 insurance companies to write property and casualty insurance
14 policies.
15 (6) To do all things necessary to carry out the purposes
16 of this act.
17 The association shall be administered by a board of directors as
18 specified in section 4.
19 Section 4. Board of directors.
20 (a) Composition.--The board shall consist of seven members.
21 The Majority Leader of the House of Representatives shall
22 appoint one member, who shall not be associated with the
23 insurance industry. The Minority Leader of the House of
24 Representatives shall appoint one member, who shall not be
25 associated with the insurance industry. The Majority Leader of
26 the Senate shall appoint one member, who shall not be associated
27 with the insurance industry. The Minority Leader of the Senate
28 shall appoint one member, who shall not be associated with the
29 insurance industry. The Governor shall appoint three members, of
30 which at least two shall be associated with the insurance
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1 industry. The Insurance Commissioner shall be an ex officio
2 member of the board who shall act as chairman and shall vote
3 only in the case of a tie.
4 (b) Quorum.--Four members of the board, not including the
5 Insurance Commissioner, shall constitute a quorum.
6 (c) Compensation.--Board members shall be reimbursed for any
7 actual expenses incurred in the performance of their duties but
8 shall not receive any salary.
9 (d) Terms.--Initially, one member appointed by the Governor
10 and the members appointed by the Minority Leader of the House of
11 Representatives and the Minority Leader of the Senate shall
12 serve a term of two years, and the remaining appointed members
13 shall serve a term of four years. Thereafter, all appointments
14 to the board shall be for a term of four years. A vacancy on the
15 board shall be filled by the appointing authority for the
16 unexpired term. No member appointed to the board shall serve
17 until a successor is duly appointed and qualified.
18 (e) Meetings.--The Insurance Commissioner or any four
19 members of the board shall have the power to call a meeting of
20 the board.
21 (f) Staff.--The board shall appoint an executive director
22 and shall fix the compensation of the executive director. The
23 Insurance Department shall provide all personnel services that
24 may be necessary.
25 Section 5. Powers and duties of board.
26 (a) General rule.--Whenever the board, on its own motion or
27 on petition of persons seeking coverage, determines that more
28 than 5% of standard risks in any line or subline of insurance
29 specified in subsection (b) cannot obtain coverage through the
30 voluntary market at standard rates, then the board shall
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1 implement the provisions of section 6 and provide for adequate
2 coverage. Whenever the board determines that coverage has been
3 available to 95% or more of the standard risks in any line or
4 subline of insurance for at least six consecutive months, then
5 the plan under section 6 shall be discontinued and insurance
6 coverage obtained in the voluntary market at standard rates.
7 (b) Lines of insurance.--The board shall prepare separate
8 joint underwriting plans for each of the following areas of
9 property and casualty liability insurance:
10 (1) Political subdivision liability, with separate plans
11 for municipalities, school districts and authorities.
12 (2) Local public official liability.
13 (3) Liability under section 497 of the act of April 12,
14 1951 (P.L.90, No.21), known as the Liquor Code.
15 (4) Day-care center liability.
16 (5) Commercial motor vehicles.
17 (6) Amusement ride liability.
18 (7) Nurse midwives.
19 (8) Product liability.
20 (9) Officers and directors of nonprofit organizations.
21 (10) Any other area of property and casualty liability
22 insurance which the department deems appropriate.
23 (c) Application.--Any standard risk who is unable to obtain
24 coverage may petition the board to provide insurance in a
25 certain line or subline, and the board, after consideration of
26 the extent of the problem based on data obtained from the
27 department and any other appropriate sources, shall render a
28 decision based on the petition within 45 days.
29 (d) Risk management program.--The board shall adopt a
30 program for risk management for each line or subline of
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1 insurance to be offered coverage. Compliance with such risk
2 management program shall be a condition precedent to obtaining
3 and maintaining coverage from the board-approved plan.
4 (e) Separation of funds.--The board shall, at its
5 discretion, create separate accounts for each line or subline of
6 insurance plans that it creates and shall not commingle funds.
7 (f) Prohibition.--The board may not consider coverage for
8 medical malpractice insurance, private passenger motor vehicle
9 insurance or environmental impairment liability insurance.
10 Section 6. Casualty insurance and risk apportionment plans.
11 (a) Plan.--The board shall, after consultation with property
12 and casualty insurers transacting business in this Commonwealth,
13 adopt a plan or plans for the equitable apportionment among such
14 insurers of property and casualty liability insurance coverage
15 for individuals or groups who are standard risks but are unable
16 to procure such coverage through the voluntary market at
17 standard rates or through a statutorily approved plan authorized
18 by the board or department. The board may adopt a joint
19 underwriting plan which shall provide for one or more designated
20 insurers able and willing to provide policyholder and claims
21 services, including the issuance of insurance policies, to act
22 on behalf of all other insurers required to participate in the
23 joint underwriting plan. Any joint underwriting plan adopted
24 shall provide for the equitable apportionment of any profits
25 realized, or of losses and expenses incurred, among
26 participating insurers. The plan shall include, but not be
27 limited to:
28 (1) Rules for the classification of risks and rates
29 which reflect to the maximum extent possible the past loss
30 experience and prospective loss experience in different
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1 geographic areas within this Commonwealth.
2 (2) A rating plan which reasonably reflects the prior
3 claims experience of the insureds.
4 (3) Excess coverage by insurers if the board, in its
5 discretion, requires such coverage by insurers participating
6 in the joint underwriting plan.
7 (b) Premium contingency assessment.--In the event an
8 underwriting deficit exists at the end of the year the plan is
9 in effect, each policyholder shall pay to the joint underwriting
10 plan a premium contingency assessment not to exceed one-fifth of
11 the premium payment paid by the policyholder for that year. The
12 joint underwriting plan shall pay no further claims on any
13 policy for which the policyholder fails to pay the premium
14 contingency assessment.
15 (c) Adjustment of rates.--Any deficit sustained under the
16 plan shall first be recovered through a premium contingency
17 assessment. Concurrently, the rates for insureds shall be
18 adjusted for the next year so as to be actuarially sound in
19 conformance with rules of the department.
20 (d) Proportional recovery.--If there is any remaining
21 deficit under the plan after maximum collection of the premium
22 contingency assessment, this deficit shall be recovered from the
23 companies participating in the plan in the proportion that the
24 net direct premiums of each such member written during the
25 preceding calendar year bears to the aggregate net direct
26 premiums written in this Commonwealth by all members of the
27 joint underwriting plan.
28 (e) Required participation.--Upon adoption of a plan, all
29 property and casualty liability insurers shall subscribe thereto
30 and participate therein as a condition of doing business in this
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1 Commonwealth.
2 Section 7. Funding.
3 When necessary, administrative costs, including startup
4 expenses, of the association shall be funded by an assessed
5 prorated contribution of all property and casualty insurance
6 companies licensed to do business in this Commonwealth, based on
7 premiums written in this Commonwealth. Such costs shall be
8 recoverable from premiums written. The contribution system shall
9 be established by regulation of the department under section 8.
10 Section 8. Regulations.
11 The board shall promulgate regulations to insure that:
12 (1) The association provides liability insurance as
13 required by this act.
14 (2) There is a procedure for petitioning the board to
15 act under section 5(c).
16 (3) Losses and profits are assigned equitably under
17 section 6.
18 (4) Coverage is made available through licensed agents
19 and a reasonable commission is paid.
20 (5) The cost of operating the association is reasonable
21 in relation to the service it provides to the insurance
22 business of this Commonwealth.
23 Section 9. Effective date.
24 This act shall take effect in 60 days.
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