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| Home > Statutes > Usa Arizona |
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USA Statutes : arizona
Title : Insurance
Chapter : JOINT UNDERWRITING ASSOCIATION
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20-2201 Voluntary plans; assessments; fund
A. If the director finds after a hearing that in any part of this state any
liability insurance coverage is not readily available in the voluntary insurance market
and that the public interest requires such availability, the director may authorize the
formation of voluntary plans to provide the coverage for any class or classes of risk in
this state which are entitled to but otherwise unable to obtain the coverage. The
director may request insurers, agents and brokers to prepare the plans or assist as
needed in the preparation and administration of the plans.
B. A plan formulated pursuant to this section shall give consideration to all of
the following:
1. The need for adequate and readily accessible coverage.
2. Alternative methods of improving the market affected.
3. Inherent limitations of providing coverage.
4. The need for reasonable underwriting standards.
5. The requirement of reasonable loss prevention measures.
C. The plans shall establish procedures that will encourage use of the voluntary
insurance market as a condition of placement of coverage through the plan.
D. The director may annually assess each insurer authorized to transact liability
insurance in this state up to two hundred dollars for the costs of administering the
plan. Monies collected from assessments shall be deposited in the assessment fund for
voluntary plans established by subsection E of this section.
E. An assessment fund for voluntary plans is established consisting of the monies
that are deposited pursuant to subsection D of this section. The director shall
administer the fund monies as a continuing appropriation for the purposes provided for in
this section. Monies in the fund are exempt from the provisions of section 35-190
relating to lapsing of appropriations.
20-2202 Joint underwriting association; establishment
A. There is established in the department of insurance a joint underwriting
association consisting of insurers authorized to write and engaged in writing in this
state on a direct basis liability insurance, including the liability portion of
multiperil policies, but not including ocean marine insurance. Every such insurer shall
be a member of the association and shall remain a member as a condition of its authority
to continue to transact insurance in this state.
B. If after a hearing conducted pursuant to section 20-2201, the director
determines that a voluntary plan would fail to provide coverage, the association shall
provide liability insurance coverages for a designated class or classes of risks on a
primary basis in this state. The association shall not be required to provide coverage
available through an assigned risk plan or coverages for pollution liability, hazardous
waste liability or workers' compensation. The association may operate only on a finding
by the director after a public hearing pursuant to section 20-161 that liability
insurance is substantially unavailable through private insurers for a particular line.
C. If the director determines, on application of any interested party and after a
public hearing, that liability insurance for a particular line is no longer substantially
unavailable through private insurers, the association shall cease its underwriting
operations.
D. Nothing contained in this chapter prohibits an insurer from issuing or renewing
a policy of liability insurance in this state. However, on a determination by the
director, after a public hearing pursuant to section 20-161, that substantial adverse
selection has, or will likely, result, the director may issue an order to insurers that
no original policies shall thereafter be issued or that renewal policies shall be issued
only if the insurer will offer the insurance to a representative sample of rating
classifications, or both.
20-2203 Powers of the joint underwriting association
The association may, on behalf of its members and with the approval of the director,
do all of the following, which may be exercised directly or by contractual delegation:
1. Issue or cause to be issued policies of liability insurance on a claims-made
basis to applicants, including incidental coverages, subject to limits as specified in
the plan of operation. The policies shall be offered on one of the following bases:
(a) One hundred thousand dollars for each claimant under one policy and three
hundred thousand dollars for all claimants under one policy in any one year.
(b) Two hundred fifty thousand dollars for each claimant under one policy and seven
hundred fifty thousand dollars for all claimants under one policy in any one year.
(c) Five hundred thousand dollars for each claimant under one policy and one
million five hundred thousand dollars for all claimants under one policy in any one year.
(d) One million dollars for each claimant under one policy and three million
dollars for all claimants under one policy in any one year.
2. Underwrite the insurance and adjust and pay losses with respect to the insurance
or retain service companies to perform those functions.
3. Assume reinsurance from its members.
4. Cede reinsurance.
5. Receive, invest and disburse monies.
6. Open bank accounts and delegate authority for deposit, withdrawal and
disbursement of monies.
7. Borrow monies for the association's necessary administrative expenses.
8. Provide for such fidelity and surety bonds as are deemed necessary to transact
the business of the association.
9. Review, consider and act on any matters deemed by it to be necessary and proper
for the administration of the association.
10. Develop, promulgate and effectuate loss prevention programs.
11. Sue and be sued, except that no judgment against the association shall create
any liability in the individual member companies, and the association may provide for the
indemnification of its member companies, members of the board of directors and officers
and employees and other persons acting on behalf of the association.
12. Employ attorneys and other persons necessary to perform the functions of the
association.
20-2204 Directors; election; appointment
A. The association shall be governed by a board of eleven directors annually
appointed by the director. Six of the directors shall be selected from the members of
the association. Three of the directors shall be domestic insurers and three shall be
foreign insurers. Five of the directors shall be representatives of commercial insureds.
B. Directors of the association shall receive no compensation and shall not be
entitled to travel expenses as authorized by title 38, chapter 4, article 2, but shall be
entitled to be reimbursed for expenses incurred by them as members of the board from the
assets of the association.
20-2205 Plan of operation; contents
Within forty-five days after the effective date of the initial order of the director
issued pursuant to section 20-2202, the directors of the association shall submit to the
director for his review a proposed plan of operation consistent with the provisions of
this chapter. The plan of operation shall provide for economic, fair and
nondiscriminatory administration and for the prompt and efficient provision of liability
insurance coverage in designated lines. The plan shall contain provisions pertaining to
preliminary assessment of all members for initial expenses necessary to commence
operations, establishment of necessary facilities, management of the association,
assessment of members or surcharging of insureds to defray losses and expenses,
commission arrangements, reasonable and objective underwriting standards, acceptance and
cession of reinsurance, retention of servicing carriers or other servicing arrangements,
procedures for determining amounts of insurance to be provided by the association and
retention of persons necessary to effectuate the purposes of this chapter. The plan
shall contain a provision for a system or program of reasonable loss control efforts.
20-2206 Approval of plan of operation
A. The plan of operation prepared pursuant to section 20-2205 is subject to
approval by the director after consultation with the members of the association and other
affected individuals and organizations. If the director disapproves all or any part of
the proposed plan of operation, the directors of the association, within fifteen days,
shall submit for review an appropriate revised plan of operation or a part of a revised
plan. If the directors of the association fail to act, the director shall promulgate a
plan of operation or a part of a plan, whichever is appropriate. The plan of operation
approved or promulgated by the director becomes effective and operational on order of the
director.
B. A plan of operation shall require the association to issue a claims-made
policy. Pending the approval of the plan of operation, the association shall designate a
service company or service companies to bind the association for the coverage. The
policies shall make provision for payment of dividends.
20-2207 Amendments to the plan of operation
Amendments to the plan of operation may be made by the directors of the association,
subject to the approval of the director, or shall be made at the direction of the
director consistent with the provisions of section 20-2206.
20-2208 Policies issued by the association; claims-made basis
Except as otherwise provided in this chapter, a liability insurance policy issued by
the association shall be on a claims-made basis. The policy form shall be filed with and
approved by the director.
20-2209 Claims-made policy; cancellation
A policy issued pursuant to this chapter may provide that the association may cancel
any of its policies for the reasons specified in section 20-1673 or in the event of
nonpayment of any premium assessment or other charge by mailing or delivering to the
insured at the address shown in the policy written notice at least ten days before the
effective date of the cancellation.
20-2210 Occurrence riders; premiums; assessments
A. All policies written by the association shall contain a provision that
guarantees the insured that the association shall issue, on the written demand of any
insured to whom it has issued a claims-made policy, an occurrence rider comparable to
that provided in the voluntary market.
B. The premium for the occurrence rider shall not exceed the total amount that the
insured would have paid for occurrence policies, if the occurrence policies had been
issued to the insured by the association, less the total amount that the insured paid for
claims-made policies issued to him by the association. However, if a majority of the
directors of the association concludes that the occurrence rider premium would be
inadequate, the directors may request the actuary provided for in section 20-2211 to
determine whether a premium surcharge based on the experience of the policyholder should
be required. Based on his actuarial opinion, the actuary may recommend to the director a
premium surcharge of no more than ten per cent of the initial net occurrence rider
premium. If the director approves a recommended surcharge, the surcharge shall be
imposed no earlier than the end of the policy term. Individual policyholders may pay for
an occurrence rider on a quarterly basis for a period of not to exceed two years. If the
policyholder fails to make payment, the occurrence rider is void. A policyholder
electing to pay for the occurrence rider on a deferred payment basis may be assessed a
finance charge of not to exceed six per cent per year on the unpaid balance. A private
insurer issuing a liability insurance policy on an occurrence or claims-made basis which
replaces or begins coverage on the expiration of a policy issued by the association may
provide liability coverage for acts or omissions by the insured which occurred during the
period the association's policy was in effect, excluding liability for any claim of
injury or loss made to the association during the period.
20-2211 Rates; actuary
A. The rates, rating plans, rating rules, rating classifications and territories
applicable to insurance written by the association, and the statistics relating thereto,
are subject to the provisions of chapter 2, article 4.1 of this title, giving
consideration to the past and prospective loss and expense experience for the designated
class or classes of liability insurance, trends in the frequency and severity of losses,
the investment income of the association and other relevant information. The premium
rates for an occurrence policy and a claims-made policy for each year the association
issues policies shall be established by the association. In determining whether the
association's rates are not inadequate, excessive or unfairly discriminatory, the
director shall consider recommendations made by the actuary. All rates shall be on an
actuarially sound basis, giving consideration to the group retrospective rating plan, and
shall be calculated to be self-supporting, except that the total initial expenses
necessary to establish, commence and manage operations may be amortized over a period of
at least five years. Such rates shall be deemed not inadequate if they are so
constituted that the expenses and loss costs of the plan of operation are equal to or
exceeded by the premium. Competition or lack of competition shall not be considered as a
rating standard under this section.
B. All policies issued by the association are subject to a group retrospective
rating plan under which the final premium for all policyholders of the association, as a
group, shall be equal to administrative, servicing and contingency expenses, modified as
applicable in accordance with subsection A, loss and loss adjustment expenses, and
taxes. Policyholders shall be given full credit for all investment income, net of
expenses and a reasonable management fee on policyholder supplied monies. The maximum
final premium for all policyholders of the association, as a group, is limited as
provided in this chapter.
C. The director shall examine the association as often as he deems appropriate to
ensure that the group retrospective rating plan is being operated in a manner consistent
with this section. If he finds that it is not being so operated, he shall issue an order
to the association, specifying in what respect its operation is deficient and stating
what corrective action shall be taken.
20-2212 Deficits; equitable assessments; premium tax credits
A. On a determination that within the next one hundred eighty days thereafter the
association will be unable to pay its outstanding lawful obligations as they mature in
the regular course of business as shown by an excess of such lawful obligations over
admitted assets, the association shall certify to the director the existence of this
condition.
B. At the time of certification, the association shall submit a schedule of
policyholder surcharges and a plan of member assessments which, in combination, are
sufficient to assure the continued sound financial operation of the association. The
surcharge may not exceed ten per cent of the total premium paid for a policy or policies
obtained through the association. Member assessments shall not exceed one per cent of
each member's net direct premium in this state attributable to the line of insurance, the
writing of which requires it to be a member of the association.
C. Any member of the association subject to an assessment in any one calendar year
shall be allowed a premium tax credit beginning in the following calendar year, at the
rate of twenty per cent per year for five years.
D. The association shall certify to the director the estimated amount of any
deficit remaining after the termination of all underwriting activities of the
association. Policyholder surcharges are limited to ten per cent of the annual premium.
20-2213 Initial assessment; temporary contribution by members
A. An initial assessment of up to five hundred dollars may be imposed by the
director on every participating insurer of the association to defray the initial
operating expenses of the plan. The initial assessment may be refunded by the
association.
B. If sufficient monies are not available for the sound financial operation of the
association as provided for in this chapter, all members shall contribute to the
financial requirements of the association in the manner provided for in this
chapter. Any such contributions shall not exceed one per cent annually of each member's
net direct premium attributable to the liability insurance the member writes as a
requirement for membership in the association pursuant to section 20-2202, subsection A.
C. If the association determines that the applicant meets the underwriting
standards of the association, as prescribed in the plan of operation, the association, on
receipt of the premium or the portion of the premium as is prescribed in the plan of
operation, shall cause a policy of liability insurance to be issued.
20-2214 Member participation in writings, expenses, servicing allowance, management fees and losses
All members of the association shall participate in its writings, expenses,
servicing allowance, management fees and losses in the proportion that the net direct
premium of each member, excluding that portion of a premium attributable to the operation
of the association, written during the preceding calendar year bears to the aggregate net
direct premium written in this state by all members of the association. Each member's
participation in the association shall be determined annually on the basis of the net
direct premium written during the preceding calendar year.
20-2215 Appeal by applicants to the association; order
Any applicant to the association or any person insured pursuant to this chapter, or
their representatives, or any affected member may appeal to the director within thirty
days after any ruling, action or decision by or on behalf of the association, with
respect to those items defined by the directors of the association and approved by the
director as appealable matters. Except as provided in section 41-1092.08, subsection H,
all final orders of the director made pursuant to this section are subject to judicial
review pursuant to title 12, chapter 7, article 6, except that notwithstanding any other
law, proceedings for judicial review act as a stay of the enforcement of any order or
decision of the director disapproving or ordering the withdrawal, adjustment or
termination of the effectiveness of any rate filing made by or on behalf of the
association on the ground that the rates or premiums for the business of the association
are unreasonable or excessive. The association may continue to charge rates pursuant to
the filing pending final order of the court. 20-2216 Annual filing; contents
Annually on or before January 1, the association shall file in the office of the
director a statement which contains information with respect to its transactions,
condition, operations and affairs during the preceding year. Such statement shall
contain such matters and information as are prescribed and shall be in such form as is
approved by the director. The director, at any time, may require the association to
furnish additional information with respect to its transactions, condition or any matter
connected with its transactions and condition considered to be material and of assistance
in evaluating the scope, operation and experience of the association.
20-2217 Annual examination by the director
The director shall make an examination into the affairs of the association at least
annually. The examination shall be conducted and the report filed in the manner
prescribed in section 20-156.
20-2218 Costs; charge to the association
All reasonable and necessary costs incurred by the director pursuant to this chapter
shall be charged to and immediately reimbursed by the association.
20-2219 Liability of the association
There is no liability on the part of nor does any cause of action accrue against the
association or its members, the director or his authorized representatives or any other
person or organization for any acts or omissions made in good faith by them during any
proceeding or concerning any matters within the scope of this chapter. The association
is a legal entity separate and distinct from its members.
20-2220 Prohibition from membership in ARIZONA guaranty fund
The association shall not be a member of the ARIZONA guaranty fund nor shall that
fund or this state or any of its political subdivisions be otherwise responsible for
losses sustained by the joint underwriting association.
20-2221 Dissolution
Dissolution of the association, including its assets and liabilities, shall be
accomplished under the supervision of the director.
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