20-201 "Alien" insurer defined
An "alien" insurer is one formed under the laws of a country other than the United
States.
20-202.01 Stock insurer's initial free surplus defined
Initial free surplus of a stock insurer is the minimum amount of investment required
for the lines authorized over and above the minimum required capital stock.
20-202.02 Mutual insurer's minimum required basic surplus defined
A mutual insurer's minimum required basic surplus is defined as the minimum
requirement deposited with the state treasurer through the director's office to qualify
for the lines of insurance authorized to be written.
20-202.03 Mutual insurer's initial free surplus defined
A mutual insurer's initial free surplus is defined as the minimum additional assets
required of a mutual insurer over and above the minimum required basic surplus for the
lines of insurance authorized to be written.
20-202.04 Reciprocal insurer's required basic surplus defined
A reciprocal insurer's required basic surplus is defined as the minimum requirement
deposited with the state treasurer through the director's office to qualify for the lines
of insurance authorized to be written.
20-202.05 Reciprocal insurer's initial free surplus defined
A reciprocal insurer's initial free surplus is defined as the minimum additional
assets required of a reciprocal insurer over and above the minimum required basic surplus
for the lines of insurance authorized to be written.
20-202 "Charter" defined
"Charter" means articles of incorporation, of agreement or of association, or other
basic constituent document of a corporation, or subscribers' agreement and power of
attorney of a reciprocal insurer.
20-203 "Domestic" insurer defined
A "domestic" insurer is one formed under the laws of this state.
20-204 "Foreign" insurer defined
A "foreign" insurer is one formed under the laws of another state of the United
States.
20-205 "State," "United States" defined
"State" means any state, commonwealth or territory of the United States, including
the District of Columbia, and "United States" includes the states, territories, districts
and commonwealths thereof.
20-206 Authority to transact insurance
A. No person shall act as an insurer and no insurer shall transact insurance in
this state except as authorized by a subsisting authority granted to it by the director,
except as to such transactions as are expressly otherwise provided for in this title. No
such authority shall be required for an insurer, formerly so authorized, to enable it to
investigate and settle losses under its policies lawfully written in this state, or to
liquidate such assets and liabilities of the insurer, other than collection of new
premiums, as has resulted from its former authorized operations in this state.
B. An insurer not transacting new insurance business in this state but continuing
collection of premiums on and servicing of policies remaining in force as to residents of
or risks located in this state, is transacting insurance in this state for the purpose of
premium tax requirements only and is not required to have a certificate of authority
therefor. This subsection shall not apply to insurers which have withdrawn from this
state prior to January 1, 1955.
C. As to an insurance coverage on a subject of insurance not resident, located, or
expressly to be performed in this state at time of issuance, and solicited, written and
delivered outside the state, no such authority shall be required of an insurer as to
subsequent transactions in this state on account thereof.
20-207 General qualifications to transact insurance
To qualify for and hold authority to transact insurance in this state an insurer
shall be otherwise in compliance with the provisions of this title and with its charter
powers, and shall be an incorporated stock insurer, an incorporated mutual insurer, a
reciprocal insurer, or a Lloyd's association of the same general type as may be formed as
a domestic insurer under this title. No foreign or alien insurer shall be authorized to
transact insurance in this state which does not maintain reserves as required by article
1 of chapter 3 of this title applicable to the kind or kinds of insurance transacted by
such insurer.
20-208 Definition of guaranteed investment contract
In this title, unless the context otherwise requires, "guaranteed investment
contract" means any unallocated group contract, investment contract, funding agreement,
guaranteed interest contract or other similar instrument by whatever name in which an
insurance company agrees to guarantee a fixed or variable rate of interest or a future
payment that is based on an index or any other similar criteria, that is payable at a
predetermined date on monies that are deposited with the insurance company and that is
not dependent on the continuance of human life.
20-209 Kinds of insurance an insurer may transact
A. An insurer which otherwise qualifies therefor may be authorized to transact any
one kind or combination of kinds of insurance as defined in article 2 of this chapter,
except that:
1. A life insurer shall not be authorized to transact any other kind of insurance
except disability, but if immediately prior to January 1, 1955 any life insurer lawfully
held a subsisting certificate of authority granting it the right to transact in this
state additional kinds of insurance other than disability, as long as the insurer is
otherwise in compliance with this title the director may continue to authorize such
insurer to transact the same kinds of insurance as those specified in such prior
certificate of authority.
2. A reciprocal insurer shall not transact life insurance.
3. A title insurer shall not transact any other kind of insurance.
B. A life insurer authorized to transact life insurance in this state may issue
guaranteed investment contracts. An insurer authorized to issue guaranteed investment
contracts may offer an annuity option as a feature of a guaranteed investment contract.
20-210 Minimum required capital stock or basic surplus
A. Except as provided in subsection B, to qualify for authority to transact any one
kind of insurance or combinations of kinds of insurance as shown below, an insurer shall
possess and thereafter maintain unimpaired minimum required capital stock, if a stock
insurer, or unimpaired minimum required basic surplus, if a mutual or a reciprocal
insurer, and free surplus not less than fifty per cent of the initial free surplus, and
when first so authorized shall possess initial free surplus, all in amounts not less than
as determined from the following table:
---------------------------------------------------------------------------------------
¦ ¦ ¦ ¦ ¦ ¦ ¦ ¦
¦ ¦ Stock Insurers ¦ Mutual Insurers ¦ Reciprocal Insurers ¦ ¦ ¦ ¦
---------------------------------------------------------------------------------------
¦ ¦ ¦ ¦ ¦ ¦ ¦ ¦
¦ ¦ Minimum ¦ Minimum ¦ Minimum ¦ ¦ ¦ ¦
---------------------------------------------------------------------------------------
¦ ¦ ¦ ¦ ¦ ¦ ¦ ¦
¦ Kind or ¦ Required ¦ Initial ¦ Required ¦ Initial ¦ Required ¦ Initial ¦
---------------------------------------------------------------------------------------
¦ ¦ ¦ ¦ ¦ ¦ ¦ ¦
¦ Kinds of ¦ Capital ¦ Free ¦ Basic ¦ Free ¦ Basic ¦ Free ¦
---------------------------------------------------------------------------------------
¦ ¦ ¦ ¦ ¦ ¦ ¦ ¦
¦ Insurance ¦ Stock ¦ Surplus ¦ Surplus ¦ Surplus ¦ Surplus ¦ Surplus ¦
---------------------------------------------------------------------------------------
-------------------------------------------------------------------------
¦ ¦ ¦ ¦ ¦ ¦ ¦ ¦
¦ Casualty ¦ $600,000 ¦ $300,000 ¦ $600,000 ¦ $300,000 ¦ $600,000 ¦ $300,000 ¦
-------------------------------------------------------------------------
¦ ¦ ¦ ¦ ¦ ¦ ¦ ¦
¦ Disability ¦ 300,000 ¦ 150,000 ¦ 300,000 ¦ 150,000 ¦ 300,000 ¦ 150,000 ¦
-------------------------------------------------------------------------
¦ ¦ ¦ ¦ ¦ ¦ ¦ ¦
¦ Life ¦ 300,000 ¦ 150,000 ¦ 300,000 ¦ 150,000 ¦ ¦ ¦
----------------------------------------------------------------------
not applicable
----------------------------------------------------------------------
¦ ¦ ¦ ¦ ¦ ¦ ¦ ¦
¦ Disability and ¦ 400,000 ¦ 200,000 ¦ 400,000 ¦ 200,000 ¦ ¦ ¦
----------------------------------------------------------------------
not applicable
----------------------------------------------------------------------
¦ ¦ ¦ ¦ ¦ ¦ ¦ ¦
¦ Life ¦ ¦ ¦ ¦ ¦ ¦ ¦
----------------------------------------------------------------------
¦ ¦ ¦ ¦ ¦ ¦ ¦ ¦
¦ Marine and ¦ 600,000 ¦ 300,000 ¦ 600,000 ¦ 300,000 ¦ 600,000 ¦ 300,000 ¦
----------------------------------------------------------------------
¦ ¦ ¦ ¦ ¦ ¦ ¦ ¦
¦ Transportation ¦ ¦ ¦ ¦ ¦ ¦ ¦
----------------------------------------------------------------------
¦ ¦ ¦ ¦ ¦ ¦ ¦ ¦
¦ Property ¦ 600,000 ¦ 300,000 ¦ 600,000 ¦ 300,000 ¦ 600,000 ¦ 300,000 ¦
----------------------------------------------------------------------
¦ ¦ ¦ ¦ ¦ ¦ ¦ ¦
¦ Surety ¦ 1,000,000 ¦ 500,000 ¦ 1,000,000 ¦ 500,000 ¦ 1,000,000 ¦ 500,000 ¦
----------------------------------------------------------------------
¦ ¦ ¦ ¦ ¦ ¦ ¦ ¦
¦ Multiple line ¦ 1,000,000 ¦ 500,000 ¦ 1,000,000 ¦ 500,000 ¦ 1,000,000 ¦ 500,000 ¦
----------------------------------------------------------------------
¦ ¦ ¦ ¦ ¦ ¦ ¦ ¦
¦ Vehicle ¦ 600,000 ¦ 300,000 ¦ 600,000 ¦ 300,000 ¦ 600,000 ¦ 300,000 ¦
----------------------------------------------------------------------
¦ ¦ ¦ ¦ ¦ ¦ ¦ ¦
¦ Title ¦ 500,000 ¦ 250,000 ¦ ¦ ¦ ¦ ¦
----------------------
not applicable
----------------------
not applicable
----------------------
B. A domestic insurer, including a domestic limited stock insurer subject to the
capital and surplus requirements prescribed in subsection D of this section, holding a
valid certificate of authority to transact insurance in this state of the kind or kinds
as set forth in subsection A prior to the effective date of this section, may, if
otherwise qualified, continue to be so authorized while possessing the amount of paid-in
capital stock, if a stock insurer, or surplus, if a mutual insurer, required by the laws
of this state for such authority immediately prior to the effective date of this
section. The director shall not grant such an insurer authority to transact any other or
additional kinds of insurance unless such insurer fully complies with the requirements as
to capital and surplus, as applied to all kinds of insurance which the insurer proposes
to transact, as provided by this section for like insurers applying for original
certificates of authority under this title. Upon a change in the control of such an
insurer, such insurer shall within one year from the effective date of such change in
control meet the capital and surplus requirements for new insurers pursuant to subsection
A of this section. For the purposes of this subsection "control" shall have the same
meaning and be determined in the same manner as prescribed in section 20-481.
C. Capital and surplus requirements are based upon all kinds of insurance
transacted by the insurer in all areas in which the insurer operates or proposes to
operate whether or not only a portion of such kinds are to be transacted in this state.
D. Notwithstanding the limitation in the first sentence of subsection B of this
section on increased capitalization for authorized insurers, any domestic limited stock
insurer which on January 31, 1969 was the holder of a valid certificate of authority
shall not be required to meet the capital and initial free surplus requirement of this
section, but after January 31, 1980, any such domestic limited stock insurer shall
possess and thereafter maintain:
1. Minimum paid-in capital stock of one hundred thousand dollars, and
2. Surplus funds in an amount of not less than one-half such minimum paid-in
capital. On and after the effective date of this section any domestic limited stock
insurer which holds a valid certificate of authority immediately prior to such effective
date and which qualified under the provisions of subsection B of section 20-708 and whose
premium income as a direct writer during calendar year 1976 did not exceed fifty per cent
of its total premium income including reinsurance premiums from insurance policies and
contracts for such year, shall be a domestic life and disability reinsurer and be subject
to the provisions of article 10, of chapter 4 of this title.
20-211 Surplus required
A. In addition to the minimum required capital stock, if a stock insurer, or
minimum required basic surplus, if mutual or reciprocal insurers, as required by sections
20-210 and 20-212 as to all stock insurers and foreign and alien mutual and reciprocal
insurers, by sections 20-768 and 20-212 as to domestic reciprocal insurers, and section
20-711, subsection B and section 20-212 as to domestic mutual insurers, except as stated
in subsection C of this section, any foreign or alien insurer, any title insurer, and any
domestic insurer shall possess at the time of original authorization in this state
initial free surplus as stated in section 20-210, and shall maintain free surplus funds
in an amount of not less than one-half such initial free surplus. No other insurer shall
be so initially authorized in this state unless it then possesses surplus of not less
than initial free surplus as stated in section 20-210, in addition to the minimum
required capital stock, if a stock insurer, or minimum required basic surplus, if mutual
or reciprocal insurers, otherwise required.
B. In addition to the minimum required capital stock if the insurer is a stock
insurer or in addition to the minimum required basic surplus if the insurer is a mutual
or reciprocal insurer under this article and chapter 4, article 1 of this title, a
domestic, foreign or alien insurer shall possess and maintain any additional free surplus
that the director may require based on the type, volume or nature of its business as a
necessary condition to avoid rendering its transaction of insurance hazardous to its
policyholders or the people of this state. The director shall adopt rules to implement
the provisions of this subsection.
C. Subsection A of this section shall not apply to a domestic mutual insurer which
qualifies upon the basis of applications for insurance as provided in section 20-711, nor
to reinsurers which qualify pursuant to chapter 4, article 10 of this title and which do
not within such five year period transact any kind of insurance in addition to that for
which initially authorized.
20-212 Funds required to transact additional kinds of insurance
An insurer otherwise qualified may be authorized to transact combinations of kinds
of insurance, other than the life and disability combination shown in section 20-210,
while possessing and maintaining thereafter additional minimum required capital stock, if
a stock insurer, or additional minimum required basic surplus, if a mutual or reciprocal
insurer, not less in amount than that determined as follows: For any lawful combination
add two hundred thousand dollars for each additional kind of insurance included in the
combination to the amount required under section 20-210 for that one kind of insurance in
the combination for which the largest amount is required under said section 20- 210,
except:
1. Vehicle and disability insurances may be combined with casualty, and in any
combination including casualty, without funds in addition to those required because of
casualty.
2. With such additional minimum required capital stock or such additional minimum
required basic surplus in an amount of not less than five hundred thousand dollars, an
insurer, if otherwise qualified, may be authorized to transact all kinds of insurance
except life and title insurance. Any domestic stock insurer which on January 1, 1954,
was lawfully authorized to transact vehicle insurance, for physical damage only, or
casualty insurance, and while possessing paid-in capital of not less than two hundred
fifty thousand dollars, may be so authorized to transact all kinds of insurance other
than life and title insurances.
3. The amount of such capital or surplus shall not in any event be less than would
be required if the insurer proposed to transact in this state all those kinds of
insurance which it is transacting elsewhere.
20-213 Deposit requirements
The director shall not issue a certificate of authority to any insurer unless it has
deposited in trust with the state treasurer through the director's office cash or
securities eligible for the investment of capital funds of domestic insurers under this
title in an amount not less than the minimum required capital stock, if a stock insurer,
or minimum required basic surplus, if a mutual or reciprocal insurer, required pursuant
to this article to be maintained for authority to transact the kinds of insurance to be
transacted, except:
1. As to life and disability carriers there shall be maintained with the state
treasurer or a trustee approved by the director, a deposit in cash, surety bond or
securities as described in sections 20-537 through 20-548 and sections 20-551 through
20-556, in an amount equal to the greatest of:
(a) Minimum required capital stock or minimum required basic surplus pursuant to
section 20-210.
(b) Two-thirds of the aggregate reserves as computed under section 20-510.
(c) Twenty-five per cent of the earned premium of the prior year.
2. As to title insurers, the deposit shall be in such amount as is required by
article 9 of chapter 6 of this title.
3. As to foreign insurers, in lieu of such deposit or part thereof in this state,
the director shall accept the current certificate in proper form of the public official
having supervision over insurers in any other state to the effect that a like deposit or
part thereof by such insurer is being maintained in public custody in such state in trust
for the purpose, among other reasonable purposes of protection of policyholders in this
state.
4. As to alien insurers, in lieu of such deposit or part thereof in this state, the
director shall accept evidence satisfactory to him that the insurer maintains within the
United States by way of deposits with public depositaries, or in trust institutions
within the United States approved by the director, assets available for discharge of its
United States insurance obligations which assets shall be in amount not less than the
outstanding liabilities of the insurer arising out of its insurance transactions in the
United States, together with, in the case of title insurers, the sum required by article
9 of chapter 6 of this title, and, in the case of all other insurers, together with the
larger of the following sums:
(a) The largest deposit required by this title to be made in this state by any type
of domestic insurer transacting like kinds of insurance, or
(b) Three hundred thousand dollars.
5. No deposit requirement for any insurer provided by this section shall exceed
five hundred thousand dollars.
20-214 Financial requirements; escalator provisions
If with respect to an insurer lawfully authorized to transact insurance in this
state immediately prior to the effective date of this section, this title requires a
greater amount of capital, surplus or deposit than required of such insurer immediately
prior to such effective date, such insurer shall have a period of one year from and after
such effective date within which to comply with any such increased requirement. No such
increase shall be required of any domestic stock insurer which as of such effective date,
was lawfully authorized to transact in this state only automobile physical damage
insurance, and for so long as such insurer does not transact any additional insurance.
20-215 Application for certificate of authority
To apply for an original certificate of authority an insurer shall file with the
director its application for a certificate of authority showing its name, location of its
home office or principal office in the United States, if an alien insurer, kinds of
insurance to be transacted, date of organization or incorporation, form of organization,
state or country of domicile and such additional information as the director may
reasonably require, together with the following applicable documents:
1. If a foreign or alien insurer, a copy of its corporate charter with all
amendments to the charter certified by the public officer with whom the originals are on
file in the state or country of domicile.
2. A copy of its bylaws, as amended, certified by its secretary or other officer
having custody of the bylaws.
3. A copy of its annual statement as of December 31 last preceding.
4. A copy of the report of the last examination, if any, made of the insurer,
certified by the insurance supervisory official of its state of domicile or of entry into
the United States.
5. Appointment of the director as its attorney to receive service of legal process
if, as to a foreign or alien insurer, such an appointment is not already on file.
6. Appointment of a statutory agent to receive service of legal process,
accompanied by his name and address, as to a domestic insurer.
7. If a foreign or alien insurer, a certificate of the public official having
supervision of insurance in its state or country of domicile showing that it is
authorized to transact the kinds of insurance proposed to be transacted in this state.
8. If an alien insurer, a copy of the appointment and authority of its United
States manager, certified by its officer having custody of its records.
9. If a foreign or alien insurer, a certificate as to deposit if to be tendered
pursuant to section 20-213.
20-216 Issuance or refusal of certificate
A. If on the completion of an application the director finds that the insurer has
met the requirements for and is entitled under this title, the director shall issue to
the insurer a proper certificate of authority. If the director does not so find, the
director shall issue an order refusing such certificate. The director shall act on an
application for a certificate of authority within ninety days after its completion.
B. The certificate, if issued, shall specify the kind or kinds of insurance the
insurer is authorized to transact in this state. At the insurer's request, the director
may issue a certificate of authority limited to particular types of insurance included
within a kind of insurance as defined in this title.
20-217 Certificate of authority; term; termination; delivery upon termination or revocation
A. The certificate of authority issued by the director to an insurer is evidence of
its authority to transact in this state the kind of insurance specified in the
certificate.
B. A certificate of authority remains in effect until terminated at the request of
the insurer or suspended or revoked by the director.
C. A certificate of authority remains the property of this state. Upon termination
at the request of the insurer or revocation by the director, the insurer shall
immediately deliver the certificate of authority to the director.
D. The director shall not grant the request of an insurer to terminate its
certificate of authority if the insurer has any outstanding obligations under a policy of
insurance to policyholders or claimants who are residents of this state. This subsection
does not apply if the insurer has deposited with the state treasurer securities
acceptable to the director in an amount equal to its liabilities, as computed by the
director, including its reserves as required by this title in respect to its business in
this state for the sole benefit of its policyholders and creditors who are residents of
this state. The state treasurer shall hold and administer the deposits pursuant to
chapter 3, article 3 of this title. This subsection does not apply if the insurer has
fully reinsured such outstanding obligations with a reinsurer under an agreement filed
with and approved in writing by the director pursuant to section 20-261. This subsection
does not apply when the termination of the insurer's certificate of authority is the
result of a merger on consolidation if the emerging or surviving insurer is or becomes
authorized to transact business in this state and assumes such outstanding obligations of
the terminating insurer.
E. The certificate of authority shall be suspended or revoked if the insurer fails
to pay the annual certificate of authority fee denominated a renewal fee in section
20-167 at the time provided in section 20-223.
20-218.01 Appointment of a statutory agent
A. Each domestic insurer shall have and continuously maintain in this state:
1. A known place of business which may be the office of its statutory agent.
2. A statutory agent, which agent may be the director, an individual, who has been
a resident of this state for three years, a domestic corporation or a foreign corporation
authorized to transact business in this state.
B. Failure to appoint a statutory agent by a domestic insurer may result in the
revocation or suspension of such insurer's certificate of authority.
C. The appointment required herein shall be filed with the director.
20-218.02 Change of known place of business or statutory agent
A. A domestic insurer may change its known place of business in this state or its
statutory agent in this state, or both, upon filing with the director a statement setting
forth:
1. The name of the insurer.
2. The address of its then known place of business.
3. If the address of its known place of business is to be changed, the address to
which it is to be changed.
4. The name and address of its then statutory agent.
5. If its statutory agent or his address is to be changed, the name and address of
its successor statutory agent, or the new address.
6. That such change was duly authorized by the insurer.
B. If a domestic insurer's statutory agent is changed or resigns, a new statutory
agent shall be appointed by the insurer. The termination of an existing statutory agent
shall not take effect until the insurer has appointed a new valid statutory agent.
20-218 Name of insurer
A. No insurer shall be authorized to transact insurance in this state which has or
uses a name so similar to that of any insurer already so authorized as to cause
uncertainty or confusion. In case of conflict of names between two insurers the director
may permit or require the newly authorized insurer to use in this state such
supplementation or modification of its name as may reasonably be necessary to avoid such
conflict.
B. No insurer shall be authorized to transact insurance in this state which has or
uses a name which tends to deceive or mislead as to the type of organization of the
insurer.
20-219 Mandatory revocation or suspension
The director shall refuse to renew or shall revoke or suspend an insurer's
certificate of authority:
1. If such action is required by any provision of this title, or
2. If the insurer no longer meets the requirements for the authority originally
granted, on account of deficiency in assets or otherwise.
20-220 Certificate of authority; refusal to renew; revocation or suspension; civil penalty
A. The director may after a hearing refuse to renew or may revoke or suspend an
insurer's certificate of authority, in addition to other grounds therefor in this title,
if the insurer:
1. Violates any provision of this title other than a provision as to which refusal,
suspension or revocation is mandatory.
2. Knowingly fails to comply with any lawful rule or order of the director.
3. Is found by the director to be in unsound condition or in such condition as to
render its further transaction of insurance in this state hazardous to its policyholders
or to the people of this state.
4. Usually compels claimants under its policies to accept less than the amount due
them or to bring suit against it to secure full payment thereof.
5. Refuses to be examined or to produce its accounts, records and files for
examination by the director when required.
6. Fails to pay any final judgment rendered against it in this state within thirty
days after the judgment becomes final.
7. Is affiliated with and under the same general management or interlocking
directorate or ownership as another insurer which transacts direct insurance in this
state without having a certificate of authority therefor, except as permitted to a
surplus lines insurer under article 5 of this chapter.
B. If after a hearing the director finds grounds pursuant to subsection A to
suspend or revoke an insurer's certificate of authority, the director may impose, in lieu
of or in addition to such suspension or revocation, the following civil penalties:
1. A penalty not to exceed one thousand dollars for each violation and not to
exceed an aggregate of ten thousand dollars within any six-month period with respect to
unintentional violations.
2. A penalty not to exceed five thousand dollars for each violation and not to
exceed an aggregate of fifty thousand dollars within any six-month period with respect to
intentional violations. The insurer shall pay the civil penalty to the director who
shall deposit it, pursuant to sections 35-146 and 35-147, in the state general fund. The
civil penalty is in addition to any other penalty imposed by law.
C. The director may adopt rules to provide the criteria to be used for identifying
insurers who are found to be in a condition that would render the continuance of their
business hazardous to their policyholders or the people of this state. 20-221 Director as agent for service of process
A. Each authorized foreign or alien insurer shall appoint the director as its
attorney to receive service of legal process issued against it in this state. The
appointment shall be irrevocable, shall bind any successor in interest or to the assets
or liabilities of the insurer and shall remain in effect as long as there is in force in
this state any contract made by the insurer or obligations arising therefrom.
B. Service of process against a foreign or alien insurer shall be made only by
service of process upon the director. Service of process against a domestic insurer
shall be made upon the insurer corporation in the manner provided by laws applying to
corporations generally, or upon the insurer's attorney-in-fact if a reciprocal insurer.
C. Each foreign or alien insurer at the time of application for a certificate of
authority shall file with the director the name and address of a designated person to
whom process against it served upon the director is to be forwarded. The insurer may
change such designation by a new filing.
D. Any authorized domestic insurer who does not have or maintain a statutory agent
shall appoint the director as its attorney to receive service of legal process issued
against it in this state.
20-222 Service of process; time to answer
A. Duplicate copies of legal process against an insurer for whom the director is
attorney shall be served upon him. At the time of service the plaintiff shall pay to the
director five dollars, taxable as costs in the action. Upon receiving such service the
director shall promptly forward a copy thereof by registered mail to the person last so
designated by the insurer to receive process.
B. Where process is served upon the director as an insurer's attorney, no further
proceedings shall be had against the insurer, and the insurer shall not be required to
appear, answer or plead until expiration of forty days after date of such service upon
the director.
C. Process served upon the director and copy thereof forwarded as in this section
provided shall constitute service thereof upon the insurer.
20-223.01 Annual report of product liability insurer
At the time of filing the annual report each insurer providing product liability
insurance or excess insurance above self-insured retention for product liability, either
as a separate policy or as part of a package, to one or more manufacturers or sellers in
this state shall file with the director a report of the product liability claims made
against its insureds, located in this state, which have been closed during the preceding
calendar year. This section shall not require the reporting of any information regarding
claims closed prior to June 30, 1978. Each report shall be in such form and provide such
information as may be required by the director under appropriate rules and regulations
promulgated by the director.
20-223 Annual statement; payment of fees; penalty for failure to file or pay
A. Each authorized domestic insurer shall annually on or before March 31 and each
other authorized insurer shall annually on or before March 1 file with the director a
true statement of its financial condition, transactions and affairs as of the December 31
preceding. The statement shall be completed pursuant to the instructions and accounting
practices and procedures that are approved by the national association of insurance
commissioners. The statement shall be in such general form and context as approved by
the national association of insurance commissioners for the kinds of insurance to be
reported upon, and as supplemented for additional information required by the
director. The director shall adopt rules providing requirements for the filing of annual
audited financial statements. Coincident with the filing of its annual statement, each
such insurer shall pay such fees prescribed by section 20-167 for filing the annual
statement and renewal of its certificate of authority.
B. The statement of an alien insurer shall relate only to its transactions and
affairs in the United States unless the director requires otherwise. The statement shall
be verified by the insurer's United States manager or other officer duly authorized.
C. The director may refuse to renew, or may suspend or revoke, the certificate of
authority of any insurer failing to file its annual statement or pay its fees when due or
within any extension of time therefor which the director, for good cause, may have
granted.
D. Any insurer failing to file an annual statement or to pay its fees pursuant to
the provisions of this section is subject to payment of a penalty fee not to exceed
twenty-five dollars for each day of delinquency.
20-224.01 Additional premium tax
A. Coincident with the filing of the tax report as required in section 20-224, each
insurer shall pay to the director, for deposit, pursuant to sections 35-146 and 35-147, a
tax of .4312 per cent of such net premiums received from all insurance carried for or on
vehicles as defined in section 28-101, in addition to other applicable taxes.
B. The tax of .4312 per cent of such net premiums received by the director and paid
by an insurer on account of premiums received for insurance on certain vehicles as
defined in section 28-101 shall be separately specified in the insurer's report required
in section 20-224 and is appropriated to the public safety personnel retirement system
and shall be transferred by the state treasurer to the fund manager of the public safety
personnel retirement system for deposit in the highway patrol account. If the tax
received is greater than the amount necessary to fund the highway patrol account,
beginning in the 1991-1992 fiscal year the state treasurer shall deposit the excess in
the ARIZONA highway patrol fund established in section 41-1752 in any amount required by
legislative appropriation.
C. An insurer shall report and pay the taxes required by this section in the manner
prescribed by section 20-224. An insurer who fails to pay the tax on or before the
prescribed payment dates is subject to a civil penalty determined pursuant to section
20-225.
D. An insurer shall not claim a premium tax credit pursuant to section 20-224.03 or
20-224.04 for the premium taxes paid pursuant to this section.
20-224.02 Credit for overpayment of tax
If an overpayment of the taxes imposed by sections 20-224, 20-224.01, 20-837,
20-1010, 20-1060 and 20-1097.07 results from payments made pursuant to the method
prescribed in section 20-224, subsection E, the director shall within three months after
the due date refund the overpayment without interest.
20-224.03 Premium tax credit for increased employment in enterprise zones; definition
(Rpld. 7/1/06)
A. A tax credit is allowed against the premium tax liability incurred by an insurer
pursuant to section 20-224, 20-837, 20-1010, 20-1060 or 20-1097.07 for net increases in
qualified employment positions of residents of this state by an insurer that is located
in an enterprise zone established under title 41, chapter 10, article 2. A tax credit is
not allowed for the portion of the tax payable to the fire fighters' relief and pension
fund pursuant to section 20-224 or the portion of the tax payable to the public safety
personnel retirement system pursuant to section 20-224.01. Subject to subsection D of
this section, the amount of the tax credit is equal to:
1. One-fourth of the taxable wages paid to an employee in a qualified employment
position, not to exceed five hundred dollars, in the first year or partial year of
employment.
2. One-third of the taxable wages paid to an employee in a qualified employment
position, not to exceed one thousand dollars per qualified employment position, in the
second year of continuous employment.
3. One-half of the taxable wages paid to an employee in a qualified employment
position, not to exceed one thousand five hundred dollars per qualified employment
position, in the third year of continuous employment.
B. To qualify for a credit under this section:
1. All of the employees with respect to whom a credit is claimed must reside in
this state.
2. Thirty-five per cent of the employees with respect to whom a credit is claimed
for the first year of employment must reside on the date of hire in an enterprise zone
that is located in the same county in which the insurer is located. If an employee for
whom a credit was allowed in the first year of employment leaves employment during the
second or third year, the taxpayer may substitute another employee who meets the
requirements of paragraph 3 of this subsection and who was hired during the same year as
the original employee. If the original employee was counted toward the residency
requirement under this paragraph, the substitute employee must also have resided in a
zone at the time the substitute was hired.
3. A qualified employment position must meet all of the following requirements:
(a) The position must be a minimum of one thousand seven hundred fifty hours per
year of full-time and permanent employment.
(b) The job duties must be performed primarily at the zone locations of the
business. If an eligible employee in a qualified employment position is transferred or
assigned to work in the taxpayer's workplace at a different location that is also located
in an enterprise zone and qualifies as a zone location, it may be considered to be
continuous employment if it continues to meet all qualified employment position
requirements.
(c) The employment must include health insurance coverage for the employee for
which the employer pays at least fifty per cent of the premium or membership cost. If the
taxpayer is self-insured, the taxpayer must pay at least fifty per cent of a
predetermined fixed cost per employee for an insurance program that is payable whether or
not the employee has filed claims.
(d) The employer must pay compensation at least equal to the wage offer by county
as computed annually by the department of economic security research administration
division.
(e) The employee must have been employed for at least ninety days during the first
taxable year. An employee who is hired during the last ninety days of the taxable year
shall be considered a new employee during the next taxable year. A qualified employment
position that is filled during the last ninety days of the taxable year is considered to
be a new qualified employment position for the next taxable year.
(f) The employee has not been previously employed by the taxpayer within twelve
months before the current date of hire.
C. A credit is allowed for employment in the second and third year only for
qualified employment positions for which a credit was allowed in the first year.
D. The net increase in the number of qualified employment positions is the lesser
of the total number of filled qualified employment positions created in the zone during
the tax year or the difference between the average number of full-time employees in the
zone in the current tax year and the average number of full-time employees during the
immediately preceding taxable year. The net increase in the number of qualified
employment positions computed under this subsection may not exceed two hundred qualified
employment positions per taxpayer each year.
E. A taxpayer who claims a credit under section 20-224.04 shall not claim a credit
under this section with respect to the same employees.
F. Pursuant to subsection A of this section, if the allowable tax credit exceeds
the state premium tax liability, the amount of the claim not used as an offset against
the state premium tax liability may be carried forward as a tax credit against subsequent
years' state premium tax liability for the period, not to exceed five taxable years,
provided that the insurer remains in an enterprise zone.
G. If a person purchases an insurance business in a zone or if an insurance business
in a zone changes ownership through reorganization, stock purchase or merger, the new
taxpayer may claim first year credits only for one or more qualified employment positions
that it created and filled with an eligible employee after the purchase or reorganization
was complete. If a person purchases a taxpayer that had qualified for first or second
year credits or if an insurance business changes ownership through reorganization, stock
purchase or merger, the new taxpayer may claim the second or third year credits if it
meets other eligibility requirements of this section. Credits for which a taxpayer
qualified before the changes described in this subsection are terminated and lost at the
time the changes are implemented.
H. An insurer that claims a tax credit against state premium tax liability is not
required to pay any additional retaliatory tax imposed pursuant to section 20-230 as a
result of claiming that tax credit.
I. A failure to timely report and certify to the department of commerce the
information prescribed by section 41-1525, subsection B, paragraphs 1, 2 and 3 and in the
manner prescribed by section 41-1525, subsection C, disqualifies the insurer from the
credit under this section. The department of insurance shall require written evidence of
the timely report to the department of commerce.
J. The termination of an enterprise zone does not affect the credit under this
section with respect to:
1. Insurers that have employees in the second and third years of employment in
qualified employment positions under subsection A, paragraphs 2 and 3 of this section if
the business remains in the location that was in the enterprise zone.
2. Amounts carried forward into subsequent taxable years under subsection F of this
section.
K. The department may adopt rules necessary for the administration of this section.
L. For the purposes of this section, "insurer" means any entity that is subject to
premium tax liability pursuant to section 20-224, 20-837, 20-1010, 20-1060 or 20-1097.07.
20-224.04 Premium tax credit for increased employment in military reuse zones; definitions
A. A tax credit is allowed against the premium tax liability incurred by an insurer
pursuant to section 20-224, 20-837, 20-1010, 20-1060 or 20-1097.07 for net increases in
employment positions of residents of this state by an insurer that is located in a
military reuse zone established under title 41, chapter 10, article 3. A tax credit is
not allowed for the portion of the tax payable to the fire fighters' relief and pension
fund pursuant to section 20-224 or the portion of the tax payable to the public safety
personnel retirement system pursuant to section 20-224.01. The amount of the tax credit
is a dollar amount allowed for each new employee, determined as follows:
1. With respect to each employee other than a dislocated military base employee:
1st year of employment $ 500
2nd year of employment $1,000
3rd year of employment $1,500
4th year of employment $2,000
5th year of employment $2,500
2. With respect to each dislocated military base employee:
1st year of employment $1,000
2nd year of employment $1,500
3rd year of employment $2,000
4th year of employment $2,500
5th year of employment $3,000
B. Pursuant to subsection A of this section, if the allowable tax credit exceeds
the state premium tax liability, the amount of the claim not used as an offset against
the state premium tax liability may be carried forward as a tax credit against subsequent
years' state premium tax liability for the period, not to exceed five taxable years, if
the insurer remains in the military reuse zone.
C. The net increase in the number of employees for purposes of this section shall
be determined by comparing the insurer's average employment in the military reuse zone
during the taxable year with the insurer's previous year's fourth quarter employment in
the zone, based on the insurer's report to the department of economic security for
unemployment insurance purposes but considering only employment in the zone.
D. A credit is not allowed under this section with respect to an employee whose
place of employment is relocated by the insurer from a location in this state to the
military reuse zone unless the insurer maintains at least the same number of employees in
this state but outside the zone.
E. A taxpayer who claims a credit under section 20-224.03 shall not claim a credit
under this section with respect to the same employees.
F. For the purposes of this section:
1. "Dislocated military base employee" means a civilian who previously had
permanent full-time civilian employment on the military facility as of the date the
closure of the facility was finally determined under federal law, as certified by the
department of commerce.
2. "Insurer" means any entity that is subject to premium tax liability pursuant to
section 20-224, 20-837, 20-1010, 20-1060 or 20-1097.07.
20-224 Premium tax
A. On or before March 1 of each year each authorized domestic insurer, each other
insurer and each formerly authorized insurer referred to in section 20-206, subsection B,
shall file with the director a report in a form prescribed by the director showing total
direct premium income including policy membership and other fees and all other
considerations for insurance from all classes of business whether designated as a premium
or otherwise received by it during the preceding calendar year on account of policies and
contracts covering property, subjects or risks located, resident or to be performed in
this state, after deducting from such total direct premium income applicable
cancellations, returned premiums, the amount of reduction in or refund of premiums
allowed to industrial life policyholders for payment of premiums direct to an office of
the insurer and all policy dividends, refunds, savings coupons and other similar returns
paid or credited to policyholders within this state and not reapplied as premiums for
new, additional or extended insurance. No deduction shall be made of the cash surrender
values of policies or contracts. Considerations received on annuity contracts, as well
as the unabsorbed portion of any premium deposit, shall not be included in total direct
premium income, and neither shall be subject to tax. The report shall separately
indicate the total direct premium income received from fire insurance premiums on
property located in an incorporated city or town that procures the services of a private
fire company.
B. Coincident with the filing of such tax report each insurer shall pay to the
director for deposit, pursuant to sections 35-146 and 35-147, a tax of 2.0 per cent of
such net premiums, except that the tax on fire insurance premiums on property located in
an incorporated city or town which procures the services of a private fire company is .66
per cent, the tax on all other fire insurance premiums is 2.2 per cent and the tax on
health care service and disability insurance premiums is as prescribed under sections
20-837, 20-1010 and 20-1060. Any payments of tax pursuant to subsection E of this
section shall be deducted from the tax payable pursuant to this subsection. Each insurer
shall reflect the cost savings attributable to the lower tax in fire insurance premiums
charged on property located in an incorporated city or town that procures the services of
a private fire company.
C. Eighty-five per cent of the tax paid hereunder by an insurer on account of
premiums received for fire insurance shall be separately specified in the report and
shall be apportioned in the manner provided by sections 9-951, 9-952 and 9-972, except
that all of the tax so allocated to a fund of a municipality which has no volunteer fire
fighters or pension obligations to volunteer fire fighters shall be appropriated to the
account of the municipality in the public safety personnel retirement system and all of
the tax so allocated to a fund of a municipality which has both full-time paid fire
fighters and volunteer fire fighters or pension obligations to full-time paid fire
fighters or volunteer fire fighters shall be appropriated to the account of the
municipality in the public safety personnel retirement system where it shall be
reallocated by actuarial procedures proportionately to the municipality for the account
of the full-time paid fire fighters and to the municipality for the account of the
volunteer fire fighters. A full accounting of such reallocation shall be forwarded to
the municipality and both local boards.
D. This section shall not apply to title insurance, and such insurers shall be
taxed as provided in section 20-1566.
E. Any insurer which paid or is required to pay a tax of two thousand dollars or
more on net premiums received during the preceding calendar year, pursuant to subsection
B of this section and sections 20-224.01, 20-837, 20-1010, 20-1060 and 20-1097.07, shall
file on or before the fifteenth day of each month from March through August a report for
that month, on a form prescribed by the director, accompanied by a payment in an amount
equal to fifteen per cent of the amount paid or required to be paid during the preceding
calendar year pursuant to subsection B of this section and sections 20-224.01, 20-837,
20-1010, 20-1060 and 20-1097.07. The payments are due and payable on or before the
fifteenth day of each month and shall be made to the director for deposit, pursuant to
sections 35-146 and 35-147.
F. Except for the tax paid on fire insurance premiums pursuant to subsections B and
C of this section, an insurer may claim a premium tax credit if the insurer qualifies for
a credit pursuant to section 20-224.03 or 20-224.04.
20-225 Failure to pay tax; penalty
A. Any insurer failing to pay the tax prescribed by sections 20-224, 20-224.01,
20-837, 20-1010, 20-1060 and 20-1097.07 is subject to a civil penalty equal to the
greater of twenty-five dollars or five per cent of the amount due plus interest at the
rate of one per cent per month from the date the tax was due.
B. The director may refuse to renew the certificate of authority of any insurer
failing to pay such tax on or before the date it is due. The director shall revoke the
certificate of authority of any insurer failing to pay such tax for more than thirty days
after it was due.
20-226 Exclusive character of premium tax; exception
A. With respect to authorized insurers the premium tax provided by section 20-224
shall be payment in full and in lieu of all other demands for any and all state, county,
district, municipal and school taxes, licenses and excises of whatever kind or character,
excepting only:
1. The fees prescribed by this title.
2. Taxes on real and tangible personal property located within this state.
3. The transaction privilege tax and the use tax imposed as provided in title 42,
chapter 5, articles 1 and 4.
4. The transaction privilege taxes and use taxes imposed by any county, city or
town.
B. Except as provided in subsection A of this section, the state preempts the field
of imposing excise, privilege, franchise, income, license and similar taxes upon insurers
and their general agents and agents as such and on the intangible property of insurers or
such agents. Except as provided in subsection A of this section, no county,
municipality, district, school district or other political subdivision or agency in this
state shall levy upon insurers, or upon their general agents and agents as such, any tax
additional to such as are levied in this title. Nothing in this section allows a county,
city or town to impose a transaction privilege tax or use tax on insurance policies,
premiums, brokers or agents.
20-227 Disposition of tax proceeds
The purpose of the taxes provided by this title is to assist in defraying the cost
of state government and to lessen the tax burden upon tangible property. All taxes
collected under this title shall be deposited, pursuant to sections 35-146 and 35-147, in
the state general fund and shall be used, together with the revenue from other sources,
to pay appropriations for the maintenance of state government, except as provided in
subsection C of section 20-224 (firemen's relief and pension fund) and in section
20-224.01 (highway patrol account of the public safety personnel retirement system) and
other applicable statutes.
20-228 Exemption of insurers from general corporation reports and fees
Notwithstanding any other statute, no authorized insurer or surplus line insurer is
required to file with the corporation commission the annual report required of
corporations by section 10-1622 or the certificate of disclosure required of corporations
which are exempt from filing an annual report by section 10-1622 or the statement of
bankruptcy required by section 10-1623 from corporations filing for bankruptcy. Such an
insurer is exempt from filing the annual report, from filing the certificate of
disclosure and from payment of the annual registration fee required by section 10-1622
and from the annual report fee required by section 10-122.
20-229 Countersignature of insurance producer; exceptions
A. An authorized insurer shall not issue a policy covering a subject of insurance
resident, located or to be performed in this state unless the policy or countersignature
endorsement attached to the policy is countersigned by its licensed insurance producer,
bail bond agent or managing general agent, as applicable.
B. Subsection A of this section does not apply to:
1. Reinsurance or life, disability or title insurance.
2. Insurance of the rolling stock, vessels or aircraft of any common carrier in
interstate or foreign commerce, or of any vehicle principally garaged and used in another
state or covering any liability or other risks incident to the ownership, maintenance or
operation thereof.
3. Insurance of property in the course of transportation interstate or in foreign
trade, or any liability or risk incident thereto.
4. Insurance of ocean marine risks.
5. Policies issued through salaried insurance producers or issued by insurers not
using insurance producers in the general solicitation of business.
6. Bid bonds issued by any surety insurer in connection with any public or private
contracts.
7. Policies issued by a vending machine pursuant to section 20-293.
C. A violation of this section shall not invalidate the policy.
D. The countersignature that is required under subsection A of this section may be
made by a facsimile signature or other printed or reproduced signature and shall be
presumed to be the authorized signature of the person.
20-230 Retaliation
A. When by or pursuant to the laws of any other state or foreign country any
premium or income or other taxes, or any fees, fines, penalties, licenses, deposit
requirements or other material obligations, prohibitions or restrictions are imposed upon
insurers of this state doing business, or that might seek to do business in such other
state or country, or upon the agents of such insurers, which in the aggregate are in
excess of such taxes, fees, fines, penalties, licenses, deposit requirements or other
obligations, prohibitions or restrictions directly imposed upon similar insurers of such
other state or foreign country under the statutes of this state, so long as such laws
continue in force or are so applied, the same obligations, prohibitions and restrictions
of whatever kind shall be imposed upon similar insurers of such other state or foreign
country doing business in ARIZONA. Any tax, license or other obligation imposed by any
city, county or other political subdivision of a state or foreign country on insurers of
this state or their agents shall be deemed to be imposed by such state or foreign country
within the meaning of this section. For the purpose of this section, the director shall
compute the burden of any tax, license or other obligation imposed by any city, county or
other political subdivision of a state or foreign country on insurers of this state or
their agents on an aggregate statewide or foreign countrywide basis as an addition to the
rate of tax payable by ARIZONA insurers in such state or foreign country. The addition
to the rate of tax payable by ARIZONA life insurers shall be calculated separately from
the addition to the rate of tax payable by other ARIZONA insurers. In each case, the
addition to the rate of tax payable by ARIZONA insurers shall be calculated by dividing
the aggregate of the tax obligations paid by ARIZONA insurers to any such city, county or
other political subdivision of such state or foreign country by the aggregate of their
taxable premiums under the premium taxing statute of such state or foreign country. The
director may issue rules to carry out the purpose of this section. The provisions of
this section shall not apply to ad valorem taxes on real or personal property or to
personal income taxes or to assessments on or credits to insurers for the payment of
claims of policyholders of insolvent insurers.
B. If an insurer domiciled in this state is refused authority to transact in
another state insurance upon a plan and in a manner which is permitted for domestic
insurers of such other state, notwithstanding that the insurer of this state is fully
qualified for such authority in accordance with the applicable laws of such other state,
and if such refusal is not accompanied by a written statement of the grounds therefor,
then and thereafter, and for so long as such refusal shall continue, the director may
refuse to grant an initial certificate of authority, but not a renewal of an existing
certificate of authority, to any insurer domiciled in such other state which may seek to
transact in this state a like kind or kinds of insurance.
20-231 Transfer of domicile
A. Any insurer organized under the laws of any other state and admitted to do
business in this state for the purpose of writing insurance may, upon complying with all
requirements of law relative to the organization of a domestic insurer and by designating
its principal place of business at a place in this state, become a domestic
insurer. Such a domestic insurer is entitled to a certificate of authority to transact
insurance in this state and is subject to the authority and jurisdiction of this state.
B. Any domestic insurer may, upon the approval of the director, transfer its
domicile to any other state in which it is admitted to transact insurance. Upon such a
transfer the insurer ceases to be a domestic insurer. If otherwise qualified, the
director shall admit such insurer to do business in this state as a foreign insurer. The
director shall approve any proposed transfer unless he determines the transfer is not in
the interest of the policyholders of the insurer in this state.
C. The certificate of authority, appointment of statutory agent and licenses,
policy forms, rates, authorizations and other filings and approvals in existence at the
time a foreign insurer, admitted to transact insurance in this state, transfers its
corporate domicile to this or any other state by merger or otherwise continue in effect
upon the transfer of corporate domicile. However, each transferring company shall notify
the director of the proposed transfer and shall promptly file any resulting amendments to
corporate documents filed or required to be filed with the director.
20-232 Junior achievement program; exemption from licensure
An authorized insurer may sponsor the formation of a junior achievement program
approved by the director. A student participating in the program is not an insurance
producer as defined in section 20-281 and is not subject to licensure under article 3 of
this chapter if the student operates under the direct supervision of a licensed life and
disability insurance producer.
20-233 Additional information required of insurer; disclosure to director; violation; classification
A. At the time of filing its annual statement as required by section 20-223, an
insurer shall also disclose to the director, in the form or manner prescribed by the
director, information similar to that required of other corporations transacting business
in this state pursuant to sections 10-1622 and 10-1623 which is not already filed with or
available to the director.
B. The director may refuse to renew or may suspend or revoke the certificate of
authority of any insurer failing to provide the disclosures provided by subsection A of
this section. Any insurer failing to provide the information required by subsection A at
the time of filing its annual statement shall be subject to payment of a late fee not to
exceed twenty-five dollars for each day of delinquency.
C. A person executing or contributing information for such a disclosure who
intentionally makes an untrue statement of a material fact or withholds any material fact
with regard to the information required in subsection A of this section is guilty of a
class 6 felony.
20-234 Filing requirement; participation in the insurance regulatory information system
A. On or before March 1 of each year or on or before the earliest date the company
is required to file an annual statement with any state if later, each domestic, foreign
and alien insurer that is authorized to transact insurance in this state shall file with
the national association of insurance commissioners a copy of its annual statement
convention blank, along with any additional filings that are prescribed by the director
for the preceding year. The filed information shall be in the format and scope that are
required by the director and shall include the signed jurat page and the actuarial
certification. Any amendments and addendums to the annual statement filing that are
filed subsequently with the director also shall be filed with the national association of
insurance commissioners. If the director requires an insurer that is admitted to
transact insurance by more than one state to file a quarterly financial statement, the
insurer shall also file the quarterly statement on diskette or another electronic medium
designated by the director with the national association of insurance commissioners.
B. In the absence of actual malice, members of the national association of
insurance commissioners, their duly authorized committees, subcommittees, task forces,
delegates and employees and all other persons who are charged with the responsibility of
collecting, reviewing, analyzing and disseminating the information contained in the
annual statement convention blanks are agents of the director and are not subject to
civil liability for libel, slander or other cause of action relating to the collection,
review, analysis or dissemination of the data and information that are collected.
C. All financial analysis ratios and examination synopses concerning insurance
companies that are submitted to the department by the national association of insurance
commissioners' insurance regulatory information system are confidential and shall not be
disclosed by the department.
D. The director may suspend, revoke or refuse to renew the certificate of authority
of any insurer failing to file its annual statement when due or within an extension of
time that the director, for good cause, may have granted.
E. A foreign insurer that is domiciled in a state which has a statute substantially
similar to subsection A and has complied with that statute is exempt from the
requirements of this section.
F. This section does not apply to domestic life and disability reinsurers
authorized to transact insurance pursuant to chapter 4, article 10 of this title.
20-235 Insurers; financial disclosure; requirements
A. The director shall adopt rules which require each insurer licensed to write
property or casualty insurance in this state to report its loss and expense experience,
investment income, administrative expenses and other data, as he may require, for classes
of risks which he may designate. Such reports shall be in addition to the annual
statement required by section 20-223.
B. The department may designate one or more rate service organizations or advisory
organizations to gather and compile the experience and data.
C. The director by order may require an insurer authorized to transact insurance in
this state to submit statistical and other financial data including the information
prescribed in subsection A of this section in a form and content consistent with rules
adopted pursuant to subsection A, with any model guideline, regulation, rule or act
adopted by the national association of insurance commissioners or with the classification
basis used by the insurer. The director shall prescribe the time period and form in
which the data shall be submitted.
D. An insurer who fails to provide the information required under subsection C of
this section is subject to payment of a late fee of not more than one hundred dollars
for each day of delinquency. The director shall notify an insurer of late fees that it
will incur as a result of noncompliance with this section at least ten days prior to the
date any such late fees become due.
20-236 Civil penalty for failure to respond to a request for verification of financial responsibility
If the director finds after a hearing that, upon certification by the department of
transportation, an insurer has failed to respond in writing within thirty days to a
financial responsibility verification request pursuant to section 28-4143, the director
shall impose a civil penalty of not more than two hundred fifty dollars for each
violation but not to exceed an aggregate penalty of twenty thousand dollars in any one
six-month period.
20-237 Failure to provide information; penalty
If after a hearing and certification by the department of transportation the
director of insurance finds that an insurer has failed to comply with the provisions of
section 28-4148, the director of insurance shall impose a civil penalty for each
violation of not more than two hundred fifty dollars per day for each day the insurer is
in violation of section 28-4148. The director of insurance also may suspend the
insurer's certificate of authority until the insurer complies with the provisions of
section 28-4148. No penalty shall be imposed pursuant to this section if noncompliance
is determined by the director of insurance to have been inadvertent or accidental. The
burden of proving that the noncompliance was inadvertent or accidental shall be on the
insurer.
20-251 Definitions not mutually exclusive
It is intended that certain coverages may come within the definitions of two or more
kinds of insurance as set forth in this article, and the fact that such a coverage is
included within one definition shall not exclude such coverage as to any other kind of
insurance within the definition of which such coverage likewise reasonably is includable.
20-252 "Casualty insurance" defined
"Casualty insurance" includes vehicle insurance as defined in section 20-259, and in
addition includes:
1. Liability insurance, which is insurance against legal liability for the death,
injury or disability of any human being, or for damage to property, and provision of
medical, hospital, surgical or disability benefits to injured persons and funeral and
death benefits to dependents, beneficiaries or personal representatives of persons
killed, irrespective of legal liability of the insured, when issued as an incidental
coverage with or supplemental to liability insurance.
2. Workers' compensation and employer's liability insurance, which is insurance of
the obligations accepted by, imposed upon or assumed by employers under law for death,
disablement or injury of employees.
3. Burglary and theft insurance, which is insurance against loss or damage by
burglary, theft, larceny, robbery, forgery, fraud, vandalism, malicious mischief,
confiscation or wrongful conversion, disposal or concealment, or from any attempt at any
of the foregoing, including supplemental coverages for medical, hospital, surgical and
funeral benefits sustained by the named insured or other person as a result of bodily
injury during the commission of a burglary, robbery or theft by another, and also
insurance against loss of or damage to money, coins, bullion, securities, notes, drafts,
acceptances or any other valuable papers and documents, resulting from any cause.
4. Personal property floater insurance, which is insurance upon personal effects
against loss or damage from any cause.
5. Glass insurance, which is insurance against loss or damage to glass, including
its lettering, ornamentation and fittings.
6. Boiler and machinery insurance, which is insurance against any liability and
loss or damage to property or interest resulting from accidents to or explosion of
boilers, pipes, pressure containers, machinery or apparatus, and to make inspection of
and issue certificates of inspection upon boilers, machinery and apparatus of any kind,
whether or not insured.
7. Leakage and fire extinguishing equipment insurance, which is insurance against
loss or damage to any property or interest caused by the breakage or leakage of
sprinklers, hoses, pumps and other fire extinguishing equipment or apparatus, water pipes
and containers, or by water entering through leaks or openings in buildings, and
insurance against loss or damage to such sprinklers, hoses, pumps and other fire
extinguishing equipment or apparatus.
8. Credit insurance, which is insurance against loss or damage resulting from
failure of debtors to pay their obligations to the insured.
9. Malpractice insurance, which is insurance against legal liability of the
insured, and against loss, damage or expense incidental to a claim of such liability, and
including medical, hospital, surgical and funeral benefits to injured persons,
irrespective of legal liability of the insured, arising out of the death, injury or
disablement of any person, or arising out of damage to the economic interest of any
person, as the result of negligence in rendering expert, fiduciary or professional
service.
10. Entertainments insurance, which is insurance indemnifying the producer of any
motion picture, television, radio, theatrical, sport, spectacle, entertainment or similar
production, event or exhibition against loss from interruption, postponement or
cancellation thereof due to death, accidental injury or sickness of performers,
participants, directors or other principals.
11. Miscellaneous insurance, which is insurance against any other kind of loss,
damage or liability properly a subject of insurance and not within any other kind of
insurance as defined in this title, if such insurance is not disapproved by the director
as being contrary to law or public policy.
20-253 "Disability insurance" defined
"Disability insurance" is insurance against bodily injury, disablement or death by
accident or accidental means, or the expense thereof, or against disablement or expense
resulting from sickness, and every insurance appertaining thereto.
20-254.01 "Annuities" defined
"Annuities" encompass all agreements to make periodic payments, other than contracts
defined by section 20-254 as "life insurance", where the making or continuance of all or
of some of a series of such payments, or the amount of any such payment, is dependent
upon the continuance of human life. Except as exemption or other provision is made, all
provisions in this title applicable to life insurance shall be deemed applicable also to
annuities.
20-254 "Life insurance" defined
"Life insurance" is insurance on human lives and insurance appertaining thereto or
connected therewith. The transacting of life insurance includes the granting of
endowment benefits, additional benefits in the event of death or dismemberment by
accident or accidental means, additional benefits in the event of the disability of the
insured and optional modes of settlement of proceeds of life insurance. An insurer
authorized to transact life insurance may also grant annuities.
20-255 "Marine and transportation insurance" defined
"Marine and transportation insurance" includes:
1. Insurance against any and all kinds of loss or damage to vessels, craft,
aircraft, cars, automobiles and vehicles of every kind, as well as all goods, freight,
cargoes, merchandise, effects, disbursements, profits, monies, bullion, precious stones,
securities, choses in action, evidences of debt, valuable papers, bottomry and
respondentia interests and all other kinds of property and interests therein, in respect
to, appertaining to or in connection with any and all risks or perils of navigation,
transit or transportation, including war risks, on or under any seas or other waters, on
land or in the air, or while being assembled, packed, crated, baled, compressed or
similarly prepared for shipment or while awaiting shipment or during any delays, storage,
transshipment or reshipment incident thereto, including marine builders' risks and all
personal property floater risks.
2. Insurance against any and all kinds of loss or damage to person or to property
in connection with or appertaining to a marine, inland marine, transit or transportation
insurance, including liability for loss of or damage to either, arising out of or in
connection with the construction, repair, operation, maintenance or use of the subject
matter of such insurance, but not including life insurance or surety bonds nor insurance
against loss by reason of bodily injury to the person arising out of the ownership,
maintenance or use of automobiles.
3. Insurance against any and all kinds of loss or damage to precious stones,
jewels, jewelry, gold, silver and other precious metals, whether used in business or
trade or otherwise and whether it be in course of transportation or otherwise.
4. Insurance against any and all kinds of loss or damage to bridges, tunnels and
other instrumentalities of transportation and communication (excluding buildings, their
furniture and furnishings, fixed contents and supplies held in storage) unless fire,
tornado, sprinkler leakage, hail, explosion, earthquake, riot or civil commotion or any
or all of them are the only hazards to be covered.
5. Insurance against any and all kinds of loss or damage to piers, wharves, docks
and slips, excluding the risks of fire, tornado, sprinkler leakage, hail, explosion,
earthquake, riot and civil commotion and each of them.
6. Insurance against any and all kinds of loss or damage to other aids to
navigation and transportation, including dry docks and marine railways, dams and
appurtenant facilities for the control of waterways.
7. Marine protection and indemnity insurance, which is insurance against, or
against legal liability of the insured for, loss, damage or expense arising out of, or
incident to, the ownership, operation, chartering, maintenance, use, repair or
construction of any vessel, craft or instrumentality in use in ocean or inland waterways,
including liability of the insured for personal injury, illness or death or for loss of
or damage to the property of another person.
20-256 "Property insurance" defined
"Property insurance" is insurance on real or personal property of every kind and
interest therein, against loss or damage from any or all hazard or cause, and against
loss consequential upon such loss or damage, other than noncontractual legal liability
for any such loss or damage. Property insurance shall also include miscellaneous
insurance as defined in paragraph 11 of section 20-252 except as to any noncontractual
liability coverage includable therein.
20-257 "Surety insurance" defined
"Surety insurance" includes:
1. Fidelity insurance, which is insurance guaranteeing the fidelity of persons
holding positions of public or private trust.
2. Insurance guaranteeing the performance of contracts, other than insurance
policies, and guaranteeing and executing bonds, undertakings and contracts of suretyship.
3. Insurance indemnifying banks, bankers, brokers, financial or monied corporations
or associations against loss, resulting from any cause, of bills of exchange, notes,
bonds, securities, evidences of debt, deeds, mortgages, warehouse receipts or other
valuable papers, documents, money, precious metals and articles made therefrom, jewelry,
watches, necklaces, bracelets, gems, precious and semi-precious stones, including any
loss while they are being transported in armored motor vehicles, or by messenger, but not
including any other risks of transportation or navigation, and also insurance against
loss or damage to such an insured's premises or to his furnishings, fixtures, equipment,
safes and vaults therein, caused by burglary, robbery, theft, vandalism or malicious
mischief, or any attempt to commit such crimes.
20-258 Multiple line insurers
For the purposes of this title, a multiple line insurer may transact any two or more
kinds of insurance, as defined in sections 20-252, 20-253, 20-255, 20-256 and 20-257.
20-259.01 Motor vehicle liability policy; uninsured optional; underinsured optional; subrogation; medical payments liens; definitions
A. Every insurer writing automobile liability or motor vehicle liability policies
shall make available to the named insured thereunder and by written notice offer the
insured and at the request of the insured shall include within the policy uninsured
motorist coverage which extends to and covers all persons insured under the policy, in
limits not less than the liability limits for bodily injury or death contained within the
policy. The selection of limits or rejection of coverage by a named insured or applicant
on a form approved by the director is valid for all insureds under the policy. The
completion of such form is not required where the insured purchases such coverage in an
amount equal to the limits for bodily injury or death contained in the policy. The offer
need not be made in the event of the reinstatement of a lapsed policy or the transfer,
substitution, modification or renewal of an existing policy. At the request of the
insured, the insured may purchase and the insurer shall then include within the policy
uninsured motorist coverage that extends to and covers all persons insured under the
policy in any amount up to the liability limits for bodily injury or death contained
within the policy but not less than the limits prescribed in section 28-4009.
B. Every insurer writing automobile liability or motor vehicle liability policies
shall also make available to the named insured thereunder and shall by written notice
offer the insured and at the request of the insured shall include within the policy
underinsured motorist coverage which extends to and covers all persons insured under the
policy, in limits not less than the liability limits for bodily injury or death contained
within the policy. The selection of limits or rejection of coverage by a named insured
or applicant on a form approved by the director shall be valid for all insureds under the
policy. The completion of such form is not required where the insured purchases such
coverage in an amount equal to the limits for bodily injury or death contained in the
policy. The offer need not be made in the event of the reinstatement of a lapsed policy
or the transfer, substitution, modification or renewal of an existing policy. At the
request of the insured, the insured may purchase and the insurer shall then include
within the policy underinsured motorist coverage that extends to and covers all persons
insured under the policy in any amount authorized by the insured up to the liability
limits for bodily injury or death contained within the policy.
C. Any insurer writing automobile liability or motor vehicle liability policies may
make available the coverages required by subsections A and B of this section to owners
and operators of motor vehicles that are used as public or livery conveyances or rented
to others or that are used in the business primarily to transport property or
equipment. The provisions of subsections A and B of this section shall not preclude an
insurer writing automobile liability or motor vehicle liability policies in this state
from requiring that all motor vehicles that are owned by or registered to the named
insured and that are insured by the same insurer or group of insurers under a common
management have the same limits of coverage for uninsured and underinsured motorist
coverage in amounts as selected or rejected by the named insured.
D. "Uninsured motor vehicles", subject to the terms and conditions of that
coverage, includes any insured motor vehicle if the liability insurer of the vehicle is
unable to make payment on the liability of its insured, within the limits of the
coverage, because of insolvency.
E. "Uninsured motorist coverage", subject to the terms and conditions of that
coverage, means coverage for damages due to bodily injury or death if the motor vehicle
that caused the bodily injury or death is not insured by a motor vehicle liability policy
that contains at least the limits prescribed in section 28-4009. For the purposes of
uninsured motorist coverage, an uninsured motorist does not include a person who is
insured under a motor vehicle liability policy that complies with section 28-4009.
F. Any payment made under the bodily injury liability portion of a motor vehicle
liability policy insuring the motor vehicle that caused the bodily injury or death in an
amount equal to or less than the per person or per occurrence bodily injury limits of
that policy, regardless of the number of persons receiving payments, precludes any
payment under the uninsured motorist coverage based upon the fault of the person who is
insured under the motor vehicle liability policy.
G. "Underinsured motorist coverage" includes coverage for a person if the sum of
the limits of liability under all bodily injury or death liability bonds and liability
insurance policies applicable at the time of the accident is less than the total damages
for bodily injury or death resulting from the accident. To the extent that the total
damages exceed the total applicable liability limits, the underinsured motorist coverage
provided in subsection B of this section is applicable to the difference.
H. Uninsured and underinsured motorist coverages are separate and distinct and
apply to different accident situations. Underinsured motorist coverage shall not provide
coverage for a claim against an uninsured motorist in addition to any applicable
uninsured motorist coverage. If multiple policies or coverages purchased by one insured
on different vehicles apply to an accident or claim, the insurer may limit the coverage
so that only one policy or coverage, selected by the insured, shall be applicable to any
one accident. If the policy does not contain a statement that informs the insured of the
insured's right to select one policy or coverage as required by this subsection, within
thirty days after the insurer receives notice of an accident, the insurer shall notify
the insured in writing of the insured's right to select one policy or coverage. For the
purposes of this subsection, "insurer" includes every insurer within a group of insurers
under a common management.
I. Insurers that make payments for damages to insureds for uninsured motorist
coverage may subrogate and sue for reimbursement of the total amount of the payments in
the name of the insured against any uninsured motorist responsible for the damages to the
insured.
J. Any automobile liability or motor vehicle liability insurer that makes a payment
under the medical payments coverage of a motor vehicle insurance policy to or on behalf
of any insured for an injury that arises out of an accident that occurs after December
31, 1998 may have a lien against any amount in excess of five thousand dollars that is
paid to or on behalf of that insured under the medical payments coverage of the policy
for that accident. The insurer shall compromise the lien in a fair and equitable
manner. In order to perfect a lien granted pursuant to this subsection, within sixty
days after issuing a payment that is more than five thousand dollars to the insured under
medical payments coverage, the insurer or the insurer's authorized representative shall
record in the office of the recorder of the county in which the accident occurred a
written statement that sets forth the name and address of the insured as they appear in
the records of the insurer, the name and address of the insurer at the insurer's
principal office in this state, the amount claimed pursuant to this subsection and, to
the best of the insurer's knowledge, the names and addresses of all persons, firms and
corporations and their insurance carriers that the insured or the insured's legal
representative alleges are liable for damages arising from the accident. Within five
days after recording the lien, the insurer shall also mail a copy of the lien, postage
prepaid, to the insured and to each person, firm and corporation and their insurance
carriers alleged to be liable for damages at the address given in the statement. The
recording of the lien is notice of the lien to all persons, firms and corporations that
are liable for damages regardless of whether they are named in the lien. The recorder
shall endorse on the lien recorded pursuant to this subsection the date and hour of
receipt and all facts that are necessary to indicate that the lien has been
recorded. The lien may be amended to reflect payments to the insured made after the lien
is recorded. Within thirty days after the lien is satisfied, the lienholder shall issue
and record a release of the lien.
K. Any common law prohibition against assignments of causes of action for personal
injuries is abrogated to the extent provided in subsection I of this section.
L. An insurer is not required to offer, provide or make available coverage
conforming to this section in connection with any general commercial liability policy,
excess policy, umbrella policy or other policy that does not provide primary motor
vehicle insurance for liabilities arising out of the ownership, maintenance, operation or
use of a specifically insured motor vehicle.
M. If an insured makes a bodily injury or death claim under uninsured or
underinsured motorist coverage based on an accident that involved an unidentified motor
vehicle and no physical contact with the motor vehicle occurred, the insured shall
provide corroboration that the unidentified motor vehicle caused the accident. For the
purposes of this subsection, "corroboration" means any additional and confirming
testimony, fact or evidence that strengthens and adds weight or credibility to the
insured's representation of the accident.
20-259.02 Coverage to include car pool operators and car pool vehicles; definitions
A. A policy of private passenger vehicle insurance shall not be delivered or issued
for delivery in this state unless coverage is provided for the protection of any person
insured under such policy while such person is acting as a car pool operator, and for the
protection of any vehicle insured under such policy while such vehicle is, or while it is
being operated as, a car pool vehicle. Such car pool coverage shall not entail a premium
higher than the premium would otherwise have been for such private passenger vehicle.
B. For the purposes of this section:
1. "Car pool operator" has the same meaning prescribed in section 28-4032.
2. "Car pool vehicle" means any motor vehicle when operated by a car pool operator.
3. "Private passenger vehicle" includes a vehicle accommodating no more than
fifteen passengers and owned by a commercial organization but used exclusively as a car
pool vehicle. Private passenger vehicle does not include vehicles accommodating more
than fifteen passengers, vehicles used for commercial purposes or motorcycles.
20-259.03 Uninsured and underinsured motorist coverages; insured; wrongful death recovery
Notwithstanding any other law, in the case of the death of an insured who is covered
under the uninsured and underinsured motorist coverages of a motor vehicle liability
policy, recovery for wrongful death is limited to any party who is qualified to bring a
wrongful death action pursuant to section 12-612 and who is also a surviving insured
under the same coverages of the policy. If there are no surviving insureds who qualify
to bring a wrongful death action pursuant to section 12-612, the estate of the deceased
insured maintains the right of recovery against the uninsured and underinsured motorist
coverages of the motor vehicle policy.
20-259 "Vehicle insurance" defined
"Vehicle insurance" is insurance against loss of or damage to any land vehicle or
aircraft or to property while contained therein or thereon or being loaded or unloaded
therein or therefrom, from any hazard or cause, and against any loss, liability or
expense resulting from or incident to ownership, maintenance or use of any such vehicle
or aircraft, together with insurance against accidental death or accidental injury to
individuals, including the named insured, while in, entering, alighting from, adjusting,
repairing, cranking or caused by being struck by a vehicle or aircraft, if such insurance
is issued as a part of insurance on the vehicle or aircraft.
20-260 Limit of risk
A. No insurer shall retain any risk on any one subject of insurance, whether
located or to be performed in this state or elsewhere, in an amount exceeding ten per
cent of its surplus to policyholders, except that a domestic mutual insurer holding a
certificate of authority may retain up to such ten per cent or up to the maximum
applicable as set forth in section 20-711, whichever is the larger, and a domestic
limited stock insurer may retain up to the maximum applicable as set forth in section
20-708.
B. Reinsurance authorized by section 20-261 shall be deducted in determining risk
retained. As to surety risks, deduction shall also be made of the amount assumed by any
established incorporated cosurety and the value of any security deposited, pledged or
held subject to the surety's consent and for the surety's protection.
C. As to alien insurers, other than life insurers domiciled in Canada, this section
shall relate only to risks and surplus to policyholders of the insurer's United States
branch.
D. This section shall not apply to group life or group or blanket disability
insurance, title insurance, insurance of ocean marine risks or marine protection and
indemnity risks, workers' compensation insurance, employers' liability coverages, nor to
any policy or type of coverage as to which the maximum possible loss to the insurer is
not readily ascertainable on issuance of the policy.
E. A "subject of insurance" for the purposes of this section, as to insurance
against fire and hazards other than windstorm or earthquake, includes all properties
insured by the same insurer which are customarily considered by underwriters to be
subject to loss or damage from the same fire or other such hazard insured against.
F. "Surplus to policyholders" for the purpose of this section shall be deemed to
include any voluntary reserves which are not required pursuant to law, and shall be
determined from the last sworn statement of the insurer on file with the director or by
the last report of examination by the director, whichever is the more recent at time of
assumption of such risk.
20-261.01 Credit for reinsurance
A. A domestic ceding insurer shall be allowed a credit for reinsurance as an asset
to or a deduction from liability on account of reinsurance ceded if the reinsurer
satisfies one of the following requirements, except that a reinsurer that satisfies the
requirements of paragraph 3 or 4 of this subsection must also satisfy the requirements of
paragraph 6 of this subsection:
1. The reinsurance is ceded to an assuming insurer that is licensed to transact
insurance or reinsurance in this state.
2. The reinsurance is ceded to an assuming insurer that is accredited as a
reinsurer in this state. Credit shall not be allowed a domestic ceding insurer if the
director after notice and a hearing revokes the assuming insurer's accreditation. For
the purposes of this paragraph, "accredited reinsurer" means a reinsurer that:
(a) Files with the director evidence of its submission to this state's
jurisdiction.
(b) Submits to this state's authority to examine its books and records.
(c) Is licensed to transact insurance or reinsurance in at least one state, or if
the accredited reinsurer is a United States branch of an alien assuming insurer, is
entered through and licensed to transact insurance or reinsurance in at least one state.
(d) Files annually with the director a copy of its annual statement that is filed
with the insurance department of its state of domicile and a copy of its most recent
audited financial statement and maintains either:
(i) A surplus as regards policyholders in an amount of not less than twenty million
dollars and the director within ninety days of submission has not denied its
accreditation.
(ii) A surplus as regards policyholders in an amount of less than twenty million
dollars and the director approves its accreditation.
3. The reinsurance is ceded to an assuming insurer that is domiciled and licensed
in, or is a United States branch of an alien assuming insurer that is entered through and
licensed in, a state that employs standards regarding credit for reinsurance
substantially similar to the standards applicable under this section and the assuming
insurer does both of the following:
(a) Maintains a surplus as regards policyholders in an amount of not less than
twenty million dollars. This subdivision does not apply to reinsurance that is ceded and
assumed pursuant to pooling arrangements among insurers in the same holding company
system.
(b) Submits to the authority of this state to examine its books and records.
4. The reinsurance is ceded to an assuming insurer that maintains a trust fund in a
qualified United States financial institution as defined in section 20-261.03, subsection
B exclusively for the payment of the valid claims of its United States policyholders and
ceding insurers and their assigns and successors in interest. To enable the director to
determine the sufficiency of the trust fund, the assuming insurer shall report annually
to the director information that is substantially similar to the information that must be
reported by licensed insurers on the national association of insurance commissioners
form. The amount of the trust shall be as follows:
(a) In the case of a single assuming insurer, the trust shall consist of a trusteed
account representing the assuming insurer's liabilities that are attributable to business
written in the United States and the assuming insurer shall maintain a trusteed surplus
of not less than twenty million dollars. In the case of a group including incorporated
and individual unincorporated underwriters, the trust shall consist of a trusteed account
representing the group's liabilities that are attributable to business written in the
United States and the group shall maintain a trusteed surplus of which one hundred
million dollars shall be held jointly for the benefit of United States ceding insurers of
any member group. The incorporated members of the group shall not engage in any business
other than underwriting as a member of the group and are subject to the same level of
solvency regulation and control by the group's domiciliary regulator as are the
unincorporated members. The group shall make available to the director an annual
certification of the solvency of each underwriter by the group's domiciliary regulator
and its independent public accountants.
(b) In the case of a group of incorporated insurers under common administration
that complies with the filing requirements under this paragraph, that has transacted
continuously for at least three years immediately before applying for accreditation an
insurance business outside the United States, that submits to this state's authority to
examine its books and records and bears the expense of that examination and that has an
aggregate policyholders' surplus of ten billion dollars, the trust shall be in an amount
equal to the group's several liabilities that are attributable to business ceded by
United States ceding insurers to any member of the group pursuant to reinsurance
contracts issued in the name of the group. The group shall maintain a joint trusteed
surplus of which one hundred million dollars shall be held jointly as additional security
for any such liabilities and shall be held exclusively for the benefit of United States
ceding insurers of any member of the group. Each member shall make available to the
director an annual certification of the member's solvency by the member's domiciliary
regulator and its independent public accountant.
5. The reinsurance is ceded to an assuming insurer that does not satisfy the
requirements of paragraph 1, 2, 3 or 4 of this subsection with respect to the insurance
of risks that are located in foreign or alien jurisdictions where the reinsurance is
required by law or regulation.
6. If the assuming insurer is not licensed or accredited to transact insurance or
reinsurance in this state, credit will be allowed pursuant to paragraph 3 or 4 of this
subsection only if the assuming insurer agrees in the reinsurance agreement:
(a) That, if the assuming insurer fails to perform its obligations under the
agreement and at the request of the ceding insurer, the assuming insurer shall submit to
the jurisdiction of any court of competent jurisdiction in the United States, comply with
all jurisdictional requirements and abide by the court's final decision or, if an appeal
is taken, the final decision of an appellate court.
(b) To designate the director or a qualified person under section 20-218.01 as its
true and lawful agent upon whom may be served any lawful process in any action, suit or
proceeding instituted by or on behalf of the ceding company.
B. A trust under subsection A, paragraph 4 of this section shall be established in
a form that is approved by the director. The trust instrument shall provide that
contested claims are valid and enforceable on the final order of any court of competent
jurisdiction in the United States. The trust shall vest legal title to its assets in the
trustees of the trust for its United States policyholders and ceding insurers and their
assigns and successors in interest. The trust and the assuming insurer are subject to
examination by the director. The trust shall remain in effect for as long as the
assuming insurer has outstanding obligations due under the reinsurance agreements that
are subject to the trust. On or before February 28 of each year, the trustees of the
trust shall submit in writing to the director a report setting forth the balance of the
trust and listing the trust's investments at the preceding year end. If the termination
of the trust is planned, the trustees shall certify the date of termination of the
trust. Otherwise the trustees shall certify that the trust will not expire before
December 31 of the following year.
C. This section shall not override the obligation of the parties to a reinsurance
agreement to arbitrate a dispute if the agreement requires arbitration.
20-261.02 Reduction from liability for reinsurance ceded by a domestic insurer to an assuming insurer
A. A reduction from liability for the reinsurance that is ceded by a domestic
insurer to an assuming insurer who does not meet the requirements of section 20-261.01
shall be allowed in the amount of monies that are held by or on behalf of the ceding
insurer and that do not exceed the liabilities carried by the ceding insurer, including:
1. Security that is held in the United States subject to withdrawal solely by and
under the exclusive control of the ceding insurer and monies held in trust for the ceding
insurer, including monies held in trust, under a reinsurance contract with the assuming
insurer as security for the payment of obligations thereunder.
2. In the case of a trust, monies held in a qualified United States financial
institution as defined in section 20-261.03, subsection B.
B. The security that is required by subsection A of this section may be in the form
of:
1. Cash.
2. Securities that are listed by the securities valuation office of the national
association of insurance commissioners and that qualify as admitted assets.
3. Clean, irrevocable and unconditional letters of credit that are issued or
confirmed by a qualified United States financial institution as defined in section
20-261.03, subsection A, that are issued no later than December 31 in the year for which
filing is made and that are in the possession of the ceding company on or before the
filing date of the ceding company's annual statement. Notwithstanding the issuing or
confirming institution's subsequent failure to meet the applicable standards of issuer
acceptability, letters of credit that meet applicable standards of issuer acceptability
as to the date of issuance or confirmation are acceptable as security until their
expiration, extension, renewal, modification or amendment, whichever first occurs.
4. Any other form of security that is acceptable to the director.
20-261.03 Qualified United States financial institution; definitions
A. For the purposes of section 20-261.02, subsection B, "qualified United States
financial institution" means an institution that:
1. Is organized, or in the case of a United States office of a foreign banking
organization, licensed, under the laws of the United States or any state of the United
States.
2. Is regulated, supervised and examined by federal or state authorities having
regulatory authority over banks and trust companies.
3. According to the director of insurance or the securities valuation office of the
national association of insurance commissioners, meets the standards of financial
condition and standing that are considered necessary and appropriate to regulate the
quality of financial institutions whose letters of credit will be acceptable to the
director.
B. For the purposes of this article, except for the purposes of section 20-261.02,
subsection B, "qualified United States financial institution" means an institution that:
1. Is organized, or in the case of a United States branch or agency office of a
foreign banking organization, licensed, under the laws of the United States or any state
of the United States that has been granted authority to operate with fiduciary powers.
2. Is regulated, supervised and examined by federal or state authorities having
regulatory authority over banks and trust companies.
20-261.04 Reinsurance agreements affected
Sections 20-261.01, 20-261.02 and 20-261.03 apply after the effective date of this
section to all cessions under reinsurance agreements that have had an inception,
anniversary or renewal date of not less than twelve months after the effective date of
this section.
20-261 Authorized reinsurance
A. An insurer shall reinsure its risks, or any part of its risks, only in solvent
insurers having surplus to policyholders not less in amount than the minimum required
capital stock required under this title of a domestic stock insurer, other than a limited
stock insurer or a domestic life and disability reinsurer, authorized to transact like
kinds of insurance. A domestic limited stock life insurer or domestic life and
disability reinsurer may accept reinsurance of the risks of other limited stock insurers
or domestic life and disability reinsurers.
B. An insurer may reinsure in alien insurers if the alien insurers are authorized
to transact insurance in at least one state of the United States or have in the United
States a duly authorized attorney-in-fact to accept service of legal process against the
insurer as to any liability that might arise on account of such reinsurance.
C. A credit shall not be allowed, as an admitted asset or as a deduction from
liability, to any ceding insurer for reinsurance unless the reinsurance is payable by the
reinsurer on the basis of the liability of the ceding insurer under the contracts
reinsured without diminution because of the insolvency of the ceding insurer nor unless
under the reinsurance contract the reinsurer assumes the liability for the reinsurance as
of the same effective date. The reinsurer shall make payment directly to the ceding
insurer or to its statutory successor by whatever name called for the purpose of
liquidating or rehabilitating the business of the insurer unless either the reinsurance
contract or the policies reinsured required the reinsurer to make payment to the payees
under the policies reinsured in the event the ceding insurer becomes insolvent, or the
reinsurer with the consent of the direct insured assumes the policy obligations of the
ceding insurer to the payees under the policies reinsured in substitution for the
obligations of the ceding insurer to those payees.
D. A domestic insurer shall not be a party to any agreement of reinsurance with an
unauthorized insurer until the agreement is filed with and approved in writing by the
director. The director shall approve the agreement within a reasonable time after filing
unless in the director's opinion the effect of the agreement would be to reduce
protection or service substantially either to policyholders resident of this state or to
policyholders anywhere of the domestic insurer. If the director does not approve the
agreement, the director shall notify the domestic insurer in writing specifying the
reasons for not approving the agreement.
E. This section does not apply to insurance of ocean marine risks or marine
protection and indemnity risks.
F. Unless the director requires the assuming insurer to file assumption reinsurance
contracts, assumption reinsurance contracts are exempt from the filing requirements
prescribed in subsection D if the assuming insurer has a surplus as to policyholders of
at least fifty million dollars as shown in the most recent financial statement that is
filed by the insurer with the department.
20-262 Motor vehicle insurance policy; reduction of rate for older person completing accident prevention course; course requirements
A. An insurer issuing motor vehicle liability insurance policies in this state may
provide additional reductions in rates for motor vehicle personal injury and property
damage coverage to an insured who:
1. Is at least fifty-five years of age.
2. Within the last three years has successfully completed a driver improvement
course:
(a) That is approved by the department of transportation, motor vehicle division.
(b) That includes classroom instruction or practice driving of at least the minimum
number of hours that the director of the department of transportation requires.
(c) Which is not self-instructed and provides actual classroom or field driving
instruction for the minimum number of hours required by the department of transportation.
(d) For which the insured has received a certificate that certifies the completion
of the course.
B. Upon successfully completing an approved course, the agency sponsoring the
course shall issue to each participant a certificate which is the basis of qualification
for the premium reduction authorized by this section.
20-263 Vehicle insurance; prohibited act by insurer; hearing; penalty
A. No insurer shall increase the motor vehicle insurance premium of an insured as a
result of an accident not caused or significantly contributed to by the actions of the
insured. Any insurer which increases the premium as a result of accident involvement
shall notify the insured of the reason for such increase.
B. The director, after a hearing, shall order an insurer that has raised the
premium of an insured in violation of subsection A to refund the amount attributable to
such premium increase and shall impose a civil penalty not to exceed three hundred
dollars. In determining whether an insurer has violated subsection A, the director may
conduct such investigation as he deems necessary and the costs shall be paid by the
insurer pursuant to section 20-159.
20-264 Automobile insurance; damaged safety equipment deductible optional; definition
A. Any insurer writing private passenger automobile insurance which includes
comprehensive coverage for motor vehicle damage shall provide at the option of the
insured complete coverage for the repair or replacement of all damaged safety equipment
without regard to any deductible.
B. As used in this section, "safety equipment" means the glass used in the
windshield, doors and windows and the glass, plastic or other material used in the lights
of a motor vehicle.
20-265 Motor vehicle insurance; premium comparisons and complaint ratios
The department of insurance shall compile premium comparisons and complaint ratios
for motor vehicle insurance policies that insure six or fewer motor vehicles. The
premium comparisons shall reflect premiums for not fewer than five hypothetical insureds
for urban areas and five hypothetical insureds for rural areas. The department of
insurance shall forward copies of the premium comparisons and complaint ratios to the
department of transportation. The director of the department of transportation in
consultation with the director of the department of insurance shall make the copies
available to the public. The department of insurance may include in the premium
comparison information consumer information that describes the nature of bodily injury
coverage, property damage coverage, collision coverage, comprehensive coverage, medical
payment coverage, uninsured motorist coverage and underinsured motorist coverage.
20-266 Minimum liability policy; availability
An insurer writing or an insurance producer soliciting applications for motor
vehicle liability policies that insure six or fewer motor vehicles shall make available a
policy for the mandatory minimum motor vehicle liability limits as prescribed in section
28-4009 if requested by a named insured or an applicant who meets the underwriting
criteria of the insurer. 20-267 Motor vehicle liability policies; monthly basis; fee
A. An insurer writing or an insurance producer soliciting applications for motor
vehicle liability policies shall make available a monthly premium payment plan on
policies that insure six or fewer motor vehicles.
B. At the inception of a monthly premium payment plan, an insurer may not require
an insured to pay more than an amount equal to one and one-half times the monthly premium
in addition to the first month's premium. Premiums for each month of coverage collected
thereafter under a monthly premium payment plan may be due and payable not more than
thirty days before the month of coverage related to that premium. An insurer may cancel
or fail to renew a policy for nonpayment of premium, except that a cancellation or
nonrenewal is not effective until the requirements of section 20-1632.01 are met.
C. An insurer or insurance producer may charge a fee pursuant to section 20-465
that is reasonably related to the administrative expenses of the monthly premium payment
plan.
D. An insurer or insurance producer may use a premium finance company to meet the
requirements of this section. In financing the monthly premium payment plan, at the
inception of a premium finance agreement, a premium finance company may not require an
insured to pay more than an amount equal to one and one-half times the monthly premium
and the first month's premium. Payments collected thereafter under the premium finance
agreement may be due and payable not more than every thirty days until the premium
finance agreement is satisfied. A premium finance company may cancel a premium finance
agreement for nonpayment pursuant to section 6-1415. 20-268 Motor vehicle subrogation
A. If a motor vehicle claim is subject to subrogation, the insured may bring a
cause of action separate and apart from the insurer seeking recovery of damages for which
the insured has not been compensated by the insurer. Any settlement or judgment of the
claim of the insured alone shall not affect the rights of the insurer.
B. If requested in writing by an insured, the insurer shall report to the insured
the status of the subrogated claim.
20-269 Reduction in automobile liability insurance premiums for mandatory seat belt use
Beginning one year after the effective date of section 28-909, the director shall
require that insurance companies transacting business in this state reflect a reduction
in annual losses they incur as a result of the enactment of section 28-909 in the
automobile liability or motor vehicle liability insurance premiums that they charge in
this state. To enforce this requirement, the director may employ or contract with
actuarial consultants necessary to make the determination authorized by sections 20-148
and 20-159.
20-270 Residential property insurance; prohibited acts
A. An insurer shall not charge more premium for residential property insurance
coverage on a property with a single below deductible claim, not exceeding five hundred
dollars in the previous three years, than it would charge for like coverage on the same
property if the property had no below deductible claims. For the purposes of this
subsection, "below deductible claim" means a claim for indemnification for a loss under a
residential property insurance policy that provided coverage for the loss that was closed
without any payment because the amount of the loss was less than the amount of the
deductible provided by the policy.
B. For the purposes of this section, residential property insurance has the same
meaning as the insurance covered under section 20-1651. 20-271 Lienholders; proof; accidents; notice; applicability A. An insured or claimant shall provide information as part of the proof of loss concerning the existence of any lien or encumbrance against the vehicle involved in the accident or incident giving rise to the damage or loss. A claim shall not be an acceptable proof of loss until satisfactory evidence of the existence of any lien or encumbrance has been provided to the insurer. This section shall not apply if the amount of damages or loss does not exceed two thousand five hundred dollars. B. An insurer shall be entitled to rely upon information provided by the insured or claimant pursuant to subsection A concerning the existence of any lien or encumbrance against the vehicle. An insurer that acts in good faith upon the information provided by the claimant or insured shall not be liable for any damages arising from the insured's or claimant's failure to provide accurate information to the insurer concerning existence of any lien or encumbrance against the vehicle involved in the accident or incident giving rise to the damage or loss. C. An insured or claimant shall be liable for any damages arising from the failure of the insured or claimant to provide accurate information pursuant to subsection A regarding the existence of any lien or encumbrance against the vehicle involved in the accident or incident giving rise to the damage or loss. D. This section shall not apply if an insurer does either of the following with respect to the repair of damages or loss to a vehicle: 1. Issues a release of claims in the names or makes the proceeds payable to both the insured or claimant and all lienholders or vehicle lessors. 2. Makes the proceeds payable to the motor vehicle repair facility after verification by the insurer that the damage or loss has been repaired. 20-281 Definitions
In this article, unless the context otherwise requires:
1. "Business entity" means any corporation, association, partnership, limited
liability company, limited liability partnership or other legal entity except an
individual or sole proprietorship.
2. "Designated producer" means the individual insurance producer that a business
entity designates pursuant to section 20-285, subsection D, paragraph 3 as the individual
responsible for the business entity's compliance with the insurance laws of this state.
3. "Health or sickness insurance" means disability insurance as defined in section
20-253.
4. "Home state" means the District of Columbia and any state or territory of the
United States in which:
(a) An individual insurance producer maintains a principal place of residence or
principal place of business and is licensed to act as a resident insurance producer.
(b) A business entity insurance producer maintains its principal place of business
and is licensed to act as a resident insurance producer.
5. "Insurance producer" means a person required to be licensed under this article
to sell, solicit or negotiate insurance.
6. "Limited line credit insurance" means any form of insurance that is offered in
connection with an extension of credit and that is limited to partially or wholly
extinguishing that credit obligation, including credit life, credit disability, credit
property, credit unemployment, involuntary unemployment, mortgage life, mortgage
guaranty, mortgage disability, guaranteed asset or automobile protection insurance and
any other form of insurance that is offered in connection with an extension of credit,
that is limited to partially or wholly extinguishing that credit obligation and that the
director determines should be designated a form of limited line credit insurance.
7. "Limited line insurance" means limited line credit insurance, travel accident
ticket and baggage insurance and any other line of insurance that the director deems
necessary to recognize for the purposes of complying with section 20-287, subsection C,
paragraph 2.
8. "Major line insurance" means life insurance, accident and health or sickness
insurance, property insurance, casualty insurance and variable insurance contracts, as
described in section 20-286.
9. "Member" means, if used in reference to a business entity, a person that holds
an ownership interest in the business entity, excluding any interest in publicly traded
securities and any interest of less than ten per cent of the voting rights.
10. "Negotiate" means the act of conferring directly with or offering advice
directly to a purchaser or prospective purchaser of a particular contract of insurance
concerning any of the substantive benefits, terms or conditions of the contract if the
person engaged in that act either sells insurance or obtains insurance from insurers for
purchasers.
11. "Nonresident" means a person whose home state is not ARIZONA.
12. "Person" means an individual or a business entity.
13. "Resident" means a person whose home state is ARIZONA and who does not hold a
resident insurance producer license in another state or territory of the United States or
in the District of Columbia.
14. "Sell" means to exchange a contract of insurance by any means, for money or its
equivalent, on behalf of an insurer.
15. "Solicit" means attempting to sell insurance or asking or urging a person to
apply for a particular kind of insurance from a particular company.
16. "Travel accident ticket and baggage insurance producer" means a ticket selling
agent or other representative of a common carrier who solicits or sells only
over-the-counter, short-term, nonrenewable travel accident, ticket and baggage insurance.
20-282 License required
A person shall not sell, solicit or negotiate insurance in this state for any class
or classes of insurance unless the person is licensed for that line of authority in
accordance with this article. 20-283 Exceptions to insurance producer licensing
A. An insurer is not required to obtain an insurance producer license. In this
section, insurer does not include an insurer's officers, directors, employees,
subsidiaries or affiliates.
B. The following persons are not required to obtain a license as an insurance
producer:
1. An officer, director or employee of an insurer or of an insurance producer, if
the officer, director or employee does not receive any commission on policies written or
sold to insurer risks residing, located or to be performed in this state and either:
(a) The activities of the officer, director or employee are executive,
administrative, managerial, clerical or a combination of these and are only indirectly
related to the sale, solicitation or negotiation of insurance.
(b) The functions of the officer, director or employee relate to underwriting, loss
control, inspection or the processing, adjusting, investigating or settling of a claim on
a contract of insurance.
(c) The officer, director or employee either:
(i) Acts as a special agent or agency supervisor assisting insurance producers and
engages in activities that are limited to providing technical advice and assistance to
licensed insurance producers and that do not include the sale, solicitation or
negotiation of insurance.
(ii) Responds to requests from existing policyholders to transact matters after
effectuation of the policy and arising out of the policy and does not engage in
negotiation or solicitation, other than to confer with the policyholders regarding the
policyholders' requests.
2. A person who does not receive any commission, but who secures and provides
information for the purpose of either:
(a) Group life insurance, group annuities, group or blanket accident and health or
sickness insurance.
(b) Enrolling individuals under plans, issuing certificates under plans or
otherwise assisting in administering plans or performing administrative services related
to mass-marketed property and casualty insurance.
3. An employer or association or its officers, directors or employees or the
trustees of an employee trust plan, to the extent that the employer or association or
officers, directors, employees or trustees are engaged in the administration or operation
of a program of employee benefits for the employer's or association's own employees or
the employees of its subsidiaries or affiliates and the program involves the use of
insurance issued by an insurer, if the employer or association or officers, directors,
employees or trustees are not directly or indirectly compensated in any manner by the
company that issues the contracts.
4. Employees of insurers or organizations employed by insurers who engage in the
inspection, rating or classification of risks or the supervision of the training of
insurance producers and who are not individually engaged in the sale, solicitation or
negotiation of insurance.
5. A person whose activities in this state are limited to advertising without the
intent to solicit insurance in this state through communications in printed publications
or other forms of electronic mass media whose distribution is not limited to residents of
the state, if the person does not sell, solicit or negotiate insurance that would insure
risks residing, located or to be performed in this state.
6. A person who is not a resident of this state and who sells, solicits or
negotiates a contract of insurance for commercial property and casualty risks to an
insured with risks that are located in more than one state insured under that contract,
if that person is otherwise licensed as an insurance producer to sell, solicit or
negotiate that insurance in the state where the insured maintains its principal place of
business and the contract of insurance insures risks located in that state.
7. A salaried full-time employee who counsels or advises the employee's employer
regarding the insurance interests of the employer or its subsidiaries or business
affiliates, if the employee does not sell or solicit insurance or receive a commission. 20-284 Application for examination
A. A resident individual applying for an insurance producer license shall pass an
examination within the one hundred twenty day period that precedes the date the director
received the individual's license application unless the individual is exempt pursuant to
section 20-288. The examination shall test the knowledge of the individual concerning the
lines of authority for which the application is made, the duties and responsibilities of
an insurance producer and the insurance laws of this state.
B. For an individual called into active military service after passing the
examination, the one hundred twenty day period prescribed by subsection A of this section
shall be extended by the number of days that the individual was in active military
service, not to exceed a total of one year. An individual applying for an insurance
producer license pursuant to this subsection shall include with the license application a
copy of the documentation from the armed forces showing the period of time that the
individual was in active military service. For the purposes of this subsection, active
military service does not include periodic and routine service as a military reservist.
C. The director shall make the examination available to applicants for licenses
with such frequency as shall meet the reasonable convenience of both the director and
applicants, but at least every sixty days. The director may reasonably prescribe by rule
the time, places and conduct of examinations. Except as provided in subsection H of this
section the director may require a reasonable waiting period before examination of an
applicant who failed to pass a previous similar examination.
D. The director shall ensure that all examinations are given, conducted and graded
in a fair and impartial manner and without unfair discrimination as among individuals
examined. At the director's discretion, any written examination may be supplemented by an
oral examination of the applicant. The director shall inform the applicant of the result
of the examination within thirty days after the examination.
E. The director may appoint one or more advisory committees to make recommendations
to the director as to the scope, type and conduct of written examinations under this
article. The members of the committee shall serve without pay and without expense to the
state.
F. An individual who fails to appear for the examination as scheduled or who fails
to pass the examination shall reapply for an examination and remit all required fees and
forms before being rescheduled for another examination.
G. An individual shall not take an examination for a line of authority for which
the individual already holds a license in this state.
H. The director shall not allow an individual to take an examination administered
for any line of license authority pursuant to this section more than four times within a
twelve month period. If an individual fails an examination for a specific line of
authority four times, the individual may not take an examination for that line of
authority for one year. For the purposes of this subsection, an individual who fails an
examination that covers more than one line of license authority is considered to have
failed the examination for each individual line of license authority. 20-285 Application for license
A. A person who applies for a resident insurance producer license shall apply to
the director on a form prescribed by the director and shall declare under penalty of
denial, suspension or revocation of the license that the statements made in the
application are true, correct and complete to the best of the knowledge and belief of the
applicant or the applicant's duly authorized representative. The applicant shall provide
information concerning the applicant's identity, personal history, business record,
experience in insurance and purposes for which the license is to be used and any other
pertinent fact the director requires.
B. Before the director approves the application of the individual, the director
shall find that the individual:
1. Is at least eighteen years of age.
2. Has not committed any act that is a ground for denial, suspension or revocation
prescribed in section 20-295.
3. Has paid the fees prescribed in section 20-167.
4. Has successfully passed the examinations for the lines of authority for which
the individual has applied.
5. Will not use or does not intend to use the license principally for the purpose
of procuring insurance that covers:
(a) The individual.
(b) The members of the individual's family or the individual's relatives to the
second degree.
(c) The individual's property or insurable interests.
(d) The property or insurable interests of the individual's relatives to the second
degree, employer or employees or a firm or corporation in which the individual owns a
substantial interest or the employees of that firm or corporation.
(e) Property or insurable interests for which the individual or the individual's
relatives to the second degree, employer, firm or corporation is the bailee, trustee or
receiver.
C. For the purposes of subsection B, paragraph 5 of this section, a vendor's or
lender's interest in property that is sold or is being sold under a contract or that is
the security for any loan is not property or an insurable interest of that vendor or
lender.
D. Before the director approves the application of a business entity, the director
shall find that the business entity:
1. Has paid the fees prescribed in section 20-167.
2. Will be acting within the scope of its partnership agreement, articles of
incorporation or other chartering documents when the business entity transacts business
under the license.
3. Has designated an individually licensed insurance producer who is responsible
for the business entity's compliance with the insurance laws of this state.
E. The application of a business entity shall also include the names of all
members, officers and directors of the business entity. For any individual who is
identified pursuant to this subsection and pursuant to subsection D, paragraph 3 of this
section, the director may require the applicant to provide the information required for a
license as an individual.
F. Before the director grants a license, the director may require the applicant to:
1. Provide any document that is reasonably necessary to verify the information that
is contained in an application and other information including prior criminal records.
2. Submit a full set of fingerprints to the department. The department of insurance
shall submit the fingerprints to the department of public safety for the purpose of
obtaining a state and federal criminal records check pursuant to section 41-1750 and
Public Law 92-544. The department of public safety may exchange this fingerprint data
with the federal bureau of investigation.
G. A nonresident person who is licensed as an insurance producer in another state,
who becomes a resident of this state and who continues to act as an insurance producer
shall apply to become a resident licensee pursuant to this section within ninety days.
20-286 Licensure; lines of authority
A. Unless the director denies a license pursuant to section 20-295, the director
shall issue a resident insurance producer license to any person who meets the
requirements prescribed in sections 20-284 and 20-285. An insurance producer may qualify
for a license in one or more of the following lines of authority:
1. Life. Life insurance is coverage on human lives, including benefits of endowment
and annuities, and may include benefits in the event of death or dismemberment by
accident and benefits for disability income.
2. Accident and health or sickness. Accident and health or sickness insurance is
coverage for sickness, bodily injury or accidental death and may include benefits for
disability income.
3. Property. Property insurance is coverage for the direct or consequential loss or
damage to property of every kind.
4. Casualty. Casualty insurance is coverage against legal liability, including
liability for death, injury, disability or damage to real or personal property.
5. Variable life and variable annuity products. Variable life and variable annuity
is insurance coverage that is provided under a variable life insurance contract or a
variable annuity.
6. Personal lines. Personal lines is property and casualty insurance coverage that
is sold to individuals and families for primarily noncommercial purposes.
7. Credit. Credit insurance is limited line credit insurance.
8. Any other line of insurance allowed under state law or rules adopted by the
director.
B. The license shall contain the licensee's name, address and identification
number, the date of issuance, the lines of authority, the expiration date and any other
information the director deems necessary. The director may make the information
prescribed by this section available electronically.
C. A licensee shall inform the director in writing within thirty days of any change
in the licensee's:
1. Residential or business address.
2. Members, directors, officers or designated producer. The director may require
that a licensee who notifies the director of a change pursuant to this paragraph submit a
full set of fingerprints of each new member, director, officer or designated producer to
the director for the purpose of obtaining a state and federal criminal records check
pursuant to section 41-1750 and public law 92-544. The department of public safety may
exchange this fingerprint data with the federal bureau of investigation.
3. Name.
D. In order to assist in the performance of the director's duties, the director may
contract with a third party to perform any ministerial functions that are related to
producer licensing and that the director deems appropriate, including the collection of
fees. 20-287 Nonresident licensing
A. Unless the director denies a license pursuant to section 20-295, the director
shall issue a nonresident person a nonresident producer license if all of the following
apply:
1. The person is currently licensed as a resident and in good standing in the
person's home state.
2. The person has submitted the proper request for licensure and has paid the fees
prescribed in section 20-167.
3. The person has submitted the application for licensure as an insurance producer
that the person submitted to the person's home state or a completed uniform application
on a form prescribed by the national association of insurance commissioners.
4. The person's home state issues nonresident producer licenses to residents of
this state on the same basis.
B. A nonresident insurance producer who moves from one state to another state or a
resident insurance producer who moves from this state to another state shall file a
change of address form as prescribed in section 20-286, subsection C and provide the
director with certification of licensure from the new resident state within thirty days
after receiving the new resident license. A fee or license application is not required.
C. Notwithstanding any other provision of this chapter, the director shall issue:
1. A nonresident surplus lines broker license pursuant to subsection A of this
section to a person who is licensed as a surplus lines producer or broker in the person's
home state. Except as provided in subsection A of this section, this section does not
amend or supersede article 5 of this chapter.
2. A nonresident insurance producer license pursuant to subsection A of this
section to a person who is licensed in the person's home state to transact limited lines
insurance. The license shall grant the person the same scope of authority granted under
the license issued by the person's home state. For the purposes of this paragraph,
limited lines insurance is any authority that is granted by the home state and that
restricts the authority of the license to less than the total authority prescribed in the
associated major line insurance.
D. Except as otherwise provided in this title, a nonresident licensee is subject to
this title as though the licensee were licensed as a resident.
20-288 Exemption from examination
A. An individual who applies for an insurance producer license in this state and
who was previously licensed for the same lines of authority in another state is not
required to take an examination if either:
1. The applicant is currently licensed in the other state.
2. The application is received within ninety days after the cancellation of the
applicant's previous license and the other state issues a certification that, at the time
of cancellation, the applicant was in good standing in that state, or other reliable
information available to the director indicates that the applicant is or was licensed in
good standing for the line of authority requested.
B. The following applicants are not required to take an examination:
1. An applicant for timely renewal of a license.
2. An applicant for the same type of license that covers the same lines of
authority for which the applicant was licensed in this state, other than under a
temporary license, within the twelve months preceding the date of application.
3. An applicant who is a ticket selling agent or any other representative of a
common carrier for a limited line license that covers the sale of travel accident ticket
policies or baggage insurance.
4. An applicant for a license as a nonresident insurance producer who meets the
requirements of section 20-287, subsection A.
5. An applicant for a rental car agent license pursuant to section 20-331. 20-289.01 Inactive license or application status during military service
A. A licensee or applicant who is ordered into active military service may request
that the license or application be placed on inactive status by sending the department a
written statement that includes all of the following:
1. The licensee's name.
2. The licensee's license number or social security number.
3. The date that the active military service begins.
4. A request for inactive status.
B. The license or application is deemed to be on inactive status while the licensee
or applicant is in active military service.
C. A licensee whose license is on inactive status:
1. Shall not sell, solicit or negotiate insurance.
2. May receive renewal or other deferred commissions for selling, soliciting or
negotiating insurance in this state if the licensee was required to be licensed under
this article at the time of the sale, solicitation or negotiation and held an active
license at that time.
D. The time periods for submission of the license renewal fee and for completion of
the applicable renewal requirements prescribed in this article and the continuing
education requirements that are prescribed in chapter 18, article 1 of this title and
that apply to a licensee with an active license are extended for a licensee whose license
is on inactive status by the number of days that the licensee is in active military
service. A licensee applying for renewal under this section shall include, with the
renewal application, a copy of the documentation from the armed forces showing the period
of time that the licensee was in active military service.
E. For the purposes of this section, active military service does not include
periodic and routine service as a military reservist. 20-289 Expiration; surrender; renewal
A. Any license that is issued pursuant to this article, other than a temporary
license, continues in force until it expires or the director suspends, revokes or
terminates the license. The license is also subject to renewal pursuant to this section.
B. A license that is issued or renewed pursuant to this article or a license that
is issued or renewed pursuant to chapter 6, article 9 of this title expires quadrennially
as follows:
1. If the licensee is an individual, on the last day of the month of the licensee's
birthday, but not less than three years and not more than four years after the last day
of the month in which the license is issued or is required to be renewed.
2. If the licensee is a business entity, on the last day of the same month four
years after the issuance or renewal due date of the license as provided pursuant to this
article.
C. The director may renew a license if the director receives from the licensee all
of the following on or before the license expiration date:
1. An application on a form approved by the director.
2. The license fee prescribed in section 20-167.
3. Evidence that the licensee has complied with the continuing education
requirements prescribed in chapter 18 of this title.
D. Before renewing a license, the director may require the applicant to:
1. Provide all documents that are reasonably necessary to verify the information
that is contained in the application and any other information including prior criminal
records.
2. Submit a full set of fingerprints to the department. The department of
insurance shall submit the fingerprints to the department of public safety for the
purpose of obtaining a state and federal criminal records check pursuant to section
41-1750 and Public Law 92-544. The department of public safety may exchange this
fingerprint data with the federal bureau of investigation.
E. Any license for which the director does not receive timely application for
renewal and full payment of fees expires at midnight on the renewal date. During the year
after the expiration of a license under this section, a person who otherwise meets the
qualifications for a license may renew an expired license by filing with the director a
renewal application, the quadrennial license fee and an additional one hundred dollars as
a late renewal fee. Any application that is received during this one year period for the
same license that expired under this section is deemed a renewal application. Any
application that is received after the one year period for the same license that expired
under this section is deemed a new application.
F. On the written request of a person who is licensed pursuant to this article, the
director may accept the voluntary surrender of the person's authority to transact one or
more lines of insurance or of the person's entire license. A person who surrenders an
authority or a license under this subsection shall not reapply for the same authority or
license for at least one year after the date of the surrender.
20-290 Insurance producer records; individual licensees
A. An insurance producer shall keep at the insurance producer's principal place of
business the usual and customary records that pertain to transactions under the insurance
producer's license. The insurance producer shall keep all records for any transaction for
three years immediately after the date of completion of the transaction and shall make
them available and open to the inspection of the director at any business time during
those three years.
B. A business entity insurance producer shall have at least one insurance producer
individually licensed for the appropriate lines of authority in each office or place of
business in which the business entity transacts insurance in this state.
20-291 Service of process on nonresident licensees
A. Application for and acceptance of any nonresident license pursuant to this
article constitutes an irrevocable appointment of the director as the agent of the
licensee for the acceptance of service of process issued in this state in any action or
proceeding against the licensee arising out of the licensing or out of transactions under
the license.
B. Duplicate copies of any process shall be served on the director. At the time of
service the plaintiff shall pay the director the fee prescribed in section 20-167. On
receiving service the director shall promptly forward a copy by certified mail, return
receipt requested, to the licensee at the licensee's last address of record with the
director. Process served on the director pursuant to this section constitutes service on
the licensee as though the licensee were personally served with process in this state.
20-292 Violation; injunctive relief
If the director has cause to believe that any person is violating or about to
violate section 20-282, 20-298, 20-311.01, 20-321.01, 20-331, 20-331.01, 20-340.01 or
20-411, the director may order the person to cease and desist and, through the attorney
general, may cause a complaint to be filed in the superior court in Maricopa county to
enjoin and restrain the person from continuing the violation, engaging in the violation
or doing any act in furtherance of the violation. If the director orders the person to
cease and desist, the person may file a notice of appeal and may appeal any final order
pursuant to title 41, chapter 6, article 10. If the director, through the attorney
general, causes a complaint to be filed, the superior court in Maricopa county has
jurisdiction of the proceeding and may make and enter an order or judgment awarding the
preliminary or final relief as in its judgment is proper.
20-293 Insurance vending machines
A. Only a licensed insurance producer who is authorized by the director may solicit
applications for and issue policies by means of mechanical vending machines. The
insurance producer shall supervise each machine and shall issue policies only of insurers
authorized to transact business in this state. A policy shall not be solicited and
issued through a machine if the director finds that the kind of insurance or form of
policy to be sold is unsuitable for sale and issuance through vending machines, that use
of a vending machine may pose a risk of harm to the public or that the proposed type of
vending machine is not reasonably suitable and practical for the purpose.
B. The insurance producer shall display on or near each vending machine evidence of
the producer's authority to solicit applications and issue policies in a manner and form
as the director may reasonably require. The evidence of authority shall specify the name
and address of both the insurer and the insurance producer, the kind of insurance and
type of policy to be sold, the place where the machine is to be in operation and the
machine's identification number. The authority granted pursuant to this section expires
coincident with the insurance producer's license. The director shall suspend, revoke or
otherwise terminate the authority to operate a vending machine coincidentally with that
of the insurance producer.
20-294 Temporary licensing
A. The director may issue a temporary insurance producer license for not more than
one hundred eighty days without requiring an examination if the director deems that the
temporary license is necessary for the servicing of an insurance business in the
following cases:
1. To the surviving spouse or court appointed personal representative of a licensed
insurance producer who dies or becomes mentally or physically disabled to allow adequate
time for the sale of the insurance business owned by the producer, for the recovery of
the producer and return of the producer to the business or to provide for the training
and licensing of new personnel to operate the producer's business.
2. To a member or employee of a business entity that is licensed as an insurance
producer on the death or disability of an individual who is the designated producer on
the business entity application or license.
3. To the designee of a licensed insurance producer who enters active service in
the armed forces of the United States.
B. By order the director may impose conditions or limitations on the authority of
any temporary licensee in any way the director deems necessary to protect insureds and
the public, including requiring the temporary licensee to have a suitable sponsor who is
a licensed insurance producer or insurer and who assumes responsibility for all acts of
the temporary licensee. Unless the director imposes conditions or limitations pursuant to
this subsection, a temporary licensee has the same rights and privileges prescribed in
this article for an insurance producer.
C. By order the director may summarily revoke a temporary license if the interests
of insureds or the public are endangered. A temporary license may not continue after the
owner or the personal representative disposes of the business. 20-295 License denial, suspension or revocation; civil penalty
A. The director may deny, suspend for not more than twelve months, revoke or refuse
to renew an insurance producer's license or may impose a civil penalty in accordance with
subsection F of this section or any combination of actions for any one or more of the
following causes:
1. Providing incorrect, misleading, incomplete or materially untrue information in
the license application.
2. Violating any provision of this title or any rule, subpoena or order of the
director.
3. Obtaining or attempting to obtain a license through misrepresentation or fraud.
4. Improperly withholding, misappropriating or converting any monies or properties
received in the course of doing insurance business.
5. Intentionally misrepresenting the terms of an actual or proposed insurance
contract or application for insurance.
6. Having been convicted of a felony.
7. Having admitted or been found to have committed any insurance unfair trade
practice or fraud.
8. Using fraudulent, coercive or dishonest practices, or demonstrating
incompetence, untrustworthiness or financial irresponsibility in the conduct of business
in this state or elsewhere.
9. Having an insurance producer license, or its equivalent, denied, suspended or
revoked in any other state, province, district or territory.
10. Forging another's name to any document related to an insurance transaction.
11. Aiding or assisting any person in the unauthorized transaction of insurance
business.
12. Violating section 41-624, subsection B or C.
13. Violating section 6-1410, 6-1412 or 6-1413.
B. The director may deny, suspend for not more than twelve months, revoke or refuse
to renew the license of a business entity:
1. For any of the causes prescribed in subsection A of this section if the cause
relates to the designated producer or any member, officer, director or manager of the
business entity.
2. If the director finds that an individual insurance producer's violation was
known or should have been known by the designated producer or one or more of the members,
officers, directors or managers acting on behalf of the business entity and the violation
was not seasonably reported to the director and no reasonable corrective action was
taken.
C. If the director denies an application for a license, the director shall notify
the applicant in accordance with title 41, chapter 6, article 10.
D. The director may revoke, suspend or refuse to renew a license after notice and
an opportunity for a hearing in accordance with title 41, chapter 6, article 10.
E. Any hearing required by this section shall be conducted as prescribed in chapter
1, article 2 of this title and title 41, chapter 6, article 10.
F. In addition to or instead of any suspension, revocation or refusal to renew a
license pursuant to this section, after a hearing the director may:
1. Impose a civil penalty of not more than two hundred fifty dollars for each
unintentional failure or violation, up to an aggregate civil penalty of two thousand five
hundred dollars.
2. Impose a civil penalty of not more than two thousand five hundred dollars for
each intentional failure or violation, up to an aggregate civil penalty of fifteen
thousand dollars.
3. Order the licensee to provide restitution to any party injured by the licensee's
action.
G. The licensee shall pay any civil penalty to the director who shall deposit it,
pursuant to sections 35-146 and 35-147, in the state general fund. The civil penalty is
in addition to any other applicable penalty or restraint either in this article or in any
other law and may be recovered in a civil action brought by the director. For the
purposes of subsection F of this section, a single publication, exhibition or utterance
of any matter in violation of this title is deemed one violation or failure, including an
edition of a newspaper, book or magazine, a single representation to an audience, a
single broadcast over radio or television or a single exhibition of a motion picture.
H. The director shall retain the authority to enforce this title and impose any
penalty or remedy authorized by this title against any person who is under investigation
for or charged with a violation of this title even if the person's license has been
surrendered or has lapsed by operation of law. 20-296 Procedure after suspension or revocation of license
A. On suspension or revocation of the license the licensee shall deliver the
license to the director.
B. The director shall not again issue any license under this title to any person
whose license has been revoked until one year after the revocation and the person again
qualifies in accordance with the applicable provisions of this title.
C. If the license of a business entity is suspended or revoked, a member, officer
or director of or designated producer for the business entity shall not be issued a
license or serve as the designated producer for any licensee during the period of the
suspension or revocation unless the director determines that the member, officer,
director or designated producer was not personally at fault and did not acquiesce in the
matter that resulted in the suspension or revocation of the license.
20-297 Assumed business name; trade name
A. An insurance producer doing business under any name other than the producer's
legal name shall notify the director on a form prescribed by the director before using
the assumed name.
B. The director may deny the use of an assumed business name, require the use of a
different assumed business name or require the use of an assumed business name if an
insurance producer uses or proposes to use an assumed business name that either:
1. Is so similar to the legal name or name already assumed under this section by
any other licensed insurance producer so as to cause uncertainty or confusion.
2. Tends to deceive or mislead the public as to the nature of the business that is
or will be conducted.
C. An insurance producer shall notify the director in writing within thirty days
after any material change to the information filed with the director under this section.
D. The director shall not issue any license in a trade name except to a business
entity and on proof satisfactory to the director that the trade name has been lawfully
registered. 20-298 Commissions
A. An insurer or insurance producer shall not pay a commission, service fee,
brokerage or other valuable consideration to a person for selling, soliciting or
negotiating insurance in this state if that person is required to be licensed under this
article and is not so licensed.
B. A person shall not accept a commission, service fee, brokerage or other valuable
consideration for selling, soliciting or negotiating insurance in this state if that
person is required to be licensed under this article and is not so licensed.
C. Renewal or other deferred commissions may be paid to a person for selling,
soliciting or negotiating insurance in this state if the person was required to be
licensed under this article at the time of the sale, solicitation or negotiation and was
so licensed at that time.
D. An insurer or insurance producer may pay or assign commissions, service fees,
brokerages or other valuable consideration to an insurance agency or to persons who do
not sell, solicit or negotiate insurance in this state, unless the payment would violate
section 20-451.
E. This section does not affect payment of the regular salaries due to a licensee's
employees or the distribution in the regular course of business of compensation and
profits among a business entity's members or other owners.
20-299 Sharing of information
A. The director may:
1. Share any nonpublic document, material or other information with other state,
federal and international regulatory agencies, with the national association of insurance
commissioners and its affiliates or subsidiaries and with state, federal and
international law enforcement authorities, if the recipient agrees to maintain the
confidentiality and privileged status of the document, material or other information and
warrants that it has the authority to maintain that confidentiality and privileged
status.
2. Receive any document, material or other information from the national
association of insurance commissioners and its affiliates or subsidiaries and from
regulatory and law enforcement officials of other foreign or domestic jurisdictions and
shall maintain as confidential or privileged any document, material or other information
received with notice or the understanding that it is confidential or privileged under the
laws of the jurisdiction that is the source of the document, material or other
information.
3. Enter into agreements that govern the sharing and use of documents, materials or
other information and that are consistent with this subsection.
B. Any disclosure to the director or sharing of documents, materials or other
information in accordance with this section is not a waiver of any applicable privilege
or claim of confidentiality in any document, material or other information. 20-300 Reciprocity
A. The director shall waive any requirements, except the requirements prescribed in
section 20-287, for a nonresident license applicant who holds a license in good standing
from the applicant's home state if the applicant's home state issues nonresident licenses
to residents of this state on the same basis.
B. A nonresident insurance producer who satisfies the continuing education
requirements for a licensed insurance producer in the producer's home state also
satisfies this state's continuing education requirements if the nonresident producer's
home state recognizes the satisfaction of its continuing education requirements imposed
on producers from this state on the same basis. 20-301 Report of actions
A. Within thirty days after the final disposition of the matter, an insurance
producer shall report to the director any administrative action taken against the
producer in another jurisdiction or by another governmental agency in this state. The
report shall include a copy of the order, consent to order or other relevant dispositive
document.
B. Within thirty days after the initial pretrial hearing date, an insurance
producer shall report to the director any criminal prosecution of the producer taken in
any jurisdiction. The report shall include a copy of the initial complaint filed, the
order resulting from the hearing and all other relevant legal documents. 20-302 Rules
The director may adopt rules pursuant to title 41, chapter 6 to carry out this
article.
20-311.01 Licensing of managing general agents; surety deposit; definition
A. A person in this state shall not act as a managing general agent of an insurer
or underwriter's department unless the person is licensed by the director. A person
shall apply for the license on forms designated and provided by the director. The
director shall issue the license on completion and filing of the application and payment
of the license fee prescribed in section 20-167.
B. The license expires as prescribed in section 20-289. The director may suspend
or revoke the license or licenses of a managing general agent for any of the same causes
and pursuant to the same procedures that apply to insurance producer licenses under
article 3 of this chapter.
C. All managing general agents shall maintain a deposit according to section 20-581
in favor of this state to be held in trust for the benefit and protection of insureds and
insurers whose monies the managing general agent handles that consists of any of the
following:
1. Cash.
2. Securities eligible for investment pursuant to chapter 3, articles 1 and 2 of
this title.
3. Surety insurance as defined in section 20-257 in a form acceptable to the
director and issued by a corporate surety authorized to transact business in this
state. The surety insurance may include individual bonds or schedule or blanket forms of
bonds.
D. The amount of the deposit required by subsection C of this section is ten per
cent of the amount of total monies handled by the managing general agent on behalf of
insurers possessing a certificate of authority issued by the director to transact
insurance in this state unless the director determines that a lesser amount is adequate
for the protection of the public, except that the deposit shall not be less than fifty
thousand dollars or more than one hundred thousand dollars. The amount of the deposit
shall be determined by the total monies handled by the managing general agent during the
preceding year, or if no monies were handled during the preceding year, the amount of
monies reasonably estimated to be handled during the current calendar year by the
managing general agent. The amount of the deposit is payable on the failure of the
managing general agent to pay funds that it is legally obligated to pay and shall provide
protection to the insurers and insureds of this state against loss by reason of acts of
fraud or dishonesty.
E. The director may require a managing general agent to maintain an errors and
omissions policy.
F. For purposes of this section, "monies" means the total amount of gross written
premium less gross return premium. 20-311.02 Requirements for managing general agent agreements
A. A person, firm, association or corporation acting in the capacity of a managing
general agent shall not place business with an insurer unless there is in force a written
contract between the parties that sets forth the responsibilities of each party and, if
both parties share responsibility for a particular function, specifies the division of
the responsibilities. The contract shall contain the following minimum provisions:
1. The insurer may terminate the contract for cause on written notice to the
managing general agent. The insurer may suspend the underwriting authority of the
managing general agent during the pendency of a dispute regarding the cause for
termination.
2. At least each month the managing general agent shall render accounts to the
insurer detailing all transactions and remit all monies due under the contract to the
insurer.
3. The managing general agent shall hold in a fiduciary capacity all monies that
are collected for the account of an insurer in a bank that is a member of the federal
reserve system. The account shall be used for all payments on behalf of the insurer. The
managing general agent may retain no more than three months' estimated claims payments
and allocated loss adjustment expenses.
4. The managing general agent shall maintain separate records of business that is
written by the managing general agent. The insurer shall have access to and the right to
copy all accounts and records related to its business in a form usable by the insurer.
The director shall have access to all books, bank accounts and records of the managing
general agent in a form usable to the director.
5. The managing general agent may not assign the contract in whole or in part.
6. Appropriate underwriting guidelines, including:
(a) The maximum annual premium volume.
(b) The basis of the rates to be charged.
(c) The types of risks that may be written.
(d) Maximum limits of liability.
(e) Applicable exclusions.
(f) Territorial limitations.
(g) Policy cancellation provisions.
(h) The maximum policy period.
7. The insurer may cancel or refuse to renew an insurance policy subject to
applicable laws and rules.
8. If the contract permits the managing general agent to settle claims on behalf of
the insurer:
(a) All claims shall be reported to the company in a timely manner.
(b) A copy of the claim file shall be sent to the insurer on request or as soon as
it becomes known that the claim:
(i) May exceed an amount determined by the director or exceeds the limit set by the
company, whichever is less.
(ii) Involves a coverage dispute.
(iii) May exceed the managing general agent's claims settlement authority.
(iv) Is open for more than six months.
(v) Is closed by payment of an amount set by the director or an amount set by the
company, whichever is less.
(c) All claim files are the joint property of the insurer and the managing general
agent. On an order of liquidation of the insurer the files become the sole property of
the insurer or its estate. The managing general agent shall have reasonable access to and
the right to copy the files on a timely basis.
(d) Any settlement authority that is granted to the managing general agent may be
terminated for cause on the insurer's written notice to the managing general agent or on
the termination of the contract. The insurer may suspend the settlement authority during
the pendency of a dispute regarding the cause for termination.
9. If electronic claims files exist, provisions on the timely transmission of the
data.
10. If the contract provides for the sharing of interim profits by the managing
general agent, and the managing general agent has the authority to determine the amount
of the interim profits by establishing loss reserves, controlling claim payments or any
other manner, interim profits shall not be paid to the managing general agent until one
year after the interim profits are earned for property insurance business or five years
after the interim profits are earned on casualty business and the interim profits have
been verified pursuant to subsection B of this section.
11. The managing general agent shall not:
(a) Bind reinsurance or retrocessions on behalf of the insurer, except that the
managing general agent may bind facultative reinsurance contracts pursuant to obligatory
facultative agreements if the contract with the insurer contains reinsurance underwriting
guidelines including, for both reinsurance assumed and ceded, a list of reinsurers with
whom the automatic agreements are in effect, the coverages and amounts or percentages
that may be reinsured and commission schedules.
(b) Commit the insurer to participation in insurance or reinsurance syndicates.
(c) Appoint a producer without assuring that the producer is lawfully licensed to
transact the type of insurance for which the producer is appointed.
(d) Without prior approval of the insurer, pay or commit the insurer to pay a claim
over a specified amount, net of reinsurance, that does not exceed one per cent of the
insurer's policyholder's surplus as of December 31 of the last completed calendar year.
(e) Without prior approval of the insurer, collect any payment from a reinsurer or
commit the insurer to any claim settlement with a reinsurer. If prior approval is given,
a report shall be forwarded promptly to the insurer.
(f) Permit its subproducer to serve on the insurer's board of directors.
(g) Employ jointly an individual who is employed by the insurer.
(h) Appoint a submanaging general agent.
B. With respect to its managing general agent, an insurer shall:
1. Have an independent financial examination of each managing general agent it does
business with on file in a form acceptable to the director.
2. Notwithstanding any other required loss reserve certification, if the managing
general agent establishes loss reserves, annually obtain an actuary's opinion attesting
to the adequacy of the loss reserves established for losses incurred and outstanding on
business that is produced by the managing general agent.
3. Conduct semiannually an on-site review of the managing general agent's
underwriting and claims processing operations.
4. Give to an officer of the insurer who is not affiliated with the managing
general agent binding authority for all reinsurance contracts or participation in
insurance or reinsurance syndicates.
5. Within thirty days of entering into or terminating a contract with a managing
general agent, provide to the director written notification of the appointment or
termination. A notice of appointment of a managing general agent shall include a
statement of the duties that the applicant shall perform on behalf of the insurer, the
lines of insurance for which the applicant shall be authorized to act and any other
information the director may request.
6. Review its books and records each quarter to determine if a producer has become,
by operation, a managing general agent. If the insurer determines that a producer has
become a managing general agent, the insurer promptly shall notify the producer and the
director of the determination. The insurer and the producer shall comply with this
section within thirty days.
C. An insurer shall not appoint to its board of directors an officer, director,
employee, subproducer or controlling shareholder of its managing general agents. This
subsection does not apply to relationships that are governed by the insurance holding
company act or, if applicable, the producer controlled insurer act.
D. The acts of the managing general agent are considered to be the acts of the
insurer on whose behalf the managing general agent is acting. A managing general agent
may be examined as if the managing general agent were the insurer.
E. If after a hearing the director finds that a person has violated this section,
the director may order:
1. For each separate violation, a civil penalty in an amount of up to one thousand
dollars.
2. Revocation or suspension of the producer's license.
3. The managing general agent to reimburse the insurer or the rehabilitator or
liquidator of the insurer for any losses incurred by the insurer that are caused by an
act that is committed by the managing general agent in violation of this section.
F. Nothing contained in this section affects the right of the director to impose
any other penalties pursuant to this title.
G. Nothing contained in this section limits or restricts the rights of
policyholders, claimants and auditors.
H. The director may adopt rules for the implementation and administration of this
section.
I. Except as provided in section 41-1092.08, subsection H, the final decision,
determination or order of the director pursuant to subsection E of this section is
subject to judicial review pursuant to title 12, chapter 7, article 6.
20-311.03 Application of other laws
To the extent not inconsistent with this article, sections 20-281, and 20-289,
section 20-290, subsection A and sections 20-291, 20-292, 20-295, 20-296, 20-297, 20-298,
20-299, 20-301 and 20-302 apply to managing general agents. 20-311 Definition of managing general agent; exceptions; adjustment or payment of claims
A. In this article, unless the context otherwise requires, "managing general agent"
means any person, firm, association or corporation that negotiates and binds ceding
reinsurance contracts on behalf of an insurer or that manages all or part of the
insurance business of an insurer, including the management of a separate division,
department or underwriting office, that acts as an insurance producer or agent for the
insurer and that, with or without authority and either separately or together with
affiliates, directly or indirectly produces and underwrites an amount of gross direct
written premium that is at least five per cent of the policyholder surplus as reported in
the last annual statement of the insurer in any one quarter or year and that either:
1. Engages in the adjustment or payment of claims.
2. Negotiates reinsurance on behalf of the insurer.
B. Notwithstanding subsection A of this section, for the purposes of this article
the following persons are not managing general agents:
1. An employee of the insurer.
2. A United States manager of the United States branch of an alien insurer.
3. An underwriting manager who, pursuant to contract, manages all of the insurance
operations of the insurer other than those operations that are managed by the insurer,
who is under common control with the insurer, subject to the holding company regulatory
act, and whose compensation is not based on the volume of premiums written.
4. The attorney-in-fact who is authorized by and acting for the subscribers of a
reciprocal insurer or inter-insurance exchange under powers of attorney.
5. A reinsurance intermediary broker or a reinsurance intermediary manager as
defined in section 20-486, who provides administrative services for an insurer and whose
compensation consists only of remuneration not related directly or indirectly to direct
written premium. For the purposes of this paragraph reinsurance commissions shall not be
considered remuneration related to direct written premium.
C. The director shall establish by rule the dollar amount of adjusted or paid
claims that constitutes engaging in the adjustment or payment of claims. 20-321.01 Licensing of adjusters; qualifications; exemption
A. A person shall not act as or claim to be an adjuster unless the person is
licensed under this article.
B. To obtain a license as an adjuster a person shall apply to the director for the
license and use the forms prescribed and provided by the director. The director shall
issue the license to qualified persons on payment of the license fee prescribed in
section 20-167.
C. To be licensed as an adjuster the applicant shall meet all of the following
qualifications:
1. Be a person who is at least eighteen years of age.
2. Be a resident of this state, or a resident of another state that allows
residents of this state to act as adjusters in the other state.
3. Take and pass an examination that is given by or under the supervision of the
director and that reasonably tests the applicant's knowledge of insurance and legal
responsibilities as an adjuster.
4. Have and maintain in this state an office accessible to the public and keep at
the office the usual and customary records pertaining to transactions under the
license. This paragraph does not prohibit maintaining an office in the home of the
licensee.
D. A firm or corporation, whether or not organized under the laws of this state,
may be licensed as an adjuster if each individual who is to exercise the license powers
is qualified for an individual license as an adjuster.
E. An adjuster who is licensed or permitted to act as an adjuster in the state of
the adjuster's domicile is not required to be licensed pursuant to this section or meet
the qualifications prescribed in this section if the adjuster is sent to this state on
behalf of an insurer for the purpose of investigating or making adjustment of a
particular loss under an insurance policy or a series of losses resulting from a
catastrophe common to all those losses. 20-321.02 Application of other laws
To the extent not inconsistent with this article, sections 20-281, 20-289, 20-291,
20-292, 20-295, 20-296, 20-297, 20-299, 20-301 and 20-302 apply to adjusters. 20-321 Definition of adjuster; exception
A. In this article, unless the context otherwise requires, "adjuster" means any
person who for compensation, fee or commission either:
1. Adjusts, investigates or negotiates settlement of claims arising under insurance
contracts on behalf of either the insurer or the insured.
2. Holds oneself out to perform a service listed in paragraph 1 of this subsection.
B. For the purposes of this article, an adjuster does not include:
1. A licensed attorney-at-law who is qualified to practice law in this state.
2. A salaried employee of an insurer or of a managing general agent.
3. A licensed insurance producer who adjusts or assists in adjustment of losses
arising under policies procured through the insurance producer.
4. An employee of a political subdivision who adjusts or assists in the adjustment
of losses arising under policies covering the political subdivision or persons
indemnified by the political subdivision.
5. An independent contractor retained by a licensed adjuster or a person listed in
paragraphs 1 through 4 of this subsection for the sole purpose of providing technical
assistance in connection with a claim. An independent contractor may include
photographers, estimators, engineers, private detectives or handwriting experts.
C. For the purposes of subsection B, "salaried employee" means an employee whose
compensation is not contingent on the outcome of a claim determination.
20-331.01 Political subdivision employees; risk management consultant licenses
A. An employee of a political subdivision may be licensed as a risk management
consultant for the purposes of title 11, chapter 7, article 5 to carry out the provisions
of title 11, chapter 7, article 5. The director shall license these employees in the same
manner as insurance producers. The director may waive the examination requirement for a
license issued pursuant to this section. The license automatically expires when the
employee terminates employment with the political subdivision.
B. To the extent not inconsistent with this article, sections 20-281, 20-284 and
20-285, section 20-288, subsection B and sections 20-289, 20-290, 20-291, 20-292, 20-295,
20-296, 20-297, 20-298, 20-299, 20-301 and 20-302 apply to risk management consultants. 20-331 Rental car agents; definitions
A. The director may issue to a rental company that has complied with the
requirements of this section a license that authorizes the rental company as a rental car
agent to offer or sell insurance in connection with and incidental to rental
agreements. Notwithstanding section 20-290, subsection B, a rental car agent is not
required to have an individual licensee in each office or other rental site or place
where insurance is transacted.
B. An applicant for a rental car agent license shall file with the director a
written application that is in a form prescribed by the director and that is signed by an
officer of the applicant. The application shall specify all locations at which the
licensee may conduct business under the license. The licensee shall provide the director
at least thirty days' prior notice before conducting business under the license at any
additional location.
C. A rental car agent may offer or sell insurance at the rental company office or
other rental site or process a preselection of coverage in a master, corporate, group or
individual rental agreement for any of the following kinds or types of insurance,
separately or in combination:
1. Accident and health or sickness insurance that provides coverage, as applicable,
to renters and other rental vehicle occupants for accidental death or dismemberment and
reimbursement for medical expenses that result from an accident that occurs during the
rental period.
2. Liability insurance that provides coverage, as applicable, to renters and other
authorized drivers of rental vehicles for liability that arises from the operation of the
rental vehicles, including uninsured and underinsured motorist coverage separately or in
combination with other liability insurance.
3. Personal property insurance that provides coverage, as applicable, to renters
and other vehicle occupants for the loss of or damage to personal effects that occurs
during the rental period.
4. Vehicle breakdown coverage.
5. Physical damage insurance that provides coverage to renters and other authorized
drivers of rental vehicles for property damage liability that arises from the operation
of the vehicle.
D. A rental car agent is not subject to the continuing education requirements of
chapter 18 of this title.
E. A rental car agent shall not offer or sell insurance pursuant to this section
unless:
1. The rental period of the rental agreement is ninety consecutive days or less.
2. The rental car agent provides brochures or other written materials to the
prospective renter that:
(a) Summarize the material terms and conditions of coverage offered to renters,
including the identity of the insurer.
(b) Describe the process for filing a claim.
3. The rental car agent makes the following disclosures to the renter and the
renter acknowledges the disclosures in writing:
(a) That the insurance policies offered by the rental car agent may provide a
duplication of coverage already provided by a renter's personal automobile insurance
policy or by another source of coverage.
(b) That the purchase by the renter of the kinds of insurance prescribed in this
section is not required in order to rent a vehicle.
4. Evidence of coverage is stated on the face of the rental agreement.
5. Costs for the insurance are separately itemized in the rental agreement.
6. The insurance is provided under a group or master policy issued to the rental
company by an insurer authorized to transact the applicable kinds or types of insurance
in this state or by a surplus lines insurer in accordance with article 5 of this chapter.
F. Any salaried employee of a rental car agent may act on behalf and under the
supervision of the rental car agent in matters relating to the conduct of business under
the license issued pursuant to this section. The conduct of an employee or agent of a
rental car agent acting within the scope of employment or agency is deemed the conduct of
the rental car agent for purposes of this article.
G. Each rental car agent licensed pursuant to this section shall conduct a training
program that provides employees and agents of the rental company with basic instruction
about the provisions of this section, including the kinds of coverage prescribed in this
section.
H. A rental car agent shall not:
1. Offer or sell insurance except in conjunction with and incidental to rental
agreements.
2. Advertise, represent or otherwise portray itself or any of its employees or
agents as licensed insurers or insurance producers.
3. Pay any person any compensation, fee or commission dependent on the placement of
insurance under the license issued pursuant to this section.
I. Nothing in this section prohibits production payments or incentive payments to
an employee if the payments are not dependent on the sale of insurance.
J. To the extent not inconsistent with this article, sections 20-281 and 20-289,
section 20-290, subsection A and sections 20-291, 20-292, 20-295, 20-296, 20-297, 20-298,
20-299, 20-301 and 20-302 apply to rental car agents.
K. For the purposes of this section:
1. "Rental agreement" means any written agreement that states the terms and
conditions that govern the use of a vehicle provided by the rental company for rent or
lease for a rental period of ninety days or less.
2. "Rental car agent" means a rental company that is licensed pursuant to this
section.
3. "Rental company" means any firm or corporation in the business of renting
vehicles to renters under a rental agreement.
4. "Rental period" means the term of the rental agreement.
5. "Rental vehicle" or "vehicle" means a motor vehicle operated by a driver who is
not required to possess a commercial driver license to operate the motor vehicle and the
motor vehicle is either:
(a) A private passenger motor vehicle, including a passenger van, minivan or sport
utility vehicle.
(b) A cargo vehicle, including a cargo van, pickup truck and truck with a gross
vehicle weight of less than twenty-six thousand pounds.
6. "Renter" means any person who obtains the use of a vehicle from a rental company
under the terms of a rental agreement.
20-340.01 Bail bond agents; business entities; place of business; receipt; maintenance of records A. A person shall not act as a bail bond agent in this state unless the person is licensed by the director in accordance with this article. B. The director shall not license a resident business entity as a bail bond agent unless each owner and shareholder is individually licensed as a bail bond agent. C. Each bail bond agent shall have and maintain a place of business in this state that is accessible to the public and where the bail bond agent principally conducts transactions under the agent's license. D. As a minimum requirement for permanent office records, each bail bond agent and general lines agent who is engaged in the bail bond business shall maintain a daily bond register that is the original and permanent record of all bonds or undertakings executed by the licensee and that states the: 1. Number of the power of attorney form. 2. Date the bond was executed. 3. Name of the principal. 4. Amount of the bond. 5. Premium charged. 6. Premium reported to the surety company. 7. Security or collateral received. 8. Date the security or collateral was received and the date released. 9. Indemnity agreements. 10. Disposition of the bond. 11. Date of disposition. E. Each bail bond agent and general lines agent who is engaged in the bail bond business and who accepts monies or any other consideration for any bail bond undertaking shall for each payment received give to the person paying the monies or giving the consideration a prenumbered receipt as evidence of payment. The receipt must state the date, the name of the principal, a description of the consideration or amount of monies received and the purpose for which received, the number of the power of attorney form attached to the bond, the penal sum of the bond, the name of the person making the payment or giving the consideration and the terms under which the monies or other consideration shall be released. Each bail bond agent shall retain a duplicate copy of each receipt issued as part of the agent's records. F. The bail bond agent shall keep at the agent's place of business the usual and customary records pertaining to transactions made under the license. The licensee shall keep all the records as to any particular transaction available and open to the inspection of the director at any business time during the three years immediately after the date of completion of the transaction. G. The director may examine the business practices, books and records of any bail bond agent as often as the director deems appropriate. The bail bond agent shall pay the costs incurred for the examination. 20-340.02 Bond of bail bond agents
A. Each applicant for a bail bond agent's license or license renewal shall file
with the application and shall maintain in force while licensed a bond in favor of this
state executed by a surety insurer authorized to do business in this state. The bond may
be continuous in form, and total aggregate liability on the bond shall be at least ten
thousand dollars. The applicant shall place the bond on deposit with the state treasurer
through the director's office. The bond shall be conditioned on full accounting and due
payment to the person entitled to the bond of monies coming into the bail bond agent's
possession as an incident to bail bond transactions under the license.
B. The bond remains in force until released by the director or until cancelled by
the surety. Without prejudice to any liability previously incurred, the surety may
cancel the bond on thirty days' advance written notice filed with the director.
20-340.03 Bail bond agent prohibitions
A. A bail bond agent shall not:
1. Suggest or advise the employment of or name for employment any particular
attorney to represent the agent's principal.
2. Solicit business in or around any place where prisoners are confined or in or
around any court.
3. Receive or collect for an attorney any monies or other items of value for any
attorney fee, cost or other purpose on behalf of an arrestee, unless a receipt is given.
4. For any purpose, directly or indirectly, enter into an arrangement of any kind
or have an understanding with any person to inform or notify any bail bond agent directly
or indirectly of any of the following:
(a) The existence of a criminal complaint.
(b) The fact of an arrest.
(c) The fact that an arrest of any person is pending or contemplated.
(d) Any information pertaining to matters described in this paragraph or to the
persons involved.
5. Participate in the capacity of an attorney at a trial or hearing of a person on
whose bond the bail bond agent is the surety.
6. Accept anything of value from a principal except the premium and expenses. The
bail bond agent may accept collateral security or other indemnity from the principal or
on behalf of the principal that the bail bond agent shall return on final termination of
liability on the bond unless the collateral has been forfeited because the defendant did
not appear in court. The collateral security or other indemnity required by the bail
bond agent must be reasonable in relation to the amount of the bond.
7. Give, authorize, sign or countersign in blank any power of attorney to bonds
unless the authorized person is a licensed bail bond agent directly employed by the bail
bond agent giving the power of attorney.
8. Advertise as or claim to be a surety company.
9. Employ or assist in the employment of any person who has been convicted in any
jurisdiction of theft or of any felony or any crime involving carrying or the possession
of a deadly weapon or dangerous instrument.
B. For the purposes of subsection A, paragraph 9, "employment" means working for a
salary, a commission or under contract or owning, operating or controlling any business
or agency that solicits, services or assists in any way in dealing in bail bonds.
C. Law enforcement, adjudication and prosecution officials and the officials'
employees, attorneys-at-law, officials authorized to admit to bail and state and county
officers shall not be bail bond agents and shall not directly or indirectly receive any
benefits from the execution of any bail bond. This section does not prohibit a bail bond
agent from hiring counsel or asking assistance of a law enforcement officer.
D. In any bail transaction or in connection with any bail transaction, a bail bond
agent shall not directly or indirectly charge or collect monies or other valuable
consideration from any person except for the following purposes:
1. To pay the premium at the rates that are established by the surety insurer and
that are approved by the director.
2. To provide collateral.
3. To be reimbursed for actual and reasonable expenses incurred in connection with
the individual bail transaction. 20-340.04 Bail recovery agent prohibitions; criminal records checks
A. No person who has been convicted in any jurisdiction of theft, any felony or any
crime involving the carrying or illegal use or possession of a deadly weapon or dangerous
instrument may act as a bail recovery agent.
B. A person shall submit a full set of fingerprints to the department before acting
as a bail recovery agent and shall submit a new set of fingerprints on or before
September 1 of every third year after initial identification by the bail bond agent in
the report that is filed with the director pursuant to section 13-3885, subsection C.
The department of insurance shall submit the fingerprints to the department of public
safety for the purpose of obtaining a state and federal criminal records check pursuant
to section 41-1750 and Public Law 92-544. The fingerprint processing fee collected by
the department shall be an amount that does not exceed the cost to the department that is
charged by the federal bureau of investigation for the fingerprint processing to obtain
federal criminal history record information. The department of public safety may exchange
this fingerprint data with the federal bureau of investigation. The department of public
safety shall provide the criminal history record information to the director pursuant to
section 41-1750.
C. Any person who acts as a bail recovery agent on behalf of any bail bond agent
and any person who conducts any action relating to a bail recovery or apprehension must
be identified by the bail bond agent in the report that is filed with the director
pursuant to section 13-3885, subsections C and D.
D. A bail bond agent may not employ a bail recovery agent who does not comply with
this section and who has not been identified by the bail bond agent in the report that is
filed with the director pursuant to section 13-3885, subsection C. A bail bond agent who
is not licensed in this state shall contract with a bail bond agent in this state to
retain the services of a bail recovery agent in this state.
20-340.05 Rules
The director shall adopt rules relating to collateral received by bail bond agents,
the issuance of contracts and other matters relating to the business of bail bond agents.
20-340.06 Application of other laws
To the extent not inconsistent with this article, sections 20-281, 20-284 and
20-285, section 20-288, subsection B and sections 20-289, 20-292, 20-295, 20-296, 20-297,
20-298, 20-299, 20-301 and 20-302 apply to bail bond agents.
20-340 Definitions
In this article, unless the context otherwise requires:
1. "Bail bond agent" means an individual who is appointed by an insurer through a
power of attorney to execute or countersign bail bonds in connection with judicial
proceedings and who receives or is promised monies or other things of value for that
service.
2. "Bail recovery agent" has the same meaning prescribed in section 13-3885. 20-341 Purpose of insurance rate regulation
A. The purpose of this article is to promote the public welfare by regulating
insurance rates to the end that they shall not be excessive, inadequate or unfairly
discriminatory, and to authorize and regulate cooperative action among insurers in rate
making and in other matters within the scope of this article. Nothing in this article is
intended to prohibit or discourage reasonable competition, or to prohibit or encourage,
except to the extent necessary to accomplish the purpose stated in this section,
uniformity in insurance rates, rating systems, rating plans or practices. This article
shall be liberally interpreted to carry into effect the provisions of this section.
B. Where the rules and regulations of a rating bureau or advisory organization
conflict with the law, the rules and regulations do not apply.
20-342 Scope and application of article
A. This article does not apply to:
1. Life insurance.
2. Disability insurance.
3. Reinsurance, except joint reinsurance as provided in section 20-369.
4. Mortgage guaranty insurance.
5. Insurance against loss of or damage to aircraft, their hulls, accessories and
equipment, or against liability, other than employers' liability, arising out of the
ownership, maintenance or use of aircraft.
6. Insurance of vessels or craft, their cargoes, marine builders' risks, marine
protection and indemnity, or other risks commonly insured under marine, as distinguished
from inland marine, insurance policies.
7. Insurance risks described in section 20-382, subsection A, paragraph 8.
B. Rates for the types of insurance included in section 20-382 are only subject to
sections 20-381 through 20-399.
C. This section and sections 20-341 and 20-356 through 20-374 apply to workers'
compensation and employers' liability insurance incident to and written in connection
with workers' compensation on risks or operations in this state.
D. This section and sections 20-341 and 20-361 through 20-379 apply to title
insurance on risks located in this state and to escrow services performed by a title
insurer or title insurance agent as defined in section 20-1562. Those sections are
designated as the title insurance rate regulatory provisions of this article and are the
only sections of this article that apply to title insurance. 20-343 Definitions
In this article, unless the context otherwise requires:
1. "Board" means the workers' compensation appeals board established by section
20-367.
2. "Classification plan" means the plan or system that groups industries,
occupations or operations with a similar exposure to loss into rate classifications for
workers' compensation rating, rate making and statistical reporting purposes.
3. "Designated rating organization" means the rating organization selected by the
director pursuant to section 20-371, subsection F.
4. "Designated statistical agent" means the organization designated by the director
under section 20-371, subsection D.
5. "Experience rating plan" means a mandatory rating plan for all eligible insureds
that establishes a workers' compensation rating procedure that compares the actual loss
experience of individual insureds to the industry average for the same classification
with differences reflected in the insured's premium.
6. "Schedule rating plan" means a rating plan by which an insurer increases or
decreases workers' compensation rates to reflect the individual risk characteristics or
the loss ratios of the subject of insurance.
7. "Statistical plan" means the plan, system or arrangement used in collecting
workers' compensation data.
8. "Uniform plan" means a workers' compensation statistical plan, classification
plan or experience rating plan designated by the director pursuant to section 20-371,
subsection J.
9. "Uniform rate filing" means the rate filing that is made by the designated
rating organization and that includes all of the workers' compensation rates to which
insurers transacting workers' compensation insurance in this state shall adhere except as
provided in section 20-359, subsection A. Uniform rate filing also includes the expected
loss ratios, ballast factors and other factors promulgated by the designated rating
organization for the uniform experience rating plan.
10. "Workers' compensation rates" means rates for workers' compensation and
employers' liability insurance incident to and written in connection with workers'
compensation.
20-344 Uniform plans
A. Except as provided in subsections B and C of this section, every rating
organization and every insurer that transacts workers' compensation insurance in this
state shall adhere to plans approved by the director as the uniform statistical plan,
uniform classification plan and uniform experience rating plan for the state.
B. A rating organization may use its own statistical plan to the extent that the
statistical plan does not materially conflict with the uniform statistical plan for the
purposes of making all reports to the statistical agent designated by the director
pursuant to section 20-371, subsection D. The rating organization shall file its
statistical plan with the director and receive the director's approval before using its
own statistical plan.
C. An insurer may directly or through the rating organization of which it is a
member develop subclassifications of the uniform classification plan. The insurer, or a
rating organization on the insurer's behalf, shall file each subclassification and the
rate for the subclassification with the director, and they shall be on file for a waiting
period of at least fifteen days before they become effective. The director shall
disapprove the subclassification if the insurer fails to demonstrate that the data
produced by the subclassification can be reported consistently with the uniform
classification plan and uniform statistical plan or the rate of the subclassification
does not meet the standards of section 20-356, paragraph 1. 20-356 Making of rates
All rates subject to this article shall be made in accordance with the following
provisions:
1. Rates shall not be excessive, inadequate or unfairly discriminatory. No rate
shall be held to be inadequate unless the director finds that the loss experience of the
insurer in the classification covered by the rate has been adverse for a continuous
period of not less than two years immediately preceding the date of such finding.
2. Due consideration shall be given to past and prospective loss experience within
and outside this state, to catastrophe hazards, if any, to a reasonable margin for
underwriting profit and contingencies, to dividends, savings or unabsorbed premium
deposits allowed or returned by insurers to their policyholders, members or subscribers,
to past and prospective expenses within and outside this state and to all other relevant
factors within and outside this state.
3. The systems of expense provisions included in the rates for use by any insurer
or group of insurers may differ from those of other insurers or groups of insurers to
reflect the requirements of the operating methods of any such insurer or group with
respect to any kind of insurance, or with respect to any subdivision or combination
thereof for which subdivision or combination separate expense provisions are applicable.
4. Risks may be grouped by classifications for the establishment of rates and
minimum premiums. Classification rates may be modified to produce rates for individual
risks in accordance with rating plans which establish standards for measuring variations
in hazards or expense provisions, or both. Such standards may measure any differences
among risks that can be demonstrated to have a probable effect upon losses or expenses.
5. Nothing in this article shall be construed to prohibit payment of dividends by
insurers issuing policies on the participating plan, or by mutual or reciprocal insurers,
but in the payment of such dividends there shall be no unfair discrimination between
policyholders.
6. Except to the extent necessary to meet the provisions of paragraph 1, uniformity
among insurers in any matters within the scope of this section is neither required nor
prohibited.
20-357 Filing of rating system; definition
A. Every insurer shall file with the director the rating systems the insurer
proposes to use. As used in the rate regulatory provisions of this article, "rating
systems" includes every manual of classifications, rules and rates, every rating plan and
every modification of any of the foregoing. Every filing shall have a proposed effective
date and shall indicate the character and extent of the coverage contemplated. If a
filing does not include the information on which the insurer supports the filing, and the
director does not have sufficient information to determine whether the filing meets the
rate regulatory requirements of this article, the director shall require the insurer to
furnish information supporting the filing. The supporting information may include the
experience or judgment of the insurer or rating organization making the filing, its
interpretation of any statistical data on which it relies, the experience of other
insurers or rating organizations or any other relevant factors. A filing and any
supporting information shall be open to public inspection after the filing becomes
effective.
B. A workers' compensation insurer shall satisfy its obligation to make filings by
becoming a member of a licensed rating organization that makes filings and by authorizing
the director to accept on its behalf filings made by the rating organization. A rating
organization shall annually file with the director rates to be effective on October 1.
Nothing in this subsection requires an insurer to be a member of the designated rating
organization.
C. Each filing shall be on file for a waiting period of at least thirty days before
it becomes effective. On written application by the insurer or rating organization making
the filing, the director may authorize a filing to become effective before the waiting
period expires.
D. On written application of the insured that states the insured's reasons and that
is filed with and approved by the director, an insurer may use a rate in excess of the
insurer's filed rate on the insured's risk.
E. An insurer shall not make or issue a contract or policy except in accordance
with the filings in effect for that insurer as provided in the rate regulatory provisions
of this article.
20-358 Disapproval of rates
A. If at any time the director finds that a filing does not meet the standards set
forth in section 20-356, he shall, after a hearing held upon not less than ten days'
written notice, in which he shall specify the matters to be considered at such hearing,
to every insurer and rating organization which made the filing, issue an order specifying
in what respects he finds that the filing fails to meet the requirements of the rate
regulatory provisions of this article, and stating when, within a reasonable period
thereafter, the filing or rating system shall be deemed no longer effective. Copies of
the order shall be sent to every such insurer and rating organization. The order shall
not affect any contract or policy made or issued prior to the expiration of the period
set forth therein.
B. Any person or organization aggrieved with respect to any filing or rating system
which is in effect may make written application to the director for a hearing thereon,
but the insurer or rating organization which made the filing or uses the rating system
shall not be authorized to proceed under this subsection. The application shall specify
the grounds to be relied upon by the applicant. If the director finds that the
application is made in good faith, that the applicant would be so aggrieved if his
grounds are established and that the grounds otherwise justify holding such a hearing, he
shall within thirty days after receipt of the application hold a hearing upon not less
than ten days' written notice to the applicant and to every insurer and rating
organization which made such filing or uses such rating system. If, after the hearing,
the director finds that the filing or rating system does not meet the requirements of the
rate regulatory provisions of this article, he shall issue an order specifying in what
respects he finds that it fails to meet such requirements and stating when, within a
reasonable period thereafter, it shall be deemed no longer effective. Copies of the
order shall be sent to the applicant and to every such insurer and rating
organization. The order shall not affect any contract or policy made or issued prior to
the expiration of the period set forth therein.
C. No manual of classifications, rules, rating plan or any modification of any of
the foregoing which establishes standards for measuring variations in hazards or expense
provisions, or both, and which is being used pursuant to the requirements of section
20-356, shall be disapproved if the rates thereby produced meet the requirements of the
rate regulatory provisions of this article.
D. The director may utilize independent contractor examiners experienced in the
review of applicable rates and reserves pursuant to sections 20-148 and 20-159 to
implement the provisions of this article. All examination and examination related
expenses shall be borne by the insurer and shall be paid by the insurance examiners'
revolving fund pursuant to section 20-159.
20-359 Deviations from filed workers' compensation rates
A. Every insurer shall adhere to the filings made by the rating organization of
which it is a member, except that any member insurer may file with the director:
1. A uniform percentage decrease or increase to be applied to the statewide rate
portion of the rating organization's rate filing.
2. A subclassification rate related rule that deviates from the rules or schedule
rating plan filed by the insurer's rating organization. An insurer shall not apply a
deviation and a schedule rating plan within the same insurance company.
B. Each deviation filed shall be on file with the director for a waiting period of
at least thirty days before it becomes effective. On written application by the insurer
making the filing, the director may authorize a filing to become effective before the
waiting period expires. A deviation that is filed pursuant to subsection A, paragraph 1
of this section and that is not disapproved by the director expires the following
September 30 at midnight in this state unless the director terminates the deviation
sooner. A deviation that is filed pursuant to subsection A, paragraph 2 of this section
continues until the insurer withdraws the deviation or the director determines that the
deviation no longer meets the standards prescribed in section 20-356, paragraph 1. At any
time the director may require an insurer to actuarially support a deviation. The insurer
that files the deviation shall simultaneously send a copy of the filing to the rating
organization of which it is a member and to any designated rating organization.
C. A rating organization shall notify the director if the organization disapproves
any deviation relating to workers' compensation insurance. The director shall notify the
industrial commission of the disapproval within ten days of receipt of the disapproval
from the rating organization.
20-361 Licensing of rating organizations
A. A corporation, an unincorporated association, a partnership or an individual,
whether located within or outside this state, may apply to the director for a license as
a rating organization for insurance subject to this article and shall file:
1. A copy of its constitution, its articles of agreement or association or its
certificate of incorporation, and a copy of its bylaws, rules and regulations governing
the conduct of its business.
2. A list of its members.
3. The name and address of a resident of this state for service of process, notices
and orders.
4. A statement of its qualifications as a rating organization.
5. A financial statement that is certified by an officer of the applicant, that is
on a form acceptable to the director and that includes financial information that is
current as of not more than ninety days before the date the application is filed with the
director. The financial statement shall include an income statement and a balance sheet
that is prepared according to generally accepted accounting principles and that is for
the two years immediately preceding the date of the financial statement. The applicant
shall not submit consolidated income statements or balance sheets.
6. A plan for the orderly and timely transfer to the designated statistical agent
or the director of all data collected in accordance with the statistical plan in effect
in this state from its member insurers in this state if the rating organization ceases to
do business in this state.
B. If the director finds that the applicant is competent, trustworthy and otherwise
qualified to act as a rating organization and that its constitution, articles of
agreement or association or certificate of incorporation and its bylaws, rules and
regulations governing the conduct of its business conform to the requirements of law, the
director shall issue a license specifying the kinds of insurance, or subdivisions or
classes of risks or parts or combinations thereof, for which the applicant is authorized
to act as a rating organization. The director shall either grant or deny an application
in whole or in part within sixty days after its filing.
C. Licenses issued pursuant to this section shall remain in effect until suspended
or revoked by the director or the director has accepted the surrender of the
license. The director may suspend or revoke a license after notice and a hearing if the
rating organization ceases to meet the requirements of this section. 20-362 Notice to director of changes in rating organization
Every rating organization shall notify the director promptly of every change in:
1. Its constitution, its articles of agreement or association, or its certificate
of incorporation, and its bylaws, rules and regulations governing the conduct of its
business.
2. Its list of members and subscribers.
3. The name and address of the resident of this state designated by it upon whom
notices or orders of the director or process affecting the rating organization may be
served.
20-363 Availability of services of rating organization to members
A. Subject to rules and regulations that have been approved by the director as
reasonable, each workers' compensation rating organization shall permit any insurer
writing workers' compensation insurance in this state to become a member. The rating
organization shall give its members notice of proposed changes in its rules and
regulations.
B. Each rating organization shall furnish its rating services without
discrimination to its members.
C. Any member or insurer may request that the director review the reasonableness of
any rule or regulation in its application to members at a hearing held on at least ten
days' written notice to the rating organization and to the member or insurer. If the
director finds that the rule or regulation is unreasonable in its application, the
director shall order that the rule or regulation does not apply.
D. Every insurer writing workers' compensation insurance in this state, including
the state compensation fund, shall be a member of one workers' compensation rating
organization.
E. A rating organization shall have as members at least five insurers authorized to
write and who are writing workers' compensation insurance in this state and whose
combined experience is determined by the director to be reasonably adequate for rate
making purposes.
F. In a rating organization of which the state compensation fund is a member, the
state compensation fund shall be entitled, without election, to membership on any
committee established in connection with the operation of the rating organization in this
state. One-half of the members of each committee shall be chosen by the stock insurers
and one-half by the nonstock insurers.
G. Neither the provisions of this section nor the rules, regulations or rating
plans of a rating organization affect or apply to self-rating plans and rates and charges
fixed by the state compensation fund under section 23-983.
20-364 Technical services
A. Any rating organization may provide for the examination of policies, daily
reports, binders, renewal certificates, endorsements or other evidence of insurance, or
the cancellation thereof, and may make reasonable rules governing their submission. Such
rules shall contain a provision that in the event any insurer does not within sixty days
furnish satisfactory evidence to the rating organization of the correction of any error
or omission previously called to its attention by the rating organization, it shall be
the duty of the rating organization to notify the director thereof. All information so
submitted shall be confidential.
B. Any rating organization may subscribe for or purchase actuarial, technical or
other services, and such services shall be available to all members and subscribers
without discrimination.
20-365 Cooperation in rate making
Cooperation among rating organizations and among rating organizations and insurers
in rate making and in other matters within the scope of this article is authorized, if
the filings resulting from such cooperation are subject to the provisions of this
article. The director may review such cooperative activities and practices and if, after
a hearing, he finds that any such activity or practice is unfair or unreasonable or
otherwise inconsistent with the provisions of this article, he may issue a written order
specifying in what respects such activity or practice is unfair or unreasonable or
otherwise inconsistent, and requiring the discontinuance of such activity or practice.
20-366 Appeal by member or subscriber from action relating to filings
A. Any member of or subscriber to a rating organization may appeal to the director
from the action or decision of the rating organization in approving or rejecting any
proposed change in or addition to the filings of the rating organization, and the
director shall, after a hearing held upon not less than ten days' written notice to the
applicant and to the rating organization, issue an order approving the action or decision
of the rating organization or directing it to give further consideration to the proposal,
or if the appeal is from the action or decision of the rating organization in rejecting a
proposed addition to its filings, the director may, in the event that he shall find that
such action or decision was unreasonable, issue an order directing the rating
organization to make an addition to its filings, on behalf of its members and
subscribers, in a manner consistent with the findings of the director, within a
reasonable time after the issuance of the order.
B. In the case of insurance to which this article applies, if the appeal is based
upon the failure of the rating organization to make a filing on behalf of such member or
subscriber which is based on a system of expense provisions which differs from the system
of expense provisions included in a filing made by the rating organization, the director
shall, if he grants the appeal, order the rating organization to make the requested
filing for use by the applicant. In deciding the appeal the director shall apply the
standards set forth in section 20-356.
C. In the case of title insurance, if the appeal is from the action or decision of
the rating organization with regard to a rate or a proposed change in or addition to its
filings relating to the character and extent of coverage, the director may, in the event
that he shall find that such action or decision was unreasonable, issue an order
directing the rating organization to proceed in a manner consistent with his findings,
within a reasonable time after the issuance of the order. The failure of a title
insurance rating organization to take action or make a decision within thirty days after
submission to it of a proposal under this article shall constitute a rejection of such
proposal within the meaning of this section. If such appeal is based upon the failure of
the rating organization to make a filing on behalf of such members or subscriber which is
based on a system of expense allocation which differs from the system of expense
allocation included in a filing made by the rating organization, the director shall, if
he grants the appeal, order the rating organization to make the requested filing for use
by the applicant. In deciding such appeal, the director shall apply the standards set
forth in section 20-375.
20-367.01 Appeals procedure
A. Within a reasonable time after receiving a written request and on payment of a
reasonable fee, every rating organization and insurer shall give to any insured affected
by a rate that is made or applied by the organization or insurer, or to the insured's
authorized representative, all pertinent information related to the rate.
B. If a person is aggrieved by the application of a rating system, the person may
send a written request to the workers' compensation appeals board established by section
20-367 to review the manner in which the rating system has been applied to the insurance
afforded the aggrieved person. The aggrieved person or that person's representative may
present the grievance before the board. A representative of the rating organization whose
rating system is the subject of the appeal shall attend any hearing before the board
pursuant to this section to explain that application of the rating system to the
aggrieved person.
C. If the board does not act on the aggrieved person's request for review within
thirty days after receiving the request, the aggrieved person may proceed as if the board
had rejected the request for review.
D. The appellant shall pay the cost to record the board's proceedings.
E. The board shall mail a written notice of its decision to the aggrieved person.
Within thirty days after the date the written notice of the board's decision is mailed by
the board, the aggrieved person may appeal the action to the director. After a hearing
held on at least ten days' written notice to the person and the rating organization or
insurer, the director shall affirm, modify or reverse the board's decision. The person
appealing the board's decision shall pay the costs of the transcript and record of the
appeal to the director.
20-367 Workers' compensation appeals board; composition; board termination
A. A workers' compensation appeals board is established in the department.
B. The board shall have at least nine but not more than eleven members who are
appointed by the director. The members shall serve three year terms. A member shall not
serve more than two consecutive terms.
C. The board shall be comprised of:
1. The following voting members:
(a) Five representatives of insurers, one of which is the state compensation fund.
Any licensed rating organization that meets the requirements prescribed in section
20-363, subsection E may nominate from its membership in this state one representative
for each complete twenty per cent share of the total statewide workers' compensation net
written premium for the preceding calendar year attributable to its membership. The
director shall appoint any remaining insurer representatives needed to constitute five
members as ratably as possible based on distribution of the total statewide workers'
compensation net written premium for the preceding calendar year.
(b) Four representatives of the public. At least two shall be representatives of
employers, and the remaining public members shall be persons who are knowledgeable about
workers' compensation insurance.
2. A representative from any designated statistical agent who shall serve as a
nonvoting advisory member.
D. The board members shall select a chairperson who shall call meetings as needed
to consider requests made pursuant to section 20-367.01 or on request of the director.
E. The board shall submit to the director a plan of operation and all amendments
that are necessary or suitable to ensure the fair, reasonable and equitable
administration of the appeals process. The plan of operation and all amendments are
effective on approval by the director.
F. Subject to the powers of the director, the board shall review appeals that are
filed pursuant to section 20-367.01. The board may affirm the action of the rating
organization or insurer or direct any rating organization or insurer to modify or reverse
its application of the rating system that resulted in the appeal.
G. Members of the board are not eligible to receive compensation or travel expenses
under title 38, chapter 4, article 2.
H. The board established by this section terminates on July 1, 2010 pursuant to
section 41-3102.
20-368 Advisory organizations
A. Every group, association or other organization of insurers, whether located
within or outside this state, which assists insurers which make their own filings or
rating organizations in rate making, by the collection and furnishing of loss or expense
statistics, or by the submission of recommendations, but which does not make filings
under this article, shall be known as an advisory organization.
B. Every advisory organization shall file with the director:
1. A copy of its constitution, its articles of agreement or association or its
certificate of incorporation and a copy of its bylaws, rules and regulations governing
its activities.
2. A list of its members.
3. The name and address of a resident of this state upon whom notices or orders of
the director or process affecting the advisory organization may be served.
4. An agreement that the director may examine the advisory organization in
accordance with the provisions of section 20-370.
C. If, after a hearing, the director finds that the furnishing of such information
or assistance involves any act or practice which is unfair or unreasonable or otherwise
inconsistent with the provisions of this article, he may issue a written order specifying
in what respects such act or practice is unfair or unreasonable or otherwise
inconsistent, and requiring the discontinuance of such act or practice.
D. No insurer which makes its own filings nor any rating organization shall support
its filings by statistics or adopt rate making recommendations furnished to it by an
advisory organization which has not complied with this section or with an order of the
director involving such statistics or recommendations issued under subsection C of this
section. If the director finds the insurer or rating organization to be in violation of
this subsection, he may issue an order requiring the discontinuance of the violation.
20-369 Joint underwriting or joint reinsurance
A. Every group, association or other organization of insurers which engages in
joint underwriting or joint reinsurance shall be subject to regulation with respect
thereto as provided by this article, subject, however, with respect to joint
underwriting, to all other provisions of this article, and with respect to joint
reinsurance, to the provisions of sections 20-370 and 20-374.
B. If, after a hearing the director finds that any activity or practice of any such
group, association or other organization is unfair or unreasonable or otherwise
inconsistent with the provisions of this article, he may issue a written order specifying
in what respects the activity or practice is unfair or unreasonable or otherwise
inconsistent and requiring the discontinuance of the activity or practice.
20-370 Examinations of rating organizations
A. The director shall, at least once in every five years, make or cause to be made
an examination of each rating organization licensed in this state, and he may, as often
as he deems it expedient, make or cause to be made an examination of each advisory
organization referred to in section 20-368, and of each group, association or other
organization referred to in section 20-369. The reasonable costs of such examination
shall be paid by the rating organization, advisory organization or group, association or
other organization examined upon presentation to it of a detailed account of the cost.
B. The officers, managers, agents and employees of the rating organization,
advisory organization or group, association or other organization may be examined at any
time under oath, and shall exhibit all books, records, accounts, documents or agreements
governing its method of operation.
C. The director shall furnish two copies of the examination report to the
organization, group or association examined and shall notify the organization, group or
association that it may, within twenty days thereafter, request a hearing on the report
or on any facts or recommendations therein. Before filing the report for public
inspection, the director shall grant a hearing to the organization, group or association
examined.
D. The report of the examination, when filed for public inspection, shall be
admissible in evidence in any action or proceeding brought by the director against the
organization, group or association examined, or its officers or agents, and shall be
prima facie evidence of the facts stated therein.
E. The director may withhold the report of the examination from public inspection
for such time as he deems proper.
F. In lieu of the examination, the director may accept the report of an examination
made by the insurance supervisory official of another state, pursuant to the laws of such
state.
20-371 Rate administration
A. The director shall promulgate reasonable rules and statistical plans that are
reasonably adapted to each of the rating systems on file with the director and that may
be modified from time to time. An insurer shall use the rules and statistical plans to
record and report its loss and countrywide expense experience in order that the
experience of all insurers may be made available, at least annually, in sufficient form
and detail to aid the director in determining whether rating systems comply with the
standards set forth in this article. The rules and plans may also provide for the
recording and reporting of expense experience items which are especially applicable to
this state and are not susceptible of determination by prorating of countrywide expense
experience.
B. In promulgating the rules and plans, the director shall give due consideration
to the rating systems on file with the director, and, in order that the rules and plans
may be as uniform as is practicable among the several states, to the rules and to the
form of plans used for comparable rating systems in other states.
C. An insurer is not required to record or report its loss experience on a
classification basis that is inconsistent with the uniform classification plan.
D. The director may designate an organization the director deems qualified, other
than an insurer that has outstanding obligations under a policy of workers' compensation
insurance in this state, to act as the director's statistical agent. The statistical
agent shall assist the director in gathering and compiling workers' compensation
experience and performing other related services as the director may specify. The
compilations shall be made available subject to reasonable rules adopted by the director,
to insurers and rating organizations, but no insurer shall be required to file its
experience with an organization of which it is not a member.
E. Every insurer shall report its loss and expense experience to the rating
organization of which it is a member. The rating organization shall report the insurer's
experience to the designated statistical agent. If the rating organization is unable to
report the experience of its member insurers to the designated statistical agent, every
insurer that is a member of the rating organization shall directly report its experience
to the designated statistical agent.
F. If there is more than one licensed rating organization that meets the
requirements of section 20-363, subsection E, the director shall designate one of the
organizations as the designated rating organization for the purpose of annually making
and filing with the director statewide workers' compensation insurance rates that become
effective on October 1.
G. The designated rating organization shall annually file its rate filing with the
director on or before August 1 for rates that become effective on October 1. The director
shall disapprove the filing if it does not meet the standards of section 20-356,
paragraph 1. An insurer transacting workers' compensation insurance in this state shall
adhere to the expected loss ratios, ballast factors and other experience rating factors
and to the statewide rates and other rating values made by the designated rating
organization for the uniform rate filing, except that an insurer may deviate from the
statewide rate portion of the uniform rate filing according to section 20-359, subsection
A.
H. The director may allow the designated statistical agent and designated rating
organization to charge licensed rating organizations that operate in this state a
reasonable fee for their services. The licensed rating organizations shall pay the fees
on a ratable basis.
I. To further the uniform administration of rate regulatory laws, the director and
every insurer and rating organization may exchange information and experience data with
insurance supervisory officials, insurers and rating organizations in other states and
may consult with them with respect to rate making and the application of rating systems.
J. If more than one rating organization meets the requirements of section 20-363,
subsection E, the director shall designate the statistical plan, classification plan or
experience rating plan adopted by the designated rating organization or any other rating
organization, or the plans of another state, as the uniform statistical plan, the uniform
classification plan or the uniform experience rating plan.
K. If the director does not designate a uniform statistical plan, a uniform
classification plan or a uniform experience rating plan pursuant to this section, each
insurer shall adhere to the statistical plan, classification plan, and experience rating
plan adopted by the rating organization of which the insurer is a member in this state.
20-372 Disclosure of information relating to rates
No person or organization shall wilfully withhold information from, or knowingly
give false or misleading information to, the director, any statistical agency designated
by the director, any rating organization or any insurer, which will affect the rates or
premiums chargeable under this article.
20-373 Commissions and fees
Nothing in this article shall abridge or restrict the freedom of contract of
insurers, agents or brokers with reference to the amount of commissions or fees to be
paid to agents or brokers by insurers, and such payments are expressly authorized.
20-374 Revocation and suspension of licenses
The director may suspend the license of any rating organization or the certificate
of authority of any insurer which fails to comply with an order of the director made
pursuant to this article within the time limited by the order, or any extension thereof
which may be granted by the director. The director shall not suspend the license of any
rating organization or the certificate of authority of any insurer for failure to comply
with an order until the time prescribed for a review thereof has expired, or if a review
has been sought, until the order has been affirmed. The director may determine when a
suspension of license or certificate shall become effective, and it shall remain in
effect for the period fixed by him, unless he modifies or rescinds the suspension, or
until the order upon which suspension is based is modified, rescinded or reversed. No
license or certificate shall be suspended or revoked except upon the written order of the
director stating his findings, made after a hearing held upon not less than ten days
written notice to such person or organization, specifying the alleged violation.
20-375 Making of title insurance rates
A. Every title insurer that shall make its own rates, and every title insurance
rating organization, shall make rates that are not excessive nor inadequate for the
safety and soundness of any title insurer, that do not unfairly discriminate between
risks in this state which involve essentially the same exposure to loss and expense
elements, and that give due consideration to all of the following matters:
1. The desirability for stability of rate structures.
2. The necessity, by encouraging growth in assets of title insurers in periods of
high business activity, of assuring the financial solvency of title insurers in periods
of economic depression.
3. The necessity for paying dividends on the capital stock of title insurers
sufficient to induce capital to be invested therein.
B. Every title insurer that shall make its own rates, and every title insurance
rating organization, shall adopt basic classifications of policies or contracts of title
insurance which shall be used as the basis for rates.
C. Rates within each rate classification may, at the discretion of the title
insurer which files its own rates, or at the discretion of the title insurance rating
organization, be less than the cost of the expense elements in the case of smaller
insurance policies or contracts, and the excess may be charged against the larger
insurance policies or contracts without rendering the rates unfairly discriminatory.
D. There shall be no combined rate for the issuance of title insurance policies and
escrow services rendered in connection with such insurance.
20-376 Filing of title insurance rates; approval or disapproval
A. Every title insurer shall file with the director its schedules of fees, every
manual of classifications, rules and plans pertaining thereto, and every modification of
any of the foregoing that it proposes to use concerning its title insurance forms and
products in this state. Every filing shall include a proposed effective date and shall
indicate the character and extent of the coverage or service contemplated.
B. A title insurer may satisfy its obligations to make filings by becoming a member
of, or a subscriber to, a licensed title insurance rating organization that makes
filings, and by authorizing the director to accept the rating organization's filings on
its behalf. The filings may, at the option of the insurer, govern all of its or certain
designated agents in this state. The insurer may also elect to permit all or certain of
its agents to make rate filings directly or to subscribe to a licensed title insurance
rating organization that makes filings.
C. The director shall review the filings as necessary to carry out the provisions
of this article.
D. Subject to the provisions of subsection F of this section, each filing shall be
on file for a period of at least thirty days before it becomes effective. The director
may, on written notice given within the thirty day waiting period to the person making
the filing, extend the waiting period for up to fifteen additional days, to enable the
director to complete the review of the filing. The director may grant further extensions
of the waiting period only with the consent of the person making the filing. On written
application by the person making the filing, the director may authorize all or part of a
filing that has been reviewed to become effective before the expiration of the waiting
period or any extension of the waiting period.
E. Except in the case of rates filed under subsection F, a filing that has become
effective shall be deemed to meet the requirements of this article.
F. When the director finds that any rate for a particular kind or class of risk
cannot practicably be filed before it is used, or that any contract or kind of title
insurance, by reason of rarity or peculiar circumstances, does not lend itself to advance
determination and filing of rates, the director may permit the rate to be used without a
previous filing and waiting period.
G. The director shall not have the power to regulate, or require the filing of,
rates or fees for reinsurance policies, contracts or agreements, for policies, contracts
or agreements of excess coinsurance or for account servicing and subdivision trust
services.
20-377 Justification for title insurance rates
A. A title insurance filing shall be accompanied by a statement of the title
insurer, title insurance agent, or title insurance rating organization making the filing,
setting forth the basis upon which the rate was fixed, and the manner in which fees are
to be computed. Any filing may be justified by:
1. The experience or judgment of the title insurer, title insurance agent, or title
insurance rating organization making the filing.
2. Its interpretation of any statistical data relied upon.
3. The experience of other title insurers, title insurance agents, or title
insurance rating organizations.
4. Any other factors which the title insurer, title insurance agent, or title
insurance rating organization deems relevant.
B. The statement and justification shall be open to public inspection after the
rate to which they apply becomes effective.
20-378 Disapproval of title insurance filings
A. Before issuing an order of disapproval of a title insurance filing, the director
shall hold a hearing upon not less than ten days' written notice, specifying in
reasonable detail the matters to be considered at such hearing. Such notice shall be
sent to every title insurer, title insurance agent and title insurance rating
organization which made such filing. If, after such hearing, the director finds that
such filing or a part thereof does not meet the requirements of this article, he shall
issue an order specifying in what respects he finds that it so fails, and stating when,
within a reasonable period thereafter, such filing or a part thereof shall be deemed no
longer effective if the filing or a part thereof has become effective under the
provisions of section 20-376. A title insurer, title insurance agent or title insurance
rating organization shall have the right at any time to withdraw a filing or a part
thereof. Copies of every such order shall be sent to every title insurer, title
insurance agent and title insurance rating organization affected. Such an order shall
not affect any contract or preliminary report, commitment, binder or title insurance
policy made or issued prior to the expiration of the period set forth therein.
B. Any person or organization aggrieved with respect to any filing which is in
effect may make written application to the director for a hearing thereon, but the title
insurer, title insurance agent or title insurance rating organization which made the
filing shall not be authorized to proceed under this subsection. Such an application
shall specify in reasonable detail the grounds to be relied upon by the applicant. If
the director finds that the application is made in good faith, that the applicant would
be so aggrieved if his grounds are established, and that such grounds otherwise justify
holding such a hearing, he shall, within thirty days after receipt of such application,
hold a hearing upon not less than ten days' written notice to the applicant and to every
title insurer, title insurance agent and title insurance rating organization which made
such a filing. If, after such hearing, the director finds that the filing or a part
thereof does not meet the requirements of this article, he shall issue an order
specifying in what respects he finds that such filing or a part thereof fails to meet the
requirements of this article and stating when within a reasonable period thereafter such
filing or a part thereof shall be deemed no longer effective. Copies of such an order
shall be sent to the applicant and to every such title insurer, title insurance agent and
title insurance rating organization that made the filing. Such an order shall not affect
any contract or policy made or issued prior to the expiration of the period set forth
therein.
C. No filing nor any modification thereof shall be disapproved if the rates in
connection therewith meet the requirements of this article.
20-379 Deviations in title insurance rates
A. No title insurer or title insurance agent may deviate from its rates that are in
effect for the title insurer or title insurance agent pursuant to section 20-376.
B. If the director finds that a title insurer or title insurance agent has charged
rates that deviate from its rates filed pursuant to section 20-376, the title insurer or
title insurance agent who computed and initially collected the deviation is subject to a
civil penalty for each deviation that is equal to the difference between the rate charged
and the allowable rate pursuant to section 20-376. To the extent that the deviation
results in an overcharge, the director in lieu of a civil penalty may require a refund of
the overcharge.
C. If after a hearing the director finds that a title insurer or title insurance
agent with such frequency as to indicate a general business practice violated the
provisions of this section and section 20-376 with respect to a particular provision of
the applicable title insurance rate, the director, in addition to the civil penalty
imposed under subsection B of this section, may:
1. For each violation, impose an additional civil penalty of not more than two
times the civil penalty imposed under subsection B of this section.
2. Order the title insurance agent to cease and desist from the act or practice.
3. Revoke the title insurance agent's license or suspend the title insurer's
certificate of authority.
D. The civil penalties that are imposed under subsections B and C of this section
may not in the aggregate exceed fifteen thousand dollars during any one year period for
an individual title insurer or title insurance agent licensed pursuant to this title.
20-381 Definitions
In this article, unless the context otherwise requires:
1. "Advisory organization" means any person other than a single insurer who assists
insurers or rate service organizations in the making of rates by compiling and furnishing
loss or expense statistics or other statistical information and data, or by the
submission of recommendations as to rates, forms or supplementary rate information.
Advisory organization does not include a joint underwriting association, any actuarial or
legal consultant, any employee of an insurer or insurers under common control or
management or their employees or manager.
2. "Loss cost adjustment" means that portion of a rate filed by an insurer with the
director that includes the insurer's general expenses, total product expenses, taxes,
licenses and fee expenses and underwriting profit and contingencies. Loss cost
adjustment does not include loss adjustment expenses or prospective loss costs.
3. "Loss cost modification factor" means that rating factor filed by an insurer
with the director for the purpose of modifying the rate service organization's
prospective loss cost filing.
4. "Prospective loss costs" means the historical aggregate losses and loss
adjustment expenses filed by a rate service organization with the director on which a
portion of a rate is based, adjusted through actuarial trending to a future point in time
and developed to their ultimate values.
5. "Rate" means that cost of insurance per exposure unit whether expressed as a
single number or as a prospective loss cost with an adjustment to account for the
treatment of expenses, profit and individual insurer variation in loss experience before
any application of individual risk variations based on loss or expense
considerations. Rate does not include the minimum premium.
6. "Rate service organization" means any person other than a single insurer who
assists insurers by compiling and furnishing loss or expense statistics and recommending,
making or filing rates, forms or supplementary rate information. Rate service
organization does not include a joint underwriting association, any actuarial or legal
consultant, any employee of an insurer or insurers under common control or management, or
their employees or manager.
7. "Supplementary rate information" means any manual or plan of rates, statistical
plan, classification, rating schedule, minimum premium, policy fee, rating rule, rate
related underwriting rule and any other information used by an insurer in making
rates. Supplementary rate information does not include the final rate pages that combine
the prospective loss costs with the loss cost adjustments.
20-382 Scope of application
A. This article applies to all insurance on risks or on operations in this state,
except:
1. Reinsurance, other than joint reinsurance to the extent stated in section
20-391.
2. Any policy of insurance against loss or damage to or legal liability in
connection with property located outside this state, any motor vehicle or aircraft
principally garaged and used outside this state or any activity wholly carried on outside
this state.
3. Insurance of vessels or craft, their cargoes, marine builders' risks, marine
protection and indemnity or other risks commonly insured under marine, as distinguished
from inland marine, insurance policies.
4. Disability or life insurance.
5. Annuities.
6. Workers' compensation and employers' liability insurance written in connection
with workers' compensation.
7. Title insurance.
8. Rates developed by an insurer to be applied individually to the insurance
policies of risks, other than medical malpractice risks and industrial insured risks
pursuant to section 20-400.10, for which no rate service organization has published a
rate or loss costs in this or any other state and for which insufficient similar exposure
units and loss experience data exist to develop statistically credible rates for the risk
and no homogeneous rating class exists in which the risk could reasonably be
placed. With respect to each type of risk covered by this subsection, the insurer shall
annually certify by January 30 to the director for the preceding calendar year, on a form
acceptable to the director, that the insurer did not have when the risks were written
credible experience to establish a rating class for the specific types of risks. The
insurer or rate service organization on the insurer's behalf shall file a rate for the
specific risks with the director pursuant to section 20-385 when either of the following
occurs:
(a) The insurer's written premiums for any specific risk covered by this subsection
exceed twenty-five per cent of the insurer's total annual written premium in this state
and the insurer has issued contracts for five or more homogeneous risks covered by this
subsection in this state in any consecutive three year period, unless an insurer
demonstrates to the director that its experience under this subsection does not produce
sufficient data to satisfy the requirements of subdivision (b) of this paragraph.
(b) The number of specific risks covered by this subsection and written by the
insurer in a specific class meet the standards set forth in the actuarial standard of
practice 25 applying to credibility for rate making purposes as adopted by the actuarial
standards board as of January 1, 1997.
B. This article does not apply to hospital service or medical service corporations,
investment companies, mutual benefit associations or fraternal beneficiary associations.
20-383 Rate standards
A. An insurer shall not charge rates that are excessive, inadequate or unfairly
discriminatory. An insurer shall not charge any rate which if continued will have or
tend to have the effect of destroying competition or establishing a monopoly.
B. Rates are excessive if they are likely to produce an underwriting profit that is
unreasonably high for the class of business or if expenses are unreasonably high in
relation to established services rendered. Rates are presumed not to be excessive if a
reasonable degree of price competition exists at the consumer level with respect to a
particular class of business. A competitive market is presumed to exist unless the
director, after a hearing, determines that a reasonable degree of price competition does
not exist in the market and issues an order pursuant to section 20-388 to that
effect. The order expires no later than one year after its effective date unless the
director finds, after a hearing, that there is a continuing lack of reasonable
competition in the market. If the director finds, after a hearing, that a reasonable
degree of price competition among insurers writing a particular line, subline or class of
business does not exist, he may prescribe an allowable percentage of increase in a
proposed rate level for such line, subline or class of business. Any insurer making a
rate filing exceeding the allowable percentage of increase shall, prior to the effective
date of such proposed rate increase, provide the director with sufficient actuarial data
to support such increase. The director's order establishing allowable percentages of
increase for a particular line, subline or class of business shall expire no later than
one year after its effective date. In determining whether a reasonable degree of price
competition exists, the director shall consider relevant tests of competition pertaining
to market structure, market performance and market conduct, including:
1. The number of insurers actively engaged in the class of business.
2. The market share and changes in market share of insurers.
3. The existence of a degree of rate differentials in a particular class of
business.
4. The ease of entry and latent competition of insurers capable of easy entry.
C. Rates are inadequate if they are clearly insufficient to sustain projected
losses and expenses in the class of business to which they apply.
D. A rate is not unfairly discriminatory in relation to another in the same class
if it reflects equitably the differences in expected losses and expenses. Rates are not
unfairly discriminatory because different premiums result for policyholders with like
loss exposures but different expense factors, or like expense factors but different loss
exposures, if the rates reflect the differences with reasonable accuracy. Rates are not
unfairly discriminatory if they are averaged broadly among persons insured under a group,
franchise or blanket policy.
20-384 Rating criteria
A. In setting rates, an insurer shall apply the criteria prescribed in this
section.
B. An insurer shall give due consideration to past and prospective loss and expense
experience within and outside this state, to catastrophe hazards, to a reasonable margin
for underwriting profit and contingencies, to investment income from unearned premium and
loss reserves, to trends within and outside this state, to reasonable dividends or
savings to be allowed or returned by insurers to their policyholders, members or
subscribers and to all other factors, including judgment factors.
C. Risks may be classified in any reasonable way for the establishment of rates and
minimum premiums. Classifications shall not be based on race, color, creed or national
origin. Rates produced may be modified for individual risks in accordance with rating
plans or schedules that establish reasonable standards for measuring probable variations
in hazards or expenses, or both.
D. The expense provisions included in the rates to be used by an insurer may
reflect the operating methods of the insurer and its own expense experience.
E. Rates and supplementary rate information established pursuant to this article
shall not be based on or include loss and expense experience attributable to insurance
coverage issued to an industrial insured pursuant to section 20-400.10.
20-385 Filing of rates
A. Except as to marine, inland marine and transportation risks, which by general
custom of the business are not written according to manual rates and rating plans, and
except as provided in subsection F of this section or section 20-400.10, every authorized
insurer and every rate service organization which has been designated by any insurer for
the filing of rates pursuant to section 20-387, subsection B shall file with the director
all rates and supplementary rate information and all changes and amendments to those
rates made by it for use in this state within thirty days after they become
effective. If a rate service organization files prospective loss costs on behalf of its
member insurers with the director, each member insurer that adopts the rate service
organization's prospective loss costs shall file, on a form approved by the director, the
loss cost adjustment and loss cost modification factors applicable to the prospective
loss costs filed by the rate service organization. Each member insurer that does not
adopt or that delays adoption of the loss costs filed by the rate service organization
shall notify the director of that decision, in a form acceptable to the director, within
thirty days after the effective date of the prospective loss costs.
B. For any filing made pursuant to subsection A of this section, the director may
require the filing of supporting data including:
1. The experience and judgment of the filer.
2. The experience and judgment of other insurers or rate service organizations.
3. The filer's interpretation of any statistical data relied upon.
4. A description of the methods used in making the rates.
5. A description of the methods used and statistics relied on by the insurer in
developing its loss cost modification factor and providing its loss cost adjustment.
6. A description of the methods used and statistics relied on by the rate service
organization in developing its prospective loss costs filing.
C. An insurer is not required to file with the director the insurer's final rate
pages that combine the prospective loss costs separately filed by the rate service
organization with the loss cost modification factor filed by the insurer.
D. For the purposes of this section, an insurer does not need to file with the
director the insurer's final rate pages that combine the prospective loss costs with the
loss cost adjustments.
E. On written consent of the insured stating the insured's reasons, the insurer may
use a rate in excess of that provided by an otherwise applicable filing on a specific
risk, if that rate is filed with the director pursuant to subsection A of this section.
F. For as long as the director deems proper, the director by order may exempt from
the requirements of this section any insurance rate, rating class, rating rule or rating
program or type the filing of which in the director's opinion is not desirable or
necessary for the protection of the public.
G. If, after a hearing, the director finds that a particular market is
noncompetitive, the director shall order that all rates or rate changes and all
supplementary rate information in the noncompetitive market be filed with the director at
least thirty days before the effective date. The order remains in effect until the
director determines that a competitive market has been restored.
20-386 Filings open to inspection
The director shall open to public inspection at any reasonable time each filing and
supporting information filed pursuant to this article. A person may obtain copies upon
request and payment of a reasonable charge.
20-387 Delegation of rate making and rate filing obligations
A. An insurer may establish rates and supplementary rate information based on the
factors in section 20-384 using, if desired, the recommendations of an advisory
organization, or rates and supplementary rate information prepared by a rate service
organization, with average expense factors determined by the rate service organization or
with such modification for its own expense and loss experience as the credibility of that
experience allows.
B. An insurer may discharge its obligations pursuant to section 20-385 by giving
notice to the director that it uses rates and supplementary rate information prepared by
a designated rate service organization, with such information about modifications of the
rates as is necessary to inform the director. The insurer's rates and supplementary rate
information are those filed by the rate service organization, including any amendments to
the rate as filed, subject to the modifications filed by the insurer.
C. Licensed rate service organizations, advisory organizations and admitted
insurers are authorized to exchange information and experience data with rate service
organizations, advisory organizations and insurers in this and other states and may
consult with them with respect to rate making.
20-388 Disapproval of rates
If the director finds that a rate is not in compliance with section 20-383, the
director shall issue an order specifying in what respects it so fails and stating that,
within thirty days after the order is issued, the rate is no longer effective. The order
does not affect any contract or policy made or issued prior to the effective date of the
order. The order shall be served immediately pursuant to section 20-151. Any insurer,
rate service organization or advisory organization may request a hearing pursuant to
title 41, chapter 6, article 10, and the request for a hearing stays the effectiveness of
the order as provided in section 20-162.
20-389 Rate service organizations; license; application
A. A rate service organization shall not provide any service relating to the rates
of any insurance subject to this article nor may any insurer utilize the service of such
organization for such purposes unless the organization has obtained a license from the
director.
B. No rate service organization may refuse to supply any services for which it is
licensed in this state to any insurer authorized to do business in this state and
offering to pay the fair and usual compensation for the services.
C. A rate service organization applying for a license shall include with its
application:
1. A copy of its constitution, charter, articles of organization, agreement,
association or incorporation and a copy of its bylaws and any other rules or regulations
governing its activities.
2. A list of its members and subscribers.
3. The name and address of one or more residents of this state upon whom notices,
process affecting it or orders of the director may be served.
4. A statement showing its technical qualifications for acting in the capacity for
which it seeks a license.
5. Any other relevant information or documents the director may require.
D. If the director finds that the applicant and the natural persons through whom it
acts are qualified to provide the services proposed and that all requirements of law are
met, the director shall issue a license specifying the authorized activity of the
applicant. The director shall not issue a license if the proposed activity would tend to
establish a monopoly or to lessen or to destroy price competition. Licenses issued
pursuant to this section remain in effect until the licensee withdraws from this state or
until the license is suspended or revoked.
E. A rate service organization shall promptly file any amendment to a document
required to be filed pursuant to this section. Failure to file any such amendment is a
ground for suspension of the license during the period of noncompliance. Repeated
failures to file such amendments are grounds for revocation of the license.
F. Pending its application to the director for a license to provide services as a
rate service organization, every rating organization providing services in this state on
the effective date of this section may continue to provide services after that date as a
rate service organization subject to the provisions of this article. A rate service
organization shall apply for a license within thirty days after the effective date of
this article.
20-390 Advisory organizations; filing with director
A. An advisory organization shall not conduct its operations in this state until it
files with the director:
1. A copy of its constitution, charter, articles of organization, agreement,
association or incorporation and a copy of its bylaws and any other rules or regulations
governing its activities.
2. A list of its members and subscribers.
3. The name and address of one or more residents of this state upon whom notices,
process affecting it or orders of the director may be served.
B. An advisory organization shall promptly file any amendments to a document
required to be filed pursuant to this section.
C. It is unlawful for an advisory organization to engage in any unfair or
unreasonable practice.
20-391 Joint underwriting and joint reinsurance organizations; filing with director
A. Every group, association or other organization of insurers which engages in
joint underwriting or joint reinsurance through such group, association or organization
or by standing agreement among the members shall file with the director:
1. A copy of its constitution, articles of association and bylaws.
2. A list of its members.
3. The name and address of a resident of this state upon whom notices or orders of
the director or process may be served.
B. Every such group, association or other organization shall notify the director
promptly of any change in the documents required to be filed with the director.
C. If after a hearing the director finds that any activity or practice of any such
group, association or other organization is inconsistent with this article, the director
may issue a written order specifying the inconsistencies and requiring the discontinuance
of such activity or practice.
20-392 Rate agreements among insurers prohibited
A. Except with respect to apportionment agreements among insurers approved by the
director pursuant to section 20-395, an insurer shall not assume any obligation to any
person, other than a policyholder or other insurers which, with it, are under common
control or management or are members of a joint underwriting or joint reinsurance
organization, to use or adhere to certain rates or rules. No person other than the
director may impose any penalty or other adverse consequence for failure of an insurer to
adhere to certain rates or rules.
B. Members and subscribers of rate service organizations or advisory organizations
may use the work products and services of such organizations as their individual judgment
may dictate. Such use by two or more authorized insurers shall not be sufficient to
support a finding that an agreement to adhere exists and may be used only for the purpose
of supplementing direct evidence of such an agreement.
20-393 Recording and reporting of experience
The director shall promulgate reasonable rules, including rules providing
statistical plans, for use by all insurers in the recording and reporting of loss and
expense experience, in order that the experience of such insurers may be made available
to the director. No insurer may be required to record or report its experience on a
classification basis inconsistent with its own rating system. An insurer may report its
experience to any rate service organization or advisory organization with which it
affiliates.
20-394 Examination of rate service organizations and joint underwriting and joint reinsurance organizations
The director shall, at least once every five years, make an examination of each rate
service organization. The director may, as often as considered necessary, examine each
advisory organization and each group, association or other organization filing pursuant
to section 20-391. The director shall examine only those activities conducted pursuant
to this article. The director may examine the officers, manager, agents and employees of
such organizations at any time under oath. The organization examined shall pay the
reasonable costs of such an examination upon presentation to it of a detailed account of
the costs. The organization examined shall exhibit all books, records, accounts,
documents or agreements governing its method of operation. Instead of such an
examination the director may accept the report of an examination made by the insurance
supervisory official of another state, pursuant to the laws of such state.
20-395 Apportionment agreements among insurers
Insurers may make agreements among themselves with respect to equitable
apportionment among them of insurance which may be afforded applicants who are in good
faith entitled to but who are unable to procure such insurance through ordinary methods,
and such insurers may agree among themselves on the use of reasonable rate modifications
for such insurance, with all such agreements and rate modifications subject to the
approval of the director.
20-396 Hearing and judicial review
Any insurer, rate service organization or advisory organization to which the
director has issued an order or decision may request a hearing pursuant to title 41,
chapter 6, article 10 and, except as provided in section 41-1092.08, subsection H, seek
judicial review pursuant to title 12, chapter 7, article 6.
20-397 Penalties; exception
A. If the director finds that a person or organization has violated this article or
any order of the director issued pursuant to this article after the effective date of
such order, the director may, after a hearing, impose a civil penalty of not more than
fifty dollars for each violation. If the director finds that a person or organization
knowingly violated this article or any order of the director issued pursuant to this
article after the effective date of such order, the director may, after a hearing, impose
a civil penalty of not more than five hundred dollars for each violation. Such civil
penalties, which may not in the aggregate exceed fifty thousand dollars, may be in
addition to any other penalty provided by law.
B. It is not a violation of this article if an insurer or rate service organization
files a rate or rate change pursuant to section 20-385 which is later disapproved by the
director.
C. The director may suspend the license of any rate service organization or insurer
which fails to comply with an order of the director within the time prescribed by such
order, or any extension of the order which the director may grant. The director shall
not suspend the license of any rate service organization or insurer for failure to comply
with an order until the time prescribed for an appeal from the order has expired, or if
an appeal has been taken, until such order has been affirmed. The director may determine
when a suspension of a license becomes effective and it shall remain in effect for the
period fixed by the director, unless the director modifies or rescinds such suspension,
or until the order upon which such suspension is based is modified, rescinded or
reversed.
D. The director shall not impose a penalty or suspend or revoke a license except
upon a written order stating the director's findings, made after a hearing held upon not
less than ten days' written notice to such person or organization specifying the alleged
violation.
20-398 Policy forms; approval or disapproval; exemption
A. Except for fidelity, surety or guaranty bonds or industrial insurance as
provided in section 20-400.10 and except as to inland marine risks that by general custom
of the business are not written according to manual rates or rating plans, no policy form
applying to insurance on risks or operations covered by this article may be delivered or
issued for delivery unless the form has been filed with the director and either the
director has issued, within thirty days, an order affirmatively approving or disapproving
the form or, the thirty day period has elapsed and the director has not disapproved the
form as ambiguous, misleading or deceptive. On written notice given within the thirty day
period to the person making the filing, the director may extend the period for up to
fifteen additional days to enable the director to complete the review of the filing.
B. The director may, by order, exempt from the requirements of this section, for as
long as the director deems proper, any insurance document or form as specified in the
order, to which, in the director's opinion, this section may not practicably be applied,
or the filing and approval of which are, in the director's opinion, not desirable or
necessary for the protection of the public.
20-399 Payment of dividends
This article does not prohibit or regulate the payment of dividends, savings or
unabsorbed premium deposits allowed or returned by insurers to their policyholders,
members or subscribers. A plan for the payment of dividends, savings or unabsorbed
premium deposits allowed or returned by insurers to their policyholders, members or
subscribers is not considered a rating plan or system.
20-400.01 Unjustified adjustments
A. No insurer may issue a policy of insurance subject to this article with a
premium developed in a manner which is not consistent with a filing made pursuant to
sections 20-357 and 20-385.
B. No insurer may make any adjustment to the full manual premium developed for any
risk without adequate justification for that adjustment. An adjustment will be presumed
to be adequately justified if both:
1. It is applied in a manner consistent with the insurer's filed rules.
2. The insurer's files contain adequate documentation of the facts supporting the
adjustment.
C. A misclassification of a risk shall be considered an adjustment without adequate
justification.
D. Each insurer shall maintain reasonable records of the information collected or
used by it in developing the premium charged for any risk so that such records will be
available to enable the director to verify compliance with this section.
20-400.02 Submittal of data comparing premiums charged to filed rates
On the request of the director, each insurer authorized to write any insurance in
this state to which this article applies shall submit data to the director establishing
the relationship of the aggregate premiums actually charged policyholders by the insurer
for each line of insurance to the premiums produced by the insurer's filed unmodified
rates for each line of insurance. A rate service organization may file the data on
behalf of the insurer. Any insurer whose data indicates that the aggregate premiums
actually charged policyholders for each line of insurance exceed the premiums produced by
its filed unmodified rates by more than a percentage established by the director by rule,
or fall below the premiums produced by its filed unmodified rates by more than a
percentage established and published by the director by rule, shall be examined by the
director to determine whether the rating plan or filed unmodified rates comply with
sections 20-356 and 20-357 or 20-384 and 20-385. The director shall prescribe the time
period the data are to cover and the form in which the data are to be submitted.
20-400.03 Penalties
If the director finds after a hearing that the insurer has knowingly, or with such
frequency as to indicate a general business practice, violated the provisions of section
20-400.01 with respect to a particular class or that an insurer examined under section
20-400.02 has not complied with sections 20-356 and 20-357 or 20-384 and 20-385, he may,
in addition to or in lieu of the penalties provided in section 20-397, do the following:
1. Impose a civil penalty equal to the difference between the premium charged and
that which would have been charged without the application of inadequately justified
adjustments if a refund pursuant to paragraph 3 of this section has not been ordered.
2. Suspend the insurer's authority to do business in any given class.
3. Require applicable refunds to policyholders.
20-400.04 Examinations
The director may examine each insurer authorized to write any insurance to which
this article applies to determine whether such insurer has complied with sections
20-400.01 and 20-400.02.
20-400.05 Examiners and examination related expenses
A. The director shall utilize independent contractor examiners pursuant to section
20-148, subsection B and section 20-159 to perform the examinations required under
sections 20-400.01 and 20-400.02.
B. All examination and examination related expenses shall be borne by the insurer
and shall be paid by the insurance examiners' revolving fund in accordance with section
20-159.
20-400.07 Report of examination
The director shall make a full written report of each examination under this article
in accordance with section 20-158.
20-400.08 Insurance consumer advisory board
A. An insurance advisory board is established within the department of insurance
consisting of seven members appointed by the director. Membership on the board is for a
term of three years.
B. The board shall consist of the following members:
1. Two members licensed as insurance agents in this state.
2. Two members licensed as insurance brokers in this state.
3. Three members representing consumers.
C. The board shall conduct periodic meetings. Meetings shall be held on call of
the director or on written request of any three members of the board.
D. The board shall advise and counsel with the director on matters relating to the
condition of the insurance marketplace in terms of competition and compliance with this
article.
E. No civil liability arises against the board, members of the board or the
director or his representatives for any action taken or statements made in the good faith
performance of their duties pursuant to this section.
F. The director may withhold from public inspection any information related to an
ongoing criminal or civil investigation and may delete from any reports the name or names
of individuals who have brought complaints.
G. Notwithstanding any provision of law, the board or the director may disclose
information related to subsections F and G to any law enforcement agency.
H. The members are not entitled to receive compensation but are entitled to
reimbursement of expenses by the department in accordance with title 38, chapter 4,
article 2.
20-400.09 Rules
The director may promulgate rules necessary to implement the provisions of this
article.
20-400.10 Industrial insureds
A. An industrial insured as defined in section 20-401.07 may purchase and an
admitted insurer may sell to an industrial insured a policy of insurance that is subject
to article 4.1 of this chapter and that is on a form that has not been filed for review
or approval by the director pursuant to article 4.1 of this chapter. The admitted
insurer may use rates for a policy provided pursuant to this section that have not been
filed for review or approval by the director pursuant to article 4.1 of this chapter.
B. At the inception of each new policy and at the time of each renewal, but not
less than annually during the term of the policy, each industrial insured that purchases
a policy as provided in this section shall certify to the insurer on a form prescribed by
the director that the insured meets the definition of industrial insured prescribed in
section 20-401.07.
C. Except as otherwise provided in section 20-407, subsection B, The insurer shall
maintain the certification described in subsection B of this section in the insurer's
policy file.
D. The following provisions do not apply to insurance issued to industrial insureds
pursuant to this section:
1. Section 20-229.
2. Section 20-400.
3. Sections 20-400.01 through 20-400.05 and 20-400.07.
4. Section 20-448, Subsection C.
5. Section 20-451.
6. Section 20-452.
7. Section 20-465.
8. Sections 20-1111 through 20-1117.
9. Sections 20-1120, 20-1121 and 20-1122.
10. Chapter 2, article 4.1 of this title.
11. Chapter 3, article 6 of this title.
12. Chapter 6, articles 7 and 14 of this title.
E. Any policy issued for delivery to an industrial insured in this state by an
insurer pursuant to this section shall contain a conspicuously stamped or written notice
in bold-faced type that states:
Pursuant to ARIZONA Revised Statutes section 20-400.10, this policy and the
rates charged for it have not been filed with or approved by the director of
the ARIZONA department of insurance. Certain provisions of ARIZONA law,
specified in ARIZONA Revised Statutes section 20-400.10, do not apply to this
policy. If the insurer that issued this policy becomes insolvent, insureds or
claimants will not be eligible for insurance guaranty fund protection pursuant
to ARIZONA Revised Statutes title 20.
F. An insurer shall annually file with the insurer's annual statement filed
pursuant to section 20-223 on a form prescribed by the director the following information
for the prior year ending December 31 for all policies issued to industrial insureds
pursuant to this section:
1. The total number of policies written.
2. The total premiums written.
3. The total premiums earned.
4. The total losses paid.
5. The total losses incurred.
6. The total number of claims incurred.
7. Any other information the director deems appropriate.
20-400 Scope of provisions
A. This article applies to all insurers having a certificate of authority issued by
the director to transact insurance in this state except:
1. Reinsurance.
2. Annuities.
3. Title insurance.
4. Mortgage guaranty insurance.
5. Disability or life insurance.
6. Risks subject to section 20-395.
7. Risks commonly insured under marine and inland marine insurance policies.
8. Personal lines automobile, dwelling and homeowner insurance policies.
9. Any policy of insurance against loss or damage to or legal liability in
connection with property located outside this state, any motor vehicle or aircraft
principally garaged and used outside this state or any activity wholly carried on outside
this state.
B. This article does not apply to hospital service or medical service corporations,
investment companies, mutual benefit associations or fraternal beneficiary associations. 20-401.01 Unlawful transaction of insurance business; exemptions
A. It is unlawful for any insurer to transact insurance business, as provided by
section 20-106, in this state without a certificate of authority from the director.
B. The provisions of subsection A of this section do not apply to:
1. The lawful transaction of surplus lines insurance.
2. The lawful transaction of reinsurance by insurers.
3. Transactions in this state involving a policy lawfully solicited, written and
delivered outside of this state covering only subjects of insurance not resident, located
or expressly to be performed in this state at the time of issuance, and which
transactions are subsequent to the issuance of such policy.
4. Attorneys acting in the ordinary relation of attorney and client in the
adjustment of claims or losses.
5. Transactions in this state involving group annuities where the master policy of
such groups was lawfully issued and delivered in and pursuant to the laws of a state in
which the insurer was authorized to do an insurance business, to a group organized for
purposes other than the procurement of insurance, and where the policyholder is domiciled
or otherwise has a bona fide situs.
6. Transactions in this state involving any policy of insurance or annuity contract
issued prior to August 13, 1972.
7. Transactions in this state relative to a policy issued or to be issued outside
this state involving insurance on vessels, craft or hulls, cargoes, marine builder's
risk, marine protection and indemnity or other risk, including strikes and war risks
commonly insured under ocean or wet marine forms of policy.
8. Transactions in this state involving contracts of insurance not readily
obtainable from insurers authorized to transact insurance in this state issued to one or
more industrial insureds, as defined in section 20-401.07.
20-401.02 Violation; cease and desist orders; injunctive relief
A. If the director has cause to believe that any insurer is violating or about to
violate section 20-401.01, the director may order the insurer to cease and desist and,
through the attorney general, may cause a complaint to be filed in the superior court
in Maricopa county to enjoin and restrain the insurer from continuing the violation,
engaging in the violation or doing any act in furtherance of the violation.
B. If the director orders the insurer to cease and desist, the insurer may
request a hearing pursuant to title 41, chapter 6, article 10. Except as provided in
section 41-1092.08, subsection H, a final decision of the director is subject to
judicial review pursuant to title 12, chapter 7, article 6.
C. If the director, through the attorney general, causes a complaint to be filed,
the superior court in Maricopa county shall have jurisdiction of the proceeding and may
make and enter an order or judgment awarding the preliminary or final relief as in its
judgment is proper.
20-401.03 Service of process in an action by the director of insurance
A. Any act of transacting an insurance business in violation of section 20-401.01
by any unauthorized insurer is equivalent to and shall constitute an irrevocable
appointment by such insurer, binding upon him, his executor or administrator, or
successor in interest if a corporation, of the secretary of state or his successor in
office to be the true and lawful attorney of such insurer upon whom may be served all
lawful process in any action, suit or proceeding in any court by the director of
insurance, through the attorney general, and upon whom may be served any notice, order,
pleading or process in any proceeding before the director of insurance and which arises
out of transacting an insurance business in this state by such insurer. Any act of
transacting an insurance business in this state by any unauthorized insurer shall be
signification of its agreement that any such lawful process in such court action, suit or
proceedings and any such notice, order, pleading or process in such administrative
proceeding before the director of insurance so served shall be of the same legal force
and validity as personal service of process in this state upon such insurer.
B. Service of process in an action prescribed by subsection A of this section shall
be made by delivering to and leaving with the secretary of state, or some person in
apparent charge of his office, two copies of such process. Service upon the secretary of
state as such attorney shall be service upon the principal.
C. The secretary of state shall forthwith forward, by registered or certified mail,
one copy of such process or such notice, order, pleading or process in proceedings before
the director to the defendant in such court proceeding or to whom the notice, order,
pleading or process in such administrative proceeding is addressed or directed at its
last known principal place of business and shall keep a record of all process so served
on him which shall show the day and hour of service. Such service shall be sufficient,
provided:
1. Notice of such service and a copy of the court process or the notice, order,
pleading or process in such administrative proceeding are sent within ten days thereafter
by registered or certified mail by the director of insurance or the attorney general in
the court proceeding or by the director of insurance in the administrative proceeding to
the defendant in the court proceeding or to whom the notice, order, pleading or process
in such administrative proceeding is addressed or directed at the last known principal
place of business of the defendant in the court or administrative proceeding.
2. The defendant's receipt or receipts, issued by the post office with which the
letter is registered or certified, showing the name of the sender of the letter and the
name and address of the person or insurer to whom the letter is addressed, and an
affidavit of the director of insurance or the attorney general in court proceeding or of
the director of insurance in administrative proceeding, showing compliance therewith, are
filed with the clerk of the court in which such action, suit or proceeding is pending or
with the director in administrative proceedings, on or before the date the defendant in
the court or administrative proceeding is required to appear or respond thereto, or
within such further time as the court or director of insurance may allow.
D. The director of insurance or the attorney general shall not be entitled to a
judgment or a determination by default in any court or administrative proceeding in which
court process or notice, order, pleading or process in proceedings before the director of
insurance is served under this section until the expiration of thirty days from the date
of filing of the affidavit of compliance.
E. Nothing in this section shall limit or affect the right to serve any process,
notice, order or demand upon any person or insurer in any other manner now or hereafter
permitted by law or rules of the courts.
20-401.04 Action by attorney general to enforce order or decision of court or director; foreign decrees
A. The attorney general upon request of the director may proceed in the courts of
this state or any reciprocal state to enforce an order or decision in any court
proceeding, in any administrative proceeding before the director of insurance or any
foreign decree.
B. The director of insurance of this state shall determine which states and
territories qualify as reciprocal states and shall maintain at all times an up-to-date
list of such states.
C. A copy of any foreign decree authenticated as provided by the laws of this state
may be filed in the office of the clerk of any superior court of this state. The clerk,
upon verifying with the director of insurance that the decree or order qualified as a
foreign decree, shall treat the foreign decree in the same manner as a decree of a
superior court of this state. A foreign decree so filed has the same effect and shall be
deemed as a decree of a superior court of this state, and is subject to the same
procedures, defenses and proceedings for reopening, vacating, or staying as a decree of a
superior court of this state and may be enforced or satisfied in like manner.
D. At the time of the filing of the foreign decree, the attorney general shall make
and file with the clerk of the court an affidavit setting forth the name and last known
post office address of the defendant.
E. Promptly upon the filing of the foreign decree and the affidavit, the clerk
shall mail notice of the filing of the foreign decree to the defendant at the address
given and to the director of insurance of this state and shall make a note of the mailing
in the docket. In addition, the attorney general may mail a notice of the filing of the
foreign decree to the defendant and to the director of insurance of this state and may
file proof of mailing with the clerk. Lack of mailing notice of filing by the clerk
shall not affect the enforcement proceedings if proof of mailing by the attorney general
has been filed.
F. No execution or other process for enforcement of a foreign decree filed under
this section shall issue until thirty days after the date the decree is filed.
G. If the defendant shows the superior court that an appeal from the foreign decree
is pending or will be taken, or that a stay of execution has been granted, the court
shall stay enforcement of the foreign decree until the appeal is concluded, the time for
appeal expires, or the stay of execution expires or is vacated, upon proof that the
defendant has furnished the security for the satisfaction of the decree required by the
state in which it was rendered.
H. If the defendant shows the superior court any ground upon which enforcement of a
decree of any superior court of this state would be stayed, the court shall stay
enforcement of the foreign decree for an appropriate period, upon requiring the same
security for satisfaction of the decree which is required in this state.
20-401.05 Certificate of exemption; definitions
A. On July 1 of each year, the director shall grant a certificate of exemption to
any insurer, employee benefit trust or voluntary employees' beneficiary association
transacting life insurance, disability insurance or annuity business, or providing other
health or welfare benefits, under the laws of its domicile that:
1. Is organized and operated without profit to any person, firm, partnership,
association, corporation or other entity.
2. Is organized and operated exclusively for either of the following purposes:
(a) Aiding educational or scientific institutions that are also organized and
operated without profit to any person, firm, partnership, association, corporation or
other entity.
(b) Aiding agricultural institutions if the grantee is subject to regulation either
as an insurer, a multiple employer welfare arrangement or an employee benefit trust by
its state of domicile.
3. Serves a purpose prescribed in paragraph 2 by issuing insurance, annuity and
employee benefits contracts only to or for the benefit of the educational, scientific or
agricultural institutions or their respective members or to individuals engaged in the
service of those institutions.
4. Appoints the secretary of state, and the secretary of state's successors in
office, as its true and lawful attorney on whom may be served all lawful process in any
action, suit or proceeding in any court by the director of insurance, through the
attorney general, or any action or proceeding against the insurer, employee benefit trust
or voluntary employees' beneficiary association brought by someone other than the
director of insurance, which appointment is irrevocable, binds the insurer, employee
benefit trust or voluntary employees' beneficiary association or any successor in
interest, remains in effect as long as there is in force in this state any contract or
policy made or issued by the insurer, employee benefit trust or voluntary employees'
beneficiary association or any obligation arising therefrom and must be processed in
accordance with sections 20-401.03 and 20-403.
5. Is fully and legally organized and qualified to do business and has been
actively doing business under the laws of the state of its domicile for a period of at
least twenty years before its application for a certificate of exemption.
6. Files with the director for the director's approval a copy of any policy or
contract form issued to residents of this state.
7. Files with the director on or before March 1 of each year a copy of its annual
statement prepared pursuant to the laws of its state of domicile, as well as any other
financial material as may be requested, including the annual statement or such other
financial materials as may be requested relating to any subsidiary or other legal entity
operated by the insurer, employee benefit trust or voluntary employees' beneficiary
association under a management contract or other form of agreement, and coincident with
the filing of its annual statement, pays the filing fee prescribed in section 20-167.
8. Agrees to submit to periodic examinations as may be deemed necessary by the
director.
B. On or before March 1 of each year, any insurer holding a certificate of
exemption shall file with the director a form of premium tax return prescribed by the
director and shall pay the premium tax imposed by section 20-224 on all policies of life
insurance and disability insurance in force with residents of this state.
C. After a hearing, the director may refuse to renew, or may revoke or suspend, a
certificate of exemption if the director finds that the insurer, employee benefit trust
or voluntary employees' beneficiary association no longer meets the requirements of this
section, or finds that the insurer, employee benefit trust or voluntary employees'
beneficiary association has violated any provisions of article 6 of this chapter.
D. For the purposes of this section:
1. "Agricultural Institutions" means agricultural growers, shippers, packers,
brokers, distributors, wholesalers, receivers and jobbers, or affiliated, associated and
related suppliers, industries or firms.
2. "Voluntary employees' beneficiary association" means an association described in
26 United States Code section 501(c)(9).
20-401.06 Unauthorized transactions; classification
Any unauthorized insurer who knowingly transacts any unauthorized act of an
insurance business is guilty of a class 5 felony.
20-401.07 Premium receipts tax on industrial insureds contracting with unauthorized insurer; definitions
A. Every industrial insured under a contract procured from an unauthorized insurer
shall pay to the director before March 1 next succeeding the calendar year in which the
insurance was so effectuated, continued or renewed a premium receipts tax of three per
cent of the gross premiums, less premiums returned on account of cancellation or
reduction of premium, charged for insurance on subjects resident, located or to be
performed in this state. Such insurance, whether procured through negotiation or an
application, in whole or in part occurring or made within or outside of this state, or
for which premiums in whole or in part are remitted directly or indirectly from within or
outside of this state, shall be deemed to be insurance effectuated or continued in this
state. If a contract covers risks or exposures only partly in this state, the tax
payable shall be computed on the portions of the premium that are properly allocable to
the risks or exposures located in this state. Proration of premium taxes due from an
industrial insured under a contract procured from an unauthorized insurer having property
in states other than ARIZONA shall be determined by rules adopted by the director using
the following criteria where applicable:
1. Percentage of physical assets in ARIZONA.
2. Percentage of employee payroll in ARIZONA.
3. Percentage of sales in ARIZONA.
4. Percentage of taxable income reportable in ARIZONA.
B. For purposes of this section:
1. "Industrial insured" means an insured that applies for or procures any insurance
that is subject to article 4.1 of this chapter through the use of a risk manager and that
meets at least two of the following criteria:
(a) Has aggregate annual gross premiums for insurance on all property and casualty
risks that are subject to article 4.1 of this chapter totaling at least one hundred
thousand dollars as of the preceding fiscal year end of the industrial insured.
(b) Possesses a net worth of over ten million dollars as of the preceding fiscal
year end of the industrial insured as verified by a certified public accountant.
(c) Has net revenues or sales exceeding twenty-five million dollars as of the
preceding fiscal year end of the industrial insured as verified by a certified public
accountant.
(d) Has more than eighty full-time employees or equivalent per individual company
or one hundred full-time employees or equivalent per holding company system as of the
date the policy is issued.
2. "Risk manager" means a full-time employee of the industrial insured or a third
party consultant who is retained by the industrial insured, who provides skilled services
in loss prevention, loss reduction, risk and insurance coverage analysis and the purchase
of insurance and who possesses at least one of the following qualifications:
(a) A baccalaureate or higher degree in risk management that is issued by an
accredited college or university.
(b) A designation as a chartered property and casualty underwriter that is issued
by an insurance institute.
(c) A designation as a certified insurance counselor that is issued by a society of
certified insurance counselors.
(d) A designation as an associate in risk management that is issued by an insurance
institute.
(e) A designation as a certified risk manager that is issued by a national alliance
for insurance education and research.
(f) A designation as a fellow in risk management that is issued by a global risk
management institute.
(g) Any other similar qualification that, before the employee or consultant applies
for or procures any insurance that is subject to article 4.1 of this chapter, the
director determines is sufficient, other than a license as an insurance producer pursuant
to article 3 of this chapter.
20-401 Definitions
In this article, unless the context otherwise requires:
1. "Diligent effort" means having sought insurance for the same risk from at least
three insurers authorized in this state to write the particular insurance coverage or
type, class or kind of insurance.
2. "Foreign decree" means any decree or order in equity of a court located in a
reciprocal state, including a court of the United States located therein, obtained by a
qualified party against any insurer incorporated or authorized to do business in this
state.
3. "Qualified party" means a state regulatory agency acting in its capacity to
enforce the insurance laws of such state.
4. "Reciprocal state" means any state or territory of the United States the laws of
which give to insurers organized under the laws of this state the same right to defend
actions as that granted to foreign insurers under the laws of this state and the laws of
which contain procedures substantially similar to those specified in this article for the
enforcement of decrees or orders in equity issued by courts located in other states or
territory of the United States against any insurer incorporated or authorized to do
business in such state or territory.
20-402 Validity of contracts
A. The transaction of business in violation of section 20-401.01 by an insurer does
not impair the validity of any act or contract of the insurer and does not prevent the
insurer from defending any action at law or suit in equity in any court of this state,
except that no insurer transacting insurance business in this state without a certificate
of authority is permitted to maintain an action in any court of this state to enforce any
right, claim or demand arising out of the transaction of the business until the insurer
obtains a certificate of authority.
B. If an insurer transacting business in violation of section 20-401.01 fails to
pay any claim or loss within the provisions of the insurance contract, any person who
acted directly or indirectly as an insurance producer for or otherwise represented or
aided the insurer in the solicitation, negotiation, procurement or effectuation of the
insurance contract or renewal of the contract is liable to the insured for the full
amount of the claim or loss in the manner provided by the provisions of the insurance
contract. 20-403 Service of process in an action by someone other than the director of insurance
A. The transaction of an insurance business in this state, as provided in section
20-106, by, or on behalf of, an unauthorized nonresident insurer shall be deemed to
constitute an appointment by the insurer of the director and his successors in office as
its attorney, upon whom may be served all lawful process issued within this state in any
action or proceeding against such insurer brought by someone other than the director of
insurance and arising out of any such transaction.
B. Such service of process shall be made by delivering to and leaving with the
director two copies thereof. At the time of service the plaintiff shall pay five dollars
to the director, taxable as costs in the action. The director shall forthwith mail by
registered or certified mail one of the copies of process to the defendant at its
principal place of business as last known to the director, and shall keep a record of all
process so served.
C. Notice of service and a copy of process shall be sent by plaintiff's attorney to
defendant insurer at its last known principal place of business by registered or
certified mail. Defendant insurer's receipt, or registry receipt as to the mailing
issued by the post office where registered or certified, showing the name of the sender
and name and address of the addressee, and the affidavit of plaintiff's attorney showing
compliance with this subsection, shall be filed in the court in which the action is
pending on or before the date the defendant insurer is required to appear, or within such
further time as the court may allow. No judgment by default against the insurer may be
taken under this section until the expiration of thirty days from date of filing of the
affidavit of compliance.
D. Service of process in such an action or proceeding against an unauthorized
resident insurer shall be valid if served upon any person within this state who transacts
an insurance business in this state on behalf of such insurer. The requirements of
subsection C of this section shall likewise apply with respect to such service of
process.
E. Service of process upon such an insurer in accordance with this section shall be
as valid and effective as if served upon a defendant personally present in this state.
F. Means provided in this section for service of process upon the insurer shall not
be deemed to prevent service of process upon the insurer by any other lawful means.
G. An insurer which has been so served with process, subject to section 20-405,
shall have the right to appear in and defend the action and employ attorneys and other
persons in this state to assist in its defense thereto or settlement thereof.
20-404 Exemptions
Sections 20-403, 20-405 and 20-406 shall not apply to such transactions as are
prescribed in section 20-401.01, paragraphs 1, 2, 3, 4, 5, 7 and 8, nor to any action or
proceeding against an unauthorized insurer arising out of the following types of
insurance where the policy or contract contains a provision designating the director as
its attorney for the acceptance of service of lawful process in any action or proceeding
instituted by or on behalf of an insured or beneficiary arising out of any such policy,
or where the insurer enters a general appearance in any such action:
1. Ocean marine and foreign trade insurance.
2. Insurance on subjects located, resident or to be performed, wholly outside this
state, or on vehicles or aircraft owned and principally garaged outside this state.
3. Insurance on property or operations of railroads engaged in interstate commerce.
20-405 Prerequisites for participating in court action
Before an unauthorized insurer may initiate any action or proceeding in this state,
the insurer shall procure a certificate of authority to transact insurance in this state,
or deposit with the clerk of the court in which the action or proceeding is pending cash
or securities, or file with the clerk a bond with good and sufficient sureties, to be
approved by the court, in an amount to be fixed by the court sufficient to secure the
payment of any costs and attorney's fees which may be assessed against the unauthorized
insurer in the action. The court may in its discretion make an order dispensing with the
deposit or bond where the insurer makes a showing satisfactory to the court that it
maintains in any state funds or securities, in trust or otherwise, sufficient and
available to satisfy any such assessment which may be entered in the action or
proceeding, and that the insurer will pay any final judgment entered therein without
requiring suit to be brought on the judgment in the state where the funds or securities
are located.
20-406 Attorneys' fees in action against insurer
In any action against an unauthorized insurer pursuant to section 20-403, if the
insurer has failed for thirty days after demand prior to the commencement of the action
to make payment in accordance with the terms of the contract of insurance, and it appears
to the court that the refusal was vexatious and without reasonable cause, the court may
allow to the plaintiff a reasonable attorney's fee and include such fee in any judgment
that may be rendered in the action. The attorney's fee shall not exceed one third of the
amount which the court or jury finds the plaintiff is entitled to recover against the
insurer, but in no event shall such a fee be less than one hundred dollars. Failure of
an insurer to defend any such action shall be deemed prima facie evidence that its
failure to make payment was vexatious and without reasonable cause.
20-407 Surplus lines; brokers
A. Any portion or all of an insurance coverage designated in this article as
"surplus lines" may be procured from unauthorized insurers subject to the following
conditions:
1. The insurance is procured through a surplus lines broker licensed in this state,
referred to in this article as the "broker".
2. The insurance coverage is a recognized surplus line pursuant to section 20-409
or the insurance coverage is not procurable, after diligent effort has been made to
procure coverage or the coverage has been procured to the full extent the insurers are
willing to insure, and the placing of insurance with an unauthorized insurer is not for
the purpose of securing advantages either as to premium rate or terms of the insurance
contract.
B. Subsection A, paragraph 2 of this section does not apply to the sale of
insurance coverage to an industrial insured as defined in section 20-401.07. At the
inception of each new policy and at the time of each renewal, but not less than annually
during the term of the policy, each industrial insured that purchases a policy as
provided in this section shall certify to the broker on a form prescribed by the director
that the insured meets the definition of industrial insured prescribed in section
20-401.07. The broker shall maintain the certification in the broker's files. The
insurance is surplus lines insurance and is subject to the applicable provisions of this
article that relate to surplus lines insurance.
C. Nothing in this section prohibits a resident or nonresident insurance producer
or managing general agent licensed in this state for property or casualty insurance from
obtaining surplus lines insurance for policyholders through a surplus lines broker if the
insurance producer or managing general agent uses a surplus lines broker licensed in this
state for the transaction of the insurance with the surplus lines insurer. The surplus
lines broker is responsible for compliance with the applicable provisions of this
article. The insurance producer or managing general agent may pay a fee or share a
commission with a surplus lines broker who procures the surplus coverage on behalf of the
insurance producer. For the purposes of this subsection, "transaction" means the acts
listed in section 20-106, subsection A.
D. For the transaction of surplus lines insurance, a surplus lines broker licensed
in this state shall not receive a fee, commission, brokerage or other valuable
consideration from any person who is not licensed in this state as any of the following:
1. An insurance producer pursuant to chapter 2, article 3 of this title.
2. A managing general agent pursuant to chapter 2, article 3.1 of this title.
3. A surplus lines broker pursuant to section 20-411, 20-411.01 or 20-411.02.
20-408 Report of broker; civil penalty
A. Within sixty days after procuring any surplus lines insurance, the broker
procuring the coverage shall execute and file with the director a verified report setting
forth facts from which it may be determined whether the requirements of section 20-407
have been met. The report shall also contain or be accompanied by the following:
1. The name of the insurer and the identification number assigned to it by the
national association of insurance commissioners.
2. The number of the policy issued.
3. The name and address of the insured.
4. The premium, including taxable policy fees.
5. The identity of the specific recognized surplus lines coverage written.
6. If the insurance coverage is not a recognized surplus line pursuant to section
20-409, an affidavit executed by the surplus lines broker attesting to compliance with
the requirements of section 20-407, subsection A and confirming that evidence of
compliance will be maintained in the broker's file for the duration of the insurance
policy and for a period of six years after the expiration of the policy.
7. The policy effective dates that shall not be open to public inspection.
B. The director shall prescribe the required report form.
C. The director may direct a broker to file the broker's report required by this
section with a voluntary domestic organization of surplus lines brokers with which the
director has contracted to accept reports pursuant to section 20-167.
D. A broker may collect from the insured the stamping fee prescribed in section
20-167.
E. The director may impose and collect a civil penalty of not more than twenty-five
dollars against a broker for each day the report prescribed in subsection A of this
section is late. 20-409 Recognized surplus lines
A. If after a hearing the director finds that a particular insurance coverage or
type, class or kind of coverage is not readily procurable from authorized insurers, the
director may by order declare such coverage or coverages to be recognized surplus lines
until the director's further order.
B. The order is subject to modification by the director. The director shall modify
any coverage if the director determines that the coverage is no longer entitled
to recognition as surplus lines after a hearing held on the director's initiative or on
the request of any insurance producer, surplus lines broker, broker, insurer, rating or
advisory organization, or other person. 20-410 Validity of surplus lines insurance; disclosure; policy fees
A. Insurance contracts procured as surplus lines coverage are fully valid and
enforceable as to all parties and shall be recognized in all matters in the same manner
as like contracts issued by authorized insurers.
B. Any policy and any evidence of surplus lines coverage from an unauthorized
insurer pursuant to this article and that is issued for delivery to the insured shall
contain a conspicuously stamped or written notice in bold-faced type that states:
Pursuant to ARIZONA Revised Statutes section 20-401.01, subsection B,
paragraph 1, this policy is issued by an insurer that does not possess a
certificate of authority from the director of the ARIZONA Department of
Insurance. If the insurer that issued this policy becomes insolvent, insureds
or claimants will not be eligible for insurance guaranty fund protection
pursuant to ARIZONA Revised Statutes title 20.
C. A surplus lines broker may charge and receive a fee in addition to the premium
for services provided in the transaction of surplus lines insurance if before effecting
any coverage both of the following conditions are met:
1. The service fees and the specific services for which the fees are charged are
disclosed to the insured or the insured's representative and are agreed to in writing by
the insured or the insured's representative.
2. The taxes prescribed in section 20-416 are paid on any fees charged to the
insured.
20-411.01 Licensing of Mexican insurance surplus lines broker
A. Any resident or nonresident licensed insurance producer that maintains an office
in this state may be licensed as a Mexican insurance surplus lines broker to transact
insurance business as prescribed in section 20-422 if the director determines that the
insurance producer is competent and trustworthy and the insurance producer complies with
all of the requirements of section 20-411 except for section 20-411, subsection C. The
director shall prescribe and provide application forms.
B. Any surplus lines broker licensed pursuant to section 20-411 or 20-411.02 may
transact the insurance business prescribed in section 20-422 without being licensed under
this section.
20-411.02 Nonresident surplus lines broker; remittance of tax on insurance procured out of state
A. The director shall license a nonresident person as a surplus lines broker in
accordance with section 20-287.
B. Except as otherwise provided, a nonresident surplus lines broker is subject to
this title as if the broker were licensed as a resident.
C. A license from this state is not required for a nonresident who procures surplus
lines insurance in another state in which the nonresident is licensed solely because of
the allocation of premium to this state to determine the surplus lines tax due to this
state pursuant to section 20-416, subsection C. The nonresident shall remit the tax
according to this article. The director shall prescribe the form of any reports or
statements that are necessary for the nonresident to remit the tax. 20-411 Licensing of surplus lines broker; examination
A. A person shall not act as a surplus lines broker in this state unless the person
has a current surplus lines broker license issued by the director.
B. Any individual who is a resident of this state and who is licensed as a resident
insurance producer authorized for property or casualty insurance in this state may also
be licensed as a resident surplus lines broker if the director determines that the
insurance producer is competent and trustworthy. The director shall prescribe and furnish
application forms.
C. Each individual applicant for an original license as a resident surplus lines
broker or for renewal of a resident surplus lines broker license who has not previously
taken and passed a surplus lines broker license examination in this state shall take and
pass to the director's satisfaction a written examination given by or under the
supervision of the director. The examination shall reasonably test the applicant's
knowledge of surplus lines insurance and the legal responsibilities of a surplus lines
broker.
D. The director may issue a resident surplus lines broker license to any business
entity that is licensed as a resident property or casualty insurance producer in this
state and that satisfies all of the requirements prescribed by section 20-285,
subsections D and E.
E. At least one individual in each office or place where surplus lines insurance is
transacted in this state shall be licensed pursuant to this title as either an insurance
producer authorized for property or casualty insurance or a managing general agent for
property or casualty insurance, and shall be licensed pursuant to this article as a
surplus lines broker.
F. The license prescribed in this section shall expire and be subject to renewal
coincidental to, and in the same manner as, other insurance license authority as
prescribed in section 20-289. The director shall charge the surplus lines broker license
fee prescribed in section 20-167, except that, from and after June 30, 2005, a licensee
adding surplus lines broker authority to an existing insurance license shall be charged
one-half the surplus lines broker license fee if less than two years remain in the term
of the existing insurance license as of the date the director receives the application to
add surplus lines broker authority to the existing insurance license.
G. To the extent not inconsistent with this article, section 20-281, section
20-283, subsection B, paragraph 6, section 20-286, subsection C and sections 20-287,
20-289, 20-291, 20-292, 20-295, 20-296, 20-297, 20-298, 20-299, 20-300, 20-301 and 20-302
apply to surplus lines brokers. 20-412 Acceptance of surplus lines business by broker
A licensed surplus lines broker may accept or place surplus lines business from any
insurance producer licensed in this state for the kind of insurance involved and may
compensate the insurance producer therefor. The broker shall have the right to receive
from the insurer the customary commission.
20-413 Placing of surplus lines coverage; endorsement by broker; list of unauthorized insurers; removal from list; definition
A. A surplus lines broker shall not knowingly place any surplus lines coverage with
an unauthorized insurer, Lloyd's association, insurance exchange or syndicate of an
insurance exchange that does not meet the minimum financial requirements of this section
or that is declared by the director to be in a hazardous financial condition, improperly
managed or unreliable in insurance transactions. A surplus lines broker may place
surplus lines coverage with a syndicate of an unauthorized insurance exchange even if
another syndicate of the insurance exchange is declared by the director to be in a
hazardous financial condition, improperly managed or unreliable in insurance
transactions, as long as that syndicate does not participate in insuring the risk and
unless the declaration of the director specifies that the insurance exchange shall not
accept surplus lines placements.
B. An unauthorized foreign insurer authorized to transact insurance on an admitted
or surplus lines basis in at least one other state shall possess a minimum capital and
surplus of at least five million dollars and shall maintain a deposit of at least two
million five hundred thousand dollars in public custody in trust, in part, for the
purpose of protecting all of the foreign insurer's policyholders.
C. An unauthorized alien insurer other than a title insurer shall possess minimum
capital and surplus of at least fifteen million dollars and shall maintain within the
United States in public depositories or trust institutions approved by the director
assets in the amount of two million five hundred thousand dollars. The director may
require the unauthorized alien insurer to maintain a larger deposit if the director
determines that the public interest reasonably requires a larger deposit. A broker
shall not knowingly place any insurance with the unauthorized alien insurer until the
insurer complies with the director's requirement to maintain a larger deposit.
D. Any unauthorized Lloyd's association or any similar association of individual or
incorporated insurers under a common administration shall maintain a trust fund in the
United States of at least one hundred million dollars as joint and several security for
all United States policyholders of any member of the association. The director may
require the association to maintain a larger fund if the director determines that the
public interest reasonably requires a larger fund. A broker shall not knowingly place
any insurance with the association until the association complies with the director's
requirement to maintain a larger fund.
E. An unauthorized insurance exchange authorized to transact insurance on an
admitted or surplus lines basis in at least one other state shall possess minimum
aggregate capital and surplus of at least fifty million dollars. Each syndicate of the
insurance exchange with which a risk is to be placed shall possess minimum aggregate
capital and surplus of at least four million dollars until December 31, 1996. Beginning
January 1, 1997 each syndicate with which a risk is to be placed shall possess minimum
capital and surplus of at least five million dollars. The insurance exchange shall
maintain a deposit of at least two million five hundred thousand dollars in public
custody in trust, in part, for the purpose of protecting all of the policyholders of the
insurance exchange. Each syndicate of an insurance exchange qualified to transact
surplus lines insurance in this state shall file with the director on or before June 1 an
annual statement for the preceding year in a form prescribed by the national association
of insurance commissioners. The annual statement is in addition to any other document
required of the insurance exchange by the director.
F. If the surplus lines broker delivers a certificate in a form prescribed by the
director, it is prima facie evidence of the insurer's compliance with the financial
requirements of this section. The certificate shall state the names of the public
officials or other persons who have supervision over the insurer in any other state and
shall certify the amount of capital and surplus that the insurer possesses and the amount
of the trust deposit that the insurer maintains, as determined from the records and
knowledge of the public officials or other persons, together with any supporting
documentation that the director requires. The certifying surplus lines broker of an
alien insurer may deliver other evidence acceptable to the director to establish that the
alien insurer meets the financial requirements of this section. The certifying surplus
lines broker may withdraw the certificate by providing written notice of intent to
withdraw to the director and the affected insurer. The withdrawal is not effective until
forty-five days after delivery of the notice to all parties. The withdrawal is not
grounds for removal from the list pursuant to subsection H if, before the withdrawal
becomes effective, another licensed surplus lines broker delivers to the director a
replacement certificate based on the qualifying documentation already on file with the
department.
G. The director may periodically publish a list of unauthorized insurers that may
write surplus lines insurance in this state established on the basis of documentation
provided to the director pursuant to this section. The director may mail a copy of the
list to each licensed surplus lines broker at the last address on the records of the
department. This subsection is not deemed to require the director to determine the
actual financial condition or claims practices of any unauthorized insurer, and the
appearance of an unauthorized insurer on the list indicates only that the insurer appears
to be financially sound and to have satisfactory claims practices. A broker shall
restrict all surplus lines business placed by the broker with an unauthorized insurer to
those insurers qualified with the director as provided in this section.
H. The director may refuse to add an insurer to the list established pursuant to
subsection G or may remove an insurer from that list if the director believes that the
insurer:
1. Is in a hazardous financial condition.
2. No longer meets the requirements of this article.
3. Does not have the endorsement of a surplus lines broker pursuant to subsection
F.
4. Does not comply with all applicable provisions of this title.
5. Is improperly managed.
6. Is unreliable in insurance transactions.
I. In addition to any other penalty provided by law, if a surplus lines broker's
license is revoked for a violation of this section, the director shall not license the
broker again within a period of two years thereafter.
J. For the purposes of subsections F, G and H, "insurer" means an unauthorized
insurer, Lloyd's association, insurance exchange or syndicate of an insurance exchange.
20-414 Records of surplus lines brokers
Each surplus lines broker shall keep in the broker's principal place of business a
full and true record of each surplus lines contract procured by the broker under the
license issued pursuant to this article. The director may examine the record at any time
within three years after the expiration or cancellation date of the insurance
policy. The record shall include the following items as applicable:
1. Name and address of the insurer.
2. Name and address of the insured.
3. Amount of insurance.
4. Gross premium charged.
5. Return premium paid, if any.
6. Rate of premium charged on the several items of coverage.
7. Effective date and terms of the contract.
8. Brief general description of the risks insured against and the property insured.
20-415 Statement of surplus lines insurance business transacted by broker; reporting periods
A. Beginning January 1, 1998, each surplus lines broker shall file semiannually
with the director a notarized statement of all surplus lines insurance business
transacted by the broker during the period for which the statement is being filed. The
statement shall be on a form prescribed by the director and shall show:
1. Gross amount of each kind of insurance transacted.
2. Aggregate gross premiums charged.
3. Aggregate of return premiums paid to insureds.
4. Aggregate of net premiums.
5. Such additional information as may reasonably be required by the director.
B. The statement is due on or before March 1 of each year for the preceding July
through December and on or before September 1 of each year for the preceding January
through June.
20-416 Tax on surplus lines
A. On or before the due date prescribed in section 20-415, each surplus lines
broker shall remit to the state treasurer through the director a tax on the premiums,
exclusive of sums collected to cover federal and state taxes, examination fees and
stamping fees collected pursuant to section 20-167, on surplus lines insurance subject to
tax transacted by the broker during the preceding reporting period, as shown by the
statement of surplus lines business filed with the director. The tax is at the rate of
three per cent of the gross premiums, including policy fees other than stamping fees
prescribed in section 20-167, less premiums returned on account of cancellation or
reduction of premium and shall exclude gross premiums and returned premiums upon business
exempted from surplus lines provisions under section 20-420. The surplus lines broker
shall collect the tax from the insured in addition to the full amount of the gross
premium charged by the insurer for the insurance. The surplus lines broker shall return
the tax on any portion of the premium unearned at the termination of the insurance policy
to the policyholder. The surplus lines broker is prohibited from absorbing the tax and
from rebating, for any reason, any part of the tax or commission.
B. Notwithstanding section 20-415 and subsection A of this section, if a surplus
lines broker fails to timely renew the license held by the broker to transact surplus
lines insurance and the broker's license is revoked by order of the director or the
director accepts the consent to voluntary termination of the license, the broker shall
file a statement of surplus lines business from the end of the last reporting period
covered by the statement filed by the broker through the date the license was last valid
and shall remit all outstanding surplus lines taxes to the director. The broker shall
file the statement of surplus lines business and shall remit any outstanding surplus
lines taxes within thirty days after the nonrenewal, revocation or voluntary termination
of the license.
C. Except as provided in subsection D of this section, for the purpose of
determining the surplus lines tax, the total premium charged for surplus lines insurance
placed in a single transaction with one underwriter or group of underwriters, whether in
one or more policies, shall be allocated to this state in the proportion as the total
premium on the insured properties or operations in this state, computed on the exposure
in this state on the basis of any single standard rating method in use in all states or
countries where the insurance applies, bears to the total premium so computed in all the
states or countries.
D. The surplus lines tax on insurance on motor transit operations conducted between
this and other states is payable on the total premium charged on all surplus lines
insurance less the portion of the premium determined as provided in subsection C of this
section charged for operations in other states taxing the premium of an insured
maintaining its headquarters office in this state or the premium for operations outside
of this state of an insured maintaining its headquarters office outside of this state and
a branch office in this state.
E. Such tax shall be apportioned in the manner provided by section 20-224,
subsection C.
F. All surplus lines taxes collected pursuant to this section are monies that
belong to this state and constitute a debt to this state.
20-417 Failure to remit tax; civil penalty
If any surplus lines broker fails to remit the surplus lines tax provided for by
section 20-416, the broker is liable for a civil penalty of not to exceed twenty-five
dollars for each additional day of delinquency. The director shall collect the tax by
distraint and shall recover the civil penalty by an action in the name of this state
against the insured, the surplus lines broker and the surety on the bond filed pursuant
to section 20-411. All civil penalties are payable into the general fund of this state.
20-418 Denial, revocation or suspension of license; civil penalty
A. The director may deny or suspend for not more than twelve months, revoke or
refuse to renew any surplus lines broker's license and, in addition or in lieu thereof,
may levy a civil penalty and order restitution to any injured party:
1. If the broker fails to comply with any requirement of this article.
2. For any of the causes for which an insurance producer's license may be denied,
revoked or suspended.
B. The procedures provided by this title for the denial, suspension or revocation
of an insurance producer's license apply to denial, suspension or revocation of a surplus
lines broker's license. 20-419 Legal process against surplus lines insurer
A. Every unauthorized nonresident insurer issuing or delivering a surplus lines
policy through a surplus lines broker in this state is conclusively deemed to have
irrevocably appointed the director as its agent for acceptance of service of all legal
process issued in this state in any action or proceeding under or arising out of the
policy, and service of the process on the director is lawful personal service on the
nonresident insurer.
B. Service of process in an action or proceeding against an unauthorized resident
insurer issuing or delivering a surplus lines policy through a surplus lines broker in
this state is valid if served on any person within this state who transacts an insurance
business in this state on behalf of the insurer.
C. Each surplus lines policy shall contain a provision stating the substance of
subsection A or B of this section, whichever is applicable, and designating the person to
whom process shall be mailed as provided in subsection D of this section.
D. Duplicate copies of legal process against a nonresident insurer shall be served
on the director, and at the time of service the plaintiff shall pay to the director the
service of process fee prescribed in section 20-167, taxable as costs in the action. The
director shall immediately mail one copy of the process served to the person designated
by the nonresident insurer in the policy for the purpose, by certified mail, return
receipt requested. Legal process against a resident insurer shall be served on any person
within this state who transacts an insurance business within this state on behalf of the
insurer. The plaintiff shall mail notice of service and a copy of the process to the
person designated by the resident insurer in the policy for the purpose, by certified
mail, return receipt requested. An insurer shall have forty days after the date of
mailing within which to plead, answer or otherwise defend the action.
20-420 Exemptions from surplus lines provisions
A. The sections of this article relating to surplus lines coverages do not apply to
reinsurance or to the following classes of insurance placed by licensed insurance
producers of this state:
1. Ocean marine and foreign trade insurance.
2. Insurance on subjects located, resident or to be performed wholly outside this
state, or on vehicles or aircraft owned and principally garaged outside this state.
3. Insurance on property or operations of railroads engaged in interstate commerce.
B. Any insurance producer that places any of the classes of insurance prescribed
in subsection A of this section with an unauthorized insurer shall keep a record of each
coverage in detail as required of surplus lines insurance pursuant to section
20-414. The insurance producer shall preserve the record for not less than three years
after the expiration or cancellation date of the insurance policy and shall make the
record available in this state and open to the examination of the director. 20-421 Access of director to records of person insured by unauthorized insurer
Upon the director's request any person in this state who is the insured under any
policy issued by an unauthorized insurer upon a subject of insurance resident, located or
to be performed in this state at the time the policy was issued, shall produce for
examination all policies and other documents evidencing and relating to the insurance,
and shall disclose the amount of the gross premiums paid or agreed to be paid for the
insurance, through whom the insurance was procured, and such other information relative
to the placing of the insurance as may reasonably be required.
20-422 Alien insurance for coverage in Mexico
A. A person shall not solicit or accept applications in this state for insurance or
collect a commission on a policy that is to be effective in Mexico and only outside the
geographical limits of this state and that is to be issued by an alien insurer or
insurers not authorized to transact insurance in this state, unless that person is
licensed pursuant to section 20-411, 20-411.01 or 20-411.02 or any agent or employee of
that licensed person or any other authorized insurance producer in this state provided
that the insurance producer obtains the coverage through that licensed person.
B. Except for sections 20-411, 20-411.01, 20-411.02, 20-414 and 20-418, the
insurance prescribed in this section is not subject to this article.
C. Any policy and any evidence of coverage that is issued by an alien insurer and
that is issued pursuant to this section for delivery to the insured in this state shall
contain a conspicuously stamped or written notice in bold-faced type that states:
This policy is issued by an insurance company that is not regulated by the
ARIZONA department of insurance. The insurance company may not provide claims
service and may not be subject to service of process in ARIZONA. If the
insurance company becomes insolvent, insureds or claimants will not be
eligible for protection under ARIZONA law.
20-441 Purpose of article; definition
A. Among the purposes of this article is the regulation of trade practices in the
business of insurance in accordance with the intent of Congress as expressed in the act
of Congress of March 9, 1945, 59 Stat. 33, by defining, or providing for the
determination of, all such practices in this state that constitute unfair methods of
competition or unfair or deceptive acts or practices and by prohibiting the trade
practices so defined or determined.
B. For the purposes of this article, "insurance company" or "insurer" means any:
1. Stock, mutual, reciprocal or title insurer.
2. Fraternal benefit society.
3. Health care services organization.
4. Hospital, medical, dental and optometric service corporation.
5. Prepaid dental plan organization.
6. Mechanical reimbursement reinsurer.
7. Prepaid legal plan.
8. Lloyd's association.
9. Service company as defined in this title.
10. Any other entity licensed under this title.
20-442 Unfair trade practices prohibited
No person shall engage in this state in any trade practice which is prohibited by
this article, or defined in this article as, or determined pursuant to this article to
be, an unfair method of competition or an unfair or deceptive act or practice in the
business of insurance.
20-443.01 Misrepresentation in sale of insurance; violation; classification
A. It is unlawful for a person to knowingly make any misrepresentation as
proscribed by section 20-443 in the sale of insurance.
B. A person who violates this section is guilty of a class 5 felony.
20-443 Misrepresentations and false advertising of policies
A person shall not make, issue or circulate, or cause to be made, issued or
circulated, any estimate, illustration, circular, sales material or statement:
1. Misrepresenting the terms of any policy issued or to be issued or the benefits
or advantages promised or the dividends or share of the surplus to be received.
2. Making any false or misleading statement as to the dividends or share of surplus
previously paid on similar policies.
3. Making any misleading representation or any misrepresentation as to the
financial condition of any insurer or as to the legal reserve system upon which any life
insurer operates.
4. Using any name or title of any policy or class of policies misrepresenting the
true nature of the policy.
5. Making any misrepresentation to any policyholder for the purpose of inducing or
tending to induce the policyholder to lapse, forfeit, surrender, retain or convert any
insurance policy.
6. Referring to the coverage or any of the provisions of chapter 3, article 6 or 7
of this title in connection with the sale or attempted sale of any policy of insurance,
except in connection with the notice prescribed in section 20-400.10, subsection E,
section 20-410, subsection B and section 20-422, subsection C.
20-444 False or deceptive advertising of insurance or status as insurer
A. No person shall make, publish, disseminate, circulate or place before the
public, or cause, directly or indirectly, to be made, published, disseminated, circulated
or placed before the public, in a newspaper, magazine or other publication, or in the
form of a notice, circular, pamphlet, letter or poster, or over any radio or television
station, or in any other way, any advertisement, announcement, sales material or
statement containing any assertion, representation or statement with respect to the
business of insurance or with respect to any person in the conduct of his insurance
business, which is untrue, deceptive or misleading.
B. No person that is not an insurer shall assume or use any name which deceptively
infers or suggests that it is an insurer.
20-445 Defamation
No person shall make, publish, disseminate or circulate, directly or indirectly, or
aid, abet or encourage the making, publishing, disseminating or circulating of any oral
or written statement or any pamphlet, circular, article, sales material or literature
which is false or maliciously critical of or derogatory to the financial condition of an
insurer, and which is calculated to injure any person engaged in the business of
insurance, or any domestic corporation or group being formed pursuant to this code for
the purpose of becoming an insurer. This provision shall not be deemed to restrict the
right, lawfully exercised, of newspapers, magazines, radio and television stations, and
similar public media for news dissemination, objectively to publish and disseminate news.
20-446 Acts tending to result in unreasonable restraint or monopoly of insurance business
No person shall enter into any agreement to commit, or by any concerted action
commit, any act of boycott, coercion or intimidation resulting in or tending to result in
unreasonable restraint of, or monopoly in, the business of insurance.
20-447 False financial statements or records
A. No person shall file with any public official, or make, publish, disseminate,
circulate or deliver to any person, or place before the public, or cause, directly or
indirectly, to be made, published, disseminated, circulated or delivered to any person,
or placed before the public, any false statement of the financial condition of an insurer
with intent to deceive.
B. No person shall make any false entry in any book, report or statement of any
insurer or other person required to have records under this title, with intent to deceive
any agent or examiner lawfully appointed to examine into its condition or into any of its
affairs, or any public official to whom the insurer or person is required by law to
report, or who has authority by law to examine into its condition or into any of its
affairs, or, with like intent, wilfully omit to make a true entry of any material fact
pertaining to the business of the insurer or person in any book, report or statement
thereof.
20-448.01 Required insurance procedures relating to HIV information; confidentiality; violations; penalties; definitions
A. In this section unless the context otherwise requires:
1. "Confidential HIV-related information" means information concerning whether a
person has had an HIV-related test or has HIV infection, HIV-related illness or acquired
immune deficiency syndrome and includes information which identifies or reasonably
permits identification of that person or the person's contacts.
2. "HIV" means the human immunodeficiency virus.
3. "HIV-related test" means a laboratory test or series of tests for the virus,
components of the virus or antibodies to the virus thought to indicate the presence of
HIV infection.
4. "Protected person" means a person who takes an HIV-related test or who has been
diagnosed as having HIV infection, acquired immune deficiency syndrome or HIV-related
illness.
5. "Person" includes all entities subject to regulation under title 20, the
employees, contractors and agents thereof, and anyone performing insurance related tasks
for such entities, employees, contractors or agents.
B. Except as otherwise specifically authorized or required by this state or by
federal law, no person may require the performance of, or perform an HIV-related test
without first receiving the specific written informed consent of the subject of the test
who has capacity to consent or, if the subject lacks capacity to consent, of a person
authorized pursuant to law to consent for that person. Written consent shall be in a
form as prescribed by the director.
C. No person who obtains confidential HIV-related information in the course of
processing insurance information or insurance applications or pursuant to a release of
confidential HIV-related information may disclose or be compelled to disclose that
information except to the following:
1. The protected person or, if the protected person lacks capacity to consent, a
person authorized pursuant to law to consent for the protected person.
2. A person to whom disclosure is authorized in writing pursuant to a release as
set forth in subsection E of this section, including but not limited to a physician
designated by the insured or a medical information exchange for insurers operated under
procedures intended to ensure confidentiality, provided that in the case of a medical
information exchange:
(a) The insurer will not report that blood tests of an applicant showed the
presence of the AIDS virus antibodies, but only that unspecified blood test results were
abnormal.
(b) Reports must use a general code that also covers results of tests for many
diseases or conditions, such as abnormal blood counts that are not related to HIV, AIDS,
AIDS related complex or similar diseases.
3. A government agency specifically authorized by law to receive the
information. The agency is authorized to redisclose the information only pursuant to
this section or as otherwise permitted by law.
4. A person regulated by this title to which disclosure is ordered by a court or
administrative body pursuant to section 36-665.
5. The industrial commission or parties to an industrial commission claim pursuant
to the provisions of section 23-908, subsection D and section 23-1043.02.
D. Test results and application responses may be shared with the underwriting
departments of the insurer and reinsurers, or to those contractually retained medical
personnel, laboratories, and insurance affiliates, excluding agents and brokers, which
are involved in underwriting decisions regarding the individual's application if
disclosure is reasonably necessary to make the underwriting decision regarding such
application, and claims information may be shared with claims personnel and attorneys
reviewing claims if disclosure is reasonably necessary to process and resolve claims.
E. A release of confidential HIV-related information pursuant to subsection C,
paragraph 2 of this section shall be signed by the protected person or, if the protected
person lacks capacity to consent, a person authorized pursuant to law to consent for the
protected person. A release shall be dated and shall specify to whom disclosure is
authorized, the purpose for disclosure and the time period during which the release is
effective. A general authorization for the release of medical or other information is
not a release of confidential HIV-related information unless the authorization
specifically indicates its purpose as a general authorization and an authorization for
the release of confidential HIV-related information and complies with the requirements of
this section.
F. A person to whom confidential HIV-related information is disclosed pursuant to
this section shall not disclose the information to another person except as authorized by
this section. This subsection does not apply to the protected person or a person who is
authorized pursuant to law to consent for the protected person.
G. If a disclosure of confidential HIV-related information is made pursuant to the
provisions of a written release as permitted by subsection C, paragraph 2 of this
section, the disclosure shall be accompanied by a statement in writing which warns that
the information is from confidential records which are protected by state law that
prohibits further disclosure of the information without the specific written consent of
the person to whom it pertains or as otherwise permitted by law.
H. The person making a disclosure in accordance with subsection C, paragraphs 3, 4
and 5, and subsection G of this section shall keep a record of all disclosures for the
time period prescribed by the director. On request, a protected person or his legal
representative shall have access to the record.
I. Except as otherwise provided pursuant to this section or subject to an order or
search warrant issued pursuant to section 36-665, no person who receives confidential
HIV-related information pursuant to a release of confidential HIV-related information may
disclose that information to another person or legal entity or be compelled by subpoena,
order, search warrant or other judicial process to disclose that information to another
person or legal entity.
J. The director shall adopt rules to implement the allowable tests and testing
procedures, written consent to perform a human immunodeficiency virus relate test,
procedures for confidentiality and disclosure of medical information and procedures for
gathering underwriting information and may adopt additional rules reasonable and
necessary to implement this section.
K. Notwithstanding any other provision of law to the contrary, nothing in this
section shall be interpreted to restrict the director's authority to full access to
records of any entity subject to regulation under title 20, including but not limited to
all records containing confidential HIV-related information. The director may only
redisclose confidential HIV-related information in accordance with this section.
L. A protected person, whose rights provided in this section have been violated by
a person or entity described in subsection A, paragraph 5 of this section, has those
individual remedies specified in section 20-2118 against such a person or entity.
20-448.02 Genetic testing; informed consent; definitions
A. Except as otherwise specifically authorized or required by this state or by
federal law, a person shall not require the performance of or perform a genetic test
without first receiving the specific written informed consent of the subject of the test
who has the capacity to consent or, if the person subject to the test lacks the capacity
to consent, of a person authorized pursuant to law to consent for that person. Written
consent shall be in a form as prescribed by the director. The results of a genetic test
performed pursuant to this subsection are privileged and confidential and may not be
released to any party without the expressed consent of the subject of the test.
B. As used in this section:
1. "Gene products" means gene fragments, nucleic acids or proteins derived from
deoxyribonucleic acids that would be a reflection of or indicate DNA sequence
information.
2. "Genetic test" means an analysis of an individual's DNA, gene products or
chromosomes that indicates a propensity for or susceptibility to illness, disease,
impairment or other disorders, whether physical or mental, or that demonstrates genetic
or chromosomal damage due to environmental factors, or carrier status for disease or
disorder.
20-448 Unfair discrimination; definitions
A. A person shall not make or permit any unfair discrimination between individuals
of the same class and equal expectation of life in the rates charged for any contract of
life insurance or of life annuity or in the dividends or other benefits payable or in any
other of the terms and conditions of the contract.
B. A person shall not make or permit any unfair discrimination respecting
hemophiliacs or between individuals of the same class and of essentially the same hazard
in the amount of premium, policy fees or rates charged for any policy or contract of
disability insurance or in the benefits payable or in any of the terms or conditions of
the contract, or in any other manner whatever. The provisions of this subsection
regarding hemophiliacs do not apply to any policy or subscription contract which provides
only benefits for specific diseases or for accidental injuries or which provides only
indemnity for blood transfusion services or replacement of whole blood products,
fractions or derivatives.
C. As to kinds of insurance other than life and disability, a person shall not make
or permit any unfair discrimination in favor of particular persons or between insureds or
subjects of insurance having substantially like insuring, risk and exposure factors, or
expense elements, in the terms or conditions of any insurance contract, or in the rate or
amount of premium charged.
D. An insurer shall not refuse to consider an application for life or disability
insurance on the basis of a genetic condition, developmental delay or developmental
disability.
E. The rejection of an application or the determining of rates, terms or conditions
of a life or disability insurance contract on the basis of a genetic condition,
developmental delay or developmental disability constitutes unfair discrimination, unless
the applicant's medical condition and history and either claims experience or actuarial
projections establish that substantial differences in claims are likely to result from
the genetic condition, developmental delay or developmental disability.
F. In addition to the provisions in subsection E of this section, the rejection of
an application or the determination of rates, terms or conditions of a disability
insurance contract on the basis of a genetic condition constitutes unfair discrimination
in the absence of a diagnosis of the condition related to information obtained as a
result of a genetic test.
G. An insurer that offers life, disability, property or liability insurance
contracts shall not deny a claim incurred or deny, refuse, refuse to renew, restrict,
cancel, exclude or limit coverage or charge a different rate for the same coverage solely
on the basis that the insured or proposed insured is or has been a victim of domestic
violence or is an entity or individual that provides counseling, shelter, protection or
other services to victims of domestic violence. If an insurer that offers life,
disability, property or liability insurance contracts denies a claim incurred or denies,
refuses, refuses to renew, restricts, cancels, excludes or limits coverage or charges a
different rate for the same coverage on the basis of a mental or physical condition and
the insured or the proposed insured is or has been a victim of domestic violence, the
insurer shall submit a written explanation to the insured or proposed insured of the
reasons for the insurer's actions, in accordance with section 20-2110. The fact that an
insured or proposed insured is or has been the victim of domestic violence is not a
mental or physical condition. Nothing contained in this subsection is intended to
provide any private right or cause of action to or on behalf of any applicant or
insured. It is the specific intent of this subsection to provide solely an
administrative remedy to the director for any violation of this section. Nothing in this
subsection prevents an insurer from refusing to issue a life insurance policy insuring a
person who has been the victim of domestic violence if either of the following is true:
1. The family or household member who commits the act of domestic violence is the
applicant for or prospective owner of the policy or would be the beneficiary of the
policy and any of the following is true:
(a) The applicant or prospective beneficiary of the policy is known, on the basis
of police or court records, to have committed an act of domestic violence.
(b) The insurer has knowledge of an arrest or conviction for a domestic violence
related offense by the family or household member.
(c) The insurance company has other reasonable grounds to believe, and those
grounds are corroborated, that the applicant or proposed beneficiary of a policy is a
family or household member committing acts of domestic violence.
2. The applicant or prospective owner of the policy lacks an insurable interest in
the insured.
H. Nothing in subsection G of this section prevents an insurer that:
1. Offers life or disability insurance contracts from underwriting coverage on the
basis of an insured's or proposed insured's mental or physical condition if the
underwriting:
(a) Does not consider whether or not the mental or physical condition was caused by
an act of domestic violence.
(b) Is the same for an insured or proposed insured who is not the victim of
domestic violence as it is for an insured or proposed insured who is the victim of
domestic violence.
(c) Does not violate any other rule or law.
2. Offers property or liability insurance contracts from underwriting coverage on
the basis of the insured's claims history or characteristics of the insured's property
and using rating criteria consistent with section 20-384.
I. Any determination made pursuant to section 20-2537 by the external independent
review organization shall not be considered in connection with the evaluation of whether
any person subject to this article has complied with this section.
J. A property or liability insurer may exclude coverage for losses caused by an
insured's intentional or fraudulent act. The exclusion shall not deny an insured's
otherwise covered property loss if the property loss is caused by an act of domestic
violence by another insured under the policy and the insured who claims the property loss
cooperates in any investigation relating to the loss and did not cooperate in or
contribute to the creation of the property loss. The insurer may apply reasonable
standards of proof for claims filed under this subsection. The insurer may limit the
payment to the insured's insurable interest in the property minus any payment made to any
mortgagee or other party with a secured interest in the property. This subsection does
not require an insurer to pay any amount that is more than the amount of the loss or
property coverage limits. An insurer who pays a claim under this subsection has the right
of subrogation against any person except the victim of the domestic violence.
K. All insurers shall adopt and adhere to written policies that are consistent with
title 20, chapter 11 and that specify the procedures to be followed by employees,
contractors, producers, agents and brokers to ensure the privacy of and to help protect
the safety of a victim of domestic violence when taking an application, investigating a
claim, pursuing subrogation or taking any other action relating to a policy or claim
involving a victim of domestic violence. Insurers shall distribute the written policies
to employees, contractors, producers, agents and brokers who have access to personal or
privileged information regarding domestic violence.
L. For the purposes of this section:
1. "Developmental delay" means a delay of at least one and one-half standard
deviations from the norm.
2. "Developmental disability" has the same meaning prescribed in section 36-551.
3. "Domestic violence" means any act that is a dangerous crime against children as
defined in section 13-604.01 or an offense defined in section 13-1201 through 13-1204,
13-1302 through 13-1304, 13-1502 through 13-1504 or 13-1602, section 13-2810, section
13-2904, subsection A, paragraph 1, 2, 3 or 6, section 13-2916 or section 13-2921,
13-2921.01, 13-2923 or 13-3623, if any of the following applies:
(a) The relationship between the victim and the defendant is one of marriage or
former marriage or of persons residing or having resided in the same household.
(b) The victim and the defendant have a child in common.
(c) The victim or the defendant is pregnant by the other party.
(d) The victim is related to the defendant or the defendant's spouse by blood or
court order as a parent, grandparent, child, grandchild, brother or sister, or by
marriage as a parent-in-law, grandparent-in-law, stepparent, step-grandparent, stepchild,
step-grandchild, brother-in-law or sister-in-law.
(e) The victim is a child who resides or has resided in the same household as the
defendant and is related by blood to a former spouse of the defendant or to a person who
resides or has resided in the same household as the defendant.
4. "Gene products" means gene fragments, nucleic acids or proteins derived from
deoxyribonucleic acids that would be a reflection of or indicate DNA sequence
information.
5. "Genetic condition" means a specific chromosomal or single-gene genetic
condition.
6. "Genetic test" means an analysis of an individual's DNA, gene products or
chromosomes that indicates a propensity for or susceptibility to illness, disease,
impairment or other disorders, whether physical or mental, or that demonstrates genetic
or chromosomal damage due to environmental factors, or carrier status for a disease or
disorder.
20-449 Rebates on life or disability insurance
Except as otherwise expressly provided by law, no person shall knowingly permit or
offer to make or make any contract of life insurance, life annuity or disability
insurance, or agreement as to such contract other than as plainly expressed in the
contract issued thereon, or pay or allow, or give or offer to pay, allow or give,
directly or indirectly, as an inducement to such insurance or annuity, any rebate of
premiums payable on the contract, or any special favor or advantage in the dividends or
other benefits thereon, or any valuable consideration or inducement whatever not
specified in the contract.
20-450 Practices not prohibited as discrimination or rebates in life and disability insurance
Nothing in sections 20-448 or 20-449 shall be construed as including within the
definition of discrimination or rebates any of the following practices:
1. In the case of any contract of life insurance or life annuity, paying bonuses to
policyholders or otherwise abating their premiums in whole or part out of surplus
accumulated from nonparticipating insurance, but any such bonuses or abatement of
premiums shall be fair and equitable to policyholders and for the best interests of the
insurer and its policyholders.
2. In the case of life insurance policies issued on the industrial debit plan,
making allowance to policyholders who have continuously for a specified period made
premium payments directly to an office of the insurer in an amount which fairly
represents the saving in collection expense.
3. Readjustment of the rate of premium for a group insurance policy based on the
loss or expense experience thereunder, at the end of the first or any subsequent policy
year of insurance thereunder, which may be made retroactive only for such policy year.
4. Issuing life or disability policies on a salary savings or payroll deduction
plan at a reduced rate commensurate with the savings made by the use of such plan.
20-451 Rebates on other than life or disability insurance
No insurer or employee, insurance producer or representative thereof shall knowingly
charge, demand or receive a premium for any policy of insurance, other than life or
disability insurance, except in accordance with any applicable filing on file with the
director. No such insurer, employee, insurance producer or representative shall offer,
pay, allow or give, directly or indirectly, as an inducement to insurance, or after
insurance has been effected, any rebate, discount, abatement, credit or reduction of the
premium named in a policy of insurance, or any special favor or advantage in the
dividends or other benefits to accrue thereon, or any valuable consideration or
inducement whatever, not specified in the policy of insurance, except to the extent
provided for in an applicable filing. No insured named in a policy of insurance nor any
representative or employee of the insured shall knowingly receive or accept, directly or
indirectly, any such rebate, discount, abatement, credit or reduction of premium, or any
such special favor or advantage or valuable consideration or inducement. Nothing in this
section shall be construed as prohibiting the payment of commissions or other
compensation to duly licensed insurance producers nor as prohibiting any insurer from
allowing or returning to its participating policyholders, members or subscribers
dividends, savings or unabsorbed premium deposits. As used in this section "insurance"
includes suretyship and "policy" includes bond.
20-452.01 Designation of particular insurer or person transacting insurance prohibited
No person engaged in the business of financing the purchase of real or personal
property or of lending money on the security of real or personal property, and no
trustee, director, officer, agent or other employee, or affiliate of, any such person
shall require, as a condition precedent to financing the purchase of such property or to
lending money upon the security thereof, or as a condition prerequisite for the renewal
or extension of any such loan or for the performance of any other act in connection
therewith, that the person for whom such purchase is to be financed or to whom the money
is to be loaned, or for whom such extension, renewal or other act is to be granted or
performed, negotiate any insurance or renewal thereof covering such property through a
particular insurer or person transacting insurance.
20-452.02 Exceptions
Section 20-452.01 shall not prevent:
1. The exercise by any person engaged in such business of his right to approve or
disapprove of the insurer selected to underwrite the insurance, nor of his right to
furnish such insurance or to renew any insurance required by the contract of sale or
trust deed or other loan agreement if the borrower or purchaser shall have failed to
furnish the insurance or renewal thereof within such reasonable time or form as may be
specified in the sale or loan agreement.
2. Any lender from recommending to any borrower or prospective borrower the placing
of insurance with a specified insurer, or through a specified insurer or person
transacting insurance, as long as such recommendation does not violate the provisions of
section 20-452.01.
3. The free choice of insurer or person transacting insurance by any borrower or
purchaser at any time, and he may revoke any designation of insurer or person transacting
insurance at any time, irrespective of the provisions of any loan or purchase agreement
or trust deed.
20-452.03 Evidence of nonviolation
In any trial, hearing or proceeding to determine a violation of section 20-452.01, a
written statement or authorization signed by the person for whom any purchase is
financed, to whom any money is loaned or for whom any extension, renewal or other act in
connection with a loan is to be granted or performed, declaring that such person
voluntarily chooses the insurer or person transacting insurance through whom the
insurance or its renewal was transacted, and that the choice of such insurer or person
transacting insurance was not made a condition precedent to such purchase, loan,
extension, renewal or other act, shall be prima facie evidence that no violation of
section 20-452.01 has occurred, if the borrower or purchaser in his own handwriting shall
have written the name of his chosen insurer or person transacting insurance on a written
statement or authorization of such insurer or person transacting insurance.
20-452.04 Investigation by director of alleged violations
The director may investigate any person, whether licensed or not, for the purpose of
determining if there has been any violation of section 20-452.01; however, if such
investigation be upon a complaint, the complainant must be party to the contract of sale,
trust deed, mortgage, or loan agreement, and must make such complaint within three months
of the execution or any modification thereof.
20-452 Prohibited inducements
Except as permitted in sections 20-453 and 20-454, any insurer, insurance producer
or other person, as an inducement to insurance or in connection with any insurance
transaction, shall not provide in any policy for or offer, sell, buy or offer or promise
to buy, sell, give, promise or allow to the insured or prospective insured or to any
other person on behalf of the insured or prospective insured in any manner:
1. Any employment.
2. Any shares of stock or other securities issued or at any time to be issued or
any interest therein or rights thereto.
3. Any advisory board contract, or any similar contract, agreement or
understanding, offering, providing for or promising any special profits.
4. Any prizes, goods, wares, merchandise or tangible property of an aggregate value
of more than ten dollars.
20-453 Programs for purchase by policyholders of securities of insurance companies
Notwithstanding the provisions of section 20-452 and notwithstanding any other
provision of law, domestic life insurers, whether of the stock, mutual, fraternal or
limited capital stock type, shall not be prohibited from engaging in a program whereby
the holders of their life insurance policies are offered the right from time to time to
buy for cash or to exchange dividends on such policies or other policy values resulting
therefrom for securities in domestic corporations engaged in or organized to engage in
the insurance business, but no such insurer shall engage in any such program unless the
right to buy or the dividends or other policy values subject to exchange result from
ownership of or are payable on account of a policy that from its inception is or that,
within a period of not to exceed six years from its issue date, becomes a life insurance
policy on a permanent plan other than term. From and after being placed on such permanent
plan, every such policy shall be in full compliance with sections 20-1231 and 20-1231.01
(standard nonforfeiture law) computed as from the date of being placed on such permanent
plan. No such offering shall be deemed to be exempt from title 44, chapter 12.
20-454 Programs for purchase by policyholders of securities of companies not engaged in insurance
Notwithstanding the provisions of section 20-452 and notwithstanding any other
provision of law, domestic life insurers, whether of the stock, mutual, fraternal or
limited capital stock type that on January 1, 1955 are engaged pursuant to the
requirements of title 44, chapter 12 in a program whereby the holders of their life
insurance policies are offered the right from time to time to buy for cash or to exchange
dividends on such policies or other policy values resulting therefrom for securities in
domestic corporations neither engaged in nor organized to engage in the insurance
business shall be permitted, subject to the requirements of title 44, chapter 12, to
continue to engage in such program notwithstanding the adoption of this title, but no
such insurer shall so engage unless the right to buy or the dividends or other policy
values subject to exchange result from ownership of or are payable on account of a policy
that from its inception is or that, within a period of not to exceed six years from its
issue date, becomes a life insurance policy on a permanent plan other than term. From and
after being placed on such permanent plan, every such policy shall be in full compliance
with sections 20-1231 and 20-1231.01 (standard nonforfeiture law), computed as from the
date of being placed on such permanent plan. No such program shall be engaged in by the
insurer subsequent to January 1, 1960, except that any such insurer may, subject to title
44, chapter 12, cause to be delivered stock in such corporation for an indefinite period
subsequent to such limiting date if the right to acquire the stock arises as a result of
a policy actually issued and delivered prior to such date. 20-455 Interlocking ownership or management; multiple directorship
A. Any insurer may retain, invest in or acquire the whole or any part of the
capital stock of any other insurer or insurers, or have a common management with any
other insurer or insurers, unless such retention, investment, acquisition or common
management is inconsistent with any other provision of this title, or unless by reason
thereof the business of such insurers with the public is conducted in a manner which
substantially lessens competition generally in the insurance business or tends to create
a monopoly therein.
B. Any person otherwise qualified may be a director of two or more insurers which
are competitors, unless the effect thereof is to substantially lessen competition between
insurers generally or tend to create a monopoly.
20-456 Cease and desist order for defined or prohibited practices; civil penalty
A. If after a hearing the director finds that the person charged has engaged or is
engaging in any act or practice defined in or prohibited under this article as an illegal
or unfair method of competition or an unfair or deceptive act or practice, the director
shall order the person to cease and desist from the proscribed acts or practices.
B. If the act or practice is a violation of section 20-443, 20-443.01, 20-444,
20-445, 20-446, 20-447, 20-448, 20-448.01, 20-448.02, 20-449, 20-451, 20-452 or 20-467 or
a general business practice of committing or performing acts or omissions proscribed by
sections 20-461 and 20-468 and 20-469, the director may also impose a civil penalty of
not more than one thousand dollars for each act or violation but not to exceed an
aggregate penalty of ten thousand dollars unless the person intentionally violates any
section enumerated in this subsection, in which case the director may impose a civil
penalty of up to five thousand dollars for each act or violation but not to exceed an
aggregate penalty of fifty thousand dollars in any six month period.
C. No order of the director pursuant to this section or order of a court to enforce
it, or holding of a hearing, may in any manner relieve or absolve any person affected by
the order or hearing from any other liability, penalty or forfeiture under law.
20-457 Premature disposal of premium notes prohibited
An insurer and its insurance producer shall not hypothecate, sell or dispose of a
promissory note received in payment of any part of a premium on a policy of insurance
applied for prior to the delivery of the policy.
20-458 Fraudulent statement in application; classification
Any life insurance producer, examining physician or other person who knowingly makes
a false or fraudulent statement or representation in or relative to an application for
life or disability insurance, or who makes any such statement to obtain a fee,
commission, money or benefit is guilty of a class 2 misdemeanor.
20-459 Deferred dividends; life
On and after January 1, 1961, no person shall make or issue or offer to make or
issue any contract of life insurance or of life annuity which provides that any premiums,
dividends, excess interest, mortality savings, gains from lapses, loadings, or earnings
and accumulations therefrom, be payable only to those of a group of policyholders who
make premium payments to the end of any period of time in excess of one year.
20-460 Free choice of insurance producer
No casualty or property insurance company, including any subsidiary of any such
company, may offer any insurance program in this state to exclusive insurance producers
without offering the same insurance program through all of its other authorized insurance
producers authorized for similar types of insurance coverage with the exception of
employer-employee programs making use of central premium collection.
20-461 Unfair claim settlement practices
A. A person shall not commit or perform with such a frequency to indicate as a
general business practice any of the following:
1. Misrepresenting pertinent facts or insurance policy provisions relating to
coverages at issue.
2. Failing to acknowledge and act reasonably and promptly upon communications with
respect to claims arising under an insurance policy.
3. Failing to adopt and implement reasonable standards for the prompt investigation
of claims arising under an insurance policy.
4. Refusing to pay claims without conducting a reasonable investigation based upon
all available information.
5. Failing to affirm or deny coverage of claims within a reasonable time after
proof of loss statements have been completed.
6. Not attempting in good faith to effectuate prompt, fair and equitable
settlements of claims in which liability has become reasonably clear.
7. As a property or casualty insurer, failing to recognize a valid assignment of a
claim. The property or casualty insurer shall have the rights consistent with the
provisions of its insurance policy to receive notice of loss or claim and to all defenses
it may have to the loss or claim, but not otherwise to restrict an assignment of a loss
or claim after a loss has occurred.
8. Compelling insureds to institute litigation to recover amounts due under an
insurance policy by offering substantially less than the amounts ultimately recovered in
actions brought by the insureds.
9. Attempting to settle a claim for less than the amount to which a reasonable
person would have believed he was entitled by reference to written or printed advertising
material accompanying or made part of an application.
10. Attempting to settle claims on the basis of an application which was altered
without notice to, or knowledge or consent of, the insured.
11. Making claims payments to insureds or beneficiaries not accompanied by a
statement setting forth the coverage under which the payments are being made.
12. Making known to insureds or claimants a policy of appealing from arbitration
awards in favor of insureds or claimants for the purpose of compelling them to accept
settlements or compromises less than the amount awarded in arbitration.
13. Delaying the investigation or payment of claims by requiring an insured, a
claimant or the physician of either to submit a preliminary claim report and then
requiring the subsequent submission of formal proof of loss forms, both of which
submissions contain substantially the same information.
14. Failing to promptly settle claims if liability has become reasonably clear under
one portion of the insurance policy coverage in order to influence settlements under
other portions of the insurance policy coverage.
15. Failing to promptly provide a reasonable explanation of the basis in the
insurance policy relative to the facts or applicable law for denial of a claim or for the
offer of a compromise settlement.
16. Attempting to settle claims for the replacement of any nonmechanical sheet metal
or plastic part which generally constitutes the exterior of a motor vehicle, including
inner and outer panels, with an aftermarket crash part which is not made by or for the
manufacturer of an insured's motor vehicle unless the part meets the specifications of
section 44-1292 and unless the consumer is advised in a written notice attached to or
printed on a repair estimate which:
(a) Clearly identifies each part.
(b) Contains the following information in ten point or larger type:
This estimate has been prepared based on the use of replacement parts supplied
by a source other than the manufacturer of your motor vehicle. Warranties
applicable to these replacement parts are provided by the manufacturer or
distributor of these parts rather than the manufacturer of your vehicle.
17. As an insurer subject to section 20-826, 20-1342, 20-1402 or 20-1404, or as an
insurer of the same type as those subject to section 20-826, 20-1342, 20-1402 or 20-1404
that issues policies, contracts, plans, coverages or evidences of coverage for delivery
in this state, failing to pay charges for reasonable and necessary services provided by
any physician licensed pursuant to title 32, chapter 8, 13 or 17, if the services are
within the lawful scope of practice of the physician and the insurance coverage includes
diagnosis and treatment of the condition or complaint, regardless of the nomenclature
used to describe the condition, complaint or service.
18. Failing to comply with chapter 15 of this title.
19. Denying liability for a claim under a motor vehicle liability policy in effect
at the time of an accident without having substantial facts based on reasonable
investigation to justify the denial for damages or injuries that are a result of the
accident and that were caused by the insured if the denial is based solely on a medical
condition that could affect the insured's driving ability.
B. Nothing in subsection A, paragraph 17 of this section shall be construed to
prohibit the application of deductibles, coinsurance, preferred provider organization
requirements, cost containment measures or quality assurance measures if they are equally
applied to all types of physicians referred to in this section, and if any limitation or
condition placed upon payment to or upon services, diagnosis or treatment by any
physician covered by this section is equally applied to all physicians referred to in
subsection A, paragraph 16 of this section, without discrimination to the usual and
customary procedures of any type of physician. A determination under this section of
discrimination to the usual and customary procedures of any type of physician shall not
be based on whether an insurer applies medical necessity review to a particular type of
service or treatment.
C. In prescribing rules to implement this section, the director shall follow, to
the extent appropriate, the national association of insurance commissioners unfair claims
settlement practices model regulation.
D. Nothing contained in this section is intended to provide any private right or
cause of action to or on behalf of any insured or uninsured resident or nonresident of
this state. It is, however, the specific intent of this section to provide solely an
administrative remedy to the director for any violation of this section or rule related
to this section.
E. The director shall deposit, pursuant to sections 35-146 and 35-147, all civil
penalties collected pursuant to this article in the state general fund.
20-462 Timely payment of claims
A. From and after July 15, 1986 any first party claim not paid within thirty days
after the receipt of an acceptable proof of loss by the insurer which contains all
information necessary for claim adjudication shall be required to pay interest at the
legal rate from the date the claim is received by the insurer. The interest shall be
calculated on the amount the insurer is legally obligated to pay according to the terms
of the insurance contract under which the claim is being submitted.
B. For purposes of determining whether the claim has been paid within thirty days,
the date of payment shall be deemed to have been received by the addressee on the date
shown by the postmark or other official mark of the United States mail stamped on the
payment envelope. If the receipt disputes the date where there is no mark or the mark is
not legible, the sender may establish the mailing or transfer date by competent evidence.
C. This section shall not apply to:
1. Claims submitted for payment under medicare, title XVIII of the social security
act (42 United States Code section 1301).
2. Claims submitted under a medicare supplement contract where, according to the
terms of the supplement contract, claims will be based upon the amount paid by medicare.
3. The payment of a claim shall not be overdue during any period in which the
insurer is unable to pay such claim because there is no recipient who is legally able to
give a valid release for such payment, or in which the insurer is unable to determine who
is entitled to receive such payment, if the insurer has promptly notified the claimant of
such inability and has offered in good faith to promptly pay said claim upon
determination of who is entitled to receive such payment.
4. Claims submitted to a person who is the processing agent for a foreign insurer
or other person providing an insurance program for retirees residing in ARIZONA.
5. Claims denied in good faith within thirty days after receipt of acceptable
proofs of loss.
D. This section shall apply only to claims that are to be paid by the insurer
directly to the insured, to a beneficiary named in the contract, or to a provider who has
been assigned the right to receive benefits under the contract by the insured.
20-463 Fraud; injunction; penalties; restitution; definitions
A. It is a fraudulent practice and unlawful for a person to knowingly:
1. Present, cause to be presented or prepare with the knowledge or belief that it
will be presented an oral or written statement, including computer generated documents,
to or by an insurer, reinsurer, purported insurer or reinsurer, insurance producer or
agent of a reinsurer that contains untrue statements of material fact or that fails to
state any material fact with respect to any of the following:
(a) An application for the issuance or renewal of an insurance policy.
(b) The rating of an insurance policy.
(c) A claim for payment or benefit pursuant to an insurance policy.
(d) Premiums paid on any insurance policy.
(e) Payments made pursuant to the terms of any insurance policy.
(f) An application for a certificate of authority.
(g) The financial condition of an insurer, reinsurer or purported insurer or
reinsurer.
(h) The acquisition of an insurer or reinsurer or the concealing of any information
concerning any fact material to the acquisition.
2. Solicit or accept new or renewal insurance risks by or for any insolvent
insurer, reinsurer or other entity licensed to transact insurance business in this state.
3. Conceal or attempt to conceal from the department or remove or attempt to remove
from the home office, place of safekeeping or other place of business of any insurer,
reinsurer or other entity licensed to transact insurance business in this state part or
all of the assets or records of the assets, transactions and affairs.
4. Divert or attempt or conspire to divert the monies of an insurer, reinsurer,
entity licensed to transact insurance business in this state or other person in
connection with:
(a) The transaction of insurance or reinsurance.
(b) The conduct of business activities by any insurer, reinsurer or other entity
licensed to transact insurance business in this state.
(c) The formation, acquisition or dissolution of any insurer, reinsurer or other
entity licensed to transact insurance business in this state.
5. Assist, abet, solicit or conspire with another person to violate paragraph 1 of
this subsection.
6. Employ, use or act as a runner, capper or steerer for the purposes of violating
paragraph 1 of this subsection.
B. A person who acts without malice, fraudulent intent or bad faith is not subject
to liability for filing reports or furnishing orally or in writing other information
concerning suspected, anticipated or completed fraudulent insurance acts if the reports
or information is provided to or received from:
1. The director or the department.
2. Law enforcement officials and their agents and employees.
3. The national association of insurance commissioners, other state insurance
departments, a federal or state agency or bureau established to detect and prevent
fraudulent insurance acts, and the agency's or bureau's agents, employees or designees,
or an organization established by insurers to assist in the detection and prevention of
fraudulent insurance acts, and the organization's agents, employees or designees.
C. A person, or an officer, employee or agent of the person acting within the scope
of employment or agency of that officer, employee or agent, identified under subsection
B, paragraph 1, 2 or 3 when performing authorized activities without malice, fraudulent
intent or bad faith is not subject to civil liability for libel, slander or another
relevant tort. No civil cause of action may be brought against the person or entity.
D. A person or entity under subsection B or C is entitled to an award of attorney
fees and costs if the person or entity is a prevailing party in a civil cause of action
for libel, slander or other relevant tort and the action is not substantially
justified. For purposes of this subsection, "substantially justified" means a proceeding
that has a reasonable basis in law or fact at the time that it is initiated.
E. Nothing in this section limits any common law right of the person or entity.
F. Nothing in this section is intended to prohibit contact or communication with
clients or patients for any lawful purpose, including communication by and between
insurers, the insurers' policyholders and claimants under policies issued to the
insurers' policyholders regarding the investigation or settlement of any claim.
G. For the purposes of this section:
1. "Runner", "capper" or "steerer" means a person who procures clients at the
direction of, or in cooperation with, a person who intends to perform or obtain services
or benefits under a contract of insurance or who intends to assert a claim against an
insured.
2. "Statement" includes any notice, proof of injury, bill for services, payment for
services, hospital or doctor records, x-rays, test reports, medical or legal expenses, or
other evidence of loss or injury, or other expense or payment. 20-464 Prohibiting payment for services to persons other than the assignee
If an insured assigns to a covered health care provider performing services covered
by the contract payment for benefits under a disability insurance contract, a group
disability insurance contract or a blanket disability contract, the contract does not
prohibit assignments and the assignment is delivered to the insurer, payment may be made
only to the health care provider to whom payment has been assigned.
20-465 Fees; deposits
A. An insurer and insurance producer shall not charge or receive any fee or service
charge in addition to the premium charged for services customarily provided in the
transaction of insurance for motor vehicle insurance policies that insure six or fewer
motor vehicles.
B. An insurer and insurance producer may charge and receive a fee for services not
customarily provided in the transaction of insurance if the fee is filed with the
director and the following conditions exist:
1. The services performed by the insurer or insurance producer are in excess of
those normally performed for insureds.
2. The service charge and the specific services for which the charge is made are
disclosed and agreed to in writing by the insured on a form that is approved by the
director.
3. The amount of the service charge is reasonably related to the cost of the
service performed.
C. After notice and a hearing, the director shall prescribe the services that are
customarily provided in the transaction of insurance.
D. If after an examination and a hearing the director determines that an insurer or
insurance producer has violated subsection A of this section, the director may order the
insurer or insurance producer to refund the fee or that part of the fee that the director
determines was excessive and may impose civil penalties as set forth in section
20-456. The insurer or insurance producer shall pay the costs of the examination from
monies deposited with the director pursuant to section 20-159 regardless of the findings
of the examination.
E. Nothing in this section prohibits fees, including membership fees charged by a
reciprocal or mutual insurer, if the fees are filed with the director and are included by
an insurer in supplemental rate information.
20-466.01 Fraud; classification
A person who violates section 20-463 with the intent to injure, defraud or deceive
an insurer is guilty of a class 6 felony.
20-466.02 Injunction; restitution; civil penalties; costs
A. On request by the director, the attorney general may seek and obtain in an
action in the superior court an injunction that prohibits a person from engaging in
practices or doing any acts that violate section 20-463 or 23-1028. The court may enter
any order or judgment that is necessary to:
1. Prevent any act or practice that is unlawful under section 20-463 or 23-1028.
2. Return any monies, interest or real or personal property that was acquired by an
act or practice that is unlawful under section 20-463 or 23-1028.
B. An order of restitution may also include expenses incurred and paid by an
insurer in connection with any medical evaluation or treatment services.
C. If the court finds that a person has violated section 20-463 or 23-1028, the
attorney general on petition or complaint to the court may recover from that person on
behalf of the state a civil penalty of not more than five thousand dollars for each
violation.
D. In any action pursuant to this section, the court may award the attorney general
costs including reasonable attorney fees and investigative costs for the services
rendered.
20-466.03 Notice of penalty for false or fraudulent claims; claim forms
The forms provided by an insurer to an insured or any other person for filing a
notice or making a claim in connection with a policy or contract issued by the insurer
shall include in substance the following statement in at least twelve point type: "For
your protection ARIZONA law requires the following statement to appear on this form. Any
person who knowingly presents a false or fraudulent claim for payment of a loss is
subject to criminal and civil penalties."
20-466.04 Referrals to other licensing agencies; definition
A. The director shall forward to the appropriate licensing agency the name of any
person who is convicted of, enjoined from or penalized for violating section 20-463 or
23-1028. The director shall include any information the director believes is material to
the case.
B. A person whose name is forwarded pursuant to subsection A of this section has no
cause of action against the director and the department's employees and agents pursuant
to any administrative appeal or judicial review.
C. For the purposes of this section, "licensing agency" means any state board,
commission, department or agency that issues any occupational or professional license,
permit or registration and the state bar of ARIZONA.
20-466 Fraud unit; peace officer status; powers; information sharing duty of insurers
A. A fraud unit is established in the department of insurance.
B. The fraud unit shall work in conjunction with the department of public safety.
C. The director may investigate any act or practice of fraud prohibited by section
20-466.01 and any other act or practice of fraud against an insurer or entity licensed
under this title. The director shall administer the fraud unit.
D. The director may employ investigators for the fraud unit. A fraud unit
investigator has and shall exercise the law enforcement powers of a peace officer of this
state but only while acting in the course and scope of employment for the department.
The director shall adopt guidelines for the conduct of investigations that are
substantially similar to the investigative policy and procedural guidelines of the
department of public safety for peace officers. Fraud unit investigators shall not
preempt the authority and jurisdiction of other law enforcement agencies of this state or
its political subdivisions. Fraud unit investigators:
1. Shall have at least the qualifications prescribed by the ARIZONA peace officer
standards and training board pursuant to section 41-1822.
2. Are not eligible to participate in the public safety personnel retirement system
established by title 38, chapter 5, article 4 due solely to employment as fraud unit
investigators.
E. The director may request the submission of papers, documents, reports or other
evidence relating to an investigation under this section. The director may issue
subpoenas and take other actions pursuant to section 20-160. The materials are privileged
and confidential until the director completes the investigation. Any documents, materials
or other information that is provided to the director pursuant to this section is not
subject to discovery or subpoena until opened for public inspection by the director or,
after notice and a hearing, a court determines that the director would not be unduly
burdened by compliance with the subpoena. The director shall keep the identity of an
informant confidential, including any information that might identify the informant,
unless the request for information is made by a law enforcement agency, the attorney
general or a county attorney for purposes of a criminal investigation or prosecution.
The director shall notify an insurer of any public record request or subpoena for
documents, materials or other information the insurer has referred to the fraud unit for
purposes of asserting, in a court of competent jurisdiction, any applicable privileges
under the circumstances unless the subpoena is issued by the attorney general or a county
attorney or by the court at the request of the attorney general or a county attorney.
The director may use the documents, materials or other information in the furtherance of
any regulatory or legal action brought as a part of the director's official duties.
F. If the documents, materials or other information the director seeks to obtain by
request is located outside this state, the person requested to provide the documents,
materials or other information shall arrange for the fraud unit or a representative,
including an official of the state in which the documents, materials or other information
is located, to examine the documents, materials or other information where it is located.
The director may respond to similar requests from other states.
G. An insurer that believes a fraudulent claim has been or is being made shall send
to the director, on a form prescribed by the director, information relative to the claim
including the identity of parties claiming loss or damage as a result of an accident and
any other information the fraud unit may require. The director shall review the report
and determine if further investigation is necessary. If the director determines that
further investigation is necessary, the director may conduct an independent investigation
to determine if fraud, deceit or intentional misrepresentation in the submission of the
claim exists. If the director is satisfied that fraud, deceit or intentional
misrepresentation of any kind has been committed in the submission of a claim, the
director may report the violations of the law to the reporting insurer, to the
appropriate licensing agency as defined in section 20-466.04 and to the appropriate
county attorney or the attorney general for prosecution.
H. The director may:
1. Share nonpublic documents, materials or other information with other state,
federal and international regulatory agencies, with the national association of insurance
commissioners and its affiliates and subsidiaries and with state, federal and
international law enforcement authorities if the recipient agrees and warrants that it
has the authority to maintain the confidentiality and privileged status of the documents,
materials or other information.
2. Receive documents, materials and other information from the national association
of insurance commissioners and its affiliates and subsidiaries and from regulatory and
law enforcement officials of other jurisdictions and shall maintain as confidential or
privileged any document, material or other information received with notice or the
understanding that it is confidential or privileged under the laws of the jurisdiction
that is the source of the document, material or other information.
3. Enter into agreements that govern the sharing and use of documents, materials
and other information and that are consistent with this section.
I. A disclosure to or by the director pursuant to this section or as a result of
sharing information pursuant to subsection G of this section is not a waiver of any
applicable privilege or claim of confidentiality in the documents, materials or other
information disclosed or shared.
J. The director shall annually assess each insurer as defined in section 20-441,
subsection B authorized to transact business in this state up to one thousand fifty
dollars, as annually adjusted pursuant to this subsection for the administration and
operation of the fraud unit and the prosecution of fraud pursuant to this section.
Monies collected shall be deposited, pursuant to sections 35-146 and 35-147, in the state
general fund. The director shall annually revise the assessment amount in such a manner
that the revenue derived from the assessment equals at least ninety-five per cent but not
more than one hundred ten per cent of the appropriated budget of the fraud unit for the
prior fiscal year.
K. A person, or an officer, employee or agent of the person acting within the scope
of employment or agency of that officer, employee or agent, who in good faith files a
report or provides other information to the fraud unit pursuant to this section is not
subject to civil or criminal liability for reporting that information to the fraud unit.
20-467 Return premiums; penalties
All insurers and insurance producers shall comply with the requirements prescribed
in sections 6-1415 and 6-1416. In addition to any penalty provided by law, any insurer
or insurance producer who fails to comply with the requirements prescribed in sections
6-1415 and 6-1416 is subject to the penalties prescribed in section 20-456.
20-468 Motor vehicle loss; policyholder choice of repair facility
A. For repair facilities other than glass repair facilities and subject to the
rights of an insurer to receive notice of loss or claim consistent with the provisions of
its policy, a person in this state has the right to choose any repair facility for the
repair of a motor vehicle loss. If an insurer provides information about a repair
facility, the insurer shall inform the person of this right at the same time as making
the recommendation or providing the information. This section does not create a private
right or cause of action to or on behalf of any person.
B. If an insured or claimant selects a repair facility to repair the insured's or
claimant's motor vehicle in which the insurer owns an interest in that repair facility,
the adjuster for the motor vehicle shall not be employed by the repair facility or have
any direct authority over that facility's recommendations or decisions relating to the
repair of the insured's or claimant's motor vehicle.
20-469 Motor vehicle loss; choice of glass repair facility
Unless otherwise prescribed by contract, a person in this state has the right to
choose any glass repair facility for the repair of a loss relating to motor vehicle
glass. If an insurer recommends or provides information about a glass repair facility,
the insurer shall inform the person of this right at the same time as making the
recommendation or providing the information. This section does not create a private right
or cause of action to or on behalf of any person. This section provides solely an
administrative remedy to the director for any violation of this section.
20-471 Definition of insurance service charge; limit; prohibited use
A. "Insurance service charge" means any charge, other than the insurance premium,
for the service of placing, renewing, approving or recording on the records and accounts
of any mortgagee, vendor, holder or lender any substitution of insurers or change in
insurance on the collateral security for a loan.
B. Except as provided in subsection C of this section, it shall be unlawful for any
mortgagee, vendor, holder or lender to charge an insurance company, insurance agency,
borrower, mortgagor or purchaser with payment of an insurance service charge.
C. An insurance service charge of eight dollars may be charged as a condition to
acceptance of an insurance policy tendered to satisfy the requirements of a real estate
mortgage contract when a mortgagee, vendor, holder or lender performs services in
connection with this subsection, as follows:
1. An insurance policy is tendered without an authorization signed by the borrower
appointing the insurance producer tendering the policy attached thereto, unless a prior
authorization not revoked has been delivered to the lender.
2. An insurance policy is tendered without the borrower's mortgage loan number as
assigned for payment identification or a legal description of the insured property
printed in bold-faced type on the face of the policy.
3. An original, a renewal or a replacement insurance policy is tendered less than
ten days prior to an expiration date, renewal date or continuous policy premium
anniversary date, or expiration of an insurance binder issued preliminary to issuance of
a permanent policy.
4. An insurance policy is tendered by an agent other than an agent appearing on the
records of the mortgagee as authorized to represent the borrower at any time during the
term of such insurance other than within thirty days prior to the policy's expiration
date, renewal or continuous policy premium anniversary date.
20-472 Service charges in connection with insurance on collateral security prohibited when change of ownership
It is unlawful for a mortgagee to require the payment of any insurance service
charge for services performed in changing of the mortgagee's records and accounts with
regard to a change in ownership of the insured property held as security by the mortgagee
and with regard to which the mortgagee issues a written beneficiary statement or
assumption statement.
20-473 Obligation of mortgagee to furnish mortgagor copies of insurance policy
Whenever the mortgagee or a person acting for the mortgagee, by the terms of the
mortgage agreement retains possession of the original policy of insurance insuring
collateral security for a mortgage, and the mortgagee or his agent has procured the
issuance of the insurance, then such mortgagee or his agent shall furnish the borrower,
mortgagor or purchaser with a copy of the insurance policy.
20-474 Service charges in connection with insurance on collateral security prohibited when mortgagee procures insurance
When a mortgagee or his agent at the inception of the mortgage procures the issuance
of insurance for the mortgagor then the mortgagor may substitute a replacement policy
within one year after the inception of the original policy procured by the mortgagee and
it shall be unlawful for the mortgagee to charge an insurance service charge for services
performed in changing the mortgagee's records and accounts.
20-475.01 Insurance on mortgaged property; disclosure of expiration date prohibited; exception
When a real property mortgage or a lending agreement in connection with a loan on
real property provides that the mortgagor or borrower shall furnish insurance upon the
mortgaged property, the mortgagee, assignee or creditor shall not disclose expiration
dates or other policy information to other persons, directly or indirectly, for the
purpose of permitting any person or persons to solicit the insurance or any renewal
thereof without the consent of the policyholder in writing.
20-475 Reasonable requirements of security holder are valid
Nothing in this article shall prevent a mortgagee, lender, vendor, or holder from
requiring insurance on the collateral security for a loan or exercising a reasonable
privilege of approval or disapproval of the insurance provided for such purpose by the
borrower, mortgagor or purchaser.
20-476 Violation; classification
Intentional violation of this article is a petty offense.
20-481.01 Investment limitations; exemptions
A. Any domestic insurer, either by itself or in cooperation with one or more
persons, may organize or acquire one or more subsidiaries subject to the limitations of
this article. Such subsidiaries may conduct any kind of business or businesses and the
authority to do so shall not be limited by reason of the fact that such subsidiaries are
subsidiaries of a domestic insurer.
B. In addition to investments in common stock, preferred stock, debt obligations
and other securities permitted under all other sections of this title, a domestic insurer
may, pursuant to subsection A of this section:
1. Invest in common stock, preferred stock, debt obligations and other securities
of one or more subsidiaries in amounts which do not exceed the lesser of ten per cent of
such insurer's assets or fifty per cent of such insurer's surplus as regards
policyholders, provided that after such investments the insurer's surplus as regards
policyholders will be reasonable in relation to the insurer's outstanding liabilities and
adequate to its financial needs. In calculating the amount of such investments,
investments in domestic or foreign insurance subsidiaries and health care service
organizations shall be excluded, and there shall be included total net monies or other
consideration expended and obligations assumed in the acquisition or formation of a
subsidiary including all organizational expenses and contributions to capital and surplus
of such subsidiary whether or not represented by the purchase of capital stock or
issuance of other securities, and all amounts expended in acquiring additional common
stock, preferred stock, debt obligations, and other securities and all contributions to
the capital or surplus, of a subsidiary subsequent to its acquisition or formation.
2. Invest any amount in common stock, preferred stock, debt obligations and other
securities of one or more subsidiaries that is engaged or organized to engage exclusively
in the ownership and management of assets authorized as investments for the insurer if
each subsidiary agrees to limit its investments in any asset so that such investments
will not cause the amount of the total investment of the insurer to exceed any of the
investment limitations specified in paragraph 1 of this subsection or in chapter 3,
article 2 of this title, applicable to the insurer. For the purpose of this paragraph,
"the total investment of the insurer" includes any direct investment by the insurer in an
asset and the insurer's proportionate share of the investment in an asset by any
subsidiary of the insurer, which shall be calculated by multiplying the amount of the
subsidiary's investment by the percentage of the insurer's ownership of such subsidiary.
3. With the approval of the director, invest any amount in common stock, preferred
stock, debt obligations or other securities of one or more subsidiaries, provided that
after such investment the insurer's surplus as regards policyholders will be reasonable
in relation to the insurer's outstanding liabilities and adequate to its financial needs.
C. Investments in common stock, preferred stock, debt obligations or other
securities of subsidiaries made pursuant to subsection B of this section shall not be
subject to any of the otherwise applicable restrictions or prohibitions contained in this
title applicable to such investment of insurers.
D. Whether any investment pursuant to subsection B of this section meets the
applicable requirements is to be determined before the investment is made by calculating
the applicable investment limitations as if the investment had already been made, taking
into account the then outstanding principal balance on all previous investments in debt
obligations, and the value of all previous investments in equity securities as of the
date they were made.
E. If an insurer ceases to control a subsidiary, it shall dispose of any investment
in the subsidiary made pursuant to this section within three years from the time of the
cessation of control or within such further times as the director may prescribe, unless
at any time after such investment has been made, such investment has met the requirements
for investment under any other section of this title, and the insurer has so notified the
director.
F. For purposes of this section, in determining whether an insurer's surplus as
regards policyholders is reasonable in relation to the insurer's outstanding liabilities
and adequate to its financial needs, the following factors shall be considered:
1. The minimum expendable surplus amount required by section 20-211.
2. The size of the insurer as measured by its assets, capital and surplus,
reserves, premium writings, insurance in force and other appropriate criteria.
3. The extent to which the insurer's business is diversified among the several
lines of insurance.
4. The number and size of risks insured in each line of business.
5. The extent of the geographical dispersion of the insurer's insured risks.
6. The nature and extent of the insurer's reinsurance program.
7. The quality, diversification and liquidity of the insurer's investment
portfolio.
8. The recent past and projected future trend in the size of the insurer's surplus
as regards policyholders.
9. The surplus as regards policyholders maintained by other comparable insurers.
10. The adequacy of the insurer's reserves. 20-481.02 Tender offers; required statements; disclosures; approval or disapproval by director
A. No person other than the issuer shall make a tender for or a request or
invitation for tenders of a voting security of a domestic insurer or enter into any
agreement to exchange securities or seek to acquire in the open market or in any other
place any voting security of a domestic insurer if, after the consummation thereof, such
person would, directly or indirectly, by conversion or by the exercise of any right to
acquire, be in control of such insurer. No person may enter into an agreement to merge
with or to otherwise acquire control of a domestic insurer or a person who controls a
domestic insurer unless, at the time the offer, request or invitation is made or the
agreement is entered into or prior to the acquisition of the securities, if no offer or
agreement is involved, such person has filed with the director and has sent to such
insurer a statement containing the information required by section 20-481.03 and the
offer, request, invitation, agreement or acquisition has been approved by the
director. For purposes of this section, a "domestic insurer" shall include any other
person controlling a domestic insurer, unless such other person, as determined by the
director, is either directly, or through its affiliates, primarily engaged in business
other than the business of insurance.
B. With respect to the acquisition of a domestic insurer by a person, directly or
indirectly through an affiliate or affiliates, who is not required to file a statement
pursuant to subsection A of this section because such person is not primarily engaged in
the business of insurance, such person shall, at least thirty days prior to the effective
date of the acquisition of the domestic insurer, file with the director a statement
containing the information required by section 20-481.03. If the director finds that the
acquisition does not meet the requirements of section 20-481.07, subsection A, the
director shall issue an order disapproving the acquisition of the domestic insurer and
shall require the person to make an expeditious divestiture of such insurer. The
director shall have the authority to take such actions as are necessary to assure such
divestiture.
C. The director may employ insurance analysts, hearing examiners and such other
staff as necessary to insure compliance with this section. Such costs shall be paid by
the insurance examiners' revolving fund in accordance with section 20-159.
D. The filing requirements provided in subsection A of this section shall not be
deemed in conflict with federal securities acts where such federal securities acts
apply. No offer, transaction, proposed transaction, agreement or acquisition subject to
approval of the director pursuant to subsection A of this section shall become effective
until approved by the director.
20-481.03 Contents of statement
A. The statement to be filed with the director as provided in section 20-481.02
shall be made under oath or affirmation and shall contain the following information:
1. The name and address of each person by whom or on whose behalf the tender offer,
merger or other acquisition of control referred to in section 20-481.02 is to be
effected.
2. If the acquiring party is an individual, his principal occupation and all
offices and positions held during the past five years and any convictions of crimes other
than minor traffic violations during the past ten years.
3. If the acquiring party is not an individual:
(a) A report of the nature of its business operations during the past five years or
for such lesser period as such person and any predecessors thereof shall have been in
existence.
(b) An informative description of the business intended to be done by such person
and such person's subsidiaries.
(c) A list of all individuals who are or who have been selected to become directors
or executive officers of such person, or who perform or will perform functions
appropriate to such positions. Such list shall include for each such individual the
information required by paragraph 2 of this subsection.
4. The source, nature and amount of the consideration used or to be used in
effecting the tender offer, merger or other acquisition of control, a description of any
transaction wherein funds were or are to be obtained for any such purpose including a
pledge of the insurer's stocks or the stock of any of its subsidiaries or controlling
affiliates, and the identity of persons furnishing such consideration, provided that if a
source of such consideration is a loan made in the lender's ordinary course of business,
the identity of the lender shall remain confidential, if the person filing such statement
so requests.
5. Fully audited financial information as to the earnings and financial condition
of each acquiring party for the preceding five fiscal years of each such acquiring party
or for such lesser period as such acquiring party and any predecessors thereof have been
in existence and similar unaudited information as of a date not earlier than ninety days
prior to the filing of the statement. If audited financial information is unavailable,
unaudited financial information may be substituted if such information is acceptable to
the director.
6. Any plans or proposals which each acquiring party may have to liquidate such
insurer, to sell its assets or merge or consolidate it with any person or to make any
other material change in its business or corporate structure or management.
7. The number of shares of any security referred to in section 20-481.02 which each
acqui
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