AN ACT Relating to insurance; and adding a new chapter to Title 48 RCW.

BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF WASHINGTON:

NEW SECTION. Sec. 1. Unless the context clearly requires otherwise, the definitions contained in this section shall apply throughout this chapter.

(1) "Agency" means and includes every state office, officer, each institution, whether educational, correctional, or other, every department, division, board, and commission.

(2) "Commissioner" means the state insurance commissioner.

(3) "Fund" means the state insurance fund created in section 2 of this act.

(4) "Political subdivision" means and includes all cities, towns, counties, school districts, metropolitan municipal corporations, and special purpose districts.

NEW SECTION. Sec. 2. There shall be maintained as a special fund, separate and apart from all public moneys or funds of this state a state insurance fund, which shall be administered by the commissioner exclusively for the purposes of this chapter, and to which RCW 43.01.050 shall not be applicable. If the state insurance fund does not have sufficient assets to pay claims that are due, the office of financial management shall issue a warrant as a transfer from the general fund to the state insurance fund sufficient to pay the losses and the state treasurer shall pay the warrant. The state insurance fund shall thereafter repay the general fund and the office of financial management shall issue warrants for such transfer as soon as there are assets in the state insurance fund.

NEW SECTION. Sec. 3. (1) Except as provided in section 5 of this act, all state property and property for which the state may be liable in the event of damage or destruction is insured in the state insurance fund against fire and extended coverage perils under section 4(1)(a) of this act. By agreement between the commissioner and the state agency having charge of the property, it may be insured against other perils under section 4(1)(b) of this act.

(2) All political subdivisions shall insure in the state insurance fund its property or property for which it may be liable in the event of damage or destruction. Property insured under this section by a political subdivision may not also be insured in any other manner unless the commissioner certifies that additional insurance is necessary, or unless the political subdivision by resolution, a certified copy of which is filed with the commissioner, decides to insure specified personal property with insurers authorized to do business in this state.

(3) The state and all political subdivisions shall insure in the state insurance fund against casualty loss for which they may be responsible. Casualty coverage insured under this section may not be insured in any other manner unless specified in subsections (1) and (2) of this section.

NEW SECTION. Sec. 4. (1)(a) The fund shall provide protection against fire and extended coverage perils. The coverage shall be at least as favorable as that customarily provided by policies approved by the commissioner for the use of private insurers in insuring comparable property.

(b) The fund may also provide additional protection against other named perils or may provide protection on an all-risk basis, on such terms as the commissioner prescribes.

(c) The fund may provide coverage on any appropriate valuation basis including actual cash value and replacement cost, and may cover loss from the lack of use of or reduction in the income from property caused by perils insured against.

(d) The commissioner may prescribe the time periods for which coverage is to be provided.

(e) The commissioner shall prepare policies and supplementary documents for the use of the fund in providing the coverage under (a) and (b) of this subsection, but no such documents may be used by the fund if the commissioner would not approve them for the use of private insurers.

(2) The commissioner may prescribe by rule the percentages of value or cost for which coverage may be provided.

(3) The commissioner may prescribe by rule that small losses in any one occurrence shall not be paid.

NEW SECTION. Sec. 5. (1)(a) No officer or agent of this state, and no agency having charge of any property of the state or for which the state may be liable, may pay any public money to any private insurer for any insurance on property or casualty insurance available under this chapter nor incur any indebtedness against the state to a private insurer for any such insurance, except as provided by (b) of this subsection.

(b) The provisions of (a) of this subsection do not apply if:

(i) A specific statute provides for private insurance; or

(ii) The commissioner approves the use of self-insurance funds or the purchase of insurance from private insurers on the ground that the public interest will be better protected than by insurance in the fund; or

(iii) The commissioner terminates insurance in the fund or property of an agency of the state because the agency does not comply with section 6(1) of this act.

(2) No political subdivision may pay out any money to any private insurer nor incur any indebtedness against the political subdivision to a private insurer for any insurance on any property or casualty insurance of the political subdivision or for which the political subdivision may be legally liable if such insurance is available under this chapter, unless it is approved by the commissioner as necessary or unless it is insurance on personal property which the political subdivision by resolution filed with the commissioner has decided to insure in insurance companies authorized to do business in this state.

NEW SECTION. Sec. 6. (1) The agency having charge of property described in section 3(1) of this act shall furnish to the commissioner a list of all the property under its charge with estimates of its insurable value based on such data and standards as the commissioner reasonably prescribes. The commissioner shall compute the premium on property and casualty insurance coverage, and may consider the rates suggested by rate service organizations in this state for the perils against which the fund insures, with deviations and other departures from those rates as the commissioner considers sound. The commissioner shall submit to the office of financial management a statement of the amount of required property and casualty insurance on the property and the premium payable therefor. The amount due for insurance shall be paid to the fund by the office of financial management from funds appropriated by law to the agency that is insured.

(2)(a) The fund shall insure property described in section 3(2) of this act after receipt of a report to the commissioner of each policy then in force upon such property, stating the property covered by the policy and the dates of issue and of expiration, the amounts and rates of insurance and the premiums. Property already insured shall become insured by the fund as existing policies expire or are canceled. Thereafter the insurance on all property described in section 3(2) of this act shall be provided just as for state property, except that the premium shall be certified by the commissioner to the clerk of the appropriate political subdivision.

(b) Upon receipt of certification of premium due, the premium shall be paid into the state treasury for the benefit of the fund, within sixty days after the date of certification or the effective date of the policy, whichever is the later. Premiums for property insured effective at a later date shall be paid within sixty days after the effective date of each addition. The amount of a premium in default shall be a special charge against the political subdivision, and be included in the next certification of state taxes and charged and collected as other special charges are collected, with interest from the due date at a rate set by the commissioner by rule or, in the absence of a rule, at twice the most common prime rate charged by major banks in this state.

(c) All personal property of the political subdivision is insured and premiums therefor must be paid under this subsection except to the extent that coverage is excluded by resolution under section 3(2) of this act. (3)(a) The fund shall insure casualty loss described in section 3(3) of this act after receipt of a report to the commissioner of each policy then in force stating the policy coverage and the dates of issue and of expiration, the amounts and rates of insurance and the premiums. Any casualty insurance already insured shall become insured by the fund as existing policies expire or are canceled. Thereafter casualty insurance described in section 3(3) of this act shall be provided just as for state property insurance, except that the premium shall be certified by the commissioner to the clerk of the appropriate political subdivision.

(b) Upon receipt of certification of premium due, the premium shall be paid into the state treasury for the benefit of the fund, within sixty days after the date of certification or the effective date of the policy, whichever is the later. Premiums for casualty insured effective at a later date shall be paid within sixty days after the effective date of each addition. The amount of a premium in default shall be a special charge against the political subdivision, and be included in the next certification of state taxes and charged and collected as other special charges are collected, with interest from the due date at a rate set by the commissioner by rule or, in the absence of a rule, at twice the most common prime rate charged by major banks in this state.

(c) All casualty premiums therefor must be paid under this subsection except to the extent that coverage is excluded by resolution under section 3(3) of this act.

NEW SECTION. Sec. 7. (1) The commissioner shall determine within a reasonable time any casualty loss or loss on state property or property for which the state is liable and promptly file a statement with the state treasurer and the office of financial management. The office of financial management shall then issue a warrant for the amount of the loss less any applicable amounts under section 4 (2) or (3) of this act, as a transfer from the fund to the credit of the agency in whose charge the building or property belongs, to be disbursed to such agency by the state treasurer in the same manner as other state funds for such agency's use are paid out.

(2) The commissioner shall determine within a reasonable time any casualty loss or loss on insured property owned by a political subdivision or for which the political subdivision is liable and promptly certify the amount to the office of financial management, which shall issue a warrant on the fund payable to the treasurer of the local governmental unit for the amount of the loss less any applicable amounts under section 4 (2) or (3) of this act.

(3) If there is disagreement between the commissioner and the political subdivision or state agency in charge of state property as to the amount of casualty loss or the amount of loss or damage to property covered by the fund, the amount shall be determined by appraisal, upon the demand of the political subdivision or state agency having charge of state property. The commissioner and the claimant shall each select a competent and disinterested appraiser and notify the other of the selection within twenty days of the demand. If either party fails to select an appraiser within the allotted time, the other party may request a court of record to appoint an appraiser. The appraisers shall first select a competent and disinterested umpire. If they do not agree on one within fifteen days, then either party may request a judge of a court of record in the county in which the property is located to select a competent and disinterested umpire and he shall do so promptly. The appraisers shall then appraise any loss or damage, stating separately the actual cash value or other applicable basis of valuation and the loss or damage to each item. If they fail to agree they shall submit their differences to the umpire. An itemized award in writing of any two of the three when filed with the commissioner shall determine the amount of the insured value and of loss or damage. Each appraiser shall be paid by the party selecting the appraiser and other expenses of appraisal and of the umpire shall be paid by the parties equally.

(4) The basic criterion for ascertaining the amount of any casualty loss or loss to property under this chapter is actual cash value, unless the property is insured for replacement cost. Obsolescence and plans for demolition are factors to be considered in determining actual cash value, and replacement cost shall not be paid if there are plans for demolition of the property.

NEW SECTION. Sec. 8. (1) Upon the request of the commissioner, the attorney general may proceed in the courts of any jurisdiction to recover from any responsible party other than an insured or any person using or dealing with the property in the course of his employment for the insured, for any loss or damage covered by insurance under this chapter. Any recovery less expenses shall be paid into the fund, but if the amount recovered less expenses exceeds that paid out by the fund, the difference shall be paid to the insured.

(2) The commissioner shall collect reinsurance due and pay the amount collected into the fund.

(3) The fund may name other persons as additional persons protected under section 3 of this act, but unless it does so the fund shall have any right of recovery by subrogation or otherwise against such persons that a private insurer would have and shall not lose such right because the political subdivision protected has after commencement of the coverage waived any right of recovery it would otherwise have had, or has thereafter contracted to assume the risk that general law would have placed elsewhere.

NEW SECTION. Sec. 9. Sections 1 through 8 of this act shall constitute a new chapter in Title 48 RCW.