WSR 10-15-014

PERMANENT RULES

OFFICE OF

INSURANCE COMMISSIONER

[ Insurance Commissioner Matter No. R 2010-02 -- Filed July 8, 2010, 12:15 p.m. , effective August 8, 2010 ]


Effective Date of Rule: Thirty-one days after filing.

Purpose: This rule amends the exiting [existing] rule to: Allow other entities to act as the administrator for the joint underwriting association (JUA), allow the JUA board the discretion to indemnify the servicing company for acting on its behalf, change the composition of the board of the directors, change the reporting requirements of the JUA, change the circumstances under which the board may refuse or cancel coverage for a licensee, update citations and terms which have changed as result of statutory amendments, set forth the order of distribution of the assets of the JUA upon dissolution, and allow the JUA to distribute excess reserves.

Citation of Existing Rules Affected by this Order: Amending WAC 284-87-020, 284-87-050, 284-87-060, 284-87-080, 284-87-090, 284-87-100, 284-87-110, 284-87-130, 284-87-140, and 284-87-150.

Statutory Authority for Adoption: RCW 48.02.060 and 48.87.100.

Adopted under notice filed as WSR 10-12-101 on June 2, 1010 [2010].

Number of Sections Adopted in Order to Comply with Federal Statute: New 0, Amended 0, Repealed 0; Federal Rules or Standards: New 0, Amended 0, Repealed 0; or Recently Enacted State Statutes: New 0, Amended 0, Repealed 0.

Number of Sections Adopted at Request of a Nongovernmental Entity: New 0, Amended 0, Repealed 0.

Number of Sections Adopted on the Agency's Own Initiative: New 2, Amended 10, Repealed 0.

Number of Sections Adopted in Order to Clarify, Streamline, or Reform Agency Procedures: New 0, Amended 0, Repealed 0.

Number of Sections Adopted Using Negotiated Rule Making: New 0, Amended 0, Repealed 0; Pilot Rule Making: New 0, Amended 0, Repealed 0; or Other Alternative Rule Making: New 2, Amended 10, Repealed 0.

Date Adopted: July 8, 2010.

Mike Kreidler

Insurance Commissioner

OTS-3056.2


AMENDATORY SECTION(Amending Order R 93-18, filed 12/30/93, effective 1/30/94)

WAC 284-87-020   Definitions.   Unless the context clearly requires otherwise, the definitions in this section apply throughout this chapter.

"Association" means the joint underwriting association established pursuant to the provisions of chapter 48.87 RCW.

"Board" means the governing board of the association.

"Licensee" means any person or birth center facility licensed to provide midwifery services pursuant to chapters 18.46, 18.50, and ((18.88)) 18.79 RCW.

"Market assistance plan" or "MAP" means the voluntary consumer assistance plan established pursuant to the provisions of RCW 48.22.050.

"Member insurer" means any insurer that on or after July 25, 1993, possesses a certificate of authority to write medical malpractice, general casualty insurance, or both, within this state.

"Midwifery and birth center insurance" means insurance coverage against the legal liability of the insured and against loss, damage, or expense incident to a claim arising out of the death or injury of any person as a result of negligence or malpractice in rendering professional service by any licensee.

"Service ((insurer)) company" means any insurance company or person designated by the association ((and approved by the commissioner)) to ((issue policies pursuant to this)) act on behalf of the association under chapters 48.87 RCW and 284-87 WAC.

[Statutory Authority: RCW 48.02.060 and 48.87.100. 94-02-053 (Order R 93-18), 284-87-020, filed 12/30/93, effective 1/30/94.]


AMENDATORY SECTION(Amending Order R 93-18, filed 12/30/93, effective 1/30/94)

WAC 284-87-050   Administration.   (1) The association ((shall)) must be administered by a governing board, subject to the supervision of the commissioner, and operated by a ((manager)) service company or companies appointed by the board.

(2) The board ((shall)) must consist of seven members. ((Four)) Five board members ((shall)) must be member insurers appointed by the commissioner. ((A fifth board member shall be the insurer designated as the service insurer for the association (or, if there is more than one service insurer, the fifth board member shall be such service insurer as the commissioner designates as the board member).)) The other two board members ((shall)) must be licensees who are appointed by the commissioner to so serve, neither of whom shall ((be interested)) have an interest, directly or indirectly, in any insurer except as a policyholder. Three of the original board members ((shall)) must be appointed to serve an initial term of three years, two ((shall)) must be appointed to serve an initial term of two years, and the remaining ((shall)) must be appointed to serve a one-year initial term. All other terms ((shall)) must be for three years or until a successor has been appointed. Not more than one member insurer in a group under the same management or ownership shall serve on the board at the same time. At least one of the ((four)) five insurers on the board ((shall)) must be a domestic insurer. Members of the board may be removed by the commissioner for cause.

(3) The association must indemnify each person serving on the board or any subcommittee thereof, each member insurer of the association, and each officer and employee of the association ((shall be indemnified by the association against)) all costs and expenses actually and necessarily incurred by him, her, or it in connection with the defense of any action, suit, or proceeding in which he, she, or it is made a party by reason of his, her, or its being or having been a member of the board, or a member or officer or employee of the association, except in relation to matters as to which he, she, or it has been judged in such action, suit, or proceeding to be liable by reason of ((wilful)) willful misconduct in the performance of his, her, or its duties as a member of such board, or member, officer, or employee of the association. This indemnification shall not be exclusive of other rights as to which such member, or officer, or employee may be entitled as a matter of law.

(4) The association at the discretion of the board may agree to indemnify its appointed service company or companies and its staff from all costs and expenses actually and necessarily incurred by them in defense of any action, suit, or proceeding in which they are made a party by reason of their being or having been a service company of the association, except in relation to matters as to which they have been judged by a court of competent jurisdiction, to have engaged in willful misconduct in the performance of their duties as a service company on its behalf by staff.

[Statutory Authority: RCW 48.02.060 and 48.87.100. 94-02-053 (Order R 93-18), 284-87-050, filed 12/30/93, effective 1/30/94.]


AMENDATORY SECTION(Amending Order R 93-18, filed 12/30/93, effective 1/30/94)

WAC 284-87-060   General powers and duties of the board.   (1) Within thirty days after the appointment of its members by the commissioner, the board ((shall)) must prepare and adopt a plan of operation and bylaws consistent with this chapter, subject to approval by the commissioner. In a timely manner thereafter, the board ((shall)) must take all actions necessary to prepare the association to receive applications and issue policies, when and if the commissioner activates the association as provided in WAC 284-87-040. These actions ((shall)) must include the preparation of all necessary policy forms and rating information to be filed with the commissioner for approval and all necessary operating manuals and procedures to be followed.

(2) The board shall meet as often as may be required to perform the general duties of the administration of the association or on the call of the commissioner. Four members of the board shall constitute a quorum as long as at least one of ((whom shall be)) those present is a licensee board member.

(3) The board may appoint a ((manager)) service company or companies, who shall serve at the pleasure of the board, to perform any duties necessary or incidental to the proper administration of the association, including the hiring of necessary staff.

(4) The board shall annually furnish to ((all member insurers of the association and to)) the commissioner a written report of operations. All insurer members of the association may receive a copy of the report from the association upon request.

[Statutory Authority: RCW 48.02.060 and 48.87.100. 94-02-053 (Order R 93-18), 284-87-060, filed 12/30/93, effective 1/30/94.]


AMENDATORY SECTION(Amending Order R 93-18, filed 12/30/93, effective 1/30/94)

WAC 284-87-080   Statistics, records, and reports.   (1) The association ((shall)) must maintain statistics on business written and shall make the following quarterly report to the commissioner:

(a) Number of applications received by the association;

(b) Number of applications accepted by the association and the total and average premiums charged, including the high and low premiums;

(c) ((Number of risks declined;

(d) Number of risks conditionally declined and the number ultimately accepted after having been conditionally declined; and

(e))) Number of ((risks cancelled)) policies canceled; and

(d) Claims activity.

(2) In addition to statistics, the association ((shall)) must maintain complete and separate records of all business transactions, including copies of all policies and endorsements issued by the association, and records of reasons provided for each declination of coverage or cancellation of coverage, including the results of any on-site inspections, or investigations of applicants or insureds or their employees. Information concerning individual licensees ((shall)) must be kept confidential to the extent permitted by law.

(3) Regular reports of the association's operations ((shall)) must be submitted to all members of the board and to the commissioner, ((such)) the reports ((to)) must include, but not necessarily to be limited to, premiums written and earned, losses, including loss adjustment expense, paid and incurred, all other expenses incurred, outstanding liabilities, and, at least once a year, the proposed annual budget of the association for the next fiscal year.

(4) The books of account, records, reports, and other documents of the associations ((shall)) must be open to the commissioner for examination at all reasonable times.

(5) The books of account, records, reports, and other documents of the association shall be open to inspection by members only at ((such)) times and under ((such)) conditions as the board shall determine.

(6) The books of account of any and all servicing ((insurers)) companies may be audited by a firm of independent auditors designated by the board.

[Statutory Authority: RCW 48.02.060 and 48.87.100. 94-02-053 (Order R 93-18), 284-87-080, filed 12/30/93, effective 1/30/94.]


AMENDATORY SECTION(Amending Order R 94-11, filed 6/2/94, effective 7/3/94)

WAC 284-87-090   Eligibility of licensees for coverage.   Any licensee that is unable to obtain midwifery or birthing center insurance with liability limits of at least one million dollars per claim and three million dollars per annual aggregate, or ((such)) other minimum level of mandated coverage as determined by the department of health, from the voluntary insurance market or from any market assistance plan organized pursuant to RCW 48.22.050, is eligible to apply for coverage through the association. The association's service ((insurer)) company or companies shall promptly process such application and, if the licensee is judged to be an acceptable insurable risk, offer coverage to the licensee. In view of the purpose of chapter 48.87 RCW, every licensee will be presumed to be an acceptable insurable risk for the association. To refuse or cancel coverage to any licensee meeting the other eligibility requirements of this section, the association must have the prior written approval of the commissioner. The commissioner will grant such approval only if the association demonstrates that ((extraordinary)) circumstances justify refusing or canceling coverage to ((such individual)) the licensee.

[Statutory Authority: RCW 48.02.060, 48.87.100 and 48.87.050. 94-13-006 (Order R 94-11), 284-87-090, filed 6/2/94, effective 7/3/94. Statutory Authority: RCW 48.02.060 and 48.87.100. 94-02-053 (Order R 93-18), 284-87-090, filed 12/30/93, effective 1/30/94.]


AMENDATORY SECTION(Amending Order R 94-11, filed 6/2/94, effective 7/3/94)

WAC 284-87-100   Standard policy coverage -- Premiums.   (1) All policies issued by the association ((shall)) must have liability limits of at least one million dollars per claim and three million dollars per annual aggregate, or ((such)) other minimum level of mandated coverage as determined by the department of health, and shall be issued for a term of one year.

(2) Premiums ((shall)) must be based on the association's rate filings approved by the commissioner in accordance with chapter 48.19 RCW. ((Such)) The rate filings shall provide for modification of rates for licensees according to the type, size, and past loss experience of each licensee, and any other differences among licensees that can be demonstrated to have a probable effect upon losses.

(3) Consistent with the nonprofit character of the association, rates for policies issued by the association ((shall)) must be set so that the expected profit (that is, premiums plus investment income minus the sum of expenses and losses) is zero.

(4) The association is exempt from the requirements of WAC 284-24-065.

[Statutory Authority: RCW 48.02.060, 48.87.100 and 48.87.050. 94-13-006 (Order R 94-11), 284-87-100, filed 6/2/94, effective 7/3/94. Statutory Authority: RCW 48.02.060 and 48.87.100. 94-02-053 (Order R 93-18), 284-87-100, filed 12/30/93, effective 1/30/94.]


AMENDATORY SECTION(Amending Order R 93-18, filed 12/30/93, effective 1/30/94)

WAC 284-87-110   Renewal of policies.   (1) Policies written by the association will not automatically renew. To obtain continuing coverage by the association, a licensee must again satisfy initial eligibility requirements under WAC 284-87-090 at the end of the expiring policy term.

(2) The association shall notify covered licensees in writing at least ((forty-five)) ninety days prior to the expiration of a policy term of the need to submit a new application for coverage to the association to continue coverage.

(3) If the association fails to provide the required written notice, the existing policy shall continue in force until the association has provided the required notice. In such case, premium shall be charged the licensee on a pro rata basis for coverage during the extended coverage period.

[Statutory Authority: RCW 48.02.060 and 48.87.100. 94-02-053 (Order R 93-18), 284-87-110, filed 12/30/93, effective 1/30/94.]


AMENDATORY SECTION(Amending Order R 93-18, filed 12/30/93, effective 1/30/94)

WAC 284-87-130   Right of appeal.   (1) Any applicant or insured, licensed pursuant to chapter 18.46, 18.50, or 18.88 RCW, shall have a right of appeal to the commissioner, including the right to appear ((personally)) before the commissioner or his or her designee, if requested by the person seeking appeal, from any decision by the board.

(2) Appeals to the commissioner under this provision shall be handled in accordance with chapters 48.04 and 34.05 RCW.

[Statutory Authority: RCW 48.02.060 and 48.87.100. 94-02-053 (Order R 93-18), 284-87-130, filed 12/30/93, effective 1/30/94.]


AMENDATORY SECTION(Amending Order R 93-18, filed 12/30/93, effective 1/30/94)

WAC 284-87-140   Cooperation of ((agents and brokers)) producers.   All licensed ((insurance agents and brokers shall)) producers must provide full cooperation in carrying out the aims and the operation of the association.

[Statutory Authority: RCW 48.02.060 and 48.87.100. 94-02-053 (Order R 93-18), 284-87-140, filed 12/30/93, effective 1/30/94.]


AMENDATORY SECTION(Amending Order R 93-18, filed 12/30/93, effective 1/30/94)

WAC 284-87-150   Commissions.   The association shall pay commissions as established by the board on policies issued ((pursuant to)) under this chapter to the licensed ((agent or broker)) producer designated by the applicant.

[Statutory Authority: RCW 48.02.060 and 48.87.100. 94-02-053 (Order R 93-18), 284-87-150, filed 12/30/93, effective 1/30/94.]


NEW SECTION
WAC 284-87-155   Reserves and surplus.   (1) The board shall determine and establish a minimum loss reserve account to offset infrequent severe losses.

(2) If the board, in its sole discretion, determines that the reserve account is in excess of an amount necessary to pay potential infrequent severe losses, the association may, but is not obligated to:

(a) Refund to the member insurers all or any portion of any assessment that was received from the member insurers in the same pro rata amount the member insurer was assessed and paid. No return to a member insurer may exceed the aggregate amount paid to the association by the member insurer.

(b) After all assessments received by the association from member insurers are refunded to the member insurers, the association may make a one-time premium adjustment to the insured licensees.

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NEW SECTION
WAC 284-87-165   Distribution of assets upon dissolution of the association.   If the association is deactivated or dissolved and has a positive asset balance, the excess funds will be distributed in the following order:

(1) For the purchase of prior acts coverage from the successor insurer for all active licensees insured by the association.

(2) For the return of one hundred percent of unearned premium to all active licensees insured by the association.

(3) For the return of remaining funds to the member insurers on a pro rata formula, based upon the total of all assessments paid in throughout the lifetime of the association's operation. Returns to a member insurer must not exceed the aggregate amount paid to the association by the member insurer.

(4) For the distribution of any remaining balance to active licensees insured by the association at the time of deactivation or dissolution, according to a pro rata formula based upon the total of all premiums paid to the association. Distribution amounts paid to a licensee must not exceed the aggregate amount paid to the association by the licensee. Pro rata amounts of less than twenty-five dollars will not be returned.

(5) Any remaining balance will utilized at the discretion of the commissioner.

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Washington State Code Reviser's Office