SENATE BILL REPORT

SB 5829

BYSenators Talmadge, Fleming, Bender, McDermott, Wojahn, Bauer and Rasmussen

Creating state insurance fund for property and casualty insurance.

Senate Committee on Financial Institutions

Senate Hearing Date(s):February 27, 1987

Senate Staff:Phil Sorensen (786-7470)

AS OF FEBRUARY 27, 1987

BACKGROUND:

In 1977 the Legislature created the Office of Risk Management.  All state institutional and agency facilities are covered by risk management for the purposes of controlling and adjusting losses sustained by the facilities.  Currently, no separate cash reserves are maintained by the state to deal with property and casualty losses.

There is no policy or procedure in place on catastrophic losses, which continue to be dealt with by the Legislature rather than on an administrative level.

SUMMARY:

A separate fund is created exclusively for the purpose of insuring the property of all agencies of the state and its political subdivisions.  The fund provides protection against fire and other perils.  The Insurance Commissioner has exclusive control over the administration of the insurance program and the fund.

Agencies possessing state property or property for which the state may be liable must provide the Commissioner with a list of property and its value.  The Commissioner determines the premium rate necessary to fund the program.  The premiums assessed are paid by the Office of Financial Management (OFM) from funds appropriated by law to the agency that is insured.

When a loss is incurred, the Commissioner determines its extent and files a statement with OFM.  Based upon that statement, OFM issues payment.  Disagreements between the Commissioner and the affected agency regarding valuation of the loss sustained are settled by an appraisal.  Specific procedures for obtaining a binding appraisal are set forth.  Valuation is on actual cash basis unless the property is specifically insured for replacement cost.

The Commissioner may direct the Attorney General to file suit against responsible parties, other than the agency or parties employed by the agency, for any loss or damage covered by the insurance created by this act.

Fiscal Note:      requested