BILL REQ. #: Z-0244.1
State of Washington | 58th Legislature | 2003 Regular Session |
Read first time 01/31/2003. Referred to Committee on Financial Institutions & Insurance.
AN ACT Relating to forming market assistance plans and joint underwriting associations; amending RCW 48.22.050; adding a new chapter to Title 48 RCW; and repealing RCW 48.88.010, 48.88.020, 48.88.030, 48.88.040, 48.88.050, and 48.88.070.
BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF WASHINGTON:
Sec. 1 RCW 48.22.050 and 1986 c 305 s 906 are each amended to
read as follows:
(1) For the purposes of this section:
(a) "Market assistance plan" means a voluntary mechanism operated
by a committee to assist individuals, businesses, and public entities
to buy general casualty insurance when it cannot be readily obtained
from the voluntary market. A market assistance plan is comprised of
both insurers and risk retention groups that write general casualty
insurance in this state.
(b) "Committee" means a committee comprised of licensed agents,
brokers, and insurers designated by the commissioner to coordinate
activities of the market assistance plan.
(c) "Insurer" means the same as in RCW 48.01.050 and includes
unauthorized insurers providing surplus line coverage.
(2) The commissioner ((shall by regulation require)) may request
insurers authorized to write general casualty insurance in this state
to form a market assistance plan ((to assist)) if:
(a) Persons and other entities are unable to purchase a particular
class or type of general casualty insurance in an adequate amount from
either the admitted ((market)) or nonadmitted market((.)); or
For the purpose of this section, a market assistance plan means a
voluntary mechanism by insurers writing casualty insurance in this
state in either the admitted or nonadmitted market to provide casualty
insurance for a class of insurance designated in writing to the plan by
the commissioner.
The bylaws and method of operation of any market assistance plan
shall be approved by the commissioner prior to its operation.
A market assistance plan shall have a minimum of twenty-five
insurers willing to insure risks within the class designated by the
commissioner. If twenty-five insurers do not voluntarily agree to
participate, the commissioner may require casualty insurers to
participate in a market assistance plan as a condition of continuing to
do business in this state. The commissioner shall make such a
requirement to fulfill the quota of at least twenty-five insurers. The
commissioner shall make his or her designation on the basis of the
insurer's premium volume of casualty insurance in this state
(b) There are so few insurers actively selling insurance in a
particular class or type of general casualty insurance that a
competitive market does not exist. A competitive market does not exist
if the commissioner finds:
(i) The capacity of insurers and risk retention groups to provide
coverage in a particular class or type of general casualty insurance is
inadequate to fulfill the reasonable needs of buyers; or
(ii) Underwriting practices of insurers and risk retention groups
are so restrictive that a significant number of buyers cannot qualify
for a particular class or type of general casualty insurance.
(3) A market assistance plan may be established only if the
commissioner determines a sufficient number of insurers are willing to
insure risks to create a market where insurance is available to
standard risks at adequate coverage limits. If, upon the request of
the commissioner, an insurer declines to participate in a market
assistance plan, the insurer must state both the business and financial
reasons why it is unable to participate in the market assistance plan.
(4) The commissioner, in consultation with the committee, must
develop a plan of operation for the market assistance plan.
(5) The market assistance plan may charge a reasonable processing
fee to applicants who seek insurance coverage through the market
assistance plan.
(6) Licensed agents and brokers may receive a reasonable commission
for insurance placed in the market assistance plan. The plan of
operation may allow a commission to be paid regardless of whether the
agent or broker is appointed or otherwise represents the insurer
accepting the risk.
(7) The commissioner may adopt rules to implement this section.
NEW SECTION. Sec. 2 Availability of commercial liability
insurance is essential to economic vitality and quality of life in the
state of Washington. If adequate commercial liability insurance is not
available, the viability of some business operations and services is
threatened.
This chapter gives the commissioner authority to ensure continued
availability of essential commercial liability insurance in this state.
The commissioner may establish a temporary market for commercial
liability insurance coverage if:
(1) Commercial liability insurance of a particular class or type is
not available from the voluntary market; or
(2) There are so few insurers selling insurance in a particular
class or type of casualty insurance that a competitive market does not
exist.
The commissioner may use appropriated funds as needed to establish
and supervise the association.
NEW SECTION. Sec. 3 The definitions in this section apply
throughout this chapter unless the context clearly requires otherwise.
(1) "Association" means the nonprofit joint underwriting
association established under this chapter.
(2) "Board" means the governing board of the association.
(3) "Commercial liability insurance" means any casualty insurance
policy that provides coverage to businesses or service providers for
legal liability that results from negligent acts or omissions related
to their operations. "Commercial liability insurance" does not include
any type of:
(a) Workers' compensation insurance;
(b) Employer's liability insurance; or
(c) Nuclear liability insurance.
NEW SECTION. Sec. 4 (1) The commissioner has authority to create
a Washington association to provide a class or type of commercial
liability insurance if it is not available through the voluntary
market. Coverage through the association is available only if the
insurance is required by statute, ordinance, rule, or is necessary to
earn a livelihood or conduct business operations in this state. At the
discretion of the commissioner:
(a) More than one class or type of commercial liability insurance
may be offered by a single association; and
(b) An association may be required to write an additional class or
type of commercial liability insurance if the remaining requirements of
this section are met.
(2) The commissioner must attempt to form a market assistance plan
under RCW 48.22.050 before implementing this chapter.
(3)(a) The commissioner must provide notice and opportunity for
hearing under chapter 48.04 RCW before forming or ending the operations
of the association.
(b) The association may not begin underwriting operations for any
class or type of commercial liability insurance until the commissioner
finds that:
(i) Certain businesses or service providers cannot buy essential
commercial liability insurance through the voluntary market; or
(ii)(A) There are so few insurers actively selling insurance in a
particular class or type of commercial liability insurance that a
competitive market does not exist; and
(B) Other mechanisms, such as a voluntary market assistance plan,
will not provide an adequate market for these businesses or service
providers.
(4) The association may not offer insurance coverage to any person
or entity the board decides is outside the scope and purpose for which
the association was formed.
(5) The association may decline to insure persons or entities that
present an extraordinary risk because of the nature of their
operations, past claims experience, or inadequate risk management
program.
(a) Any decision to decline coverage must be documented and may be
reviewed by the commissioner.
(b) If the commissioner finds that either the documentation or
criteria used to decline coverage is inadequate, the commissioner may
require the association to provide coverage.
(c) The association may appeal a decision of the commissioner under
chapter 48.04 RCW.
NEW SECTION. Sec. 5 The association is comprised of all:
(1) Insurers that have a certificate of authority to write general
casualty insurance in this state; and
(2) Risk retention groups that are chartered and licensed to write
liability insurance in this state.
Every general casualty insurer and risk retention group must be a
member of the association as a condition of its authority to continue
to transact business in this state.
NEW SECTION. Sec. 6 (1) A person or entity that cannot buy
commercial liability insurance that the commissioner has found to be
unavailable under section 4 of this act is eligible to apply to the
association for insurance.
(2) The commissioner must permit the association to use a rating
plan to develop insurance premiums. Any rating plan used by the
association for premium development must be based on sound actuarial
principles. The rating plan must result in premium rates that are not
excessive, inadequate, or unfairly discriminatory.
NEW SECTION. Sec. 7 (1) The commissioner must appoint a
governing board to administer the association.
(a) The board is subject to the supervision by the commissioner.
(b) Members of the board may be reimbursed by the association for
actual and necessary expenses incurred to attend meetings.
(2) The commissioner may select one or more insurers to manage the
operations of the association. Every managing insurer must be admitted
to transact the business of insurance in the state of Washington and
have demonstrated expertise in the type of commercial liability
insurance coverage that it manages.
NEW SECTION. Sec. 8 (1) The association has the general
corporate powers and authority granted under the laws of the state of
Washington.
(2) The board must adopt a plan of operation and submit the plan to
the commissioner. The plan of operation may take affect only after it
has been approved by the commissioner.
(a) The plan of operation may be amended.
(b) All amendments are subject to review and approval by the
commissioner.
(3) If the board does not submit a suitable plan of operation
within one hundred eighty days after the board has been appointed, the
commissioner may adopt rules to implement this chapter.
NEW SECTION. Sec. 9 The association must establish a risk
management program for persons or entities insured by the association.
The risk management program must include:
(1) Standards for systematic investigation and reporting of claims
and incidents; and
(2) A loss control program. The loss control program must include
procedures that:
(a) Analyze claim frequency, severity, and causes of loss;
(b) Identify situations that may produce large losses;
(c) Develop measures to control losses;
(d) Monitor the effectiveness of the loss control measures that are
implemented; and
(e) Educate insured persons or entities on methods to reduce or
prevent losses.
NEW SECTION. Sec. 10 The association must file a statement
annually with the commissioner that contains information about the
association's transactions, financial condition, and operations during
the preceding year. The statement must be in the form and according to
instructions adopted by the national association of insurance
commissioners for property and casualty insurers and include all of the
information stipulated by the commissioner. The association must
maintain its records according to the accounting practices and
procedures manual adopted by the national association of insurance
commissioners. The commissioner shall establish rules for the form and
content of this statement. The commissioner may require the
association to furnish additional information if the commissioner
considers it necessary to evaluate the scope, operation, and experience
of the association.
NEW SECTION. Sec. 11 (1) The commissioner must examine the
transactions, financial condition, and operations of the association at
least once every five years. Each examination must be conducted in the
manner prescribed for domestic insurance companies in chapter 48.03
RCW.
(2) The commissioner or designee may visit and examine the
operation and experience of the association at any time. The
commissioner or designee must have free access to all the books,
records, files, papers, and documents that relate to the operation of
the association, and may summon, qualify, and examine as witnesses all
persons having knowledge of the association's operations.
NEW SECTION. Sec. 12 (1) The association is a legal entity
separate and distinct from its members.
(2) Liability or a cause of action may not arise against the
following for any acts or omissions made in good faith while performing
their duties under this chapter:
(a) The association or any participating insurer;
(b) The commissioner or any of the commissioner's staff;
(c) The commissioner's authorized representatives; or
(d) Any other person or organization.
(3) The state is not liable to pay any debts or obligations of the
association.
(4) A person may not assert any claim against the state, its
agencies, or any of its employees for any act or omission of the
association.
NEW SECTION. Sec. 13 The association is not a member of the
guaranty fund created under chapter 48.32 RCW. The guaranty fund, this
state, and any political subdivisions are not responsible for losses
sustained by the association.
NEW SECTION. Sec. 14 The association is exempt from payment of
all fees and all taxes levied by this state or any of its subdivisions,
except taxes levied on real or personal property.
NEW SECTION. Sec. 15 (1) The association will be funded by
premiums paid by people and entities insured by the association.
(a) All premiums must be deposited into a fund under the management
of the board.
(b) Premiums must be used to pay claims, administrative costs, and
other expenses of the association.
(2) The association may assess all general casualty insurers and
risk retention groups to pay past and future financial obligations.
(3) If the association decides it must make an assessment, an
assessed insurer or risk retention group must pay the association
within thirty days after it receives notice of the assessment. If an
insurer or risk retention group does not pay an assessment within
thirty days after it receives notice of the assessment:
(a) The assessment accrues interest at the maximum legal rate until
it is paid in full. The interest is paid to the association; and
(b) The commissioner may suspend, revoke, or refuse to renew an
insurer's certificate of authority; and
(c) The commissioner may fine the insurer or risk retention group
up to ten thousand dollars.
NEW SECTION. Sec. 16 (1) An association may operate for a period
of three years. At the end of the three-year period, the association
must be dissolved unless the commissioner provides notice and
opportunity for hearing under chapter 48.04 RCW to reauthorize the
operations of the association.
(2) If, at any time, the commissioner provides notice and
opportunity for hearing under chapter 48.04 RCW and determines that
adequate commercial liability insurance is available in the voluntary
market for:
(a) A class or type of insurance provided by the association, the
commissioner shall order the association to end its underwriting
operations for that class or type of insurance; or
(b) All classes or types of insurance provided by the association,
the commissioner shall order the association to end all underwriting
operations and supervise the dissolution of the association, including
settlement of all financial and legal obligations and distribution of
any remaining assets.
NEW SECTION. Sec. 17 The commissioner may adopt all rules needed
to ensure the efficient, equitable operation of the association,
including but not limited to rules:
(1) Requiring or limiting certain policy provisions;
(2) Assessing members for operation of the association; and
(3) Necessary to implement and administer this chapter.
NEW SECTION. Sec. 18 Sections 2 through 17 of this act
constitute a new chapter in Title 48 RCW.
NEW SECTION. Sec. 19 The following acts or parts of acts are
each repealed:
(1) RCW 48.88.010 (Intent) and 1986 c 141 s 1;
(2) RCW 48.88.020 (Definitions) and 1986 c 141 s 2;
(3) RCW 48.88.030 (Plan for joint underwriting association) and
1986 c 141 s 3;
(4) RCW 48.88.040 (Association -- Membership) and 1986 c 141 s 4;
(5) RCW 48.88.050 (Policies -- Liability limits -- Rating plan) and
1986 c 141 s 5; and
(6) RCW 48.88.070 (Rules) and 1986 c 141 s 7.