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NINETY-FOURTH DAY


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MORNING SESSION


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Senate Chamber, Olympia, Wednesday, April 14, 1993

     The Senate was called to order at 10:00 a.m. by President Pritchard. The Secretary called the roll and announced to the President that all Senators were present except Senators Bluechel, Moyer, Rinehart and Skratek. On motion of Senator Oke, Senators Bluechel and Moyer were excused. On motion of Senator Spanel, Senators Rinehart and Skratek were excused.

     The Sergeant at Arms Color Guard, consisting of Pages Casey Hanell and Sean Lassiter, presented the Colors. Reverend Tammy Leiter, pastor of the Westminster Presbyterian Church of Olympia, offered the prayer.


MOTION


     On motion of Senator Jesernig, the reading of the Journal of the previous day was dispensed with and it was approved.


MESSAGES FROM THE HOUSE


April 13, 1993


MR. PRESIDENT:

     The House has passed:

     SUBSTITUTE SENATE BILL NO. 5066,

     SUBSTITUTE SENATE BILL NO. 5159,

     SENATE BILL NO. 5906, and the same are herewith transmitted.

ALAN THOMPSON, Chief Clerk


April 13, 1993


MR. PRESIDENT:

     The House has passed SENATE BILL NO. 5290, and the same is herewith transmitted.

ALAN THOMPSON, Chief Clerk


SIGNED BY THE PRESIDENT


     The President signed:

     SUBSTITUTE SENATE BILL NO. 5066,

     SUBSTITUTE SENATE BILL NO. 5159,

     SENATE BILL NO. 5290,

     SENATE BILL NO. 5906.


SIGNED BY THE PRESIDENT


     The President signed:

     SUBSTITUTE SENATE BILL NO. 5937.



INTRODUCTION AND FIRST READING

 

SB 5987          by Senator Pelz


     AN ACT Relating to retail sales and use tax on motor vehicle fuels; and creating a new section.


     HOLD.


MOTION


     On motion of Senator Jesernig, Senate Bill No. 5987 was held on the desk.


MOTION


     On motion of Senator Fraser, the following resolution was adopted:


SENATE RESOLUTION 1993-8640


By Senators Fraser, Gaspard, Snyder, Amondson, Anderson, Sellar, Roach, Rasmussen and Prentice


     WHEREAS, Washington State Government would cease to exist without the skill, dedication, and commitment of highly qualified and talented state employees; and

     WHEREAS, State employees demonstrate consistent excellence in the performance of their duties and responsibilities, providing quality services to the public, and managing both human and fiscal resources efficiently and creatively; and

     WHEREAS, The people of Washington greatly value state employees who are essential to the healthy functioning of state government and to the critical services provided to the citizens of our state; and

     WHEREAS, The Governor's Distinguished Management Leadership Award was created in 1985 and the Sustaining Leadership Award was created in 1992 to formally recognize managers whose accomplishments are commendable and who demonstrate that leadership excellence is prevalent in state government; and

     WHEREAS, Forty-nine people employed in nineteen different state agencies have been nominated for the Governor's 1993 Distinguished Management Leadership Award and the Governor's 1993 Sustaining Leadership Award, including: John M. Adsit, Corrections; Michael Arnis, Basic Health Plan; Joseph G. Bell, Social and Health Services; Bruce J. Bjork, State Patrol; Richard Bosse, Corrections; Lonnie R. Brackins, State Patrol; William Brookreson, Agriculture; Cheryl Brown-Young, Corrections; Robert Darling, Retirement Systems; Chris Drivdahl, Wildlife; John S. Gabler, Social and Health Services; Roger P. Gantz, Social and Health Services; Marilyn Glenn, Personnel; Ron Gray, Labor and Industries; Phil Grigg, General Administration; Kate Heimbach, Community Development; Dave Hogan, Social and Health Services; Martin M. Keeling, Social and Health Services; Leana D. Lamb-Miller, Social and Health Services; Robert M. Leichner, State Patrol; Christine Lewis, Trade and Economic Development; John Mills, Corrections; Ann Morgan, Natural Resources; Steven Meacham, Natural Resources; Robert E. Milam, Social and Health Services; Gary O'Neil, Revenue; Larry W. Peck, Fisheries; James A. Peterson, Social and Health Services; Bill Phillips, General Administration; Roger Polzin, Insurance Commissioner; Betty Reed, General Administration; Jeff Robinson, Community Development; Greg R. Sorlie, Ecology; Kenneth D. Stark, Social and Health Services; Marsha Tadano-Long, Licensing; Pat Terry, Social and Health Services; James E. Thatcher, Corrections; Dennis Thaut, Corrections; Leila K. Todorovich, Social and Health Services; Mel Tonasket, Social and Health Services; Barbara Vane, Revenue; Margaret Vonheeder, Corrections; Jeanne M. Ward, Social and Health Services; Colleen M. Waterhouse, Social and Health Services; Ron L. Weaver, Health; Cathy Wiggins, Social and Health Services; Joseph R. Williams, Ecology; Judy Winsor, Licensing; and Philip Young, Corrections; and

     WHEREAS, These nominees, who have truly made a difference in state government, will be officially honored by Governor Mike Lowry today, April 14, in a reception at 2:30 p.m. in the State Reception Room;

     NOW, THEREFORE, BE IT RESOLVED, That the Washington State Senate, on behalf of all Washington citizens, recognize and applaud these leaders in state government who deserve the appreciation and gratitude of everyone who lives in our great state.


MOTION


     On motion of Senator Anderson, the following resolution was adopted:


SENATE RESOLUTION 1993-8633


By Senators Anderson and Fraser


     WHEREAS, It is customary that the second Wednesday in April each year be designated as Arbor Day; and

     WHEREAS, Arbor Day is a traditional day for the planting of trees and shrubs by many citizens in the state of Washington; and

     WHEREAS, Arbor Day is a symbolic day to recognize the importance of trees and shrubs to the environment, to neighborhoods and communities, to our state's agricultural and timber-based economy, and the importance of continued regeneration of our renewable resources; and

     WHEREAS, The state of Washington is appropriately called the Evergreen State due to the existence and special significance that trees and plants contribute to jobs, natural beauty, environment, and quality of life to our citizens; and

     WHEREAS, By observing Arbor Day every year, our citizens can appreciate and express thanksgiving for our state's natural resources, the full range of benefits that are provided from trees and shrubs in the state, and the importance of planting trees and shrubs throughout the year;

     NOW, THEREFORE, BE IT RESOLVED, That the Senate hereby proclaim April 14, 1993, as Arbor Day and encourage residents to plant a tree or shrub and celebrate this day.


MOTION


     On motion of Senator Jesernig, the Senate reverted to the sixth order of business.


     There being no objection, the Senate resumed consideration of House Bill No. 1379 and the pending amendment by Senator Vognild on page 3, line 36, to the Committee on Transportation striking amendment, deferred April 13, 1993.


RULING BY THE PRESIDENT


     President Pritchard: "In ruling upon the point of order raised by Senator Nelson, the President finds that House Bill No. 1379 is a measure which makes several changes in the laws dealing with motor vehicle registration and sales, including an extension of time to claim refunds, staggering of renewal periods for licensing, dealer penalties and licensing of vehicle salespersons.

     "The amendment by Senator Vognild on page 3, line 36, to the Committee on Transportation amendment, would mandate the replacement, at the time of annual renewal, of all license plates which are not of a mountain design background, or a horseless carriage plate, or a plate awarded congressional medal of honor winners.

     "The President, therefore, finds that the proposed amendment to the committee amendment does change the scope and object of the bill and the point of order is well taken."


     The amendment by Senator Vognild on page 3, line 36, to the Committee on Transportation striking amendment to House Bill No. 1379 was ruled out of order.


     The President declared the question before the Senate to be the adoption of the Committee on Transportation striking amendment to House Bill No. 1379.

     The Committee on Transportation striking amendment to House Bill No. 1379 was adopted.


MOTIONS


     On motion of Senator Vognild, the following title amendment was adopted:

     In line 1 of the title, after "vehicles;" strike the remainder of the title and insert "amending RCW 46.12.050, 46.68.010, 82.44.120, 46.70.021, 46.70.023, 46.70.041, 46.70.051, 46.70.083, 46.70.140, 46.70.290, 46.70.300, 46.87.020, 46.87.030, 46.87.080, 46.87.310, and 46.87.340; adding a new section to chapter 46.87 RCW; adding new sections to chapter 46.70 RCW; adding a new chapter to Title 88 RCW; recodifying RCW 46.12.120, 46.12.140, 88.02.060, 88.08.112, 88.02.115, 88.02.118, 88.02.125, 88.02.184, 88.02.188, 88.02.210, and 88.02.230; repealing RCW 46.70.150, 46.87.160, 88.02.023, 88.02.078, and 88.02.220; and prescribing penalties."


     On motion of Senator Vognild, the rules were suspended, House Bill No. 1379, as amended by the Senate, was advanced to third reading, the second reading considered the third and the bill was placed on final passage.

     The President declared the question before the Senate to be the roll call on the final passage of House Bill No. 1379, as amended by the Senate.


ROLL CALL


     The Secretary called the roll on the final passage of House Bill No. 1379, as amended by the Senate, and the bill passed the Senate by the following vote: Yeas, 44; Nays, 1; Absent, 0; Excused, 4.

     Voting yea: Senators Amondson, Barr, Bauer, Cantu, Deccio, Drew, Erwin, Franklin, Fraser, Gaspard, Hargrove, Haugen, Hochstatter, Jesernig, Loveland, McAuliffe, McCaslin, McDonald, Moore, Nelson, Newhouse, Niemi, Oke, Owen, Pelz, Prentice, Prince, Quigley, Rasmussen, M., Roach, Sellar, Sheldon, Smith, A., Smith, L., Snyder, Spanel, Sutherland, Talmadge, Vognild, von Reichbauer, West, Williams, Winsley and Wojahn - 44.

     Voting nay: Senator Anderson - 1.

     Excused: Senators Bluechel, Moyer, Rinehart and Skratek - 4.

     HOUSE BILL NO. 1379, as amended by the Senate, having received the constitutional majority, was declared passed. There being no objection, the title of the bill was ordered to stand as the title of the act.


SECOND READING


     SUBSTITUTE HOUSE BILL NO. 1870, by House Committee on Financial Institutions and Insurance (originally sponsored by Representatives Zellinsky, Heavey and R. Meyers)

 

Licensing bail bond agents.


     The bill was read the second time.


MOTIONS


     Senator Moore moved that the following Committee on Labor and Commerce amendment be adopted:

     Strike everything after the enacting clause and insert the following:

      "NEW SECTION. Sec. 1. The legislature declares that the licensing of bail bond agents should be uniform throughout the state. Therefore, it is the intent of the legislature to preempt any local regulation of bail bond agents, including licensing fees, but not including local business license fees. Nothing in this chapter limits the discretion of the courts of this state to accept or reject a particular surety or recognizance bond in a particular case.

      NEW SECTION. Sec. 2. Unless the context clearly requires otherwise, the definitions in this section apply throughout this chapter.

      (1) "Department" means the department of licensing.

      (2) "Director" means the director of licensing.

      (3) "Collateral or security" means property of any kind given as security to obtain a bail bond.

      (4) "Bail bond agency" means a business that sells and issues corporate surety bail bonds or that provides security in the form of personal or real property to insure the appearance of a criminal defendant before the courts of this state or the United States.

      (5) "Qualified agent" means an owner, sole proprietor, partner, manager, officer, or chief operating officer of a corporation who meets the requirements set forth in this chapter for obtaining a bail bond agency license.

      (6) "Bail bond agent" means a person who is employed by a bail bond agency and engages in the sale or issuance of bail bonds, but does not mean a clerical, secretarial, or other support person who does not participate in the sale or issuance of bail bonds.

      (7) "Licensee" means a bail bond agency or a bail bond agent or both.

      NEW SECTION. Sec. 3. An applicant must meet the following minimum requirements to obtain a bail bond agent license:

      (1) Be at least eighteen years of age;

      (2) Be a citizen or resident alien of the United States;

      (3) Not have been convicted of a crime in any jurisdiction in the preceding ten years, if the director determines that the applicant's particular crime directly relates to a capacity to perform the duties of a bail bond agent and the director determines that the license should be withheld to protect the citizens of Washington state. If the director shall make a determination to withhold a license because of previous convictions, the determination shall be consistent with the restoration of employment rights act, chapter 9.96A RCW;

      (4) Be employed by a bail bond agency or be licensed as a bail bond agency; and

      (5) Pay the required fee.

      NEW SECTION. Sec. 4. (1) In addition to meeting the minimum requirements to obtain a license as a bail bond agent, a qualified agent must meet the following additional requirements to obtain a bail bond agency license:

      (a) Pass an examination determined by the director to measure the person's knowledge and competence in the bail bond agency business; or

      (b) Have had at least three years' experience as a manager, supervisor, or administrator in the bail bond business or a related field as determined by the director. A year's experience means not less than two thousand hours of actual compensated work performed before the filing of an application. An applicant shall substantiate the experience by written certifications from previous employers. If the applicant is unable to supply written certifications from previous employers, applicants may offer written certifications from persons other than employers who, based on personal knowledge, can substantiate the employment; and

      (c) Pay any additional fees as established by the director.

      (2) An agency license issued under this section may not be assigned or transferred without prior written approval of the director.

      NEW SECTION. Sec. 5. (1) Applications for licenses required under this chapter shall be filed with the director on a form provided by the director. The director may require any information and documentation that reasonably relates to the need to determine whether the applicant meets the criteria, which may include fingerprints.

      (2) After receipt of an application for a license, the director may conduct an investigation to determine whether the facts set forth in the application are true.

      NEW SECTION. Sec. 6. (1) The director shall issue a bail bond agent license card to each licensed bail bond agent. A bail bond agent shall carry the license card whenever he or she is performing the duties of a bail bond agent and shall exhibit the card upon request.

      (2) The director shall issue a license certificate to each licensed bail bond agency.

      (a) Within seventy-two hours after receipt of the license certificate, the licensee shall post and display the certificate in a conspicuous place in the principal office of the licensee within the state.

      (b) It is unlawful for any person holding a license certificate to knowingly and willfully post the license certificate upon premises other than those described in the license certificate or to materially alter a license certificate.

      (c) Every advertisement by a licensee that solicits or advertises business shall contain the name of the licensee, the address of record, and the license number as they appear in the records of the director.

      (d) The licensee shall notify the director within thirty days of any change in the licensee's officers or directors or any material change in the information furnished or required to be furnished to the director.

      NEW SECTION. Sec. 7. (1) The director shall adopt rules establishing prelicense training and testing requirements, which shall include a minimum of four hours of classes. The director may establish, by rule, continuing education requirements for bail bond agents.

      (2) The director shall consult with the bail bond industry before adopting or amending the prelicensing training or continuing education requirements of this section.        (3) The director may appoint an advisory committee consisting of representatives from the bail bond industry and a consumer to assist in the development of rules to implement this chapter.

      (4) A bail bond agent need not fulfill the prelicensing training requirements of this chapter if he or she, within sixty days prior to July 1, 1994, provides proof to the director that he or she previously has met the training requirements of this chapter or has been employed as a bail bond agent for at least eighteen consecutive months immediately prior to the date of application.

      NEW SECTION. Sec. 8. (1) No bail bond agency license may be issued under the provisions of this chapter unless the qualified agent files with the director a bond, executed by a surety company authorized to do business in this state, in the sum of ten thousand dollars conditioned to recover against the agency and its servants, officers, agents, and employees by reason of its violation of the provisions of section 11 of this act. The bond shall be made payable to the state of Washington, and anyone so injured by the agency or its servants, officers, agents, or employees shall have the right and shall be permitted to sue directly upon this obligation in his or her own name. This obligation shall be subject to successive suits for recovery until the face amount is completely exhausted.

      (2) Every licensed bail bond agency must at all times maintain on file with the director the bond required by this section in full force and effect. Upon failure by a licensee to do so, the director shall suspend the licensee's license and shall not reinstate the license until this requirement is met.

      (3) In lieu of posting a bond, a qualified agent may deposit in an interest-bearing account, ten thousand dollars.

      (4) The director may waive the bond requirements of this section, in his or her discretion, pursuant to adopted rules.

      NEW SECTION. Sec. 9. (1) The provisions of this chapter relating to the licensing for regulatory purposes of bail bond agents and bail bond agencies are exclusive. No governmental subdivision of this state may enact any laws or rules licensing for regulatory purposes such persons, except as provided in subsections (2) and (3) of this section.

      (2) This section shall not be construed to prevent a political subdivision of this state from levying a business fee, business and occupation tax, or other tax upon bail bond agencies if such fees or taxes are levied by the political subdivision on other types of businesses within its boundaries.

      (3) This section shall not be construed to prevent this state or a political subdivision of this state from licensing for regulatory purposes bail bond agencies with respect to activities that are not regulated under this chapter.

      NEW SECTION. Sec. 10. (1) A bail bond agency shall notify the director within thirty days after the death or termination of employment of any employee who is a licensed bail bond agent.

      (2) A bail bond agency shall notify the director within seventy-two hours upon receipt of information affecting a licensed bail bond agent's continuing eligibility to hold a license under the provisions of this chapter.

      NEW SECTION. Sec. 11. (1) Every qualified agent shall keep adequate records for three years of all collateral and security received, all trust accounts required by this section, and all bail bond transactions handled by the bail bond agency, as specified by rule. The records shall be open to inspection without notice by the director or authorized representatives of the director.

      (2) Every qualified agent who receives collateral or security is a fiduciary of the property and shall keep adequate records for three years of the receipt, safekeeping, and disposition of the collateral or security. Every qualified agent shall maintain a trust account in a federally insured financial institution located in this state. All moneys, including cash, checks, money orders, wire transfers, and credit card sales drafts, received as collateral or security or otherwise held for a bail bond agency's client shall be deposited in the trust account not later than the third banking day following receipt of the funds or money. A qualified agent shall not in any way encumber the corpus of the trust account or commingle any other moneys with moneys properly maintained in the trust account. Each qualified agent required to maintain a trust account shall report annually under oath to the director the account number and balance of the trust account, and the name and address of the institution that holds the trust account, and shall report to the director within ten business days whenever the trust account is changed or relocated or a new trust account is opened.

      (3) Whenever a bail bond is exonerated by the court, the bail bond agency shall, within five business days after written notification of exoneration and upon demand, return all collateral or security to the person entitled thereto.

      NEW SECTION. Sec. 12. The following acts are prohibited and constitute grounds for disciplinary action or denial, suspension, or revocation of any license under this chapter, as deemed appropriate by the director:

      (1) Knowingly violating any of the provisions of this chapter or the rules adopted under this chapter;

      (2) Knowingly making a material misstatement or omission in the application for or renewal of a license;

      (3) Failing to meet the qualifications set forth in sections 3 and 4 of this act;

      (4) Conviction of a gross misdemeanor or felony or the commission of any act involving moral turpitude, dishonesty, or corruption whether the act constitutes a crime or not. If the act constitutes a crime, conviction in a criminal proceeding is not a condition precedent to disciplinary action. Upon such a conviction, however, the judgment and sentence is conclusive evidence at the ensuing disciplinary hearing of the guilt of the license holder or applicant of the crime described in the indictment or information, and of the person's violation of the statute on which it is based. For the purposes of this section, conviction includes all instances in which a plea of guilty or nolo contendere is the basis for the conviction and all proceedings in which the sentence has been deferred or suspended. Nothing in this section abrogates rights guaranteed under chapter 9.96A RCW;

      (5) Advertising that is false, fraudulent, or misleading;

      (6) Incompetence or negligence that results in injury to a person or that creates an unreasonable risk that a person may be harmed;

      (7) Suspension, revocation, or restriction of the individual's license to practice the profession by competent authority in any state, federal, or foreign jurisdiction, a certified copy of the order, stipulation, or agreement being conclusive evidence of the revocation, suspension, or restriction;

      (8) Failure to cooperate with the director by not:

      (a) Furnishing any necessary papers or documents requested by the director for purposes of conducting an investigation for disciplinary action, denial, suspension, or revocation of a license under this chapter;

      (b) Furnishing in writing a full and complete explanation covering the matter contained in a complaint filed with the department; or

      (c) Responding to subpoenas issued by the director, whether or not the recipient of the subpoena is the accused in the proceeding;

      (9) Failure to comply with an order issued by the director or an assurance of discontinuance entered into with the director;

      (10) Aiding or abetting an unlicensed person to practice if a license is required;

      (11) Knowingly committing, or being a party to, any material fraud, misrepresentation, concealment, conspiracy, collusion, trick, scheme, or device whereby any other person lawfully relies upon the word, representation, or conduct of the licensee;

      (12) Failure to adequately supervise employees to the extent that the client funds are at risk;

      (13) Interference with an investigation or disciplinary proceeding by willful misrepresentation of facts before the director or the director's authorized representative, or by the use of threats or harassment against any client or witness to prevent them from providing evidence in a disciplinary proceeding or any other legal action;

      (14) Assigning or transferring any license issued pursuant to the provisions of this chapter, except as provided in section 4 of this act;

      (15) Conversion of any money or contract, deed, note, mortgage, or other evidence of title, to his or her own use or to the use of his or her principal or of any other person, when delivered to him or her in trust or on condition, in violation of the trust or before the happening of the condition; and failure to return any money or contract, deed, note, mortgage, or other evidence of title within thirty days after the owner is entitled to possession, and makes demand for possession, shall be prima facie evidence of conversion;

      (16) Failing to keep records, maintain a trust account, or return collateral or security, as required by section 11 of this act;

      (17) Any conduct in a bail bond transaction which demonstrates bad faith, dishonesty, or untrustworthiness; or

      (18) Violation of an order to cease and desist that is issued by the director under this chapter.

      NEW SECTION. Sec. 13. The director has the following authority in administering this chapter:

      (1) To adopt, amend, and rescind rules as deemed necessary to carry out this chapter;

      (2) To issue an order providing for one or any combination of the following upon violation or violations of this chapter: Denying, suspending, or revoking a license; assessing monetary penalties; restricting or limiting practice; complying with conditions of probation for a designated period of time; making restitution to the person harmed by the licensee; or other corrective action;

      (3) To issue subpoenas and administer oaths in connection with an investigation, hearing, or proceeding held under this chapter;

      (4) To take or cause depositions to be taken and use other discovery procedures as needed in an investigation, hearing, or proceeding held under this chapter;

      (5) To compel attendance of witnesses at hearings;

      (6) To establish fees by rule under RCW 43.24.086 and chapter 34.05 RCW;

      (7) To take emergency action ordering summary suspension of a license, or restriction or limitation of the licensee's practice pending proceedings by the director;

      (8) To use the office of administrative hearings as authorized in chapter 34.12 RCW to conduct hearings. However, the director or the director's designee shall make the final decision in the hearing;

      (9) To enter into contracts for professional services determined to be necessary for adequate enforcement of this chapter;

      (10) To adopt standards of professional conduct or practice;

      (11) In the event of a finding of unprofessional conduct by an applicant or license holder, to impose sanctions against an applicant or license holder as provided by this chapter;

      (12) To enter into an assurance of discontinuance in lieu of issuing a statement of charges or conducting a hearing. The assurance shall consist of a statement of the law in question and an agreement to not violate the stated provision. The applicant or license holder shall not be required to admit to any violation of the law, and the assurance shall not be construed as such an admission. Violation of an assurance under this subsection is grounds for disciplinary action;

      (13) To designate individuals authorized to sign subpoenas and statements of charges; and

      (14) To employ such investigative, administrative, and clerical staff as necessary for the enforcement of this chapter.

      NEW SECTION. Sec. 14. Any person may submit a written complaint to the department charging a license holder or applicant with unprofessional conduct and specifying the grounds for the charge. If the director determines that the complaint merits investigation, or if the director has reason to believe, without a formal complaint, that a license holder or applicant may have engaged in unprofessional conduct, the director shall investigate to determine if there has been unprofessional conduct. A person who files a complaint under this section in good faith is immune from suit in any civil action related to the filing or contents of the complaint.

      NEW SECTION. Sec. 15. (1) If the director determines, upon investigation, that there is reason to believe a violation of this chapter has occurred, a statement of charges shall be prepared and served upon the license holder or applicant and notice of this action given to the owner or qualified agent of the employing bail bond agency. The statement of charges shall be accompanied by a notice that the license holder or applicant may request a hearing to contest the charges. The license holder or applicant must file a request for hearing with the department within twenty days after being served the statement of charges. The failure to request a hearing constitutes a default, whereupon the director may enter an order under RCW 34.05.440.

      (2) If a hearing is requested, the time of the hearing shall be scheduled but the hearing shall not be held earlier than thirty days after service of the charges upon the license holder or applicant. A notice of hearing shall be issued at least twenty days prior to the hearing, specifying the time, date, and place of the hearing.

      NEW SECTION. Sec. 16. The procedures governing adjudicative proceedings before agencies under chapter 34.05 RCW, the administrative procedure act, shall govern all hearings before the director.

      NEW SECTION. Sec. 17. If an order for payment of a monetary penalty is made as a result of a hearing and timely payment is not made as directed in the final order, the director may enforce the order for payment in the superior court in the county in which the hearing was held. This right of enforcement shall be in addition to any other rights the director may have as to a licensee ordered to pay a monetary penalty but shall not be construed to limit a licensee's ability to seek judicial review.

      In an action for enforcement of an order of payment of a monetary penalty, the director's order is conclusive proof of the validity of the order of payment of a penalty and the terms of payment.

      NEW SECTION. Sec. 18. (1) The director shall investigate complaints concerning practice by unlicensed persons of a profession or business for which a license is required by this chapter. In the investigation of the complaints, the director has the same authority as provided the director under section 15 of this act. The director shall issue a cease and desist order to a person after notice and hearing and upon a determination that the person has violated this subsection. If the director makes a written finding of fact that the public interest will be irreparably harmed by delay in issuing an order, the director may issue a temporary cease and desist order. The cease and desist order shall not relieve the person practicing or operating a business without a license from criminal prosecution therefor, but the remedy of a cease and desist order shall be in addition to any criminal liability. The cease and desist order is conclusive proof of unlicensed practice and may be enforced under RCW 7.21.060. This method of enforcement of the cease and desist order may be used in addition to, or as an alternative to, any provisions for enforcement of agency orders.

      (2) The attorney general, a county prosecuting attorney, the director, or any person may, in accordance with the law of this state governing injunctions, maintain an action in the name of this state to enjoin any person practicing a profession or business for which a license is required by this chapter without a license from engaging in such practice or operating such business until the required license is secured. However, the injunction shall not relieve the person practicing or operating a business without a license from criminal prosecution therefor, but the remedy by injunction shall be in addition to any criminal liability.

      (3) After June 30, 1994, any person who performs the functions and duties of a bail bond agent in this state without being licensed in accordance with the provisions of this chapter, or any person presenting or attempting to use as his or her own the license of another, or any person who gives false or forged evidence of any kind to the director in obtaining a license, or any person who falsely impersonates any other licensee, or any person who attempts to use an expired or revoked license, or any person who violates any of the provisions of this chapter is guilty of a gross misdemeanor.

      (4) After January 1, 1994, a person is guilty of a gross misdemeanor if he or she owns or operates a bail bond agency in this state without first obtaining a bail bond agency license.

      (5) After June 30, 1994, the owner or qualified agent of a bail bond agency is guilty of a gross misdemeanor if he or she employs any person to perform the duties of a bail bond agent without the employee having in his or her possession a permanent bail bond agent license issued by the department.

      (6) All fees, fines, forfeitures, and penalties collected or assessed by a court because of a violation of this section shall be remitted to the department.

      NEW SECTION. Sec. 19. A person or business that violates an injunction issued under this chapter shall pay a civil penalty, as determined by the court, of not more than twenty-five thousand dollars, which shall be paid to the department. For the purpose of this section, the superior court issuing any injunction shall retain jurisdiction.

      NEW SECTION. Sec. 20. The director or individuals acting on the director's behalf are immune from suit in any action, civil or criminal, based on disciplinary proceedings or other official acts performed in the course of their duties in the administration and enforcement of this chapter.

      NEW SECTION. Sec. 21. The director, in implementing and administering the provisions of this chapter, shall act in accordance with the administrative procedure act, chapter 34.05 RCW.

      NEW SECTION. Sec. 22. Failure to fulfill the fiduciary duties and other duties as prescribed in section 11 of this act is not reasonable in relation to the development and preservation of business. A violation of section 11 of this act is an unfair or deceptive act in trade or commerce for the purpose of applying the consumer protection act, chapter 19.86 RCW.

      NEW SECTION. Sec. 23. If any provision of this act or its application to any person or circumstance is held invalid, the remainder of the act or the application of the provision to other persons or circumstances is not affected.

      NEW SECTION. Sec. 24. The director of licensing may take such steps as are necessary to ensure that this act is implemented on its effective date.

      NEW SECTION. Sec. 25. This act is necessary for the immediate preservation of the public peace, health, or safety, or support of the state government and its existing public institutions, and shall take effect July 1, 1993.

      NEW SECTION. Sec. 26. Sections 1 through 23 of this act shall constitute a new chapter in Title 18 RCW."


     On motion of Senator Moore, the following amendment to the Committee on Labor and Commerce amendment was adopted:

     On page 4, line 15 of the amendment, after "employees" strike the remainder of the subsection and insert "may bring suit upon the bond in any county in which jurisdiction over the licensee may be obtained. The suit must be brought not later than two years after the failure to return property in accordance with section 11 of this act. If valid claims against the bond exceed the amount of the bond or deposit, each claimant shall be entitled only to a pro rata amount, based on the amount of the claim as it is valid against the bond, without regard to the date of filing of any claim or action."

     The President declared the question before the Senate to be the adoption of the Committee on Labor and Commerce striking amendment, as amended, to Substitute House Bill No. 1870.

     The Committee on Labor and Commerce striking amendment, as amended, to Substitute House Bill No. 1870 was adopted.


MOTIONS


     On motion of Senator Moore, the following title amendment was adopted:

     On page 1, line 1 of the title, after "agents;" strike the remainder of the title and insert "adding a new chapter to Title 18 RCW; creating a new section; prescribing penalties; providing an effective date; and declaring an emergency."


     On motion of Senator Moore, the rules were suspended, Substitute House Bill No. 1870, as amended by the Senate, was advanced to third reading, the second reading considered the third and the bill was placed on final passage.


MOTION


     On motion of Senator Oke, Senator Roach was excused.


     The President declared the question before the Senate to be the roll call on the final passage of Substitute House Bill No. 1870, as amended by the Senate.


ROLL CALL


     The Secretary called the roll on the final passage of Substitute House Bill No. 1870, as amended by the Senate, and the bill passed the Senate by the following vote: Yeas, 45; Nays, 0; Absent, 0; Excused, 4.

     Voting yea: Senators Amondson, Anderson, Barr, Bauer, Cantu, Deccio, Drew, Erwin, Franklin, Fraser, Gaspard, Hargrove, Haugen, Hochstatter, Jesernig, Loveland, McAuliffe, McCaslin, McDonald, Moore, Nelson, Newhouse, Niemi, Oke, Owen, Pelz, Prentice, Prince, Quigley, Rasmussen, M., Rinehart, Sellar, Sheldon, Smith, A., Smith, L., Snyder, Spanel, Sutherland, Talmadge, Vognild, von Reichbauer, West, Williams, Winsley and Wojahn - 45.

     Excused: Senators Bluechel, Moyer, Roach and Skratek - 4.

     SUBSTITUTE HOUSE BILL NO. 1870, as amended by the Senate, having received the constitutional majority, was declared passed. There being no objection, the title of the bill was ordered to stand as the title of the act.


SECOND READING


     HOUSE BILL NO. 1645, by Representatives Anderson, Reams, Veloria, Vance, Campbell, Dyer, Pruitt, Conway, Brough, Wang, Cothern, Wineberry and J. Kohl

 

Changing provisions relating to initiatives and referenda.


     The bill was read the second time.


MOTIONS


     On motion of Senator Haugen, the following amendment was adopted:

     On page 6, after line 13, insert the following:

      "NEW SECTION. Sec. 7. A new section is added to chapter 29.79 RCW to read as follows:

      (1) Except as provided to the contrary in RCW 82.14.036, 82.46.021, or 82.80.090, the ballot title of any referendum filed on an enactment or portion of an enactment of the state legislature or of the legislative authority of a unit of local government shall be composed of three elements: (a) An identification of the enacting legislative body; (b) a concise statement identifying the essential features of the enactment on which the referendum is filed; and (c) a question asking the voters whether the enactment should be approved or rejected by the people. The ballot issue shall be displayed on the ballot substantially as follows:


Referendum Measure No. XX. The (name of legislative body) has passed a law that (concise statement). Should this law be

                                      APPROVED .......

                                      OR

                                      REJECTED .......

      (2) For a referendum measure on a state enactment, the concise statement shall be prepared by the attorney general and shall not exceed twenty-five words.

      (3) The concise statement for a referendum measure on an enactment of the legislative authority of a unit of local government shall not exceed seventy-five words. If the local governmental unit is a city or a town, the concise statement shall be prepared by the city or town attorney. If the local governmental unit is a county, the concise statement shall be prepared by the prosecuting attorney of the county. If the unit is a unit of local government other than a city, town, or county, the concise statement shall be prepared by the prosecuting attorney of the county within which the majority area of the unit is located.

      (4) A referendum measure on the enactment of a unit of local government shall be advertised in the manner provided for nominees for elective office.

      Sec. 8. RCW 29.27.060 and 1985 c 252 s 1 are each amended to read as follows:

      (1) When a proposed constitution or constitutional amendment or other question is to be submitted to the people of the state for state-wide popular vote, the attorney general shall prepare a concise statement posed as a question and not exceeding twenty words containing the essential features thereof expressed in such a manner as to clearly identify the proposition to be voted upon.

      Questions to be submitted to the people of a county or municipality shall also be advertised as provided for nominees for office, and in such cases there shall also be printed on the ballot a concise statement posed as a question and not exceeding seventy-five words containing the essential features thereof expressed in such a manner as to clearly identify the proposition to be voted upon, which statement shall be prepared by the city or town attorney for the city or town, and by the prosecuting attorney for the county or any other ((political subdivision of the state)) unit of local government, other than ((cities)) a city or town, the majority area of which is situated in the county.

      The concise statement constitutes the ballot title.

      (2) The secretary of state shall certify to the county auditors the ballot title for a proposed constitution, constitutional amendment or other state-wide question at the same time and in the same manner as the ballot titles to initiatives and referendums.

      (3) Subsection (1) of this section does not apply to referendum measures filed on an enactment of the state legislature or on an enactment of the legislative authority of a unit of local government, nor does it apply to the extent that other provisions of state law provide otherwise for a specific type of ballot question or proposition.

      Sec. 9. RCW 29.79.040 and 1982 c 116 s 4 are each amended to read as follows:

      Within seven calendar days after the receipt of an initiative or referendum measure the attorney general shall formulate and transmit to the secretary of state ((a)) the concise statement ((posed as a question and not to exceed twenty words,)) required by RCW 29.27.060 or section 7 of this act bearing the serial number of the measure and a summary of the measure, not to exceed seventy-five words, to follow the statement. The statement may be distinct from the legislative title of the measure, and shall give a true and impartial statement of the purpose of the measure. Neither the statement nor the summary may intentionally be an argument, nor likely to create prejudice, either for or against the measure. Except as provided for in section 7 of this act, such a concise statement shall constitute the ballot title. The ballot title or, for a referendum on a state enactment, the concise statement formulated by the attorney general shall be the ballot title of or concise statement describing the measure unless changed on appeal. When practicable, the question posed by the ballot title shall be written in such a way that an affirmative answer to such question and an affirmative vote on the measure would result in a change in then current law, and a negative answer to the question and a negative vote on the measure would result in no change to then current law.

      Sec. 10. RCW 29.79.110 and 1982 c 116 s 11 are each amended to read as follows:

      Petitions ordering that acts or parts of acts passed by the legislature be referred to the people at the next ensuing general election, or special election ordered by the legislature, shall be substantially in the following form:


WARNING


      Every person who signs this petition with any other than his or her true name, knowingly signs more than one of these petitions, signs this petition when he or she is not a legal voter, or makes any false statement on this petition may be punished by fine or imprisonment or both.


PETITION FOR REFERENDUM


To the Honorable .........., Secretary of State of the State of Washington:

      We, the undersigned citizens and legal voters of the State of Washington, respectfully order and direct that Referendum Measure No. ....., ((entitled (here insert the established ballot title of the measure) being)) filed to revoke a (or part or parts of a) bill that (concise statement required by section 7 of this act) and that was passed by the .......... legislature of the State of Washington at the last regular (special) session of said legislature, shall be referred to the people of the state for their approval or rejection at the regular (special) election to be held on the ..... day of November, 19..; and each of us for himself or herself says: I have personally signed this petition; I am a legal voter of the State of Washington, in the city (or town) and county written after my name, my residence address is correctly stated, and I have knowingly signed this petition only once.

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 

Petitioner's                            |               Print name              |               Residence address, |               City         |

signature                               |               for positive             |               street and number,                  |               or            |               County

                                              |               identification          |               if any                                      |               Town      |

                                              |                                               |                                                               |                               |

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 

              (Here follow 20 numbered lines divided into columns as below.)

                                              |                                               |                                                               |                               |

                                              |                                               |                                                               |                               |

1 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

                                              |                                               |                                                               |                               | 

                                              |                                               |                                                               |                               |

2 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

                                              |                                               |                                                               |                               |                

                                              |                                               |                                                               |                               |

3 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

etc.


      Sec. 11. RCW 29.27.065 and 1965 c 9 s 29.27.065 are each amended to read as follows:

      Upon the filing of a ballot title as defined in RCW 29.27.060 or a concise statement as required under section 7 of this act, the secretary of state, in the event it is a state question, or the county auditor in the event it is a county or other local question, shall forthwith notify the persons proposing the measure of the exact language of the ballot title.

      Sec. 12. RCW 29.27.067 and 1965 c 9 s 29.27.067 are each amended to read as follows:

      If the persons filing any state or local question covered by RCW 29.27.060 or section 7 of this act are dissatisfied with the ballot title or concise statement formulated by the attorney general, city attorney, or prosecuting attorney preparing the same, they may at any time within ten days from the time of the filing of the ballot title or statement appeal to the superior court of Thurston county if it is a state-wide question, or to the superior court of the county where the question is to appear on the ballot, if it is a county or local question, by petition setting forth the measure, the ballot title or statement objected to, their objections to ((the ballot title)) it and praying for amendment thereof. The time of the filing of the ballot title or statement, as used herein in determining the time for appeal, is the time the ballot title or statement is first filed with the secretary of state, if concerning a state-wide question, or the county auditor, if a local question, the secretary of state or the county officer being herein called the "filing officer."

      A copy of the petition on appeal together with a notice that an appeal has been taken shall be served upon the filing officer and the official preparing the ballot title or statement. Upon the filing of the petition on appeal, the court shall forthwith, or at the time to which a hearing may be adjourned by consent of the appellants, examine the proposed measure, the ballot title or concise statement filed and the objections thereto and may hear arguments thereon, and shall as soon as possible render its decision and certify to and file with the filing officer such ballot title or statement as it determines will meet the requirements of this chapter. The decision of the superior court shall be final, and the title or statement so certified shall be the established ballot title or concise statement. Such appeal shall be heard without cost to either party.

      Sec. 13. RCW 35A.29.120 and 1979 ex.s. c 18 s 31 are each amended to read as follows:

      When any question is to be submitted to the voters of a code city, or when a proposition is to be submitted to the voters of an area under provisions of this title, the question or proposition shall be advertised as provided for nominees for office, and in such cases there shall also be printed on the ballot a ((concise statement)) ballot title for the question or proposition in the form ((of a question and as otherwise provided in)) applicable under section 7 of this act, RCW 29.27.060, ((which statement)) 82.14.036, 82.46.021, or 82.80.090 or as otherwise expressly required by state law. The ballot title shall be prepared by the attorney for the code city, or ((by the prosecuting attorney for the county)) as specified in RCW 29.27.060 for elections held outside of a code city. ((The concise statement shall constitute the ballot title.))

      NEW SECTION. Sec. 14. RCW 35.17.320 and 1965 c 7 s 35.17.320 are each repealed.

      NEW SECTION. Sec. 15. If any provision of this act or its application to any person or circumstance is held invalid, the remainder of the act or the application of the provision to other persons or circumstances is not affected."

      Renumber the remaining section consecutively.


     On motion of Senator Haugen, the following title amendments were considered simultaneously and were adopted:

     On page 1, line 2 of the title, after "29.79.490," strike "and 42.17.090" and insert "42.17.090, 29.27.060, 29.79.040, 29.79.110, 29.27.065, 29.27.067, and 35A.29.120"

     On page 1, line 3 of the title, after "29.79 RCW;" insert "repealing RCW 35.17.320;"


MOTION


     On motion of Senator Haugen, the rules were suspended, House Bill No. 1645, as amended by the Senate, was advanced to third reading, the second reading considered the third and the bill was placed on final passage.

     Debate ensued.

     The President declared the question before the Senate to be the roll call on the final passage of House Bill No. 1645, as amended by the Senate.


ROLL CALL


     The Secretary called the roll on the final passage of House Bill No. 1645, as amended by the Senate, and the bill passed the Senate by the following vote: Yeas, 33; Nays, 15; Absent, 0; Excused, 1.

     Voting yea: Senators Bauer, Drew, Erwin, Franklin, Fraser, Gaspard, Hargrove, Haugen, Jesernig, Loveland, McAuliffe, McCaslin, Moore, Moyer, Niemi, Owen, Pelz, Prentice, Prince, Quigley, Rasmussen, M., Rinehart, Sheldon, Skratek, Smith, A., Snyder, Spanel, Sutherland, Talmadge, Vognild, West, Williams and Wojahn - 33.

     Voting nay: Senators Amondson, Anderson, Barr, Bluechel, Cantu, Deccio, Hochstatter, McDonald, Nelson, Newhouse, Oke, Sellar, Smith, L., von Reichbauer and Winsley - 15.

     Excused: Senator Roach - 1.

     HOUSE BILL NO. 1645, as amended by the Senate, having received the constitutional majority, was declared passed. There being no objection, the title of the bill was ordered to stand as the title of the act.


SECOND READING


     ENGROSSED SUBSTITUTE HOUSE BILL NO. 1505, by House Committee on Commerce and Labor (originally sponsored by Representatives Heavey, Kremen, King, Lisk, G. Cole, Linville, Springer, Vance and R. Johnson)

 

Requiring verification of registration of contractors.


     The bill was read the second time.


MOTIONS


     Senator Sutherland moved that the following amendments be considered simultaneously and be adopted:

     On page 1, line 6, after "unregistered" insert "and unqualified"

      On page 1, line 11, after "contractors." insert "The department of labor and industries shall also develop and implement a program to educate and provide for competence of contractors involved with hazardous materials."

      On page 7, after line 16, insert the following:

      "NEW SECTION. Sec. 12. Unless the context clearly requires otherwise, the definitions in this section apply throughout sections 12 through 24 of this act.

      (1) "Commission" means the commission appointed by the governor to develop a program to educate, test, and certify paint or coating applicators. The commission shall also advise the department on the application and administration of any regulations applicable to the paint and coating application industry as may be required by federal or state legislative or regulatory actions.

      (2) "Paint or coating application" means the application of a substance in atomized, liquid, or particulate form that will adhere to or coat a surface and generally protect or preserve the surface, or the removal of paint or coatings. For the purposes of sections 12 through 24 of this act, paint and coating application includes applying or removing paints, pigments, extenders, metal primers and metal pigments, clear pigments, binders, thinners, and dryers, primers and sealers, oil paints and enamels, clear coatings, oils, stains, varnishes, lacquers, polyurethanes, chemical and epoxy coatings, emulsions, acrylic coatings, industrial coatings, and other materials commonly used in the paint and coating trade, preparation of surfaces to which paint or coatings will be applied or removed, and cleanup work in connection with painting.

      (3) "Paint or coating applicator" means a person directly engaged in painting or coating application, removal, or treatment of painted or coated surfaces for compensation, including those employees directly supervising such employees. For the purposes of sections 12 through 24 of this act, paint or coating applicator means a person who offers paint or coating application or removal as his or her primary business activity or whose job description or employment activity is primarily that of paint or coating application or removal. A person primarily engaged in roofing, printing, or the application of cosmetics is not considered a paint or coating applicator for the purpose of sections 12 through 24 of this act. A person engaged in the buying, selling, or leasing of industrial equipment, including agricultural, logging, or construction equipment, is not considered a paint or coating applicator for the purpose of sections 12 through 24 of this act and is exempted from the requirements of sections 12 through 24 of this act.

      (4) "Employer" means a natural person, corporation, trust, unincorporated association or partnership that hires paint or coating applicators, contracts to provide painting services to other persons, or both. An employer engaged in the buying, selling, or leasing of industrial equipment, including agricultural, logging, or construction equipment is exempted from the requirements of sections 12 through 24 of this act.

      (5) Employers of twenty-five thousand persons or more are presumed to have existing training programs at least equivalent to those which may be required under sections 12 through 24 of this act and are excluded from the provisions of sections 12 through 24 of this act.

      NEW SECTION. Sec. 13. The commission shall develop and the department shall adopt a program to educate, and test paint and coating applicators in handling hazardous materials applicable to paint or coating application. The program shall include:

      (1) A certification application form;

      (2) Standards for certificates of competency;

      (3) Rules for revoking certificates of competency;

      (4) A definition of the relationship of training programs to the competency certification program;

      (5) Notification procedures to ensure that painting and coating applicators and employers are notified in a timely manner of the requirements of sections 12 through 24 of this act; and

      (6) Provisions for certificates of competency for persons who engage solely in a subspecialty of painting and coating application or removal.

      A paint or coating applicator shall obtain a certificate of competency issued by the department after completing an approved training program.

      NEW SECTION. Sec. 14. A paint or coating applicator's course of education shall include an understanding of materials applied, removed, or treated as they affect the applicator, the workers around the applicator, the general public, and the environment; methods of preparation, handling, and knowledge of the equipment used in painting or coating; and understanding of all pertinent federal and state safety laws and administrative rules.

      It is the intent of the legislature that every effort be made to combine training requirements applicable to the application of paint and coating materials from all departments of state government in order to consolidate and reduce the regulatory burden and reduce the associated costs to the state.

      NEW SECTION. Sec. 15. There is created a painting safety commission comprised of nine members:

      (1) Three from organizations or associations whose primary purpose is to represent employers of paint or coating applicators. Every effort shall be made to ensure that at least one member in this category represents employers of ten or fewer paint or coating applicators on an annual full-time equivalent basis;

      (2) Three from organizations or associations whose primary purpose is to represent paint or coating applicators;

      (3) Two representing the painting or coating industry at large; and

      (4) One representing the consumer.

      The governor shall appoint the consumer representative to a three-year term, and the three paint or coating employee representatives and the three paint or coating employer representatives to one, two, and three year terms respectively. One at-large industry representative shall be appointed to a one-year term, and the other to a two-year term. Subsequent employee, employer, and at-large representatives shall serve for three years each. The governor shall consider recommendations from paint or coating organizations or associations whose primary purpose is to represent paint or coating employees and employers. The governor shall strive to make the commission appointments reflect the demographics of the state and reflect the make-up of the paint and coating industry. The director or the director's designee shall serve on the commission as an ex officio, nonvoting member. Each member of the commission shall be reimbursed for travel expenses in accordance with RCW 43.03.050 and 43.03.060 for each day in which the member is actually engaged in the business of the commission. The department shall provide staff support to the commission.

      NEW SECTION. Sec. 16. The department shall certify as meeting the requirements of sections 12 through 24 of this act, training programs of an employer or organization, that meet or exceed the standards established under section 13 of this act.

      NEW SECTION. Sec. 17. The department shall charge fees for training and issuance, renewal, and reinstatement of all certificates of competency and examinations required by sections 12 through 24 of this act. The department shall set the fees by rule. The fees shall cover the full cost of administering and enforcing sections 12 through 24 of this act and shall include travel, per diem, and administrative support costs.

      NEW SECTION. Sec. 18. Authorized representatives of the department shall investigate alleged or apparent violations of sections 12 through 24 of this act and upon presentation of credentials may inspect a worksite for the purpose of determining compliance with sections 12 through 24 of this act. The department shall also promptly investigate alleged violations of sections 12 through 24 of this act based on a written complaint. The department shall notify the complainant, in writing, within sixty days of the action taken on all the complaints.

      NEW SECTION. Sec. 19. Each day in which a paint or coating applicator works without a valid certificate of competency is a separate infraction. Each worksite at which a painting or coating applicator works in violation of sections 12 through 24 of this act is a separate infraction. Each day in which an employer employs such person is a separate infraction.

      NEW SECTION. Sec. 20. An authorized representative of the department may issue a notice of an infraction if a person who is doing paint or coating application or removal fails to produce a certificate of competency issued by the department in accordance with sections 12 through 24 of this act. A notice of an infraction issued under this section must be personally served on the person named in the notice by an authorized representative of the department. However, no penalties may be assessed for notices of infraction issued for one year after the adoption of rules under section 13 of this act.

      NEW SECTION. Sec. 21. The department shall establish monetary penalties for employee infractions, with the advice of the commission, not less than:

      (1) For the first offense, a sum of two hundred fifty dollars;

      (2) For the second offense, a sum of five hundred dollars;

      (3) For the third offense and subsequent offenses, a sum of one thousand dollars.

      NEW SECTION. Sec. 22. The department shall establish monetary penalties for employer infractions, with the advice of the commission, not less than:

      (1) For the first offense, a sum of two hundred fifty dollars;

      (2) For the second offense, a sum of five hundred dollars;

      (3) For the third offense and subsequent offenses, a sum of one thousand dollars.

      NEW SECTION. Sec. 23. An appeal by an employee or employer of a penalty set out in either section 21 or 22 of this act shall consist of an adjudicative proceeding set out in chapter 34.05 RCW.

      NEW SECTION. Sec. 24. The paint and coating applicators account is created in the custody of the state treasurer. All receipts from fees and fines collected by the department under the authority of sections 12 through 24 of this act shall be deposited into the account. Expenditures from the account may be used only for the purposes of the commission and other expenditures approved by the director or the director's designee. Only the director or the director's designee may authorize expenditures from the account. The account is subject to allotment procedures under chapter 43.88 RCW, but no appropriation is required for expenditures.

      NEW SECTION. Sec. 25. Sections 12 through 24 of this act are each added to chapter 18.27 RCW.

      NEW SECTION. Sec. 26. The director of the department of labor and industries may take such steps as are necessary to ensure that this act is implemented on its effective date.

      NEW SECTION. Sec. 27. If any provision of this act or its application to any person or circumstance is held invalid, the remainder of the act or the application of the provision to other persons or circumstances is not affected."


POINT OF ORDER


     Senator Cantu: "Mr. President, I rise to a point of order. I urge that you consider that the ruling on these amendments is outside the scope and object of the bill. The original bill dealt with registration of contractors. These amendments deal with painting and plating applications. It requests the commission develop training programs and education programs for the application of painting and I suggest and urge that you evaluate the scope and object of these amendments. I believe they do not fit this bill."

     Further debate ensued.


     There being no objection, the President deferred further consideration of Engrossed Substitute House Bill No. 1505.


MOTION


     On motion of Senator Jesernig, the Senate advanced to the eighth order of business.


MOTION


     On motion of Senator Moyer, the following resolution was adopted:


SENATE RESOLUTION 1993-8634


By Senators Moyer, McCaslin, Moore and West


     WHEREAS, The state of Washington applauds those educators who promote and encourage an interest in science by providing quality science experiences for students and teachers; and

     WHEREAS, Scott Stowell and Rosemary Sweet have been named to the 1993 Honor Roll of Teachers by the Association of Science-Technology Centers and Pacific Science Center for their exemplary use of community resources to enhance and expand the science enrichment opportunities available to students and teachers; and

     WHEREAS, Scott Stowell, science coordinator for the Spokane School District, has developed a district-wide training program in science education for elementary teachers, serves on the Advisory Committee for the Washington Systemic Initiative in Mathematics, Science and Technology Education, and serves on the Spokane Park Board Advisory Committee working to develop a permanent science center in Spokane; and

     WHEREAS, Rosemary Sweet teaches 6th, 7th, and 8th grade science at St. Alphonsus School in Seattle, serves as a resource for kindergarten through 5th grade teachers by modifying her curriculum for their grade levels, spent a year as a Science Education Associate at Pacific Science Center, and builds on her own knowledge and skills by participating in teacher workshops frequently; and

     WHEREAS, Scott Stowell and Rosemary Sweet, along with approximately forty other educators being named to the 1993 Honor Roll of Teachers, will be honored in Washington, D.C., on April 29 and 30, 1993, before members of Congress; and

     WHEREAS, The National Science Foundation has declared April 25 through May 1, 1993, National Science and Technology Week to convey the importance of science to the nation;

     NOW, THEREFORE, BE IT RESOLVED, That the Senate commends Scott Stowell and Rosemary Sweet for their outstanding efforts as science educators; and

     BE IT FURTHER RESOLVED, That the Senate commends the Pacific Science Center for its dedication to providing interactive science, mathematics and technology education to students and teachers throughout the state of Washington; and

     BE IT FURTHER RESOLVED, That copies of this resolution be immediately transmitted by the Secretary of the Senate to Scott Stowell, Rosemary Sweet, and the Directors of the Association of Science-Technology Centers and the Pacific Science Center.


INTRODUCTION OF SPECIAL GUESTS


     The President introduced and congratulated Mr. Scott Stowell and Ms. Rosemary Sweet, who were seated in the gallery.


     There being no objection, the President returned the Senate to the sixth order of business.


SECOND READING


     SUBSTITUTE HOUSE BILL NO. 1931, by House Committee on Transportation (originally sponsored by Representatives Schmidt, Zellinsky and Wood)

 

Regulating steamboat operators.


     The bill was read the second time.


MOTIONS


     Senator Vognild moved that the following Committee on Transportation amendment be adopted:

     Strike everything after the enacting clause and insert the following:

      "Sec. 1. RCW 47.60.120 and 1984 c 7 s 307 are each amended to read as follows:

      (1) If the department acquires or constructs, maintains, and operates any ferry crossings upon or toll bridges over Puget Sound or any of its tributary or connecting waters, there shall not be constructed, operated, or maintained any other ferry crossing upon or bridge over any such waters within ten miles of any such crossing or bridge operated or maintained by the department excepting such bridges or ferry crossings in existence, and being operated and maintained under a lawfully issued franchise at the time of the location of the ferry crossing or construction of the toll bridge by the department.

      (2) The Washington utilities and transportation commission may, upon written petition of a commercial ferry operator certificated or applying for certification under chapter 81.84 RCW, and upon notice and hearing, grant a waiver from the ten-mile restriction. The waiver must not be detrimental to the public interest. In making a decision to waive the ten-mile restriction, the commission shall consider, but is not limited to, the impact of the waiver on transportation congestion mitigation, air quality improvement, and the overall impact on the Washington state ferry system. The commission shall act upon a request for a waiver within ninety days after the conclusion of the hearing. A waiver is effective for a period of five years from the date of issuance. At the end of five years the waiver becomes permanent unless appealed within thirty days by the commission on its own motion, the department, or an interested party.

      (3) The department shall not maintain and operate any ferry crossing or toll bridge over Puget Sound or any of its tributary or connecting waters that would infringe upon any franchise lawfully issued by the state and in existence and being exercised at the time of the location of the ferry crossing or toll bridge by the department, without first acquiring the rights granted to such franchise holder under the franchise.

      ((While any revenue bonds issued by the department under the provisions of this chapter are outstanding no additional bonds may be issued for the purposes of acquiring, constructing, operating, or maintaining any ferries or toll bridges within the aforesaid ten mile distance by the department unless the revenues of any such additional ferries or toll bridges are pledged to the bonds then outstanding to the extent provided by the resolution authorizing the issue of the outstanding bonds. The provisions of this section are binding upon the state, and all of its departments, agencies, and instrumentalities, as well as any and all private, political, municipal, and public corporations and subdivisions, including cities, towns, counties, and other political subdivisions, and the prohibitions of this section shall restrict and limit the powers of the legislature of the state in respect to the matters herein mentioned so long as any of such bonds are outstanding and unpaid and shall be deemed to constitute a contract to that effect for the benefit of the holders of all such bonds.))

      NEW SECTION. Sec. 2. A new section is added to chapter 47.60 RCW to read as follows:

      The ten-mile distance in RCW 47.60.120 means ten statute miles measured by airline distance. The ten-mile restriction shall be applied by comparing the two end points (termini) of a state ferry crossing to those of a private ferry crossing.

      Sec. 3. RCW 81.84.010 and 1961 c 14 s 81.84.010 are each amended to read as follows:

      (1) No ((steamboat company shall)) commercial ferry may hereafter operate any vessel or ferry for the public use for hire between fixed termini or over a regular route upon the waters within this state, including the rivers and lakes and Puget Sound, without first applying for and obtaining from the commission a certificate declaring that public convenience and necessity require such operation. Service authorized by certificates issued before or after the effective date of this act to a commercial ferry operator shall be exercised by the operator in a manner consistent with the conditions established in the certificate or tariffs: PROVIDED, That no certificate shall be required for a vessel primarily engaged in transporting freight other than vehicles, whose gross earnings from the transportation of passengers and/or vehicles, are not more than ten percent of the total gross annual earnings of such vessel: PROVIDED, That nothing herein shall be construed to affect the right of any county within this state to construct, condemn, purchase, operate, or maintain, itself or by contract, agreement, or lease, with any person, firm, or corporation, ferries or boats across or wharfs at or upon the waters within this state, including rivers and lakes and Puget Sound, provided such operation is not over the same route or between the same districts, being served by a certificate carrier, nor shall this chapter be construed to affect, amend, or invalidate any contract entered into prior to January 15, 1927, for the operation of ferries or boats upon the waters within this state, which was entered into in good faith by any county with any person, firm, or corporation, except that in case of the operation or maintenance by any county, city, town, port district, or other political subdivision by contract, agreement, or lease with any person, firm, or corporation, of ferries or boats across or wharfs at or upon the waters within this state, including rivers and lakes and Puget Sound, the commission shall have power and authority to regulate rates and services of such operation or maintenance of ferries, boats, or wharfs, to make, fix, alter, or amend said rates, and to regulate service and safety of operations thereof, in the manner and to the same extent as it is empowered to regulate a ((steamboat company)) commercial ferry, notwithstanding the provisions of any act or parts of acts inconsistent herewith.

      (2) The holder of a certificate of public convenience and necessity granted under this chapter must initiate service within five years of obtaining the certificate. The certificate holder shall report to the commission every six months after the certificate is granted on the progress of the certificated route. The reports shall include, but not be limited to, the progress of environmental impact, parking, local government land use, docking, and financing considerations. However, if service has not been initiated within five years of obtaining the certificate, the commission may extend the certificate on a twelve-month basis for up to three years if the six-month progress reports indicate there is significant advancement toward initiating service.

      (3) The commission shall review certificates in existence as of the effective date of this act, where service is not being provided on all or any portion of the route or routes certificated. Based on progress reports required under subsection (2) of this section, the commission may grant an extension beyond that provided in subsection (2) of this section. Such additional extension may not exceed a total of two years.

      Sec. 4. RCW 81.84.020 and 1961 c 14 s 81.84.020 are each amended to read as follows:

      (1) Upon the filing of an application the commission shall give reasonable notice to the department, affected cities and counties, and any common carrier which might be adversely affected, of the time and place for hearing on such application. The commission shall have power after hearing, to issue the certificate as prayed for, or to refuse to issue it, or to issue it for the partial exercise only of the privilege sought, and may attach to the exercise of the rights granted by said certificate such terms and conditions as in its judgment the public convenience and necessity may require; but the commission shall not have power to grant a certificate to operate between districts and/or into any territory prohibited by RCW 47.60.120 or already served by an existing certificate holder, unless such existing certificate holder ((shall fail and refuse)) has failed or refused to furnish reasonable and adequate service or has failed to provide the service described in its certificate or tariffs after the time period allowed to initiate service has elapsed: PROVIDED, A certificate shall be granted when it shall appear to the satisfaction of the commission that ((such steamboat company)) the commercial ferry was actually operating in good faith over the route for which such certificate shall be sought, on January 15, 1927: PROVIDED, FURTHER, That in case two or more ((steamboat companies)) commercial ferries shall upon said date have been operating vessels upon the same route, or between the same districts the commission shall determine after public hearing whether one or more certificates shall issue, and in determining to whom a certificate or certificates shall be issued, the commission shall consider all material facts and circumstances including the prior operation, schedules, and services rendered by either of ((said companies)) the ferries, and in case more than one certificate shall issue, the commission shall fix and determine the schedules and services of the ((companies to whom such)) ferries to which the certificates are issued to the end that duplication of service be eliminated and public convenience be furthered.

      (2) Before issuing a certificate, the commission shall determine that the applicant has the financial resources to operate the proposed service for at least twelve months, based upon the submission by the applicant of a pro forma financial statement of operations. Issuance of a certificate shall be determined upon, but not limited to, the following factors: Ridership and revenue forecasts; the cost of service for the proposed operation; an estimate of the cost of the assets to be used in providing the service; a statement of the total assets on hand of the applicant that will be expended on the proposed operation; and a statement of prior experience, if any, in such field by the applicant. The documentation required of the applicant under this section shall comply with the provisions of RCW 9A.72.085.

      (3) Subsection (2) of this section does not apply to an application for a certificate that is pending as of the effective date of this act.

      NEW SECTION. Sec. 5. A new section is added to chapter 81.84 RCW to read as follows:

      The commission, in granting a certificate to operate as a commercial ferry, shall require the operator to first obtain liability and property damage insurance from a company licensed to write liability insurance in the state or a surety bond of a company licensed to write surety bonds in the state, on each vessel or ferry to be used, in the amount of not less than one hundred thousand dollars for any recovery for personal injury by one person, and not less than one million dollars and in such additional amount as the commission shall determine, for all persons receiving personal injury and property damage by reason of one act of negligence, and not less than fifty thousand dollars for damage to property of any person other than the insured; or combined bodily injury and property damage liability insurance of not less than one million dollars, and to maintain such liability and property damage insurance or surety bond in force on each vessel or ferry while so used. Each policy for liability or property damage insurance or surety bond required by this section must be filed with the commission and kept in full force and effect, and failure to do so is cause for revocation of the operator's certificate.

      Sec. 6. RCW 81.84.030 and 1961 c 14 s 81.84.030 are each amended to read as follows:

      No certificate or any right or privilege thereunder held, owned, or obtained under the provisions of this chapter shall be sold, assigned, leased, mortgaged, or in any manner transferred, either by the act of the parties or by operation of law, except upon authorization by the commission first obtained. ((The commission may at any time by its order duly entered after hearing had upon notice to the holder of any certificate hereunder and an opportunity to such holder to be heard, suspend, revoke, alter, or amend any certificate issued under the provisions of this chapter, if the holder thereof wilfully violates or fails to observe the provisions or conditions of the certificate, or the orders, rules or regulations of the commission, or the provisions of this title.))

      Sec. 7. RCW 81.84.050 and 1961 c 14 s 81.84.050 are each amended to read as follows:

      Every ((steamboat company)) commercial ferry and every officer, agent, or employee of any ((steamboat company)) commercial ferry who violates or who procures, aids, or abets in the violation of any provision of this title, or any order, rule, regulation, or decision of the commission shall incur a penalty of one hundred dollars for every such violation. Each and every such violation shall be a separate and distinct offense, and in case of a continuing violation every day's continuance shall be and be deemed to be a separate and distinct violation. Every act of commission or omission which procures, aids, or abets in the violation shall be considered a violation under the provisions of this section and subject to the penalty herein provided for.

      The penalty herein provided for shall become due and payable when the person incurring the same receives a notice in writing from the commission describing such violation with reasonable particularity and advising such person that the penalty is due.

      The commission may, upon written application therefor, received within fifteen days, remit or mitigate any penalty provided for in this section or discontinue any prosecution to recover the same upon such terms as it in its discretion shall deem proper, and shall have authority to ascertain the facts upon all such applications in such manner and under such regulations as it may deem proper.

      If the amount of such penalty is not paid to the commission within fifteen days after receipt of notice imposing the same or, if application for remission or mitigation has not been made, within fifteen days after the violator has received notice of the disposition of such application, the attorney general shall bring an action to recover the penalty in the name of the state of Washington in the superior court of Thurston county or of some other county in which such violator may do business. In all such actions the procedure and rules of evidence shall be the same as in ordinary civil actions except as otherwise herein provided. All penalties recovered by the state under this chapter shall be paid into the state treasury and credited to the public service revolving fund.

      NEW SECTION. Sec. 8. A new section is added to chapter 81.84 RCW to read as follows:

      The commission, upon complaint by an interested party, or upon its own motion after notice and opportunity for hearing, may cancel, revoke, suspend, alter, or amend a certificate issued under this chapter on any of the following grounds:

      (1) Failure of the certificate holder to initiate service by the conclusion of the fifth year after the certificate has been granted or by the conclusion of an extension granted under RCW 81.84.010 (2) or (3), if the commission has considered the progress report information required under RCW 81.84.010 (2) or (3);

      (2) Failure of the certificate holder to file an annual report;

      (3) The filing by a certificate holder of an annual report that shows no revenue in the previous twelve-month period after service has been initiated;

      (4) The violation of any provision of this chapter;

      (5) The violation of or failure to observe the provisions or conditions of the certificate or tariffs;

      (6) The violation of an order, decision, rule, regulation, or requirement established by the commission under this chapter;

      (7) Failure of a certificate holder to maintain the required insurance coverage in full force and effect; or

      (8) Failure or refusal to furnish reasonable and adequate service after initiating service.

      The commission shall take appropriate action within thirty days upon a complaint by an interested party or of its own finding that a provision of this section has been violated.

      NEW SECTION. Sec. 9. A new section is added to chapter 81.84 RCW to read as follows:

      The commission may, with or without a hearing, issue temporary certificates to operate under this chapter, but only after it finds that the issuance of the temporary certificate is necessary due to an immediate and urgent need and is otherwise consistent with the public interest. The certificate may be issued for a period of up to one hundred eighty days. The commission may prescribe such special rules and impose special terms and conditions on the granting of the certificate as in its judgment are reasonable and necessary in carrying out this chapter. The commission shall collect a filing fee, not to exceed two hundred dollars, for each application for a temporary certificate. The commission shall not issue a temporary certificate to operate on a route for which a certificate has been issued or for which an application by another commercial ferry operator is pending.

      Sec. 10. RCW 81.04.010 and 1991 c 272 s 3 are each amended to read as follows:

      As used in this title, unless specially defined otherwise or unless the context indicates otherwise:

      "Commission" means the utilities and transportation commission.

      "Commissioner" means one of the members of such commission.

      "Corporation" includes a corporation, company, association, or joint stock association.

      "Low-level radioactive waste site operating company" includes every corporation, company, association, joint stock association, partnership, and person, their lessees, trustees, or receivers appointed by any court whatsoever, owning, operating, controlling, or managing a low-level radioactive waste disposal site or sites located within the state of Washington.

      "Low-level radioactive waste" means low-level waste as defined by RCW 43.145.010.

      "Person" includes an individual, a firm, or copartnership.

      "Street railroad" includes every railroad by whatsoever power operated, or any extension or extensions, branch or branches thereof, for public use in the conveyance of persons or property for hire, being mainly upon, along, above, or below any street, avenue, road, highway, bridge, or public place within any one city or town, and includes all equipment, switches, spurs, tracks, bridges, right of trackage, subways, tunnels, stations, terminals, and terminal facilities of every kind used, operated, controlled, or owned by or in connection with any such street railroad, within this state.

      "Street railroad company" includes every corporation, company, association, joint stock association, partnership, and person, their lessees, trustees, or receivers appointed by any court whatsoever, and every city or town, owning, controlling, operating, or managing any street railroad or any cars or other equipment used thereon or in connection therewith within this state.

      "Railroad" includes every railroad, other than street railroad, by whatsoever power operated for public use in the conveyance of persons or property for hire, with all bridges, ferries, tunnels, equipment, switches, spurs, tracks, stations, and terminal facilities of every kind used, operated, controlled, or owned by or in connection with any such railroad.

      "Railroad company" includes every corporation, company, association, joint stock association, partnership, or person, their lessees, trustees, or receivers appointed by any court whatsoever, owning, operating, controlling, or managing any railroad or any cars or other equipment used thereon or in connection therewith within this state.

      "Express company" includes every corporation, company, association, joint stock association, partnership, and person, their lessees, trustees, or receivers appointed by any court whatsoever, who shall engage in or transact the business of carrying any freight, merchandise, or property for hire on the line of any common carrier operated in this state.

      "Common carrier" includes all railroads, railroad companies, street railroads, street railroad companies, ((steamboat companies)) commercial ferries, express companies, car companies, sleeping car companies, freight companies, freight line companies, and every corporation, company, association, joint stock association, partnership, and person, their lessees, trustees, or receivers appointed by any court whatsoever, and every city or town, owning, operating, managing, or controlling any such agency for public use in the conveyance of persons or property for hire within this state.

      "Vessel" includes every species of watercraft, by whatsoever power operated, for public use in the conveyance of persons or property for hire over and upon the waters within this state, excepting all towboats, tugs, scows, barges, and lighters, and excepting rowboats and sailing boats under twenty gross tons burden, open steam launches of five tons gross and under, and vessels under five tons gross propelled by gas, fluid, naphtha, or electric motors.

      "((Steamboat company)) Commercial ferry" includes every corporation, company, association, joint stock association, partnership, and person, their lessees, trustees, or receivers, appointed by any court whatsoever, owning, controlling, leasing, operating, or managing any vessel over and upon the waters of this state.

      "Transportation of property" includes any service in connection with the receiving, delivery, elevation, transfer in transit, ventilation, refrigeration, icing, storage, and handling of the property transported, and the transmission of credit.

      "Transportation of persons" includes any service in connection with the receiving, carriage, and delivery of the person transported and his baggage and all facilities used, or necessary to be used in connection with the safety, comfort, and convenience of the person transported.

      "Public service company" includes every common carrier.

      The term "service" is used in this title in its broadest and most inclusive sense.

      Sec. 11. RCW 81.24.030 and 1981 c 13 s 5 are each amended to read as follows:

      Every ((steamboat company)) commercial ferry shall, on or before the first day of April of each year, file with the commission a statement on oath showing its gross operating revenue from intrastate operations for the preceding calendar year, or portion thereof, and pay to the commission a fee of two-fifths of one percent of the amount of gross operating revenue: PROVIDED, That the fee so paid shall in no case be less than five dollars. The percentage rate of gross operating revenue to be paid in any year may be decreased by the commission by general order entered before March 1st of such year."


     Senator Haugen moved that the following amendments by Senators Haugen and Nelson to the Committee on Transportation striking amendment be considered simultaneously and be adopted:

     On page 1, line 35 of the amendment, after "existence" strike "and being exercised" and insert "((and being exercised))"

     On page 3, line 4 of the amendment, after "county" insert "public transportation benefit area or other public agency"

     On page 3, beginning on line 10 of the amendment, strike "being served" and insert "((being served)) held"

     On page 3, line 10 of the amendment, after "carrier" insert "without first acquiring the rights granted to such certificate holder under the certificate"


MOTION


     On motion of Senator Vognild, the question was divided.

     The President declared the question before the Senate to be the adoption of the amendment by Senators Haugen and Nelson on page 1, line 35, to the Committee on Transportation striking amendment to Substitute House Bill No. 1931.

     Debate ensued.

POINT OF INQUIRY


     Senator Jesernig: "Senator Vognild, does this bill give any protection to current certificate holders?"

     Senator Vognild: "Yes, Senator, it does. It effectively gives them five years to put their service in place, plus a two-year extension, plus, if they can qualify, another year extension up to a maximum of three. Under the bill, the current certificate holders are well-protected, but the one thing they must do is show that they are making some kind of progress toward initiating service and not simply holding the paper and trying to put value on the paper."

     The President declared the question before the Senate to be the adoption of the amendment by Senators Haugen and Nelson on page 1, line 35, to the Committee on Transportation striking amendment to Substitute House Bill No. 1931.

     The amendment by Senators Haugen and Nelson on page 1, line 35, to the Committee on Transportation striking amendment was adopted.


     The President declared the question before the Senate to be the adoption of the amendment by Senators Haugen and Nelson on page 3, line 4, to the Committee on Transportation striking amendment to Substitute House Bill No. 1931.

     The amendment by Senators Haugen and Nelson on page 3, line 4, to the Committee on Transportation striking amendment was adopted.


     The President declared the question before the Senate to be the adoption of the amendments by Senators Haugen and Nelson on page 3, beginning on line 10, and page 3, line 10, to the Committee on Transportation striking amendment to Substitute House Bill No. 1931.

     Debate ensued.

     The amendments by Senators Haugen and Nelson on page 3, beginning on line 10, and page 3, line 10, to the Committee on Transportation striking amendment were adopted on a rising vote.

     The President declared the question before the Senate to be the adoption of the Committee on Transportation striking amendment, as amended, to Substitute House Bill No. 1931.

     The Committee on Transportation striking amendment, as amended, to Substitute House Bill No. 1931 was adopted.



MOTIONS


     On motion of Senator Vognild, the following title amendment was adopted:

     On line 1 of the title, after "operators;" strike the remainder of the title and insert "amending RCW 47.60.120, 81.84.010, 81.84.020, 81.84.030, 81.84.050, 81.04.010, and 81.24.030; adding a new section to chapter 47.60 RCW; adding new sections to chapter 81.84 RCW; and prescribing penalties."


     On motion of Senator Vognild, the rules were suspended, Substitute House Bill No. 1931, as amended by the Senate, was advanced to third reading, the second reading considered the third and the bill was placed on final passage.

     The President declared the question before the Senate to be the roll call on the final passage of Substitute House Bill No. 1931, as amended by the Senate.


ROLL CALL


     The Secretary called the roll on the final passage of Substitute House Bill No. 1931, as amended by the Senate, and the bill passed the Senate by the following vote: Yeas, 48; Nays, 1; Absent, 0; Excused, 0.

     Voting yea: Senators Amondson, Anderson, Barr, Bauer, Bluechel, Cantu, Deccio, Drew, Erwin, Fraser, Gaspard, Hargrove, Haugen, Hochstatter, Jesernig, Loveland, McAuliffe, McCaslin, McDonald, Moore, Moyer, Nelson, Newhouse, Niemi, Oke, Owen, Pelz, Prentice, Prince, Quigley, Rasmussen, M., Rinehart, Roach, Sellar, Sheldon, Skratek, Smith, A., Smith, L., Snyder, Spanel, Sutherland, Talmadge, Vognild, von Reichbauer, West, Williams, Winsley and Wojahn - 48.

     Voting nay: Senator Franklin - 1.

     SUBSTITUTE HOUSE BILL NO. 1931, as amended by the Senate, having received the constitutional majority, was declared passed. There being no objection, the title of the bill was ordered to stand as the title of the act.


SECOND READING


     HOUSE BILL NO. 1490, by Representatives Wineberry, Forner, Shin, Sheldon, King, Karahalios, J. Kohl and Anderson

 

Providing for child care.


     The bill was read the second time.


MOTION


     Senator Anderson moved that the following amendment by Senators Anderson and Wojahn be adopted:

     On page 2, beginning on line 23, delete "((. After the 1991-93 fiscal biennium, no grant shall be distributed that is greater than twenty-five thousand dollars))" and insert ". After the 1991-93 fiscal biennium, no grant shall be distributed that is greater than twenty-five thousand dollars"

     Debate ensued.


POINT OF INQUIRY


     Senator Moyer: "Senator Talmadge, would this money strictly go out to local grants, rather than to regionals?"

     Senator Talmadge: "These, I believe Senator Moyer, are for local referral networks--the networks that are in the communities. They make referrals for people who request information about appropriate child care. My understanding is that the grants are to be made to local referral networks and I believe those are based in local communities. I don't know that there are any regional ones in any regions of the state."

     Senator Moyer: "Or the state could not absorb all the money at a central location?"

     Senator Talmadge: "No, this is meant to go specifically to the local referral networks in the communities across the state and not to any larger groups than that."

     Senator Moyer: "Thank you."

     The President declared the question before the Senate to be the adoption of the amendment by Senators Anderson and Wojahn on page 2, beginning on line 23, to House Bill No. 1490.

     The motion by Senator Anderson carried and the amendment was adopted on a rising vote.


MOTION


     On motion of Senator Talmadge, the rules were suspended, House Bill No. 1490, as amended by the Senate, was advanced to third reading, the second reading considered the third and the bill was placed on final passage.


MOTION


     On motion of Senator Oke, Senator Cantu was excused.

     The President declared the question before the Senate to be the roll call on the final passage of House Bill No. 1490, as amended by the Senate.


ROLL CALL


     The Secretary called the roll on the final passage of House Bill No. 1490, as amended by the Senate, and the bill passed the Senate by the following vote: Yeas, 47; Nays, 1; Absent, 0; Excused, 1.

     Voting yea: Senators Amondson, Anderson, Bauer, Bluechel, Deccio, Drew, Erwin, Franklin, Fraser, Gaspard, Hargrove, Haugen, Hochstatter, Jesernig, Loveland, McAuliffe, McCaslin, McDonald, Moore, Moyer, Nelson, Newhouse, Niemi, Oke, Owen, Pelz, Prentice, Prince, Quigley, Rasmussen, M., Rinehart, Roach, Sellar, Sheldon, Skratek, Smith, A., Smith, L., Snyder, Spanel, Sutherland, Talmadge, Vognild, von Reichbauer, West, Williams, Winsley and Wojahn - 47.

     Voting nay: Senator Barr - 1.

     Excused: Senator Cantu - 1.

     HOUSE BILL NO. 1490, as amended by the Senate, having received the constitutional majority, was declared passed. There being no objection, the title of the bill was ordered to stand as the title of the act.


     There being no objection, the President returned the Senate to the fourth order of business.


MESSAGE FROM THE HOUSE


April 14, 1993


MR. PRESIDENT:

     The Speaker has signed ENGROSSED SUBSTITUTE HOUSE BILL NO. 1320, and the same is herewith transmitted:


ALAN THOMPSON, Chief Clerk


SIGNED BY THE PRESIDENT


     The President signed:

     ENGROSSED SUBSTITUTE HOUSE BILL NO. 1320.


     There being no objection, the President advanced the Senate to the sixth order of business.


SECOND READING


     SUBSTITUTE HOUSE BILL NO. 1855, by House Committee on Financial Institutions and Insurance (originally sponsored by Representatives Zellinsky, Kessler and R. Meyers) (by request of Insurance Commissioner)

 

Enabling accreditation of the insurance commissioner.


     The bill was read the second time.


MOTION


     Senator Moore moved that the following Committee on Labor and Commerce amendment be adopted:

     Strike everything after the enacting clause and insert the following:

      "NEW SECTION. Sec. 1. This chapter may be known and cited as the Insurer Holding Company Act.

      NEW SECTION. Sec. 2. As used in this chapter, the following terms have the meanings set forth in this section, unless the context requires otherwise.

      (1) An "affiliate" of, or person "affiliated" with, a specific person, is a person who directly, or indirectly through one or more intermediaries, controls, or is controlled by, or is under common control with, the person specified.

      (2) The term "control," including the terms "controlling," "controlled by," and "under common control with," means the possession, direct or indirect, of the power to direct or cause the direction of the management and policies of a person, whether through the ownership of voting securities, by contract other than a commercial contract for goods or nonmanagement services, or otherwise, unless the power is the result of an official position with or corporate office held by the person. Control is presumed to exist if a person, directly or indirectly, owns, controls, holds with the power to vote, or holds proxies representing, ten percent or more of the voting securities of any other person. This presumption may be rebutted by a showing made in a manner similar to that provided by section 6(11) of this act that control does not exist in fact. The commissioner may determine, after furnishing all persons in interest notice and opportunity to be heard and making specific findings of fact to support such determination, that control exists in fact, notwithstanding the absence of a presumption to that effect.

      (3) An "insurance holding company system" consists of two or more affiliated persons, one or more of which is an insurer.

      (4) The term "insurer" has the same meaning as set forth in RCW 48.01.050; it does not include agencies, authorities, or instrumentalities of the United States, its possessions and territories, the commonwealth of Puerto Rico, the District of Columbia, or a state or political subdivision of a state.

      (5) A "person" is an individual, a corporation, a partnership, an association, a joint stock company, a trust, an unincorporated organization, a similar entity, or any combination of the foregoing acting in concert, but does not include a joint venture partnership exclusively engaged in owning, managing, leasing, or developing real or tangible personal property.

      (6) A "securityholder" of a specified person is one who owns a security of that person, including common stock, preferred stock, debt obligations, and any other security convertible into or evidencing the right to acquire any of the foregoing.

      (7) A "subsidiary" of a specified person is an affiliate controlled by that person directly or indirectly through one or more intermediaries.

      (8) The term "voting security" includes a security convertible into or evidencing a right to acquire a voting security.

      NEW SECTION. Sec. 3. If an insurer ceases to control a subsidiary, it shall dispose of any investment in the subsidiary within three years from the time of the cessation of control or within such further time as the commissioner may prescribe, unless at any time after the investment has been made, the investment meets the requirements for investment under any other section of this Title, and the insurer has notified the commissioner thereof.

      NEW SECTION. Sec. 4. (1) No person other than the issuer may make a tender offer for or a request or invitation for tenders of, or enter into an agreement to exchange securities of, seek to acquire, or acquire, in the open market or otherwise, voting security of a domestic insurer if, after the consummation thereof, the person would, directly or indirectly, or by conversion or by exercise of a right to acquire, be in control of the insurer. No person may enter into an agreement to merge with or otherwise to acquire control of a domestic insurer or person controlling a domestic insurer unless, at the time the offer, request, or invitation is made or the agreement is entered into, or before the acquisition of the securities if no offer or agreement is involved, the person has filed with the commissioner and has sent to the insurer, a statement containing the information required by this section and the offer, request, invitation, agreement, or acquisition has been approved by the commissioner as prescribed in this section.

      For purposes of this section a domestic insurer includes a person controlling a domestic insurer unless the person, as determined by the commissioner, is either directly or through its affiliates primarily engaged in business other than the business of insurance. However, the person shall file a preacquisition notification with the commissioner containing the information set forth in section 5(3)(a) of this act sixty days before the proposed effective date of the acquisition. Persons who fail to file the required preacquisition notification with the commissioner are subject to the penalties in section 5(5)(c) of this act. For the purposes of this section, "person" does not include a securities broker holding, in usual and customary broker's function, less than twenty percent of the voting securities of an insurance company or of a person who controls an insurance company.

      (2) The statement to be filed with the commissioner under this section must be made under oath or affirmation and must contain the following information:

      (a) The name and address of each person by whom or on whose behalf the merger or other acquisition of control referred to in subsection (1) of this section is to be effected, hereinafter called "acquiring party," and:

      (i) If that person is an individual, his or her principal occupation and all offices and positions held during the past five years, and any conviction of crimes other than minor traffic violations during the past ten years;

      (ii) If that person is not an individual, a report of the nature of its business operations during the past five years or for such lesser period as the person and any predecessors have been in existence; an informative description of the business intended to be done by the person's subsidiaries; any convictions of crimes during the past ten years; and a list of all individuals who are or who have been selected to become directors or executive officers of the person, or who perform or will perform functions appropriate to those positions. The list must include for each such individual the information required by (a)(i) of this subsection.

      (b) The source, nature, and amount of the consideration used or to be used in effecting the merger or other acquisition of control, a description of any transaction in which funds were or are to be obtained for any such purpose, including a pledge of the insurer's stock, or the stock of any of its subsidiaries or controlling affiliates, and the identity of persons furnishing the consideration. However, where a source of the consideration is a loan made in the lender's ordinary course of business, the identity of the lender must remain confidential if the person filing the statement so requests.

      (c) Fully audited financial information as to the earnings and financial condition of each acquiring party for the preceding five fiscal years of each acquiring party, or for such lesser period as the acquiring party and any predecessors have been in existence, and similar unaudited information as of a date not earlier than ninety days before the filing of the statement.

      (d) Any plans or proposals that each acquiring party may have to liquidate the 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.

      (e) The number of shares of any security referred to in subsection (1) of this section that each acquiring party proposes to acquire, the terms of the offer, request, invitation, agreement, or acquisition referred to in subsection (1) of this section, and a statement as to the method by which the fairness of the proposal was arrived at.

      (f) The amount of each class of any security referred to in subsection (1) of this section that is beneficially owned or concerning which there is a right to acquire beneficial ownership by each acquiring party.

      (g) A full description of any contracts, arrangements, or understandings with respect to any security referred to in subsection (1) of this section in which an acquiring party is involved, including but not limited to transfer of any of the securities, joint ventures, loan or option arrangements, puts or calls, guarantees of loans, guarantees against loss or guarantees of profits, division of losses or profits, or the giving or withholding of proxies. The description must identify the persons with whom the contracts, arrangements, or understandings have been entered into.

      (h) A description of the purchase of any security referred to in subsection (1) of this section during the twelve calendar months before the filing of the statement, by an acquiring party, including the dates of purchase, names of the purchasers, and consideration paid or agreed to be paid for the security.

      (i) A description of any recommendations to purchase any security referred to in subsection (1) of this section made during the twelve calendar months before the filing of the statement, by an acquiring party, or by anyone based upon interviews or at the suggestion of the acquiring party.

      (j) Copies of all tender offers for, requests or invitations for tenders of, exchange offers for, and agreements to acquire or exchange any securities referred to in subsection (1) of this section, and, if distributed, of additional soliciting material relating to the securities.

      (k) The term of an agreement, contract, or understanding made with or proposed to be made with a broker-dealer as to solicitation or securities referred to in subsection (1) of this section for tender, and the amount of fees, commissions, or other compensation to be paid to broker-dealers with regard to the securities.

      (l) Such additional information as the commissioner may prescribe by rule as necessary or appropriate for the protection of policyholders of the insurer or in the public interest.

      If the person required to file the statement referred to in subsection (1) of this section is a partnership, limited partnership, syndicate, or other group, the commissioner may require that the information called for by (a) through (l) of this subsection shall be given with respect to each partner of the partnership or limited partnership, each member of the syndicate or group, and each person who controls a partner or member. If a partner, member, or person is a corporation, or the person required to file the statement referred to in subsection (1) of this section is a corporation, the commissioner may require that the information called for by (a) through (l) of this subsection shall be given with respect to the corporation, each officer and director of the corporation, and each person who is directly or indirectly the beneficial owner of more than ten percent of the outstanding voting securities of the corporation.

      If a material change occurs in the facts set forth in the statement filed with the commissioner and sent to the insurer under this section, an amendment setting forth the change, together with copies of all documents and other material relevant to the change, must be filed with the commissioner and sent to the insurer within two business days after the person learns of the change.

      (3) If an offer, request, invitation, agreement, or acquisition referred to in subsection (1) of this section is proposed to be made by means of a registration statement under the Securities Act of 1933 or in circumstances requiring the disclosure of similar information under the Securities Exchange Act of 1934, or under a state law requiring similar registration or disclosure, the person required to file the statement referred to in subsection (1) of this section may use those documents in furnishing the information called for by that statement.

      (4)(a) The commissioner shall approve a merger or other acquisition of control referred to in subsection (1) of this section unless, after a public hearing thereon, he or she finds that:

      (i) After the change of control, the domestic insurer referred to in subsection (1) of this section would not be able to satisfy the requirements for the issuance of a license to write the line or lines of insurance for which it is presently licensed;

      (ii) The effect of the merger or other acquisition of control would be substantially to lessen competition in insurance in this state or tend to create a monopoly therein. In applying the competitive standard in (a)(ii) of this subsection:

      (A) The informational requirements of section 5(3)(a) of this act and the standards of section 5(4)(b) of this act apply;

      (B) The commissioner may not disapprove the merger or other acquisition if the commissioner finds that any of the situations meeting the criteria provided by section 5(4)(c) of this act exist; and

      (C) The commissioner may condition the approval of the merger or other acquisition on the removal of the basis of disapproval within a specified period of time;

      (iii) The financial condition of an acquiring party is such as might jeopardize the financial stability of the insurer, or prejudice the interest of its policyholders;

      (iv) The plans or proposals that the acquiring party has to liquidate the insurer, sell its assets, consolidate or merge it with any person, or to make any other material change in its business or corporate structure or management, are unfair and unreasonable to policyholders of the insurer and not in the public interest;

      (v) The competence, experience, and integrity of those persons who would control the operation of the insurer are such that it would not be in the interest of policyholders of the insurer and of the public to permit the merger or other acquisition of control; or

      (vi) The acquisition is likely to be hazardous or prejudicial to the insurance-buying public.

      (b) The commissioner shall approve an exchange or other acquisition of control referred to in section 4 of this act within sixty days after he or she declares the statement filed under section 4 of this act to be complete and after holding a public hearing. At the hearing, the person filing the statement, the insurer, and any person whose significant interest is determined by the commissioner to be affected may present evidence, examine and cross-examine witnesses, and offer oral and written arguments and in connection therewith may conduct discovery proceedings in the same manner as is allowed in the superior court of this state. All discovery proceedings must be concluded not later than three days before the commencement of the public hearing.

      (c) The commissioner may retain at the acquiring person's expense any attorneys, actuaries, accountants, and other experts not otherwise a part of the commissioner's staff as may be reasonably necessary to assist the commissioner in reviewing the proposed acquisition of control. All reasonable costs of a hearing held under this section, as determined by the commissioner, including costs associated with the commissioner's use of investigatory, professional, and other necessary personnel, mailing of required notices and other information, and use of equipment or facilities, must be paid before issuance of the commissioner's order by the acquiring person.

      (5) This section does not apply to:

      (a) A transaction that is subject to RCW 48.31.010, dealing with the merger or consolidation of two or more insurers;

      (b) An offer, request, invitation, agreement, or acquisition that the commissioner by order has exempted from this section as: (i) Not having been made or entered into for the purpose and not having the effect of changing or influencing the control of a domestic insurer, or (ii) otherwise not comprehended within the purposes of this section.

      (6) The following are violations of this section:

      (a) The failure to file a statement, amendment, or other material required to be filed under subsection (1) or (2) of this section; or

      (b) The effectuation or an attempt to effectuate an acquisition of control of, or merger with, a domestic insurer unless the commissioner has given approval thereto.

      (7) The courts of this state have jurisdiction over every person not resident, domiciled, or authorized to do business in this state who files a statement with the commissioner under this section, and over all actions involving that person arising out of violations of this section, and each such person is deemed to have performed acts equivalent to and constituting an appointment by that person of the commissioner to be the person's true and lawful attorney upon whom may be served all lawful process in an action, suit, or proceeding arising out of violations of this section. Copies of all such lawful process shall be served on the commissioner and transmitted by registered or certified mail by the commissioner to such person at the person's last known address.

      NEW SECTION. Sec. 5. (1) The definitions in this subsection apply only for the purposes of this section.

      (a) "Acquisition" means an agreement, arrangement, or activity, the consummation of which results in a person acquiring directly or indirectly the control of another person, and includes but is not limited to the acquisition of voting securities, the acquisition of assets, bulk reinsurance, and mergers.

      (b) An "involved insurer" includes an insurer which either acquires or is acquired, is affiliated with an acquirer or acquired, or is the result of a merger.

      (2)(a) Except as exempted in (b) of this subsection, this section applies to any acquisition in which there is a change in control of an insurer authorized to do business in this state.

      (b) This section does not apply to the following:

      (i) An acquisition subject to approval or disapproval by the commissioner under section 4 of this act;

      (ii) A purchase of securities solely for investment purposes so long as the securities are not used by voting or otherwise to cause or attempt to cause the substantial lessening of competition in any insurance market in this state. If a purchase of securities results in a presumption of control under section 2(2) of this act, it is not solely for investment purposes unless the commissioner of the insurer's state of domicile accepts a disclaimer of control or affirmatively finds that control does not exist and the disclaimer action or affirmative finding is communicated by the domiciliary commissioner to the commissioner of this state;

      (iii) The acquisition of a person by another person when neither person is directly nor through affiliates primarily engaged in the business of insurance, if preacquisition notification is filed with the commissioner in accordance with subsection (3)(a) of this section sixty days before the proposed effective date of the acquisition. However, preacquisition notification is not required for exclusion from this section if the acquisition would otherwise be excluded from this section by this subsection (2)(b);

      (iv) The acquisition of already affiliated persons;

      (v) An acquisition if, as an immediate result of the acquisition:

      (A) In no market would the combined market share of the involved insurers exceed five percent of the total market;

      (B) There would be no increase in any market share; or

      (C) In no market would:

      (I) The combined market share of the involved insurers exceed twelve percent of the total market; and

      (II) The market share increase by more than two percent of the total market.

      For the purpose of (b)(v) of this subsection, a "market" means direct written insurance premium in this state for a line of business as contained in the annual statement required to be filed by insurers licensed to do business in this state;

      (vi) An acquisition for which a preacquisition notification would be required under this section due solely to the resulting effect on the ocean marine insurance line of business;

      (vii) An acquisition of an insurer whose domiciliary commissioner affirmatively finds: That the insurer is in failing condition; there is a lack of feasible alternative to improving such condition; and the public benefits of improving the insurer's condition through the acquisition exceed the public benefits that would arise from not lessening competition; and the findings are communicated by the domiciliary commissioner to the commissioner of this state.

      (3) An acquisition covered by subsection (2) of this section may be subject to an order under subsection (5) of this section unless the acquiring person files a preacquisition notification and the waiting period has expired. The acquired person may file a preacquisition notification.

      (a) The preacquisition notification must be in such form and contain such information as prescribed by the commissioner relating to those markets that, under subsection (2)(b)(v) of this section, cause the acquisition not to be exempted from this section. The commissioner may require such additional material and information as he or she deems necessary to determine whether the proposed acquisition, if consummated, would violate the competitive standard of subsection (4) of this section. The required information may include an opinion of an economist as to the competitive impact of the acquisition in this state accompanied by a summary of the education and experience of the person indicating his or her ability to render an informed opinion.

      (b) The waiting period required begins on the date the commissioner declares the preacquisition notification to be complete and ends on the earlier of the sixtieth day after the date of the declaration or the termination of the waiting period by the commissioner. Before the end of the waiting period, the commissioner may require the submission of additional needed information relevant to the proposed acquisition. If additional information is required, the waiting period ends on the earlier of the sixtieth day after the commissioner declares he or she has received the additional information or the termination of the waiting period by the commissioner.

      (4)(a) The commissioner may enter an order under subsection (5)(a) of this section with respect to an acquisition if there is substantial evidence that the effect of the acquisition may be substantially to lessen competition in a line of insurance in this state or tend to create a monopoly therein or if the insurer fails to file adequate information in compliance with subsection (3) of this section.

      (b) In determining whether a proposed acquisition would violate the competitive standard of (a) of this subsection, the commissioner shall consider the following:

      (i) An acquisition covered under subsection (2) of this section involving two or more insurers competing in the same market is prima facie evidence of violation of the competitive standards:

      (A) If the market is highly concentrated and the involved insurers possess the following shares of the market:

                           Insurer A            Insurer B

                            4%                     4% or more

                           10%                   2% or more

                           15%                   1% or more; or

      (B) If the market is not highly concentrated and the involved insurers possess the following shares of the market:

                           Insurer A            Insurer B

                            5%                     5% or more

                           10%                   4% or more

                           15%                   3% or more

                           19%                   1% or more



      A highly concentrated market is one in which the share of the four largest insurers is seventy-five percent or more of the market. Percentages not shown in the tables are interpolated proportionately to the percentages that are shown. If more than two insurers are involved, exceeding the total of the two columns in the table is prima facie evidence of violation of the competitive standard in (a) of this subsection. For the purpose of (b)(i) of this subsection, the insurer with the largest share of the market is Insurer A.

      (ii) There is a significant trend toward increased concentration when the aggregate market share of a grouping of the largest insurers in the market, from the two largest to the eight largest, has increased by seven percent or more of the market over a period of time extending from a base year five to ten years before the acquisition up to the time of the acquisition. An acquisition or merger covered under subsection (2) of this section involving two or more insurers competing in the same market is prima facie evidence of violation of the competitive standard in (a) of this subsection if:

      (A) There is a significant trend toward increased concentration in the market;

      (B) One of the insurers involved is one of the insurers in a grouping of such large insurers showing the requisite increase in the market share; and

      (C) Another involved insurer's market is two percent or more.

      (iii) For the purposes of (b) of this subsection:

      (A) The term "insurer" includes a company or group of companies under common management, ownership, or control;

      (B) The term "market" means the relevant product and geographical markets. In determining the relevant product and geographical markets, the commissioner shall give due consideration to, among other things, the definitions or guidelines, if any, adopted by the National Association of Insurance Commissioners and to information, if any, submitted by parties to the acquisition. In the absence of sufficient information to the contrary, the relevant product market is assumed to be the direct written insurance premium for a line of business, such line being that used in the annual statement required to be filed by insurers doing business in this state, and the relevant geographical market is assumed to be this state;

      (C) The burden of showing prima facie evidence of violation of the competitive standard rests upon the commissioner.

      (iv) Even though an acquisition is not prima facie violative of the competitive standard under (b)(i) and (ii) of this subsection, the commissioner may establish the requisite anticompetitive effect based upon other substantial evidence. Even though an acquisition is prima facie violative of the competitive standard under (b)(i) and (ii) of this subsection, a party may establish the absence of the requisite anticompetitive effect based upon other substantial evidence. Relevant factors in making a determination under (b)(iv) of this subsection include, but are not limited to, the following: Market shares, volatility of ranking of market leaders, number of competitors, concentration, trend of concentration in the industry, and ease of entry and exit into the market.

      (c) An order may not be entered under subsection (5)(a) of this section if:

      (i) The acquisition will yield substantial economies of scale or economies in resource use that cannot be feasibly achieved in any other way, and the public benefits that would arise from the economies exceed the public benefits that would arise from not lessening competition; or

      (ii) The acquisition will substantially increase the availability of insurance, and the public benefits of the increase exceed the public benefits that would arise from not lessening competition.

      (5)(a)(i) If an acquisition violates the standards of this section, the commissioner may enter an order:

      (A) Requiring an involved insurer to cease and desist from doing business in this state with respect to the line or lines of insurance involved in the violation; or

      (B) Denying the application of an acquired or acquiring insurer for a license to do business in this state.

      (ii) The commissioner may not enter the order unless: (A) There is a hearing; (B) notice of the hearing is issued before the end of the waiting period and not less than fifteen days before the hearing; and (C) the hearing is concluded and the order is issued no later than sixty days after the end of the waiting period. Every order must be accompanied by a written decision of the commissioner setting forth his or her findings of fact and conclusions of law.

      (iii) An order entered under (a) of this subsection may not become final earlier than thirty days after it is issued, during which time the involved insurer may submit a plan to remedy the anticompetitive impact of the acquisition within a reasonable time. Based upon the plan or other information, the commissioner shall specify the conditions, if any, under the time period during which the aspects of the acquisition causing a violation of the standards of this section would be remedied and the order vacated or modified.

      (iv) An order pursuant to (a) of this subsection does not apply if the acquisition is not consummated.

      (b) A person who violates a cease and desist order of the commissioner under (a) of this subsection and while the order is in effect, may, after notice and hearing and upon order of the commissioner, be subject at the discretion of the commissioner to one or more of the following:

      (i) A monetary penalty of not more than ten thousand dollars for every day of violation; or

      (ii) Suspension or revocation of the person's license; or

      (iii) Both (b)(i) and (b)(ii) of this subsection.

      (c) An insurer or other person who fails to make a filing required by this section and who also fails to demonstrate a good faith effort to comply with the filing requirement, is subject to a civil penalty of not more than fifty thousand dollars.

      (6) Sections 10 (2) and (3) and 11 of this act do not apply to acquisitions covered under subsection (2) of this section.

      NEW SECTION. Sec. 6. (1) Every insurer authorized to do business in this state that is a member of an insurance holding company system shall register with the commissioner, except a foreign insurer subject to registration requirements and standards adopted by statute or regulation in the jurisdiction of its domicile that are substantially similar to those contained in:

      (a) This section;

      (b) Section 7(1)(a), (2), and (3) of this act; and



      (c) Either section 7(1)(b) of this act or a provision such as the following: Each registered insurer shall keep current the information required to be disclosed in its registration statement by reporting all material changes or additions within fifteen days after the end of the month in which it learns of each change or addition.

      An insurer subject to registration under this section shall register within fifteen days after it becomes subject to registration, and annually thereafter by May 15th of each year for the previous calendar year, unless the commissioner for good cause shown extends the time for registration, and then within the extended time. The commissioner may require an insurer authorized to do business in the state that is a member of a holding company system, but that is not subject to registration under this section, to furnish a copy of the registration statement, the summary specified in subsection (3) of this section, or other information filed by the insurance company with the insurance regulatory authority of its domiciliary jurisdiction.

      (2) An insurer subject to registration shall file the registration statement on a form prescribed by the commissioner, containing the following current information:

      (a) The capital structure, general financial condition, ownership, and management of the insurer and any person controlling the insurer;

      (b) The identity and relationship of every member of the insurance holding company system;

      (c) The following agreements in force, and transactions currently outstanding or that have occurred during the last calendar year between the insurer and its affiliates:

      (i) Loans, other investments, or purchases, sales, or exchanges of securities of the affiliates by the insurer or of the insurer by its affiliates;

      (ii) Purchases, sales, or exchange of assets;

      (iii) Transactions not in the ordinary course of business;

      (iv) Guarantees or undertakings for the benefit of an affiliate that result in an actual contingent exposure of the insurer's assets to liability, other than insurance contracts entered into in the ordinary course of the insurer's business;

      (v) All management agreements, service contracts, and cost-sharing arrangements;

      (vi) Reinsurance agreements;

      (vii) Dividends and other distributions to shareholders; and

      (viii) Consolidated tax allocation agreements;

      (d) Any pledge of the insurer's stock, including stock of subsidiary or controlling affiliate, for a loan made to a member of the insurance holding company system;

      (e) Other matters concerning transactions between registered insurers and affiliates as may be included from time to time in registration forms adopted or approved by the commissioner.

      (3) Registration statements must contain a summary outlining all items in the current registration statement representing changes from the prior registration statement.

      (4) No information need be disclosed on the registration statement filed under subsection (2) of this section if the information is not material for the purposes of this section. Unless the commissioner by rule or order provides otherwise, sales, purchases, exchanges, loans or extensions of credit, investments, or guarantees involving one-half of one percent or less of an insurer's admitted assets as of the 31st day of the previous December are not material for purposes of this section.

      (5)(a) Subject to section 7(2) of this act, each registered insurer shall report to the commissioner all dividends and other distributions to shareholders within five business days after their declaration and at least fifteen business days before payment, and shall provide the commissioner such other information as may be required by rule.

      (b) If the commissioner determines that a registered insurer's surplus as regards policyholders is not reasonable in relation to the insurer's outstanding liabilities and adequate to its financial needs, the commissioner may order the registered insurance company to limit or discontinue the payment of stockholder dividends until such time as the surplus is adequate.

      (6) A person within an insurance holding company system subject to registration shall provide complete and accurate information to an insurer, where the information is reasonably necessary to enable the insurer to comply with this chapter.

      (7) The commissioner shall terminate the registration of an insurer that demonstrates that it no longer is a member of an insurance holding company system.

      (8) The commissioner may require or allow two or more affiliated insurers subject to registration under this section to file a consolidated registration statement.

      (9) The commissioner may allow an insurer authorized to do business in this state and part of an insurance holding company system to register on behalf of an affiliated insurer that is required to register under section 6(1) of this act and to file all information and material required to be filed under this section.

      (10) This section does not apply to an insurer, information, or transaction if and to the extent that the commissioner by rule or order exempts the insurer, information, or transaction from this section.

      (11) A person may file with the commissioner a disclaimer of affiliation with an authorized insurer, or an insurer or a member of an insurance holding company system may file the disclaimer. The disclaimer must fully disclose all material relationships and bases for affiliation between the person and the insurer as well as the basis for disclaiming the affiliation. After a disclaimer has been filed, the insurer is relieved of any duty to register or report under this section that may arise out of the insurer's relationship with the person unless and until the commissioner disallows the disclaimer. The commissioner shall disallow the a disclaimer only after furnishing all parties in interest with notice and opportunity to be heard and after making specific findings of fact to support the disallowance.

      (12) Failure to file a registration statement or a summary of the registration statement required by this section within the time specified for the filing is a violation of this section.

      NEW SECTION. Sec. 7. (1)(a) Transactions within a holding company system to which an insurer subject to registration is a party are subject to the following standards:

      (i) The terms must be fair and reasonable;

      (ii) Charges or fees for services performed must be fair and reasonable;

      (iii) Expenses incurred and payment received must be allocated to the insurer in conformity with customary insurance accounting practices consistently applied;

      (iv) The books, accounts, and records of each party to all such transactions must be so maintained as to clearly and accurately disclose the nature and details of the transactions, including such accounting information as is necessary to support the reasonableness of the charges or fees to the respective parties; and

      (v) The insurer's surplus regarding policyholders after dividends or distributions to shareholders or affiliates must be reasonable in relation to the insurer's outstanding liabilities and adequate to its financial needs.

      (b) The following transactions involving a domestic insurer and a person in its holding company system may not be entered into unless the insurer has notified the commissioner in writing of its intention to enter into the transaction and the commissioner declares the notice to be sufficient at least sixty days before, or such shorter period as the commissioner may permit, and the commissioner has not disapproved it within that period:

      (i) Sales, purchases, exchanges, loans or extensions of credit, guarantees, or investments if the transactions are equal to or exceed: (A) With respect to nonlife insurers, the lesser of three percent of the insurer's admitted assets or twenty-five percent of surplus as regards policyholders; (B) with respect to life insurers, three percent of the insurer's admitted assets; each as of the 31st day of the previous December;

      (ii) Loans or extensions of credit to any person who is not an affiliate, where the insurer makes the loans or extensions of credit with the agreement or understanding that the proceeds of the transactions, in whole or in substantial part, are to be used to make loans or extensions of credit to, to purchase assets of, or to make investments in, an affiliate of the insurer making the loans or extensions of credit if the transactions are equal to or exceed: (A) With respect to nonlife insurers, the lesser of three percent of the insurer's admitted assets or twenty-five percent of surplus as regards policyholders; (B) with respect to life insurers, three percent of the insurer's admitted assets; each as of the 31st day of the previous December;

      (iii) Reinsurance agreements or modifications to them in which the reinsurance premium or a change in the insurer's liabilities equals or exceeds five percent of the insurer's surplus as regards policyholders, as of the 31st day of the previous December, including those agreements that may require as consideration the transfer of assets from an insurer to a nonaffiliate, if an agreement or understanding exists between the insurer and nonaffiliate that any portion of the assets will be transferred to one or more affiliates of the insurer;

      (iv) Management agreements, service contracts, and cost-sharing arrangements; and

      (v) Material transactions, specified by rule, that the commissioner determines may adversely affect the interests of the insurer's policyholders.

      Nothing contained in this section authorizes or permits a transaction that, in the case of an insurer not a member of the same holding company system, would be otherwise contrary to law.

      (c) A domestic insurer may not enter into transactions that are part of a plan or series of like transactions with persons within the holding company system if the purpose of those separate transactions is to avoid the statutory threshold amount and thus avoid the review that would occur otherwise. If the commissioner determines that the separate transactions were entered into over a twelve-month period for that purpose, the commissioner may apply for an order as described in section 10(1) of this act.

      (d) The commissioner, in reviewing transactions under (b) of this subsection, shall consider whether the transactions comply with the standards set forth in (a) of this subsection and whether they may adversely affect the interests of policyholders.

      (e) The commissioner shall be notified within thirty days of an investment of the domestic insurer in any one corporation if the total investment in the corporation by the insurance holding company system exceeds ten percent of the corporation's voting securities.

      (2)(a) No domestic insurer may pay an extraordinary dividend or make any other extraordinary distribution to its shareholders until: (i) Thirty days after the commissioner declares that he or she has received sufficient notice of the declaration thereof and has not within that period disapproved the payment; or (ii) the commissioner has approved the payment within the thirty-day period.

      (b) For purposes of this section, an extraordinary dividend or distribution is a dividend or distribution of cash or other property whose fair market value, together with that of other dividends or distributions made within the period of twelve consecutive months ending on the date on which the proposed dividend is scheduled for payment or distribution, exceeds the greater of: (i) Ten percent of the company's surplus as regards policyholders as of the 31st day of the previous December; or (ii) the net gain from operations of the company if the company is a life insurance company, or the net income if the company is not a life insurance company, for the twelve month period ending the 31st day of the previous December, but does not include pro rata distributions of any class of the company's own securities.

      (c) Notwithstanding any other provision of law, an insurer may declare an extraordinary dividend or distribution that is conditional upon the commissioner's approval. The declaration confers no rights upon shareholders until: (i) The commissioner has approved the payment of the dividend or distribution; or (ii) the commissioner has not disapproved the payment within the thirty-day period referred to in (a) of this subsection.

      (3) For purposes of this chapter, 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, among others, may be considered:

      (a) The size of the insurer as measured by its assets, capital and surplus, reserves, premium writings, insurance in force, and other appropriate criteria;

      (b) The extent to which the insurer's business is diversified among the several lines of insurance;

      (c) The number and size of risks insured in each line of business;

      (d) The extent of the geographical dispersion of the insurer's insured risks;

      (e) The nature and extent of the insurer's reinsurance program;

      (f) The quality, diversification, and liquidity of the insurer's investment portfolio;

      (g) The recent past and projected future trend in the size of the insurer's surplus as regards policyholders;

      (h) The surplus as regards policyholders maintained by other comparable insurers;

      (i) The adequacy of the insurer's reserves;

      (j) The quality and liquidity of investments in affiliates. The commissioner may discount any such investment or may treat any such investment as a disallowed asset for purposes of determining the adequacy of surplus as regards policyholders whenever in his or her judgment the investment so warrants; and

      (k) The quality of the insurer's earnings and the extent to which the reported earnings include extraordinary items.

      NEW SECTION. Sec. 8. (1) Subject to the limitation contained in this section and in addition to the powers that the commissioner has under chapter 48.03 RCW relating to the examination of insurers, the commissioner also may order an insurer registered under section 6 of this act to produce such records, books, or other information papers in the possession of the insurer or its affiliates as are reasonably necessary to ascertain the financial condition of the insurer or to determine compliance with this title. If the insurer fails to comply with the order, the commissioner may examine the affiliates to obtain the information.

      (2) The commissioner may retain at the registered insurer's expense such attorneys, actuaries, accountants, and other experts not otherwise a part of the commissioner's staff as are reasonably necessary to assist in the conduct of the examination under subsection (1) of this section. Persons so retained are under the direction and control of the commissioner and shall act in a purely advisory capacity.

      (3) Each registered insurer producing for examination records, books, and papers under subsection (1) of this section are liable for and shall pay the expense of the examination in accordance with RCW 48.03.060.

      NEW SECTION. Sec. 9. The commissioner may, upon notice and opportunity for all interested persons to be heard, adopt rules and issue orders that are necessary to carry out this chapter.

      NEW SECTION. Sec. 10. (1) Whenever it appears to the commissioner that an insurer or a director, officer, employee, or agent of the insurer has committed or is about to commit a violation of this chapter or any rule or order of the commissioner under this chapter, the commissioner may apply to the superior court for Thurston county or to the court for the county in which the principal office of the insurer is located for an order enjoining the insurer or the director, officer, employee, or agent from violating or continuing to violate this chapter or any such rule or order, and for such other equitable relief as the nature of the case and the interest of the insurer's policyholders, creditors, and shareholders or the public may require.

      (2) No security that is the subject of an agreement or arrangement regarding acquisition, or that is acquired or to be acquired, in contravention of this chapter or of a rule or order of the commissioner under this chapter may be voted at a shareholders' meeting, or may be counted for quorum purposes. Any action of shareholders requiring the affirmative vote of a percentage of shares may be taken as though the securities were not issued and outstanding, but no action taken at any such meeting may be invalidated by the voting of the securities, unless the action would materially affect control of the insurer or unless the courts of this state have so ordered. If an insurer or the commissioner has reason to believe that a security of the insurer has been or is about to be acquired in contravention of this chapter or of a rule or order of the commissioner under this chapter, the insurer or the commissioner may apply to the superior court for Thurston county or to the court for the county in which the insurer has its principal place of business to enjoin an offer, request, invitation, agreement, or acquisition made in contravention of section 4 of this act or a rule or order of the commissioner under that section to enjoin the voting of a security so acquired, to void a vote of the security already cast at a meeting of shareholders, and for such other relief as the nature of the case and the interest of the insurer's policyholders, creditors, and shareholders or the public may require.

      (3) If a person has acquired or is proposing to acquire voting securities in violation of this chapter or a rule or order of the commissioner under this chapter, the superior court for Thurston county or the court for the county in which the insurer has its principal place of business may, on such notice as the court deems appropriate, upon the application of the insurer or the commissioner seize or sequester voting securities of the insurer owned directly or indirectly by the person, and issue such order with respect to the securities as may be appropriate to carry out this chapter.

      Notwithstanding any other provisions of law, for the purposes of this chapter, the situs of the ownership of the securities of domestic insurers is in this state.

      NEW SECTION. Sec. 11. (1) The commissioner shall require, after notice and hearing, an insurer failing, without just cause, to file a registration statement as required in this chapter, to pay a penalty of not more than ten thousand dollars per day. The maximum penalty under this section is one million dollars. The commissioner may reduce the penalty if the insurer demonstrates to the commissioner that the imposition of the penalty would constitute a financial hardship to the insurer. The commissioner shall pay a fine collected under this section to the state treasurer for the account of the general fund.

      (2) Every director or officer of an insurance holding company system who knowingly violates this chapter, or participates in, or assents to, or who knowingly permits an officer or agent of the insurer to engage in transactions or make investments that have not been properly reported or submitted under section 6(1) or 7(1)(b) or (2) of this act, or that violate this chapter, shall pay, in their individual capacity, a civil forfeiture of not more than ten thousand dollars per violation, after notice and hearing before the commissioner. In determining the amount of the civil forfeiture, the commissioner shall take into account the appropriateness of the forfeiture with respect to the gravity of the violation, the history of previous violations, and such other matters as justice may require.

      (3) Whenever it appears to the commissioner that an insurer subject to this chapter or a director, officer, employee, or agent of the insurer has engaged in a transaction or entered into a contract that is subject to section 7 of this act and that would not have been approved had approval been requested, the commissioner may order the insurer to cease and desist immediately any further activity under that transaction or contract. After notice and hearing the commissioner may also order the insurer to void any such contracts and restore the status quo if that action is in the best interest of the policyholders, creditors, or the public.

      (4) Whenever it appears to the commissioner that an insurer or a director, officer, employee, or agent of the insurer has committed a willful violation of this chapter, the commissioner may refer the matter to the prosecuting attorney of Thurston county or the county in which the principal office of the insurer is located. An insurer that willfully violates this chapter may be fined not more than one million dollars. Any individual who willfully violates this chapter may be fined in his or her individual capacity not more than ten thousand dollars, or be imprisoned for not more than three years, or both.

      (5) An officer, director, or employee of an insurance holding company system who willfully and knowingly subscribes to or makes or causes to be made a false statement or false report or false filing with the intent to deceive the commissioner in the performance of his or her duties under this chapter, upon conviction thereof, shall be imprisoned for not more than three years or fined not more than ten thousand dollars or both. The officer, director, or employee upon whom the fine is imposed shall pay the fine in his or her individual capacity.

      NEW SECTION. Sec. 12. Whenever it appears to the commissioner that a person has committed a violation of this chapter that so impairs the financial condition of a domestic insurer as to threaten insolvency or make the further transaction of business by it hazardous to its policyholders, creditors, shareholders, or the public, the commissioner may proceed as provided in RCW 48.31.030 and 48.31.040 to take possession of the property of the domestic insurer and to conduct the business of the insurer.

      NEW SECTION. Sec. 13. (1) If an order for liquidation or rehabilitation of a domestic insurer has been entered, the receiver appointed under the order may recover on behalf of the insurer: (a) From a parent corporation or holding company or person or affiliate who otherwise controlled the insurer, the amount of distributions, other than distributions of shares of the same class of stock, paid by the insurer on its capital stock; or (b) a payment in the form of a bonus, termination settlement, or extraordinary lump sum salary adjustment made by the insurer or its subsidiary to a director, officer, or employee, where the distribution or payment under (a) or (b) of this subsection is made at any time during the one year before the petition for liquidation, conservation, or rehabilitation, as the case may be, subject to the limitations of subsections (2), (3), and (4) of this section.

      (2) No such distribution is recoverable if it is shown that when paid, the distribution was lawful and reasonable, and that the insurer did not know and could not reasonably have known that the distribution might adversely affect the ability of the insurer to fulfill its contractual obligations.

      (3) A person who was a parent corporation or holding company or a person who otherwise controlled the insurer or affiliate when the distributions were paid is liable up to the amount of distributions or payments under subsection (1) of this section the person received. A person who controlled the insurer at the time the distributions were declared is liable up to the amount of distributions he or she would have received if they had been paid immediately. If two or more persons are liable with respect to the same distributions, they are jointly and severally liable.

      (4) The maximum amount recoverable under this section is the amount needed in excess of all other available assets of the impaired or insolvent insurer to pay the contractual obligations of the impaired or insolvent insurer and to reimburse any guaranty funds.

      (5) To the extent that a person liable under subsection (3) of this section is insolvent or otherwise fails to pay claims due from it under those provisions, its parent corporation or holding company or person who otherwise controlled it at the time the distribution was paid, is jointly and severally liable for a resulting deficiency in the amount recovered from the parent corporation or holding company or person who otherwise controlled it.

      NEW SECTION. Sec. 14. Whenever it appears to the commissioner that a person has committed a violation of this chapter that makes the continued operation of an insurer contrary to the interests of policyholders or the public, the commissioner may, after giving notice and an opportunity to be heard, determine to suspend, revoke, or refuse to renew the insurer's license or authority to do business in this state for such period as he or she finds is required for the protection of policyholders or the public. Such a determination must be accompanied by specific findings of fact and conclusions of law.

      NEW SECTION. Sec. 15. (1) A person aggrieved by an act, determination, rule, order, or any other action of the commissioner under this chapter may proceed in accordance with the Administrative Procedure Act, chapter 34.05 RCW.

      (2) A person aggrieved by a failure of the commissioner to act or make a determination required by this chapter may petition the commissioner under the procedure described in RCW 34.05.330.

      NEW SECTION. Sec. 16. This chapter may be known and cited as the Business Transacted with Broker-controlled Property and Casualty Insurer Act.

      NEW SECTION. Sec. 17. Unless the context clearly requires otherwise, the definitions in this section apply throughout this chapter.

      (1) "Accredited state" means a state in which the insurance department or regulatory agency has qualified as meeting the minimum financial regulatory standards promulgated and established from time to time by the National Association of Insurance Commissioners.

      (2) "Broker" means an insurance broker or brokers or any other person, firm, association, or corporation, when, for compensation, commission, or other thing of value, the person, firm, association, or corporation acts or aids in any manner in soliciting, negotiating, or procuring the making of an insurance contract on behalf of an insured other than the person, firm, association, or corporation.

      (3) "Control" or "controlled by" has the meaning ascribed in section 2(2) of this act.

      (4) "Controlled insurer" means a licensed insurer that is controlled, directly or indirectly, by a broker.

      (5) "Controlling producer" means a broker who, directly or indirectly, controls an insurer.

      (6) "Licensed insurer" or "insurer" means a person, firm, association, or corporation licensed to transact property and casualty insurance business in this state. The following, among others, are not licensed insurers for purposes of this chapter:

      (a) Risk retention groups as defined in the Superfund Amendments Reauthorization Act of 1986, P.L. 99-499, 100 Stat. 1613 (1986), the Risk Retention Act, 15 U.S.C. Sec. 3901 et seq. (1982 and Supp. 1986), and chapter 48.92 RCW;

      (b) Residual market pools and joint underwriting associations; and

      (c) Captive insurers. For the purposes of this chapter, captive insurers are insurance companies owned by another organization, whose exclusive purpose is to insure risks of the parent organization and affiliated companies or, in the case of groups and associations, insurance organizations owned by the insureds whose exclusive purpose is to insure risks to member organizations or group members, or both, and their affiliates.

      NEW SECTION. Sec. 18. This chapter applies to licensed insurers either domiciled in this state or domiciled in a state that is not an accredited state having in effect a substantially similar law. All provisions of the Insurer Holding Company Act, chapter 48.-- RCW (sections 1 through 15 of this act), or its successor act, to the extent they are not superseded by this chapter, continue to apply to all parties within the holding company systems subject to this chapter.

      NEW SECTION. Sec. 19. (1)(a) This section applies in a particular calendar year if in that calendar year the aggregate amount of gross written premium on business placed with a controlled insurer by a controlling broker is equal to or greater than five percent of the admitted assets of the controlled insurer, as reported in the controlled insurer's quarterly statement filed as of September 30th of the prior year.

      (b) Notwithstanding (a) of this subsection, this section does not apply if:

      (i) The controlling producer:

      (A) Places insurance only with the controlled insurer; or only with the controlled insurer and a member or members of the controlled insurer's holding company system, or the controlled insurer's parent, affiliate, or subsidiary and receives no compensation based upon the amount of premiums written in connection with the insurance; and

      (B) Accepts insurance placements only from nonaffiliated subbrokers, and not directly from insureds; and

      (ii) The controlled insurer, except for business written through a residual market facility such as the assigned risk plan, fair plans, or other such plans, accepts insurance business only from a controlling broker, a broker controlled by the controlled insurer, or a broker that is a subsidiary of the controlled insurer.

      (2) A controlled insurer may not accept business from a controlling broker and a controlling broker may not place business with a controlled insurer unless there is a written contract between the controlling broker and the insurer specifying the responsibilities of each party, which contract has been approved by the board of directors of the insurer and contains the following minimum provisions:

      (a) The controlled insurer may terminate the contract for cause, upon written notice to the controlling broker. The controlled insurer shall suspend the authority of the controlling broker to write business during the pendency of a dispute regarding the cause for the termination;

      (b) The controlling broker shall render accounts to the controlling insurer detailing all material transactions, including information necessary to support all commissions, charges, and other fees received by, or owing to, the controlling broker;

      (c) The controlling broker shall remit all funds due under the terms of the contract to the controlling insurer on at least a monthly basis. The due date must be fixed so that premiums or installments collected are remitted no later than ninety days after the effective date of a policy placed with the controlling insurer under this contract;

      (d) The controlling broker shall hold all funds collected for the controlled insurer's account in a fiduciary capacity, in one or more appropriately identified bank accounts in banks that are members of the federal reserve system, in accordance with the applicable provisions of this title. However, funds of a controlling broker not required to be licensed in this state must be maintained in compliance with the requirements of the controlling broker's domiciliary jurisdiction;

      (e) The controlling broker shall maintain separately identifiable records of business written for the controlled insurer;

      (f) The contract shall not be assigned in whole or in part by the controlling broker;

      (g) The controlled insurer shall provide the controlling broker with its underwriting standards, rules, and procedures, manuals setting forth the rates to be charged, and the conditions for the acceptance or rejection of risks. The controlling broker shall adhere to the standards, rules, procedures, rates, and conditions that are the same as those applicable to comparable business placed with the controlled insurer by a broker other than the controlling broker;

      (h) The rates of the controlling broker's commissions, charges, and other fees must be no greater than those applicable to comparable business placed with the controlled insurer by brokers other than controlling brokers. For purposes of (g) and (h) of this subsection, examples of comparable business include the same lines of insurance, same kinds of insurance, same kinds of risks, similar policy limits, and similar quality of business;

      (i) If the contract provides that the controlling broker, on insurance business placed with the insurer, is to be compensated contingent upon the insurer's profits on that business, then the compensation shall not be determined and paid until at least five years after the premiums on liability insurance are earned and at least one year after the premiums are earned on any other insurance. In no event may the commissions be paid until the adequacy of the controlled insurer's reserves on remaining claims has been independently verified under subsection (3) of this section;

      (j) The insurer may establish a different limit on the controlling broker's writings in relation to the controlled insurer's surplus and total writings for each line or subline of business. The controlled insurer shall notify the controlling broker when the applicable limit is approached and may not accept business from the controlling broker if the limit is reached. The controlling broker may not place business with the controlled insurer if it has been notified by the controlled insurer that the limit has been reached; and

      (k) The controlling broker may negotiate but may not bind reinsurance on behalf of the controlled insurer on business the controlling broker places with the controlled insurer, except that the controlling broker may bind facultative reinsurance contracts under obligatory facultative agreements if the contract with the controlled insurer contains underwriting guidelines including, for both reinsurance assumed and ceded, a list of reinsurers with which the automatic agreements are in effect, the coverages and amounts of percentages that may be reinsured, and commission schedules.

      (3) Every controlled insurer shall have an audit committee of the board of directors composed of independent directors. The audit committee shall annually meet with management, the insurer's independent certified public accountants, and an independent casualty actuary or other independent loss reserve specialist acceptable to the commissioner to review the adequacy of the insurer's loss reserves.

      (4)(a) In addition to any other required loss reserve certification, the controlled insurer shall, annually, on April 1st of each year, file with the commissioner an opinion of an independent casualty actuary, or such other independent loss reserve specialist acceptable to the commissioner, reporting loss ratios for each line of business written and attesting to the adequacy of loss reserves established for losses incurred and outstanding as of year-end, including losses incurred but not reported, on business placed by the broker; and

      (b) The controlled insurer shall annually report to the commissioner the amount of commissions paid to the producer, the percentage that amount represents of the net premiums written, and comparable amounts and percentages paid to noncontrolling brokers for placements of the same kinds of insurance.

      NEW SECTION. Sec. 20. The broker, before the effective date of the policy, shall deliver written notice to the prospective insured disclosing the relationship between the broker and the controlled insurer, except that, if the business is placed through a subbroker who is not a controlling broker, the controlling broker shall retain in his or her records a signed commitment from the subbroker that the subbroker is aware of the relationship between the insurer and the broker and that the subbroker has notified or will notify the insured.

      NEW SECTION. Sec. 21. (1)(a) If the commissioner believes that the controlling broker has not materially complied with this chapter, or a rule adopted or order issued under this chapter, the commissioner may after notice and opportunity to be heard, order the controlling broker to cease placing business with the controlled insurer; and

      (b) If it is found that because of material noncompliance that the controlled insurer or any policyholder thereof has suffered loss or damage, the commissioner may maintain a civil action or intervene in an action brought by or on behalf of the insurer or policyholder for recovery of compensatory damages for the benefit of the insurer or policyholder or other appropriate relief.

      (2) If an order for liquidation or rehabilitation of the controlled insurer has been entered under chapter 48.31 RCW, and the receiver appointed under that order believes that the controlling broker or any other person has not materially complied with this chapter, or a rule adopted or order issued under this chapter, and the insurer suffered any loss or damage from the noncompliance, the receiver may maintain a civil action for recovery of damages or other appropriate sanctions for the benefit of the insurer.

      (3) Nothing contained in this section alters or affects the right of the commissioner to impose other penalties provided for in this title.

      (4) Nothing contained in this section alters or affects the rights of policyholders, claimants, creditors, or other third parties.

      NEW SECTION. Sec. 22. This chapter may be known and cited as the Reinsurance Intermediary Act.

      NEW SECTION. Sec. 23. The definitions set forth in this section apply throughout this chapter:

      (1) "Actuary" means a person who is a member in good standing of the American Academy of Actuaries.

      (2) "Controlling person" means a person, firm, association, or corporation who directly or indirectly has the power to direct or cause to be directed, the management, control, or activities of the reinsurance intermediary.

      (3) "Insurer" means insurer as defined in RCW 48.01.050.

      (4) "Licensed producer" means an agent, broker, or reinsurance intermediary licensed under the applicable provisions of this title.

      (5) "Reinsurance intermediary" means a reinsurance intermediary- broker or a reinsurance intermediary-manager as these terms are defined in subsections (6) and (7) of this section.

      (6) "Reinsurance intermediary-broker" means a person, other than an officer or employee of the ceding insurer, firm, association, or corporation who solicits, negotiates, or places reinsurance cessions or retrocessions on behalf of a ceding insurer without the authority or power to bind reinsurance on behalf of the insurer.

      (7) "Reinsurance intermediary-manager" means a person, firm, association, or corporation who has authority to bind or manages all or part of the assumed reinsurance business of a reinsurer, including the management of a separate division, department, or underwriting office, and acts as an agent for the reinsurer whether known as a reinsurance intermediary-manager, manager, or other similar term. Notwithstanding this subsection, the following persons are not considered a reinsurance intermediary-manager, with respect to such reinsurer, for the purposes of this chapter:

      (a) An employee of the reinsurer;

      (b) A United States manager of the United States branch of an alien reinsurer;

      (c) An underwriting manager who, pursuant to contract, manages all the reinsurance operations of the reinsurer, is under common control with the reinsurer, subject to the Insurer Holding Company Act, chapter 48.-- RCW (sections 1 through 15 of this act), and whose compensation is not based on the volume of premiums written;

      (d) The manager of a group, association, pool, or organization of insurers that engages in joint underwriting or joint reinsurance and that are subject to examination by the insurance commissioner of the state in which the manager's principal business office is located.

      (8) "Reinsurer" means a person, firm, association, or corporation licensed in this state under this title as an insurer with the authority to assume reinsurance.

      (9) "To be in violation" means that the reinsurance intermediary, insurer, or reinsurer for whom the reinsurance intermediary was acting failed to substantially comply with this chapter.

      (10) "Qualified United States financial institution" means an institution that:

      (a) 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 thereof;

      (b) Is regulated, supervised, and examined by United States federal or state authorities having regulatory authority over banks and trust companies; and

      (c) Has been determined by either the commissioner, or the securities valuation office of the National Association of Insurance Commissioners, to meet such standards of financial condition and standing as are considered necessary and appropriate to regulate the quality of financial institutions whose letters of credit will be acceptable to the commissioner.

      NEW SECTION. Sec. 24. (1) No person, firm, association, or corporation may act as a reinsurance intermediary-broker in this state if the person, firm, association, or corporation maintains an office either directly or as a member or employee of a firm or association, or an officer, director, or employee of a corporation:

      (a) In this state, unless the person, firm, association, or corporation is a licensed reinsurance intermediary-broker in this state; or

      (b) In another state, unless the person, firm, association, or corporation is a licensed reinsurance intermediary-broker in this state or another state having a regulatory scheme substantially similar to this chapter.

      (2) No person, firm, association, or corporation may act as a reinsurance intermediary-manager:

      (a) For a reinsurer domiciled in this state, unless the person, firm, association, or corporation is a licensed reinsurance intermediary-manager in this state;

      (b) In this state, if the person, firm, association, or corporation maintains an office either directly or as a member or employee of a firm or association, or an officer, director, or employee of a corporation in this state, unless the person, firm, association, or corporation is a licensed reinsurance intermediary-manager in this state;

      (c) In another state for a nondomestic reinsurer, unless the person, firm, association, or corporation is a licensed reinsurance intermediary-manager in this state or another state having a substantially similar regulatory scheme.

      (3) The commissioner may require a reinsurance intermediary-manager subject to subsection (2) of this section to:

      (a) File a bond in an amount and from an insurer acceptable to the commissioner for the protection of the reinsurer; and

      (b) Maintain an errors and omissions policy in an amount acceptable to the commissioner.

      (4)(a) The commissioner may issue a reinsurance intermediary license to a person, firm, association, or corporation who has complied with the requirements of this chapter. Any such license issued to a firm or association authorizes all the members of the firm or association and any designated employees to act as reinsurance intermediaries under the license, and all such persons may be named in the application and any supplements to it. Any such license issued to a corporation authorizes all of the officers, and any designated employees and directors of it, to act as reinsurance intermediaries on behalf of the corporation, and all such persons must be named in the application and any supplements to it.

      (b) If the applicant for a reinsurance intermediary license is a nonresident, the applicant, as a condition precedent to receiving or holding a license, shall designate the commissioner as agent for service of process in the manner, and with the same legal effect, provided for by this title for designation of service of process upon unauthorized insurers, and also shall furnish the commissioner with the name and address of a resident of this state upon whom notices or orders of the commissioner or process affecting the nonresident reinsurance intermediary may be served. The licensee shall promptly notify the commissioner in writing of every change in its designated agent for service of process, but the change does not become effective until acknowledged by the commissioner.

      (5) The commissioner may refuse to issue a reinsurance intermediary license if, in his or her judgment, the applicant, anyone named on the application, or a member,

principal, officer, or director of the applicant, is not trustworthy, or that a controlling person of the applicant is not trustworthy to act as a reinsurance intermediary, or that any of the foregoing has given cause for revocation or suspension of the license, or has failed to comply with a prerequisite for the issuance of such license. Upon written request, the commissioner will furnish a summary of the basis for refusal to issue a license, which document is privileged and not subject to chapter 42.17 RCW.

      (6) Licensed attorneys at law of this state when acting in their professional capacity as such are exempt from this section.

      NEW SECTION. Sec. 25. Brokers transactions between a reinsurance intermediary-broker and the insurer it represents in such capacity may be entered into only under a written authorization, specifying the responsibilities of each party. The authorization must, at a minimum, provide that:

      (1) The insurer may terminate the reinsurance intermediary-broker's authority at any time.

      (2) The reinsurance intermediary-broker shall render accounts to the insurer accurately detailing all material transactions, including information necessary to support all commissions, charges, and other fees received by, or owing, to the reinsurance intermediary-broker, and remit all funds due to the insurer within thirty days of receipt.

      (3) All funds collected for the insurer's account must be held by the reinsurance intermediary-broker in a fiduciary capacity in a bank that is a qualified United States financial institution as defined in this chapter.

      (4) The reinsurance intermediary-broker will comply with section 26 of this act.

      (5) The reinsurance intermediary-broker will comply with the written standards established by the insurer for the cession or retrocession of all risks.

      (6) The reinsurance intermediary-broker will disclose to the insurer any relationship with any reinsurer to which business will be ceded or retroceded.

      NEW SECTION. Sec. 26. (1) For at least ten years after expiration of each contract of reinsurance transacted by the reinsurance intermediary-broker, the reinsurance intermediary-broker shall keep a complete record for each transaction showing:

      (a) The type of contract, limits, underwriting restrictions, classes, or risks and territory;

      (b) Period of coverage, including effective and expiration dates, cancellation provisions, and notice required of cancellation;

      (c) Reporting and settlement requirements of balances;

      (d) Rate used to compute the reinsurance premium;

      (e) Names and addresses of assuming reinsurers;

      (f) Rates of all reinsurance commissions, including the commissions on any retrocessions handled by the reinsurance intermediary-broker;

      (g) Related correspondence and memoranda;

      (h) Proof of placement;

      (i) Details regarding retrocessions handled by the reinsurance intermediary-broker including the identity of retrocessionaires and percentage of each contract assumed or ceded;

      (j) Financial records, including but not limited to, premium and loss accounts; and

      (k) When the reinsurance intermediary-broker procures a reinsurance contract on behalf of a licensed ceding insurer:

      (i) Directly from any assuming reinsurer, written evidence that the assuming reinsurer has agreed to assume the risk; or

      (ii) If placed through a representative of the assuming reinsurer, other than an employee, written evidence that the reinsurer has delegated binding authority to the representative.

      (2) The insurer has access and the right to copy and audit all accounts and records maintained by the reinsurance intermediary-broker related to its business in a form usable by the insurer.

      NEW SECTION. Sec. 27. (1) An insurer may not engage the services of a person, firm, association, or corporation to act as a reinsurance intermediary-broker on its behalf unless the person is licensed as required by section 24(1) of this act.

      (2) An insurer may not employ an individual who is employed by a reinsurance intermediary-broker with which it transacts business, unless the reinsurance intermediary-broker is under common control with the insurer and subject to the Insurer Holding Company Act, chapter 48.-- RCW (sections 1 through 15 of this act).

      (3) The insurer shall annually obtain a copy of statements of the financial condition of each reinsurance intermediary-broker with which it transacts business.

      NEW SECTION. Sec. 28. Transactions between a reinsurance intermediary manager and the reinsurer it represents in such capacity may be entered into only under a written contract, specifying the responsibilities of each party, which shall be approved by the reinsurer's board of directors. At least thirty days before the reinsurer assumes or cedes business through the reinsurance intermediary-manager, a true copy of the approved contract must be filed with the commissioner for approval. The contract must, at a minimum, provide that:

      (1) The reinsurer may terminate the contract for cause upon written notice to the reinsurance intermediary-manager. The reinsurer may immediately suspend the authority of the reinsurance intermediary-manager to assume or cede business during the pendency of a dispute regarding the cause for termination.

      (2) The reinsurance intermediary-manager shall render accounts to the reinsurer accurately detailing all material transactions, including information necessary to support all commissions, charges, and other fees received by, or owing to, the reinsurance intermediary-manager, and remit all funds due under the contract to the reinsurer on not less than a monthly basis.

      (3) All funds collected for the reinsurer's account must be held by the reinsurance intermediary-manager in a fiduciary capacity in a bank that is a qualified United States financial institution. The reinsurance intermediary-manager may retain no more than three months' estimated claims payments and allocated loss adjustment expenses. The reinsurance intermediary-manager shall maintain a separate bank account for each reinsurer that it represents.

      (4) For at least ten years after expiration of each contract of reinsurance transacted by the reinsurance intermediary-manager, the reinsurance intermediary-manager shall keep a complete record for each transaction showing:

      (a) The type of contract, limits, underwriting restrictions, classes, or risks and territory;

      (b) Period of coverage, including effective and expiration dates, cancellation provisions, and notice required of cancellation, and disposition of outstanding reserves on covered risks;

      (c) Reporting and settlement requirements of balances;

      (d) Rate used to compute the reinsurance premium;

      (e) Names and addresses of reinsurers;

      (f) Rates of all reinsurance commissions, including the commissions on any retrocessions handled by the reinsurance intermediary-manager;

      (g) Related correspondence and memoranda;

      (h) Proof of placement;

      (i) Details regarding retrocessions handled by the reinsurance intermediary-manager, as permitted by section 30(4) of this act, including the identity of retrocessionaires and percentage of each contract assumed or ceded;

      (j) Financial records, including but not limited to, premium and loss accounts; and

      (k) When the reinsurance intermediary-manager places a reinsurance contract on behalf of a ceding insurer:

      (i) Directly from an assuming reinsurer, written evidence that the assuming reinsurer has agreed to assume the risk; or

      (ii) If placed through a representative of the assuming reinsurer, other than an employee, written evidence that the reinsurer has delegated binding authority to the representative.

      (5) The reinsurer has access and the right to copy all accounts and records maintained by the reinsurance intermediary-manager related to its business in a form usable by the reinsurer.

      (6) The reinsurance intermediary-manager may not assign the contract in whole or in part.

      (7) The reinsurance intermediary-manager shall comply with the written underwriting and rating standards established by the insurer for the acceptance, rejection, or cession of all risks.

      (8) The rates, terms, and purposes of commissions, charges, and other fees that the reinsurance intermediary-manager may levy against the reinsurer are clearly specified.

      (9) If the contract permits the reinsurance intermediary-manager to settle claims on behalf of the reinsurer:

      (a) All claims will be reported to the reinsurer in a timely manner;

      (b) A copy of the claim file will be sent to the reinsurer at its request or as soon as it becomes known that the claim:

      (i) Has the potential to exceed the lesser of an amount determined by the commissioner or the limit set by the reinsurer;

      (ii) Involves a coverage dispute;

      (iii) May exceed the reinsurance intermediary-manager's claims settlement authority;

      (iv) Is open for more than six months; or

      (v) Is closed by payment of the lesser of an amount set by the commissioner or an amount set by the reinsurer;

      (c) All claim files are the joint property of the reinsurer and reinsurance intermediary-manager. However, upon an order of liquidation of the reinsurer, the files become the sole property of the reinsurer or its estate; the reinsurance intermediary-manager has reasonable access to and the right to copy the files on a timely basis;

      (d) Settlement authority granted to the reinsurance intermediary-manager may be terminated for cause upon the reinsurer's written notice to the reinsurance intermediary-manager or upon the termination of the contract. The reinsurer may suspend the settlement authority during the pendency of a dispute regarding the cause of termination.

      (10) If the contract provides for a sharing of interim profits by the reinsurance intermediary-manager, such interim profits will not be paid until one year after the end of each underwriting period for property business and five years after the end of each underwriting period for casualty business, or a later period set by the commissioner for specified lines of insurance, and not until the adequacy of reserves on remaining claims has been verified under section 30(3) of this act.

      (11) The reinsurance intermediary-manager shall annually provide the reinsurer with a statement of its financial condition prepared by an independent certified accountant.

      (12) The reinsurer shall periodically, at least semiannually, conduct an on-site review of the underwriting and claims processing operations of the reinsurance intermediary-manager.

      (13) The reinsurance intermediary-manager shall disclose to the reinsurer any relationship it has with an insurer before ceding or assuming any business with the insurer under this contract.

      (14) Within the scope of its actual or apparent authority the acts of the reinsurance intermediary-manager are deemed to be the acts of the reinsurer on whose behalf it is acting.

      NEW SECTION. Sec. 29. The reinsurance intermediary-manager may not:

      (1) Cede retrocessions on behalf of the reinsurer, except that the reinsurance intermediary-manager may cede facultative retrocessions under obligatory automatic agreements if the contract with the reinsurer contains reinsurance underwriting guidelines for the retrocessions. The guidelines must include a list of reinsurers with which the automatic agreements are in effect, and for each such reinsurer, the coverages and amounts or percentages that may be reinsured, and commission schedules.

      (2) Commit the reinsurer to participate in reinsurance syndicates.

      (3) Appoint a reinsurance intermediary without assuring that the reinsurance intermediary is lawfully licensed to transact the type of reinsurance for which he or she is appointed.

      (4) Without prior approval of the reinsurer, pay or commit the reinsurer to pay a claim, net of retrocessions, that exceeds the lesser of an amount specified by the reinsurer or one percent of the reinsurer's policyholder's surplus as of December 31st of the last complete calendar year.

      (5) Collect a payment from a retrocessionaire or commit the reinsurer to a claim settlement with a retrocessionaire, without prior approval of the reinsurer. If prior approval is given, a report must be promptly forwarded to the reinsurer.

      (6) Jointly employ an individual who is employed by the reinsurer unless the reinsurance intermediary-manager is under common control with the reinsurer subject to the Insurer Holding Company Act, chapter 48.-- RCW (sections 1 through 15 of this act).

      (7) Appoint a subreinsurance intermediary-manager.

      NEW SECTION. Sec. 30. (1) A reinsurer may not engage the services of a person, firm, association, or corporation to act as a reinsurance intermediary-manager on its behalf unless the person is licensed as required by section 24(2) of this act.

      (2) The reinsurer shall annually obtain a copy of statements of the financial condition of each reinsurance intermediary-manager that the reinsurer has had prepared by an independent certified accountant in a form acceptable to the commissioner.

      (3) If a reinsurance intermediary-manager establishes loss reserves, the reinsurer shall annually obtain the opinion of an actuary attesting to the adequacy of loss reserves established for losses incurred and outstanding on business produced by the reinsurance intermediary-manager. This opinion is in addition to any other required loss reserve certification.

      (4) Binding authority for all retrocessional contracts or participation in reinsurance syndicates must rest with an officer of the reinsurer who is not affiliated with the reinsurance intermediary-manager.

      (5) Within thirty days of termination of a contract with a reinsurance intermediary-manager, the reinsurer shall provide written notification of the termination to the commissioner.

      (6) A reinsurer may not appoint to its board of directors an officer, director, employee, controlling shareholder, or subproducer of its reinsurance intermediary-manager. This subsection does not apply to relationships governed by the Insurer Holding Company Act, chapter 48.-- RCW (sections 1 through 15 of this act), or, if applicable, the Broker-controlled Property and Casualty Insurer Act, chapter 48.-- RCW (sections 16 through 21 of this act).

      NEW SECTION. Sec. 31. (1) A reinsurance intermediary is subject to examination by the commissioner. The commissioner has access to all books, bank accounts, and records of the reinsurance intermediary in a form usable to the commissioner.

      (2) A reinsurance intermediary-manager may be examined as if it were the reinsurer.

      NEW SECTION. Sec. 32. (1) A reinsurance intermediary, insurer, or reinsurer found by the commissioner, after a hearing conducted in accordance with chapters 48.17 and 34.05 RCW, to be in violation of any provision of this chapter, shall:

      (a) For each separate violation, pay a penalty in an amount not exceeding five thousand dollars;

      (b) Be subject to revocation or suspension of its license; and

      (c) If a violation was committed by the reinsurance intermediary, make restitution to the insurer, reinsurer, rehabilitator, or liquidator of the insurer or reinsurer for the net losses incurred by the insurer or reinsurer attributable to the violation.

      (2) The decision, determination, or order of the commissioner under subsection (1) of this section is subject to judicial review under this title and chapter 34.05 RCW.

      (3) Nothing contained in this section affects the right of the commissioner to impose any other penalties provided in this title.

      (4) Nothing contained in this chapter is intended to or in any manner limits or restricts the rights of policyholders, claimants, creditors, or other third parties or confer any rights to those persons.

      NEW SECTION. Sec. 33. The commissioner may adopt reasonable rules for the implementation and administration of this chapter.

      NEW SECTION. Sec. 34. This chapter may be known and cited as the Managing General Agents Act.

      NEW SECTION. Sec. 35. Unless the context clearly requires otherwise, the definitions in this section apply throughout this chapter.

      (1) "Actuary" means a person who is a member in good standing of the American Academy of Actuaries.

      (2) "Insurer" means a person having a certificate of authority in this state as an insurance company under RCW 48.01.050.

      (3) "Managing general agent" means:

      (a) A person who manages all or part of the insurance business of an insurer, including the management of a separate division, department, or underwriting office, and acts as a representative of the insurer whether known as a managing general agent, manager, or other similar term, and who, with or without the authority, either separately or together with affiliates, produces, directly or indirectly, and underwrites an amount of gross direct written premium equal to or more than five percent of the policyholder surplus as reported in the last annual statement of the insurer in any one quarter or year together with one or more of the following activities related to the business produced:

      (i) Adjusts or pays claims in excess of an amount to be determined by the commissioner; or

      (ii) Negotiates reinsurance on behalf of the insurer.

      (b) Notwithstanding (a) of this subsection, the following persons may not be managing general agents for purposes of this chapter:

      (i) An employee of the insurer;

      (ii) A United States manager of the United States branch of an alien insurer;

      (iii) An underwriting manager who, under a contract, manages all of the insurance operations of the insurer, is under common control with the insurer, subject to the Insurer Holding Company Act, chapter 48.-- RCW (sections 1 through 15 of this act), and whose compensation is not based on the volume of premiums written; or

      (iv) The attorney-in-fact authorized by and acting for the subscribers of a reciprocal insurer or interinsurance exchange under powers of attorney.

      (4) "Underwrite" means to accept or reject risks on behalf of the insurer.

      NEW SECTION. Sec. 36. (1) No person may act in the capacity of a managing general agent with respect to risks located in this state, for an insurer authorized by this state, unless that person is licensed in this state as an agent, under chapter 48.17 RCW, for the lines of insurance involved and is designated as a managing general agent and appointed as such by the insurer.

      (2) No person may act in the capacity of a managing general agent representing an insurer domiciled in this state with respect to risks located outside this state unless that person is licensed as an agent in this state, under chapter 48.17 RCW, for the lines of insurance involved and is designated as a managing general agent and appointed as such by the insurer.

      (3) The commissioner may require a bond for the protection of each insurer.

      (4) The commissioner may require the managing general agent to maintain an errors and omissions policy.

      NEW SECTION. Sec. 37. No managing general agent may place business with an insurer unless there is in force a written contract between the managing general agent and the insurer that sets forth the responsibilities of each party and, where both parties share responsibility for a particular function, specifies the division of the responsibilities, and that contains the following minimum provisions:

      (1) The insurer may terminate the contract for cause upon 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) The managing general agent shall render accounts to the insurer detailing all transactions and remit all funds due under the contract to the insurer on not less than a monthly basis.

      (3) The managing general agent shall hold funds collected for the account of an insurer in a fiduciary capacity in a financial institution located in this state that is a member of the federal reserve system. This account must 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 written for each insurer. The insurer has access to and the right to copy all accounts and records related to its business in a form usable by the insurer, and the commissioner has access to all books, bank accounts, and records of the managing general agent in a form usable to the commissioner. Those records shall be retained according to the requirements of this title and rules adopted under it.

      (5) The managing general agent may not assign the contract in whole or part.

      (6)(a) Appropriate underwriting guidelines must include at least the following: The maximum annual premium volume; the basis of the rates to be charged; the types of risks that may be written; maximum limits of liability; applicable exclusions; territorial limitations; policy cancellation provisions; and the maximum policy period.

      (b) The insurer has the right to cancel or not renew any policy of insurance, subject to the applicable laws and rules, including those in chapter 48.18 RCW.

      (7) If the contract permits the managing general agent to settle claims on behalf of the insurer:

      (a) All claims must be reported to the insurer in a timely manner.

      (b) A copy of the claim file must be sent to the insurer at its request or as soon as it becomes known that the claim:

      (i) Has the potential to exceed an amount determined by the commissioner, or exceeds the limit set by the insurer, 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; or

      (v) Is closed by payment in excess of an amount set by the commissioner or an amount set by the insurer, whichever is less.

      (c) All claim files are the joint property of the insurer and the managing general agent. However, upon an order of liquidation of the insurer, those files become the sole property of the insurer or its liquidator or successor. The managing general agent has reasonable access to and the right to copy the files on a timely basis.

      (d) Settlement authority granted to the managing general agent may be terminated for cause upon the insurer's written notice to the managing general agent or upon the termination of the contract. The insurer may suspend the managing general agent's settlement authority during the pendency of a dispute regarding the cause for termination.

      (8) Where electronic claims files are in existence, the contract must address the timely transmission of the data.

      (9) If the contract provides for a 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 or controlling claim payments or in any other manner, interim profits shall not be paid to the managing general agent until one year after they are earned for property insurance business and five years after they are earned on casualty business and not until the profits have been verified under section 38 of this act.

      (10) The managing general agent may not:

      (a) Bind reinsurance or retrocessions on behalf of the insurer, except that the managing general agent may bind automatic reinsurance contracts under obligatory automatic agreements if the contract with the insurer contains reinsurance underwriting guidelines including, for both reinsurance assumed and ceded, a list of reinsurers with which the automatic agreements are in effect, the coverages and amounts or percentages that may be reinsured, and commission schedules;

      (b) Commit the insurer to participate in insurance or reinsurance syndicates;

      (c) Use an agent that is not appointed to represent the insurer in accordance with the requirements of chapter 48.17 RCW;

      (d) Without prior approval of the insurer, pay or commit the insurer to pay a claim over a specified amount, net of reinsurance, that shall not exceed one percent of the insurer's policyholder surplus as of December 31st of the last-completed calendar year;

      (e) Collect a payment from a reinsurer or commit the insurer to a claim settlement with a reinsurer, without prior approval of the insurer. If prior approval is given, a report shall be promptly forwarded to the insurer;

      (f) Permit an agent appointed by it to serve on the insurer's board of directors;

      (g) Jointly employ an individual who is employed by the insurer; or

      (h) Appoint a submanaging general agent.

      NEW SECTION. Sec. 38. (1) The insurer shall have on file an independent audited financial statement, in a form acceptable to the commissioner, of each managing general agent with which it is doing or has done business.

      (2) If a managing general agent establishes loss reserves, the insurer shall annually obtain the opinion of an actuary attesting to the adequacy of loss reserves established for losses incurred and outstanding on business produced by the managing general agent. This is in addition to any other required loss reserve certification.

      (3) The insurer shall periodically, and no less frequently than semiannually, conduct an on-site review of the underwriting and claims processing operations of the managing general agent.

      (4) Binding authority for all reinsurance contracts or participation in insurance or reinsurance syndicates must rest with an officer of the insurer, who may not be affiliated with the managing general agent.

      (5) Within thirty days of entering into or terminating a contract with a managing general agent, the insurer shall provide written notification of that appointment or termination to the commissioner. Notices of appointment of a managing general agent must include a statement of duties that the managing general agent is expected to perform on behalf of the insurer, the lines of insurance for which the managing general agent is to be authorized to act, and any other information the commissioner may request. This subsection applies to managing general agents operating in this state.

      (6) An insurer shall review its books and records each calendar quarter to determine if any agent has become a managing general agent. If the insurer determines that an agent has become a managing general agent under section 35 of this act, the insurer shall promptly notify the agent and the commissioner of that determination, and the insurer and agent shall fully comply with this chapter within thirty days.

      (7) An insurer may not appoint to its board of directors an officer, director, employee, subagent, or controlling shareholder of its managing general agents. This subsection does not apply to relationships governed by the Insurer Holding Company Act, chapter 48.-- RCW (sections 1 through 15 of this act), or, if applicable, the business transacted with Broker-controlled Property and Casualty Insurer Act, chapter 48.-- RCW (sections 16 through 21 of this act).

      NEW SECTION. Sec. 39. The acts of the managing general agent are considered to be the acts of the insurer on whose behalf it is acting. A managing general agent may be examined as if it were the insurer, as provided in chapter 48.03 RCW.

      NEW SECTION. Sec. 40. (1) Subject to a hearing in accordance with chapters 34.05 and 48.04 RCW, upon a finding by the commissioner that any person has violated any provision of this chapter, the commissioner may order:

      (a) For each separate violation, a penalty in an amount of not more than one thousand dollars;

      (b) Revocation, or suspension for up to one year, of the agent's license; and

      (c) The managing general agent to reimburse the insurer, the rehabilitator, or liquidator of the insurer for losses incurred by the insurer caused by a violation of this chapter committed by the managing general agent.

      (2) The decision, determination, or order of the commissioner under this section is subject to judicial review under chapters 34.05 and 48.04 RCW.

      (3) Nothing contained in this section affects the right of the commissioner to impose any other penalties provided for in this title.

      (4) Nothing contained in this chapter is intended to or in any manner limits or restricts the rights of policyholders, claimants, and auditors.

      NEW SECTION. Sec. 41. The commissioner may adopt rules for the implementation and administration of this chapter, that shall include but are not limited to licensure of managing general agents.

      NEW SECTION. Sec. 42. No insurer may continue to use the services of a managing general agent on and after January 1, 1994, unless that use complies with this chapter.

      Sec. 43. RCW 48.03.010 and 1982 c 181 s 1 are each amended to read as follows:

      (1) The commissioner shall examine the affairs, transactions, accounts, records, documents, and assets of each authorized insurer as often as he or she deems advisable. ((He)) The commissioner shall so examine each ((domestic)) insurer holding a certificate of authority or certificate of registration not less frequently than every five years. Examination of an alien insurer may be limited to its insurance transactions in the United States. In scheduling and determining the nature, scope, and frequency of an examination, the commissioner shall consider such matters as the results of financial statement analyses and ratios, changes in management or ownership, actuarial opinions, reports of independent certified public accountants, and other criteria as set forth in the examiner's handbook adopted by the National Association of Insurance Commissioners and in effect when the commissioner exercises discretion under this section.

      (2) As often as ((he)) the commissioner deems advisable and at least once in five years, the commissioner shall fully examine each rating organization and examining bureau licensed in this state. As often as he or she deems it advisable ((he)) the commissioner may examine each advisory organization and each joint underwriting or joint reinsurance group, association, or organization.

      (3) The commissioner shall in like manner examine each insurer or rating organization applying for authority to do business in this state.

      (4) In lieu of making ((his own)) an examination under this chapter, the commissioner may accept a full report of the last recent examination of a nondomestic ((insurer or)) rating or advisory organization, or joint underwriting or joint reinsurance group, association or organization, ((certified to)) as prepared by the insurance supervisory official of the state of domicile or of entry. In lieu of an examination under this chapter of a foreign or alien insurer licensed in this state, the commissioner may accept an examination report on the company as prepared by the insurance department for the company's state of domicile or port-of-entry state until January 1, 1994. Thereafter, an examination report may be accepted only if: (a) That insurance department was at the time of the examination accredited under the National Association of Insurance Commissioners' financial regulation standards and accreditation program; or (b) the examination was performed either under the supervision of an accredited insurance department or with the participation of one or more examiners employed by an accredited state insurance department who, after a review of the examination work papers and report, state under oath that the examination was performed in a manner consistent with the standards and procedures required by their insurance department.

      (5) The commissioner may elect to accept and rely on an audit report made by an independent certified public accountant for the insurer in the course of that part of the commissioner's examination covering the same general subject matter as the audit. The commissioner may incorporate the audit report in his or her report of the examination.

      (6) For the purposes of completing an examination of any company under this chapter, the commissioner may examine or investigate any managing general agent or any other person, or the business of any managing general agent or other person, insofar as that examination or investigation is, in the sole discretion of the commissioner, necessary or material to the examination of the company.

      NEW SECTION. Sec. 44. A new section is added to chapter 48.03 RCW to read as follows:

      Upon determining that an examination should be conducted, the commissioner or the commissioner's designee shall appoint one or more examiners to perform the examination and instruct them as to the scope of the examination. In conducting the examination, the examiner shall observe those guidelines and procedures set forth in the examiners' handbook adopted by the National Association of Insurance Commissioners. The commissioner may also employ such other guidelines or procedures as the commissioner may deem appropriate.

      Sec. 45. RCW 48.03.040 and 1965 ex.s. c 70 s 1 are each amended to read as follows:

      (1) No later than sixty days after completion of each examination, the commissioner shall make a full written report of each examination made by him or her containing only facts ascertained from the accounts, records, and documents examined and from the sworn testimony of individuals, and such conclusions and recommendations as may reasonably be warranted from such facts.

      (2) The report shall be certified by the commissioner or by his or her examiner in charge of the examination, and shall be filed in the commissioner's office subject to subsection (3) of this section.

      (3) The commissioner shall furnish a copy of the examination report to the person examined not less than ten days and, unless the time is extended by the commissioner, not more than thirty days prior to the filing of the report for public inspection in the commissioner's office. If such person so requests in writing within such ((ten-day)) period, the commissioner shall hold a hearing to consider objections of such person to the report as proposed, and shall not so file the report until after such hearing and until after any modifications in the report deemed necessary by the commissioner have been made.

      (4) Within thirty days of the end of the period described in subsection (3) of this section, unless extended by order of the commissioner, the commissioner shall consider the report, together with any written submissions or rebuttals and any relevant portions of the examiner's workpapers and enter an order:

      (a) Adopting the examination report as filed or with modification or corrections. If the examination report reveals that the company is operating in violation of any law, rule, or order of the commissioner, the commissioner may order the company to take any action the commissioner considers necessary and appropriate to cure that violation;

      (b) Rejecting the examination report with directions to the examiners to reopen the examination for purposes of obtaining additional data, documentation, or information, and refiling under this section; or

      (c) Calling for an investigatory hearing with no less than twenty days' notice to the company for purposes of obtaining additional documentation, data, information, and testimony.

      (5) All orders entered under subsection (4) of this section must be accompanied by findings and conclusions resulting from the commissioner's consideration and review of the examination report, relevant examiner workpapers, and any written submissions or rebuttals. Such an order is considered a final administrative decision and may be appealed under the Administrative Procedure Act, chapter 34.05 RCW, and must be served upon the company by certified mail, together with a copy of the adopted examination report. A copy of the adopted examination report must be sent by certified mail to each director at the director's residence address.

      (6)(a) Upon the adoption of the examination report under subsection (4) of this section, the commissioner shall continue to hold the content of the examination report as private and confidential information for a period of five days except that the order may be disclosed to the person examined. Thereafter, the commissioner may open the report for public inspection so long as no court of competent jurisdiction has stayed its publication.

      (b) Nothing in this title prohibits the commissioner from disclosing the content of an examination report, preliminary examination report or results, or any matter relating thereto, to the insurance department of any other state or country, or to law enforcement officials of this or any other state or agency of the federal government at any time, so long as the agency or office receiving the report or matters relating thereto agrees in writing to hold it confidential and in a manner consistent with this chapter.

      (c) If the commissioner determines that regulatory action is appropriate as a result of any examination, he or she may initiate any proceedings or actions as provided by law.

      (d) Nothing contained in this section requires the commissioner to disclose any information or records that would indicate or show the existence or content of any investigation or activity of a criminal justice agency.

      Sec. 46. RCW 48.03.050 and 1947 c 79 s .03.05 are each amended to read as follows:

      The commissioner may withhold from public inspection any examination or investigation report for so long as he or she deems it advisable, subject to RCW 48.32.080.

      Sec. 47. RCW 48.03.060 and 1981 c 339 s 2 are each amended to read as follows:

      (1) Examinations within this state of any insurer domiciled or having its home offices in this state, other than a title insurer, made by the commissioner or his or her examiners and employees shall, except as to fees, mileage, and expense incurred as to witnesses, be at the expense of the state.

      (2) Every other examination, whatsoever, or any part of the examination of any person domiciled or having its home offices in this state requiring travel and services outside this state, shall be made by the commissioner or by examiners designated by ((him)) the commissioner and shall be at the expense of the person examined; but a domestic insurer shall not be liable for the compensation of examiners employed by the commissioner for such services outside this state.

      (3) When making an examination under this chapter, the commissioner may retain attorneys, appraisers, independent actuaries, independent certified public accountants, or other professionals and specialists as examiners, the cost of which shall be borne by the person who is the subject of the examination, except as provided in subsection (1) of this section.

      (4) The person examined and liable therefor shall reimburse the state upon presentation of an itemized statement thereof, for the actual travel expenses of the commissioner's examiners, their reasonable living expense allowance, and their per diem compensation, including salary and the employer's cost of employee benefits, at a reasonable rate approved by the commissioner, incurred on account of the examination. Per diem salary and expenses for employees examining insurers domiciled outside the state of Washington shall be established by the commissioner on the basis of the National Association of Insurance Commissioner's recommended salary and expense schedule for zone examiners, or the salary schedule established by the state personnel board and the expense schedule established by the office of financial management, whichever is higher. Domestic title insurer shall pay the examination expense and costs to the commissioner as itemized and billed by him or her.

      The commissioner or his or her examiners shall not receive or accept any additional emolument on account of any examination.

      (5) Nothing contained in this chapter limits the commissioner's authority to terminate or suspend any examination in order to pursue other legal or regulatory action under the insurance laws of this state. Findings of fact and conclusions made pursuant to any examination are prima facie evidence in any legal or regulatory action.

      NEW SECTION. Sec. 48. A new section is added to chapter 48.03 RCW to read as follows:

      (1) No examiner may be appointed by the commissioner if the examiner, either directly or indirectly, has a conflict of interest or is affiliated with the management of or owns a pecuniary interest in a person subject to examination under this chapter. This section does not automatically preclude an examiner from being:

      (a) A policyholder or claimant under an insurance policy;

      (b) A grantor of a mortgage or similar instrument on the examiner's residence to a regulated entity if done under customary terms and in the ordinary course of business;

      (c) An investment owner in shares of regulated diversified investment companies; or

      (d) A settlor or beneficiary of a blind trust into which any otherwise impermissible holdings have been placed.

      (2) Notwithstanding the requirements of subsection (1) of this section, the commissioner may retain from time to time, on an individual basis, qualified actuaries, certified public accountants, or other similar individuals who are independently practicing their professions, even though those persons may from time to time be similarly employed or retained by persons subject to examination under this chapter.

      NEW SECTION. Sec. 49. A new section is added to chapter 48.03 RCW to read as follows:

      (1) No cause of action may arise nor may any liability be imposed against the commissioner, the commissioner's authorized representatives, or an examiner appointed by the commissioner for statements made or conduct performed in good faith while carrying out this chapter.

      (2) No cause of action may arise nor may any liability be imposed against any person for the act of communicating or delivering information or data to the commissioner or the commissioner's authorized representative or examiner pursuant to an examination made under this chapter, if that act of communication or delivery was performed in good faith and without fraudulent intent or the intent to deceive.

      (3) This section does not modify a privilege or immunity previously enjoyed by a person identified in subsection (1) of this section.

      (4) A person identified in subsection (1) of this section is entitled to an award of attorneys' fees and costs if he or she is the prevailing party in a civil cause of action for libel, slander, or any other tort arising out of activities in carrying out this chapter and the party bringing the action was not substantially justified in doing so. For purposes of this section a proceeding is "substantially justified" if it had a reasonable basis in law or fact at the time that it was initiated.

      (5) If a claim is made or threatened of the sort described in subsection (1) of this section, the commissioner shall provide or pay for the defense of himself or herself, the examiner or representative, and shall pay a judgment or settlement, until it is determined that the person did not act in good faith or did act with fraudulent intent or the intent to deceive.

      (6) The immunity, indemnification, and other protections under this section are in addition to those now or hereafter existing under other law.

      Sec. 50. RCW 48.05.340 and 1991 sp.s. c 5 s 1 are each amended to read as follows:

      (1) Subject to RCW 48.05.350 and 48.05.360 to qualify for authority to transact any one kind of insurance as defined in chapter 48.11 RCW or combination of kinds of insurance as shown below, a foreign or alien insurer, whether stock or mutual, or a domestic insurer hereafter formed shall possess and thereafter maintain unimpaired paid-in capital stock, if a stock insurer, or unimpaired surplus if a mutual insurer, and shall possess when first so authorized additional funds in surplus as follows:


                                                                                      Paid-in capital

      Kind or kinds                                                          stock or                                                                                                            Additional

      of insurance                                            basic surplus                                                                                                                       surplus

Life . . . . . . . . . .. . . . . .. . . . . . . . . . . . . . . .                 $2,000,000                                                                                                      $2,000,000

Disability . . . . .. . . . . .. . . . . . . . . . . . . . . .                 2,000,000                                                                                                          2,000,000

Life and disability . . . . . . . . . . . . . . . . . . . .                 2,400,000                                                                                                          2,400,000

Property . . . . . .. . . . . .. . . . . . . . . . . . . . . .                 2,000,000                                                                                                          2,000,000

Marine & transportation . . . . . . . . . . . . . . .                 2,000,000                                                                                                          2,000,000

General casualty.. . . . . .. . . . . . . .                 2,400,000                                                                                                                          2,400,000

Vehicle. . . . . . . .. . . . . .. . . . . . . . . . . . . . . .                 2,000,000                                                                                                          2,000,000

Surety. . . . . . . . .. . . . . .. . . . . . . . . . . . . . . .                 2,000,000                                                                                                          2,000,000

Any two of the following

      kinds of insurance:

      Property, marine &

      transportation, general

      casualty, vehicle,

      surety, disability. . .. . . . . . . . . . . . . . . .                 3,000,000                                                                                                          3,000,000

Multiple lines (all insurances

      except life and title

      insurance) . .. . . . . .. . . . . . . . . . . . . . . .                 3,000,000                                                                                                          3,000,000

Title (in accordance with the

      provisions of chapter 48.29

      RCW)


      (2) Capital and surplus requirements are based upon all the kinds of insurance transacted by the insurer wherever it may operate or propose to operate, whether or not only a portion of such kinds are to be transacted in this state.

      (3) An insurer holding a certificate of authority to transact insurance in this state immediately prior to July 1, 1991, may continue to be authorized to transact the same kinds of insurance as long as it is otherwise qualified for such authority and thereafter maintains unimpaired the amount of paid-in capital stock, if a stock insurer, or basic surplus, if a mutual or reciprocal insurer, and special surplus as required of it under laws in force immediately prior to such effective date; and any proposed domestic insurer which is in process of formation or financing under a solicitation permit which is outstanding immediately prior to July 1, 1991, shall, if otherwise qualified therefor, be authorized to transact any kind or kinds of insurance upon the basis of the capital and surplus requirements of such an insurer under the laws in force immediately prior to such effective date. The requirements for paid-in capital stock, basic surplus, and special surplus that were in effect immediately before July 1, 1991, apply to any completed application for a certificate of authority from a foreign or alien insurer that is on file with the commissioner on July 1, 1991.

      (4) The commissioner may, by rule, require insurers to maintain additional capital and surplus based upon the type, volume, and nature of insurance business transacted consistent with the methods then adopted by the National Association of Insurance Commissioners for determining the appropriate amount of additional capital and surplus to be required. In the absence of an applicable rule, the commissioner may, after a hearing or with the consent of the insurer, require an insurer to have and maintain a larger amount of capital or surplus than prescribed under this section or the rules under this section, based upon the volume and kinds of insurance transacted by the insurer and on the principles of risk-based capital as determined by the National Association of Insurance Commissioners. This subsection applies only to insurers authorized to write life insurance, disability insurance, or both.

      Sec. 51. RCW 48.08.030 and 1947 c 79 s .08.03 are each amended to read as follows:

      (1) No domestic stock insurer shall pay any cash dividend to stockholders except out of earned surplus. For the purpose of this section, "earned surplus" means that part of its available surplus funds which is derived from any realized net profits on its business, and does not include unrealized capital gains or reevaluation of assets.

      (2) Such an insurer may pay a stock dividend out of any available surplus funds.

      (3) Payment of any dividend to stockholders of a domestic stock insurer shall also be subject to all the limitations and requirements governing the payment of dividends by other private corporations.

      (4) No dividend shall be declared or paid which would reduce the insurer's surplus to an amount less than the minimum required for the kinds of insurance thereafter to be transacted.

      (5) For the purposes of this chapter "surplus funds" means the excess of the insurer's assets over its liabilities, including its capital stock as a liability.

      (6) Available surplus means the excess over the minimum amount of surplus required for the kinds of insurance the insurer is authorized to transact.

      Sec. 52. RCW 48.11.140 and 1983 c 3 s 149 are each amended to read as follows:

      (1) No insurer shall retain any ((fire or surety)) risk on any one subject of insurance, whether located or to be performed in this state or elsewhere, in an amount exceeding ten percent of its surplus to policyholders((, except that:

      (a) Domestic mutual insurers may insure up to the applicable limits provided by RCW 48.05.340, if greater.

      (b) In the case of fire risks adequately protected by automatic sprinklers or fire risks principally of noncombustible construction and occupancy, an insurer may retain fire risks as to any one subject in an amount not exceeding twenty-five percent of the sum of (i) its unearned premium reserve and (ii) its surplus to policyholders)).

      (2) For the purposes of this section, a "subject of insurance" as to insurance against fire includes all properties insured by the same insurer which are reasonably subject to loss or damage from the same fire.

      (3) Reinsurance in an alien reinsurer not qualified under RCW 48.05.300 may not be deducted in determining risk retained for the purposes of this section.

      (4) In the case of surety insurance, the net retention shall be computed after deduction of reinsurances, the amount assumed by any co-surety, the value of any security deposited, pledged, or held subject to the consent of the surety and for the protection of the surety.

      (5) This section ((shall)) does not apply to life insurance, disability insurance, title insurance, or insurance of marine risks or marine protection and indemnity risks.

      Sec. 53. RCW 48.12.180 and 1973 c 151 s 1 are each amended to read as follows:

      (1) Securities, other than those referred to in RCW 48.12.170, held by an insurer shall be valued, in the discretion of the commissioner, at their market value, or at their appraised value, or at prices determined by him or her as representing their fair market value((, all consistent with any current method for the valuation of any such security formulated or approved by the National Association of Insurance Commissioners)).

      (2) Preferred or guaranteed stocks or shares while paying full dividends may be carried at a fixed value in lieu of market value, at the discretion of the commissioner and in accordance with such method of computation as he or she may approve.

      (3) The stock of a subsidiary of an insurer shall be valued on the basis of the greater of (a) the value of only such of the assets of such subsidiary as would constitute lawful investments for the insurer if acquired or held directly by the insurer or (b) such other value determined pursuant to rules and cumulative limitations which shall be promulgated by the commissioner to effectuate the purposes of this chapter.

      (4) The commissioner has full discretion in determining the method of calculating values according to the rules set forth in this section, and consistent with such methods as then adopted by the National Association of Insurance Commissioners.

      Sec. 54. RCW 48.12.190 and 1967 ex.s. c 95 s 10 are each amended to read as follows:

      (1) Real property acquired pursuant to a mortgage loan or a contract for a deed, in the absence of a recent appraisal deemed by the commissioner to be reliable, shall not be valued at an amount greater than the unpaid principal of the defaulted loan or contract at the date of such acquisition, together with any taxes and expenses paid or incurred in connection with such acquisition, and the cost of improvements thereafter made by the insurer and any amounts thereafter paid by the insurer on assessments levied for improvements in connection with the property.

      (2) Other real property held by an insurer shall not be valued at any amount in excess of fair value, less reasonable depreciation based on the estimated life of the improvements.

      (3) Personal property acquired pursuant to chattel mortgages made under RCW 48.13.150 shall not be valued at an amount greater than the unpaid balance of principal on the defaulted loan at date of acquisition together with taxes and expenses incurred in connection with such acquisition, or the fair value of such property, whichever amount is the lesser.

      (4) The commissioner has full discretion in determining the method of calculating values according to the rules set forth in this section, and consistent with such methods as then adopted by the National Association of Insurance Commissioners.

      Sec. 55. RCW 48.12.200 and 1947 c 79 s .12.20 are each amended to read as follows:

      (1) Purchase money mortgages shall be valued in an amount not exceeding the acquisition cost of the real property covered thereby or ninety percent of the fair value of such real property, whichever is less.

      (2) The commissioner has full discretion in determining the method of calculating values according to the rules set forth in this section, and consistent with such methods as then adopted by the National Association of Insurance Commissioners.

      Sec. 56. RCW 48.14.010 and 1988 c 248 s 7 are each amended to read as follows:

      (1) The commissioner shall collect in advance the following fees:

(a) For filing charter documents:

                      (i) Original charter documents, bylaws or record of organization of insurers, or certified copies thereof, required to be filed. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $250.00

                     (ii) Amended charter documents, or certified copy thereof, other than amendments of bylaws. . . . . . . . . . . . . . . . . . . . . . $ 10.00

                    (iii) No additional charge or fee shall be required for filing any of such documents in the office of the secretary of state.

(b) Certificate of authority:

                      (i) Issuance. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .$ 25.00

                     (ii) Renewal. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .$ 25.00

(c)  Annual statement of insurer, filing. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 20.00

(d) Organization or financing of domestic insurers and affiliated corporations:

                      (i) Application for solicitation permit, filing. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .$100.00

                     (ii) Issuance of solicitation permit. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .$ 25.00

(e)  Agents' licenses:

                      (i) Agent's qualification licenses each year. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .$ 25.00

                     (ii) Filing of appointment of each such agent, each year. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .$ 10.00

                    (iii) Limited license issued pursuant to RCW 48.17.190, each year. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .$ 10.00

(f)  Reinsurance intermediary licenses:

                      (i) Reinsurance intermediary-broker, each year                                                                                                                   $ 50.00

                     (ii) Reinsurance intermediary-manager, each year                                                                                                               $100.00

(g) Brokers' licenses:

                      (i) Broker's license, each year. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .$ 50.00

                     (ii) Surplus line broker, each year. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $100.00

(((g))) (h)           Solicitors' license, each year. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 10.00

(((h))) (i)            Adjusters' licenses:

                      (i) Independent adjuster, each year. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .$ 25.00

                     (ii) Public adjuster, each year. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 25.00

(((i))) (j) Resident general agent's license, each year. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 25.00

(((j))) (k) Managing general agent appointment, each year. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $100.00

(l)  Examination for license, each examination:

      All examinations, except examinations administered by an independent testing service, the fees for which are to be approved by the commissioner and collected directly by and retained by such independent testing service. . . . . . . . . . . . . . . . . .$ 10.00

(((k))) (m) Miscellaneous services:

                      (i) Filing other documents. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .$ 5.00

                     (ii) Commissioner's certificate under seal. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .$ 5.00

                    (iii) Copy of documents filed in the commissioner's office, reasonable charge therefor as determined by the commissioner.


  (2) All fees so collected shall be remitted by the commissioner to the state treasurer not later than the first business day following, and shall be placed to the credit of the general fund: PROVIDED, That fees for examinations administered by an independent testing service which are approved by the commissioner pursuant to subsection (1)(((j))) (l) of this section shall be collected directly by such independent testing service and retained by it.

      NEW SECTION. Sec. 57. (1) An officer, manager, director, trustee, owner, employee, or agent of an insurer or other person with authority over or in charge of a segment of the insurer's affairs shall cooperate with the commissioner in a proceeding under this chapter or an investigation preliminary to the proceeding. The term "person" as used in this section includes a person who exercises control directly or indirectly over activities of the insurer through a holding company or other affiliate of the insurer. "To cooperate" as used in this section includes the following:

      (a) To reply promptly in writing to an inquiry from the commissioner requesting such a reply; and

      (b) To make available to the commissioner books, accounts, documents, or other records or information or property of or pertaining to the insurer and in his or her possession, custody, or control.

      (2) A person may not obstruct or interfere with the commissioner in the conduct of a delinquency proceeding or an investigation preliminary or incidental thereto.

      (3) This section does not abridge existing legal rights, including the right to resist a petition for liquidation or other delinquency proceedings, or other orders.

      (4) A person included within subsection (1) of this section who fails to cooperate with the commissioner, or a person who obstructs or interferes with the commissioner in the conduct of a delinquency proceeding or an investigation preliminary or incidental thereto, or who violates an order the commissioner issued validly under this chapter may:

      (a) Be sentenced to pay a fine not exceeding ten thousand dollars or to undergo imprisonment for a term of not more than one year, or both; or

      (b) After a hearing, be subject to the imposition by the commissioner of a civil penalty not to exceed ten thousand dollars and be subject further to the revocation or suspension of insurance licenses issued by the commissioner.

      NEW SECTION. Sec. 58. (1) Except as provided in RCW 48.32A.060, no delinquency proceeding may be commenced under this chapter by anyone other than the commissioner of this state, and no court has jurisdiction to entertain a proceeding commenced by another person.

      (2) No court of this state has jurisdiction to entertain a complaint praying for the dissolution, liquidation, rehabilitation, sequestration, conservation, or receivership of an insurer, or praying for an injunction or restraining order or other relief preliminary to, incidental to, or relating to the proceedings, other than in accordance with this chapter.

      (3) In addition to other grounds for jurisdiction provided by the law of this state, a court of this state having jurisdiction of the subject matter has jurisdiction over a person served under the rules of civil procedure or other applicable provisions of law in an action brought by the receiver of a domestic insurer or an alien insurer domiciled in this state:

      (a) If the person served is an agent, broker, or other person who has written policies of insurance for or has acted in any manner on behalf of an insurer against which a delinquency proceeding has been instituted, in an action resulting from or incident to such a relationship with the insurer; or

      (b) If the person served is a reinsurer who has entered into a contract of reinsurance with an insurer against which a delinquency proceeding has been instituted, or is an agent or broker of or for the reinsurer, in an action on or incident to the reinsurance contract; or

      (c) If the person served is or has been an officer, director, manager, trustee, organizer, promoter, or other person in a position of comparable authority or influence over an insurer against which a delinquency proceeding has been instituted, in an action resulting from or incident to such a relationship with the insurer; or

      (d) If the person served is or was at the time of the institution of the delinquency proceeding against the insurer holding assets in which the receiver claims an interest on behalf of the insurer, in an action concerning the assets; or

      (e) If the person served is obligated to the insurer in any way, in an action on or incident to the obligation.

      (4) If the court on motion of a party finds that an action should as a matter of substantial justice be tried in a forum outside this state, the court may enter an appropriate order to stay further proceedings on the action in this state.

      NEW SECTION. Sec. 59. (1) The persons entitled to protection under this section are:

      (a) The commissioner and any other receiver responsible for conducting a delinquency proceeding under this chapter, including present and former commissioners and receivers; and

      (b) The commissioner's employees, meaning all present and former special deputies and assistant special deputies and special receivers appointed by the commissioner and all persons whom the commissioner, special deputies, or assistant special deputies have employed to assist in a delinquency proceeding under this chapter. Attorneys, accountants, auditors, and other professional persons or firms who are retained as independent contractors, and their employees, are not considered employees of the commissioner for purposes of this section.

       (2) The commissioner and the commissioner's employees are immune from suit and liability, both personally and in their official capacities, for a claim for damage to or loss of property or personal injury or other civil liability caused by or resulting from an alleged act or omission of the commissioner or an employee arising out of or by reason of his or her duties or employment. However, nothing in this subsection may be construed to hold the commissioner or an employee immune from suit or liability for any damage, loss, injury, or liability caused by the intentional or willful and wanton misconduct of the commissioner or an employee.

      (3) If a legal action is commenced against the commissioner or an employee, whether against him or her personally or in his or her official capacity, alleging property damage, property loss, personal injury, or other civil liability caused by or resulting from an alleged act or omission of the commissioner or an employee arising out of or by reason of his or her duties or employment, the commissioner and any employee shall be indemnified from the assets of the insurer for all expenses, attorneys' fees, judgments, settlements, decrees, or amounts due and owing or paid in satisfaction of or incurred in the defense of the legal action unless it is determined upon a final adjudication on the merits that the alleged act or omission of the commissioner or employee giving rise to the claim did not arise out of or by reason of his or her duties or employment, or was caused by intentional or willful and wanton misconduct.

      (a) Attorneys' fees and related expenses incurred in defending a legal action for which immunity or indemnity is available under this section shall be paid from the assets of the insurer, as they are incurred, in advance of the final disposition of such action upon receipt of an undertaking by or on behalf of the commissioner or employee to repay the attorneys' fees and expenses if it is ultimately determined upon a final adjudication on the merits and that the commissioner or employee is not entitled to immunity or indemnity under this section.

      (b) Any indemnification under this section is an administrative expense of the insurer.

      (c) In the event of an actual or threatened litigation against the commissioner or an employee for which immunity or indemnity may be available under this section, a reasonable amount of funds that in the judgment of the commissioner may be needed to provide immunity or indemnity shall be segregated and reserved from the assets of the insurer as security for the payment of indemnity until all applicable statutes of limitation have run or all actual or threatened actions against the commissioner or an employee have been completely and finally resolved, and all obligations of the insurer and the commissioner under this section have been satisfied.

      (d) In lieu of segregation and reserving of funds, the commissioner may obtain a surety bond or make other arrangements that will enable the commissioner to secure fully the payment of all obligations under this section.

      (4) If a legal action against an employee for which indemnity may be available under this section is settled before final adjudication on the merits, the insurer shall pay the settlement amount on behalf of the employee, or indemnify the employee for the settlement amount, unless the commissioner determines:

      (a) That the claim did not arise out of or by reason of the employee's duties or employment; or

      (b) That the claim was caused by the intentional or willful and wanton misconduct of the employee.

      (5) In a legal action in which the commissioner is a defendant, that portion of a settlement relating to the alleged act or omission of the commissioner is subject to the approval of the court before which the delinquency proceeding is pending. The court may not approve that portion of the settlement if it determines:

      (a) That the claim did not arise out of or by reason of the commissioner's duties or employment; or

      (b) That the claim was caused by the intentional or willful and wanton misconduct of the commissioner.

      (6) Nothing in this section removes or limits an immunity, indemnity, benefit of law, right, or defense otherwise available to the commissioner, an employee, or any other person, not an employee under subsection (1)(b) of this section, who is employed by or in the office of the commissioner or otherwise employed by the state.

      (7)(a) Subsection (2) of this section applies to any suit based in whole or in part on an alleged act or omission that takes place on or after the effective date of this act.

      (b) No legal action lies against the commissioner or an employee based in whole or in part on an alleged act or omission that took place before the effective date of this act, unless suit is filed and valid service of process is obtained within twelve months after the effective date of this act.

      (c) Subsections (3), (4), and (5) of this section apply to a suit that is pending on or filed after the effective date of this act without regard to when the alleged act or omission took place.

      NEW SECTION. Sec. 60. (1) The commissioner may petition the court alleging, with respect to a domestic insurer:

      (a) That there exists a ground that would justify a court order for a formal delinquency proceeding against an insurer under this chapter;

      (b) That the interests of policyholders, creditors, or the public will be endangered by delay; and

      (c) The contents of an order deemed necessary by the commissioner.

      (2) Upon a filing under subsection (1) of this section, the court may issue forthwith, ex parte and without a hearing, the requested order that shall: Direct the commissioner to take possession and control of all or a part of the property, books, accounts, documents, and other records of an insurer, and of the premises occupied by it for transaction of its business; and until further order of the court enjoin the insurer and its officers, managers, agents, and employees from disposition of its property and from the transaction of its business except with the written consent of the commissioner.

      (3) The court shall specify in the order what the order's duration shall be, which shall be such time as the court deems necessary for the commissioner to ascertain the condition of the insurer. On motion of either party or on its own motion, the court may from time to time hold hearings it deems desirable after such notice as it deems appropriate, and may extend, shorten, or modify the terms of the seizure order. The court shall vacate the seizure order if the commissioner fails to commence a formal proceeding under this chapter after having had a reasonable opportunity to do so. An order of the court pursuant to a formal proceeding under this chapter vacates the seizure order.

      (4) Entry of a seizure order under this section does not constitute an anticipatory breach of a contract of the insurer.

      (5) An insurer subject to an ex parte order under this section may petition the court at any time after the issuance of an order under this section for a hearing and review of the order. The court shall hold the hearing and review not more than fifteen days after the request. A hearing under this subsection may be held privately in chambers, and it must be so held if the insurer proceeded against so requests.

      (6) If, at any time after the issuance of an order under this section, it appears to the court that a person whose interest is or will be substantially affected by the order did not appear at the hearing and has not been served, the court may order that notice be given. An order that notice be given does not stay the effect of an order previously issued by the court.

      NEW SECTION. Sec. 61. (1) All policies, including bonds and other noncancellable business, other than life or health insurance or annuities, in effect at the time of issuance of an order of liquidation continue in force only until the earliest of:

      (a) The end of a period of thirty days from the date of entry of the liquidation order;

      (b) The expiration of the policy coverage;

      (c) The date when the insured has replaced the insurance coverage with equivalent insurance in another insurer or otherwise terminated the policy;

      (d) The liquidator has effected a transfer of the policy obligation; or

      (e) The date proposed by the liquidator and approved by the court to cancel coverage.

      (2) An order of liquidation terminates coverages at the time specified in subsection (1) of this section for purposes of any other statute.

      (3) Policies of life or health insurance or annuities shall continue in force for the period and under the terms provided by an applicable guaranty association or foreign guaranty association.

      (4) Policies of life or health insurance or annuities or a period or coverage of the policies not covered by a guaranty association or foreign guaranty association shall terminate under subsections (1) and (2) of this section.

      NEW SECTION. Sec. 62. (1) Upon issuance of an order appointing a liquidator of a domestic insurer or of an alien insurer domiciled in this state, an action at law or equity or in arbitration may not be brought against the insurer or liquidator, whether in this state or elsewhere, nor may such an existing action be maintained or further presented after issuance of the order. The courts of this state shall give full faith and credit to injunctions against the liquidator or the company when the injunctions are included in an order to liquidate an insurer issued under laws in other states corresponding to this subsection. Whenever, in the liquidator's judgment, protection of the estate of the insurer necessitates intervention in an action against the insurer that is pending outside this state, the liquidator may intervene in the action. The liquidator may defend an action in which he or she intervenes under this section at the expense of the estate of the insurer.

      (2) The liquidator may, upon or after an order for liquidation, within two years or such other longer time as applicable law may permit, institute an action or proceeding on behalf of the estate of the insurer upon a cause of action against which the period of limitation fixed by applicable law has not expired at the time of the filing of the petition upon which the order is entered. Where, by an agreement, a period of limitation is fixed for instituting a suit or proceeding upon a claim, or for filing a claim, proof of claim, proof of loss, demand, notice, or the like, or where in a proceeding, judicial or otherwise, a period of limitation is fixed, either in the proceeding or by applicable law, for taking an action, filing a claim or pleading, or doing an act, and where in such a case the period had not expired at the date of the filing of the petition, the liquidator may, for the benefit of the estate, take such an action or do such an act, required of or permitted to the insurer, within a period of one hundred eighty days after the entry of an order for liquidation, or within such further period as is shown to the satisfaction of the court not to be unfairly prejudicial to the other party.

      (3) A statute of limitation or defense of laches does not run with respect to an action against an insurer between the filing of a petition for liquidation against an insurer and the denial of the petition. An action against the insurer that might have been commenced when the petition was filed may be commenced for at least sixty days after the petition is denied.

      (4) A guaranty association or foreign guaranty association has standing to appear in a court proceeding concerning the liquidation of an insurer if the association is or may become liable to act as a result of the liquidation.

      NEW SECTION. Sec. 63. The amount recoverable by the commissioner from reinsurers may not be reduced as a result of the delinquency proceedings, regardless of any provision in the reinsurance contract or other agreement except as provided in RCW 48.31.290. Payment made directly to an insured or other creditor does not diminish the reinsurer's obligation to the insurer's estate except when the reinsurance contract provided for direct coverage of a named insured and the payment was made in discharge of that obligation.

      NEW SECTION. Sec. 64. (1)(a) An agent, broker, premium finance company, or any other person, other than the policy owner or the insured, responsible for the payment of a premium is obligated to pay any unpaid premium for the full policy term due the insurer at the time of the declaration of insolvency, whether earned or unearned, as shown on the records of the insurer. The liquidator also has the right to recover from the person a part of an unearned premium that represents commission of the person. Credits or setoffs or both may not be allowed to an agent, broker, or premium finance company for amounts advanced to the insurer by the agent, broker, or premium finance company on behalf of, but in the absence of a payment by, the policy owner or the insured.

      (b) Notwithstanding (a) of this subsection, the agent, broker, premium finance company, or other person is not liable for uncollected unearned premium of the insurer. A presumption exists that the premium as shown on the books of the insurer is collected, and the burden is upon the agent, broker, premium finance company, or other person to demonstrate by a preponderance of the evidence that the unearned premium was not actually collected. For purposes of this subsection, "unearned premium" means that portion of an insurance premium covering the unexpired term of the policy or the unexpired period of the policy period.

      (c) An insured is obligated to pay any unpaid earned premium due the insurer at the time of the declaration of insolvency, as shown on the records of the insurer.

      (2) Upon a violation of this section, the commissioner may pursue either one or both of the following courses of action:

      (a) Suspend or revoke or refuse to renew the licenses of the offending party or parties;

      (b) Impose a penalty of not more than one thousand dollars for each violation.

      (3) Before the commissioner may take an action as set forth in subsection (2) of this section, he or she shall give written notice to the person accused of violating the law, stating specifically the nature of the alleged violation, and fixing a time and place, at least ten days thereafter, when a hearing on the matter shall be held. After the hearing, or upon failure of the accused to appear at the hearing, the commissioner, if he or she finds a violation, shall impose those penalties under subsection (2) of this section that he or she deems advisable.

      (4) When the commissioner takes action in any or all of the ways set out in subsection (2) of this section, the party aggrieved has the rights granted under the Administrative Procedure Act, chapter 34.05 RCW.

      NEW SECTION. Sec. 65. (1) When the liquidator denies a claim in whole or in part, the liquidator shall give written notice of the determination to the claimant or the claimant's attorney by first class mail at the address shown in the proof of claim. Within sixty days from the mailing of the notice, the claimant may file his or her objections with the liquidator. If no such a filing is made, the claimant may not further object to the determination.

      (2) Whenever the claimant files objections with the liquidator and the liquidator does not alter his or her denial of the claim as a result of the objections, the liquidator shall ask the court for a hearing as soon as practicable and give notice of the hearing by first class mail to the claimant or the claimant's attorney and to other persons directly affected, not less than ten nor more than thirty days before the date of the hearing. The matter may be heard by the court or by a court-appointed referee who shall submit findings of fact along with his or her recommendation.

      NEW SECTION. Sec. 66. Whenever a creditor whose claim against an insurer is secured, in whole or in part, by the undertaking of another person, fails to prove and file that claim, the other person may do so in the creditor's name, and is subrogated to the rights of the creditor, whether the claim has been filed by the creditor or by the other person in the creditor's name, to the extent that he or she discharges the undertaking. In the absence of an agreement with the creditor to the contrary, the other person is not entitled to a distribution until the amount paid to the creditor on the undertaking plus the distributions paid on the claim from the insurer's estate to the creditor equals the amount of the entire claim of the creditor. The creditor shall hold any excess received by him or her in trust for the other person. The term "other person" as used in this section does not apply to a guaranty association or foreign guaranty association.

      NEW SECTION. Sec. 67. Unclaimed funds subject to distribution remaining in the liquidator's hands when he or she is ready to apply to the court for discharge, including the amount distributable to a person who is unknown or cannot be found, shall be deposited with the state treasurer, and shall be paid without interest to the person entitled to them or his or her legal representative upon proof satisfactory to the state treasurer of his or her right to them. An amount on deposit not claimed within six years from the discharge of the liquidator is deemed to have been abandoned and shall be escheated without formal escheat proceedings and be deposited with the state treasurer.

      NEW SECTION. Sec. 68. After the liquidation proceeding has been terminated and the liquidator discharged, the commissioner or other interested party may at any time petition the court to reopen the proceedings for good cause, including the discovery of additional assets. If the court is satisfied that there is justification for reopening, it shall so order.

      NEW SECTION. Sec. 69. (1) If no domiciliary receiver has been appointed, the commissioner may apply to the court for an order directing him or her to liquidate the assets found in this state of a foreign insurer or an alien insurer not domiciled in this state, on any of the grounds stated in: RCW 48.31.030, except subsection (10) of that section; 48.31.050(2); or 48.31.080.

      (2) When an order is sought under subsection (1) of this section, the court shall cause the insurer to be given thirty days' notice and time to respond, or a lesser period reasonable under the circumstances.

      (3) If it appears to the court that the best interests of creditors, policyholders, and the public require, the court may issue an order to liquidate in whatever terms it deems appropriate. The filing or recording of the order with the recorder of deeds of the county in which the principal business of the company in this state is located or the county in which its principal office or place of business in this state is located, imparts the same notice as a deed or other evidence of title duly filed or recorded with that recorder of deeds would have imparted.

      (4) If a domiciliary liquidator is appointed in a reciprocal state while a liquidation is proceeding under this section, the liquidator under this section shall thereafter act as ancillary receiver under RCW 48.31.130 (as recodified by this act). If a domiciliary liquidator is appointed in a nonreciprocal state while a liquidation is proceeding under this section, the liquidator under this section may petition the court for permission to act as ancillary receiver under RCW 48.31.130 (as recodified by this act).

      (5) On the same grounds as are specified in subsection (1) of this section, the commissioner may petition an appropriate federal court to be appointed receiver to liquidate that portion of the insurer's assets and business over which the court will exercise jurisdiction, or any lesser part thereof that the commissioner deems desirable for the protection of policyholders, creditors, and the public in this state.

      (6) The court may order the commissioner, when he or she has liquidated the assets of a foreign or alien insurer under this section, to pay claims of residents of this state against the insurer under those rules on the liquidation of insurers under this chapter that are otherwise compatible with this section.

      NEW SECTION. Sec. 70. (1) Except as to special deposits and security on secured claims under RCW 48.31.130(2) (as recodified by this act), the domiciliary liquidator of an insurer domiciled in a reciprocal state is vested by operation of law with the title to all of the assets, property, contracts, and rights of action, agents' balances, and all the books, accounts, and other records of the insurer located in this state. The date of vesting is the date of the filing of the petition, if that date is specified by the domiciliary law for the vesting of property in the domiciliary state. Otherwise, the date of vesting is the date of entry of the order directing possession to be taken. The domiciliary liquidator has the immediate right to recover balances due from agents and to obtain possession of the books, accounts, and other records of the insurer located in this state. The domiciliary liquidator also has the right to recover all other assets of the insurer located in this state, subject to RCW 48.31.130 (as recodified by this act).

      (2) If a domiciliary liquidator is appointed for an insurer not domiciled in a reciprocal state, the commissioner of this state is vested by operation of law with the title to all of the property, contracts, and rights of action, and all the books, accounts, and other records of the insurer located in this state, at the same time that the domiciliary liquidator is vested with title in the domicile. The commissioner of this state may petition for a conservation or liquidation order under RCW 48.31.100 or 48.31.130 (as recodified by this act), or for an ancillary receivership under RCW 48.31.130 (as recodified by this act), or after approval by the court may transfer title to the domiciliary liquidator, as the interests of justice and the equitable distribution of the assets require.

      (3) Claimants residing in this state may file claims with the liquidator or ancillary receiver, if any, in this state or with the domiciliary liquidator, if the domiciliary law permits. The claims must be filed on or before the last date fixed for the filing of claims in the domiciliary liquidation proceedings.

      NEW SECTION. Sec. 71. The commissioner in his or her sole discretion may institute proceedings under section 60 of this act at the request of the commissioner or other appropriate insurance official of the domiciliary state of a foreign or alien insurer having property located in this state.

      NEW SECTION. Sec. 72. (1) In a liquidation proceeding in this state involving one or more reciprocal states, the order of distribution of the domiciliary state controls as to claims of residents of this and reciprocal states. Claims of residents of reciprocal states shall be given equal priority of payment from general assets regardless of where the assets are located.

      (2) The owners of special deposit claims against an insurer for which a liquidator is appointed in this or any other state shall be given priority against the special deposits in accordance with the statutes governing the creation and maintenance of the deposits. If there is a deficiency in a deposit, so that the claims secured by it are not fully discharged from it, the claimants may share in the general assets, but the sharing shall be deferred until general creditors, and also claimants against other special deposits who have received smaller percentages from their respective special deposits, have been paid percentages of their claims equal to the percentage paid from the special deposit.

      (3) The owner of a secured claim against an insurer for which a liquidator has been appointed in this or another state may surrender his or her security and file his or her claim as a general creditor, or the claim may be discharged by resort to the security, in which case the deficiency, if any, shall be treated as a claim against the general assets of the insurer on the same basis as claims of unsecured creditors.

      NEW SECTION. Sec. 73. If an ancillary receiver in another state or foreign country, whether called by that name or not, fails to transfer to the domiciliary liquidator in this state assets within his or her control other than special deposits, diminished only by the expenses of the ancillary receivership, if any, then the claims filed in the ancillary receivership, other than special deposit claims or secured claims, shall be placed in the class of claims under RCW 48.31.280(7).

      Sec. 74. RCW 48.31.030 and 1949 c 190 s 28 are each amended to read as follows:

      The commissioner may apply for an order directing him or her to rehabilitate a domestic insurer upon one or more of the following grounds: That the insurer

      (1) Is insolvent; or

      (2) Has refused to submit its books, records, accounts, or affairs to the reasonable examination of the commissioner; or

      (3) Has failed to comply with the commissioner's order, made pursuant to law, to make good an impairment of capital (if a stock insurer) or an impairment of assets (if a mutual or reciprocal insurer) within the time prescribed by law; or

      (4) Has transferred or attempted to transfer substantially its entire property or business, or has entered into any transaction the effect of which is to merge substantially its entire property or business in that of any other insurer without first having obtained the written approval of the commissioner; or

      (5) Is found, after examination, to be in such condition that its further transaction of business will be hazardous to its policyholders, or to its creditors, or to its members, subscribers, or stockholders, or to the public; or

      (6) Has willfully violated its charter or any law of this state; or

      (7) Has an officer, director, or manager who has refused to be examined under oath, concerning its affairs, for which purpose the commissioner is authorized to conduct and to enforce by all appropriate and available means any such examination under oath in any other state or territory of the United States, in which any such officer, director, or manager may then presently be, to the full extent permitted by the laws of any such other state or territory, this special authorization considered; or

      (8) Has been the subject of an application for the appointment of a receiver, trustee, custodian, or sequestrator of the insurer or of its property, or if a receiver, trustee, custodian, or sequestrator is appointed by a federal court or if such appointment is imminent; or

      (9) Has consented to such an order through a majority of its directors, stockholders, members, or subscribers; or

      (10) Has failed to pay a final judgment rendered against it in any state upon any insurance contract issued or assumed by it, within thirty days after the judgment became final or within thirty days after time for taking an appeal has expired, or within thirty days after dismissal of an appeal before final determination, whichever date is the later; or

      (11) There is reasonable cause to believe that there has been embezzlement from the insurer, wrongful sequestration or diversion of the insurer's assets, forgery or fraud affecting the insurer, or other illegal conduct in, by, or with respect to the insurer that, if established, would endanger assets in an amount threatening the solvency of the insurer; or

      (12) The insurer has failed to remove a person who in fact has executive authority in the insurer, whether an officer, manager, general agent, employee, or other person, if the person has been found after notice and hearing by the commissioner to be dishonest or untrustworthy in a way affecting the insurer's business; or

      (13) Control of the insurer, whether by stock ownership or ownership or otherwise, and whether direct or indirect, is in a person or persons found after notice and hearing to be untrustworthy; or

      (14) The insurer has failed to file its annual report or other financial report required by statute within the time allowed by law and, after written demand by the commissioner, has failed to give an adequate explanation immediately; or

      (15) The board of directors or the holders of a majority of the shares entitled to vote, request, or consent to rehabilitation under this chapter.

      Sec. 75. RCW 48.31.040 and 1947 c 79 s .31.04 are each amended to read as follows:

      (1) An order to rehabilitate a domestic insurer shall direct the commissioner forthwith to take possession of the property of the insurer and to conduct the business thereof, and to take such steps toward removal of the causes and conditions which have made rehabilitation necessary as the court may direct.

      (2) If at any time the commissioner deems that further efforts to rehabilitate the insurer would be useless, he or she may apply to the court for an order of liquidation.

      (3) The commissioner, or any interested person upon due notice to the commissioner, at any time may apply for an order terminating the rehabilitation proceeding and permitting the insurer to resume possession of its property and the conduct of its business, but no such order shall be granted except when, after a full hearing, the court has determined that the purposes of the proceedings have been fully accomplished.

      (4) An order to rehabilitate the business of a domestic insurer, or an alien insurer domiciled in this state, shall appoint the commissioner and his or her successors in office as the rehabilitator, and shall direct the rehabilitator to immediately take possession of the assets of the insurer, and to administer them under the general supervision of the court. The filing or recording of the order with the recorder of deeds of the county in this state in which the principal business of the company is conducted, or the county in this state in which the company's principal office or place of business is located, imparts the same notice as a deed or other evidence of title duly filed or recorded with that recorder of deeds would have imparted. The order to rehabilitate the insurer by operation of law vests title to all assets of the insurer in the rehabilitator.

      (5) An order issued under this section requires accountings to the court by the rehabilitator. Accountings must be done at such intervals as the court specifies in its order, but no less frequently than semiannually.

      (6) Entry of an order of rehabilitation does not constitute an anticipatory breach of contracts of the insurer nor may it be grounds for retroactive revocation or retroactive cancellation of contracts of the insurer, unless the revocation or cancellation is done by the rehabilitator.

      NEW SECTION. Sec. 76. A new section is added to chapter 48.31 RCW to read as follows:

      (1) A court in this state before which an action or proceeding in which the insurer is a party, or is obligated to defend a party, is pending when a rehabilitation order against the insurer is entered shall stay the action or proceeding for ninety days and such additional time as is necessary for the rehabilitator to obtain proper representation and prepare for further proceedings. The rehabilitator shall take such action respecting the pending litigation as he or she deems necessary in the interests of justice and for the protection of creditors, policyholders, and the public. The rehabilitator shall immediately consider all litigation pending outside this state and shall petition the courts having jurisdiction over that litigation for stays whenever necessary to protect the estate of the insurer.

      (2) A statute of limitations or defense of laches does not run with respect to an action by or against an insurer between the filing of a petition for appointment of a rehabilitator for that insurer and the order granting or denying that petition. An action against the insurer that might have been commenced when the petition was filed may be commenced for at least sixty days after the order of rehabilitation is entered or the petition is denied. The rehabilitator may, upon an order for rehabilitation, within one year or such other longer time as applicable law may permit, institute an action or proceeding on behalf of the insurer upon a cause of action against which the period of limitation fixed by applicable law has not expired at the time of the filing of the petition upon which the order is entered.

      (3) A guaranty association or foreign guaranty association covering life or health insurance or annuities has standing to appear in a court proceeding concerning the rehabilitation of a life or health insurer if the association is or may become liable to act as a result of the rehabilitation.

      Sec. 77. RCW 48.31.110 and 1961 c 194 s 12 are each amended to read as follows:

      This ((section and RCW 48.31.120 to 48.31.180, inclusive, comprise and)) chapter may be known and cited as the Uniform Insurers Liquidation Act. For the purposes of this ((act)) chapter:

      (1) "Insurer" means any person, firm, corporation, association, or aggregation of persons doing an insurance business and subject to the insurance supervisory authority of, or to liquidation, rehabilitation, reorganization, or conservation by, the commissioner, or the equivalent insurance supervisory official of another state.

      (2) "Delinquency proceeding" means any proceeding commenced against an insurer for the purpose of liquidating, rehabilitating, reorganizing, or conserving such insurer.

      (3) "State" means any state of the United States, and also the District of Columbia and Puerto Rico.

      (4) "Foreign country" means territory not in any state.

      (5) "Domiciliary state" means the state in which an insurer is incorporated or organized, or, in the case of an insurer incorporated or organized in a foreign country, the state in which such insurer, having become authorized to do business in such state, has, at the commencement of delinquency proceedings, the largest amount of its assets held in trust and assets held on deposit for the benefit of its policyholders or policyholders and creditors in the United States; and any such insurer is deemed to be domiciled in such state.

      (6) "Ancillary state" means any state other than a domiciliary state.

      (7) "Reciprocal state" means any state other than this state in which in substance and effect the provisions of this ((act)) chapter are in force, including the provisions requiring that the insurance commissioner or equivalent insurance supervisory official be the receiver of a delinquent insurer.

      (8) "General assets" means all property, real, personal, or otherwise, not specifically mortgaged, pledged, deposited, or otherwise encumbered for the security or benefit of specified persons or a limited class or classes of persons, and as to such specifically encumbered property the term includes all such property or its proceeds in excess of the amount necessary to discharge the sum or sums secured thereby. Assets held in trust and assets held on deposit for the security or benefit of all policyholders, or all policyholders and creditors in the United States, shall be deemed general assets.

      (9) "Preferred claim" means any claim with respect to which the law of a state or of the United States accords priority of payment from the general assets of the insurer.

      (10) "Special deposit claim" means any claim secured by a deposit made pursuant to statute for the security or benefit of a limited class or classes of persons, but not including any general assets.

      (11) "Secured claim" means any claim secured by mortgage, trust, deed, pledge, deposit as security, escrow, or otherwise, but not including special deposit claims or claims against general assets. The term also includes claims which more than four months prior to the commencement of delinquency proceedings in the state of the insurer's domicile have become liens upon specific assets by reason of judicial process.

      (12) "Receiver" means receiver, liquidator, rehabilitator, or conservator as the context may require.

      Sec. 78. RCW 48.31.160 and 1947 c 79 s .31.16 are each amended to read as follows:

      (1) In a delinquency proceeding against an insurer domiciled in this state, claims owing to residents of ancillary states shall be preferred claims if like claims are preferred under the laws of this state. All such claims whether owing to residents or nonresidents shall be given equal priority of payment from general assets regardless of where such assets are located.

      (2) In a delinquency proceeding against an insurer domiciled in a reciprocal state, claims owing to residents of this state shall be preferred if like claims are preferred by the laws of that state.

      (3) The owners of special deposit claims against an insurer for which a receiver is appointed in this or any other state shall be given priority against their several special deposits in accordance with the provisions of the statutes governing the creation and maintenance of such deposits. If there is a deficiency in any such deposit so that the claims secured thereby are not fully discharged therefrom, the claimants may share in the general assets, but such sharing shall be deferred until general creditors, and also claimants against other special deposits who have received smaller percentages from their respective special deposits, have been paid percentages of their claims equal to the percentage paid from the special deposit.

      (4) The owner of a secured claim against an insurer for which a receiver has been appointed in this or any other state may surrender his security and file his claim as a general creditor, or the claim may be discharged by resort to the security, in which case the deficiency, if any, shall be treated as a claim against the general assets of the insurer on the same basis as claims of unsecured creditors. If the amount of the deficiency has been adjudicated in ancillary proceedings as provided in this ((act)) chapter, or if it has been adjudicated by a court of competent jurisdiction in proceedings in which the domiciliary receiver has had notice and opportunity to be heard, such amount shall be conclusive; otherwise the amount shall be determined in the delinquency proceeding in the domiciliary state.

      Sec. 79. RCW 48.31.180 and 1947 c 79 s .31.18 are each amended to read as follows:

      (1) If any provision of this ((act)) chapter or the application thereof to any person or circumstances is held invalid, such invalidity shall not affect other provisions or applications of the ((act)) chapter which can be given effect without the invalid provision or application, and to this end the provisions of this ((act)) chapter are declared to be severable.

      (2) This Uniform Insurers Liquidation Act shall be so interpreted and construed as to effectuate its general purpose to make uniform the law of those states that enact it. To the extent that its provisions, when applicable, conflict with ((other)) provisions of ((this)) chapter 48.31 RCW, the provisions of this ((act)) chapter shall control.

      NEW SECTION. Sec. 80. RCW 48.31.110, 48.31.120, 48.31.130, 48.31.140, 48.31.150, 48.31.160, 48.31.170, and 48.31.180 are recodified to constitute a new chapter in Title 48 RCW.

      Sec. 81. RCW 48.31.190 and 1988 c 202 s 46 are each amended to read as follows:

      (1) Proceedings under this chapter involving a domestic insurer shall be commenced in the superior court for the county in which is located the insurer's home office or, at the election of the commissioner, in the superior court for Thurston county. Proceedings under this chapter involving other insurers shall be commenced in the superior court for Thurston county.

      (2) The commissioner shall commence any such proceeding, the attorney general representing him, by an application to the court or to any judge thereof, for an order directing the insurer to show cause why the commissioner should not have the relief prayed for.

      (3) Upon a showing of an emergency or threat of imminent loss to policyholders of the insurer the court may issue an ex parte order authorizing the commissioner immediately to take over the premises and assets of the insurer, the commissioner then to preserve the status quo, pending a hearing on the order to show cause, which shall be heard as soon as the court calendar permits in preference to other civil cases.

      (4) In response to any order to show cause issued under this chapter the insurer shall have the burden of going forward with and producing evidence to show why the relief prayed for by the commissioner is not required.

      (5) On the return of such order to show cause, and after a full hearing, the court shall either deny the relief sought in the application or grant the relief sought in the application together with such other relief as the nature of the case and the interest of policyholders, creditors, stockholders, members, subscribers, or the public may require.

      (6) No appellate review of a superior court order, entered after a hearing, granting the commissioner's petition to rehabilitate an insurer or to carry out an insolvency proceeding under this chapter, shall stay the action of the commissioner in the discharge of his responsibilities under this chapter, pending a decision by the appellate court in the matter.

      (7) In any proceeding under this chapter the commissioner and his deputies shall be responsible on their official bonds for the faithful performance of their duties. If the court deems it desirable for the protection of the assets, it may at any time require an additional bond from the commissioner or his deputies.

      Sec. 82. RCW 48.31.280 and 1975-'76 2nd ex.s. c 109 s 1 are each amended to read as follows:

      (((1) Compensation actually owing to employees other than officers of an insurer, for services rendered within three months prior to the commencement of a proceeding against the insurer under this chapter, but not exceeding three hundred dollars for each such employee, shall be paid prior to the payment of any other debt or claim, and in the discretion of the commissioner may be paid as soon as practicable after the proceeding has been commenced; except, that at all times the commissioner shall reserve such funds as will in his opinion be sufficient for the expenses of administration. Such priority shall be in lieu of any other similar priority which may be authorized by law as to the wages or compensation of such employees.

      (2) The priorities of distribution in a liquidation proceeding shall be in the following order:

      (a) Expenses of administration;

      (b) Compensation of employees as provided in subsection (1) of this section;

      (c) Federal, state, and local taxes;

      (d) Claims arising out of and within the coverages of insurance policies issued by the insurer being liquidated for losses incurred, including:

      (i) Third party claims and claims for unearned premiums;

      (ii) Claims presented by the Washington Insurance Guaranty Association which represent "covered claims" as defined in RCW 48.32.030(4) and which have been paid by such association;

      (iii) Claims to which the Washington life and disability insurance guaranty association shall have become subrogated under the provisions of RCW 48.32A.060; and

      (iv) Claims similar to those described in parts (ii) and (iii) of this subsection as presented by similar guaranty associations of other states; and

      (e) All other claims.)) The priority of distribution of claims from the insurer's estate is as follows: Every claim in a class must be paid in full or adequate funds retained for payment before the members of the next class receive any payment; no subclasses may be established within a class; and no claim by a shareholder, policyholder, or other creditor may circumvent the priority classes through the use of equitable remedies. The order of distribution of claims is:

      (1) Class 1. The costs and expenses of administration during rehabilitation and liquidation, including but not limited to the following:

      (a) The actual and necessary costs of preserving or recovering the assets of the insurer;

      (b) Compensation for all authorized services rendered in the rehabilitation and liquidation;

      (c) Necessary filing fees;

      (d) The fees and mileage payable to witnesses;

      (e) Authorized reasonable attorneys' fees and other professional services rendered in the rehabilitation and liquidation;

      (f) The reasonable expenses of a guaranty association or foreign guaranty association for unallocated loss adjustment expenses.

      (2) Class 2. Reasonable compensation to employees for services performed to the extent that they do not exceed two months of monetary compensation and represent payment for services performed within one year before the filing of the petition for liquidation or, if rehabilitation preceded liquidation, within one year before the filing of the petition for rehabilitation. Principal officers and directors are not entitled to the benefit of this priority except as otherwise approved by the liquidator and the court. The priority is in lieu of any other similar priority that may be authorized by law as to wages or compensation of employees.

      (3) Class 3. Loss claims. For purposes of this section, "loss claims" are all claims under policies, including claims of the federal or a state or local government, for losses incurred, including third-party claims and all claims of a guaranty association or foreign guaranty association. All claims under life insurance and annuity policies, whether for death proceeds, annuity proceeds, or investment values, are loss claims. That portion of any loss indemnification that is provided for by other benefits or advantages recovered by the claimant, is not included in this class, other than benefits or advantages recovered or recoverable in discharge of familial obligation of support or by way of succession at death or a proceeds of life insurance, or as gratuities. No payment by an employer to his or her employee may be treated as a gratuity.

      (4) Class 4. Claims under nonassessable policies for unearned premium or other premium refunds and claims of general creditors including claims of ceding and assuming companies in their capacity as such.

      (5) Class 5. Claims of the federal or any state or local government except those under subsection (3) of this section. Claims, including those of any governmental body for a penalty or forfeiture, are allowed in this class only to the extent of the pecuniary loss sustained from the act, transaction, or proceeding out of which the penalty or forfeiture arose, with reasonable and actual costs occasioned thereby. The remainder of such claims are postponed to the class of claims under subsection (8) of this section.

      (6) Class 6. Claims filed late or any other claims other than claims under subsections (7) and (8) of this section.

      (7) Class 7. Surplus or contribution notes, or similar obligations, and premium refunds on assessable policies. Payments to members of domestic mutual insurance companies are limited in accordance with law.

      (8) Class 8. The claims of shareholders or other owners in their capacity as shareholders.

      Sec. 83. RCW 48.31.300 and 1947 c 79 s .31.30 are each amended to read as follows:

      (1) No contingent claim shall share in a distribution of the assets of an insurer which has been adjudicated to be insolvent by an order made pursuant to RCW 48.31.310, except that such claims shall be considered, if properly presented, and may be allowed to share where:

      (a) Such claim becomes absolute against the insurer on or before the last day fixed for filing of proofs of claim against the assets of such insurer, or

      (b) There is a surplus and the liquidation is thereafter conducted upon the basis that such insurer is solvent.

      (2) Where an insurer has been so adjudicated to be insolvent any person who has a cause of action against an insured of such insurer under a liability insurance policy issued by such insurer, shall have the right to file a claim in the liquidation proceeding, regardless of the fact that such claim may be contingent, and such claim may be allowed

      (a) If it may be reasonably inferred from the proof presented upon such claim that such person would be able to obtain a judgment upon such cause of action against such insured; and

      (b) If such person shall furnish suitable proof, unless the court for good cause shown shall otherwise direct, that no further valid claims against such insurer arising out of his or her cause of action other than those already presented can be made; and

      (c) If the total liability of such insurer to all claimants arising out of the same act of its insured shall be no greater than its maximum liability would be were it not in liquidation.

      No judgment against such an insured taken after the date of the entry of the liquidation order shall be considered in the liquidation proceedings as evidence of liability, or of the amount of damages, and no judgment against an insured taken by default, inquest or by collusion prior to the entry of the liquidation order shall be considered as conclusive evidence in the liquidation proceeding either of the liability of such insured to such person upon such cause of action or of the amount of damages to which such person is therein entitled.

      (3) No claim of any secured claimant shall be allowed at a sum greater than the difference between the value of the claim without security and the value of the security itself as of the date of the entry of the order of liquidation or such other date set by the court for fixation of rights and liabilities as provided in RCW 48.31.260 unless the claimant shall surrender his or her security to the commissioner in which event the claim shall be allowed in the full amount for which it is valued.

      (4) Whether or not the third party files a claim, the insured may file a claim on his or her own behalf in the liquidation.

      (5) No claim may be presented under this section if it is or may be covered by a guaranty association or foreign guaranty association.

      Sec. 84. RCW 48.32A.010 and 1990 c 51 s 1 are each amended to read as follows:

      The purpose of this chapter is the creation of funds arising from assessments upon all insurers authorized to transact life or disability insurance business in the state of Washington, to be used to assure to the extent prescribed herein the performance of the insurance contractual obligations of insurers becoming impaired or insolvent to residents of this state, and to promote thereby the stability of domestic insurers. In the judgment of the legislature, the foregoing purpose not being capable of accomplishment by a corporation created under general laws, the creation of the nonprofit association hereinafter in this chapter described is deemed essential for the protection of the general welfare.

      Sec. 85. RCW 48.32A.020 and 1990 c 51 s 2 are each amended to read as follows:

      This chapter shall apply as follows to life insurance policies, disability insurance policies, and annuity contracts of ((liquidating)) impaired or insolvent insurers, other than separate account variable policies and contracts authorized by chapter 48.18A RCW:

      (1) To all such policies and contracts of a domestic, foreign, or alien insurer authorized to transact such insurance or annuity business in this state at the time such policies or contracts were issued or at the time ((of entry of the order of liquidation of the insolvent)) the insurer becomes an impaired or insolvent insurer, and of which the policy or contract owner, insured, annuitant, beneficiary, or payee is a resident ((of and domiciled within this state. This chapter shall apply only as to the insurance or annuities thereunder of individuals who are residents of and domiciled within this state. The place of residence or domicile shall be determined as of the date of entry of the order of liquidation against the insurer)).

      (2) To policies and contracts only of impaired or insolvent insurers ((with respect to which an order of liquidation is entered after May 21, 1971)).

      (3) The obligations of the association created under this chapter shall apply only as to contractual obligations of the insurer under insurance policies and annuity contracts, and shall be no greater than such obligations of the impaired or insolvent insurer ((at the time of entry of the order of liquidation)). However, the liability of the association shall in no event exceed:

      (a) With respect to any one life, regardless of the number of policies or contracts:

      (i) Five hundred thousand dollars in life insurance death benefits, including any net cash surrender and net cash withdrawal values for life insurance;

      (ii) Five hundred thousand dollars in disability insurance benefits, including any net cash surrender and net cash withdrawal values; or

      (iii) Five hundred thousand dollars in the present value of allocated annuity benefits and annuities established under section 403(b) of the United States internal revenue code.

      The association shall not be liable to expend more than five hundred thousand dollars in the aggregate with respect to any one individual under this subsection; or

      (b) With respect to any one contract owner covered by any unallocated annuity contract, including governmental retirement plans established under section 401 or 457 of the United States internal revenue code, five million dollars in benefits, irrespective of the number of such contracts held by that contract owner.

      (4) This chapter shall not apply to:

      (a) Fraternal benefit societies;

      (b) Health care service contractors;

      (c) Insurance or liability assumed by the ((liquidating)) impaired or insolvent insurer under a contract of reinsurance other than bulk reinsurance;

      (d) Any unallocated annuity contract issued to an employee benefit plan protected under the federal pension benefit guaranty corporation; or

      (e) Any portion of any unallocated annuity contract which is not issued to or in connection with a specific employee, union, association of natural persons benefit plan, or a government lottery.

      Sec. 86. RCW 48.32A.030 and 1990 c 51 s 3 are each amended to read as follows:

      Within the meaning of this chapter:

      (1) "Account" means any one of the three guaranty fund accounts created under RCW 48.32A.080(1).

      (2) "Assessment" means a charge made upon an insurer by the board under this chapter for payment into a guaranty fund. The charge constitutes a legal liability of the insurer so assessed.

      (3) "Association" means "the Washington life and disability insurance guaranty association(("))."

      (((2))) (4) "Board" means the board of directors of the Washington life and disability insurance guaranty association.

      (((3))) (5) "Certificate" means a certificate of contribution provided for in RCW 48.32A.090.

      (6) "Commissioner" means the insurance commissioner of this state.

      (((4) "Policies" means life or disability insurance policies; "contracts" means annuity contracts and contracts supplemental to such insurance policies and annuity contracts.

      (5) "Liquidating)) (7) "Contributor" means an insurer that has paid an assessment.

      (8) "Fund" means a guaranty fund provided for in RCW 48.32A.080.

      (9) "Impaired insurer" means an insurer that, after the effective date of this act, is not an insolvent insurer, and is placed under an order of rehabilitation or conservation, or a substantially similar order, by a court of competent jurisdiction.

      (10) "Insolvent insurer" means an insurer with respect to which an order of liquidation has been entered by a court of competent jurisdiction.

      (((6) "Fund" means a guaranty fund provided for in RCW 48.32A.080.

      (7) "Account" means any one of the three guaranty fund accounts created under RCW 48.32A.080(1).

      (8) "Assessment" means a charge made upon an insurer by the board under this chapter for payment into a guaranty fund. The charge shall constitute a legal liability of the insurer so assessed.

      (9) "Contributor" means an insurer which has paid an assessment.

      (10) "Certificate" means a certificate of contribution provided for in RCW 48.32A.090.))

      (11) "Policies" means life or disability insurance policies; "contracts" means annuity contracts and contracts supplemental to such insurance policies and annuity contracts.

      (12) "Resident" means a person who resides in this state at the time an insurer is determined to be an impaired or insolvent insurer and to whom a contractual obligation is owed. A person may be resident of only one state, which in the case of a person other than an individual is its principal place of business.

      (13) "Unallocated annuity contract" means any annuity contract or group annuity certificate which is not issued to and owned by an individual, except to the extent of any annuity benefits guaranteed to an individual by an insurer under such contract or certificate.

      Sec. 87. RCW 48.32A.050 and 1971 ex.s. c 259 s 5 are each amended to read as follows:

      The association shall have the power:

      (1) To use a seal, to contract, to sue and be sued and, in addition, possess and exercise all powers necessary or convenient for the purposes of this chapter.

      (2) With the approval of the commissioner and as provided in RCW 48.32A.060, to assume, reinsure, or guarantee or cause to be assumed, reinsured, or guaranteed, partially or wholly, any or all of the policies or contracts of any ((liquidating)) impaired or insolvent domestic life or disability insurer or any policy or contract to which this chapter applies, and to make available from a fund, the creation of which is hereinafter in RCW 48.32A.080 provided, such sum or sums as may be necessary for such purpose.

      (3) To carry out the provisions of this section, the association shall have, and may exercise, all necessary rights, powers, privileges, and franchises of a domestic insurer, except that it shall not be authorized to issue contracts or policies unless such contracts or policies are pursuant to contracts and policies representing obligations in whole or in part of the ((liquidating)) impaired or insolvent insurer or of the association.

      (4) To borrow money for the purposes of the fund, either with or without security, and pledge such assets in a fund as security for such loans, and in connection therewith, rehypothecate any securities or collateral pledged to it by an insurer. Any notes or other evidence of indebtedness of the association shall be legal investments for domestic insurers and may be carried as admitted assets.

      (5) To collect or enforce by legal proceedings, if necessary, the payment of all assessments for which any insurer may be liable under this chapter; and to collect any other debt or obligation due to the association or a fund created in this chapter.

      (6) To make bylaws and regulations for the conduct of the affairs of the association, not inconsistent with this chapter.

      Sec. 88. RCW 48.32A.060 and 1990 c 51 s 4 are each amended to read as follows:

      (1) The association shall, subject to such terms and conditions as it may impose with the approval of the commissioner, assume, reinsure, or guarantee the performance of the policies and contracts, for a resident ((of the state)), of any insolvent domestic life or disability insurer ((with respect to which an order of liquidation has been entered by any court of general jurisdiction in the state of Washington)), and shall have power to receive, own, and administer any assets acquired in connection with such assumption, reinsurance, or guaranty. The association, as to any such policy or contract under which there is no default in payment of premiums subsequent to such assumption, reinsurance, or guaranty, shall make or cause to be made prompt payment of the benefits due under the terms of the policy or contract.

      (2) The association shall make or cause to be made payment of the death, endowment, or disability insurance or annuity benefits due under the terms of each policy or contract insuring the life or health of, or providing annuity or other benefits for, a resident of this state which was issued or assumed by ((a)) an insolvent foreign or alien insurer ((with respect to which an order of liquidation has been entered by a court of competent jurisdiction in the state or country of its domicile)).

      (3) The association may, subject to such terms and conditions imposed by the association that do not impair the contractual obligations of the impaired insurer and that are approved by the commissioner, take those actions authorized in subsection (1) of this section with regards to an impaired domestic life or disability insurer and subsection (2) of this section with regards to an impaired foreign or alien insurer. The association may provide substitute benefits in lieu of the contractual obligations of the impaired insurer solely for health claims, periodic annuity benefit payments, death benefits, supplemental benefits, and cash withdrawals for policy or contract owners who qualify therefor under claims of emergency or hardship in accordance with standards proposed by the association and approved by the commissioner.

      (4) In determining benefits to be paid with respect to the policies and contracts of a particular ((liquidating)) impaired or insolvent insurer the board may give due consideration to amounts reasonably recoverable or deductible because of the contingent liability, if any, of policyholders of the insurer (if a mutual insurer) or recoverable because of the assessment liability, if any, of the insurer's stockholders (if a stock insurer).

      (((4))) (5) With respect to an insolvent domestic insurer, the board shall have power to petition the court in which the delinquency proceedings are pending for, and the court shall have authority to order and effectuate, such modifications in the terms, benefits, values, and premiums thereafter to be in effect of policies and contracts of the insurer as may reasonably be necessary to effect a bulk reinsurance of such policies and contract in a solvent insurer. In the event, after the entry of an order of liquidation, an assessment on the members is necessary to increase the assets of the insolvent company to an extent that a bulk reinsurance of such policies may be effected, the court shall have authority to order such assessment.

      (((5))) (6) In addition to any other rights of the association acquired by assignment or otherwise, the association shall be subrogated to the rights of any person entitled to receive benefits under this chapter against the ((liquidating)) impaired or insolvent insurer, or the receiver, rehabilitator, liquidator, or conservator, as the case may be, under the policy or contract with respect to which a payment is made or guaranteed, or obligation assumed by the association pursuant to this section, and the association may require an assignment to it of such rights by any such persons as a condition precedent to the receipt by such person of payment of any benefits under this chapter.

      (((6))) (7) For the purpose of carrying out its obligations under this chapter, the association shall be deemed to be a creditor of the ((liquidating)) impaired or insolvent insurer to the extent of assets attributable to covered policies and contracts reduced by any amounts to which the association is entitled as a subrogee. All assets of the ((liquidating)) impaired or insolvent insurer attributable to covered policies and contracts shall be used to continue all covered policies and contracts and pay all contractual obligations of the ((liquidating)) impaired or insolvent insurer as required by this chapter. Assets attributable to covered policies and contracts, as used in this subsection, are those in that proportion of the assets which the reserves that should have been established for such policies and contracts bear to the reserves that should have been established for all insurances written by the ((liquidating)) impaired or insolvent insurer.

      (((7))) (8) The association shall have the power to petition the superior court for an order appointing the commissioner as receiver of a domestic insurer upon any of the grounds set forth in RCW 48.31.030.

      Sec. 89. RCW 48.32A.070 and 1971 ex.s. c 259 s 7 are each amended to read as follows:

      Whenever a guaranty or payment of proceeds or benefits of a policy or contract otherwise provided for under this chapter is also provided for by a similar law of another jurisdiction, there shall be only one recovery of values or benefits, and the association or their entity established by such law in the domiciliary jurisdiction or state of entry of the ((liquidating)) impaired or insolvent insurer shall be solely responsible for such guaranty and payment.

      Sec. 90. RCW 48.32A.080 and 1990 c 51 s 5 are each amended to read as follows:

      (1) For purposes of administration and assessment, the association shall establish and maintain three guaranty fund accounts:

      (a) The life insurance and annuity account, which shall be divided into three subaccounts:

      (i) The life insurance subaccount;

      (ii) The allocated annuity subaccount; and

      (iii) The unallocated annuity subaccount which shall include contracts qualified under section 403(b) of the United States internal revenue code;

      (b) The disability insurance account; and

      (c) The general account.

      (2) For the purpose of providing the funds necessary to carry out the powers and duties of the association, the board shall assess the member insurers, separately for each account, at such times and for such amounts as the board finds necessary. The board shall collect the assessment after thirty days written notice to the member insurers before payment is due. The board may charge reasonable interest for delinquent payment of the assessment.

      (3) (a) The amount of any assessment for each account and subaccount shall be determined by the board, and shall be divided among the accounts and subaccounts in the proportion that the premiums received by the ((liquidating)) impaired or insolvent insurer on the policies or contracts covered by each account and subaccount bears to the premiums received by such insurer on all covered policies and contracts.

      (b) Assessments against member insurers for each account and subaccount shall be in the proportion that the premiums received on business in this state by each assessed member insurer on policies or contracts covered by each account or subaccount bears to such premiums received on business in this state by all assessed member insurers.

      (c) Assessments for funds to meet the requirements of the association with respect to a particular ((liquidating)) impaired or insolvent insurer shall not be made until necessary, in the board's opinion, to implement the purposes of this chapter; and in no event shall such an assessment be made with respect to ((such)) an insolvent insurer until an order of liquidation has been entered against the insurer by a court of competent jurisdiction of the insurer's state or country of domicile. Computation of assessments under this subsection shall be made with a reasonable degree of accuracy, recognizing that exact determination may not always be possible.

      (d) The board may make an assessment of up to one hundred fifty dollars for each member insurer to be deposited in the general account and used for administrative and general expenses in carrying out the provisions of this chapter.

      (4)(a) The total of all assessments upon a member insurer for the life and annuity account and for each subaccount shall not in any one calendar year exceed two percent and for the disability account shall not in any one calendar year exceed two percent of such insurer's average premiums received in this state on the policies and contracts covered by the account during the three calendar years preceding the ((entry of the order of liquidation against the liquidating)) year in which the insurer became an impaired or insolvent insurer.

      (b) The board may provide a method of allocating funds among claims, whether relating to one or more impaired or insolvent insurers, when the maximum assessment will be insufficient to cover anticipated claims.

      (c) If a one percent assessment for any subaccount of the life and annuity account in any one year does not provide an amount sufficient to carry out the responsibilities of the association, then pursuant to subsection (3) of this section, the board shall access all subaccounts of the life and annuity account for the necessary additional amount, subject to the maximum stated in (a) of this subsection.

      (5) The association may abate or defer, in whole or in part, the assessment of a member insurer if, in the opinion of the board, payment of the assessment would endanger the ability of the insurer to fulfill its contractual obligations. In the event an assessment against a member insurer is abated or deferred, in whole or in part, the amount by which such assessment is abated or deferred may be assessed against the other member insurers in a manner consistent with the basis for assessments set forth in this section. If the maximum assessment, together with the other assets of the association in an account, does not provide in any one year an amount sufficient to carry out the responsibilities of the association with respect to such account, the necessary additional funds shall be assessed as soon thereafter as permitted by this chapter.

      (6) The amount in a fund shall be kept at such a sum as in the opinion of the board will enable the association to meet the immediate obligations and liabilities of such fund. Whenever in the opinion of the board the amount in a fund is in excess of such immediate obligations and liabilities, with the approval of the commissioner the association may distribute such excess by retirement of certificates previously issued against the fund. Such distribution shall be made pro rata upon the basis of outstanding certificates, except that by unanimous consent of all directors and with the approval of the commissioner any other reasonable method of retirement of such certificates may be adopted.

      (7) As used in this section, "premiums" are those for the calendar year preceding the ((entry of the order of liquidation as to a particular liquidating)) year in which the insurer became an impaired or insolvent insurer, and shall be direct gross insurance premiums and annuity considerations received on policies and contracts to which this chapter applies, less return premiums and considerations and less dividends paid or credited to policyholders.

      (8) Upon dissolution of a fund by the repeal of this chapter or otherwise, the fund shall be distributed in the same manner as is provided for the repayment or retirement of certificates. If the amount in the fund at the time of dissolution is in excess of outstanding certificates issued against the fund, such excess shall be distributed among contributing member insurers in such equitable manner as is approved by the commissioner.

      Sec. 91. RCW 48.32A.120 and 1971 ex.s. c 259 s 12 are each amended to read as follows:

      (1) If an order for liquidation or rehabilitation of a domestic insurer has been entered, the receiver appointed or existing under such order shall have a right to recover, and upon request of the board or without such request shall take such action as he or she deems advisable to recover, on behalf of the insurer from any affiliate that controlled it the amount of distributions, other than stock dividends paid by the insurer on its capital stock, at any time during the five years preceding the petition for liquidation or rehabilitation of the insurer subject to the limitations of subsections (2) through (4) of this section.

      (2) No such dividend shall be recoverable if the insurer shows that when paid the distribution was lawful and reasonable, and that the insurer did not know and could not reasonably have known that the distribution might adversely affect the ability of the insurer to fulfill its contractual obligations.

      (3) Any person who was an affiliate in control of the insurer at the time a distribution was paid shall be liable up to the amount of distribution ((he)) that person received. Any person who was an affiliate in control of the insurer at the time a distribution was declared shall be liable up to the amount of distribution ((he)) the person would have received if it had been paid immediately. If two persons are liable with respect to the same distribution they shall be jointly and severally liable.

      (4) The maximum amount recoverable by the receiver under this section shall be the amount needed in excess of all other available assets to pay the contractual obligations of the insurer.

      (5) If any person liable under subsection (3) of this section is insolvent, all its affiliates that controlled it at the time the distribution was paid shall be jointly and severally liable for any resulting deficiency in the amount recovered from the insolvent affiliate.

      NEW SECTION. Sec. 92. A new section is added to chapter 48.74 RCW to read as follows:

      (1) Every life insurance company doing business in this state shall annually submit the opinion of a qualified actuary as to whether the reserves and related actuarial items held in support of the policies and contracts specified by the commissioner by rule are computed appropriately, are based on assumptions that satisfy contractual provisions, are consistent with prior reported amounts, and comply with applicable laws of this state. The commissioner by rule shall define the specifics of this opinion and add any other items deemed to be necessary to its scope.

      (2)(a) Every life insurance company, except as exempted by rule, shall also include in the opinion required under subsection (1) of this section an opinion as to whether the reserves and related actuarial items held in support of the policies and contracts specified by the commissioner by rule, when considered in light of the assets held by the company with respect to the reserves and related actuarial items, including but not limited to the investment earnings on the assets and the considerations anticipated to be received and retained under the policies and contracts, make adequate provision for the company's obligations under the policies and contracts, including but not limited to the benefits under and expenses associated with the policies and contracts.

      (b) The commissioner may provide by rule for a transition period for establishing higher reserves that the qualified actuary may deem necessary in order to render the opinion required by this section.

      (3) Each opinion required under subsection (2) of this section is governed by the following provisions:

      (a) A memorandum, in form and substance acceptable to the commissioner as specified by rule, must be prepared to support each actuarial opinion.

      (b) If the insurance company fails to provide a supporting memorandum at the request of the commissioner within a period specified by rule or if the commissioner determines that the supporting memorandum provided by the insurance company fails to meet the standards prescribed by the rules or is otherwise unacceptable to the commissioner, the commissioner may engage a qualified actuary at the expense of the company to review the opinion and the basis for the opinion and prepare such supporting memorandum as is required by the commissioner.

      (4) A memorandum in support of the opinion, and other material provided by the company to the commissioner in connection with it, must be kept confidential by the commissioner and may not be made public and is not subject to subpoena, other than for the purpose of defending an action seeking damages from any person by reason of an action required by this section or by rules adopted under it. However, the commissioner may otherwise release the memorandum or other material (a) with the written consent of the company or (b) to the American Academy of Actuaries upon request stating that the memorandum or other material is required for the purpose of professional disciplinary proceedings and setting forth procedures satisfactory to the commissioner for preserving the confidentiality of the memorandum or other material. Once any portion of the confidential memorandum is cited by the company in its marketing or is cited before any governmental agency other than a state insurance department or is released by the company to the news media, all portions of the confidential memorandum are no longer confidential.

      (5) Each opinion required under this section is governed by the following provisions:

      (a) The opinion must be submitted with the annual statement reflecting the valuation of the reserve liabilities for each year ending on or after December 31, 1994.

      (b) The opinion applies to all business in force, including individual and group disability insurance, in form and substance acceptable to the commissioner as specified by rule.

      (c) The opinion must be based on standards adopted by the commissioner, who in setting the standards shall give due regard to the standards established by the actuarial standards board or its successors.

      (d) In the case of an opinion required to be submitted by a foreign or alien company, the commissioner may accept the opinion filed by that company with the insurance supervisory official of another state if the commissioner determines that the opinion reasonably meets the requirements applicable to a company domiciled in this state.

      (e) For purposes of this section, "qualified actuary" means a person who meets qualifications set by the commissioner with due regard to the qualifications established for membership in the American Academy of Actuaries or its successors.

      (f) Except in cases of fraud or willful misconduct, the qualified actuary is not liable for damages to any person, other than the insurance company and the commissioner, for any act, error, omission, decision, or conduct with respect to the actuary's opinion.

      (g) Rules adopted by the commissioner shall define disciplinary action by the commissioner against the company or the qualified actuary.

      Sec. 93. RCW 48.74.030 and 1982 1st ex.s. c 9 s 3 are each amended to read as follows:

      (1) Except as otherwise provided in subsections (2) and (3) of this section, or in section 97 of this act, the minimum standard for the valuation of all such policies and contracts issued prior to July 10, 1982, shall be that provided by the laws in effect immediately prior to such date. Except as otherwise provided in subsections (2) and (3) of this section, or in section 97 of this act, the minimum standard for the valuation of all such policies and contracts issued on or after July 10, 1982, shall be the commissioner's reserve valuation methods defined in RCW 48.74.040 ((and)), 48.74.070, and section 97 of this act, three and one-half percent interest, or in the case of life insurance policies and contracts, other than annuity and pure endowment contracts, issued on or after July 16, 1973, four percent interest for such policies issued prior to September 1, 1979, five and one-half percent interest for single premium life insurance policies and four and one-half percent interest for all other such policies issued on and after September 1, 1979, and the following tables:

      (a) For all ordinary policies of life insurance issued on the standard basis, excluding any disability and accidental death benefits in such policies--the commissioner's 1941 standard ordinary mortality table for such policies issued prior to the operative date of RCW 48.23.350(5a) and the commissioner's 1958 standard ordinary mortality table for such policies issued on or after such operative date and prior to the operative date of RCW 48.76.050(4), except that for any category of such policies issued on female risks, all modified net premiums and present values referred to in this chapter may be calculated according to an age not more than six years younger than the actual age of the insured; and for such policies issued on or after the operative date of RCW 48.76.050(4): (i) The commissioner's 1980 standard ordinary mortality table; or (ii) at the election of the company for any one or more specified plans of life insurance, the commissioner's 1980 standard ordinary mortality table with ten-year select mortality factors; or (iii) any ordinary mortality table, adopted after 1980 by the National Association of Insurance Commissioners, that is approved by regulation promulgated by the commissioner for use in determining the minimum standard of valuation for such policies.

      (b) For all industrial life insurance policies issued on the standard basis, excluding any disability and accidental death benefits in such policies--the 1941 standard industrial mortality table for such policies issued prior to the operative date of RCW 48.23.350(5b), and for such policies issued on or after such operative date the commissioner's 1961 standard industrial mortality table or any industrial mortality table, adopted after 1980 by the National Association of Insurance Commissioners, that is approved by rule of the commissioner for use in determining the minimum standard of valuation for such policies.

      (c) For individual annuity and pure endowment contracts, excluding any disability and accidental death benefits in such policies--the 1937 standard annuity mortality table or, at the option of the company, the annuity mortality table for 1949, ultimate, or any modification of either of these tables approved by the commissioner.

      (d) For group annuity and pure endowment contracts, excluding any disability and accidental death benefits in such policies--the group annuity mortality table for 1951, any modification of such table approved by the commissioner, or, at the option of the company, any of the tables or modifications of ((table[s])) tables specified for individual annuity and pure endowment contracts.

      (e) For total and permanent disability benefits in or supplementary to ordinary policies or contracts--for policies or contracts issued on or after January 1, 1966, the tables of period 2 disablement rates and the 1930 to 1950 termination rates of the 1952 disability study of the Society of Actuaries, with due regard to the type of benefit or any tables of disablement rates and termination rates, adopted after 1980 by the National Association of Insurance Commissioners, that are approved by regulation promulgated by the commissioner for use in determining the minimum standard of valuation for such policies; for policies or contracts issued on or after January 1, 1961, and prior to January 1, 1966, either such tables or, at the option of the company, the class (3) disability table (1926); and for policies issued prior to January 1, 1961, the class (3) disability table (1926). Any such table shall, for active lives, be combined with a mortality table permitted for calculating the reserves for life insurance policies.

      (f) For accidental death benefits in or supplementary to policies--for policies issued on or after January 1, 1966, the 1959 accidental death benefits table or any accidental death benefits table, adopted after 1980 by the National Association of Insurance Commissioners, that is approved by regulation promulgated by the commissioner for use in determining the minimum standard of valuation for such policies; for policies issued on or after January 1, 1961, and prior to January 1, 1966, either such table or, at the option of the company, the intercompany double indemnity mortality table; and for policies issued prior to January 1, 1961, the intercompany double indemnity mortality table. Either table shall be combined with a mortality table permitted for calculating the reserves for life insurance policies.

      (g) For group life insurance, life insurance issued on the substandard basis and other special benefits--such tables as may be approved by the commissioner.

      (2) Except as provided in subsection (3) of this section, the minimum standard for the valuation of all individual annuity and pure endowment contracts issued on or after July 10, 1982, and for all annuities and pure endowments purchased on or after such effective date under group annuity and pure endowment contracts, shall be the commissioner's reserve valuation methods defined in RCW 48.74.040 and the following tables and interest rates:

      (a) For individual annuity and pure endowment contracts issued before September 1, 1979, excluding any disability and accidental death benefit in such contracts--the 1971 individual annuity mortality table, or any modification of this table approved by the commissioner, and six percent interest for single premium immediate annuity contracts, and four percent interest for all other individual annuity and pure endowment contracts.

      (b) For individual single premium immediate annuity contracts issued on or after September 1, 1979, excluding any disability and accidental death benefits in such contracts--the 1971 individual annuity mortality table or any individual annuity mortality table, adopted after 1980 by the National Association of Insurance Commissioners, that is approved by regulation promulgated by the commissioner for use in determining the minimum standard of valuation for such contracts, or any modification of these tables approved by the commissioner, and seven and one-half percent interest.

      (c) For individual annuity and pure endowment contracts issued on or after September 1, 1979, other than single premium immediate annuity contracts, excluding any disability and accidental death benefits in such contracts--the 1971 individual annuity mortality table or any individual annuity mortality table, adopted after 1980 by the National Association of Insurance Commissioners, that is approved by regulation promulgated by the commissioner for use in determining the minimum standard of valuation for such contracts, or any modification of these tables approved by the commissioner, and five and one-half percent interest for single premium deferred annuity and pure endowment contracts and four and one-half percent interest for all other such individual annuity and pure endowment contracts.

      (d) For all annuities and pure endowments purchased prior to September 1, 1979, under group annuity and pure endowment contracts, excluding any disability and accidental death benefits purchased under such contracts--the 1971 group annuity mortality table, or any modification of this table approved by the commissioner, and six percent interest.

      (e) For all annuities and pure endowments purchased on or after September 1, 1979, under group annuity and pure endowment contracts, excluding any disability and accidental death benefits purchased under such contracts--the 1971 group annuity mortality table or any group annuity mortality table, adopted after 1980 by the National Association of Insurance Commissioners, that is approved by regulation promulgated by the commissioner for use in determining the minimum standard of valuation for such annuities and pure endowments, or any modification of these tables approved by the commissioner, and seven and one-half percent interest.

      After July 16, 1973, any company may file with the commissioner a written notice of its election to comply with the provisions of this section after a specified date before January 1, 1979, which shall be the operative date of this section for such company((: PROVIDED, That a company may elect a different operative date for individual annuity and pure endowment contracts from that elected for group annuity and pure endowment contracts)). If a company makes no such election, the operative date of this section for such company shall be January 1, 1979.

      (3)(a) The interest rates used in determining the minimum standard for the valuation of:

      (i) All life insurance policies issued in a particular calendar year, on or after the operative date of RCW 48.76.050(4);

      (ii) All individual annuity and pure endowment contracts issued in a particular calendar year on or after January 1, 1982;

      (iii) All annuities and pure endowments purchased in a particular calendar year on or after January 1, 1982, under group annuity and pure endowment contracts; and

      (iv) The net increase, if any, in a particular calendar year after January 1, 1982, in amounts held under guaranteed interest contracts shall be the calendar year statutory valuation interest rates as defined in this section.

      (b) The calendar year statutory valuation interest rates, I, shall be determined as follows and the results rounded to the nearer one-quarter of one percent:

      (i) For life insurance:

      I = .03 + W (R1 - .03) + W/2 (R2 - .09);

      (ii) For single premium immediate annuities and for annuity benefits involving life contingencies arising from other annuities with cash settlement options and from guaranteed interest contracts with cash settlement options:

      I = .03 + W (R - .03)

where R1 is the lesser of R and .09,

      R2 is the greater of R and .09,

      R is the reference interest rate defined in this section, and

      W is the weighting factor defined in this section;

      (iii) For other annuities with cash settlement options and guaranteed interest contracts with cash settlement options, valued on an issue year basis, except as stated in (ii) of this subparagraph, the formula for life insurance stated in (i) of this subparagraph shall apply to annuities and guaranteed interest contracts with guarantee durations in excess of ten years and the formula for single premium immediate annuities stated in (ii) of this subparagraph shall apply to annuities and guaranteed interest contracts with guarantee duration of ten years or less;

      (iv) For other annuities with no cash settlement options and for guaranteed interest contracts with no cash settlement options, the formula for single premium immediate annuities stated in (ii) of this subparagraph shall apply;

      (v) For other annuities with cash settlement options and guaranteed interest contracts with cash settlement options, valued on a change in fund basis, the formula for single premium immediate annuities stated in (ii) of this subparagraph shall apply.

      (c) However, if the calendar year statutory valuation interest rate for any life insurance policies issued in any calendar year determined without reference to this sentence differs from the corresponding actual rate for similar policies issued in the immediately preceding calendar year by less than one-half of one percent, the calendar year statutory valuation interest rate for such life insurance policies shall be equal to the corresponding actual rate for the immediately preceding calendar year. For purposes of applying the immediately preceding sentence, the calendar year statutory valuation interest rate for life insurance policies issued in a calendar year shall be determined for 1983 using the reference interest rate defined for 1982 and shall be determined for each subsequent calendar year regardless of when RCW 48.76.050(4) becomes operative.

      (d) The weighting factors referred to in the formulas stated in subparagraph (b) of this subsection are given in the following tables:

      (i) Weighting Factors for Life Insurance:


      Guarantee Duration                                Weighting

      (Years)                                                    Factors

      10 or less                                                .50

      More than 10, but not more than 20       .45

      More than 20                                          .35


      For life insurance, the guarantee duration is the maximum number of years the life insurance can remain in force on a basis guaranteed in the policy or under options to convert to plans of life insurance with premium rates or nonforfeiture values or both which are guaranteed in the original policy;

      (ii) Weighting factor for single premium immediate annuities and for annuity benefits involving life contingencies arising from other annuities with cash settlement options and guaranteed interest contracts with cash settlement options: .80;

      (iii) Weighting factors for other annuities and for guaranteed interest contracts, except as stated in (ii) of this subparagraph, shall be as specified in (d)(iii) (A), (B), and (C) of this subsection, according to the rules and definitions in (d)(iii) (D), (E), and (F) of this subsection:

      (A) For annuities and guaranteed interest contracts valued on an issue year basis:

      Guarantee Duration                             Weighting Factor

                                                                      for Plan Type

      (Years)                                                    A B C

      5 or less:.                                                .80 .60 .50

      More than 5, but not more than 10:        .75 .60 .50

      More than 10, but not more than 20:      .65 .50 .45

      More than 20:                                         .45 .35 .35


      (B) For annuities and guaranteed interest contracts valued on a change in fund basis, the factors shown in (d)(iii) (A) of this subsection increased by:

                                                                      Plan Type

                                       A                              B                            C

                                      .15                           .25                           .05


      (C) For annuities and guaranteed interest contracts valued on an issue year basis other than those with no cash settlement options which do not guarantee interest on considerations received more than one year after issue or purchase and for annuities and guaranteed interest contracts valued on a change in fund basis which do not guarantee interest rates on considerations received more than twelve months beyond the valuation date, the factors shown in (d)(iii) (A) of this subsection or derived in (d)(iii) (B) of this subsection increased by:

                                                                      Plan Type

                                       A                              B                             C

                                      .05                           .05                           .05


      (D) For other annuities with cash settlement options and guaranteed interest contracts with cash settlement options, the guarantee duration is the number of years for which the contract guarantees interest rates in excess of the calendar year statutory valuation interest rate for life insurance policies with guarantee duration in excess of twenty years. For other annuities with no cash settlement options and for guaranteed interest contracts with no cash settlement options, the guarantee duration is the number of years from the date of issue or date of purchase to the date annuity benefits are scheduled to commence.

      (E) Plan type as used in the tables in (d)(iii) (A), (B), and (C) of this subsection is defined as follows:

      Plan Type A: At any time a policyholder may withdraw funds only: (1) With an adjustment to reflect changes in interest rates or asset values since receipt of the funds by the insurance company; or (2) without such adjustment but in installments over five years or more; or (3) as an immediate life annuity; or (4) no withdrawal permitted.

      Plan Type B: Before expiration of the interest rate guarantee, a policyholder may withdraw funds only: (1) With adjustment to reflect changes in interest rates or asset values since receipt of the funds by the insurance company; or (2) without such adjustment but in installments over five years or more; or (3) no withdrawal permitted. At the end of the interest rate guarantee, funds may be withdrawn without such adjustment in a single sum or installments over less than five years.

      Plan Type C: A policyholder may withdraw funds before expiration of the interest rate guarantee in a single sum or installments over less than five years either: (1) Without adjustment to reflect changes in interest rates or asset values since receipt of the funds by the insurance company; or (2) subject only to a fixed surrender charge stipulated in the contract as a percentage of the fund.

      (F) A company may elect to value guaranteed interest contracts with cash settlement options and annuities with cash settlement options on either an issue year basis or on a change in fund basis. Guaranteed interest contracts with no cash settlement options and other annuities with no cash settlement options must be valued on an issue year basis. As used in this section, an issue year basis of valuation refers to a valuation basis under which the interest rate used to determine the minimum valuation standard for the entire duration of the annuity or guaranteed interest contract is the calendar year valuation interest rate for the year of issue or year of purchase of the annuity or guaranteed interest contract. The change in fund basis of valuation refers to a valuation basis under which the interest rate used to determine the minimum valuation standard applicable to each change in the fund held under the annuity or guaranteed interest contract is the calendar year valuation interest rate for the year of the change in the fund.

      (e) The reference interest rate referred to in subparagraphs (b) and (c) of this subsection is defined as follows:

      (i) For all life insurance, the lesser of the average over a period of thirty-six months and the average over a period of twelve months, ending on June 30th of the calendar year next preceding the year of issue, of Moody's corporate bond yield average--monthly average corporates, as published by Moody's Investors Service, Inc.

      (ii) For single premium immediate annuities and for annuity benefits involving life contingencies arising from other annuities with cash settlement options and guaranteed interest contracts with cash settlement options, the average over a period of twelve months, ending on June 30th of the calendar year of issue or year of purchase of Moody's corporate bond yield average--monthly average corporates, as published by Moody's Investors Service, Inc.

      (iii) For other annuities with cash settlement options and guaranteed interest contracts with cash settlement options, valued on a year of issue basis, except as stated in (ii) of this subparagraph, with guarantee duration in excess of ten years, the lesser of the average over a period of thirty-six months and the average over a period of twelve months, ending on June 30th of the calendar year of issue or purchase, of Moody's corporate bond yield average--monthly average corporates, as published by Moody's Investors Service, Inc.

      (iv) For other annuities with cash settlement options and guaranteed interest contracts with cash settlement options, valued on a year of issue basis, except as stated in (ii) of this subparagraph, with guarantee duration of ten years or less, the average over a period of twelve months, ending on June 30th of the calendar year of issue or purchase, of Moody's corporate bond yield average--monthly average corporates, as published by Moody's Investors Service, Inc.

      (v) For other annuities with no cash settlement options and for guaranteed interest contracts with no cash settlement options, the average over a period of twelve months, ending on June 30th of the calendar year of issue or purchase, of Moody's corporate bond yield average--monthly average corporates, as published by Moody's Investors Service, Inc.

      (vi) For other annuities with cash settlement options and guaranteed interest contracts with cash settlement options, valued on a change in fund basis, except as stated in (ii) of this subparagraph, the average over a period of twelve months, ending on June 30th of the calendar year of the change in the fund, of Moody's corporate bond yield average--monthly average corporates, as published by Moody's Investors Service, Inc.

      (((g)[f])) (f) If Moody's corporate bond yield average--monthly average corporates is no longer published by Moody's Investors Service, Inc., or if the National Association of Insurance Commissioners determines that Moody's corporate bond yield average--monthly average corporates as published by Moody's Investors Service, Inc. is no longer appropriate for the determination of the reference interest rate, then an alternative method for determination of the reference interest rate, which is adopted by the National Association of Insurance Commissioners and approved by rule adopted by the commissioner, may be substituted.

      Sec. 94. RCW 48.74.040 and 1982 1st ex.s. c 9 s 4 are each amended to read as follows:

      (1) Except as otherwise provided in RCW 48.74.040(2) ((and)), 48.74.070, and section 97 of this act, reserves according to the commissioner's reserve valuation method, for the life insurance and endowment benefits of policies providing for a uniform amount of insurance and requiring the payment of uniform premiums, shall be the excess, if any, of the present value, at the date of valuation, of such future guaranteed benefits provided for by such policies, over the then present value of any future modified net premiums therefor. The modified net premiums for any such policy shall be such uniform percentage of the respective contract premiums for such benefits that the present value, at the date of issue of the policy, of all such modified net premiums shall be equal to the sum of the then present value of such benefits provided for by the policy and the excess of (a) over (b), as follows:

      (a) A net level annual premium equal to the present value, at the date of issue, of such benefits provided for after the first policy year, divided by the present value, at the date of issue, of an annuity of one per annum payable on the first and each subsequent anniversary of such policy on which a premium falls due: PROVIDED HOWEVER, That such net level annual premium shall not exceed the net level annual premium on the nineteen year premium whole life plan for insurance of the same amount at an age one year higher than the age at issue of such policy.

      (b) A net one year term premium for such benefits provided for in the first policy year: PROVIDED, That for any life insurance policy issued on or after January 1, 1986, for which the contract premium in the first policy year exceeds that of the second year and for which no comparable additional benefit is provided in the first year for such excess and which provides an endowment benefit or a cash surrender value or a combination thereof in an amount greater than such excess premium, the reserve according to the commissioner's reserve valuation method as of any policy anniversary occurring on or before the assumed ending date defined herein as the first policy anniversary on which the sum of any endowment benefit and any cash surrender value then available is greater than such excess premium shall, except as otherwise provided in RCW 48.74.070, be the greater of the reserve as of such policy anniversary calculated as described in the preceding paragraph of this subsection and the reserve as of such policy anniversary calculated as described in that paragraph, but with: (i) The value defined in subparagraph (a) of that paragraph being reduced by fifteen percent of the amount of such excess first year premium; (ii) all present values of benefits and premiums being determined without reference to premiums or benefits provided for by the policy after the assumed ending date; (iii) the policy being assumed to mature on such date as an endowment; and (iv) the cash surrender value provided on such date being considered as an endowment benefit. In making the above comparison the mortality and interest bases stated in RCW 48.74.030(1) and (3) shall be used.

      Reserves according to the commissioner's reserve valuation method for life insurance policies providing for a varying amount of insurance or requiring the payment of varying premiums, group annuity and pure endowment contracts purchased under a retirement plan or plan of deferred compensation established or maintained by an employer, including a partnership or sole proprietorship, or by an employee organization, or by both, other than a plan providing individual retirement accounts or individual retirement annuities under section 408 of the Internal Revenue Code, as now or hereafter amended, disability and accidental death benefits in all policies and contracts, and all other benefits, except life insurance and endowment benefits in life insurance policies and benefits provided by all other annuity and pure endowment contracts, shall be calculated by a method consistent with the principles of the preceding paragraphs of this subsection.

      (2) This section shall apply to all annuity and pure endowment contracts other than group annuity and pure endowment contracts purchased under a retirement plan or plan of deferred compensation, established or maintained by an employer, including a partnership or sole proprietorship, or by an employee organization, or by both, other than a plan providing individual retirement accounts or individual retirement annuities under section 408 of the Internal Revenue Code, as now or hereafter amended.

      Reserves according to the commissioner's annuity reserve method for benefits under annuity or pure endowment contracts, excluding any disability and accidental death benefits in such contracts, shall be the greatest of the respective excesses of the present values, at the date of valuation, of the future guaranteed benefits, including guaranteed nonforfeiture benefits, provided for by such contracts at the end of each respective contract year, over the present value, at the date of valuation, of any future valuation considerations derived from future gross considerations, required by the terms of such contract, that become payable prior to the end of such respective contract year. The future guaranteed benefits shall be determined by using the mortality table, if any, and the interest rate, or rates, specified in such contracts for determining guaranteed benefits. The valuation considerations are the portions of the respective gross considerations applied under the terms of such contracts to determine nonforfeiture values.

      Sec. 95. RCW 48.74.050 and 1982 1st ex.s. c 9 s 5 are each amended to read as follows:

      (1) In no event may a company's aggregate reserves for all life insurance policies, excluding disability and accidental death benefits, issued on or after July 10, 1982, be less than the aggregate reserves calculated in accordance with the methods set forth in RCW 48.74.040, 48.74.070, and 48.74.080 and the mortality table or tables and rate or rates of interest used in calculating nonforfeiture benefits for such policies.

      (2) In no event may the aggregate reserves for all policies, contracts, and benefits be less than the aggregate reserves determined by the qualified actuary to be necessary to render the opinion required under section 92 of this act.

      Sec. 96. RCW 48.74.060 and 1982 1st ex.s. c 9 s 6 are each amended to read as follows:

      Reserves for all policies and contracts issued prior to the operative date of this chapter, may be calculated, at the option of the company, according to any standards which produce greater aggregate reserves for all such policies and contracts than the minimum reserves required by the laws in effect immediately prior to such date.

      Reserves for any category of policies, contracts, or benefits as established by the commissioner, issued on or after July 10, 1982, may be calculated, at the option of the company, according to any standards which produce greater aggregate reserves for such category than those calculated according to the minimum standard herein provided, but the rate or rates of interest used for policies and contracts, other than annuity and pure endowment contracts, shall not be higher than the corresponding rate or rates of interest used in calculating any nonforfeiture benefits provided therein.

      Any such company which at any time has adopted any standard of valuation producing greater aggregate reserves than those calculated according to the minimum standard herein provided may, with the approval of the commissioner, adopt any lower standard of valuation, but not lower than the minimum herein provided. For the purposes of this section, the holding of additional reserves previously determined by a qualified actuary to be necessary to render the opinion required under section 92 of this act is not to be the adoption of a higher standard of valuation.

      NEW SECTION. Sec. 97. A new section is added to chapter 48.74 RCW to read as follows:

      The commissioner shall adopt rules containing the minimum standards applicable to the valuation of disability insurance.

      Sec. 98. RCW 48.92.010 and 1987 c 306 s 1 are each amended to read as follows:

      The purpose of this chapter is to regulate the formation and operation of risk retention groups and purchasing groups in this state formed pursuant to the provisions of the federal Liability Risk Retention Act of 1986.

      Sec. 99. RCW 48.92.020 and 1987 c 306 s 2 are each amended to read as follows:

      As used in this chapter, the following terms have the meanings indicated unless the context clearly requires otherwise:

      (1) "Commissioner" means the insurance commissioner of Washington state or the commissioner, director, or superintendent of insurance in any other state.

      (2) "Completed operations liability" means liability arising out of the installation, maintenance, or repair of any product at a site which is not owned or controlled by:

      (a) Any person who performs that work; or

      (b) Any person who hires an independent contractor to perform that work; but shall include liability for activities which are completed or abandoned before the date of the occurrence giving rise to the liability.

      (3) "Domicile," for purposes of determining the state in which a purchasing group is domiciled, means:

      (a) For a corporation, the state in which the purchasing group is incorporated; and

      (b) For an unincorporated entity, the state of its principal place of business.

      (4) "Hazardous financial condition" means that, based on its present or reasonably anticipated financial condition, a risk retention group, although not yet financially impaired or insolvent, is unlikely to be able:

      (a) To meet obligations to policyholders with respect to known claims and reasonably anticipated claims; or

      (b) To pay other obligations in the normal course of business.

      (5) "Insurance" means primary insurance, excess insurance, reinsurance, surplus lines insurance, and any other arrangement for shifting and distributing risk which is determined to be insurance under the laws of this state.

      (6) "Liability" means legal liability for damages including costs of defense, legal costs and fees, and other claims expenses because of injuries to other persons, damage to their property, or other damage or loss to such other persons resulting from or arising out of:

      (a) Any business, whether profit or nonprofit, trade, product, services, including professional services, premises, or operations; or

      (b) Any activity of any state or local government, or any agency or political subdivision thereof.

      "Liability" does not include personal risk liability and an employer's liability with respect to its employees other than legal liability under the federal Employers' Liability Act 45 U.S.C. 51 et seq.

      (7) "Personal risk liability" means liability for damages because of injury to any person, damage to property, or other loss or damage resulting from any personal, familial, or household responsibilities or activities, rather than from responsibilities or activities referred to in subsection (6) of this section.

      (8) "Plan of operation or a feasibility study" means an analysis which presents the expected activities and results of a risk retention group including, at a minimum:

      (a) Information sufficient to verify that its members are engaged in businesses or activities similar or related with respect to the liability to which the members are exposed by virtue of any related, similar, or common business, trade, product, services, premises, or operations;

      (b) For each state in which it intends to operate, the coverages, deductibles, coverage limits, rates, and rating classification systems for each line of insurance the group intends to offer;

      (((b))) (c) Historical and expected loss experience of the proposed members and national experience of similar exposures;

      (((c))) (d) Pro forma financial statements and projections;

      (((d))) (e) Appropriate opinions by a qualified, independent, casualty actuary, including a determination of minimum premium or participation levels required to commence operations and to prevent a hazardous financial condition;

      (((e))) (f) Identification of management, underwriting and claims procedures, marketing methods, managerial oversight methods, ((and)) investment policies, and reinsurance agreements; ((and

      (f))) (g) Identification of each state in which the risk retention group has obtained, or sought to obtain, a charter and license, and a description of its status in each of those states; and

      (h) Such other matters as may be prescribed by the commissioner for liability insurance companies authorized by the insurance laws of the state.

      (9) "Product liability" means liability for damages because of any personal injury, death, emotional harm, consequential economic damage, or property damage including damages resulting from the loss of use of property arising out of the manufacture, design, importation, distribution, packaging, labeling, lease, or sale of a product, but does not include the liability of any person for those damages if the product involved was in the possession of such a person when the incident giving rise to the claim occurred.

      (10) "Purchasing group" means any group which:

      (a) Has as one of its purposes the purchase of liability insurance on a group basis;

      (b) Purchases the insurance only for its group members and only to cover their similar or related liability exposure, as described in (c) of this subsection;

      (c) Is composed of members whose businesses or activities are similar or related with respect to the liability to which members are exposed by virtue of any related, similar, or common business, trade, product, services, premises, or operations; and

      (d) Is domiciled in any state.

      (11) "Risk retention group" means any corporation or other limited liability association ((formed under the laws of any state, Bermuda, or the Cayman Islands)):

      (a) Whose primary activity consists of assuming and spreading all, or any portion, of the liability exposure of its group members;

      (b) Which is organized for the primary purpose of conducting the activity described under (a) of this subsection;

      (c) Which:

      (i) Is chartered and licensed as a liability insurance company and authorized to engage in the business of insurance under the laws of any state; or

      (ii) Before January 1, 1985, was chartered or licensed and authorized to engage in the business of insurance under the laws of Bermuda or the Cayman Islands and, before such date, had certified to the insurance commissioner of at least one state that it satisfied the capitalization requirements of such state, except that any such group shall be considered to be a risk retention group only if it has been engaged in business continuously since that date and only for the purpose of continuing to provide insurance to cover product liability or completed operations liability as the terms were defined in the federal Product Liability Risk Retention Act of 1981 before the date of the enactment of the federal Risk Retention Act of 1986;

      (d) Which does not exclude any person from membership in the group solely to provide for members of such a group a competitive advantage over such a person;

      (e) Which:

      (i) Has as its ((members)) owners only persons who ((have an ownership interest in the group and which has as its owners only persons who are members)) comprise the membership of the risk retention group and who are provided insurance by the risk retention group; or

      (ii) Has as its sole ((member and sole)) owner an organization ((which is owned by persons who are provided insurance by the risk retention group)) that has:

      (A) As its members only persons who comprise the membership of the risk retention group; and

      (B) As its owners only persons who comprise the membership of the risk retention group and who are provided insurance by the group;

      (f) Whose members are engaged in businesses or activities similar or related with respect to the liability of which such members are exposed by virtue of any related, similar, or common business trade, product, services, premises, or operations;

      (g) Whose activities do not include the provision of insurance other than:

      (i) Liability insurance for assuming and spreading all or any portion of the liability of its group members; and

      (ii) Reinsurance with respect to the liability of any other risk retention group or any members of such other group which is engaged in businesses or activities so that the group or member meets the requirement described in (f) of this subsection from membership in the risk retention group which provides such reinsurance; and

      (h) The name of which includes the phrase "risk retention group."

      (12) "State" means any state of the United States or the District of Columbia.

      Sec. 100. RCW 48.92.030 and 1987 c 306 s 3 are each amended to read as follows:

      (1) A risk retention group seeking to be chartered in this state must be chartered and licensed as a liability insurance company authorized by the insurance laws of this state and, except as provided elsewhere in this chapter, must comply with all of the laws, rules, regulations, and requirements applicable to the insurers chartered and licensed in this state and with RCW 48.92.040 to the extent the requirements are not a limitation on laws, rules, regulations, or requirements of this state.

      (2) A risk retention group chartered in this state shall file with the department and the National Association of Insurance Commissioners an annual statement in a form prescribed by the National Association of Insurance Commissioners, and in electronic form if required by the commissioner, and completed in accordance with its instructions and the National Association of Insurance Commissioners accounting practices and procedures manual.

      (3) Before it may offer insurance in any state, each domestic risk retention group shall also submit for approval to the insurance commissioner of this state a plan of operation or a feasibility study ((and revisions of the plan or study if the group intends to offer any additional lines of liability insurance)). The risk retention group shall submit an appropriate revision in the event of a subsequent material change in an item of the plan of operation or feasibility study, within ten days of the change. The group may not offer any additional kinds of liability insurance, in this state or in any other state, until a revision of the plan or study is approved by the commissioner.

      (4) At the time of filing its application for charter, the risk retention group shall provide to the commissioner in summary form the following information: The identity of the initial members of the group; the identify of those individuals who organized the group or who will provide administrative services or otherwise influence or control the activities of the group; the amount and nature of the initial capitalization; the coverages to be afforded; and the states in which the group intends to operate. Upon receipt of this information, the commissioner shall forward the information to the National Association of Insurance Commissioners. Providing notification to the National Association of Insurance Commissioners is in addition to and is not sufficient to satisfy the requirements of RCW 48.92.040 or this chapter.

      Sec. 101. RCW 48.92.040 and 1987 c 306 s 4 are each amended to read as follows:

      Risk retention groups chartered and licensed in states other than this state and seeking to do business as a risk retention group in this state ((must observe and abide by)) shall comply with the laws of this state as follows:

      (1) Before offering insurance in this state, a risk retention group shall submit to the commissioner on a form prescribed by the National Association of Insurance Commissioners:

      (a) A statement identifying the state or states in which the risk retention group is chartered and licensed as a liability insurance company, date of chartering, its principal place of business, and any other information including information on its membership, as the commissioner of this state may require to verify that the risk retention group is qualified under RCW 48.92.020(11);

      (b) A copy of its plan of operations or a feasibility study and revisions of the plan or study submitted to its state of domicile: PROVIDED, HOWEVER, That the provision relating to the submission of a plan of operation or a feasibility study shall not apply with respect to any line or classification of liability insurance which: (i) Was defined in the federal Product Liability Risk Retention Act of 1981 before October 27, 1986; and (ii) was offered before that date by any risk retention group which had been chartered and operating for not less than three years before that date; ((and))

      (c) The risk retention group shall submit a copy of any revision to its plan of operation or feasibility study required under RCW 48.92.030(3) at the same time that the revision is submitted to the commissioner of its chartering state; and

      (d) A statement of registration which designates the commissioner as its agent for the purpose of receiving service of legal documents or process.

      (2) Any risk retention group doing business in this state shall submit to the commissioner:

      (a) A copy of the group's financial statement submitted to its state of domicile, which shall be certified by an independent public accountant and contain a statement of opinion on loss and loss adjustment expense reserves made by a member of the American academy of actuaries or a qualified loss reserve specialist under criteria established by the National Association of Insurance Commissioners;

      (b) A copy of each examination of the risk retention group as certified by the commissioner or public official conducting the examination;

      (c) Upon request by the commissioner, a copy of any information or document pertaining to an outside audit performed with respect to the risk retention group; and

      (d) Any information as may be required to verify its continuing qualification as a risk retention group under RCW 48.92.020(11).

      (3)(a) ((All premiums paid for coverages within this state to risk retention groups shall be subject to taxation at the same rate and subject to the same interest, fines, and penalties for nonpayment as that applicable to foreign admitted insurers)) A risk retention group is liable for the payment of premium taxes and taxes on premiums of direct business for risks resident or located within this state, and shall report on or before March 1st of each year to the commissioner the direct premiums written for risks resident or located within this state. The risk retention group is subject to taxation, and applicable fines and penalties related thereto, on the same basis as a foreign admitted insurer.

      (b) To the extent agents or brokers are utilized under RCW 48.92.120 or otherwise, they shall report ((and pay the taxes for the premiums for risks which they)) to the commissioner the premiums for direct business for risks resident or located within this state that the licensees have placed with or on behalf of a risk retention group not chartered in this state.

      (c) To the extent agents or brokers are ((not utilized or fail to pay the tax, each risk retention group shall pay the tax for risks insured within the state. Each risk retention group shall report all premiums paid to it for risks insured within the state)) used under RCW 48.92.120 or otherwise, an agent or broker shall keep a complete and separate record of all policies procured from each risk retention group. The record is open to examination by the commissioner, as provided in chapter 48.03 RCW. These records must include, for each policy and each kind of insurance provided thereunder, the following:

      (i) The limit of liability;

      (ii) The time period covered;

      (iii) The effective date;

      (iv) The name of the risk retention group that issued the policy;

      (v) The gross premium charged; and

      (vi) The amount of return premiums, if any.

      (4) Any risk retention group, its agents and representatives, shall be subject to any and all unfair claims settlement practices statutes and regulations specifically denominated by the commissioner as unfair claims settlement practices regulations.

      (5) Any risk retention group, its agents and representatives, shall be subject to the provisions of chapter 48.30 RCW pertaining to deceptive, false, or fraudulent acts or practices. However, if the commissioner seeks an injunction regarding such conduct, the injunction must be obtained from a court of competent jurisdiction.

      (6) Any risk retention group must submit to an examination by the commissioner to determine its financial condition if the commissioner of the jurisdiction in which the group is chartered has not initiated an examination or does not initiate an examination within sixty days after a request by the commissioner of this state. The examination shall be coordinated to avoid unjustified repetition and conducted in an expeditious manner and in accordance with the National Association of Insurance Commissioners' examiner handbook.

      (7) ((Any)) Every application form for insurance from a risk retention group and every policy issued by a risk retention group shall contain in ten-point type on the front page and the declaration page, the following notice:


NOTICE

 

This policy is issued by your risk retention group. Your risk retention group may not be subject to all of the insurance laws and regulations of your state. State insurance insolvency guaranty funds are not available for your risk retention group.


      (8) The following acts by a risk retention group are hereby prohibited:

      (a) The solicitation or sale of insurance by a risk retention group to any person who is not eligible for membership in that group; and

      (b) The solicitation or sale of insurance by, or operation of, a risk retention group that is in a hazardous financial condition or is financially impaired.

      (9) No risk retention group shall be allowed to do business in this state if an insurance company is directly or indirectly a member or owner of the risk retention group, other than in the case of a risk retention group all of whose members are insurance companies.

      (10) ((No risk retention group may offer insurance policy coverage prohibited by Title 48 RCW or declared unlawful by the highest court of this state)) The terms of an insurance policy issued by a risk retention group may not provide, or be construed to provide, coverage prohibited generally by statute of this state or declared unlawful by the highest court of this state.

      (11) A risk retention group not chartered in this state and doing business in this state shall comply with a lawful order issued in a voluntary dissolution proceeding or in a delinquency proceeding commenced by a state insurance commissioner if there has been a finding of financial impairment after an examination under ((RCW 48.92.040(6))) subsection (6) of this section.

      Sec. 102. RCW 48.92.050 and 1987 c 306 s 5 are each amended to read as follows:

      (1) No risk retention group shall be permitted to join or contribute financially to any insurance insolvency guaranty fund, or similar mechanism, in this state, nor shall any risk retention group, or its insureds or claimants against its insureds, receive any benefit from any such fund for claims arising ((out of the operations of the)) under the insurance policies issued by a risk retention group.

      (2) A risk retention group shall participate in this state's joint underwriting associations and mandatory liability pools or plans required by the commissioners.

      (3) When a purchasing group obtains insurance covering its members' risks from an insurer not authorized in this state or a risk retention group, no such risks, wherever resident or located, are covered by an insurance guaranty fund or similar mechanism in this state.

      (4) When a purchasing group obtains insurance covering its members' risks from an authorized insurer, only risks resident or located in this state are covered by the state guaranty fund established in chapter 48.32 RCW.

      Sec. 103. RCW 48.92.070 and 1987 c 306 s 7 are each amended to read as follows:

      ((Any purchasing group meeting the criteria established under the provisions of the federal Liability Risk Retention Act of 1986 shall be exempt from any law of this state relating to the creation of groups for the purchase of insurance, prohibition of group purchasing, or any law that would discriminate against a purchasing group or its members. In addition, an insurer shall be exempt from any law of this state which prohibits providing, or offering to provide, to a purchasing group or its members advantages based on their loss and expense experience not afforded to other persons with respect to rates, policy forms, coverages, or other matters. A purchasing group shall be subject to all other applicable laws of this state.)) A purchasing group and its insurer or insurers are subject to all applicable laws of this state, except that a purchasing group and its insurer or insurers are exempt, in regard to liability insurance for the purchasing group, from any law that:

      (1) Prohibits the establishment of a purchasing group;

      (2) Makes it unlawful for an insurer to provide or offer to provide insurance on a basis providing, to a purchasing group or its members, advantages based on their loss and expense experience not afforded to other persons with respect to rates, policy forms, coverages, or other matters;

      (3) Prohibits a purchasing group or its members from purchasing insurance on a group basis described in subsection (2) of this section;

      (4) Prohibits a purchasing group from obtaining insurance on a group basis because the group has not been in existence for a minimum period of time or because any member has not belonged to the group for a minimum period of time;

      (5) Requires that a purchasing group must have a minimum number of members, common ownership or affiliation, or certain legal form;

      (6) Requires that a certain percentage of a purchasing group must obtain insurance on a group basis;

      (7) Otherwise discriminates against a purchasing group or any of its members.

      Sec. 104. RCW 48.92.080 and 1987 c 306 s 8 are each amended to read as follows:

      (1) A purchasing group which intends to do business in this state shall furnish, before doing business, notice to the commissioner, on forms prescribed by the National Association of Insurance Commissioners which shall:

      (a) Identify the state in which the group is domiciled;

      (b) Identify all other states in which the group intends to do business;

      (c) Specify the lines and classifications of liability insurance which the purchasing group intends to purchase;

      (((c))) (d) Identify the insurance company or companies from which the group intends to purchase its insurance and the domicile of that company or companies;

      (((d))) (e) Specify the method by which, and the person or persons, if any, through whom insurance will be offered to its members whose risks are resident or located in this state;

      (f) Identify the principal place of business of the group; and

      (((e))) (g) Provide any other information as may be required by the commissioner to verify that the purchasing group is qualified under RCW 48.92.020(10).

      (2) A purchasing group shall, within ten days, notify the commissioner of any changes in any of the items set forth in subsection (1) of this section.

      (3) The purchasing group shall register with and designate the commissioner as its agent solely for the purpose of receiving service of legal documents or process, except that this requirement shall not apply in the case of a purchasing group that only purchases insurance that was authorized under the federal Product Liability Risk Retention Act of 1981 and:

      (a) Which in any state of the United States:

      (i) Was domiciled before April ((2)) 1, 1986; and

      (ii) Is domiciled on and after October 27, 1986((, in any state of the United States));

      (b) Which:

      (i) Before October 27, 1986, purchased insurance from an insurance carrier licensed in any state;

      (ii) Since October 27, 1986, purchased its insurance from an insurance carrier licensed in any state; or

      (c) Which was a purchasing group under the requirements of the federal Product Liability Risk Retention Act of 1981 before October 27, 1986((; and

      (d) Which does not purchase insurance that was not authorized for purposes of an exemption under that act, as in effect before October 27, 1986)).

      (4) A purchasing group that is required to give notice under subsection (1) of this section shall also furnish such information as may be required by the commissioner to:

      (a) Verify that the entity qualifies as a purchasing group;

      (b) Determine where the purchasing group is located; and

      (c) Determine appropriate tax treatment.

      Sec. 105. RCW 48.92.090 and 1987 c 306 s 9 are each amended to read as follows:

      (1) A purchasing group may not purchase insurance from a risk retention group that is not chartered in a state or from an insurer not admitted in the state in which the purchasing group is located, unless the purchase is effected through a licensed agent or broker acting pursuant to the surplus lines laws and regulations of that state.

      (2) A purchasing group that obtains liability insurance from an insurer not admitted in this state or a risk retention group shall inform each of the members of the group that have a risk resident or located in this state that the risk is not protected by an insurance insolvency guaranty fund in this state, and that the risk retention group or insurer may not be subject to all insurance laws and rules of this state.

      (3) No purchasing group may purchase insurance providing for a deductible or self-insured retention applicable to the group as a whole; however, coverage may provide for a deductible or self-insured retention applicable to individual members.

      (4) Purchases of insurance by purchasing groups are subject to the same standards regarding aggregate limits that are applicable to all purchases of group insurance.

      NEW SECTION. Sec. 106. A new section is added to chapter 48.92 RCW to read as follows:

      Premium taxes and taxes on premiums paid for coverage of risks resident or located in this state by a purchasing group or any members of the purchasing groups must be:

      (1) Imposed at the same rate and subject to the same interest, fines, and penalties as those applicable to premium taxes and taxes on premiums paid for similar coverage from authorized insurers, as defined under chapter 48.05 RCW, or unauthorized insurers, as defined and provided for under chapter 48.15 RCW, by other insurers; and

      (2) The obligation of the insurer; and if not paid by the insurer, then the obligation of the purchasing group; and if not paid by the purchasing group, then the obligation of the agent or broker for the purchasing group; and if not paid by the agent or broker for the purchasing group, then the obligation of each of the purchasing group's members. The liability of each member of the purchasing group is several, not joint, and is limited to the tax due in relation to the premiums paid by that member.

      Sec. 107. RCW 48.92.100 and 1987 c 306 s 10 are each amended to read as follows:

      The commissioner is authorized to make use of any of the powers established under Title 48 RCW to enforce the laws of this state so long as those powers are not specifically preempted by the federal Product Liability Risk Retention Act of 1981, as amended by the federal Risk Retention Amendments of 1986. This includes, but is not limited to, the commissioner's administrative authority to investigate, issue subpoenas, conduct depositions and hearings, issue orders, ((and)) impose penalties, and seek injunctive relief. With regard to any investigation, administrative proceedings, or litigation, the commissioner can rely on the procedural law and regulations of the state. The injunctive authority of the commissioner in regard to risk retention groups is restricted by the requirement that any injunction be issued by a court of competent jurisdiction.

      Sec. 108. RCW 48.92.120 and 1987 c 306 s 12 are each amended to read as follows:

      ((Any person acting, or offering to act, as an agent or broker for a risk retention group or purchasing group, which solicits members, sells insurance coverage, purchases coverage for its members located within the state or otherwise does business in this state shall be subject to the provisions of chapter 48.17 RCW and before commencing any such activity, obtain a license and pay the fees designated for the license under RCW 48.14.010.)) (1) No person may act or aid in any manner in soliciting, negotiating, or procuring liability insurance in this state from a risk retention group unless the person is licensed as an insurance agent or broker for casualty insurance in accordance with chapter 48.17 RCW and pays the fees designated for the license under RCW 48.14.010.

      (2)(a) No person may act or aid in any manner in soliciting, negotiating, or procuring liability insurance in this state for a purchasing group from an authorized insurer or a risk retention group chartered in a state unless the person is licensed as an insurance agent or broker for casualty insurance in accordance with chapter 48.17 RCW and pays the fees designated for the license under RCW 48.14.010.

      (b) No person may act or aid in any manner in soliciting, negotiating, or procuring liability insurance coverage in this state for a member of a purchasing group under a purchasing group's policy unless the person is licensed as an insurance agent or broker for casualty insurance in accordance with chapter 48.17 RCW and pays the fees designated for the license under RCW 48.14.010.

      (c) No person may act or aid in any manner in soliciting, negotiating, or procuring liability insurance from an insurer not authorized to do business in this state on behalf of a purchasing group located in this state unless the person is licensed as a surplus lines broker in accordance with chapter 48.15 RCW and pays the fees designated for the license under RCW 48.14.010.

      (3) For purposes of acting as an agent or broker for a risk retention group or purchasing group under subsections (1) and (2) of this section, the requirement of residence in this state does not apply.

      (4) Every person licensed under chapters 48.15 and 48.17 RCW, on business placed with risk retention groups or written through a purchasing group, shall inform each prospective insured of the provisions of the notice required under RCW 48.92.040(7) in the case of a risk retention group and RCW 48.92.090(3) in the case of a purchasing group.

      Sec. 109. RCW 48.92.130 and 1987 c 306 s 13 are each amended to read as follows:

      An order issued by any district court of the United States enjoining a risk retention group from soliciting or selling insurance, or operating, in any state or in all states or in any territory or possession of the United States, upon a finding that the group is in a hazardous financial or financially impaired condition, shall be enforceable in the courts of the state.

      Sec. 110. RCW 48.92.140 and 1987 c 306 s 14 are each amended to read as follows:

      The commissioner may establish and from time to time amend the rules relating to risk retention or purchasing groups as may be necessary or desirable to carry out the provisions of this chapter.

      NEW SECTION. Sec. 111. The following acts or parts of acts are each repealed:

      (1) RCW 48.07.090 and 1975 1st ex.s. c 266 s 4, 1953 c 197 s 3, & 1947 c 79 s .07.09;

      (2) RCW 48.31A.005 and 1983 c 46 s 1;

      (3) RCW 48.31A.010 and 1971 ex.s. c 13 s 3;

      (4) RCW 48.31A.020 and 1985 c 55 s 1, 1983 c 46 s 2, & 1971 ex.s. c 13 s 4;

      (5) RCW 48.31A.030 and 1983 c 46 s 3 & 1971 ex.s. c 13 s 5;

      (6) RCW 48.31A.040 and 1971 ex.s. c 13 s 6;

      (7) RCW 48.31A.050 and 1985 c 55 s 2, 1983 c 46 s 4, & 1971 ex.s. c 13 s 7;

      (8) RCW 48.31A.055 and 1985 c 55 s 3;

      (9) RCW 48.31A.060 and 1971 ex.s. c 13 s 8;

      (10) RCW 48.31A.070 and 1971 ex.s. c 13 s 9;

      (11) RCW 48.31A.080 and 1971 ex.s. c 13 s 10;

      (12) RCW 48.31A.090 and 1971 ex.s. c 13 s 11;

      (13) RCW 48.31A.100 and 1971 ex.s. c 13 s 12;

      (14) RCW 48.31A.110 and 1971 ex.s. c 13 s 13;

      (15) RCW 48.31A.120 and 1971 ex.s. c 13 s 14;

      (16) RCW 48.31A.130 and 1971 ex.s. c 13 s 15; and

      (17) RCW 48.31A.900 and 1971 ex.s. c 13 s 17.

      NEW SECTION. Sec. 112. The insurance commissioner may take such steps as are necessary to ensure that this act is implemented on its effective date.

      NEW SECTION. Sec. 113. Sections 1 through 15 of this act shall constitute a new chapter in Title 48 RCW.

      NEW SECTION. Sec. 114. Sections 16 through 21 of this act shall constitute a new chapter in Title 48 RCW.

      NEW SECTION. Sec. 115. Sections 22 through 33 of this act shall constitute a new chapter in Title 48 RCW.

      NEW SECTION. Sec. 116. Sections 34 through 42 of this act shall constitute a new chapter in Title 48 RCW.

      NEW SECTION. Sec. 117. Sections 57 through 73 of this act are each added to chapter 48.31 RCW.

      NEW SECTION. Sec. 118. If any provision of this act or its application to any person or circumstance is held invalid, the remainder of the act or the application of the provision to other persons or circumstances is not affected."


POINT OF ORDER


     Senator Newhouse: "Mr. President, I rise to a point of order. I raise the point order on the scope and object of the committee amendment as addressed to the bill, Substitute House Bill No. 1855. The basic bill is kind of an omnibus bill addressing the powers and duties of the Insurance Commissioner to make our laws consistent with national recommendations. The amendment is the substance of another bill which this body has defeated, which gives the Insurance Guarantee Association authority to go out of state and, perhaps even, loan money, interest free, to out-of-state insurance companies. I suggest that this is beyond the scope and object of the original bill."

     Further debate ensued.


MOTION


     On motion of Senator Jesernig, further consideration of Substitute House Bill No. 1855 was deferred.


MOTION


     At 11:31 a.m., on motion of Senator Jesernig, the Senate recess until 12:00 noon.


     The Senate was called to order at 12:03 p.m. by President Pritchard.

     There being no objection, the President reverted the Senate to the first order of business.


REPORTS OF STANDING COMMITTEES


April 14, 1993

SB 5724          Prime Sponsor, Senator Rinehart: Changing nursing home auditing and cost reimbursement provisions. Reported by Committee on Ways and Means


     MAJORITY recommendation: That Substitute Senate Bill No. 5724 be substituted therefor, and the substitute bill do pass. Signed by Senators Rinehart, Chairman; Spanel, Vice Chairman; Bauer, Gaspard, Hargrove, Jesernig, Owen, Pelz, Quigley, Snyder, Sutherland, Williams, and Wojahn.


     Passed to Committee on Rules for second reading.


April 14, 1993

SB 5966          Prime Sponsor, Senator Rinehart: Concerning the state veterans' homes. Reported by Committee on Ways and Means


     MAJORITY recommendation: That Substitute Senate Bill No. 5966 be substituted therefor, and the substitute bill do pass. Signed by Senators Rinehart, Chairman; Spanel, Vice Chairman; Bauer, Bluechel, Cantu, Gaspard, Hargrove, Hochstatter, McDonald, Moyer, Niemi, Owen, Pelz, Quigley, Roach, L. Smith, Snyder, Sutherland, West, Williams, and Wojahn.


     Passed to Committee on Rules for second reading.


April 14, 1993

SB 5980          Prime Sponsor, Senator Owen: Revising provisions relating to fishing licenses. Reported by Committee on Ways and Means


     MAJORITY recommendation: That Substitute Senate Bill No. 5980 be substituted therefor, and the substitute bill do pass. Signed by Senators Rinehart, Chairman; Spanel, Vice Chairman; Gaspard, Hargrove, Jesernig, Niemi, Owen, Pelz, Quigley, Snyder, Sutherland, Talmadge, and Wojahn.


     Passed to Committee on Rules for second reading.


April 14, 1993

SB 5981          Prime Sponsor, Senator Owen: Regulating forest lands to maintain a viable forest products industry. Reported by Committee on Ways and Means


     MAJORITY recommendation: That Substitute Senate Bill No. 5981 be substituted therefor, and the substitute bill do pass. Signed by Senators Rinehart, Chairman; Spanel, Vice Chairman; Bauer, Gaspard, Jesernig, Niemi, Owen, Pelz, Quigley, Snyder, Sutherland, Talmadge, and Wojahn.


     Passed to Committee on Rules for second reading.


April 14, 1993

SB 5983          Prime Sponsor, Senator M. Rasmussen: Altering fees related to agriculture. Reported by Committee on Ways and Means


     MAJORITY recommendation: Do pass as amended. Signed by Senators Rinehart, Chairman; Spanel, Vice Chairman; Bauer, Gaspard, Hargrove, Jesernig, Owen, Pelz, Quigley, Snyder, Sutherland, Talmadge, Williams, and Wojahn.


     Passed to Committee on Rules for second reading.


April 14, 1993

SB 5984          Prime Sponsor, Senator Sheldon: Using the business enterprises revolving account. Reported by Committee on Ways and Means


     MAJORITY recommendation: Do pass. Signed by Senators Rinehart, Chairman; Spanel, Vice Chairman; Bauer, Bluechel, Cantu, Gaspard, Hargrove, Hochstatter, Jesernig, McDonald, Owen, Pelz, Quigley, Roach, Snyder, Sutherland, Talmadge, Williams, and Wojahn.


     Passed to Committee on Rules for second reading.


April 14, 1993

SHB 1128       Prime Sponsor, House Committee on Revenue: Funding blood and breath alcohol testing programs. Reported by Committee on Ways and Means


     MAJORITY recommendation: Do pass as amended. Signed by Senators Rinehart, Chairman; Spanel, Vice Chairman; Bauer, Bluechel, Cantu, Gaspard, Hargrove, Hochstatter, Jesernig, McDonald, Owen, Pelz, Quigley, Roach, L. Smith, Snyder, Sutherland, Talmadge, West, Williams, and Wojahn.


     Passed to Committee on Rules for second reading.


April 14, 1993

ESHB 1197     Prime Sponsor, House Committee on Human Services: Allowing families to retain a greater percentage of income before public benefits are reduced or terminated. Reported by Committee on Ways and Means


     MAJORITY recommendation: Do pass with amendments to Committee on Health and Human Services amendments. Signed by Senators Rinehart, Chairman; Spanel, Vice Chairman; Bauer, Hargrove, Jesernig, Niemi, Owen, Pelz, Quigley, Snyder, Sutherland, Talmadge, Williams, and Wojahn.


     Passed to Committee on Rules for second reading.


April 14, 1993

ESHB 1236     Prime Sponsor, House Committee on Natural Resources and Parks: Establishing fees for certain water rights. Reported by Committee on Ways and Means


     MAJORITY recommendation: Do pass as amended. Signed by Senators Rinehart, Chairman; Spanel, Vice Chairman; Bauer, Bluechel, Gaspard, Hargrove, Jesernig, Owen, Pelz, Quigley, Snyder, Sutherland, Talmadge, Williams, and Wojahn.


     Passed to Committee on Rules for second reading.


April 14, 1993

ESHB 1307     Prime Sponsor, House Committee on Trade, Economic Development and Housing: Reauthorizing and modifying the Washington service corps. Reported by Committee on Ways and Means


     MAJORITY recommendation: Do pass with amendments to Committee on Trade, Technology and Economic Development amendments. Signed by Senators Rinehart, Chairman; Spanel, Vice Chairman; Anderson, Bauer, Bluechel, Cantu, Gaspard, Hargrove, Hochstatter, Jesernig, McDonald, Owen, Pelz, Quigley, Roach, Snyder, Sutherland, Talmadge, West, Williams, and Wojahn.


     Passed to Committee on Rules for second reading.


MOTION


     At 12:04 p.m., on motion of Senator Jesernig, the Senate recessed until 1:45 p.m.


     The Senate was called to order at 1:50 p.m. by President Pritchard.

     There being no objection, the President advanced the Senate to the sixth order of business.


MOTIONS


     On motion of Senator Oke, Senators Amondson and Barr were excused.

     On motion of Senator Spanel, Senator Loveland was excused.


SECOND READING


     SUBSTITUTE HOUSE BILL NO. 1469, by House Committee on Corrections (originally sponsored by Representatives L. Johnson, Morris, Long and Thibaudeau)

 

Clarifying that the department of social and health services is not required to reimburse certain health care costs under the limited casualty program.


     The bill was read the second time.


MOTIONS


     On motion of Senator Talmadge, the following Committee on Health and Human Services amendment was adopted:

     Strike everything after the enacting clause and insert the following:

      "Sec. 1. RCW 70.48.130 and 1986 c 118 s 9 are each amended to read as follows:

      It is the intent of the legislature that all jail inmates receive appropriate and cost-effective emergency and necessary medical care. Governing units, the department of social and health services, and medical care providers shall cooperate to achieve the best rates consistent with adequate care.

      Payment for emergency or necessary health care shall be by the governing unit, except that the department of social and health services shall directly reimburse the ((governing unit for the cost thereof if the confined person requires treatment for which such person is eligible under the department of social and health services' public assistance medical program)) provider pursuant to chapter 74.09 RCW, in accordance with the rates and benefits established by the department, if the confined person is eligible under the department's medical care programs as authorized under chapter 74.09 RCW. After payment by the department, the financial responsibility for any remaining balance, including unpaid client liabilities that are a condition of eligibility or participation under chapter 74.09 RCW, shall be borne by the medical care provider and the governing unit as may be mutually agreed upon between the medical care provider and the governing unit. In the absence of mutual agreement between the medical care provider and the governing unit, the financial responsibility for any remaining balance shall be borne equally between the medical care provider and the governing unit. Total payments from all sources to providers for care rendered to confined persons eligible under chapter 74.09 RCW shall not exceed the amounts that would be paid by the department for similar services provided under Title XIX medicaid, unless additional resources are obtained from the confined person.

As part of the screening process upon booking or preparation of an

inmate into jail, general information concerning the inmate's ability to pay for medical care shall be identified, including insurance or other medical benefits or resources to which an inmate is entitled. This information shall be made available to the department, the governing unit, and any provider of health care services.

      The governing unit or provider may obtain reimbursement from the confined person for the cost of ((emergency and other)) health care ((to the extent that such person is reasonably able to pay for such care)) services not provided under chapter 74.09 RCW, including reimbursement from any insurance program or from other medical benefit programs available to ((such)) the confined person. Nothing in this chapter precludes civil or criminal remedies to recover the costs of medical care provided jail inmates or paid for on behalf of inmates by the governing unit. As part of a judgment and sentence, the courts are authorized to order defendants to repay all or part of the medical costs incurred by the governing unit or provider during confinement.

      To the extent that a confined person is unable to be financially responsible for medical care and is ineligible for ((financial assistance from the department or from a private source)) the department's medical care programs under chapter 74.09 RCW, or for coverage from private sources, and in the absence of an interlocal agreement or other contracts to the contrary, the governing unit may obtain reimbursement for the cost of such medical services from the unit of government whose law enforcement officers initiated the charges on which the person is being held in the jail: PROVIDED, That reimbursement for the cost of such services shall be by the state for state prisoners being held in a jail who are accused of either escaping from a state facility or of committing an offense in a state facility.

      There shall be no right of reimbursement to the governing unit from units of government whose law enforcement officers initiated the charges for which a person is being held in the jail for care provided after the charges are disposed of by sentencing or otherwise, unless by intergovernmental agreement pursuant to chapter 39.34 RCW.

      ((This section is not intended to limit or change any existing right of any party, governing unit, or unit of government against the person receiving the care for the cost of the care provided or paid for.))

      Under no circumstance shall necessary medical services be denied or delayed ((pending)) because of disputes over the cost of medical care or a determination of financial responsibility for payment of the costs of medical care provided to confined persons.

      Nothing in this section shall limit any existing right of any party, governing unit, or unit of government against the person receiving the care for the cost of the care provided.

      NEW SECTION. Sec. 2. This act is necessary for the immediate preservation of the public peace, health, or safety, or support of the state government and its existing public institutions, and shall take effect immediately."


     On motion of Senator Talmadge, the following title amendment was adopted:

     On page 1, line 2 of the title, after "persons;" strike the remainder of the title and insert "amending RCW 70.48.130; and declaring an emergency."


MOTION


     On motion of Senator Talmadge, the rules were suspended, Substitute House Bill No. 1469, as amended by the Senate, was advanced to third reading, the second reading considered the third and the bill was placed on final passage.

     The President declared the question before the Senate to be the roll call on the final passage of Substitute House Bill No. 1469, as amended by the Senate.


ROLL CALL


     The Secretary called the roll on the final passage of Substitute House Bill No. 1469, as amended by the Senate, and the bill passed the Senate by the following vote: Yeas, 44; Nays, 0; Absent, 1; Excused, 4.

     Voting yea: Senators Anderson, Bauer, Bluechel, Deccio, Drew, Erwin, Franklin, Fraser, Gaspard, Hargrove, Haugen, Hochstatter, Jesernig, McAuliffe, McCaslin, McDonald, Moore, Moyer, Nelson, Newhouse, Niemi, Oke, Owen, Pelz, Prentice, Prince, Quigley, Rasmussen, M., Roach, Sellar, Sheldon, Skratek, Smith, A., Smith, L., Snyder, Spanel, Sutherland, Talmadge, Vognild, von Reichbauer, West, Williams, Winsley and Wojahn - 44.

     Absent: Senator Rinehart - 1.

     Excused: Senators Amondson, Barr, Cantu and Loveland - 4.

     SUBSTITUTE HOUSE BILL NO. 1469, as amended by the Senate, having received the constitutional majority, was declared passed. There being no objection, the title of the bill was ordered to stand as the title of the act.


SECOND READING


     SUBSTITUTE HOUSE BILL NO. 1741, by House Committee on Judiciary (originally sponsored by Representatives Appelwick, Ludwig, Johanson and Orr)

 

Revising penalties for ignoring traffic tickets.


     The bill was read the second time.


MOTION


     Senator Adam Smith moved that the following Committee on Law and Justice amendments be considered simultaneously and be adopted:

     On page 3, after line 18, insert the following:

      "Sec. 4. RCW 46.20.285 and 1990 c 250 s 43 are each amended to read as follows:

      The department shall forthwith revoke the license of any driver for the period of one calendar year unless otherwise provided in this section, upon receiving a record of the driver's conviction of any of the following offenses, when the conviction has become final:

      (1) For vehicular homicide the period of revocation shall be two years;

      (2) Vehicular assault;

      (3) Driving a motor vehicle while under the influence of intoxicating liquor or a narcotic drug, or under the influence of any other drug to a degree which renders the driver incapable of safely driving a motor vehicle, upon a showing by the department's records that the conviction is the second such conviction for the driver within a period of five years. Upon a showing that the conviction is the third such conviction for the driver within a period of five years, the period of revocation shall be two years;

      (4) Any felony in the commission of which a motor vehicle is used;

      (5) Failure to stop and give information or render aid as required under the laws of this state in the event of a motor vehicle accident resulting in the death or personal injury of another or resulting in damage to a vehicle that is driven or attended by another;

      (6) Perjury or the making of a false affidavit or statement under oath to the department under Title 46 RCW or under any other law relating to the ownership or operation of motor vehicles;

      (7) Reckless driving upon a showing by the department's records that the conviction is the third such conviction for the driver within a period of two years;

      (8) A violation of the federal or state Uniform Controlled Substances Act."

      Renumber the sections following consecutively and correct internal references accordingly.

      On page 4, line 33, after "RCW 46.20.308;" strike "or" and insert "((or))"

      On page 4, line 34, after "RCW 46.20.265" insert "; or (g) six months after the individual applies for the issuance or reinstatement of the driver's license if the individual does not have a driver's license or the driver's license of the individual is suspended at the time the individual is convicted of a violation of the federal or state Uniform Controlled Substances Act"

      On page 10, after line 38, insert the following:

      "NEW SECTION. Sec. 8. A new section is added to chapter 46.61 RCW to read as follows:

      (1)(a) The court shall confiscate from every person who is convicted of a second violation of RCW 46.61.502 or 46.61.504 within a five-year period the Washington state vehicle registration and vehicle license plates of the vehicle the person was driving at the time of the violation, if the person is the owner of the vehicle, and if the person is not the owner of the vehicle, the court shall confiscate the Washington state vehicle registration and vehicle license plates of a vehicle owned by the person, if any. The person shall have seven days to surrender the Washington state vehicle registration and vehicle license plates.

      (b) The Washington state vehicle registration and vehicle license plates shall be held for a period of ninety days from the date of surrender.

      (c) The court shall immediately notify the department of licensing of the confiscation and the duration of the confiscation. No Washington state vehicle registration or vehicle license plates may be reissued for the vehicle by the department to the person during the period of confiscation.

      (d) No confiscation under this section affects the right of any person to transfer or acquire title in the vehicle, or the right of any person other than the arrested driver to become the registered owner of the vehicle.

      (e) In any case provided for in this section, where a Washington state vehicle registration or vehicle license is to be confiscated, the confiscation shall be stayed and shall not take effect until after the determination of any appeal from the conviction which may lawfully be taken, but in case the conviction is sustained on appeal the confiscation takes effect as of the date that the conviction becomes effective for other purposes.

      (2)(a) On a third or subsequent conviction for a violation of RCW 46.61.502 or 46.61.504 within a five-year period the motor vehicle the person was driving at the time of the violation, if the person is the owner of the vehicle, shall be seized by a law enforcement officer of this state upon process issued by the court issuing the conviction.

      (b) Proceedings for forfeiture shall be deemed commenced by the seizure. The law enforcement agency under whose authority the seizure was made shall cause notice to be served within fifteen days following the seizure on the owner of the vehicle seized and the person in charge thereof and any person having any known right or interest therein, including any community property interest, of the seizure and intended forfeiture of the seized vehicle. The notice of seizure may be served by any method authorized by law or court rule including but not limited to service by certified mail with return receipt requested. Service by mail shall be deemed complete upon mailing within the fifteen-day period following the seizure.

      (c) If no person notifies the seizing law enforcement agency in writing of the person's claim of ownership or right to possession of the vehicle within forty-five days of the seizure, the vehicle seized shall be deemed forfeited.

      (d) If any person notifies the seizing law enforcement agency in writing of the person's claim of ownership or right to possession of the vehicle within forty-five days of the seizure, the person or persons shall be afforded a reasonable opportunity to be heard as to the claim or right. The hearing shall be before the chief law enforcement officer of the seizing agency or the chief law enforcement officer's designee, except where the seizing agency is a state agency as defined in RCW 34.12.020(4), the hearing shall be before the chief law enforcement officer of the seizing agency or an administrative law judge appointed under chapter 34.12 RCW, except that any person asserting a claim or right may remove the matter to a court of competent jurisdiction if the value of the vehicle involved is more than five hundred dollars. The court to which the matter is to be removed shall be the district court when the value of the vehicle is within the jurisdictional limit set forth in RCW 3.66.020. A hearing before the seizing agency and any appeal therefrom shall be under Title 34 RCW. In a court hearing between two or more claimants to the vehicle, the prevailing party shall be entitled to a judgment for costs and reasonable attorneys' fees. The burden of producing evidence shall be upon the person claiming to be the lawful owner or the person claiming to have the lawful right to possession of the vehicle. The seizing law enforcement agency shall promptly return the vehicle to the claimant upon a determination by the administrative law judge or court that the claimant is the present lawful owner or is lawfully entitled to possession thereof.

      (e) When a vehicle is forfeited under this chapter the seizing law enforcement agency may:

      (i) Retain it for official use or upon application by any law enforcement agency of this state release such vehicle to such agency for the exclusive use of enforcing the provisions of this chapter;

      (ii) Sell the vehicle; or

      (iii) Remove it for disposition in accordance with law.

      (f)(i) When a vehicle is forfeited, the seizing agency shall keep a record indicating the identity of the prior owner, if known, a description of the vehicle, the disposition of the vehicle, the value of the vehicle at the time of seizure, and the amount of proceeds realized from disposition of the vehicle.

      (ii) Each seizing agency shall retain records of forfeited vehicles for at least seven years.

      (iii) Each seizing agency shall file a report including a copy of the records of forfeited vehicles with the state treasurer each calendar quarter.

      (iv) The quarterly report need not include a record of forfeited vehicles that are still being held for use as evidence during the investigation or prosecution of a case or during the appeal from a conviction.

      (g) Forfeited vehicles and net proceeds shall be retained by the seizing law enforcement agency exclusively for the expansion and improvement of law enforcement activity. Money retained under this section may not be used to supplant preexisting funding sources.

      (h) A forfeiture of a motor vehicle encumbered by a bona fide security interest is subject to the interest of the secured party."

      Renumber the remaining sections consecutively and correct any internal references accordingly.


POINT OF ORDER


     Senator Newhouse: "Mr. President, I rise to a point of order. I rise to a point of order that the scope and object of these amendments expand the bill. The bill itself addressed the area of failure to appear in answer to traffic tickets. These amendments go considerably further and talk about confiscations of automobiles and things like that."


POINT OF ORDER


     Senator Niemi: "Mr. President, I also rise to a point of order. My point of order is with two committee amendments, one on page 3, after line 18, and one on page 4, after line 33. Those two committee amendments deal with the addition of a violation of the Uniform Controlled Substances Act. They amend two portions of Title 46 which deals with various traffic infractions or ownership of motor vehicles and I suggest that the Uniform Controlled Substances Act has nothing to do with either of those."


MOTION


     On motion of Senator Jesernig, further consideration of Substitute House Bill No. 1741 was deferred.


STATEMENT FOR THE JOURNAL


     Due to work on the Conference Committee on Health Care Reform or business in Seattle, I missed the votes on: Engrossed Substitute House Bill No. 1464, as amended by the Senate; Engrossed Substitute House Bill No. 1089, as amended by the Senate; Engrossed Substitute House Bill No. 1806, as amended by the Senate; Engrossed Second Substitute Senate Bill No. 5451; Substitute Senate Bill No. 5966; Senate Bill No. 5984; Engrossed Substitute Senate Bill No. 5605; Substitute House Bill No. 2036, as amended by the Senate; Substitute House Bill No. 1907, as amended by the Senate; Substitute House Bill No. 1128, as amended by the Senate; and Engrossed Substitute House Bill No. 1236, as amended by the Senate.

     I would have voted 'yes' on the measures.

SENATOR PHIL TALMADGE, 34th District


SECOND READING


     ENGROSSED SUBSTITUTE HOUSE BILL NO. 1464, by House Committee on Local Government (originally sponsored by Representatives Horn, H. Myers, Edmondson, Rayburn, Bray, R. Fisher, Zellinsky and Springer)

 

Making laws relating to local government office vacancies more uniform.


     The bill was read the second time.


MOTION


     Senator Haugen moved that the following Committee on Government Operations amendment be adopted:

     Strike everything after the enacting clause and insert the following:

      "NEW SECTION. Sec. 1. A new section is added to chapter 42.12 RCW to read as follows:

      A vacancy on an elected nonpartisan governing body of a special purpose district where property ownership is not a qualification to vote, a town, or a city other than a first class city or a charter code city, shall be filled as follows unless the provisions of law relating to the special district, town, or city provide otherwise:

      (1) Where one position is vacant, the remaining members of the governing body shall appoint a qualified person to fill the vacant position.

      (2) Where two or more positions are vacant and two or more members of the governing body remain in office, the remaining members of the governing body shall appoint a qualified person to fill one of the vacant positions, the remaining members of the governing body and the newly appointed person shall appoint another qualified person to fill another vacant position, and so on until each of the vacant positions is filled with each of the new appointees participating in each appointment that is made after his or her appointment.

      (3) If less than two members of a governing body remain in office, the county legislative authority of the county in which all or the largest geographic portion of the city, town, or special district is located shall appoint a qualified person or persons to the governing body until the governing body has two members.

      (4) If a governing body fails to appoint a qualified person to fill a vacancy within ninety days of the occurrence of the vacancy, the authority of the governing body to fill the vacancy shall cease and the county legislative authority of the county in which all or the largest geographic portion of the city, town, or special district is located shall appoint a qualified person to fill the vacancy.

      (5) If the county legislative authority of the county fails to appoint a qualified person within one hundred eighty days of the occurrence of the vacancy, the county legislative authority or the remaining members of the governing body of the city, town, or special district may petition the governor to appoint a qualified person to fill the vacancy. The governor may appoint a qualified person to fill the vacancy after being petitioned if at the time the governor fills the vacancy the county legislative authority has not appointed a qualified person to fill the vacancy.

      (6) As provided in RCW 29.15.190 and 29.21.410, each person who is appointed shall serve until a qualified person is elected at the next election at which a member of the governing body normally would be elected that occurs twenty-eight or more days after the occurrence of the vacancy. If needed, special filing periods shall be authorized as provided in RCW 29.15.170 and 29.15.180 for qualified persons to file for the vacant office. A primary shall be held to nominate candidates if sufficient time exists to hold a primary and more than two candidates file for the vacant office. Otherwise, a primary shall not be held and the person receiving the greatest number of votes shall be elected. The person elected shall take office immediately and serve the remainder of the unexpired term.

      If an election for the position that became vacant would otherwise have been held at this general election date, only one election to fill the position shall be held and the person elected to fill the succeeding term for that position shall take office immediately when qualified as defined in RCW 29.01.135 and shall service both the remainder of the unexpired term and the succeeding term.

      Sec. 2. RCW 42.12.010 and 1981 c 180 s 4 are each amended to read as follows:

      Every elective office shall become vacant on the happening of any of the following events:

      (1) The death of the incumbent;

      (2) His or her resignation. A vacancy caused by resignation shall be deemed to occur upon the effective date of the resignation;

      (3) His or her removal;

      (4) His or her ceasing to be a legally ((qualified elector)) registered voter of the district, county, city, town, or other municipal or quasi municipal corporation from which he or she shall have been elected or appointed, including where applicable the council district, commissioner district, or ward from which he or she shall have been elected or appointed;

      (5) His or her conviction of a felony, or of any offense involving a violation of his or her official oath;

      (6) His or her refusal or neglect to take his or her oath of office, or to give or renew his or her official bond, or to deposit such oath or bond within the time prescribed by law;

      (7) The decision of a competent tribunal declaring void his or her election or appointment; or

      (8) Whenever a judgment shall be obtained against that incumbent for breach of the condition of his or her official bond.

      Sec. 3. RCW 43.06.010 and 1992 c 172 s 1 are each amended to read as follows:

      In addition to those prescribed by the Constitution, the governor may exercise the powers and perform the duties prescribed in this and the following sections:

      (1) The governor shall supervise the conduct of all executive and ministerial offices;

      (2) The governor shall see that all offices are filled, including as provided in section 1 of this act and the duties thereof performed, or in default thereof, apply such remedy as the law allows; and if the remedy is imperfect, acquaint the legislature therewith at its next session;

      (3) The governor shall make the appointments and supply the vacancies mentioned in this title;

      (4) The governor is the sole official organ of communication between the government of this state and the government of any other state or territory, or of the United States;

      (5) Whenever any suit or legal proceeding is pending against this state, or which may affect the title of this state to any property, or which may result in any claim against the state, the governor may direct the attorney general to appear on behalf of the state, and report the same to the governor, or to any grand jury designated by the governor, or to the legislature when next in session;

      (6) The governor may require the attorney general or any prosecuting attorney to inquire into the affairs or management of any corporation existing under the laws of this state, or doing business in this state, and report the same to the governor, or to any grand jury designated by the governor, or to the legislature when next in session;

      (7) The governor may require the attorney general to aid any prosecuting attorney in the discharge of ((his)) the prosecutor's duties;

      (8) The governor may offer rewards, not exceeding one thousand dollars in each case, payable out of the state treasury, for information leading to the apprehension of any person convicted of a felony who has escaped from a state correctional institution or for information leading to the arrest of any person who has committed or is charged with the commission of a felony;

      (9) The governor shall perform such duties respecting fugitives from justice as are prescribed by law;

      (10) The governor shall issue and transmit election proclamations as prescribed by law;

      (11) The governor may require any officer or board to make, upon demand, special reports to the governor, in writing;

      (12) The governor may, after finding that a public disorder, disaster, energy emergency, or riot exists within this state or any part thereof which affects life, health, property, or the public peace, proclaim a state of emergency in the area affected, and the powers granted the governor during a state of emergency shall be effective only within the area described in the proclamation;

      (13) The governor shall, when appropriate, submit to the select joint committee created by RCW 43.131.120, lists of state agencies, as defined by RCW 43.131.030, which agencies might appropriately be scheduled for termination by a bill proposed by the select joint committee;

      (14) The governor may, after finding that there exists within this state an imminent danger of infestation of plant pests as defined in RCW 17.24.007 or plant diseases which seriously endangers the agricultural or horticultural industries of the state of Washington, or which seriously threatens life, health, or economic well-being, order emergency measures to prevent or abate the infestation or disease situation, which measures, after thorough evaluation of all other alternatives, may include the aerial application of pesticides;

      (15) On all compacts forwarded to the governor pursuant to RCW 9.46.360(6), the governor is authorized and empowered to execute on behalf of the state compacts with federally recognized Indian tribes in the state of Washington pursuant to the federal Indian Gaming Regulatory Act, 25 U.S.C. Sec. 2701 et seq., for conducting class III gaming, as defined in the Act, on Indian lands.

      Sec. 4. RCW 14.08.304 and 1979 ex.s. c 126 s 3 are each amended to read as follows:

      The board of airport district commissioners shall consist of three members((, who shall each be a registered voter and actually a resident of the district)). The first commissioners shall be appointed by the county legislative authority. At the next general district election, held as provided in RCW 29.13.020, three airport district commissioners shall be elected. The terms of office of airport district commissioners shall be two years, or until their successors are elected and qualified and have assumed office in accordance with RCW 29.04.170. Members of the board of airport district commissioners shall be elected at each regular district general election on a nonpartisan basis in accordance with the general election law. ((They shall be nominated by petition of ten registered voters of the district.)) Vacancies on the board of airport district commissioners shall occur and shall be filled ((by appointment by the remaining commissioners)) as provided in chapter 42.12 RCW. Members of the board of airport district commissioners shall receive no compensation for their services, but shall be reimbursed for actual necessary traveling and sustenance expenses incurred while engaged on official business.

      Sec. 5. RCW 28A.315.520 and 1971 c 53 s 4 are each amended to read as follows:

      A majority of all members of the board of directors shall constitute a quorum. Absence of any board member from four consecutive regular meetings of the board, unless on account of sickness or authorized by resolution of the board, shall be sufficient cause for the remaining members of the board to declare by resolution that such board member position is vacated. In addition, vacancies shall occur as provided in RCW 42.12.010.

      NEW SECTION. Sec. 6. A new section is added to chapter 29.15 RCW to read as follows:

      If, after the close of the period established by RCW 29.15.020 for filing declarations of candidacy for the office of superintendent of public instruction or the nonpartisan elective office of a county, city, town, or special purpose district, no candidate or only one candidate has filed such a declaration for the nonpartisan office, the closure of the filing period for the office shall be extended. The extended filing period shall close at the end of business on the first Friday following the normal closing of that period under RCW 29.15.020.

      Declarations and affidavits of candidacy filed during this extended filing period for the office shall be filed in the same manner, with the same fees or petitions, and with the same officer as prescribed for filings made under RCW 29.15.020. The names of candidates who validly file within this extension of the filing period shall appear on the ballot as if the filings had been made during the normal filing period under RCW 29.15.020.

      The requirements of this section apply to a nonpartisan office of a county unless the provisions of the county's home rule charter provide otherwise. This section does not apply to a judicial office.

      Sec. 7. RCW 29.15.050 and 1990 c 59 s 85 are each amended to read as follows:

      A filing fee of one dollar shall accompany each declaration of candidacy for precinct committee officer; a filing fee of ((ten)) twenty dollars shall accompany the declaration of candidacy for any office with a fixed annual salary of one thousand dollars or less; a filing fee equal to one percent of the annual salary of the office at the time of filing shall accompany the declaration of candidacy for any office with a fixed annual salary of more than one thousand dollars per annum. No filing fee need accompany a declaration of candidacy for any office for which compensation is on a per diem or per meeting attended basis, nor for the filing of any declaration of candidacy by a write-in candidate.

      A candidate who lacks sufficient assets or income at the time of filing to pay the filing fee required by this section shall submit with his or her declaration of candidacy a nominating petition. The petition shall contain not less than a number of signatures of registered voters equal to the number of dollars of the filing fee. The signatures shall be of voters registered to vote within the jurisdiction of the office for which the candidate is filing.

      When the candidacy is for((:

      (1))) a legislative or judicial office that includes territory from more than one county, the fee shall be paid to the secretary of state for equal division between the treasuries of the counties comprising the district.

      (((2) A city or town office, the fee shall be paid to the county auditor who shall transmit it to the city or town clerk for deposit in the city or town treasury.))

      Sec. 8. RCW 29.15.120 and 1990 c 59 s 86 are each amended to read as follows:

      A candidate may withdraw his or her declaration of candidacy at any time before the close of business on the Thursday following the last day for candidates to file under RCW 29.15.020 by filing, with the officer with whom the declaration of candidacy was filed, a signed request that his or her name not be printed on the ballot. There shall be no withdrawal period for declarations of candidacy filed during extended or special filing periods held under this title. The filing officer may permit the withdrawal of a filing for the office of precinct committee officer at the request of the candidate at any time if no absentee ballots have been issued for that office and the general election ballots for that precinct have not been printed. The filing officer may permit the withdrawal of a filing for any elected office of a city, town, or special district at the request of the candidate at any time before a primary if the primary ballots for that city, town, or special district have not been ordered. No filing fee may be refunded to any candidate who withdraws under this section. Notice of the deadline for withdrawal of candidacy and that the filing fee is not refundable shall be given to each candidate at the time he or she files.

      NEW SECTION. Sec. 9. A new section is added to chapter 29.15 RCW to read as follows:

      Each person who files a declaration of candidacy for an elected office of a city, town, or special district shall be given written notice of the date by which a candidate may withdraw his or her candidacy under RCW 29.15.120.

      Sec. 10. RCW 29.15.150 and 1973 c 4 s 3 are each amended to read as follows:

      Whenever it shall be necessary to hold a special election in an odd-numbered year to fill an unexpired term of any office which is scheduled to be voted upon for a full term in an even-numbered year, no September primary election shall be held in the odd-numbered year if, after the last day allowed for candidates to withdraw or after the end of an extended filing period provided by section 6 of this act, either of the following circumstances exist:

      (1) No more than one candidate of each qualified political party has filed a declaration of candidacy for the same partisan office to be filled; or

      (2) No more than two candidates have filed a declaration of candidacy for a single nonpartisan office to be filled.

      In either event, the officer with whom the declarations of candidacy were filed shall immediately notify all candidates concerned and the names of the candidates that would have been printed upon the September primary ballot, but for the provisions of this section, shall be printed as nominees for the positions sought upon the November general election ballot.

      Sec. 11. RCW 29.15.160 and 1975-'76 2nd ex.s. c 120 s 9 are each amended to read as follows:

      A void in candidacy for a nonpartisan office occurs when an election for such office, except for the short term, has been scheduled and ((no valid declaration of candidacy has been filed for the position or)) all persons filing ((such)) valid declarations of candidacy for the office have died or been disqualified.

      Sec. 12. RCW 29.15.170 and 1975-'76 2nd ex.s. c 120 s 10 are each amended to read as follows:

      Filings for a nonpartisan office shall be reopened for a period of three normal business days, such three day period to be fixed by the election officer with whom such declarations of candidacy are filed and notice thereof given by notifying press, radio, and television in the county and by such other means as may now or hereafter be provided by law whenever before the fourth Tuesday prior to a primary:

      (1) A valid declaration of candidacy has not been filed for a judicial office during the normal filing period for the office;

      (2) All of the candidates who have filed for a nonpartisan office have withdrawn their candidacies;

      (3) A void in candidacy occurs;

      (((2))) (4) A vacancy occurs in any nonpartisan office leaving an unexpired term to be filled by an election for which filings have not been held; or

      (((3))) (5) A nominee for judge of the superior court entitled to a certificate of election pursuant to Article 4, section 29, Amendment 41 of the state Constitution, dies or is disqualified.

      Candidacies validly filed within ((said)) the three-day period shall appear on the ballot as if made during the earlier filing period.

      Sec. 13. RCW 29.15.200 and 1975-'76 2nd ex.s. c 120 s 13 are each amended to read as follows:

      If, after ((both)) the normal filing period ((and)) for which an extension of the filing period is not required by section 6 of this act, after such an extended filing period, or after a special three day filing period as provided by RCW 29.15.170 and 29.15.180((, as now or hereafter amended, have passed and still)), no candidate has filed for any single city, town, or district position to be filled, the election for such position shall be deemed lapsed, the office deemed stricken from the ballot and no write-in votes counted. In such instance, the incumbent occupying such position shall remain in office and continue to serve until ((his)) a successor is elected at the next election when such positions are voted upon ((as provided by RCW 29.21.410, as now or hereafter amended)).

      Sec. 14. RCW 29.21.015 and 1990 c 59 s 90 are each amended to read as follows:

      No primary may be held for any single position in any city, town, or district, as required by RCW 29.21.010, if, after the last day allowed for candidates to withdraw or after the end of an extended or special filing period, there are no more than two candidates filed for the position. The county auditor shall, as soon as possible, notify all the candidates so affected that the office for which they filed will not appear on the primary ballot. Names of candidates so notified shall be printed upon the general election ballot in the manner specified by RCW 29.30.025.

      NEW SECTION. Sec. 15. A new section is added to chapter 35.02 RCW to read as follows:

      An election shall be held to elect city or town elected officials at the next municipal general election occurring more than twelve months after the date of the first election of councilmembers or commissioners. Candidates shall run for specific council or commission positions. The staggering of terms of members of the city or town council shall be established at this election, where the simple majority of the persons elected as councilmembers receiving the greatest numbers of votes shall be elected to four-year terms of office and the remainder of the persons elected as councilmembers shall be elected to two-year terms of office. Newly elected councilmembers or newly elected commissioners shall serve until their successors are elected and qualified. The terms of office of newly elected commissioners shall not be staggered, as provided in chapter 35.17 RCW. All councilmembers and commissioners who are elected subsequently shall be elected to four-year terms of office and shall serve until their successors are elected and qualified and assume office in accordance with RCW 29.04.170.

      Sec. 16. RCW 35.17.020 and 1979 ex.s. c 126 s 17 are each amended to read as follows:

      All regular elections in cities organized under the statutory commission form of government shall be held quadrennially in the odd-numbered years on the dates provided in RCW 29.13.020. The commissioners shall be nominated and elected at large. Their terms shall be for four years and until their successors are elected and qualified and assume office in accordance with RCW 29.04.170. ((If a vacancy occurs in the commission the remaining members shall appoint a person to fill it for the unexpired term.)) Vacancies on a commission shall occur and shall be filled as provided in chapter 42.12 RCW, except that in every instance a person shall be elected to fill the remainder of the unexpired term at the next general municipal election that occurs twenty-eight or more days after the occurrence of the vacancy.

      Sec. 17. RCW 35.17.400 and 1979 ex.s. c 126 s 18 are each amended to read as follows:

      The first election of commissioners shall be held ((within)) at the next special election that occurs at least sixty days after the ((adoption of)) election results are certified where the proposition to organize under the commission form was approved by city voters, and the commission first elected shall commence to serve as soon as they have been elected and have qualified and shall continue to serve until their successors have been elected and qualified and have assumed office in accordance with RCW 29.04.170. The date of the second election for commissioners shall be in accordance with RCW 29.13.020 such that the term of the first commissioners will be as near as possible to, but not in excess of, four years calculated from the first day in January in the year after the year in which the first commissioners were elected.

      Sec. 18. RCW 35.18.020 and 1981 c 260 s 7 are each amended to read as follows:

      (1) The number of ((councilmen)) councilmembers in a city or town operating with a council-manager plan of government shall be ((in proportion to the population of the city or town indicated in its petition for incorporation and thereafter shall be in proportion to its population as last)) based upon the latest population of the city or town that is determined by the office of financial management as follows:

      (a) A city or town having not more than two thousand inhabitants, five ((councilmen)) councilmembers; and

      (b) A city or town having more than two thousand, seven ((councilmen)) councilmembers.

      (2) ((All councilmen shall be elected at large or from such wards or districts as may be established by ordinance, and shall serve for a term of four years and until their successors are elected and qualified and assume office in accordance with RCW 29.04.170: PROVIDED, HOWEVER, That at the first general municipal election held in the city in accordance with RCW 29.13.020, after the election approving the council-manager plan, the following shall apply:

      (a) One councilman shall be nominated and elected from each ward or such other existing district of said city as may have been established for the election of members of the legislative body of the city and the remaining councilmen shall be elected at large; but if there are no such wards or districts in the city, or at an initial election for the incorporation of a community, the councilmen shall be elected at large.

      (b) In cities electing five councilmen, the candidates having the three highest number of votes shall be elected for a four year term and the other two for a two year term commencing immediately when qualified in accordance with RCW 29.01.135 and continuing until their successors are elected and qualified and have assumed office in accordance with RCW 29.04.170.

      (c) In cities electing seven councilmen, the candidates having the four highest number of votes shall be elected for a four year term and the other three for a two year term commencing immediately when qualified in accordance with RCW 29.01.135 and continuing until their successors are elected and qualified and have assumed office in accordance with RCW 29.04.170.

      (d) In determining the candidates receiving the highest number of votes, only the candidate receiving the highest number of votes in each ward, as well as the councilman-at-large or councilmen-at-large, are to be considered)) Except for the initial staggering of terms, councilmembers shall serve for four-year terms of office. All councilmembers shall serve until their successors are elected and qualified and assume office in accordance with RCW 29.04.170. Councilmembers may be elected on a city-wide or town-wide basis, or from wards or districts, or any combination of these alternatives. Candidates shall run for specific positions. Wards or districts shall be redrawn as provided in chapter 29.70 RCW. Wards or districts shall be used as follows: (a) Only a resident of the ward or district may be a candidate for, or hold office as, a councilmember of the ward or district; and (b) only voters of the ward or district may vote at a primary to nominate candidates for a councilmember of the ward or district. Voters of the entire city or town may vote at the general election to elect a councilmember of a ward or district, unless the city or town had prior to January 1, 1993, limited the voting in the general election for any or all council positions to only voters residing within the ward or district associated with the council positions. If a city or town had so limited the voting in the general election to only voters residing within the ward or district, then the city or town shall be authorized to continue to do so.

      (3) When a ((municipality)) city or town has qualified for an increase in the number of ((councilmen)) councilmembers from five to seven by virtue of the next succeeding population determination made by the office of financial management ((after the majority of the voters thereof have approved operation under the council-manager plan)), two additional council positions shall be filled at the ((first)) next municipal general election ((when two additional councilmen are to be elected, one of the two additional councilmen receiving)) with the person elected to one of the new council positions receiving the ((highest)) greatest number of votes ((shall be)) being elected for a four-year term of office and the person elected to the other additional ((councilman shall be)) council position being elected for a two-year term of office. The ((terms of the)) two additional ((councilmen)) councilmembers shall ((commence)) assume office immediately when qualified in accordance with RCW 29.01.135, but the term of office shall be computed from the first day of January after the year in which they are elected. Their successors shall be elected to four-year terms of office.

      (((4) In the event such population determination as provided in subsection (3) of this section requires an increase in the number of councilmen)) Prior to the election of the two new councilmembers, the city or town council shall fill the additional ((councilmanic)) positions by appointment not later than ((thirty)) forty-five days following the release of ((said)) the population determination, and ((the)) each appointee shall hold office only until ((the next regular city or town election at which a person shall be elected to serve for the remainder of the unexpired term. In the event such population determination results in a decrease in the number of councilmen, said decrease shall not take effect until the next regular city or town election: PROVIDED, That)) the new position is filled by election.

      (4) When a city or town has qualified for a decrease in the number of councilmembers from seven to five by virtue of the next succeeding population determination made by the office of financial management, two council positions shall be eliminated at the next municipal general election if four council positions normally would be filled at that election, or one council position shall be eliminated at each of the next two succeeding municipal general elections if three council positions normally would be filled at the first municipal general election after the population determination. The council shall by ordinance indicate which, if any, of the remaining positions shall be elected at-large or from wards or districts.

      (5) ((If a vacancy in the council occurs, the remaining members shall appoint a person to fill such office only until the next regular general municipal election at which a person shall be elected to serve for the remainder of the unexpired term)) Vacancies on a council shall occur and shall be filled as provided in chapter 42.12 RCW.

      Sec. 19. RCW 35.18.270 and 1979 ex.s. c 126 s 20 are each amended to read as follows:

      If the majority of the votes cast at a special election for organization on the council-manager plan favor the plan, the city or town ((at its next regular election)) shall elect the council required under the council-manager plan in number according to ((the)) its population ((of the municipality: PROVIDED, That if the date of the next municipal general election is more than one year from the date of the election approving the council-manager plan, a special election shall be held to elect the councilmen; the newly elected councilmen shall assume office immediately when they are qualified in accordance with RCW 29.01.135 following the canvass of votes as certified and shall remain in office until their successors are elected at the next general municipal election: PROVIDED, That such successor shall hold office for staggered terms as provided in RCW 35.18.020 as now or hereafter amended. Councilmen shall take office at the time provided by general law. Declarations of candidacy for city or town elective positions under the council-manager plan for cities and towns shall be filed with the county auditor as the case may be not more than forty-five nor less than thirty days prior to said special election to elect the members of the city council. Any candidate may file a written declaration of withdrawal at any time within five days after the last day for filing a declaration of candidacy. All names of candidates to be voted upon shall be printed upon the ballot alphabetically in group under the designation of the title of the offices for which they are candidates. There shall be no rotation of names)) at the next municipal general election. However, special elections shall be held to nominate and elect the new city councilmembers at the next primary and general election held in an even-numbered year if the next municipal general election is more than one year after the date of the election at which the voters approved the council-manager plan. The staggering of terms of office shall occur at the election when the new councilmembers are elected, where the simple majority of the persons elected as councilmembers receiving the greatest numbers of votes shall be elected to four-year terms of office if the election is held in an odd-numbered year, or three-year terms of office if the election is held in an even-numbered year, and the remainder of the persons elected as councilmembers shall be elected to two-year terms of office if the election is held in an odd-numbered year, or one-year terms of office if the election is held in an even-numbered year. The initial councilmembers shall take office immediately when they are elected and qualified, but the lengths of their terms of office shall be calculated from the first day in January in the year following the election.

      Sec. 20. RCW 35.23.050 and 1965 c 7 s 35.23.050 are each amended to read as follows:

      All municipal elections held under the provisions of this chapter shall be conducted according to the general election laws of this state((, as far as practicable: PROVIDED, That any qualified voter of such city, duly registered for the general county or state election next preceding any municipal election, general or special, shall be qualified to vote at such municipal election. No person shall be qualified to vote at such election unless he is a qualified elector of the county and has resided in such city for at least thirty days next preceding such election)).

      Sec. 21. RCW 35.23.240 and 1965 c 7 s 35.23.240 are each amended to read as follows:

      The city council may declare an office vacant: (1) If anyone either elected or appointed to that office fails for ten days to qualify as required by law or fails to enter upon ((his)) the duties of that office at the time fixed by law or the orders of the city council, ((his)) the office shall become vacant; or (2) if such an officer ((absents himself)) who serves for compensation is absent from the city without the consent of the city council for three consecutive weeks or openly neglects or refuses to discharge ((his)) the duties((, the council may declare his office vacant: PROVIDED, That this penalty for absence from the city shall not apply to such officers as serve without compensation.

      If a vacancy occurs by reason of death, resignation, or otherwise in the office of mayor or councilman, the city council shall fill the vacancy until the next general municipal election)) of that office. In addition, a vacancy in an elective office shall occur and shall be filled as provided in chapter 42.12 RCW.

      If a vacancy occurs ((by reason of death, resignation, or otherwise)) in any other office it shall be filled by appointment of the mayor and confirmed by the council in the same manner as other appointments are made.

      Sec. 22. RCW 35.23.530 and 1965 c 7 s 35.23.530 are each amended to read as follows:

      At any time not within three months previous to an annual election the city council of a second class city may divide the city into wards, not exceeding six in all, or change the boundaries of existing wards. No change in the boundaries of wards shall affect the term of any ((councilman, but he)) councilmember, and councilmembers shall serve out ((his)) their terms in the wards of ((his)) their residences at the time of ((his election: PROVIDED, That if this results)) their elections. However, if these boundary changes result in one ward being represented by more ((councilmen)) councilmembers than the number to which it is entitled, those having the shortest unexpired terms shall be assigned by the council to wards where there is a vacancy, and the councilmembers so assigned shall be deemed to be residents of the wards to which they are assigned for purposes of determining whether those positions are vacant.

      The representation of each ward in the city council shall be in proportion to the population as nearly as is practicable.

      ((No person shall be eligible to the office of councilman unless he resides in the ward for which he is elected on the date of his election and removal of his residence from the ward for which he was elected renders his office vacant.))

      Wards shall be redrawn as provided in chapter 29.70 RCW. Wards shall be used as follows: (1) Only a resident of the ward may be a candidate for, or hold office as, a councilmember of the ward; and (2) only voters of the ward may vote at a primary to nominate candidates for a councilmember of the ward. Voters of the entire city may vote at the general election to elect a councilmember of a ward, unless the city had prior to January 1, 1993, limited the voting in the general election for any or all council positions to only voters residing within the ward associated with the council positions. If a city had so limited the voting in the general election to only voters residing within the ward, then the city shall be authorized to continue to do so. The elections for the remaining council position or council positions that are not associated with a ward shall be conducted as if the wards did not exist.

      Sec. 23. RCW 35.24.050 and 1979 ex.s. c 126 s 22 are each amended to read as follows:

      General municipal elections in third class cities not operating under the commission form of government shall be held biennially in the odd-numbered years ((as provided in RCW 29.13.020)) and shall be subject to general election law.

      The terms of office of the mayor, city attorney, clerk, and treasurer shall be four years and until their successors are elected and qualified and assume office in accordance with RCW 29.04.170: PROVIDED, That if the offices of city attorney, clerk, and treasurer are made appointive, the city attorney, clerk, and treasurer shall not be appointed for a definite term: PROVIDED FURTHER, That the term of the elected treasurer shall not commence in the same biennium in which the term of the mayor commences, nor in which the terms of the city attorney and clerk commence if they are elected.

      ((A councilman-at-large shall be elected biennially for a two-year term and until his or her successor is elected and qualified and assumes office in accordance with RCW 29.04.170. Of the other six councilmen, three shall be elected in each biennial general municipal election for terms of four years and until their successors are elected and qualified and assume)) Council positions shall be numbered in each third class city so that council position seven has a two-year term of office and council positions one through six shall each have four-year terms of office. Each councilmember shall remain in office until a successor is elected and qualified and assumes office in accordance with RCW 29.04.170.

      In its discretion the council of a third class city may divide the city by ordinance into a convenient number of wards, not exceeding six, fix the boundaries of the wards, and change the ward boundaries from time to time and as provided in RCW 29.70.100. No change in the boundaries of any ward shall be made within one hundred twenty days next before the date of a general municipal election, nor within twenty months after the wards have been established or altered. However, if a boundary change results in one ward being represented by more councilmembers than the number to which it is entitled, those having the shortest unexpired terms shall be assigned by the council to wards where there is a vacancy, and the councilmembers so assigned shall be deemed to be residents of the wards to which they are assigned for purposes of determining whether those positions are vacant. Whenever such city is so divided into wards, the city council shall designate by ordinance the number of councilmembers to be elected from each ward, apportioning the same in proportion to the population of the wards. Council position seven shall not be associated with a ward and the person elected to that position may reside anywhere in the city and voters throughout the city may vote at a primary to nominate candidates for position seven, when a primary is necessary, and at a general election to elect the person to council position seven. When additional territory is added to the city it may by act of the council, be annexed to contiguous wards without affecting the right to redistrict at the expiration of twenty months after last previous division. Wards shall be redrawn as provided in chapter 29.70 RCW. Wards shall be used as follows: (1) Only a resident of the ward may be a candidate for, or hold office as, a councilmember of the ward; and (2) only voters of the ward may vote at a primary to nominate candidates for a councilmember of the ward. Voters of the entire city may vote at the general election to elect a councilmember of a ward, unless the city had prior to January 1, 1993, limited the voting in the general election for any or all council positions to only voters residing within the ward associated with the council positions. If a city had so limited the voting in the general election to only voters residing within the ward, then the city shall be authorized to continue to do so. The elections for the remaining council position or council positions that are not associated with a ward shall be conducted as if the wards did not exist.

      Sec. 24. RCW 35.24.060 and 1965 c 7 s 35.24.060 are each amended to read as follows:

      All elections shall be held in accordance with the general election laws of the state ((insofar as the same are applicable and no person shall be entitled to vote at any election unless he shall be a qualified elector of the county and shall have resided in such city for at least thirty days next preceding such election)).

      Sec. 25. RCW 35.24.100 and 1965 c 7 s 35.24.100 are each amended to read as follows:

      ((In cities of)) The council of a third class city may declare a council position vacant if ((a member of the city council absents himself)) that councilmember is absent for three consecutive regular meetings ((thereof, unless by)) without the permission of the council((, his office may be declared vacant by the council.

      Vacancies in the city council or in the office of mayor shall be filled by majority vote of the council)). In addition, a vacancy in an elective office shall occur and shall be filled as provided in chapter 42.12 RCW.

      Vacancies in offices other than that of mayor or city ((councilman)) councilmember shall be filled by appointment of the mayor.

      ((If a vacancy occurs in an elective office the appointee shall hold office only until the next regular election at which a person shall be elected to serve for the remainder of the unexpired term.))

      If there is a temporary vacancy in an appointive office due to illness, absence from the city or other temporary inability to act, the mayor may appoint a temporary appointee to exercise the duties of the office until the temporary disability of the incumbent is removed.

      Sec. 26. RCW 35.24.290 and 1986 c 278 s 5 are each amended to read as follows:

      The city council of each third class city shall have power:

      (1) To pass ordinances not in conflict with the Constitution and laws of this state or of the United States;

      (2) To prevent and regulate the running at large of any or all domestic animals within the city limits or any part thereof and to cause the impounding and sale of any such animals;

      (3) To establish, build and repair bridges, to establish, lay out, alter, keep open, open, widen, vacate, improve and repair streets, sidewalks, alleys, squares and other public highways and places within the city, and to drain, sprinkle and light the same; to remove all obstructions therefrom; to establish and reestablish the grades thereof; to grade, plank, pave, macadamize, gravel and curb the same, in whole or in part; to construct gutters, culverts, sidewalks and crosswalks therein or upon any part thereof; to cultivate and maintain parking strips therein, and generally to manage and control all such highways and places; to provide by local assessment for the leveling up and surfacing and oiling or otherwise treating for the laying of dust, all streets within the city limits;

      (4) To establish, construct and maintain drains and sewers, and shall have power to compel all property owners on streets and alleys or within two hundred feet thereof along which sewers shall have been constructed to make proper connections therewith and to use the same for proper purposes, and in case the owners of the property on such streets and alleys or within two hundred feet thereof fail to make such connections within the time fixed by such council, it may cause such connections to be made and assess against the property served thereby the costs and expenses thereof;

      (5) To provide fire engines and all other necessary or proper apparatus for the prevention and extinguishment of fires;

      (6) To impose and collect an annual license on every dog within the limits of the city, to prohibit dogs running at large and to provide for the killing of all dogs not duly licensed found at large;

      (7) To license, for the purposes of regulation and revenue, all and every kind of business authorized by law, and transacted and carried on in such city, and all shows, exhibitions and lawful games carried on therein and within one mile of the corporate limits thereof, to fix the rate of license tax upon the same, and to provide for the collection of the same by suit or otherwise;

      (8) To improve rivers and streams flowing through such city, or adjoining the same; to widen, straighten and deepen the channel thereof, and remove obstructions therefrom; to improve the water-front of the city, and to construct and maintain embankments and other works to protect such city from overflow; to prevent the filling of the water of any bay, except such filling over tide or shorelands as may be provided for by order of the city council; to purify and prevent the pollution of streams of water, lakes or other sources of supply, and for this purpose shall have jurisdiction over all streams, lakes or other sources of supply, both within and without the city limits. Such city shall have power to provide by ordinance and to enforce such punishment or penalty as the city council may deem proper for the offense of polluting or in any manner obstructing or interfering with the water supply of such city or source thereof;

      (9) To erect and maintain buildings for municipal purposes;

      (10) To permit, under such restrictions as it may deem proper, and to grant franchises for, the laying of railroad tracks, and the running of cars propelled by electric, steam or other power thereon, and the laying of gas and water pipes and steam mains and conduits for underground wires, and to permit the construction of tunnels or subways in the public streets, and to construct and maintain and to permit the construction and maintenance of telegraph, telephone and electric lines therein;

      (11) ((In its discretion to divide the city by ordinance, into a convenient number of wards, not exceeding six, to fix the boundaries thereof, and to change the same from time to time: PROVIDED, That no change in the boundaries of any ward shall be made within sixty days next before the date of a general municipal election, nor within twenty months after the wards have been established or altered. Whenever such city is so divided into wards, the city council shall designate by ordinance the number of councilmen to be elected from each ward, apportioning the same in proportion to the population of the wards. Thereafter the councilmen so designated shall be elected by the qualified electors resident in such ward, or by general vote of the whole city as may be designated in such ordinance. When additional territory is added to the city it may by act of the council, be annexed to contiguous wards without affecting the right to redistrict at the expiration of twenty months after last previous division. The removal of a councilman from the ward for which he was elected shall create a vacancy in such office;

      (12))) To impose fines, penalties and forfeitures for any and all violations of ordinances, and for any breach or violation of any ordinance to fix the penalty by fine or imprisonment, or both, but no such fine shall exceed five thousand dollars nor the term of such imprisonment exceed the term of one year; or to provide that violations of ordinances constitute a civil violation subject to monetary penalty;

      (((13))) (12) To establish fire limits, with proper regulations;

      (((14))) (13) To establish and maintain a free public library;

      (((15))) (14) To establish and regulate public markets and market places;

      (((16))) (15) To punish the keepers and inmates and lessors of houses of ill fame, gamblers and keepers of gambling tables, patrons thereof or those found loitering about such houses and places;

      (((17))) (16) To make all such ordinances, bylaws, rules, regulations and resolutions, not inconsistent with the Constitution and laws of the state of Washington, as may be deemed expedient to maintain the peace, good government and welfare of the corporation and its trade, commerce and manufactures, and to do and perform any and all other acts and things necessary or proper to carry out the provisions of this chapter, and to enact and enforce within the limits of such city all other local, police, sanitary and other regulations as do not conflict with general laws;

      (((18))) (17) To license steamers, boats and vessels used in any bay or other watercourse in the city and to fix and collect such license; to provide for the regulation of berths, landings, and stations, and for the removing of steamboats, sail boats, sail vessels, rafts, barges and other watercraft; to provide for the removal of obstructions to navigation and of structures dangerous to navigation or to other property, in or adjoining the waterfront, except in municipalities in counties in which there is a city of the first class.

      Sec. 27. RCW 35.27.100 and 1965 c 7 s 35.27.100 are each amended to read as follows:

      All elections in towns shall be held in accordance with the general election laws of the state((, so far as the same may be applicable; and no person shall be entitled to vote at such election, unless he is a qualified elector of the county, and has resided in the town for at least thirty days next preceding the election)).

      Sec. 28. RCW 35.27.140 and 1965 c 7 s 35.27.140 are each amended to read as follows:

      ((If a member of)) The council of a town may declare a council position vacant if that councilmember is absent from the town for three consecutive council meetings ((unless by)) without the permission of the council ((his office shall be declared vacant by the council. A vacancy in the office of mayor and vacancies in the council shall be filled by a majority vote of the council)). In addition, a vacancy in an elective office shall occur and shall be filled as provided in chapter 42.12 RCW.

      A vacancy in any other office shall be filled by appointment by the mayor. ((An appointee filling the vacancy in an elective office shall hold office only until the next general election at which time a person shall be elected to serve for the remainder of the unexpired term except that the person appointed to fill a vacancy in the office of mayor shall serve for the unexpired term.))

      Sec. 29. RCW 35.61.050 and 1979 ex.s. c 126 s 24 are each amended to read as follows:

      At the same election at which the proposition is submitted to the voters as to whether a metropolitan park district is to be formed, five park commissioners shall be elected ((to hold office respectively for the following terms: Where the election is held in an odd-numbered year, one commissioner shall be elected to hold office for two years, two shall be elected to hold office for four years, and two shall be elected to hold office for six years. Where the election is held in an even-numbered year, one commissioner shall hold office for three years, two shall hold office for five years, and two shall hold office for seven years)). The election of park commissioners shall be null and void if the metropolitan park district is not created. Candidates shall run for specific commission positions. No primary shall be held to nominate candidates. The person receiving the greatest number of votes for each position shall be elected as a commissioner. The staggering of the terms of office shall occur as follows: (1) The two persons who are elected receiving the two greatest numbers of votes shall be elected to six-year terms of office if the election is held in an odd-numbered year or five-year terms of office if the election is held in an even-numbered year; (2) the two persons who are elected receiving the next two greatest numbers of votes shall be elected to four-year terms of office if the election is held in an odd-numbered year or three-year terms of office if the election is held in an even-numbered year; and (3) the other person who is elected shall be elected to a two-year term of office if the election is held in an odd-numbered year or a one-year term of office if the election is held in an even-numbered year. The initial commissioners shall take office immediately when they are elected and qualified, and for purposes of computing their terms of office the terms shall be assumed to commence on the first day of January ((of)) in the year after they are elected. ((The term of each nominee for park commissioner shall be expressed on the ballot.)) Thereafter, all commissioners shall ((serve)) be elected to six-year terms of office ((and)). All commissioners shall serve until their respective successors are elected and qualified and assume office in accordance with RCW 29.04.170. Vacancies shall occur and shall be filled ((by majority action of the remaining commissioners appointing a voter to fill the remainder of the term of the vacant commissioner position)) as provided in chapter 42.12 RCW.

      Sec. 30. RCW 35A.01.070 and 1979 ex.s. c 18 s 1 are each amended to read as follows:

      Where used in this title with reference to procedures established by this title in regard to a change of plan or classification of government, unless a different meaning is plainly required by the context:

      (1) "Classify" means a change from a city of the first, second, or third class, or a town, to a code city.

      (2) "Classification" means either that portion of the general law under which a city or a town operates under Title 35 RCW as a first, second, or third class city, unclassified city, or town, or otherwise as a code city.

      (3) "Organize" means to provide for officers after becoming a code city, under the same general plan of government under which the city operated prior to becoming a code city, pursuant to RCW 35A.02.055.

      (4) "Organization" means the general plan of government under which a city operates.

      (5) "Plan of government" means ((either the)) a mayor-council form of government under chapter 35A.12 RCW, council-manager form of government under chapter 35A.13 RCW, or a mayor-council, council-manager, or commission form of government in general that is retained by a noncharter code city as provided in RCW 35A.02.130, without regard to variations in the number of elective offices or whether officers are elective or appointive.

      (6) "Reclassify" means changing from a code city to the classification, if any, held by such a city immediately prior to becoming a code city.

      (7) "Reclassification" means changing from city or town operating under Title 35 RCW to a city operating under Title 35A RCW, or vice versa; a change in classification.

      (8) "Reorganize" means changing the plan of government under which a city or town operates to a different general plan of government, for which an election of new officers under RCW 35A.02.050 is required. A city or town shall not be deemed to have reorganized simply by increasing or decreasing the number of members of its legislative body.

      (9) "Reorganization" means a change in general plan of government where an election of all new officers is required in order to accomplish this change, but an increase or decrease in the number of members of its legislative body shall not be deemed to constitute a reorganization.

      Sec. 31. RCW 35A.02.050 and 1979 ex.s. c 18 s 7 are each amended to read as follows:

      The first election of officers where required for reorganization under a different general plan of government newly adopted in a manner provided in RCW 35A.02.020, 35A.02.030, 35A.06.030, or 35A.06.060, as now or hereafter amended, shall be at the next general municipal election if one is to be held more than ninety days but not more than one hundred and eighty days after certification of a reorganization ordinance or resolution, or otherwise at a special election to be held for that purpose in accordance with RCW 29.13.020. In the event that the first election of officers ((as herein provided)) is to be held at a general municipal election, such election shall be preceded by a primary election pursuant to RCW 29.21.010 and 29.13.070. In the event that the first election of all officers ((as herein provided)) is to be held at a special election rather than at a general election, and notwithstanding any provisions of any other law to the contrary, such special election shall be preceded by a primary election to be held on a date authorized by RCW 29.13.010, and the persons nominated at that primary election shall be voted upon at the next succeeding special election that is authorized by RCW 29.13.010: PROVIDED, That in the event the ordinances calling for reclassification or reclassification and reorganization under the provisions of Title 35A RCW have been filed with the secretary of state pursuant to RCW 35A.02.040 in an even-numbered year at least ninety days prior to a state general election then the election of new officers shall be concurrent with the state primary and general election and shall be conducted as set forth in ((chapter 35A.29 RCW)) general election law.

      Upon reorganization, candidates for all offices shall file or be nominated for and successful candidates shall be elected to specific council positions((, and an)). The initial terms ((or)) of office for those elected at a first election of all officers ((to positions one and two for a five member council, or positions one through three for a seven member council, shall if the election occurs at a general municipal election be only until the second Monday in January first following the next general municipal election two years hence and if the election occurs at a special election, the duration of these initial terms shall be until the second Monday in January in the first even-numbered year that follows the next general municipal election. The duration of the initial term attaching to the remaining councilmanic positions shall be until the second Monday in January two years next thereafter, so that staggered regular four year terms will ultimately result. Any declarations of candidacy for any primary or other election held pursuant to this section shall be filed as provided in RCW 35A.29.110 as now or hereafter amended)) shall be as follows: (1) A simple majority of the persons who are elected as councilmembers receiving the greatest numbers of votes and the mayor in a city with a mayor-council plan of government shall be elected to four-year terms of office, if the election is held in an odd-numbered year, or three-year terms of office, if the election is held in an even-numbered year; and (2) the other persons who are elected as councilmembers shall be elected to two-year terms of office, if the election is held in an odd-numbered year, or one-year terms of office, if the election is held in an even-numbered year. The newly elected officials shall take office immediately when they are elected and qualified, but the length of their terms of office shall be calculated from the first day of January in the year following the election. Thereafter, each person elected as a councilmember or mayor in a city with a mayor-council plan of government shall be elected to a four-year term of office. Each councilmember and mayor in a city with a mayor-council plan of government shall serve until a successor is elected and qualified and assumes office as provided in RCW 29.04.170.

      The former officers shall, upon the election and qualification of new officers, deliver to the proper officers of the reorganized noncharter code city all books of record, documents and papers in their possession belonging to such municipal corporation before the reorganization thereof. ((Officers elected at the first election of officers held pursuant to this amendatory act shall assume office as soon as the election returns have been certified.))

      Sec. 32. RCW 35A.02.130 and 1967 ex.s. c 119 s 35A.02.130 are each amended to read as follows:

      Any incorporated city or town governed under a plan of government authorized prior to the time this title takes effect may become a noncharter code city without changing such plan of government by the use of the petition-for-election or resolution-for-election procedures provided in RCW 35A.02.060 and 35A.02.070 to submit to the voters a proposal that such municipality adopt the classification of noncharter code city while retaining its existing plan of government, and upon a favorable vote on the proposal, such municipality shall be classified as a noncharter code city and retain its old plan of government, such reclassification to be effective upon the filing of the record of such election with the office of the secretary of state. Insofar as the provisions of RCW 35A.02.100 and 35A.02.110 are applicable to an election on such a reclassification proposal they shall apply to such election.

      Sec. 33. RCW 35A.06.020 and 1967 ex.s. c 119 s 35A.06.020 are each amended to read as follows:

      The classifications of municipalities which existed prior to the time this title goes into effect--first class city, second class city, third class ((and fourth class)) city, town, and unclassified city--and the restrictions, limitations, duties, and obligations specifically imposed by law upon such classes of cities and towns, shall have no application to noncharter code cities, but every noncharter code city, by adopting such classification, has elected to be governed by the provisions of this title, with the powers granted hereby. However, any code city that retains its old plan of government is subject to the laws applicable to that old plan of government until the city changes its plan of government to the provisions of either chapter 35A.12 or 35A.13 RCW.

      Sec. 34. RCW 35A.06.030 and 1979 ex.s. c 18 s 14 are each amended to read as follows:

      By use of the resolution for election or petition for election methods described in RCW 35A.06.040, any noncharter code city which has operated for more than six consecutive years under one of the optional plans of government authorized by this title, or for more than a combined total of six consecutive years under a particular plan of government both as a code city and under the same general plan under Title 35 RCW immediately prior to becoming a code city, may abandon such organization and may reorganize and adopt another plan of government authorized for noncharter code cities, but only after having been a noncharter code city for more than one year or a city after operating for more than six consecutive years under a particular plan of government as a noncharter code city ((or may reclassify and adopt a plan of government authorized by the general law for municipalities of the highest class for which the population of such city qualifies it, or authorized for the class to which such city belonged immediately prior to becoming a noncharter code city, if any)): PROVIDED, That these limitations shall not apply to a city seeking to adopt a charter.

      In reorganization under a different general plan of government as a noncharter code city, officers shall all be elected as provided in RCW 35A.02.050. When a noncharter code city adopts a plan of government other than those authorized under Title 35A RCW, such city ceases to be governed under this optional municipal code and shall be classified as a city or town of the class selected in the proceeding for adoption of such new plan, with the powers granted to such class under the general law.

      Sec. 35. RCW 35A.06.050 and 1979 ex.s. c 18 s 15 are each amended to read as follows:

      The proposal for abandonment of a plan of government as authorized in RCW 35A.06.030 and for adoption of the plan named in the resolution or petition shall be voted upon at the next general municipal election if one is to be held within one hundred and eighty days or otherwise at a special election called for that purpose in accordance with RCW 29.13.020. The ballot title and statement of the proposition shall be prepared by the city attorney as provided in RCW 29.27.060 and 35A.29.120((, as now or hereafter amended. If the plan proposed in the petition is not a plan authorized for noncharter code cities by this title, the ballot statement shall clearly set forth that adoption of such plan by the voters would require abandonment of the classification of noncharter code city and that government would be under the general law relating to cities of the class specified in the resolution or petition. If the plan proposed in the petition is a plan authorized for noncharter code cities the ballot statement shall clearly set forth that adoption of such plan by the voters would not affect the eligibility of the noncharter code city to be governed under this optional municipal code)).

      Sec. 36. RCW 35A.12.010 and 1985 c 106 s 1 are each amended to read as follows:

      The government of any noncharter code city or charter code city electing to adopt the mayor-council plan of government authorized by this chapter shall be vested in an elected mayor and an elected council. The council of a noncharter code city having less than twenty-five hundred inhabitants shall consist of five members; when there are twenty-five hundred or more inhabitants, the council shall consist of seven members: PROVIDED, That if the population of a city after having become a code city decreases from twenty-five hundred or more to less than twenty-five hundred, it shall continue to have a seven member council. If, after a city has become a mayor-council code city, its population increases to twenty-five hundred or more inhabitants, the number of councilmanic offices in such city may increase from five to seven members upon the affirmative vote of a majority of the existing council to increase the number of councilmanic offices in the city. When the population of a mayor-council code city having five councilmanic offices increases to five thousand or more inhabitants, the number of councilmanic offices in the city shall increase from five to seven members. In the event of an increase in the number of councilmanic offices, the city council shall, by majority vote, pursuant to RCW 35A.12.050, appoint two persons to serve in these offices until the next municipal general election, at which election one person shall be elected for a two-year term and one person shall be elected for a four-year term. The number of inhabitants shall be determined by the most recent official state or federal census or determination by the state office of financial management. A charter adopted under the provisions of this title, incorporating the mayor-council plan of government set forth in this chapter, may provide for an uneven number of ((councilmen)) councilmembers not exceeding eleven.

      A noncharter code city of less than five thousand inhabitants which has elected the mayor-council plan of government and which has seven councilmanic offices may establish a five-member council in accordance with the following procedure. At least six months prior to a municipal general election, the city council shall adopt an ordinance providing for reduction in the number of councilmanic offices to five. The ordinance shall specify which two councilmanic offices, the terms of which expire at the next general election, are to be terminated. The ordinance shall provide for the renumbering of council positions and shall also provide for a two-year extension of the term of office of a retained councilmanic office, if necessary, in order to comply with RCW 35A.12.040.

      However, a noncharter code city that has retained its old mayor-council plan of government, as provided in RCW 35A.02.130, is subject to the laws applicable to that old plan of government.

      Sec. 37. RCW 35A.12.040 and 1979 ex.s. c 18 s 21 are each amended to read as follows:

      Officers shall be elected at biennial municipal elections to be conducted as provided in chapter 35A.29 RCW. The mayor and the ((councilmen)) councilmembers shall be elected for four-year terms of office and until their successors are elected and qualified((; except that at any first election three councilmen in cities having seven councilmen, and two councilmen in cities having five councilmen, shall be elected for two year terms and the remaining councilmen shall be elected for four year terms)) and assume office in accordance with RCW 29.04.170. At any first election upon reorganization, councilmembers shall be elected as provided in RCW 35A.02.050. Thereafter the requisite number of ((councilmen)) councilmembers shall be elected biennially as the terms of their predecessors expire and shall serve for terms of four years. The positions to be filled on the city council shall be designated by consecutive numbers and shall be dealt with as separate offices for all election purposes((, as provided in RCW 35A.29.105. In any city which holds its first election under this title in the calendar year 1970, candidates elected for two year terms shall hold office until their successors are elected and qualified at the general municipal election to be held in November, 1973 and candidates elected for four year terms shall hold office until their successors are elected and qualified at the general municipal election to be held in November, 1975)). Election to positions on the council shall be by majority vote from the city at large, unless provision is made by charter or ordinance for election by wards. ((The city council shall be the judge of the qualifications of its members and determine contested elections of city officers, subject to review by certiorari as provided by law.)) The mayor and ((councilmen)) councilmembers shall qualify by taking an oath or affirmation of office and as may be provided by law, charter, or ordinance.

      Sec. 38. RCW 35A.12.050 and 1967 ex.s. c 119 s 35A.12.050 are each amended to read as follows:

      The office of a mayor or ((councilman)) councilmember shall become vacant if ((he)) the person who is elected or appointed to that position fails to qualify as provided by law ((or)), fails to enter upon ((his)) the duties of that office at the time fixed by law without a justifiable reason, ((upon his death, resignation, removal from office by recall as provided by law, or when his office is forfeited)) or as provided in RCW 35A.12.060 or 42.12.010. A vacancy in the office of mayor or in the council shall be filled ((for the remainder of the unexpired term, if any, at the next regular municipal election but the council, or the remaining members thereof, by majority vote shall appoint a qualified person to fill the vacancy until the person elected to serve the remainder of the unexpired term takes office. If at any time the membership of the council is reduced below the number required for a quorum, the remaining members, nevertheless, by majority action may appoint additional members to fill the vacancies until persons are elected to serve the remainder of the unexpired terms. If, after thirty days have passed since the occurrence of a vacancy, the council are unable to agree upon a person to be appointed to fill a vacancy in the council, the mayor may make the appointment from among the persons nominated by members of the council)) as provided in chapter 42.12 RCW.

      Sec. 39. RCW 35A.12.060 and 1967 ex.s. c 119 s 35A.12.060 are each amended to read as follows:

      ((A mayor or councilman shall forfeit his office, creating a vacancy, if he ceases to have the qualifications prescribed for such office by law, charter, or ordinance, or if he is convicted of a crime involving moral turpitude or an offense involving a violation of his oath of office. A councilman also shall forfeit his office if he)) In addition a council position shall become vacant if the councilmember fails to attend three consecutive regular meetings of the council without being excused by the council.

      Sec. 40. RCW 35A.12.180 and 1967 ex.s. c 119 s 35A.12.180 are each amended to read as follows:

      (1) At any time not within three months previous to a municipal general election the council of a noncharter code city organized under this chapter may divide the city into wards or change the boundaries of existing wards. No change in the boundaries of wards shall affect the term of any ((councilman, but he)) councilmember, and councilmembers shall serve out ((his)) their terms in the wards of ((his)) their residences at the time of ((his)) their elections: PROVIDED, That if this results in one ward being represented by more ((councilmen)) councilmembers than the number to which it is entitled those having the shortest unexpired terms shall be assigned by the council to wards where there is a vacancy, and the councilmembers so assigned shall be deemed to be residents of the wards to which they are assigned for purposes of those positions being vacant. The representation of each ward in the city council shall be in proportion to the population as nearly as is practicable. ((When the city has been divided into wards no person shall be eligible to the office of councilman unless he resides in the ward for which he is elected on the date of his election, and removal of his residence from the ward for which he was elected renders his office vacant.))

      Wards shall be redrawn as provided in chapter 29.70 RCW. Wards shall be used as follows: (a) Only a resident of the ward may be a candidate for, or hold office as, a councilmember of the ward; and (b) only voters of the ward may vote at a primary to nominate candidates for a councilmember of the ward. Voters of the entire city may vote at the general election to elect a councilmember of a ward, unless the city had prior to January 1, 1993, limited the voting in the general election for any or all council positions to only voters residing within the ward associated with the council positions. If a city had so limited the voting in the general election to only voters residing within the ward, then the city shall be authorized to continue to do so.

      (2) If on the effective date of this section or thereafter, a ward represented by more than one councilmember does not have at least one councilmember elected to office at each municipal election, then the council may change the terms of or renumber councilmember positions to be filled at the next general election if necessary, so that at least one councilmember within the ward is elected to office at each municipal general election, and the city complies with RCW 35A.12.040. The council shall determine by lot which councilmember positions shall be renumbered or terms changed prior to the date for filing declarations of candidacy for election to councilmember positions.

      Sec. 41. RCW 35A.13.010 and 1987 c 3 s 16 are each amended to read as follows:

      The ((councilmen)) councilmembers shall be the only elective officers of a code city electing to adopt the council-manager plan of government authorized by this chapter, except where statutes provide for an elective municipal judge. The council shall appoint an officer whose title shall be "city manager" who shall be the chief executive officer and head of the administrative branch of the city government. The city manager shall be responsible to the council for the proper administration of all affairs of the code city. The council of a noncharter code city having less than twenty-five hundred inhabitants shall consist of five members; when there are twenty-five hundred or more inhabitants the council shall consist of seven members: PROVIDED, That if the population of a city after having become a code city decreases from twenty-five hundred or more to less than twenty-five hundred, it shall continue to have a seven member council. If, after a city has become a council-manager code city its population increases to twenty-five hundred or more inhabitants, the number of councilmanic offices in such city may increase from five to seven members upon the affirmative vote of a majority of the existing council to increase the number of councilmanic offices in the city. When the population of a council-manager code city having five councilmanic offices increases to five thousand or more inhabitants, the number of councilmanic offices in the city shall increase from five to seven members. In the event of an increase in the number of councilmanic offices, the city council shall, by majority vote, pursuant to RCW 35A.13.020, appoint two persons to serve in these offices until the next municipal general election, at which election one person shall be elected for a two-year term and one person shall be elected for a four-year term. The number of inhabitants shall be determined by the most recent official state or federal census or determination by the state office of financial management. A charter adopted under the provisions of this title, incorporating the council-manager plan of government set forth in this chapter may provide for an uneven number of ((councilmen)) councilmembers not exceeding eleven.

      A noncharter code city of less than five thousand inhabitants which has elected the council-manager plan of government and which has seven councilmanic offices may establish a five-member council in accordance with the following procedure. At least six months prior to a municipal general election, the city council shall adopt an ordinance providing for reduction in the number of councilmanic offices to five. The ordinance shall specify which two councilmanic offices, the terms of which expire at the next general election, are to be terminated. The ordinance shall provide for the renumbering of council positions and shall also provide for a two-year extension of the term of office of a retained councilmanic office, if necessary, in order to comply with RCW 35A.12.040.

      However, a noncharter code city that has retained its old council-manager plan of government, as provided in RCW 35A.02.130, is subject to the laws applicable to that old plan of government.

      Sec. 42. RCW 35A.13.020 and 1975 1st ex.s. c 155 s 1 are each amended to read as follows:

      In council-manager code cities, eligibility for election to the council, the manner of electing councilmen, the numbering of council positions, the terms of councilmen, the occurrence and the filling of vacancies, the grounds for forfeiture of office, and appointment of a mayor pro tempore or deputy mayor or councilman pro tempore shall be governed by the corresponding provisions of RCW 35A.12.030, 35A.12.040, 35A.12.050, 35A.12.060, and 35A.12.065 relating to the council of a code city organized under the mayor-council plan((: PROVIDED, That)), except that in council-manager cities where all council positions are at-large positions, the city council may, pursuant to RCW 35A.13.033, provide that the person elected to council position one ((on or after September 8, 1975,)) shall be the council chairman and shall carry out the duties prescribed by RCW 35A.13.030((, as now or hereafter amended)).

      Sec. 43. RCW 35A.14.060 and 1967 ex.s. c 119 s 35A.14.060 are each amended to read as follows:

      An annexation election shall be held in accordance with ((chapter 35A.29 RCW of this title)) general election law and only registered voters who have resided in the area proposed to be annexed for ninety days immediately preceding the election shall be allowed to vote therein.

      Sec. 44. RCW 35A.14.070 and 1979 ex.s. c 124 s 4 are each amended to read as follows:

      Notice of an annexation election shall particularly describe the boundaries of the area proposed to be annexed, as the same may have been modified by the boundary review board or the county annexation review board, state the objects of the election as prayed in the petition or as stated in the resolution, and require the voters to cast ballots which shall contain the words "For Annexation" or "Against Annexation" or words equivalent thereto, or contain the words "For Annexation and Adoption of Proposed Zoning Regulation", and "Against Annexation and Adoption of Proposed Zoning Regulation", or words equivalent thereto in case the simultaneous adoption of a proposed zoning regulation is proposed, and in case the assumption of all or a portion of indebtedness is proposed, shall contain an appropriate, separate proposition for or against the portion of indebtedness that the city requires to be assumed. The notice shall be posted for at least two weeks prior to the date of election in four public places within the area proposed to be annexed and published at least once a week for two weeks prior to the date of election in a newspaper of general circulation within the limits of the territory proposed to be annexed. Such notice shall be in addition to the notice required by ((RCW 35A.29.140)) general election law.

      Sec. 45. RCW 35A.15.040 and 1967 ex.s. c 119 s 35A.15.040 are each amended to read as follows:

      ((The election shall be conducted and the returns canvassed as provided in chapter 35A.29 RCW.)) Ballot titles shall be prepared by the city as provided in RCW 35A.29.120 and shall contain the words "For Dissolution" and "Against Dissolution", and shall contain on separate lines, alphabetically, the names of candidates for receiver. If a majority of the votes cast on the proposition are for dissolution, the municipal corporation shall be dissolved upon certification of the election results to the office of the secretary of state.

      Sec. 46. RCW 35A.16.030 and 1967 ex.s. c 119 s 35A.16.030 are each amended to read as follows:

      ((The election returns shall be canvassed as provided in RCW 35A.29.070 and)) If three-fifths of the votes cast on the proposition favor the reduction of the corporate limits, the ((legislative body, by an order entered on its minutes, shall direct the clerk to)) county auditor shall make and transmit to the office of the secretary of state a certified abstract of the vote.

      NEW SECTION. Sec. 47. A new section is added to chapter 35A.29 RCW to read as follows:

      Elections for code cities shall comply with general election law.

      Sec. 48. RCW 36.69.020 and 1969 c 26 s 2 are each amended to read as follows:

      The formation of a park and recreation district shall be initiated by a petition designating the boundaries thereof by metes and bounds, or by describing the land to be included therein by townships, ranges and legal subdivisions. Such petition shall set forth the object of the district and state that it will be conducive to the public welfare and convenience, and that it will be a benefit to the area therein. Such petition shall be signed by not less than fifteen percent of the registered voters residing within the area so described. ((No person signing the petition may withdraw his name therefrom after filing.)) The name of a person who has signed the petition may not be withdrawn from the petition after the petition has been filed.

      The petition shall be filed with the auditor of the county within which the proposed district is located, accompanied by an obligation signed by two or more petitioners, agreeing to pay the cost of the publication of the notice provided for in RCW 36.69.040. The county auditor shall, within thirty days from the date of filing the petition, examine the signatures and certify to the sufficiency or insufficiency thereof((; and for that purpose shall have access to all registration books or records in the possession of the registration officers of the election precincts included, in whole or in part, within the proposed district. Such books and records shall be prima facie evidence of the truth of the certificate)).

      If the petition is found to contain a sufficient number of signatures of qualified persons, the auditor shall transmit it, together with ((his)) a certificate of sufficiency attached thereto, to the county ((commissioners who)) legislative authority, which shall by resolution entered upon ((their)) its minutes((,)) receive it and fix a day and hour when ((they)) the legislative authority will publicly hear the petition, as provided in RCW 36.69.040.

      Sec. 49. RCW 36.69.070 and 1979 ex.s. c 126 s 28 are each amended to read as follows:

      ((All elections pursuant to this chapter shall be conducted in accordance with the provisions of chapter 29.13 RCW for district elections.)) A ballot proposition authorizing the formation of the proposed park and recreation district shall be submitted to the voters of the proposed district for their approval or rejection at the next general state election occurring sixty or more days after the county legislative authority fixes the boundaries of the proposed district. Notices of the election for the formation of the park and recreation district shall state generally and briefly the purpose thereof and shall give the boundaries of the proposed district((, define the election precincts, designate the polling place of each, give the names of the five nominated park and recreation commissioner candidates of the proposed district,)) and name the day of the election and the hours during which the polls will be open. The proposition to be submitted to the voters shall be stated in such manner that the voters may indicate yes or no upon the proposition of forming the proposed park and recreation district. ((The ballot shall be so arranged that voters may vote for the five nominated candidates or may write in the names of other candidates.))

      The initial park and recreation commissioners shall be elected at the same election, but this election shall be null and void if the district is not authorized to be formed. No primary shall be held to nominate candidates for the initial commissioner positions. Candidates shall run for specific commission positions. A special filing period shall be opened as provided in RCW 29.15.170 and 29.15.180. The person who receives the greatest number of votes for each commission position shall be elected to that position. The three persons who are elected receiving the greatest number of votes shall be elected to four-year terms of office if the election is held in an odd-numbered year or three-year terms of office if the election is held in an even-numbered year. The other two persons who are elected shall be elected to two-year terms of office if the election is held in an odd-numbered year or one-year terms of office if the election is held in an even-numbered year. The initial commissioners shall take office immediately upon being elected and qualified, but the length of such terms shall be computed from the first day of January in the year following this election.

      Sec. 50. RCW 36.69.080 and 1979 ex.s. c 126 s 29 are each amended to read as follows:

      If a majority of all votes cast upon the proposition favors the formation of the district, (([the])) the county legislative authority shall(([,])), by resolution, declare the territory organized as a park and recreation district under the designated name ((theretofore designated, and shall declare the candidate from each subdivision receiving the highest number of votes for park and recreation commissioner the duly elected first park and recreation commissioner of the subdivision of the district. These initial park and recreation commissioners shall take office immediately upon their election and qualification and hold office until their successors are elected and qualified and assume office as provided in RCW 36.69.090 as now or hereafter amended)).

      Sec. 51. RCW 36.69.090 and 1987 c 53 s 1 are each amended to read as follows:

      A park and recreation district shall be governed by a board of five commissioners. Except for the initial commissioners, all commissioners shall be elected to staggered four-year terms of office and shall serve until their successors are elected and qualified and assume office in accordance with RCW 29.04.170. Candidates shall run for specific commissioner positions.

      Elections for park and recreation district commissioners shall be held biennially in conjunction with the general election in each odd-numbered year. ((Residence anywhere within the district shall qualify an elector for any position on the commission after the initial election.)) Elections shall be held in accordance with the provisions of Title 29 RCW dealing with general elections. ((All commissioners shall serve until their successors are elected and qualified and assume office in accordance with RCW 29.04.170. At the first election following the formation of the district, the two candidates receiving the highest number of votes shall serve for terms of four years, and the three candidates receiving the next highest number of votes shall serve for two years. Thereafter all commissioners shall be elected for four year terms: PROVIDED, That if there would otherwise be two commissioners elected at the November 1987 general election, the candidate receiving the highest number of votes shall serve a four-year term, and the commissioner receiving the second highest number of votes shall serve a two-year term.))

      Sec. 52. RCW 36.69.100 and 1963 c 4 s 36.69.100 are each amended to read as follows:

      Vacancies on the board of park and recreation commissioners shall occur and shall be filled ((by a majority vote of the remaining commissioners)) as provided in chapter 42.12 RCW.

      Sec. 53. RCW 36.69.440 and 1979 ex.s. c 11 s 3 are each amended to read as follows:

      (1) If the petition filed under RCW 36.69.430 is found to contain a sufficient number of signatures, the legislative authority of each county shall set a time for a hearing on the petition for the formation of a park and recreation district as prescribed in RCW 36.69.040.

      (2) At the public hearing the legislative authority ((for each authority)) for each county shall fix the boundaries for that portion of the proposed park and recreation district that lies within the county as provided in RCW 36.69.050. Each county shall notify the other county or counties of the determination of the boundaries within ten days.

      (3) If the territories created by the county legislative authorities are not contiguous, a joint park and recreation district shall not be formed. If the territories are contiguous, the county containing the portion of the proposed joint district having the larger population shall determine the name of the proposed joint district.

      (4) ((If the proposed district encompasses portions of two counties, the county containing the portion of the district having the larger population shall divide the territory into three subdivisions and shall name three resident electors as prescribed by RCW 36.69.060. The county containing the territory having the smaller population shall divide that territory into two subdivisions and name two resident electors.

      (5) If the proposed district encompasses portions of more than two counties, the district shall be divided into five subdivisions and resident electors shall be named as follows:

      The number of subdivisions and resident electors to be established by each county shall reflect the proportion of population within each county portion of the proposed district in relation to the total population of the proposed district, provided that each county shall designate one subdivision and one resident elector.

      (6))) The proposition for the formation of the proposed joint park and recreation district shall be submitted to the voters of the district at the next general election, which election shall be conducted as required by RCW 36.69.070 and 36.69.080.

      Sec. 54. RCW 52.14.010 and 1985 c 330 s 2 are each amended to read as follows:

      The affairs of the district shall be managed by a board of fire commissioners composed of three ((resident electors of)) registered voters residing in the district except as provided in RCW 52.14.015 and 52.14.020. Each member shall each receive fifty dollars per day or portion thereof, not to exceed four thousand eight hundred dollars per year, for attendance at board meetings and for performance of other services in behalf of the district.

      In addition, they shall receive necessary expenses incurred in attending meetings of the board or when otherwise engaged in district business, and shall be entitled to receive the same insurance available to all ((firemen)) fire fighters of the district: PROVIDED, That the premiums for such insurance, except liability insurance, shall be paid by the individual commissioners who elect to receive it.

      Any commissioner may waive all or any portion of his or her compensation payable under this section as to any month or months during his or her term of office, by a written waiver filed with the secretary as provided in this section. The waiver, to be effective, must be filed any time after the commissioner's election and prior to the date on which ((said)) the compensation would otherwise be paid. The waiver shall specify the month or period of months for which it is made.

      The board shall fix the compensation to be paid the secretary and all other agents and employees of the district. The board may, by resolution adopted by unanimous vote, authorize any of its members to serve as volunteer ((firemen)) fire fighters without compensation. A commissioner actually serving as a volunteer ((fireman)) fire fighter may enjoy the rights and benefits of a volunteer ((fireman)) fire fighter. ((The first commissioners shall take office immediately when qualified in accordance with RCW 29.01.135 and shall serve until after the next general election for the selection of commissioners and until their successors have been elected and have qualified and have assumed office in accordance with RCW 29.04.170.))

      Sec. 55. RCW 52.14.015 and 1990 c 259 s 14 are each amended to read as follows:

      In the event a three member board of commissioners of any fire protection district determines by resolution ((and approves by unanimous vote of the board)) that it would be in the best interest of the district to increase the number of commissioners from three to five, or in the event the board is presented with a petition signed by ten percent of the registered voters resident within the district who voted in the last general municipal election calling for such an increase in the number of commissioners of the district, the board shall submit a resolution to the county legislative authority or authorities of the county or counties in which the district is located requesting that an election be held. Upon receipt of the resolution, the legislative authority or authorities of the county or counties shall call a special election to be held within the fire protection district at which election the following proposition shall be submitted to the voters substantially as follows:


      Shall the board of commissioners of . . . . . county fire protection district no. . . . . . be increased from three members to five members?


                                                                                              Yes . . . . .

                                                                                              No . . . . . .


      If the fire protection district is located in more than a single county, this proposition shall indicate the name of the district.

      If the proposition receives a majority approval at the election, the board of commissioners of the fire protection district shall be increased to five members. The two additional members shall be appointed in the same manner as provided in RCW 52.14.020.

      Sec. 56. RCW 52.14.030 and 1984 c 230 s 31 are each amended to read as follows:

      ((The polling places for district elections shall be those of the county voting precincts which include any of the territory within the fire protection districts. District elections)) The polling places for a fire protection district election may be located inside or outside the boundaries of the district ((and)), as determined by the auditor of the county in which the fire protection district is located, and the elections of the fire protection district shall not be held to be irregular or void on that account.

      Sec. 57. RCW 52.14.050 and 1989 c 63 s 21 are each amended to read as follows:

      ((In the event of a vacancy occurring in the office of fire commissioner, the vacancy shall, within sixty days, be filled by appointment of a resident elector of the district by a vote of the remaining fire commissioners. If the board of commissioners fails to fill the vacancy within the sixty-day period, the county legislative authority of the county in which all, or the largest portion, of the district is located shall make the appointment. If the number of vacancies is such that there is not a majority of the full number of commissioners in office as fixed by law, the county legislative authority of the county in which all, or the largest portion, of the district is located shall appoint someone to fill each vacancy, within thirty days of each vacancy, that is sufficient to create a majority as prescribed by law.

      An appointee shall serve ad interim until a successor has been elected and qualified at the next general election as provided in chapter 29.21 RCW. A person who is so elected shall take office immediately after he or she is qualified and shall serve for the remainder of the unexpired term.))

      Vacancies on a board of fire commissioners shall occur as provided in chapter 42.12 RCW. In addition, if a fire commissioner is absent from the district for three consecutive regularly scheduled meetings unless by permission of the board, the office shall be declared vacant by the board of commissioners ((and the vacancy shall be filled as provided for in this section)). However, such an action shall not be taken unless the commissioner is notified by mail after two consecutive unexcused absences that the position will be declared vacant if the commissioner is absent without being excused from the next regularly scheduled meeting. Vacancies ((additionally shall occur)) on a board of fire commissioners shall be filled as provided in chapter 42.12 RCW.

      Sec. 58. RCW 52.14.060 and 1989 c 63 s 22 are each amended to read as follows:

      The initial three members of the board of fire commissioners shall be elected at the same election as when the ballot proposition is submitted to the voters authorizing the creation of the fire protection district. If the district is not authorized to be created, the election of the initial fire commissioners shall be null and void. If the district is authorized to be created, the initial fire commissioners shall take office immediately when qualified. Candidates shall file for each of the three separate fire commissioner positions. Elections shall be held as provided in chapter 29.21 RCW, with the county auditor opening up a special filing period as provided in RCW ((29.21.360 and 29.21.370)) 29.15.170 and 29.15.180, as if there were a vacancy. The ((candidate for each position)) person who receives the greatest number of votes for each position shall be elected to that position. ((If the election is held in an odd-numbered year, the winning candidate receiving the highest number of votes shall hold office for a term of six years, the winning candidate receiving the next highest number of votes shall hold office for a term of four years, and the candidate receiving the next highest number of votes shall serve for a term of two years. If the election were held in an even-numbered year, the winning candidate receiving the greatest number of votes shall hold office for a term of five years, the winning candidate receiving the next highest number of votes shall hold office for a term of three years, and the winning candidate receiving the next highest number of votes shall hold office for a term of one year.)) The terms of office of the initial fire commissioners shall be staggered as follows: (1) The person who is elected receiving the greatest number of votes shall be elected to a six-year term of office if the election is held in an odd-numbered year or a five-year term of office if the election is held in an even-numbered year; (2) the person who is elected receiving the next greatest number of votes shall be elected to a four-year term of office if the election is held in an odd-numbered year or a three-year term of office if the election is held in an even-numbered year; and (3) the other person who is elected shall be elected to a two-year term of office if the election is held in an odd-numbered year or a one-year term of office if the election is held in an even-numbered year. The initial commissioners shall take office immediately when elected and qualified and their terms of office ((of the initially elected fire commissioners)) shall be calculated from the first day of January in the year following their election.

      The term of office of each subsequent commissioner shall be six years. Each commissioner shall serve until a successor is elected and qualified and assumes office in accordance with RCW 29.04.170.

      Sec. 59. RCW 53.12.140 and 1959 c 17 s 9 are each amended to read as follows:

      A vacancy in the office of port commissioner shall occur ((by death, resignation, removal, conviction of a felony,)) as provided in chapter 42.12 RCW or by nonattendance at meetings of the port commission for a period of sixty days unless excused by the port commission((, by any statutory disqualification, or by any permanent disability preventing the proper discharge of his duty)). A vacancy on a port commission shall be filled as provided in chapter 42.12 RCW.

      Sec. 60. RCW 54.08.060 and 1979 ex.s. c 126 s 36 are each amended to read as follows:

      Whenever a proposition for the formation of a public utility district is to be submitted to voters in any county, the county legislative authority may by resolution call a special election, and at the request of petitioners for the formation of such district contained in the petition shall do so and shall provide for holding the same at the earliest practicable time. If the boundaries of the proposed district embrace an area less than the entire county, such election shall be confined to the area so included. The notice of such election shall state the boundaries of the proposed district and the object of such election; in other respects, such election shall be held and called in the same manner as provided by law for the holding and calling of general elections: PROVIDED, That notice thereof shall be given for not less than ten days nor more than thirty days prior to such special election. In submitting the ((said)) proposition to the voters for their approval or rejection, such proposition shall be expressed on the ballots in substantially the following terms:


      Public Utility District No. __. YES

      Public Utility District No. __. NO


      At the same special election on the proposition to form a public utility district, there shall also be an election for three public utility district commissioners((: PROVIDED, That)). However, the election of such commissioners shall be null and void if the proposition to form the public utility district does not receive approval by a majority of the voters voting on the proposition. ((Nomination for and election of public utility district commissioners shall conform with the provisions of RCW 54.12.010 as now or hereafter amended, except for the day of such election and the term of office of the original commissioners.)) No primary shall be held. A special filing period shall be opened as provided in RCW 29.15.170 and 29.15.180. The person receiving the greatest number of votes for the commissioner of each commissioner district shall be elected as the commissioner of that district. Commissioner districts shall be established as provided in RCW 54.12.010. The terms of the initial commissioners shall be staggered as follows: (1) The person who is elected receiving the greatest number of votes shall be elected to a six-year term of office if the election is held in an even-numbered year or a five-year term if the election is held in an odd-numbered year; (2) the person who is elected receiving the next greatest number of votes shall be elected to a four-year term of office if the election is held in an even-numbered year or a three-year term of office if the election is held in an odd-numbered year; and (3) the other person who is elected shall be elected to a two-year term of office if the election is held in an even-numbered year or a one-year term of office if the election is held in an odd-numbered year. The commissioners first to be elected at such special election shall ((hold office from the first day of the month following the commissioners' election for the terms as specified in this section which terms shall be computed from the first day in January next following the election. If such special election was held in an even-numbered year, the commissioners residing in commissioner district number one shall hold office for the term of six years, the commissioner residing in commissioner district number two shall hold office for the term of four years, and the commissioner residing in commissioner district number three shall hold office for the term of two years. If such special election was held in an odd-numbered year, the commissioner residing in commissioner district number one shall hold office for the term of five years, the commissioner residing in commissioner district number two shall hold office for the term of three years, and the commissioner residing in commissioner district number three shall hold office for the term of one year)) assume office immediately when they are elected and qualified, but the length of their terms of office shall be calculated from the first day in January in the year following their elections.

      The term "general election" as used herein means biennial general elections at which state and county officers in a noncharter county are elected.

      Sec. 61. RCW 54.12.010 and 1990 c 59 s 109 are each amended to read as follows:

      ((Within ten days after such election, the county canvassing board shall canvass the returns, and if at such election a majority of the voters voting upon such proposition shall vote in favor of the formation of such district, the canvassing board shall so declare in its canvass of the returns of such election, and such public utility district shall then be and become)) A public utility district that is created as provided in RCW 54.08.010 shall be a municipal corporation of the state of Washington, and the name of such public utility district shall be Public Utility District No. . . . . of . . . . . . County.

      The powers of the public utility district shall be exercised through a commission consisting of three members in three commissioner districts, and five members in five commissioner districts.

      When the public utility district is ((coextensive with the limits of such county)) county-wide and the county has three county legislative authority districts, then, at the first election of commissioners and until any change shall have been made in the boundaries of public utility district commissioner districts, one public utility district commissioner shall be chosen from each of the three county ((commissioner)) legislative authority districts ((of the county in which the public utility district is located if the county is not operating under a "Home Rule" charter)). When the public utility district comprises only a portion of the county, with boundaries established in accordance with chapter 54.08 RCW, or when the public utility district is ((located in a county operating under a "Home Rule" charter)) county-wide and the county does not have three county legislative authority districts, three public utility district commissioner districts, numbered consecutively, ((having)) each with approximately equal population and ((boundaries,)) following ((ward and)) precinct lines, as far as practicable, shall be described in the petition for the formation of the public utility district, which shall be subject to appropriate change by the county legislative authority if and when ((they)) it changes the boundaries of the proposed public utility district, and one commissioner shall be elected ((from each of said)) as a commissioner of each of the public utility district commissioner districts. ((In all five commissioner districts an additional commissioner at large shall be chosen from each of the two at large districts. No person shall be eligible to be elected to the office of public utility district commissioner for a particular district commissioner district unless he is a registered voter of the public utility district commissioner district or at large district from which he is elected.)) Commissioner districts shall be used as follows: (1) Only a registered voter who resides in a commissioner district may be a candidate for, or hold office as, a commissioner of the commissioner district; and (2) only voters of a commissioner district may vote at a primary to nominate candidates for a commissioner of the commissioner district. Voters of the entire public utility district may vote at a general election to elect a person as a commissioner of the commissioner district.

      ((Except as otherwise provided,)) The term of office of each public utility district commissioner other than the commissioners at large shall be six years, and the term of each commissioner at large shall be four years. Each term shall be computed in accordance with RCW 29.04.170 following the commissioner's election. ((One commissioner at large and one commissioner from a commissioner district shall be elected at each general election held in an even-numbered year for the term of four years and six years respectively. All candidates shall be voted upon by the entire public utility district.

      When a public utility district is formed, three public utility district commissioners shall be elected at the same election at which the proposition is submitted to the voters as to whether such public utility district shall be formed. If the general election adopting the proposition to create the public utility district was held in an even-numbered year, the commissioner residing in commissioner district number one shall hold office for the term of six years; the commissioner residing in commissioner district number two shall hold office for the term of four years; and the commissioner residing in commissioner district number three shall hold office for the term of two years. If the general election adopting the proposition to create the public utility district was held in an odd-numbered year, the commissioner residing in commissioner district number one shall hold office for the term of five years, the commissioner in district two shall hold office for the term of three years, and the commissioner in district three shall hold office for the term of one year. The commissioners first to be elected as above provided shall hold office from the first day of the month following the commissioners' election and their respective terms of office shall be computed from the first day of January next following the election.))

      All public utility district commissioners shall hold office until their successors shall have been elected and have qualified and assume office in accordance with RCW 29.04.170. ((A filing for nomination for public utility district commissioner shall be accompanied by a petition signed by one hundred registered voters of the public utility district which shall be certified by the county auditor to contain the required number of registered voters, and shall otherwise be filed in accord with the requirements of Title 29 RCW. At the time of filing such nominating petition, the person so nominated shall execute and file a declaration of candidacy subject to the provisions of Title 29 RCW, as now or hereafter amended. The petition and each page of the petition shall state whether the nomination is for a commissioner from a particular commissioner district or for a commissioner at large and shall state the districts; otherwise it shall be void.))

      A vacancy in the office of public utility district commissioner shall occur as provided in chapter 42.12 RCW or by ((death, resignation, removal, conviction of a felony,)) nonattendance at meetings of the public utility district commission for a period of sixty days unless excused by the public utility district commission((, by any statutory disqualification, or by any permanent disability preventing the proper discharge of his duty. In the event of a vacancy in said office, such vacancy shall be filled at the next general election held in an even-numbered year, the vacancy in the interim to be filled by appointment by the remaining commissioners. If more than one vacancy exists at the same time in a three commissioner district, or more than two in a five commissioner district, a special election shall be called by the county canvassing board upon the request of the remainder, or, that failing, by the county election board, such election to be held not more than forty days after the occurring of such vacancies.

      A majority of the persons holding the office of public utility district commissioner at any time shall constitute a quorum of the commission for the transaction of business, and the concurrence of a majority of the persons holding such office at the time shall be necessary and shall be sufficient for the passage of any resolution, but no business shall be transacted, except in usual and ordinary course, unless there are in office at least a majority of the full number of commissioners fixed by law)). Vacancies on a board of public utility district commissioners shall be filled as provided in chapter 42.12 RCW.

      The boundaries of the public utility district ((commissioners')) commissioner districts may be changed only by the public utility district commission, and shall be examined every ten years to determine substantial equality of population in accordance with chapter 29.70 RCW, but ((said)) the boundaries shall not be changed oftener than once in four years, and only when all members of the commission are present. Whenever territory is added to a public utility district under RCW 54.04.035, the boundaries of the public utility ((commissioners')) commissioner districts shall be changed to include such additional territory. The proposed change of the boundaries of the public utility district ((commissioners')) commissioner district must be made by resolution and after public hearing. Notice of the time of a public hearing thereon shall be published for two weeks prior thereto. Upon a referendum petition signed by ten percent of the qualified voters of the public utility district being filed with the county auditor, the county legislative authority shall submit such proposed change of boundaries to the voters of the public utility district for their approval or rejection. Such petition must be filed within ninety days after the adoption of resolution of the proposed action. The validity of ((said)) the petition shall be governed by the provisions of chapter 54.08 RCW.

      Sec. 62. RCW 54.40.070 and 1977 ex.s. c 36 s 7 are each amended to read as follows:

      Within thirty days after the public utility district commission shall divide the district into two at large districts, the county legislative authority shall call a special election, to be held at the next scheduled special election called pursuant to RCW 29.13.010, or not more than ninety days after such call, at which time the initial commissioners to such at large districts shall be elected((,)). No primary shall be held and a special filing period shall be opened as provided in RCW 29.15.170 and 29.15.180. The person receiving the greatest number of votes for each position shall be elected.

      The person who is elected receiving the ((largest)) greatest number of votes ((to serve for four years)) shall be elected to a four-year term of office, and the other person ((receiving the next largest number of votes to serve an initial term of two years)) who is elected shall be elected to a two-year term of office, if the election is held in an even-numbered year, or the person who is elected receiving the greatest number of votes shall be elected to a three-year term of office, and the other person who is elected shall be elected to a one-year term of office, if the election is held in an odd-numbered year. The length of these terms of office shall be calculated from the first day in January in the year following their elections.

      The newly elected commissioners shall assume office immediately after being elected and qualified and shall serve until their successors are elected and qualified and assume office in accordance with RCW 29.04.170. Each successor shall be elected to a four-year term of office.

      Sec. 63. RCW 56.12.020 and 1979 ex.s. c 126 s 38 are each amended to read as follows:

      At the election held to form or reorganize a sewer district, ((there shall be elected three commissioners who shall assume office immediately when qualified in accordance with RCW 29.01.135 to hold office for terms of two, four, and six years respectively, and until their successors are elected and qualified and assume office in accordance with RCW 29.04.170.

      The term of each nominee shall be expressed on the ballot and shall be computed from the first day of January next following if the initial election of the sewer district commissioners was in a general district election as provided in RCW 29.13.020, or from the first day of January following the first general election for sewer districts after its creation if the initial election was on a date other than a general district election. Thereafter, every two years there shall be elected a commissioner for a term of six years and until his or her successor is elected and qualified, at the general election held in the odd-numbered years, as provided in RCW 29.13.020, and conducted by the county auditor and the returns shall be canvassed by the county canvassing board of election returns: PROVIDED, That each such commissioner shall assume office in accordance with RCW 29.04.170)) three sewer district commissioners shall be elected. The election of sewer district commissioners shall be null and void if the ballot proposition to form or reorganize the sewer district is not approved. Candidates shall run for one of three separate commissioner positions. A special filing period shall be opened as provided in RCW 29.15.170 and 29.15.180. The person receiving the greatest number of votes for each position shall be elected to that position.

      The newly elected sewer district commissioners shall assume office immediately when they are elected and qualified. Staggering of the terms of office for the new sewer district commissioners shall be accomplished as follows: (1) The person who is elected receiving the greatest number of votes shall be elected to a six-year term of office if the election is held in an odd-numbered year or a five-year term of office if the election is held in an even-numbered year; (2) the person who is elected receiving the next greatest number of votes shall be elected to a four-year term of office if the election is held in an odd-numbered year or a three-year term of office if the election is held in an even-numbered year; and (3) the other person who is elected shall be elected to a two-year term of office if the election is held in an odd-numbered year or a one-year term of office if the election is held in an even-numbered year. The terms of office shall be calculated from the first day of January in the year following the election.

      Thereafter commissioners shall be elected to six-year terms of office. Commissioners shall serve until their successors are elected and qualified and assume office in accordance with RCW 29.04.170.

      Sec. 64. RCW 56.12.030 and 1990 c 259 s 24 are each amended to read as follows:

      (((1) Nominations for the first board of commissioners to be elected at the election for the formation of the sewer district shall be by petition of fifty registered voters or ten percent of the registered voters of the district who voted in the last general municipal election, whichever is the smaller. The petition shall be filed in the auditor's office of the county in which the district is located at least forty-five days before the election. Thereafter candidates for the office of sewer commissioner shall file declarations of candidacy and their election shall be conducted as provided by the general elections laws. A vacancy or vacancies shall be filled by appointment by the remaining commissioner or commissioners until the next regular election for commissioners: PROVIDED, That if there are two vacancies on the board, one vacancy shall be filled by appointment by the remaining commissioner and the one remaining vacancy shall be filled by appointment by the then two commissioners and the appointed commissioners shall serve until the next regular election for commissioners. If the vacancy or vacancies remain unfilled within six months of its or their occurrence, the county legislative authority in which the district is located shall make the necessary appointment or appointments. If there is a vacancy of the entire board a new board may be appointed by the county legislative authority. Any person residing in the district who is at the time of election a registered voter may vote at any election held in the sewer district.

      (2) Subsection (1) of this section notwithstanding,)) The board of commissioners of any sewer district may ((provide by majority vote that subsequent commissioners be elected from commissioner districts)) adopt a resolution providing that each subsequent commissioner be elected as a commissioner of a commissioner district within the district. If the board exercises this option, it shall divide the district into ((three)) a number of commissioner districts ((of)) equal in number to the number of commissioners on the board, each with approximately equal population following current precinct and district boundaries as far as practicable. ((Thereafter, candidates shall be nominated and one candidate shall be elected from each commissioner district by the registered voters of the commissioner district.

      (3) All expense of elections for the formation or reorganization of a sewer district shall be paid by the county in which the election is held and the expenditure is hereby declared to be for a county purpose, and the money paid for that purpose shall be repaid to the county by the district if formed or reorganized.)) Commissioner districts shall be used as follows: (1) Only a registered voter who resides in a commissioner district may be a candidate for, or serve as, a commissioner of the commissioner district; and (2) only voters of a commissioner district may vote at a primary to nominate candidates for a commissioner of the commissioner district. Voters of the entire sewer district may vote at a general election to elect a person as a commissioner of the commissioner district. Commissioner districts shall be redrawn as provided in chapter 29.70 RCW.

      NEW SECTION. Sec. 65. A new section is added to chapter 56.12 RCW to read as follows:

      Sewer district elections shall conform with general election laws.

      Vacancies on a board of sewer commissioners shall occur and shall be filled as provided in chapter 42.12 RCW.

      Sec. 66. RCW 57.02.050 and 1982 1st ex.s. c 17 s 5 are each amended to read as follows:

      Whenever the boundaries or proposed boundaries of a water district include or are proposed to include by means of formation, annexation, consolidation, or merger (including merger with a sewer district) territory in more than one county, all duties delegated by Title 57 RCW to officers of the county in which the district is located shall be delegated to the officers of the county in which the largest land area of the district is located, except that elections shall be conducted pursuant to ((RCW 57.02.060, as now existing or hereafter amended)) general election law, actions subject to review and approval under RCW 57.02.040 and 56.02.070 shall be reviewed and approved only by the officers or boards in the county in which such actions are proposed to occur, verification of electors' signatures shall be conducted by the county election officer of the county in which such signators reside, and comprehensive plan review and approval or rejection by the respective county legislative authorities under RCW 57.16.010 shall be limited to that part of such plans within the respective counties.

      Sec. 67. RCW 57.12.020 and 1990 c 259 s 30 are each amended to read as follows:

      ((Nominations for the first board of commissioners to be elected at the election for the formation of the water district shall be by petition of at least ten percent of the registered voters of the district who voted in the last general municipal election, filed in the auditor's office of the county in which the district is located, at least forty-five days prior to the election. Thereafter, candidates for the office of water commissioners shall file declarations of candidacy and their election shall be conducted as provided by the general election laws.))

      A vacancy ((or vacancies)) on the board shall occur and shall be filled ((by appointment by the remaining commissioner or commissioners until the next regular election for commissioners: PROVIDED, That if there are two vacancies on the board, one vacancy shall be filled by appointment by the remaining commissioner and the one remaining vacancy shall be filled by appointment by the then two commissioners and the appointed commissioners shall serve until the next regular election for commissioners. If the vacancy or vacancies remain unfilled within six months of its or their occurrence, the county legislative authority in which the district is located shall make the necessary appointment or appointments. If there is a vacancy of the entire board a new board may be appointed by the county legislative authority.

      Any person residing in the district who is a registered voter under the laws of the state may vote at any district election)) as provided in chapter 42.12 RCW.

      Sec. 68. RCW 57.12.030 and 1982 1st ex.s. c 17 s 14 are each amended to read as follows:

      ((The general laws of the state of Washington governing the registration of voters for a general or a special city election shall govern the registration of voters for elections held under this chapter. The manner of holding any general or special election for said)) Water district elections shall be held in accordance with the general election laws of this state. ((All elections in a water district shall be conducted under RCW 57.02.060. All expenses of elections for a water district shall be paid for out of the funds of the water district: PROVIDED, That if the voters fail to approve the formation of a water district, the expenses of the formation election shall be paid by each county in which the proposed district is located, in proportion to the number of registered voters in the proposed district residing in each county.))

      Except as in this section otherwise provided, the term of office of each water district commissioner shall be six years, such term to be computed from the first day of January following the election, and ((one commissioner shall be elected at each biennial general election, as provided in RCW 29.13.020, for the term of six years and until his or her successor is)) commissioners shall serve until their successors are elected and qualified and assume((s)) office in accordance with RCW 29.04.170. ((All candidates shall be voted upon by the entire water district.))

      Three water district commissioners shall be elected at the same election at which the proposition is submitted to the voters as to whether such water district shall be formed. ((The commissioner elected in commissioner position number one shall hold office for the term of six years; the commissioner elected in commissioner position number two shall hold office for the term of four years; and the commissioner elected in commissioner position number three shall hold office for the term of two years: PROVIDED, That the members of the first



commission shall take office immediately upon their election and qualification. The terms of all commissioners first to be elected shall also include the time intervening between the date that the results of their election are declared in the canvass of returns thereof and the first day of January following the next general district election as provided in RCW 29.13.020.)) The election of water district commissioners shall be null and void if the ballot proposition to form the water district is approved. Each candidate shall run for one of three separate commissioner positions. A special filing period shall be opened as provided in RCW 29.15.170 and 29.15.180. The person receiving the greatest number of votes for each position shall be elected to that position.

      The newly elected water district commissioners shall assume office immediately when they are elected and qualified. Staggering of the terms of office for the new water district commissioners shall be accomplished as follows: (1) The person who is elected receiving the greatest number of votes shall be elected to a six-year term of office if the election is held in an odd-numbered year or a five-year term of office if the election is held in an even-numbered year; (2) the person who is elected receiving the next greatest number of votes shall be elected to a four-year term of office if the election is held in an odd-numbered year or a three-year term of office if the election is held in an even-numbered year; and (3) the other person who is elected shall be elected to a two-year term of office if the election is held in an odd-numbered year or a one-year term of office if the election is held in an even-numbered year. The terms of office shall be calculated from the first day of January after the election.

      Thereafter, commissioners shall be elected to six-year terms of office. Commissioners shall serve until their successors are elected and qualified and assume office in accordance with RCW 29.04.170.

      Sec. 69. RCW 57.12.039 and 1986 c 41 s 2 are each amended to read as follows:

      Notwithstanding RCW 57.12.020 and 57.12.030, the board of commissioners may provide by majority vote that subsequent commissioners be elected from commissioner districts within the district. If the board exercises this option, it shall divide the district into three commissioner districts of approximately equal population following current precinct and district boundaries. ((Thereafter, candidates shall be nominated and one candidate shall be elected from each commissioner district by the electors of the commissioner district.))

      Commissioner districts shall be used as follows: (1) Only a registered voter who resides in a commissioner district may be a candidate for, or serve as, a commissioner of the commissioner district; and (2) only voters of a commissioner district may vote at a primary to nominate candidates for a commissioner of the commissioner district. Voters of the entire water district may vote at a general election to elect a person as a commissioner of the commissioner district. Commissioner districts shall be redrawn as provided in chapter 29.70 RCW.

      Sec. 70. RCW 57.32.022 and 1982 1st ex.s. c 17 s 31 are each amended to read as follows:

      The respective boards of water commissioners of the consolidating districts shall certify the agreement to the county election officer of each county in which the districts are located. A special election shall be called by the county election officer ((under RCW 57.02.060)) for the purpose of submitting to the voters of each of the consolidating districts the proposition of whether or not the several districts shall be consolidated into one water district. The proposition shall give the title of the proposed consolidated district. Notice of the election shall be given and the election conducted in accordance with the general election laws.

      Sec. 71. RCW 57.32.023 and 1982 1st ex.s. c 17 s 32 are each amended to read as follows:

      If at the election a majority of the voters in each of the consolidating districts vote in favor of the consolidation, the county canvassing board shall so declare in its canvass ((under RCW 57.02.060)) and the return of such election shall be made within ten days after the date thereof. Upon the return the consolidation shall be effective and the consolidating districts shall cease to exist and shall then be and become a new water district and municipal corporation of the state of Washington. The name of such new water district shall be "Water District No. .....", which shall be the name appearing on the ballot. The district shall have all and every power, right, and privilege possessed by other water districts of the state of Washington. The district may issue revenue bonds to pay for the construction of any additions and betterments set forth in the comprehensive plan of water supply contained in the agreement for consolidation and any future additions and betterments to the comprehensive plan of water supply, as its board of water commissioners shall by resolution adopt, without submitting a proposition therefor to the voters of the district.

      NEW SECTION. Sec. 72. A new section is added to chapter 68.52 RCW to read as follows:

      Cemetery district elections shall conform with general election laws.

      A vacancy on a board of cemetery district commissioners shall occur and shall be filled as provided in chapter 42.12 RCW.

      Sec. 73. RCW 68.52.100 and 1947 c 6 s 2 are each amended to read as follows:

      For the purpose of forming a cemetery district, a petition designating the boundaries of the proposed district by metes and bounds or describing the lands to be included in the proposed district by government townships, ranges and legal subdivisions, signed by not less than fifteen percent of the ((qualified)) registered ((electors, who are property owners or are purchasing property under contract and who are resident)) voters who reside within the boundaries of the proposed district, setting forth the object of the formation of such district and stating that the establishment thereof will be conducive to the public welfare and convenience, shall be filed with the county auditor of the county within which the proposed district is located, accompanied by an obligation signed by two or more petitioners agreeing to pay the cost of publishing the notice hereinafter provided for. The county auditor shall, within thirty days from the date of filing of such petition, examine the signatures and certify to the sufficiency or insufficiency thereof ((and for such purpose shall have access to registration books and records in possession of the registration officers of the election precincts included in whole or in part within the boundaries of the proposed district and to the tax rolls and other records in the offices of the county assessor and county treasurer. No person having)). The name of any person who signed a petition shall not be ((allowed to withdraw his name therefrom)) withdrawn from the petition after it has been filed with the county auditor. If the petition is found to contain a sufficient number of valid signatures ((of qualified persons)), the county auditor shall transmit it, with ((his)) a certificate of sufficiency attached, to the ((board of)) county ((commissioners)) legislative authority, which shall thereupon, by resolution entered upon its minutes, receive the same and fix a day and hour when it will publicly hear ((said)) the petition.

      Sec. 74. RCW 68.52.140 and 1982 c 60 s 2 are each amended to read as follows:

      The ((board of)) county ((commissioners)) legislative authority shall have full authority to hear and determine the petition, and if it finds that the formation of the district will be conducive to the public welfare and convenience, it shall by resolution so declare, otherwise it shall deny the petition. If the ((board)) county legislative authority finds in favor of the formation of the district, it shall designate the 0name and number of the district, fix the boundaries thereof, and cause an election to be held therein for the purpose of determining whether or not the district shall be organized under the provisions of this chapter, and for the purpose of electing its first cemetery district commissioners. ((The board shall, prior to calling the said election, name three registered resident electors who are property owners or are purchasing property under contract within the boundaries of the district as candidates for election as cemetery district commissioners. These electors are exempt from the requirements of chapter 42.17 RCW.)) At the same election three cemetery district commissioners shall be elected, but the election of the commissioners shall be null and void if the district is not created. No primary shall be held. A special filing period shall be opened as provided in RCW 29.15.170 and 29.15.180. Candidates shall run for specific commissioner positions. The person receiving the greatest number of votes for each commissioner position shall be elected to that commissioner position. The terms of office of the initial commissioners shall be as provided in RCW 68.52.220.

      Sec. 75. RCW 68.52.160 and 1947 c 6 s 8 are each amended to read as follows:

      The ballot for ((said)) the election shall be in such form as may be convenient but shall present the propositions substantially as follows:


".....(insert county name)..... cemetery district No. .....(insert number)......

.....Yes......

.....(insert county name)..... cemetery district No. .....(insert number)......

.....No......"


((and shall specify the names of the candidates nominated for election as the first cemetery district commissioners with appropriate space to vote for the same.))

      Sec. 76. RCW 68.52.220 and 1990 c 259 s 33 are each amended to read as follows:

      The affairs of the district shall be managed by a board of cemetery district commissioners composed of three ((qualified registered voters of the district)) members. Members of the board shall receive no compensation for their services, but shall receive expenses necessarily incurred in attending meetings of the board or when otherwise engaged in district business. The board shall fix the compensation to be paid the secretary and other employees of the district. ((The first three cemetery district commissioners shall serve only until the first day in January following the next general election, provided such election occurs thirty or more days after the formation of the district, and until their successors have been elected and qualified and have assumed office in accordance with RCW 29.04.170. At the next general district election, as provided in RCW 29.13.020, provided it occurs thirty or more days after the formation of the district, three members of the board of cemetery commissioners shall be chosen. They and all subsequently elected cemetery commissioners shall have the same qualifications as required of the first three cemetery commissioners and)) Cemetery district commissioners and candidates for cemetery district commissioner are exempt from the requirements of chapter 42.17 RCW. ((The candidate receiving the highest number of votes shall serve for a term of six years beginning on the first day in January following; the candidate receiving the next higher number of votes shall serve for a term of four years from the date; and the candidate receiving the next higher number of votes shall serve for a term of two years from the date. Upon the expiration of their respective terms, all cemetery commissioners shall be elected for terms of six years to begin on the first day in January next succeeding the day of election and shall serve until their successors have been elected and qualified and assume office in accordance with RCW 29.04.170. Elections shall be called, noticed, conducted and canvassed and in the same manner and by the same officials as provided for general county elections.))

      The initial cemetery district commissioners shall assume office immediately upon their election and qualification. Staggering of terms of office shall be accomplished as follows: (1) The person elected receiving the greatest number of votes shall be elected to a six-year term of office if the election is held in an odd-numbered year or a five-year term of office if the election is held in an even-numbered year; (2) the person who is elected receiving the next greatest number of votes shall be elected to a four-year term of office if the election is held in an odd-numbered year or a three-year term of office if the election is held in an even-numbered year; and (3) the other person who is elected shall be elected to a two-year term of office if the election is held in an odd-numbered year or a one-year term of office if the election is held in an even-numbered year. The initial commissioners shall assume office immediately after they are elected and qualified but their terms of office shall be calculated from the first day of January after the election.

      Thereafter, commissioners shall be elected to six-year terms of office. Commissioners shall serve until their successors are elected and qualified and assume office as provided in RCW 29.04.170.

      The polling places for a cemetery district election ((shall be those of the county voting precincts which include any of the territory within the cemetery district, and)) may be located inside or outside the boundaries of the district, as determined by the auditor of the county in which the cemetery district is located, and no such election shall be held irregular or void on that account.

      Sec. 77. RCW 70.44.040 and 1990 c 259 s 39 are each amended to read as follows:

      (1) The provisions of Title 29 RCW relating to elections shall govern public hospital districts, except ((that: (1))) as provided in this chapter.

      A public hospital district shall be created when the ballot proposition authorizing the creation of the district is approved by a simple majority vote of the voters of the proposed district voting on the proposition and the total vote cast upon the proposition ((to form a hospital district shall)) exceeds forty percent of the total number of votes cast in the ((precincts comprising the)) proposed district at the preceding state general ((and county)) election((; and (2) hospital district commissioners shall hold office for the term of six years and until their successors are elected and qualified, each term to commence on the first day in January following the election)).

      At the election at which the proposition is submitted to the voters as to whether a district shall be formed, three commissioners shall be elected ((to hold office, respectively, for the terms of two, four, and six years. All candidates shall be voted upon by the entire district, and the candidate residing in commissioner district No. 1 receiving the highest number of votes in the hospital district shall hold office for the term of six years; the candidate residing in commissioner district No. 2 receiving the highest number of votes in the hospital district shall hold office for the term of four years; and the candidate residing in commissioner district No. 3 receiving the highest number of votes in the hospital district shall hold office for the term of two years. The first commissioners to be elected shall take office immediately when qualified in accordance with RCW 29.01.135. Each term of the initial commissioners shall date from the time above specified following the organizational election, but shall also include the period intervening between the organizational election and the first day of January following the next district general election: PROVIDED, That in public hospital districts encompassing portions of more than one county, the total vote cast upon the proposition to form the district shall exceed forty percent of the total number of votes cast in each portion of each county lying within the proposed district at the next preceding general county election. The portion of the proposed district located within each county shall constitute a separate commissioner district. There shall be three district commissioners whose terms shall be six years. Each district shall be designated by the name of the county in which it is located. All candidates for commissioners shall be voted upon by the entire district. Not more than one commissioner shall reside in any one district: PROVIDED FURTHER, That in the event there are only two districts then two commissioners may reside in one district. The term of each commissioner shall commence on the first day in January in each year following his election. At the election at which the proposition is submitted to the voters as to whether a district shall be formed, three commissioners shall be elected to hold office, respectively, for the terms of two, four, and six years. The candidate receiving the highest number of votes within the district, as constituted by the election, shall serve a term of six years; the candidate receiving the next highest number of votes shall hold office for a term of four years; and the candidate receiving the next highest number of votes shall hold office for a term of two years: PROVIDED FURTHER, That the holding of each such term of office shall be subject to the residential requirements for district commissioners hereinbefore set forth in this section)). The election of the initial commissioners shall be null and void if the district is not authorized to be created.

      No primary shall be held. A special filing period shall be opened as provided in RCW 29.15.170 and 29.15.180. The person receiving the greatest number of votes for the commissioner of each commissioner district shall be elected as the commissioner of that district. The terms of office of the initial public hospital district commissioners shall be staggered as follows: (a) The person who is elected receiving the greatest number of votes shall be elected to a six-year term of office if the election is held in an odd-numbered year or a five-year term of office if the election is held in an even-numbered year; (b) the person who is elected receiving the next greatest number of votes shall be elected to a four-year term of office if the election is held in an odd-numbered year or a three-year term of office if the election is held in an even-numbered year; and (c) the other person who is elected shall be elected to a two-year term of office if the election is held in an odd-numbered year or a one-year term of office if the election is held in an even-numbered year. The initial commissioners shall take office immediately when they are elected and qualified, but the length of such terms shall be computed from the first day of January in the year following this election. The term of office of each successor shall be six years. Each commissioner shall serve until a successor is elected and qualified and assumes office in accordance with RCW 29.04.170.

      (2) Commissioner districts shall be used as follows: (a) Only a registered voter who resides in a commissioner district may be a candidate for, or hold office as, a commissioner of the commissioner district; and (b) on