Preproposal statement of inquiry was filed as WSR 10-06-082.
Title of Rule and Other Identifying Information: Joint Underwriting Association (JUA) for midwifery and birthing centers malpractice insurance.
Hearing Location(s): Insurance Commissioner's Office, TR 120, 5000 Capitol Boulevard, Tumwater, WA 98504-0255, on July 7, 2010, at 10:00 a.m.
Date of Intended Adoption: July 8, 2010.
Submit Written Comments to: Jim Tompkins, P.O. Box 40258, Olympia, WA 98504-0258, e-mail firstname.lastname@example.org, fax (360) 586-3109, by July 6, 2010.
Assistance for Persons with Disabilities: Contact Lorrie [Lorie] Villaflores by July 6, 2010, TTY (360) 586-02421 [586-0241] or (360) 725-7087.
Purpose of the Proposal and Its Anticipated Effects, Including Any Changes in Existing Rules: The proposed rule will amend the existing rule to: Allow other entities to act as the administrator for the JUA, allow the JUA board the discretion to indemnify the servicing company for acting on its behalf, change the composition of the board of the directors, change the reporting requirements of the JUA, change the circumstances under which the board may refuse or cancel coverage for a licensee, update citations and terms which have changed as result of statutory amendments, set forth the order of distribution of the assets of the JUA upon dissolution, and allow the JUA to distribute excess reserves.
Reasons Supporting Proposal: The current rule limits the entity that may act as the administrator for the midwife JUA to an authorized insurer. By permitting other entities to become the administrator for the JUA, it provides the opportunity to the JUA to reduce its administrative costs and permit the board the discretion to indemnify the administrator for its activities on behalf of the board. The current rule does not provide for the distribution of the assets of the JUA upon its dissolution or if it acquires excess reserves.
Statutory Authority for Adoption: RCW 48.02.060 and
Statute Being Implemented: Chapter 48.87 RCW.
Rule is not necessitated by federal law, federal or state court decision.
Name of Proponent: Mike Kreidler, insurance commissioner, governmental.
Name of Agency Personnel Responsible for Drafting, Implementation and Enforcement: Jim Tompkins, P.O. Box 40258, Olympia, WA 98504-0258, (360) 725-7036.
No small business economic impact statement has been prepared under chapter 19.85 RCW. This proposed rule change does not impose any new requirements on a private business as a result nor will any new sanctions, fees or penalties be imposed on any private business as a result of its approval and implementation. Therefore, no small business economic impact statement is required.
A cost-benefit analysis is not required under RCW 34.05.328. This proposed rule change contains a set of minor or nonsubstantive amendments to the existing rules and three changes of substance: (A) Allowing a noninsurer to be the designated service company if so designated by the midwifery JUA and allowing the JUA board to indemnify its appointed service company (and its staff) for any legal defense costs incurred as a result of their duties; (B) requiring the JUA board to determine and establish a minimum loss reserve account; and (C) providing an order of distribution of any excess funds left if the association is deactivated or dissolved. As expressly allowed by chapter 48.87 RCW, these proposed rules represent the commissioner's interpretation of the law regarding necessary administrative procedures for the midwifery JUA. No new requirements will be imposed on a private business as a result nor will any new sanctions or penalties be imposed on any private business. Therefore, no cost-benefit analysis is required.
June 2, 2010
AMENDATORY SECTION(Amending Order R 93-18, filed 12/30/93, effective 1/30/94)
WAC 284-87-020 Definitions. Unless the context clearly requires otherwise, the definitions in this section apply throughout this chapter.
"Association" means the joint underwriting association established pursuant to the provisions of chapter 48.87 RCW.
"Board" means the governing board of the association.
"Licensee" means any person or birth center facility
licensed to provide midwifery services pursuant to chapters
18.46, 18.50, and ((
18.88)) 18.79 RCW.
"Market assistance plan" or "MAP" means the voluntary consumer assistance plan established pursuant to the provisions of RCW 48.22.050.
"Member insurer" means any insurer that on or after July 25, 1993, possesses a certificate of authority to write medical malpractice, general casualty insurance, or both, within this state.
"Midwifery and birth center insurance" means insurance coverage against the legal liability of the insured and against loss, damage, or expense incident to a claim arising out of the death or injury of any person as a result of negligence or malpractice in rendering professional service by any licensee.
insurer)) company" means any insurance company
or person designated by the association (( and approved by the
commissioner)) to (( issue policies pursuant to this)) act on
behalf of the association under chapters 48.87 RCW and 284-87
[Statutory Authority: RCW 48.02.060 and 48.87.100. 94-02-053 (Order R 93-18), § 284-87-020, filed 12/30/93, effective 1/30/94.]
(2) The board ((
shall)) must consist of seven members. (( Four)) Five board members (( shall)) must be member insurers
appointed by the commissioner. (( A fifth board member shall
be the insurer designated as the service insurer for the
association (or, if there is more than one service insurer,
the fifth board member shall be such service insurer as the
commissioner designates as the board member).)) The other two
board members (( shall)) must be licensees who are appointed by
the commissioner to so serve, neither of whom shall (( be
interested)) have an interest, directly or indirectly, in any
insurer except as a policyholder. Three of the original board
members (( shall)) must be appointed to serve an initial term
of three years, two (( shall)) must be appointed to serve an
initial term of two years, and the remaining (( shall)) must be
appointed to serve a one-year initial term. All other terms
(( shall)) must be for three years or until a successor has
been appointed. Not more than one member insurer in a group
under the same management or ownership shall serve on the
board at the same time. At least one of the (( four)) five
insurers on the board (( shall)) must be a domestic insurer. Members of the board may be removed by the commissioner for
(3) The association must indemnify each person serving on
the board or any subcommittee thereof, each member insurer of
the association, and each officer and employee of the
shall be indemnified by the association
against)) all costs and expenses actually and necessarily
incurred by him, her, or it in connection with the defense of
any action, suit, or proceeding in which he, she, or it is
made a party by reason of his, her, or its being or having
been a member of the board, or a member or officer or employee
of the association, except in relation to matters as to which
he, she, or it has been judged in such action, suit, or
proceeding to be liable by reason of (( wilful)) willful
misconduct in the performance of his, her, or its duties as a
member of such board, or member, officer, or employee of the
association. This indemnification shall not be exclusive of
other rights as to which such member, or officer, or employee
may be entitled as a matter of law.
(4) The association at the discretion of the board may agree to indemnify its appointed service company or companies and its staff from all costs and expenses actually and necessarily incurred by them in defense of any action, suit, or proceeding in which they are made a party by reason of their being or having been a service company of the association, except in relation to matters as to which they have been judged by a court of competent jurisdiction, to have engaged in willful misconduct in the performance of their duties as a service company on its behalf by staff.
[Statutory Authority: RCW 48.02.060 and 48.87.100. 94-02-053 (Order R 93-18), § 284-87-050, filed 12/30/93, effective 1/30/94.]
(2) The board shall meet as often as may be required to
perform the general duties of the administration of the
association or on the call of the commissioner. Four members
of the board shall constitute a quorum as long as at least one
whom shall be)) those present is a licensee board member.
(3) The board may appoint a ((
manager)) service company
or companies, who shall serve at the pleasure of the board, to
perform any duties necessary or incidental to the proper
administration of the association, including the hiring of
(4) The board shall annually furnish to ((
insurers of the association and to)) the commissioner a
written report of operations. All insurer members of the
association may receive a copy of the report from the
association upon request.
[Statutory Authority: RCW 48.02.060 and 48.87.100. 94-02-053 (Order R 93-18), § 284-87-060, filed 12/30/93, effective 1/30/94.]
(a) Number of applications received by the association;
(b) Number of applications accepted by the association and the total and average premiums charged, including the high and low premiums;
Number of risks declined;
(d) Number of risks conditionally declined and the number ultimately accepted after having been conditionally declined; and
(e))) Number of ((
risks cancelled)) policies canceled;
(d) Claims activity.
(2) In addition to statistics, the association ((
must maintain complete and separate records of all business
transactions, including copies of all policies and
endorsements issued by the association, and records of reasons
provided for each declination of coverage or cancellation of
coverage, including the results of any on-site inspections, or
investigations of applicants or insureds or their employees. Information concerning individual licensees (( shall)) must be
kept confidential to the extent permitted by law.
(3) Regular reports of the association's operations
shall)) must be submitted to all members of the board and to
the commissioner, (( such)) the reports (( to)) must include,
but not necessarily to be limited to, premiums written and
earned, losses, including loss adjustment expense, paid and
incurred, all other expenses incurred, outstanding
liabilities, and, at least once a year, the proposed annual
budget of the association for the next fiscal year.
(4) The books of account, records, reports, and other
documents of the associations ((
shall)) must be open to the
commissioner for examination at all reasonable times.
(5) The books of account, records, reports, and other
documents of the association shall be open to inspection by
members only at ((
such)) times and under (( such)) conditions
as the board shall determine.
(6) The books of account of any and all servicing
insurers)) companies may be audited by a firm of independent
auditors designated by the board.
[Statutory Authority: RCW 48.02.060 and 48.87.100. 94-02-053 (Order R 93-18), § 284-87-080, filed 12/30/93, effective 1/30/94.]
[Statutory Authority: RCW 48.02.060, 48.87.100 and 48.87.050. 94-13-006 (Order R 94-11), § 284-87-090, filed 6/2/94, effective 7/3/94. Statutory Authority: RCW 48.02.060 and 48.87.100. 94-02-053 (Order R 93-18), § 284-87-090, filed 12/30/93, effective 1/30/94.]
(2) Premiums ((
shall)) must be based on the association's
rate filings approved by the commissioner in accordance with
chapter 48.19 RCW. (( Such)) The rate filings shall provide
for modification of rates for licensees according to the type,
size, and past loss experience of each licensee, and any other
differences among licensees that can be demonstrated to have a
probable effect upon losses.
(3) Consistent with the nonprofit character of the
association, rates for policies issued by the association
shall)) must be set so that the expected profit (that is,
premiums plus investment income minus the sum of expenses and
losses) is zero.
(4) The association is exempt from the requirements of WAC 284-24-065.
[Statutory Authority: RCW 48.02.060, 48.87.100 and 48.87.050. 94-13-006 (Order R 94-11), § 284-87-100, filed 6/2/94, effective 7/3/94. Statutory Authority: RCW 48.02.060 and 48.87.100. 94-02-053 (Order R 93-18), § 284-87-100, filed 12/30/93, effective 1/30/94.]
(2) The association shall notify covered licensees in
writing at least ((
forty-five)) ninety days prior to the
expiration of a policy term of the need to submit a new
application for coverage to the association to continue
(3) If the association fails to provide the required written notice, the existing policy shall continue in force until the association has provided the required notice. In such case, premium shall be charged the licensee on a pro rata basis for coverage during the extended coverage period.
[Statutory Authority: RCW 48.02.060 and 48.87.100. 94-02-053 (Order R 93-18), § 284-87-110, filed 12/30/93, effective 1/30/94.]
(2) Appeals to the commissioner under this provision shall be handled in accordance with chapters 48.04 and 34.05 RCW.
[Statutory Authority: RCW 48.02.060 and 48.87.100. 94-02-053 (Order R 93-18), § 284-87-130, filed 12/30/93, effective 1/30/94.]
[Statutory Authority: RCW 48.02.060 and 48.87.100. 94-02-053 (Order R 93-18), § 284-87-140, filed 12/30/93, effective 1/30/94.]
[Statutory Authority: RCW 48.02.060 and 48.87.100. 94-02-053 (Order R 93-18), § 284-87-150, filed 12/30/93, effective 1/30/94.]
(2) If the board, in its sole discretion, determines that the reserve account is in excess of an amount necessary to pay potential infrequent severe losses, the association may, but is not obligated to:
(a) Refund to the member insurers all or any portion of any assessment that was received from the member insurers in the same pro rata amount the member insurer was assessed and paid. No return to a member insurer may exceed the aggregate amount paid to the association by the member insurer.
(b) After all assessments received by the association from member insurers are refunded to the member insurers, the association may make a one-time premium adjustment to the insured licensees.
(1) For the purchase of prior acts coverage from the successor insurer for all active licensees insured by the association.
(2) For the return of one hundred percent of unearned premium to all active licensees insured by the association.
(3) For the return of remaining funds to the member insurers on a pro rata formula, based upon the total of all assessments paid in throughout the lifetime of the association's operation. Returns to a member insurer must not exceed the aggregate amount paid to the association by the member insurer.
(4) For the distribution of any remaining balance to active licensees insured by the association at the time of deactivation or dissolution, according to a pro rata formula based upon the total of all premiums paid to the association. Distribution amounts paid to a licensee must not exceed the aggregate amount paid to the association by the licensee. Pro rata amounts of less than twenty-five dollars will not be returned.
(5) Any remaining balance will utilized at the discretion of the commissioner.