HOUSE BILL No. 4029 January 25, 2001, Introduced by Rep. Richner and referred to the Committee on Insurance and Financial Services. A bill to amend 1956 PA 218, entitled "The insurance code of 1956," by amending section 2117 (MCL 500.2117), as amended by 1980 PA 461. THE PEOPLE OF THE STATE OF MICHIGAN ENACT: 1 Sec. 2117. (1) As a condition of maintaining its certifi- 2 cate of authority, an insurer shall not refuse to insure, refuse 3 to continue to insure, or limit the coverage available to an eli- 4 gible person for home insurance, except in accordance with under- 5 writing rules established pursuant to this section and section 6 2119. An insurer shall not establish underwriting rules for home 7 insurance for contracts providing identical coverages that differ 8 from those of any affiliate of the insurer. 00985'01 DKH 2 1 (2) The underwriting ruleswhichTHAT an insurer may 2 establish for home insurance shall be based only on the 3 following: 4 (a) Criteria identical to the standards set forth in section 5 2103(2). 6 (b) The physical condition of the property insured or to be 7 insured, provided the underwriting rules are objective, are 8 directly related to the perils insured against, and, without 9 regard to the age of the structure, are based upon the specific 10 provisions of a national, state, or local housing and safety 11 code, a manufacturer's specification, or standards of similar 12 specificity. If an applicant or insured obtains a certificate of 13 compliance or habitation issued by an appropriate governmental 14 unit or agency, certifying that a building is in substantial com- 15 pliance with local housing and safety codes, the certificate 16shall createCREATES a rebuttable presumption that the dwelling 17 meets the insurer's underwriting rules relating to physical 18 condition. 19 (c) For the renewal of a home insurance policy, the liabil- 20 ity claim history of the person insured or to be insured during 21 the 3-year period immediately preceding renewal of the policy, if 22 that history is based on 1 or both of the following: 23 (i) Claim experience arising out of an insured's 24 negligence. 25 (ii) Failure by the insured, after written notice from the 26 insurer, to correct a physical conditionwhichTHAT is directly 27 related to a paid liability claim orwhichTHAT presents a 00985'01 3 1 clear risk of a significant loss under the liability portion of a 2 homeowners policy. 3 (d) For new policies only, physical conditionswhichTHAT 4 clearly present an extreme likelihood of a significant loss under 5 the liability coverages of a home insurance policy. 6 (e) The relationship between market value and replacement 7 cost of a dwelling insured or to be insured for a replacement 8 cost policy, if a repair cost policy is offered by that insurer 9 pursuant to subsection (3). 10 (f) For nonrenewal of home insurance policies, the claim 11 history under the policy, excluding liability claims, if there 12 has been 1 or more of the following: 13 (i) Three paid claims within the immediately preceding 14 3-year period totaling$750.00$1,500.00 or more, exclusive of 15 weather-related claims. 16 (ii) Three paid claims within the immediately preceding 17 3-year period totaling$1,000.00$2,000.00 or more, including 18 weather-related claims. 19 (g) The number of residences within the dwelling are incon- 20 sistent with the policy forms approved by the commissioner for 21 the insurer. 22 (h) The unoccupancy of a dwelling for more than 60 days, if 23 there is evidence of an intent to vacate or keep the premises 24 vacant or unoccupied, as to the applicant or insured. 25 (i) The existence of an adjacent physical hazard, if the 26 hazard presents a significant risk of loss directly related to 27 the perils insured or to be insured against for which a rate 00985'01 4 1 surcharge is not applicable. For purposes of this subdivision 2 only, residential property or traffic patterns shall not be con- 3 sidered to cause a significant risk of loss. Nonrenewals based 4 upon an adjacent physical hazard shall be due to a change in the 5 hazard from that which existed at the original date of issuance 6 of the policy. 7 (j) The failure of the insured or applicant to purchase an 8 amount of insurance in excess of 80% of the replacement cost of 9 the property to be insured under a replacement cost policy, if 10 both of the following conditions are met: 11 (i) The purchase of an amount of insurance in excess of 80% 12 of the replacement cost is a condition for sale of the policy. 13 (ii) The insurer offers in this state at least 1 form of a 14 replacement cost policy for which the insurer requires only a 15 minimum amount of insurance equal to 80% of the replacement cost 16 of the dwelling as a condition of purchase. 17 (3) If an insurer establishes an underwriting rule based 18 upon the relationship between the market value and replacement 19 cost pursuant to subsection (2)(e), all the following shall apply 20 as to the repair cost policy: 21 (a) The insurer shall offer for sale a repair cost policy 22 with deductibles, terms and conditions, perils insured against, 23 and types and amounts of coverage, which are substantially equiv- 24 alent to the deductibles, terms and conditions, perils insured 25 against, and types and amounts of coverage provided by the 26 replacement cost policy of the insurer at least equivalent to the 27 HO-2 form replacement cost policy filed and in effect in this 00985'01 5 1 state for the principal rating organization as of October 1, 2 1979. 3 (b) The insurer shall not utilize an underwriting rule based 4 upon the relationship between the market value and replacement 5 cost for the repair cost policy. 6 (4) The rates of an insurer for a repair cost policy shall 7 be established so that the premium for a repair cost policy shall 8 not exceed 105% of the premium for an amount of insurance equal 9 to 80% of the replacement cost of the dwelling under the equiva- 10 lent replacement cost policy described in subsection (3)(a). 11 Premiums for dwellings with identical replacement costs shall 12 vary on a schedule determined by the insurer in accordance with 13 the market value of the dwellings. 14 (5) Off-premises claims may be aggregated for the purposes 15 of subsection (2)(f), irrespective of the location of the insured 16 dwelling. All claims other than off-premises losses utilized in 17 a determination for purposes of subsection (2)(f) shall be aggre- 18 gated only as to an insured dwelling. The minimum dollar amounts 19 prescribed in subsection (2)(f) shall be adjustedbiennially20pursuant to rules promulgated by the commissioner under Act No.21306 of the Public Acts of 1969, as amended, based upon an appro-22priate index relating to the cost of claimsANNUALLY TO REFLECT 23 THE ANNUAL AVERAGE PERCENTAGE CHANGE IN THE CONSUMER PRICE 24 INDEX. AS USED IN THIS SUBSECTION, "CONSUMER PRICE INDEX" MEANS 25 THE CONSUMER PRICE INDEX FOR ALL URBAN CONSUMERS IN THE U.S. CITY 26 AVERAGE, AS MOST RECENTLY REPORTED BY THE UNITED STATES 00985'01 6 1 DEPARTMENT OF LABOR, BUREAU OF LABOR STATISTICS, AND AS CERTIFIED 2 BY THE COMMISSIONER. 3 Enacting section 1. This amendatory act takes effect 4 January 1, 2002. 00985'01 Final page. DKH