Insurance; no-fault; Michigan catastrophic claims association

assessment categories; create.

INSURANCE: No-fault

A bill to amend 1956 PA 218, entitled

"The insurance code of 1956,"

by amending section 3104 (MCL 500.3104), as amended by 2001 PA

3.

THE PEOPLE OF THE STATE OF MICHIGAN ENACT:

1 Sec. 3104. (1) An unincorporated, nonprofit association to

2 be known as the catastrophic claims association, hereinafter

3 referred to as the association, is created. Each insurer engaged

4 in writing insurance coverages that provide the security required

5 by section 3101(1) within this state, as a condition of its

6 authority to transact insurance in this state, shall be a member

7 of the association and shall be bound by the plan of operation of

8 the association. Each insurer engaged in writing insurance

9 coverages that provide the security required by section 3103(1)

10 within this state, as a condition of its authority to transact

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1 insurance in this state, shall be considered a member of the

2 association, but only for purposes of premiums under subsection

3 (7)(d). Except as expressly provided in this section, the asso-

4 ciation is not subject to any laws of this state with respect to

5 insurers, but in all other respects the association is subject to

6 the laws of this state to the extent that the association would

7 be if it were an insurer organized and subsisting under chapter

8 50.

9 (2) The association shall provide and each member shall

10 accept indemnification for 100% of the amount of ultimate loss

11 sustained under personal protection insurance coverages in excess

12 of the following amounts in each loss occurrence:

13 (a) For a motor vehicle accident policy issued or renewed

14 before July 1, 2002, $250,000.00.

15 (b) For a motor vehicle accident policy issued or renewed

16 during the period July 1, 2002 to June 30, 2003, $300,000.00.

17 (c) For a motor vehicle accident policy issued or renewed

18 during the period July 1, 2003 to June 30, 2004, $325,000.00.

19 (d) For a motor vehicle accident policy issued or renewed

20 during the period July 1, 2004 to June 30, 2005, $350,000.00.

21 (e) For a motor vehicle accident policy issued or renewed

22 during the period July 1, 2005 to June 30, 2006, $375,000.00.

23 (f) For a motor vehicle accident policy issued or renewed

24 during the period July 1, 2006 to June 30, 2007, $400,000.00.

25 (g) For a motor vehicle accident policy issued or renewed

26 during the period July 1, 2007 to June 30, 2008, $420,000.00.

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1 (h) For a motor vehicle accident policy issued or renewed

2 during the period July 1, 2008 to June 30, 2009, $440,000.00.

3 (i) For a motor vehicle accident policy issued or renewed

4 during the period July 1, 2009 to June 30, 2010, $460,000.00.

5 (j) For a motor vehicle accident policy issued or renewed

6 during the period July 1, 2010 to June 30, 2011, $480,000.00.

7 (k) For a motor vehicle accident policy issued or renewed

8 during the period July 1, 2011 to June 30, 2013, $500,000.00.

9 Beginning July 1, 2013, this $500,000.00 amount shall be

10 increased biennially on July 1 of each odd-numbered year, for

11 policies issued or renewed before July 1 of the following

12 odd-numbered year, by the lesser of 6% or the consumer price

13 index, and rounded to the nearest $5,000.00. This biennial

14 adjustment shall be calculated by the association by January 1 of

15 the year of its July 1 effective date.

16 (3) An insurer may withdraw from the association only upon

17 ceasing to write insurance that provides the security required by

18 section 3101(1) in this state.

19 (4) An insurer whose membership in the association has been

20 terminated by withdrawal shall continue to be bound by the plan

21 of operation, and upon withdrawal, all unpaid premiums that have

22 been charged to the withdrawing member are payable as of the

23 effective date of the withdrawal.

24 (5) An unsatisfied net liability to the association of an

25 insolvent member shall be assumed by and apportioned among the

26 remaining members of the association as provided in the plan of

27 operation. The association has all rights allowed by law on

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1 behalf of the remaining members against the estate or funds of

2 the insolvent member for sums due the association.

3 (6) If a member has been merged or consolidated into another

4 insurer or another insurer has reinsured a member's entire busi-

5 ness that provides the security required by section 3101(1) in

6 this state, the member and successors in interest of the member

7 remain liable for the member's obligations.

8 (7) The association shall do all of the following on behalf

9 of the members of the association:

10 (a) Assume 100% of all liability as provided in subsection

11 (2).

12 (b) Establish procedures by which members shall promptly

13 report to the association each claim that, on the basis of the

14 injuries or damages sustained, may reasonably be anticipated to

15 involve the association if the member is ultimately held legally

16 liable for the injuries or damages. Solely for the purpose of

17 reporting claims, the member shall in all instances consider

18 itself legally liable for the injuries or damages. The member

19 shall also advise the association of subsequent developments

20 likely to materially affect the interest of the association in

21 the claim.

22 (c) Maintain relevant loss and expense data relative to all

23 liabilities of the association and require each member to furnish

24 statistics, in connection with liabilities of the association, at

25 the times and in the form and detail as may be required by the

26 plan of operation.

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1 (d) In a manner provided for in the plan of operation,

2 calculate and charge to members of the association a total

3 premium SEPARATE PREMIUMS FOR EACH OF THE FOLLOWING CATEGORIES:

4 TYPE A VEHICLES AND TYPE B VEHICLES. THE SEPARATE PREMIUMS IN

5 TOTAL SHALL BE CALCULATED TO BE sufficient to cover the expected

6 losses and expenses of the association that the association will

7 likely incur during the period for which the premium is

8 PREMIUMS ARE applicable. The premium PREMIUMS shall include an

9 amount to cover incurred but not reported losses for the period

10 and may be adjusted for any excess or deficient premiums from

11 previous periods. Excesses or deficiencies from previous periods

12 may be fully adjusted in a single period or may be adjusted over

13 several periods in a manner provided for in the plan of

14 operation. Each member shall be charged an amount equal to that

15 member's total written car VEHICLE years of insurance FOR EACH

16 PREMIUM CATEGORY providing the security required by section

17 3101(1) or 3103(1), or both, written in this state during the

18 period to which the premium applies, multiplied by the average

19 premium per car VEHICLE FOR EACH PREMIUM CATEGORY. The average

20 premium per car VEHICLE FOR EACH PREMIUM CATEGORY shall be the

21 total premium calculated FOR EACH PREMIUM CATEGORY divided by the

22 total written car VEHICLE years of insurance FOR EACH PREMIUM

23 CATEGORY providing the security required by section 3101(1) or

24 3103(1) written in this state of all members during the period to

25 which the premium applies. As used in this subdivision, "car"

26 includes a motorcycle.

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1 (e) Require and accept the payment of premiums from members

2 of the association as provided for in the plan of operation. The

3 association shall do either of the following:

4 (i) Require payment of the premium in full within 45 days

5 after the premium charge.

6 (ii) Require payment of the premiums to be made periodically

7 to cover the actual cash obligations of the association.

8 (f) Receive and distribute all sums required by the opera-

9 tion of the association.

10 (g) Establish procedures for reviewing claims procedures and

11 practices of members of the association. If the claims proce-

12 dures or practices of a member are considered inadequate to prop-

13 erly service the liabilities of the association, the association

14 may undertake or may contract with another person, including

15 another member, to adjust or assist in the adjustment of claims

16 for the member on claims that create a potential liability to the

17 association and may charge the cost of the adjustment to the

18 member.

19 (8) In addition to other powers granted to it by this sec-

20 tion, the association may do all of the following:

21 (a) Sue and be sued in the name of the association. A judg-

22 ment against the association shall not create any direct liabil-

23 ity against the individual members of the association. The asso-

24 ciation may provide for the indemnification of its members, mem-

25 bers of the board of directors of the association, and officers,

26 employees, and other persons lawfully acting on behalf of the

27 association.

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1 (b) Reinsure all or any portion of its potential liability

2 with reinsurers licensed to transact insurance in this state or

3 approved by the commissioner.

4 (c) Provide for appropriate housing, equipment, and person-

5 nel as may be necessary to assure the efficient operation of the

6 association.

7 (d) Pursuant to the plan of operation, adopt reasonable

8 rules for the administration of the association, enforce those

9 rules, and delegate authority, as the board considers necessary

10 to assure the proper administration and operation of the associa-

11 tion consistent with the plan of operation.

12 (e) Contract for goods and services, including independent

13 claims management, actuarial, investment, and legal services,

14 from others within or without this state to assure the efficient

15 operation of the association.

16 (f) Hear and determine complaints of a company or other

17 interested party concerning the operation of the association.

18 (g) Perform other acts not specifically enumerated in this

19 section that are necessary or proper to accomplish the purposes

20 of the association and that are not inconsistent with this sec-

21 tion or the plan of operation.

22 (9) A board of directors is created, hereinafter referred to

23 as the board, which shall be responsible for the operation of the

24 association consistent with the plan of operation and this

25 section.

26 (10) The plan of operation shall provide for all of the

27 following:

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1 (a) The establishment of necessary facilities.

2 (b) The management and operation of the association.

3 (c) Procedures to be utilized in charging premiums, includ-

4 ing adjustments from excess or deficient premiums from prior

5 periods.

6 (d) Procedures governing the actual payment of premiums to

7 the association.

8 (e) Reimbursement of each member of the board by the associ-

9 ation for actual and necessary expenses incurred on association

10 business.

11 (f) The investment policy of the association.

12 (g) Any other matters required by or necessary to effec-

13 tively implement this section.

14 (11) Each board shall include members that would contribute

15 a total of not less than 40% of the total premium calculated pur-

16 suant to subsection (7)(d). Each director shall be entitled to 1

17 vote. The initial term of office of a director shall be 2

18 years.

19 (12) As part of the plan of operation, the board shall adopt

20 rules providing for the composition and term of successor boards

21 to the initial board, consistent with the membership composition

22 requirements in subsections (11) and (13). Terms of the direc-

23 tors shall be staggered so that the terms of all the directors do

24 not expire at the same time and so that a director does not serve

25 a term of more than 4 years.

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1 (13) The board shall consist of 5 directors, and the

2 commissioner shall be an ex officio member of the board without

3 vote.

4 (14) Each director shall be appointed by the commissioner

5 and shall serve until that member's successor is selected and

6 qualified. The chairperson of the board shall be elected by the

7 board. A vacancy on the board shall be filled by the commis-

8 sioner consistent with the plan of operation.

9 (15) After the board is appointed, the board shall meet as

10 often as the chairperson, the commissioner, or the plan of opera-

11 tion shall require, or at the request of any 3 members of the

12 board. The chairperson shall retain the right to vote on all

13 issues. Four members of the board constitute a quorum.

14 (16) An annual report of the operations of the association

15 in a form and detail as may be determined by the board shall be

16 furnished to each member.

17 (17) Not more than 60 days after the initial organizational

18 meeting of the board, the board shall submit to the commissioner

19 for approval a proposed plan of operation consistent with the

20 objectives and provisions of this section, which shall provide

21 for the economical, fair, and nondiscriminatory administration of

22 the association and for the prompt and efficient provision of

23 indemnity. If a plan is not submitted within this 60-day period,

24 then the commissioner, after consultation with the board, shall

25 formulate and place into effect a plan consistent with this

26 section.

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1 (18) The plan of operation, unless approved sooner in

2 writing, shall be considered to meet the requirements of this

3 section if it is not disapproved by written order of the commis-

4 sioner within 30 days after the date of its submission. Before

5 disapproval of all or any part of the proposed plan of operation,

6 the commissioner shall notify the board in what respect the plan

7 of operation fails to meet the requirements and objectives of

8 this section. If the board fails to submit a revised plan of

9 operation that meets the requirements and objectives of this sec-

10 tion within the 30-day period, the commissioner shall enter an

11 order accordingly and shall immediately formulate and place into

12 effect a plan consistent with the requirements and objectives of

13 this section.

14 (19) The proposed plan of operation or amendments to the

15 plan of operation are subject to majority approval by the board,

16 ratified by a majority of the membership having a vote, with

17 voting rights being apportioned according to the premiums charged

18 in subsection (7)(d) and are subject to approval by the

19 commissioner.

20 (20) Upon approval by the commissioner and ratification by

21 the members of the plan submitted, or upon the promulgation of a

22 plan by the commissioner, each insurer authorized to write insur-

23 ance providing the security required by section 3101(1) in this

24 state, as provided in this section, is bound by and shall for-

25 mally subscribe to and participate in the plan approved as a con-

26 dition of maintaining its authority to transact insurance in this

27 state.

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1 (21) The association is subject to all the reporting, loss

2 reserve, and investment requirements of the commissioner to the

3 same extent as would a member of the association.

4 (22) Premiums charged members by the association shall be

5 recognized in the rate-making procedures for insurance rates in

6 the same manner that expenses and premium taxes are recognized.

7 (23) The commissioner or an authorized representative of the

8 commissioner may visit the association at any time and examine

9 any and all the association's affairs.

10 (24) The association does not have liability for losses

11 occurring before July 1, 1978.

12 (25) As used in this section:

13 (a) "Consumer price index" means the percentage of change in

14 the consumer price index for all urban consumers in the United

15 States city average for all items for the 24 months prior to

16 October 1 of the year prior to the July 1 effective date of the

17 biennial adjustment under subsection (2)(k) as reported by the

18 United States department of labor, bureau of labor statistics,

19 and as certified by the commissioner.

20 (B) "HISTORIC VEHICLE" MEANS A VEHICLE THAT IS A REGISTERED

21 HISTORIC VEHICLE UNDER SECTION 803A OR 803P OF THE MICHIGAN VEHI-

22 CLE CODE, 1949 PA 300, MCL 257.803A AND 257.803P.

23 (C) "MOTORCYCLE" MEANS A VEHICLE AS DEFINED IN SECTION

24 3101(2).

25 (D) (b) "Motor vehicle accident policy" means a policy

26 providing the coverages required under section 3101(1).

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1 (E) "PRIVATE PASSENGER AUTO" MEANS A MOTOR VEHICLE AS

2 DEFINED IN SECTION 3101(2) THAT IS ALSO ALL OF THE FOLLOWING:

3 (i) AN AUTO, MOTOR HOME, CUSTOMIZED VAN, STATION WAGON,

4 SPORTS UTILITY VEHICLE, PICKUP, PANEL TRUCK, OR VAN.

5 (ii) NOT OWNED OR REGISTERED BY A LIMITED LIABILITY COMPANY,

6 CORPORATION, PARTNERSHIP, OR UNINCORPORATED ASSOCIATION, UNLESS

7 LEASED FOR A PERIOD THAT IS GREATER THAN 30 DAYS TO AN INDIVIDUAL

8 OR HUSBAND AND WIFE.

9 (iii) NOT USED AS A PUBLIC OR LIVERY CONVEYANCE OR RENTED TO

10 OTHERS WITHOUT A DRIVER.

11 (iv) NOT REGISTERED AS A HISTORIC VEHICLE.

12 (F) "TYPE A VEHICLE" MEANS EITHER OF THE FOLLOWING:

13 (i) A MOTOR VEHICLE AS DEFINED IN SECTION 3101(2) THAT IS

14 ALSO NOT A PRIVATE PASSENGER AUTO.

15 (ii) A HISTORIC VEHICLE.

16 (G) "TYPE B VEHICLE" MEANS EITHER OF THE FOLLOWING:

17 (i) A PRIVATE PASSENGER AUTO.

18 (ii) A MOTORCYCLE.

19 (H) (c) "Ultimate loss" means the actual loss amounts that

20 a member is obligated to pay and that are paid or payable by the

21 member, and do not include claim expenses. An ultimate loss is

22 incurred by the association on the date that the loss occurs.

23 Enacting section 1. This amendatory act takes effect

24 January 1, 2005.

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