September 13, 2005, Introduced by Reps. Condino, Bieda, Lipsey, Tobocman, Clemente, Alma Smith, Dillon, Polidori, Wojno, Zelenko, Accavitti, Gillard, Ball, Kolb, Donigan, Vagnozzi, Plakas, Kathleen Law and Leland and referred to the Committee on Insurance.
A bill to amend 1956 PA 218, entitled
"The insurance code of 1956,"
by amending sections 2236, 2401, and 2601 (MCL 500.2236, 500.2401,
and 500.2601), as amended by 2002 PA 664.
THE PEOPLE OF THE STATE OF MICHIGAN ENACT:
Sec. 2236. (1) A basic insurance policy form or annuity
contract form shall not be issued or delivered to any person in
this state, and an insurance or annuity application form if a
written application is required and is to be made a part of the
policy or contract, a printed rider or indorsement form or form of
renewal certificate, and a group certificate in connection with the
policy or contract, shall not be issued or delivered to a person in
this state, until a copy of the form is filed with the insurance
bureau and approved by the commissioner as conforming with the
requirements of this act and not inconsistent with the law. Failure
of the commissioner to act within 30 days after submittal
constitutes approval. All such forms, except policies of disability
insurance as defined in section 3400, shall be plainly printed with
type size not less than 8-point unless the commissioner determines
that portions of such a form printed with type less than 8-point is
not deceptive or misleading.
(2) An insurer may satisfy its obligations to make form
filings by becoming a member of, or a subscriber to, a rating
organization, licensed under section 2436 or 2630, which makes such
filings and by filing with the commissioner a copy of its
authorization of the rating organization to make the filings on its
behalf. Every member of or subscriber to a rating organization
shall adhere to the form filings made on its behalf by the
organization except that an insurer may file with the commissioner
a substitute form, and thereafter if a subsequent form filing by
the rating organization affects the use of the substitute form, the
insurer shall review its use and notify the commissioner whether to
withdraw its substitute form.
(3) Beginning January 1, 1992, the commissioner shall not
approve a form filed pursuant to this section providing for or
relating to an insurance policy or an annuity contract for
personal, family, or household purposes if the form fails to obtain
the readability score or meet the other requirements of this
subsection, as applicable:
(a) The readability score for a form for which approval is
required by this section shall not be less than 45, as determined
by the method provided in subdivisions (b) and (c).
(b) The readability score for a form shall be determined as
follows:
(i) For a form containing not more than 10,000 words, the
entire form shall be analyzed. For a form containing more than
10,000 words, not less than two 200-word samples per page shall be
analyzed instead of the entire form. The samples shall be separated
by at least 20 printed lines.
(ii) Count the number of words and sentences in the form or
samples and divide the total number of words by the total number of
sentences. Multiply this quotient by a factor of 1.015.
(iii) Count the total number of syllables in the form or samples
and divide the total number of syllables by the total number of
words. Multiply this quotient by a factor of 84.6. As used in this
subparagraph, "syllable" means a unit of spoken language consisting
of 1 or more letters of a word as indicated by an accepted
dictionary. If the dictionary shows 2 or more equally acceptable
pronunciations of a word, the pronunciation containing fewer
syllables may be used.
(iv) Add the figures obtained in subparagraphs (ii) and (iii) and
subtract this sum from 206.835. The figure obtained equals the
readability score for the form.
(c) For the purposes of subdivision (b)(ii) and (iii), the
following procedures shall be used:
(i) A contraction, hyphenated word, or numbers and letters when
separated by spaces shall be counted as 1 word.
(ii) A unit of words ending with a period, semicolon, or colon,
but excluding headings and captions, shall be counted as 1
sentence.
(d) In determining the readability score, the method provided
in subdivisions (b) and (c):
(i) Shall be applied to an insurance policy form or an annuity
contract, together with a rider or indorsement form usually
associated with such an insurance policy form or annuity contract.
(ii) Shall not be applied to words or phrases that are defined
in an insurance policy form, an annuity contract, or riders,
indorsements, or group certificates pursuant to an insurance policy
form or annuity contract.
(iii) Shall not be applied to language specifically agreed upon
through collective bargaining or required by a collective
bargaining agreement.
(iv) Shall not be applied to language that is prescribed by
state or federal statute or by rules or regulations promulgated
pursuant to a state or federal statute.
(e) Each form for which approval is required by this section
shall contain both of the following:
(i) Topical captions.
(ii) An identification of exclusions.
(f) Each insurance policy and annuity contract that has more
than 3,000 words printed on not more than 3 pages of text or that
has more than 3 pages of text regardless of the number of words
shall contain a table of contents. This subdivision does not apply
to indorsements.
(g) Each rider or indorsement form that changes coverage shall
do all of the following:
(i) Contain a properly descriptive title.
(ii) Reproduce either the entire paragraph or the provision as
changed.
(iii) Be accompanied by an explanation of the change.
(h) If a computer system approved by the commissioner
calculates the readability score of a form as being in compliance
with this subsection, the form is considered in compliance with the
readability score requirements of this subsection.
(4) After January 1, 1992, any change or addition to a policy
or annuity contract form for personal, family, or household
purposes, whether by indorsement, rider, or otherwise, or a change
or addition to a rider or indorsement form to such policy or
annuity contract form, which policy or annuity contract form has
not been previously approved under subsection (3), shall be
submitted for approval pursuant to subsection (3).
(5) Upon written notice to the insurer, the commissioner may
disapprove, withdraw approval or prohibit the issuance,
advertising, or delivery of any form to any person in this state if
it violates any provisions of this act, or contains inconsistent,
ambiguous, or misleading clauses, or contains exceptions and
conditions that unreasonably or deceptively affect the risk
purported to be assumed in the general coverage of the policy. The
notice shall specify the objectionable provisions or conditions and
state the reasons for the commissioner's decision. If the form is
legally in use by the insurer in this state, the notice shall give
the effective date of the commissioner's disapproval, which shall
not be less than 30 days subsequent to the mailing or delivery of
the notice to the insurer. If the form is not legally in use, then
disapproval shall be effective immediately.
(6) If a form is disapproved or approval is withdrawn under
the provisions of this act, the insurer is entitled upon demand to
a hearing before the commissioner or a deputy commissioner within
30 days after the notice of disapproval or of withdrawal of
approval. After the hearing, the commissioner shall make findings
of fact and law, and either affirm, modify, or withdraw his or her
original order or decision.
(7) Any issuance, use, or delivery by an insurer of any form
without the prior approval of the commissioner as required by
subsection (1) or after withdrawal of approval as provided by
subsection (5) constitutes a separate violation for which the
commissioner may order the imposition of a civil penalty of $25.00
for each offense, but not to exceed the maximum penalty of $500.00
for any 1 series of offenses relating to any 1 basic policy form,
which penalty may be recovered by the attorney general as provided
in section 230.
(8) The filing requirements of this section do not apply to
any of the following:
(a) Insurance against loss of or damage to:
(i) Imports, exports, or domestic shipments.
(ii) Bridges, tunnels, or other instrumentalities of
transportation and communication.
(iii) Aircraft and attached equipment.
(iv) Vessels and watercraft under construction or owned by or
used in a business or having a straight-line hull length of more
than 24 feet.
(b) Insurance against loss resulting from liability, other
than worker's compensation or employers' liability arising out of
the ownership, maintenance, or use of:
(i) Imports, exports, or domestic shipments.
(ii) Aircraft and attached equipment.
(iii) Vessels and watercraft under construction or owned by or
used in a business or having a straight-line hull length of more
than 24 feet.
(c) Surety bonds other than fidelity bonds.
(d) Policies, riders, indorsements, or forms of unique
character designed for and used with relation to insurance upon a
particular subject, or that relate to the manner of distribution of
benefits or to the reservation of rights and benefits under life or
disability insurance policies and are used at the request of the
individual policyholder, contract holder, or certificate holder.
Beginning September 1, 1968, the commissioner by order may exempt
from the filing requirements of this section and sections 2242,
3606, and 4430 for so long as he or she considers proper any
insurance document or form, except that portion of the document or
form that establishes a relationship between group disability
insurance and personal protection insurance benefits subject to
exclusions or deductibles pursuant to section 3109a, as specified
in the order to which this section practicably may not be applied,
or the filing and approval of which are considered unnecessary for
the protection of the public. Insurance documents or forms
providing medical payments or income replacement benefits, except
that portion of the document or form that establishes a
relationship between group disability insurance and personal
protection insurance benefits subject to exclusions or deductibles
pursuant to section 3109a, exempt by order of the commissioner from
the filing requirements of this section and sections 2242 and 3606
are considered approved by the commissioner for purposes of section
3430.
(e)
Insurance that meets both of the following:
(i) Is sold to an exempt commercial policyholder.
(ii) Contains a prominent disclaimer that states
"This policy
is
exempt from the filing requirements of section 2236 of the
insurance
code of 1956, 1956 PA 218, MCL 500.2236." or words that
are
substantially similar.
(9)
As used in this section and sections 2401 and 2601,
"exempt
commercial policyholder" means an insured that purchases
the
insurance for other than personal, family, or household
purposes.
(9) (10)
Every order made by the commissioner under the
provisions of this section is subject to court review as provided
in section 244.
Sec. 2401. (1) Except as provided in subsection (2), this
chapter applies to the following kinds of insurance or coverages on
risks or operations in this state:
(a) Casualty insurance, as defined in section 624, except as
to livestock insurance.
(b) Surety and fidelity.
(c) Automobile insurance, as defined or included under the
following sections:
(i) 624 (general definition of casualty insurance).
(ii) 7202 (insuring powers of reciprocal insurers).
(iii) 620 (automobile insurance (limited) defined).
(iv) 614 (marine insurance defined).
(d) Worker's compensation insurance, as defined or included
under the following sections:
(i) 624 (general definition of casualty insurance).
(ii) 7202 (insuring powers of reciprocal insurers).
(e) To all insurance transacted by a reciprocal insurer
pursuant to section 7202 (insuring powers of reciprocal insurers).
(f) Personal property floaters.
(g) Title insurance.
(2) This chapter does not apply to any of the following:
(a) Reinsurance, other than joint reinsurance to the extent
stated in section 2464.
(b) Disability insurance.
(c) Insurance against loss of or damage to aircraft or against
liability, other than worker's compensation and employers'
liability, arising out of the ownership, maintenance, or use of
aircraft.
(d)
Insurance that meets both of the following and is not
worker's
compensation insurance:
(i) Is sold to an exempt commercial policyholder.
(ii) Contains a prominent disclaimer that states
"This policy
is
exempt from the filing requirements of section 2236 of the
insurance
code of 1956, 1956 PA 218, MCL 500.2236." or words that
are
substantially similar.
(3) This chapter applies to all classes of insurers admitted
to do business in this state, including stock, mutual, reciprocal,
and interinsurers authorized to write any of the kinds of insurance
to which this chapter applies under this act.
(4) If any kind of insurance, subdivision, or combination
thereof, or type of coverage, subject to this chapter, is also
subject to regulation by another rate regulatory chapter of this
act, an insurer to which both chapter 24 and chapter 26 are
otherwise applicable shall file with the commissioner, a
designation as to which rate regulatory chapter shall be applicable
to the insurer with respect to such kind of insurance, subdivision,
or combination thereof, or type of coverage.
(5) If, pursuant to subsection (6), the commissioner certifies
the absence of a reasonable degree of competition for a specified
classification, type, or kind of insurance, the commissioner may
order that each insurer file for prior approval, subject to the
provisions of this chapter, any changes to its manuals of
classification, manuals of rules and rates, and rating plans the
insurer proposes to use for that specified classification, type, or
kind of insurance. The order shall state, in writing, the reasons
for the commissioner's decision to order the filing. An order
issued under this subsection expires 2 years after the date of
issuance. If such an order is in effect, rates to which the order
applies shall be filed at least 30 days before their proposed
effective date. Failure of the commissioner to act within 30 days
after submittal constitutes approval.
(6) A determination concerning the absence of a reasonable
degree of competition shall take into account a reasonable spectrum
of relevant economic tests, including the number of insurers
actively engaged in writing the insurance in question, the present
availability of that insurance compared to the availability in
comparable past periods, the underwriting return of that insurance
over a reasonable period of time sufficient to assure reliability
in relation to the risk associated with that insurance, and the
difficulty encountered by new insurers entering the market in order
to compete for the writing of that insurance.
Sec. 2601. (1) This chapter applies to the following kinds of
insurance as written on risks located in this state by and
companies, associations, or other carriers, including reciprocals:
(a) Property insurance, as defined in section 610.
(b) Marine insurance, as defined in section 614.
(c) Inland navigation and transportation insurance, as defined
in section 616.
(d) Automobile insurance (limited), as defined in section 620.
(2) "Inland marine insurance" shall be considered to include:
(a) Insurance against loss of or damage to domestic shipments,
bridges, tunnels, and other inland instrumentalities of
transportation or communication, excluding buildings, their
furniture and furnishings, fixed contents, and supplies held in
storage.
(b) Insurance defined by ruling of the commissioner as inland
marine insurance.
(3) This chapter does not apply to any of the following:
(a) Reinsurance, other than joint reinsurance to the extent
stated in section 2658.
(b) Insurance against loss of or damage to:
(i) Imports, exports, or domestic shipments.
(ii) Bridges, tunnels, or other instrumentalities of
transportation and communication.
(iii) Aircraft and attached equipment.
(iv) Vessels and watercraft under construction or owned by or
used in a business or having a straight-line hull length of more
than 24 feet.
(c) Insurance against loss resulting from liability arising
out of the ownership, maintenance, or use of:
(i) Imports, exports, or domestic shipments.
(ii) Aircraft and attached equipment.
(iii) Vessels and watercraft that are under construction or
owned by or used in a business or having a straight-line hull
length of more than 24 feet.
(d) Motor vehicle insurance, nor to insurance against
liability arising out of the ownership, maintenance, or use of
motor vehicles.
(e) Companies organized and doing business under chapter 68.
(f)
Insurance that meets both of the following:
(i) Is sold to an exempt commercial policyholder.
(ii) Contains a prominent disclaimer that states
"This policy
is
exempt from the filing requirements of section 2236 of the
insurance
code of 1956, 1956 PA 218, MCL 500.2236." or words that
are
substantially similar.
(4) If any kind of insurance, subdivision, or combination
thereof, or type of coverage, subject to this chapter, is also
subject to regulation by another rate regulatory chapter of this
act, an insurer to which both chapters are otherwise applicable
shall file with the commissioner a designation as to which rate
regulatory chapter shall be applicable to it with respect to such
kind of insurance, subdivision, or combination thereof, or type of
coverage.
(5) If, pursuant to subsection (6), the commissioner certifies
the absence of a reasonable degree of competition for a specified
classification, type, or kind of insurance, the commissioner may
order that each insurer file for prior approval, subject to the
provisions of this chapter, any changes to its manuals of
classification, manuals of rules and rates, and rating plans the
insurer proposes to use for that specified classification, type, or
kind of insurance. The order shall state, in writing, the reasons
for the commissioner's decision to order the filing. An order
issued under this subsection expires 2 years after the date of
issuance. If such an order is in effect, rates to which the order
applies shall be filed at least 30 days before their proposed
effective date. Failure of the commissioner to act within 30 days
after submittal constitutes approval.
(6) A determination concerning the existence of a reasonable
degree of competition shall take into account a reasonable spectrum
of relevant economic tests, including the number of insurers
actively engaged in writing the insurance in question, the present
availability of that insurance compared to the availability in
comparable past periods, the underwriting return of that insurance
over a reasonable period of time sufficient to assure reliability
in relation to the risk associated with that insurance, and the
difficulty encountered by new insurers entering the market in order
to compete for the writing of that insurance.