SB-1305, As Passed Senate, November 29, 2012

SUBSTITUTE FOR

SENATE BILL NO. 1305

     A bill to amend 1956 PA 218, entitled

"The insurance code of 1956,"

by amending sections 2110a, 2111, 2117, 2119, and 2121 (MCL

500.2110a, 500.2111, 500.2117, 500.2119, and 500.2121), section

2110a as added by 1996 PA 514, sections 2111, 2117, and 2121 as

amended by 2002 PA 492, and section 2119 as amended by 1980 PA 461.

THE PEOPLE OF THE STATE OF MICHIGAN ENACT:

     Sec. 2110a. If uniformly applied to all its insureds, an

insurer may establish and maintain a premium discount plan

utilizing use factors in addition to those permitted by section

2111 for insurance if the plan is consistent with the purposes of

this act and reflects reasonably anticipated reductions or

increases in losses or expenses. This section does not affect

benefits or obligations required under chapter 31. Nothing in this

This section authorizes does not authorize an insurer to offer or

prohibits prohibit an insurer from offering premium discount plans

concerning any of the following:

     (a) Health care services, health care providers, or health

care facilities.

     (b) Automobile repair providers.

     (c) Materials used in the repair of an automobile.

     Sec. 2111. (1) Notwithstanding any provision of this act and

or this chapter to the contrary, classifications and territorial

base rates used by any an insurer in this state with respect to

automobile insurance or home insurance shall conform to the

applicable requirements of this section.

     (2) Classifications established pursuant to under this section

for automobile insurance shall be based only upon on 1 or more of

the following factors, which shall be applied by an insurer on a

uniform basis throughout the this state:

     (a) With respect to all automobile insurance coverages:

     (i) Either the age of the driver; the length of driving

experience; or the number of years licensed to operate a motor

vehicle.

     (ii) Driver primacy, based upon on the proportionate use of

each vehicle insured under the policy by individual drivers insured

or to be insured under the policy.

     (iii) Average miles driven weekly, annually, or both.

     (iv) Type of use, such as business, farm, or pleasure use.

     (v) Vehicle characteristics, features, and options, such as

engine displacement, ability of the vehicle and its equipment to

protect passengers from injury, and other similar items, including

vehicle make and model.

     (vi) Daily or weekly commuting mileage.

     (vii) Number of cars insured by the insurer or number of

licensed operators in the household. However, number of licensed

operators shall not be used as an indirect measure of marital

status.

     (viii) Amount of insurance.

     (b) In addition to the factors prescribed in subdivision (a),

with respect to personal protection insurance coverage:

     (i) Earned income.

     (ii) Number of dependents of income earners insured under the

policy.

     (iii) Coordination of benefits.

     (iv) Use of a safety belt.

     (c) In addition to the factors prescribed in subdivision (a),

with respect to collision and comprehensive coverages:

     (i) The anticipated cost of vehicle repairs or replacement,

which may be measured by age, price, cost new, or value of the

insured automobile, and other factors directly relating to that

anticipated cost.

     (ii) Vehicle make and model.

     (iii) Vehicle design characteristics related to vehicle

damageability.

     (iv) Vehicle characteristics relating to automobile theft

prevention devices.

     (d) With respect to all automobile insurance coverage other

than comprehensive, successful completion by the individual driver

or drivers insured under the policy of an accident prevention

education course that meets the following criteria:

     (i) The course shall include a minimum of 8 hours of classroom

instruction.

     (ii) The course shall include, but not be limited to, a review

of all of the following:

     (A) The effects of aging on driving behavior.

     (B) The shapes, colors, and types of road signs.

     (C) The effects of alcohol and medication on driving.

     (D) The laws relating to the proper use of a motor vehicle.

     (E) Accident prevention measures.

     (F) The benefits of safety belts and child restraints.

     (G) Major driving hazards.

     (H) Interaction with other highway users, such as

motorcyclists, bicyclists, and pedestrians.

     (3) Each insurer shall establish a secondary or merit rating

plan for automobile insurance, other than comprehensive coverage. A

secondary or merit rating plan required under this subsection shall

provide for premium surcharges for any or all coverages for

automobile insurance, other than comprehensive coverage, based upon

any or all of the following, when that information becomes

available to the insurer:

     (a) Substantially at-fault accidents.

     (b) Convictions for, determinations of responsibility for

civil infractions for, or findings of responsibility in probate

court for civil infractions for , violations under chapter VI of

the Michigan vehicle code, 1949 PA 300, MCL 257.601 to 257.750.

However, beginning 90 days after the effective date of this

sentence, an insured shall not be merit rated for a civil

infraction under chapter VI of the Michigan vehicle code, 1949 PA

300, MCL 257.601 to 257.750, for a period of time longer than that

which the secretary of state's office carries points for that

infraction on the insured's motor vehicle record.

     (4) An insurer shall not establish or maintain rates or rating

classifications for automobile insurance based upon on sex or

marital status.

     (5) Notwithstanding other provisions of this chapter,

automobile insurance risks may be grouped by territory.

     (6) This section shall does not be construed as limiting limit

insurers or rating organizations from establishing and maintaining

statistical reporting territories. This section shall does not be

construed to prohibit an insurer from establishing or maintaining,

for automobile insurance, a premium discount plan for senior

citizens in this state who are 65 years of age or older, if the

plan is uniformly applied by the insurer throughout this state. If

an insurer has not established and maintained a premium discount

plan for senior citizens, the insurer shall offer reduced premium

rates to senior citizens in this state who are 65 years of age or

older and who drive less than 3,000 miles per year, regardless of

statistical data.

     (7) Classifications established pursuant to under this section

for home insurance other than inland marine insurance provided by

policy floaters or endorsements shall be based only upon on 1 or

more of the following factors:

     (a) Amount and types of coverage.

     (b) Security and safety devices, including locks, smoke

detectors, and similar, related devices.

     (c) Repairable structural defects reasonably related to risk.

     (d) Fire protection class.

     (e) Construction of structure, based on structure size,

building material components, and number of units.

     (f) Loss experience of the insured, based upon on prior claims

attributable to factors under the control of the insured that have

been paid by an insurer. An insured's failure, after written notice

from the insurer, to correct a physical condition that presents a

risk of repeated loss shall be considered a factor under the

control of the insured for purposes of this subdivision.

     (g) Use of smoking materials within the structure.

     (h) Distance of the structure from a fire hydrant.

     (i) Availability of law enforcement or crime prevention

services.

     (8) Notwithstanding other provisions of this chapter, home

insurance risks may be grouped by territory.

     (9) An insurer may utilize factors in addition to those

specified in this section, if the commissioner finds, after a

hearing held pursuant to the administrative procedures act of 1969,

1969 PA 306, MCL 24.201 to 24.328, that the factors would encourage

innovation, would encourage insureds to minimize the risks of loss

from hazards insured against, and would be consistent with the

purposes of this chapter.

     (9) An insurer may use factors in addition to those permitted

by this section for insurance if the plan is consistent with the

purposes of this act and reflects reasonably anticipated reductions

or increases in losses or expenses.

     Sec. 2117. (1) As a condition of maintaining its certificate

of authority, an insurer shall not refuse to insure, refuse to

continue to insure, or limit the coverage available to an eligible

person for home insurance, except in accordance with underwriting

rules established pursuant to under this section and section 2119.

An insurer shall not establish underwriting rules for home

insurance for contracts providing identical coverages that differ

from those of any affiliate of the insurer.

     (2) The underwriting rules that an insurer may establish for

home insurance shall be based only on the following:

     (a) Criteria identical to the standards set forth in section

2103(2).

     (b) The physical condition of the property insured or to be

insured, provided if the underwriting rules are objective, are

directly related to the perils insured against, and, without regard

to the age of the structure, are based upon on the specific

provisions of a national, state, or local housing and safety code,

a manufacturer's specification, or standards of similar

specificity. If an applicant or insured obtains a certificate of

compliance or habitation issued by an appropriate governmental unit

or agency, certifying that a building is in substantial compliance

with local housing and safety codes, the certificate creates a

rebuttable presumption that the dwelling meets the insurer's

underwriting rules relating to physical condition.

     (c) For the renewal of a home insurance policy, the claim

history of the person insured or to be insured during the 3-year

period immediately preceding renewal of the policy, if that history

is based on 1 or both of the following:

     (i) Claim experience arising out of an the insured's

negligence.

     (ii) Failure by the insured, after written notice from the

insurer, to correct a physical condition that is directly related

to a paid claim or that presents a clear risk of a significant loss

under the property or liability portions of a homeowners policy.

     (d) The relationship between market value and replacement cost

of a dwelling insured or to be insured for a replacement cost

policy, if a repair cost policy is offered by that the insurer

pursuant to under subsection (3).

     (e) For nonrenewal of a home insurance policies, policy, the

claim history under the policy, excluding liability claims, as

follows:

     (i) If there has been 1 or more of the following:

     (A) Three paid claims within the immediately preceding 3-year

period totaling $3,000.00 or more, exclusive of weather-related

claims.

     (B) Three paid claims within the immediately preceding 3-year

period totaling $4,000.00 or more, including weather-related

claims.

     (ii) A history of 3 or more paid claims within an immediately

preceding 3-year period if the insurer meets all of the following:

     (A) Has an underwriting rule under subparagraph (i) in effect.

     (B) The underwriting rule under this subparagraph is for a

paid claim history that totals not less than the amount in

subparagraph (i)(A) exclusive of weather-related claims and totals

not less than the amount in subparagraph (i)(B) including weather-

related claims.

     (C) The underwriting rule under this subparagraph applies to

an insured who has had a home insurance policy with the insurer for

a continuous minimum period of time as determined by the insurer

that may be any period of time between 5 and 10 years.

     (f) The Whether the number of residences within the dwelling

are inconsistent with the policy forms approved by the commissioner

for the insurer.

     (g) The unoccupancy of Whether a dwelling has been unoccupied

for more than 60 days, if there is evidence of an intent to vacate

or keep the premises vacant or unoccupied, as to the applicant or

insured.

     (h) The existence of an adjacent physical hazard, if the

hazard presents a significant risk of loss directly related to the

perils insured or to be insured against for which a rate surcharge

is not applicable. For purposes of this subdivision only,

residential property or traffic patterns shall not be considered to

cause a significant risk of loss. Nonrenewals based upon an

adjacent physical hazard shall be due to a change in the hazard

from that which existed at the original date of issuance of the

policy.

     (i) The failure of the insured or applicant to purchase an

amount of insurance in excess of 80% of the replacement cost of the

property to be insured under a replacement cost policy, if both of

the following conditions are met:

     (i) The purchase of an amount of insurance in excess of 80% of

the replacement cost is a condition for sale of the policy.

     (ii) The insurer offers in this state at least 1 form of a

replacement cost policy for which the insurer requires only a

minimum amount of insurance equal to 80% of the replacement cost of

the dwelling as a condition of purchase.

     (j) One or more incidents involving a threat, harassment, or

physical assault by the insured or applicant for insurance on an

insurer employee, agent, or agent employee while acting within the

scope of his or her employment, so long as if a report of the

incident was filed with an appropriate law enforcement agency.

     (3) If an insurer establishes an underwriting rule based upon

on the relationship between the market value and replacement cost

pursuant to under subsection (2)(d), all both of the following

shall apply as to the repair cost policy:

     (a) The insurer shall offer for sale a the repair cost policy

with deductibles, terms and conditions, perils insured against, and

types and amounts of coverage, which are substantially equivalent

to the deductibles, terms and conditions, perils insured against,

and types and amounts of coverage provided by the replacement cost

policy of the insurer, at least equivalent to the HO-2 form

replacement cost policy filed and in effect in this state for the

principal rating organization as of October 1, 1979.

     (b) The insurer shall not utilize use an underwriting rule

based upon on the relationship between the market value and

replacement cost for the repair cost policy.

     (4) The rates of an insurer for a repair cost policy shall be

established so that the premium for a repair cost policy shall not

exceed 105% of the premium for an amount of insurance equal to 80%

of the replacement cost of the dwelling under the equivalent

replacement cost policy described in subsection (3)(a). Premiums

for dwellings with identical replacement costs shall vary on a

schedule determined by the insurer in accordance with the market

value of the dwellings.

     (5) Off-premises claims may be aggregated for the purposes of

subsection (2)(f), (2)(e), irrespective of the location of the

insured dwelling. All claims other than off-premises losses

utilized used in a determination for purposes of subsection (2)(f)

(2)(e) shall be aggregated only as to an insured dwelling. The

minimum dollar amounts prescribed in subsection (2)(f)(i) (2)(e)(i)

shall be adjusted on January 1, 2006, and on January 1 of every

sixth year thereafter , to reflect the aggregate annual average

percentage change in the consumer price index since the previous

adjustment, rounded to the nearest hundred dollars. As used in this

subsection, "consumer price index" means the consumer price index

for all urban consumers in the U.S. city average, as most recently

reported by the United States department of labor, bureau of labor

statistics, and after certification by the commissioner in an

administrative bulletin.

     Sec. 2119. (1) Each insurer subject to this chapter shall put

in writing all underwriting rules used by the insurer. An insurer

shall not transact automobile or home insurance inconsistently with

its underwriting rules.

     (2) An insurer shall apply its underwriting rules uniformly

and without exception throughout this state, so that every

applicant or insured conforming with the underwriting rules will be

insured or renewed, and so that every applicant or insured not

conforming with the underwriting rules will be refused insurance or

nonrenewed, when the information becomes available to the insurer.

     (3) Affiliated insurers shall not adopt underwriting rules for

automobile insurance contracts providing identical coverages which

would permit a person to be insured, for automobile insurance, with

more than 1 of the affiliated insurers, unless the affiliated

insurers use identical rates and rating plans and have adopted

identical underwriting rules in compliance with this section.

(3) (4) An insurer with more than 1 rating plan for automobile

insurance contracts providing identical coverages shall not adopt

underwriting rules which that would permit a person to be insured,

for automobile insurance, under more than 1 of the rating plans.

(4) (5) An insurer may establish underwriting rules for new

applicants which that are different than rules for renewals of

existing insureds only if the applicants or existing insureds are

not eligible persons. Underwriting rules pertaining to renewals of

existing insureds who are not eligible persons may be based on a

contractual obligation of the insurer not to cancel or nonrenew.

(5) (6) For informational purposes, an insurer shall file with

the commissioner its underwriting rules prior to before their use

in this state. All filed underwriting rules shall be available for

public inspection. If the commissioner finds that an underwriting

rule is inconsistent with the provisions of this chapter, the

commissioner, after a hearing held pursuant to Act No. 306 of the

Public Acts of 1969, as amended, under the administrative

procedures act of 1969, 1969 PA 306, MCL 24.201 to 24.328, shall by

order prohibit further use of that the underwriting rule.

(6) (7) This section shall does not prohibit an insurer from

insuring persons who are not eligible persons pursuant to under

underwriting rules established under this section and sections

2117, 2118, and 2120.

     Sec. 2121. (1) If an insurer uses an inspection of a dwelling

to determine whether the insured or applicant is an eligible person

for home insurance, criteria for selecting dwellings for inspection

shall not be based upon any of the following:

     (a) Location, whether by political subdivision, census tract,

zip code, neighborhood, or area which may be described as a block,

set of blocks, or by street coordinates.

     (b) The age of the dwelling or the age of its plumbing,

heating, electrical, or structural components, or of any other

components which form a part of the dwelling.

     (c) The market value of a dwelling, unless the value is used

as a minimum value above which all dwellings will be inspected.

     (d) The amount of insurance, unless the amount is used as a

minimum above which all dwellings will be inspected.

     (e) Race, on race, color, creed, marital status, sex, national

origin, residence, age, disability, or lawful occupation.

     (2) If an insurer establishes an inspection program that

provides for inspection of a portion of its existing business on a

periodic basis, the inspection program shall not be based upon on

any of the criteria in subsection (1)(a), (c), or (e).(1).

     (3) Criteria for selecting dwellings for inspection shall be

filed with the commissioner for informational purposes only. The

commissioner, after a hearing held pursuant to the administrative

procedures act of 1969, 1969 PA 306, MCL 24.201 to 24.328, shall

disapprove the further use of inspection criteria, if the

commissioner finds that the criteria are inconsistent with the

provisions of this chapter.

     (4) There shall be is no civil liability, other than

contractual liability, where if applicable, on the part of, and a

cause of action of any nature shall does not arise against, the

commissioner, an insurer, an inspection bureau, or an authorized

representative, agent, employee, or affiliate of the commissioner,

an insurer, or an inspection bureau, or any licensed insurance

agent, for acts or omissions related solely to the physical

condition of the property in an inspection conducted for insurance

purposes pursuant to under this chapter.