2nd Engrossment - 80th Legislature (1997 - 1998) Posted on 12/15/2009 12:00am
1.1 A bill for an act 1.2 relating to insurance; regulating companies and 1.3 agents; providing immunity from suit and 1.4 indemnification for receivers and their employees; 1.5 regulating coverages; providing certain notices and 1.6 filing requirements; providing for a study; making 1.7 certain technical changes; amending Minnesota Statutes 1.8 1996, sections 60A.02, subdivision 1a, and by adding a 1.9 subdivision; 60A.052, subdivision 2, and by adding a 1.10 subdivision; 60A.06, subdivisions 1 and 2; 60A.075, 1.11 subdivisions 1, 8, and 9; 60A.077, subdivisions 1, 2, 1.12 3, 5, 6, 7, 8, 9, 10, 11, and by adding a subdivision; 1.13 60A.092, subdivisions 6 and 11; 60A.10, subdivision 1; 1.14 60A.111, subdivision 1; 60A.13, subdivision 1; 60A.19, 1.15 subdivision 1; 60B.21, subdivision 2; 60B.25; 60B.44, 1.16 subdivisions 2, 4, 6, and by adding a subdivision; 1.17 60D.20, subdivision 2; 60K.02, subdivision 1; 60K.03, 1.18 subdivisions 2 and 3; 60K.08; 60K.14, subdivision 4; 1.19 60K.19, subdivisions 7 and 8; 61A.28, subdivisions 6, 1.20 9a, and 12; 61A.32; 61A.60, subdivision 1; 61B.19, 1.21 subdivision 3; 62A.04, subdivision 3; 62A.135, 1.22 subdivision 5; 62A.316; 62A.50, subdivision 3; 62B.04, 1.23 subdivisions 1 and 2; 62E.12; 62Q.16; 65A.01, 1.24 subdivision 3, and by adding a subdivision; 65A.27, 1.25 subdivision 4; 65A.29, subdivision 4; 65B.48, 1.26 subdivision 5; 65B.56, subdivision 1; 67A.231; 72A.20, 1.27 subdivision 34; 72B.04, subdivision 10; 79.34, 1.28 subdivision 1; 79A.01, subdivision 10, and by adding a 1.29 subdivision; 79A.02, subdivisions 1 and 4; 79A.03, 1.30 subdivisions 6, 7, 9, 10, and by adding a subdivision; 1.31 79A.06, subdivision 5; 79A.21, subdivision 2; 79A.22, 1.32 subdivision 7, and by adding a subdivision; 79A.23, 1.33 subdivisions 1 and 2; 79A.24, subdivisions 1, 2, and 1.34 4; 79A.26, subdivision 2; and 79A.31, subdivision 1; 1.35 proposing coding for new law in Minnesota Statutes, 1.36 chapters 60B; 62A; and 65B; repealing Minnesota 1.37 Statutes 1996, sections 60A.11, subdivision 24a; 1.38 60B.36; 60B.44, subdivision 3; 65A.29, subdivision 12; 1.39 and 79A.04, subdivision 8. 1.40 BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF MINNESOTA: 1.41 ARTICLE 1 1.42 Section 1. Minnesota Statutes 1996, section 60A.02, 2.1 subdivision 1a, is amended to read: 2.2 Subd. 1a. [ASSOCIATION OR ASSOCIATIONS.] (a) "Association" 2.3 or "associations" means an organized body of people who have 2.4 some interest in common and that has at the onset a minimum of 2.5 100 persons; is organized and maintained in good faith for 2.6 purposes other than that of obtaining insurance; and has a 2.7 constitution and bylaws which provide that: (1) the association 2.8 or associations hold regular meetings not less frequently than 2.9 annually to further purposes of the members; (2) except for 2.10 credit unions, the association or associations collect dues or 2.11 solicit contributions from members; (3) the members have voting 2.12 privileges and representation on the governing board and 2.13 committees, which provide the members with control of the 2.14 association including the purchase and administration of 2.15 insurance products offered to members; and (4) the members are 2.16 not, within the first 30 days of membership, directly solicited, 2.17 offered, or sold an insurance policy if the policy is available 2.18 as an association benefit. 2.19 (b) An association may apply to the commissioner for a 2.20 waiver of the 30-day waiting period to that association. The 2.21 commissioner may grant the waiver upon a finding ofallat least 2.22 three of the following: (1) the association is in full 2.23 compliance with this subdivision; (2) sanctions have not been 2.24 imposed against the association as a result of significant 2.25 disciplinary action by the commissioner;and(3) at least 80 2.26 percent of the association's income comes from dues, 2.27 contributions, or sources other than income from the sale of 2.28 insurance; or (4) the association has been organized and 2.29 maintained for at least ten years. 2.30 Sec. 2. Minnesota Statutes 1996, section 60A.02, is 2.31 amended by adding a subdivision to read: 2.32 Subd. 2b. [FILED.] In cases where a law requires documents 2.33 to be filed with the commissioner, the documents will be 2.34 considered filed when they are received by the department of 2.35 commerce. 2.36 Sec. 3. Minnesota Statutes 1996, section 60A.052, 3.1 subdivision 2, is amended to read: 3.2 Subd. 2. [SUSPENSION OR REVOCATION OF AUTHORITY OR 3.3 CENSURE.] If the commissioner determines that one of the 3.4 conditions listed in subdivision 1 exists, the commissioner may 3.5 issue an order requiring the insurance company to show cause why 3.6 any or all of the following should not occur: (1) revocation or 3.7 suspension of any or all certificates of authority granted to 3.8 the foreign or domestic insurance company or its agent; (2) 3.9 censuring of the insurance company;or(3) cancellation of all 3.10 or some of the company's insurance contracts then in force in 3.11 this state; or (4) the imposition of a civil penalty. The order 3.12 shall be calculated to give reasonable notice of the time and 3.13 place for hearing thereon, and shall state the reasons for the 3.14 entry of the order. All hearings shall be conducted in 3.15 accordance with chapter 14. The insurer may waive its right to 3.16 the hearing. If the insurer is under the supervision or control 3.17 of the insurance department of the insurer's state of domicile, 3.18 that insurance department, acting on behalf of the insurer, may 3.19 waive the insurer's right to the hearing. After the hearing, 3.20 the commissioner shall enter an order disposing of the matter as 3.21 the facts require. If the insurance company fails to appear at 3.22 a hearing after having been duly notified of it, the company 3.23 shall be considered in default, and the proceeding may be 3.24 determined against the company upon consideration of the order 3.25 to show cause, the allegations of which may be considered to be 3.26 true. 3.27 Sec. 4. Minnesota Statutes 1996, section 60A.052, is 3.28 amended by adding a subdivision to read: 3.29 Subd. 4a. [WITHDRAWAL OF INSURER FROM STATE.] No insurer 3.30 shall withdraw from this state until its direct liability to its 3.31 policyholders and obligees under all its insurance contracts 3.32 then in force in this state have been assumed by another 3.33 licensed insurer according to section 60A.09, subdivision 4a. 3.34 Sec. 5. Minnesota Statutes 1996, section 60A.06, 3.35 subdivision 1, is amended to read: 3.36 Subdivision 1. [STATUTORY LINES.] Insurance corporations 4.1 may be authorized to transact in any state or territory in the 4.2 United States, in the Dominion of Canada, and in foreign 4.3 countries, when specified in their charters or certificates of 4.4 incorporation, either as originally granted or as thereafter 4.5 amended, any of the following kinds of business, upon the stock 4.6 plan, or upon the mutual plan when the formation of such mutual 4.7 companies is otherwise authorized by law; and business trusts as 4.8 authorized by law of this state shall only be authorized to 4.9 transact in this state the following kind of business 4.10 hereinafter specified in clause (7) hereof when specified in 4.11 their "declaration of trust": 4.12 (1) To insure against loss or damage to property on land 4.13 and against loss of rents and rental values, leaseholds of 4.14 buildings, use and occupancy and direct or consequential loss or 4.15 damage caused by fire, smoke or smudge, water or other fluid or 4.16 substance, lightning, windstorm, tornado, cyclone, earthquake, 4.17 collapse and slippage, rain, hail, frost, snow, freeze, change 4.18 of temperature, weather or climatic conditions, excess or 4.19 deficiency of moisture, floods, the rising of waters, oceans, 4.20 lakes, rivers or their tributaries, bombardment, invasion, 4.21 insurrection, riot, civil war or commotion, military or usurped 4.22 power, electrical power interruption or electrical breakdown 4.23 from any cause, railroad equipment, motor vehicles or aircraft, 4.24 accidental injury to sprinklers, pumps, conduits or containers 4.25 or other apparatus erected for extinguishing fires, explosion, 4.26 whether fire ensues or not, except explosions on risks specified 4.27 in clause (3); provided, however, that there may be insured 4.28 hereunder the following: (a) explosion of any kind originating 4.29 outside the insured building or outside of the building 4.30 containing the property insured, (b) explosion of pressure 4.31 vessels which do not contain steam or which are not operated 4.32 with steam coils or steam jackets; and (c) risks under home 4.33 owners multiple peril policies; 4.34 (2)(a) To insure vessels, freight, goods, wares, 4.35 merchandise, specie, bullion, jewels, profits, commissions, bank 4.36 notes, bills of exchange, and other evidences of debt, bottomry 5.1 and respondentia interest, and every insurance appertaining to 5.2 or connected with risks of transportation and navigation on and 5.3 under water, on land or in the air; 5.4 (b) To insure all personal property floater risks; 5.5 (3) To insure against any loss from either direct or 5.6 indirect damage to any property or interest of the assured or of 5.7 another, resulting from the explosion of or injury to (a) any 5.8 boiler, heater or other fired pressure vessel; (b) any unfired 5.9 pressure vessel; (c) pipes or containers connected with any of 5.10 said boilers or vessels; (d) any engine, turbine, compressor, 5.11 pump or wheel; (e) any apparatus generating, transmitting or 5.12 using electricity; (f) any other machinery or apparatus 5.13 connected with or operated by any of the previously named 5.14 boilers, vessels or machines; and including the incidental power 5.15 to make inspections of and to issue certificates of inspection 5.16 upon, any such boilers, apparatus, and machinery, whether 5.17 insured or otherwise; 5.18 (4) To make contracts of life and endowment insurance, to 5.19 grant, purchase, or dispose of annuities or endowments of any 5.20 kind; and, in such contracts, or in contracts supplemental 5.21 thereto to provide for additional benefits in event of death of 5.22 the insured by accidental means, total permanent disability of 5.23 the insured, or specific dismemberment or disablement suffered 5.24 by the insured, or acceleration of life or endowment or annuity 5.25 benefits in advance of the time they would otherwise be payable; 5.26 (5)(a) To insure against loss or damage by the sickness, 5.27 bodily injury or death by accident of the assured or dependents 5.28 or those for whom the assured has assumed a portion of the 5.29 liability for the loss or damage, including liability for 5.30 payment of medical care costs or for provisions of medical care; 5.31 (b) To insure against the legal liability, whether imposed 5.32 by common law or by statute or assumed by contract, of employers 5.33 for the death or disablement of, or injury to, employees; 5.34 (6) To guarantee the fidelity of persons in fiduciary 5.35 positions, public or private, or to act as surety on official 5.36 and other bonds, and for the performance of official or other 6.1 obligations; 6.2 (7) To insure owners and others interested in real estate 6.3 against loss or damage, by reason of defective titles, 6.4 encumbrances, or otherwise; 6.5 (8) To insure against loss or damage by breakage of glass, 6.6 located or in transit; 6.7 (9)(a) To insure against loss by burglary, theft, or 6.8 forgery; 6.9 (b) To insure against loss of or damage to moneys, coins, 6.10 bullion, securities, notes, drafts, acceptance or any other 6.11 valuable paper or document, resulting from any cause, except 6.12 while in the custody or possession of and being transported by 6.13 any carrier for hire or in the mail; 6.14 (c) To insure individuals by means of an all risk type of 6.15 policy commonly known as the "personal property floater" against 6.16 any kind and all kinds of loss of or damage to, or loss of use 6.17 of, any personal property other than merchandise; 6.18 (d) To insure against loss or damage by water or other 6.19 fluid or substance; 6.20 (10) To insure against loss from death of domestic animals 6.21 and to furnish veterinary service; 6.22 (11) To guarantee merchants and those engaged in business, 6.23 and giving credit, from loss by reason of giving credit to those 6.24 dealing with them; this shall be known as credit insurance; 6.25 (12) To insure against loss or damage to automobiles or 6.26 other vehicles or aircraft and their contents, by collision, 6.27 fire, burglary, or theft, and other perils of operation, and 6.28 against liability for damage to persons, or property of others, 6.29 by collision with such vehicles or aircraft, and to insure 6.30 against any loss or hazard incident to the ownership, operation, 6.31 or use of motor or other vehicles or aircraft; 6.32 (13) To insure against liability for loss or damage to the 6.33 property or person of another caused by the insured or by those 6.34 for whom the insured is responsible, including insurance of 6.35 medical, hospital, surgical, funeral or other related expense of 6.36 the insured or other person injured, irrespective of legal 7.1 liability of the insured, when issued with or supplemental to 7.2 policies of liability insurance; 7.3 (14) To insure against loss of or damage to any property of 7.4 the insured, resulting from the ownership, maintenance or use of 7.5 elevators, except loss or damage by fire; 7.6 (15) To insure against attorneys fees, court costs, witness 7.7 fees and incidental expenses incurred in connection with the use 7.8 of the professional services of attorneys at law. 7.9 Sec. 6. Minnesota Statutes 1996, section 60A.06, 7.10 subdivision 2, is amended to read: 7.11 Subd. 2. [OTHER LINES.] Any insurance corporation or 7.12 association heretofore or hereafter licensed to transact within 7.13 the state any of the kinds or classes of insurance specifically 7.14 authorized under the laws of this state may, when authorized by 7.15 its charter, transact within and without the state any lines of 7.16 insurance germane to its charter powers and not specifically 7.17 provided for under the laws of this state when these lines, or 7.18 combinations of lines, of insurance are not in violation of the 7.19 constitution or the laws of the state and, in the opinion of the 7.20 commissioner, not contrary to public policy, provided the 7.21 company or association shall first obtain authority of the 7.22 commissioner and meetsuch requirements as tocapital or 7.23 surplus, or both,and other solvency and policy form 7.24 requirements as the commissioner shall prescribe. These 7.25 additional hazards may be insured against by attachment to, or 7.26 in extension of, any policy which the company may be authorized 7.27 to issue under the laws of this state. This subdivision shall 7.28 apply to companies operating upon the stock or mutual plan, 7.29 reciprocal or interinsurance exchanges. 7.30 Sec. 7. Minnesota Statutes 1996, section 60A.075, 7.31 subdivision 1, is amended to read: 7.32 Subdivision 1. [DEFINITIONS.] For the purposes of this 7.33 section, the terms in this subdivision have the meanings given 7.34 them. 7.35 (a) "Eligible member" means a policyholder whose policy is 7.36 in force as of the record date, which is the date that the 8.1 mutual company's board of directors adopts a plan of conversion 8.2 or some other date specified as the record date in the plan of 8.3 conversion and approved by the commissioner. Unless otherwise 8.4 provided in the plan, a person insured under a group policy is 8.5 not an eligible member, unless on the record date: 8.6 (1) the person is insured or covered under a group life 8.7 policy or group annuity contract under which funds are 8.8 accumulated and allocated to the respective covered persons; 8.9 (2) the person has the right to direct the application of 8.10 the funds so allocated; 8.11 (3) the group policyholder makes no contribution to the 8.12 premiums or deposits for the policy or contract; and 8.13 (4) the converting mutual company has the names and 8.14 addresses of the persons covered under the group life policy or 8.15 group annuity contract. 8.16 (b) "Reorganized company" means a Minnesota domestic stock 8.17 insurance company that has converted from a Minnesota domestic 8.18 mutual insurance company according to this section. 8.19 (c) "Plan of conversion" or "plan" means a plan adopted by 8.20 a Minnesota domestic mutual insurance company's board of 8.21 directors under this section to convert the mutual company into 8.22 a Minnesota domestic stock insurance company. 8.23 (d) "Policy" means a policy or contract of insurance issued 8.24 by a converting mutual company, including an annuity contract. 8.25 (e) "Commissioner" means the commissioner of commerce. 8.26 (f) "Converting mutual company" means a Minnesota domestic 8.27 mutual insurance company seeking to convert to a Minnesota 8.28 domestic stock insurance company according to this section. 8.29 (g) "Effective date of a conversion" means the date 8.30 determined according to subdivision 6. 8.31 (h) "Membership interests" means all policyholders' rights 8.32 as members of the converting mutual company, including but not 8.33 limited to, rights to vote and to participate in any 8.34 distributions of surplus, whether or not incident to the 8.35 company's liquidation. 8.36 (i) "Equitable surplus" means the converting mutual 9.1 company's surplus as regards policyholders as of the 9.2effectiverecord date of the conversion or other date approved 9.3 by the commissioner determined in a manner that is not unfair or 9.4 inequitable to policyholders. 9.5 (j) "Permitted issuer" means: (1) a corporation organized 9.6 and owned by the converting mutual company or by any other 9.7 insurance company or insurance holding company for the purpose 9.8 of purchasing and holdingall of the stocksecurities 9.9 representing a majority of voting control of the reorganized 9.10 company; (2) a stock insurance company owned by the converting 9.11 mutual company or by any other insurance company or insurance 9.12 holding company into which the converting mutual company will be 9.13 merged; or (3) any other corporation approved by the 9.14 commissioner. 9.15 Sec. 8. Minnesota Statutes 1996, section 60A.075, 9.16 subdivision 8, is amended to read: 9.17 Subd. 8. [SHARE CONVERSION.] A plan of conversion under 9.18 this subdivision shall provide for exchange of policyholders' 9.19 membership interests in return for shares in the reorganized 9.20 company, according to paragraphs (a) to (c). 9.21 (a) The policyholders' membership interests shall be 9.22 exchanged, in a manner that takes into account the estimated 9.23 proportionate contribution of equitable surplus of each class of 9.24 participating policies and contracts, for all of the common 9.25 shares of the reorganized company or common shares of its parent 9.26 company or a permitted issuer, or for a combination of the 9.27 common shares of the reorganized company or common shares of its 9.28 parent company or a permitted issuer. 9.29 (b) Unless the anticipated issuance within a shorter period 9.30 is disclosed in the plan of conversion, the issuer of common 9.31 shares shall not, within two years after the effective date of 9.32 reorganization, issue either of the following: 9.33 (1) any of its common shares or any securities convertible 9.34 with or without consideration into the common shares or carrying 9.35 any warrant to subscribe to or purchase common shares; and 9.36 (2) any warrant, right, or option to subscribe to or 10.1 purchase the common shares or other securities described in 10.2 paragraph (a), except for the issue of common shares to or for 10.3 the benefit of policyholders according to the plan of conversion 10.4 and the issue ofoptionsnontransferable subscription rights for 10.5 the purchase of common shares being granted to officers, 10.6 directors, oremployeesa tax qualified employee benefit plan of 10.7 the reorganized company or its parent company, if any, or a 10.8 permitted issuer, according tothis sectionsubdivision 11. 10.9 (c) Unless the common shares have a public market when 10.10 issued, the issuer shall use its best efforts to encourage and 10.11 assist in the establishment of a public market for the common 10.12 shares within two years of the effective date of the conversion 10.13 or a longer period as disclosed in the plan of conversion. 10.14 Within one year after any offering of stock other than the 10.15 initial distribution, but no later than six years after the 10.16 effective date of the conversion, the reorganized company shall 10.17 offer to make available to policyholders who received and 10.18 retained shares of common stock or securities described in 10.19 paragraph (b), clause (1), a procedure to dispose of those 10.20 shares of stock at market value without brokerage commissions or 10.21 similar fees. 10.22 Sec. 9. Minnesota Statutes 1996, section 60A.075, 10.23 subdivision 9, is amended to read: 10.24 Subd. 9. [SURPLUS DISTRIBUTION.] A plan of conversion 10.25 under this subdivision shall provide for the exchange of the 10.26 policyholders' membership interests in return for the operation 10.27 of the converting mutual company's participating policies as a 10.28 closed block of business and for the distribution of the 10.29 company's equitable surplus to policyholders, and shall provide 10.30 for the issuance of new shares of the reorganized company or its 10.31 parent corporation, each according to paragraphs (a) to (i). 10.32 (a) The converting mutual company's participating business, 10.33 comprised of its participating policies and contracts in force 10.34 on the effective date of the conversion or other reasonable date 10.35 as provided in the plan, shall be operated by the reorganized 10.36 company as a closed block of participating business. However, 11.1 at the option of the converting mutual company, group policies 11.2 and group contracts may be omitted from the closed block. 11.3 (b) Assets of the converting mutual company must be 11.4 allocated to the closed block of participating business in an 11.5 amount equal to the reserves and liabilities for the converting 11.6 mutual life insurer's participating policies and contracts in 11.7 force on the effective date of the conversion. The plan must be 11.8 accompanied by an opinion of an independent qualified actuary 11.9 who meets the standards set forth in the insurance laws or 11.10 regulations for the submission of actuarial opinions as to the 11.11 adequacy of reserves or assets. The opinion must relate to the 11.12 adequacy of the assets allocated to support the closed block of 11.13 business. The actuarial opinion must be based on methods of 11.14 analysis considered appropriate for those purposes by the 11.15 Actuarial Standards Board. 11.16 (c) The reorganized company shall keep a separate 11.17 accounting for the closed block and shall make and include in 11.18 the annual statement to be filed with the commissioner each year 11.19 a separate statement showing the gains, losses, and expenses 11.20 properly attributable to the closed block. 11.21 (d) Notwithstanding the establishment of a closed block, 11.22 the entire assets of the reorganized company shall be available 11.23 for the payment of benefits to policyholders. Payment must 11.24 first be made from the assets supporting the closed block until 11.25 exhausted, and then from the general assets of the reorganized 11.26 company. 11.27 (e) The converting mutual company's equitable surplus shall 11.28 be distributed to eligible participating policyholders in a form 11.29 or forms selected by the converting mutual company. The form of 11.30 distribution may consist of cash, securities of the reorganized 11.31 company, securities of another institution, a certificate of 11.32 contribution, additional life insurance, annuity benefits, 11.33 increased dividends, reduced premiums, or other equitable 11.34 consideration or any combination of forms of consideration. The 11.35 consideration, if any, given to a class or category of 11.36 policyholders may differ from the consideration given to another 12.1 class or category of policyholders. A certificate of 12.2 contribution must be repayable in ten years, be equal to 100 12.3 percent of the value of the policyholders' membership interest, 12.4 and bear interest at the highest rate charged by the reorganized 12.5 company for policy loans on the effective date of the conversion. 12.6 (f) The consideration must be allocated among the 12.7 policyholders in a manner that is fair and equitable to the 12.8 policyholders. 12.9 (g) The reorganized company or its parent corporation shall 12.10 issue and sell shares of one or more classes having a total 12.11 price equal to the estimated value in the market of the shares 12.12 on the initial offering date. The estimated value must take 12.13 into account all of the following: 12.14 (1) the pro forma market value of the reorganized company; 12.15 (2) the consideration to be given to policyholders 12.16 according to paragraph (e); 12.17 (3) the proceeds of the sale of the shares; and 12.18 (4) any additional value attributable to the shares as a 12.19 result of a purchaser or a group of purchasers who acted in 12.20 concert to obtain shares in the initial offering, attaining, 12.21 through such purchase, control of the reorganized company or its 12.22 parent corporation. 12.23 (h) If a purchaser or a group of purchasers acting in 12.24 concert is to attain control in the initial offering, the mutual 12.25 company shall not, directly or indirectly, pay for any of the 12.26 costs or expenses of conversion of the mutual company, whether 12.27 or not the conversion is effected, except with permission of the 12.28 commissioner. 12.29 (i) Periodically, with the commissioner's approval, the 12.30 reorganized company may share in the profits of the closed block 12.31 of participating business for the benefit of stockholders if the 12.32 assets allocated to the closed block are in excess of those 12.33 necessary to support the closed block. 12.34 Sec. 10. Minnesota Statutes 1996, section 60A.077, 12.35 subdivision 1, is amended to read: 12.36 Subdivision 1. [FORMATION.] (a) A domestic mutual 13.1 insurance company, upon approval of the commissioner, may 13.2 reorganize by forming an insurance holding company based upon a 13.3 mutual plan and continuing the corporate existence of the 13.4 reorganizing insurance company as a stock insurance company. 13.5 The commissioner, if satisfied that the interests of the 13.6 policyholders are properly protected and that the plan of 13.7 reorganization is fair and equitable to the policyholders, may 13.8 approve the proposed plan of reorganization and may require as a 13.9 condition of approval the modifications of the proposed plan of 13.10 reorganization as the commissioner finds necessary for the 13.11 protection of the policyholders' interests. The commissioner 13.12 shall retain jurisdiction over the mutual insurance holding 13.13 company according to this section and chapter 60D to assure that 13.14 policyholder and member interests are protected. 13.15 (b) All of the initial voting shares of the capital stock 13.16 of the reorganized insurance company must be issued to the 13.17 mutual insurance holding company or to an intermediate stock 13.18 holding companythat is wholly owned by the mutual insurance13.19holding company. The membership interests of the policyholders 13.20 of the reorganized insurance company become membership interests 13.21 in the mutual insurance holding company. "Membership interests" 13.22 means those interests described in section 60A.075, subdivision 13.23 1, paragraph (h). Policyholders of the reorganized insurance 13.24 company shall be members of the mutual insurance holding company 13.25 and their voting rights must be determined in accordance with 13.26 the articles of incorporation and bylaws of the mutual insurance 13.27 holding company. The mutual insurance holding company shall, at 13.28 all times, directly or throughanone or more intermediate stock 13.29 holdingcompanycompanies, control a majority of the voting 13.30 shares of the capital stock of the reorganized insurance 13.31 company, taking into account any potential dilution resulting 13.32 from convertible securities. 13.33 (c) A majority of the board of directors of a mutual 13.34 insurance holding company must be disinterested directors. For 13.35 purposes of this section, a director is disinterested if (i) the 13.36 director is not or has not within the past two years been an 14.1 officer or employee of the mutual insurance holding company or 14.2 any subsidiary or predecessor corporation, and (ii) the director 14.3 does not hold, directly or indirectly, a material ownership 14.4 interest in any subsidiary of the mutual insurance holding 14.5 company. An ownership interest is material if it represents 14.6 more than one-half of one percent of the voting securities of 14.7 the issuer, or a larger percentage as the commissioner may 14.8 approve. 14.9 Sec. 11. Minnesota Statutes 1996, section 60A.077, 14.10 subdivision 2, is amended to read: 14.11 Subd. 2. [MERGER.] (a) A domestic or foreign mutual 14.12 insurance company, upon the approval of the commissioner, may 14.13 reorganize by merging its policyholders' membership interests 14.14 into a mutual insurance holding company formed according to 14.15 subdivision 1 and continuing the corporate existence of the 14.16 reorganizing insurance company as a stock insurance company 14.17 subsidiary of the mutual insurance holding company or of an 14.18 intermediate stock holding company. "Membership interests" 14.19 means those interests described in section 60A.075, subdivision 14.20 1, paragraph (h). The commissioner, if satisfied that the 14.21 interests of thepolicyholderpolicyholders of the reorganizing 14.22 company and the interests of the existing members of the mutual 14.23 insurance holding company are properly protected and that the 14.24 merger is fair and equitable tothe policyholdersthose parties, 14.25 may approve the proposed merger and may require as a condition 14.26 of approval the modifications of the proposed merger as the 14.27 commissioner finds necessary for the protection of the 14.28 policyholders' or members' interests. The commissioner shall 14.29 retain jurisdiction, under chapter 60D, over the mutual 14.30 insurance holding company organized according to this section to 14.31 assure that policyholder and member interests are protected. 14.32 (b) All of the initial voting shares of the capital stock 14.33 of the reorganized insurance company must be issued to the 14.34 mutual insurance holding company, or to an intermediate stock 14.35 holding companythat is wholly owned by the mutual insurance14.36holding company. The membership interests of the policyholders 15.1 of the reorganized insurance company become membership interests 15.2 in the mutual insurance holding company. Policyholders of the 15.3 reorganized insurance company shall be members of the mutual 15.4 insurance holding company and their voting rights must be 15.5 determined according to the articles of incorporation and bylaws 15.6 of the mutual insurance holding company. The mutual insurance 15.7 holding company shall, at all times, directly or through one or 15.8 more intermediate stock holding companies, control a majority of 15.9 the voting shares of the capital stock of the reorganized 15.10 insurance company, taking into account any potential dilution 15.11 resulting from convertible securities. 15.12 (c) A domestic mutual insurance holding company may merge 15.13 with a domestic or foreign mutual insurance holding company in 15.14 the manner prescribed for the merger of insurance companies set 15.15 forth in section 60A.16, with any exceptions or modifications 15.16 the commissioner may approve. 15.17 Sec. 12. Minnesota Statutes 1996, section 60A.077, 15.18 subdivision 3, is amended to read: 15.19 Subd. 3. [PLAN OF REORGANIZATION; APPROVAL BY 15.20 COMMISSIONER.] (a)TheA reorganizing or merging insurer or a 15.21 merging mutual insurance holding company shallfile a plan of15.22reorganization, approved, by the affirmative vote of a majority 15.23 of its board of directors,for review and approval by the15.24commissioneradopt a plan of reorganization or merger consistent 15.25 with the requirements of this section and file the plan with the 15.26 commissioner. At any time before the approval of a plan by the 15.27 commissioner, the company, by the affirmative vote of a majority 15.28 of its directors, may amend or withdraw the plan. The plan must 15.29 provide for the following: 15.30 (1) in the case of a reorganization under subdivision 1, 15.31 establishing a mutual insurance holding company with at least 15.32 one stock insurance company subsidiary,the majority of shares15.33of which must be owned, either directly or through an15.34intermediate stock holding company, by the mutual insurance15.35holding companyor in the case of a reorganization under 15.36 subdivision 2, a description of the terms and conditions of the 16.1 proposed merger; 16.2 (2) analyzing the benefits and risks attendant to the 16.3 proposed reorganization, including the rationale for the 16.4 reorganization and analysis of the comparative benefits and 16.5 risks of a demutualization under section 60A.075; 16.6 (3) protecting the immediate and long-term interests of 16.7 existing policyholders; 16.8 (4) ensuring immediate membership in the mutual insurance 16.9 holding company of all existing policyholders of the 16.10 reorganizing domestic insurance company; 16.11 (5) describing a plan providing for membership interests of 16.12 future policyholders; 16.13 (6) describing the number of members of the board of 16.14 directors of the mutual insurance holding company required to be 16.15 policyholders; 16.16 (7)ensuring that, in the event of proceedings under16.17chapter 60B involving a stock insurance company subsidiary of16.18the mutual insurance holding company that resulted from the16.19reorganization of a domestic mutual insurance company, the16.20assets of the mutual insurance holding company will be available16.21to satisfy the policyholder obligations of the stock insurance16.22company;16.23(8) for periodic distribution of accumulated holding16.24company earnings to membersdescribing the mutual insurance 16.25 holding company's plan for distributions to members or other 16.26 uses of accumulated mutual holding company earnings; 16.27(9)(8) describing the nature and content of the annual 16.28 report and financial statement to be sent to each member; 16.29(10)(9) a copy of the proposed mutual insurance holding 16.30 company's articles of incorporation and bylaws specifying all 16.31 membership rights; 16.32(11)(10) the names, addresses, and occupational 16.33 information of all corporate officers and members of the 16.34 proposed mutual insurance holding company board of directors; 16.35(12)(11) information sufficient to demonstrate that the 16.36 financial condition of the reorganizing or merging company will 17.1 not be materially diminished upon reorganization, including 17.2 information concerning any subsidiaries of the reorganizing or 17.3 merging insurers that will become subsidiaries of the mutual 17.4 insurance holding company or an intermediate holding company as 17.5 part of the reorganization; 17.6(13)(12) a copy of the articles of incorporation and 17.7 bylaws for any proposed insurance company subsidiary or 17.8 intermediate holding company subsidiary; 17.9(14)(13) describing any plans forthean initial sale or 17.10 subscription of stockforor other securities of the reorganized 17.11 insurance company or any intermediate holding company; and 17.12(15)(14) any other information requested by the 17.13 commissioner or required by rule. 17.14 (b) The commissioner may approve the plan upon finding that 17.15 the requirements of this section have been fully met and the 17.16 plan will protect the immediate and long-term interests of 17.17 policyholders. 17.18 (c) The commissioner may retain, at the reorganizing or 17.19 merging mutual company's expense, any qualified experts not 17.20 otherwise a part of the commissioner's staff to assist in 17.21 reviewing the plan. 17.22 (d) The commissioner may, but need not, conduct a public 17.23 hearing regarding the proposed plan. The hearing must be held 17.24 within 30 days after submission of a completed plan of 17.25 reorganization to the commissioner. The commissioner shall give 17.26 the reorganizing mutual company at least 20 days' notice of the 17.27 hearing. At the hearing, the reorganizing mutual company, its 17.28 policyholders, and any other person whose interest may be 17.29 affected by the proposed reorganization, may present evidence, 17.30 examine and cross-examine witnesses, and offer oral and written 17.31 arguments or comments according to the procedure for contested 17.32 cases under chapter 14. The persons participating may conduct 17.33 discovery proceedings in the same manner as prescribed for the 17.34 district courts of this state. All discovery proceedings must 17.35 be concluded no later than three days before the scheduled 17.36 commencement of the public hearing. 18.1 Sec. 13. Minnesota Statutes 1996, section 60A.077, 18.2 subdivision 5, is amended to read: 18.3 Subd. 5. [APPROVAL BY MEMBERS.] The plan shall be approved 18.4by the membersas provided in section 60A.075, subdivision 5.by 18.5 the eligible members described in paragraphs (a) to (c). 18.6 (a) In the case of a formation under subdivision 1, the 18.7 plan must be approved by the eligible members of the 18.8 reorganizing insurance company. 18.9 (b) In the case of a merger under subdivision 2, paragraph 18.10 (a), the plan must be approved by the eligible members of the 18.11 merging insurance company and by the eligible members of the 18.12 mutual insurance holding company into which the policyholders' 18.13 membership interests are to be merged. The vote of the eligible 18.14 members of the mutual insurance holding company is not required 18.15 if the commissioner determines that the merger would not be 18.16 material to the financial condition of the mutual insurance 18.17 holding company. 18.18 (c) In the case of a merger of two mutual insurance holding 18.19 companies under subdivision 2, paragraph (c), the plan must be 18.20 approved by the eligible members of both companies. The vote of 18.21 the eligible members of the surviving mutual holding company is 18.22 not required if the commissioner determines that the merger 18.23 would not be material to the financial condition of the 18.24 surviving company. 18.25 Sec. 14. Minnesota Statutes 1996, section 60A.077, 18.26 subdivision 6, is amended to read: 18.27 Subd. 6. [INCORPORATION.] A mutual insurance holding 18.28 companyresulting from the reorganization of a domestic mutual18.29insurance company organized under chapter 300shall be 18.30 incorporated pursuant to chapter 300. The articles of 18.31 incorporation and any amendments to the articles of the mutual 18.32 insurance holding company are subject to approval of the 18.33 commissioner in the same manner as those of an insurance 18.34 company. Members of a mutual insurance holding company shall be 18.35 entitled to vote on all matters required to be submitted to 18.36 members under chapter 300 and shall additionally be treated as 19.1 shareholders for purposes of the voting approval requirements of 19.2 section 300.09. 19.3 Sec. 15. Minnesota Statutes 1996, section 60A.077, 19.4 subdivision 7, is amended to read: 19.5 Subd. 7. [APPLICABILITY OF CERTAIN PROVISIONS.] (a)AIn 19.6 the event of the insolvency of a mutual insurance holding 19.7 company, the mutual insurance holding company is considered to 19.8 be an insurer subject to chapter 60B.and shall automatically19.9be a party to any proceeding under chapter 60B involving an19.10insurance company that, as a result of a reorganization19.11according to subdivision 1 or 2, is a subsidiary of the mutual19.12insurance holding company. In any proceeding under chapter 60B19.13involving the reorganized insurance company, the assets of the19.14mutual insurance holding company are considered to be assets of19.15the estate of the reorganized insurance company for purposes of19.16satisfying the claims of the reorganized insurance company's19.17policyholders.A mutual insurance holding company shall not 19.18 dissolve or liquidate without the approval of the commissioner 19.19 or as ordered bythe districta courtaccording to chapter19.2060Bof competent jurisdiction. 19.21 (b) A mutual insurance holding company is subject to 19.22 chapter 60Dto the extent consistent with this section. 19.23 (c) As a condition to approval of the plan, the 19.24 commissioner may require the mutual insurance holding company to 19.25 comply with any provision of the insurance laws necessary to 19.26 protect the interests of the policyholders as if the mutual 19.27 insurance holding company were a domestic mutual insurance 19.28 company. 19.29 (d) No person or group of persons other than the chief 19.30 executive officer of a mutual insurance holding company, or the 19.31 chief executive officer's designee, shall seek to obtain proxies 19.32 from the members of the mutual insurance holding company for the 19.33 purposes of affecting a change of control of the mutual 19.34 insurance holding company unless that person or persons have 19.35 filed with the commissioner and have sent to the mutual 19.36 insurance holding company a statement containing the information 20.1 required by section 60D.17. Section 60D.17, subdivisions 2 to 20.2 7, apply in the event of a proxy solicitation regulated by this 20.3 paragraph. 20.4 (e) For purposes of this subdivision, the term "control," 20.5 including the terms "controlling," "controlled by," and "under 20.6 common control with," means the possession, direct or indirect, 20.7 of the power to direct or cause the direction of the management 20.8 and policies of a person, whether through membership voting 20.9 interests, by contract other than a commercial contract for 20.10 goods or nonmanagement services, or otherwise, unless the power 20.11 is the result of an official position with, corporate office 20.12 held by, or court appointment of, the person. Control is 20.13 presumed to exist if any person directly or indirectly, owns, 20.14 controls, holds with the power to vote, or holds proxies 20.15 representing, ten percent or more of the membership voting 20.16 interests of the mutual insurance holding company. This 20.17 presumption may be rebutted by a showing made in the manner 20.18 provided by section 60D.19, subdivision 11, that control does 20.19 not exist in fact. The commissioner may determine after 20.20 furnishing all persons in interest notice and opportunity to be 20.21 heard and making specific findings of fact to support the 20.22 determination, that control exists in fact, notwithstanding the 20.23 absence of a presumption to that effect. 20.24 Sec. 16. Minnesota Statutes 1996, section 60A.077, 20.25 subdivision 8, is amended to read: 20.26 Subd. 8. [APPLICABILITY OF DEMUTUALIZATION PROVISIONS.] 20.27 (a) Except as otherwise provided, section 60A.075 is not 20.28 applicable to a reorganization or merger according to this 20.29 section, except for section 60A.075, subdivisions 14 to 16. 20.30 (b) Section 60A.075 is applicable to demutualization of a 20.31 mutual insurance holding companythat resulted from the20.32reorganization of a domestic mutual insurance company organized20.33under chapter 300as if it were a mutual insurance company. 20.34 (c) Section 60A.075, subdivisions 14 to 16, are applicable 20.35 to a reorganization or merger under this section. 20.36 Sec. 17. Minnesota Statutes 1996, section 60A.077, 21.1 subdivision 9, is amended to read: 21.2 Subd. 9. [MEMBERSHIP INTERESTS.] A membership interest in 21.3 a domestic mutual insurance holding company does not constitute 21.4 a security as defined in section 80A.14, subdivision 18. No 21.5 member of a mutual insurance holding company may transfer or 21.6 pledge membership in the mutual insurance holding company or any 21.7 right arising from the membership except as attendant to the 21.8 valid transfer or assignment of the member's policy in any 21.9 reorganized company that gave rise to the member's membership 21.10 interest. A member of a mutual insurance holding company is 21.11 not, as a member, personally liable for the acts, debts, 21.12 liabilities, or obligations of the company. No assessments of 21.13 any kind may be imposed upon the members of a mutual insurance 21.14 holding company by the directors or members, or because of any 21.15 liability of any company owned or controlled by the mutual 21.16 insurance holding company or because of any act, debt, or 21.17 liability of the mutual insurance holding company. A member's 21.18 interest in the mutual insurance holding company shall 21.19 automatically terminate upon cancellation, nonrenewal, 21.20 expiration, or termination of the member's policy in any 21.21 insurance company that gave rise to the member's membership 21.22 interest. 21.23 Sec. 18. Minnesota Statutes 1996, section 60A.077, 21.24 subdivision 10, is amended to read: 21.25 Subd. 10. [FINANCIAL STATEMENT REQUIREMENTS.] (a) In 21.26 addition to any items required under chapter 60D, each mutual 21.27 insurance holding company shall file with the commissioner, by 21.28 April 1 of each year, an annual statement consisting of the 21.29 following: 21.30 (1) an income statement, balance sheet, and cashflow 21.31 statement prepared in accordance with generally accepted 21.32 accounting principles; 21.33 (2) complete information on the status of any closed block 21.34 formed as part of a plan of reorganization; 21.35 (3) an investment plan covering all assets; and 21.36 (4) a statement disclosing any intention to pledge, borrow 22.1 against, alienate, hypothecate, or in any way encumber the 22.2 assets of the mutual insurance holding company or an 22.3 intermediate stock holding company.Action taken according to22.4the statement is subject to the commissioner's prior written22.5approval.22.6 (b) The aggregate pledges and encumbrances of a mutual 22.7 insurance holding company's assets shall not affect more than 49 22.8 percent of thecompany'sstock in ownership of any subsidiary 22.9 insurance holding company or subsidiary insurance company that 22.10 resulted from a reorganization or merger. 22.11 (c) At least 50 percent of the generally accepted 22.12 accounting principles (GAAP) net worth of a mutual insurance 22.13 holding company must be invested in insurance company 22.14 subsidiaries. 22.15 Sec. 19. Minnesota Statutes 1996, section 60A.077, 22.16 subdivision 11, is amended to read: 22.17 Subd. 11. [SALE OF STOCK AND PAYMENT OF DIVIDENDS.] (a) A 22.18 reorganized insurance company and an intermediate stock holding 22.19 company may issue subscription rights and may issue or grant any 22.20 other securities, rights, options, and similar items to the same 22.21 extent as any business corporation organized under chapter 22.22 302A. However, except as provided in paragraphs (b), (c), and 22.23 (d), nosolicitation for thesale ofthe stocksecurities of the 22.24 reorganized insurance company, or of an intermediate stock 22.25 holding companyof the mutual insurance holding company,that 22.26 directly or indirectly controls a majority of voting shares of 22.27 the reorganized insurance company, may be made without the 22.28 commissioner's prior written approval. 22.29 (b) A registration statement covering securities that has 22.30 been approved by the commissioner and filed with and declared 22.31 effective by the Securities and Exchange Commission under the 22.32 Securities Act of 1933 pursuant to any provision of that statute 22.33 or rule that allows registration of securities to be sold on a 22.34 delayed or continuous basis may be sold without further approval. 22.35 (c) Unless the commissioner has granted the mutual 22.36 insurance holding company a written exemption from the 23.1 requirements of this paragraph any securities which are 23.2 regularly traded on the New York Stock Exchange, the American 23.3 Stock Exchange, or another exchange approved by the 23.4 commissioner, or designated on the National Association of 23.5 Securities Dealers automated quotations (NASDAQ) national market 23.6 system, shall be sold according to the procedure in this 23.7 paragraph. If the mutual insurance holding company, an 23.8 intermediate holding company, or a reorganized insurance company 23.9 intends to offer securities that are governed by this paragraph, 23.10 that entity shall deliver to the commissioner, not less than ten 23.11 days before the offering, a notice of the planned offering and 23.12 information regarding: (1) the approximate number of shares 23.13 intended to be offered; (2) the target date of sale; (3) 23.14 evidence the security is regularly traded on one of the public 23.15 exchanges noted above; and (4) the recent history of the trading 23.16 price and trading volume of the security. The commissioner is 23.17 considered to have approved the sale unless within ten days 23.18 following receipt of the notice, the commissioner issues an 23.19 objection to the sale. If the commissioner issues an objection 23.20 to the sale, the security may not be sold until the commissioner 23.21 issues an order approving the sale. 23.22 (d) A reorganized insurance company or intermediate holding 23.23 company that has issued securities that are regularly traded on 23.24 one of the exchanges or markets described in paragraph (c), may 23.25 establish stock option, incentive, and share ownership plans 23.26 customary for publicly traded companies in the same or similar 23.27 industries. If the reorganized insurance company or 23.28 intermediate holding company intends to establish a stock 23.29 option, incentive or share ownership plan, that entity shall 23.30 deliver to the commissioner, not less than 30 days before the 23.31 establishment of the plan, a notice of the proposed plan along 23.32 with any information about the proposed plan the commissioner 23.33 requires. The commissioner is considered to have approved the 23.34 plan unless within 30 days following receipt of the notice, the 23.35 commissioner issues an objection to the proposed plan. If the 23.36 commissioner issues an objection to the proposed plan, the plan 24.1 may not be established until the commissioner issues an order 24.2 approving the plan. If the commissioner approves the 24.3 establishment of the stock option, incentive or share ownership 24.4 plan, the reorganized insurance company or the intermediate 24.5 holding company that obtained the approval may sell or issue 24.6 securities according to the approved plan without further 24.7 approval. 24.8 (e) The total number of shares of capital stock issued by 24.9 the reorganized insurance company or an intermediate holding 24.10 company that may be held by directors and officers of the mutual 24.11 insurance holding company, any intermediate holding company, and 24.12 of any reorganized insurance company, and acquired according to 24.13 subscription rights or stock option, incentive, and share 24.14 ownership plans, may not exceed the percentage limits set forth 24.15 in section 60A.075, subdivision 11, paragraph (b). Subject to 24.16 the requirements of subdivision 1, paragraph (c), nothing in 24.17 this section prohibits the acquisition of any securities of a 24.18 reorganized insurance company or intermediate stock holding 24.19 company through a licensed securities broker-dealer by any 24.20 officer or director of the reorganized company, an intermediate 24.21 stock holding company, or the mutual insurance holding company. 24.22 (f) Dividends and other distributions to the shareholders 24.23 of the reorganized stock insurance company or of an intermediate 24.24 stock holding companyshall not be made except in24.25compliancemust comply with section 60D.20. Any dividends and 24.26 other distributions to the members of the mutual insurance 24.27 holding company must comply with section 60D.20 and any other 24.28 approval requirements contained in the mutual insurance holding 24.29 company's articles of incorporation. 24.30 (g) Unless previously approved as part of the plan of 24.31 reorganization, the initial offering of any voting shares to the 24.32 public by a reorganized company, a stock insurance company 24.33 subsidiary, or an intermediate holding company which holds a 24.34 majority of the voting shares of a reorganized insurance company 24.35 or stock insurance company subsidiary, must be approved by a 24.36 majority of votes cast at a regular or special meeting of the 25.1 members of the mutual insurance holding company. Any issuer 25.2 repurchase program, plan of exchange, recapitalization, or 25.3 offering of capital securities to the public, shall, in addition 25.4 to any other approvals required by law or by the issuer's 25.5 articles of incorporation, be approved by a majority of the 25.6 board of directors of the mutual insurance holding company and 25.7 by a majority of the disinterested members of the board of 25.8 directors of the mutual insurance holding company. 25.9 Sec. 20. Minnesota Statutes 1996, section 60A.077, is 25.10 amended by adding a subdivision to read: 25.11 Subd. 12. [PROVISIONS IN THE EVENT OF INSURER 25.12 INSOLVENCY.] (a) In the event of any insolvency proceeding 25.13 involving an insolvent stock subsidiary, the assets of the 25.14 mutual insurance holding company, together with any assets of 25.15 any intermediate holding company that directly or indirectly 25.16 controls the insolvent stock subsidiary, must be available to 25.17 satisfy the policyholder obligations of the insolvent stock 25.18 subsidiary in an amount determined by the commissioner, but in 25.19 no event more than the total amount of nonpolicyholder dividends 25.20 paid by the insolvent stock subsidiary to the mutual insurance 25.21 holding company, or any intermediate holding company that 25.22 controls the insolvent stock subsidiary, during the ten-year 25.23 period immediately preceding the date of insolvency. 25.24 (b) In determining the required contribution by the mutual 25.25 insurance holding company or any intermediate stock holding 25.26 company which controls the insolvent stock subsidiary, the 25.27 commissioner shall take into account among other factors: 25.28 (1) the possible direct or indirect negative effects of any 25.29 required contribution on any insurance company affiliate of the 25.30 insolvent stock subsidiary; and 25.31 (2) the possible direct or indirect, long-term, or 25.32 short-term negative effects on the members of the mutual 25.33 insurance holding company, other than those members who, are, or 25.34 were policyholders of the insolvent stock subsidiary. 25.35 Nothing in this subdivision limits the powers of the 25.36 commissioner or the liquidator under chapter 60B. 26.1 (c) For purposes of this subdivision, the following terms 26.2 have the meanings given: 26.3 (1) "date of insolvency" means, as to an insolvent stock 26.4 subsidiary, the date established in accordance with chapter 60B 26.5 or comparable statute of another state governing the 26.6 rehabilitation or liquidation of a foreign insolvent stock 26.7 subsidiary; 26.8 (2) "insolvency proceeding" means any proceeding under 26.9 chapter 60B or comparable statute of another state governing the 26.10 rehabilitation and liquidation of a foreign insolvent stock 26.11 subsidiary; 26.12 (3) "insolvent stock subsidiary" means any stock insurance 26.13 company subsidiary of a mutual insurance holding company that 26.14 resulted from the reorganization of a domestic or foreign mutual 26.15 insurance company according to subdivision 1 or 2, or any other 26.16 stock insurance company subsidiary that is subject to an 26.17 insolvency proceeding, which on the date of insolvency has in 26.18 force policies that have given rise to membership interests in 26.19 the mutual insurance holding company; 26.20 (4) "control" has the meaning given in section 60D.15, 26.21 subdivision 4; and 26.22 (5) "dividends" include distributions of cash or any other 26.23 assets. 26.24 Sec. 21. Minnesota Statutes 1996, section 60A.092, 26.25 subdivision 6, is amended to read: 26.26 Subd. 6. [SINGLE ASSUMING INSURER; TRUST FUND 26.27 REQUIREMENTS.] In the case of a single assuming insurer, the 26.28 trust shall consist of a trusteed account representing the 26.29 assuming insurer's liabilities attributable to business written 26.30 in the United States and, in addition,the assuming insurer26.31shall maintaina trusteed surplus of not less than $20,000,000 26.32 or such additional amount as the commissioner deems necessary, 26.33 and the assuming insurer shall maintainaits surplus as regards 26.34 policyholders in an amount not less than $50,000,000 for 26.35 long-tail casualty reinsurers as provided under subdivision 3, 26.36 paragraph (a), clause (5). 27.1 Sec. 22. Minnesota Statutes 1996, section 60A.092, 27.2 subdivision 11, is amended to read: 27.3 Subd. 11. [REINSURANCE AGREEMENT REQUIREMENTS.] (a) If the 27.4 assuming insurer is not licensed or accredited to transact 27.5 insurance or reinsurance in this state, the credit authorized 27.6 under subdivisions 4 and 5 shall not be allowed unless the 27.7 assuming insurer agrees in the reinsurance agreements: 27.8 (1) that in the event of the failure of the assuming 27.9 insurer to perform its obligations under the terms of the 27.10 reinsurance agreement, the assuming insurer shall submit to the 27.11 jurisdiction of any court of competent jurisdiction in any state 27.12 of the United States, comply with all requirements necessary to 27.13 give the court jurisdiction, and abide by the final decision of 27.14 the court or of any appellate court in the event of an appeal; 27.15 and 27.16 (2) to designate the commissioner or a designated attorney 27.17 as its true and lawful attorney upon whom may be served any 27.18 lawful process in any action, suit, or proceeding instituted by 27.19 or on behalf of the ceding company. 27.20 (b) Paragraph (a) is not intended to conflict with or 27.21 override the obligation of the parties to a reinsurance 27.22 agreement to arbitrate their disputes, if an obligation to do so 27.23 is created in the agreement. 27.24 (c) Credit will not be granted, nor an asset or a reduction 27.25 from liability allowed to a ceding insurer for reinsurance 27.26 effected with assuming insurers meeting the requirements of 27.27 subdivision 2, 3, 4, 5, 6, or 7, unless the reinsurance contract 27.28 provides that in the event of the insolvency of the ceding 27.29 insurer, the reinsurance will be payable under the contract 27.30 without diminution because of that insolvency. 27.31 Sec. 23. Minnesota Statutes 1996, section 60A.10, 27.32 subdivision 1, is amended to read: 27.33 Subdivision 1. [DOMESTIC COMPANIES.] (1) [DEPOSIT AS 27.34 SECURITY FOR ALL POLICYHOLDERS REQUIRED.] No company in this 27.35 state, other than farmers' mutual, or real estate title 27.36 insurance companies, shall do business in this state unless it 28.1 has on deposit with the commissioner, for the protection of both 28.2 its resident and nonresident policyholders, securities to an 28.3 amount, the actual market value of which, exclusive of interest, 28.4 shall never be less than$200,000 until July 1, 1986, $300,00028.5until July 1, 1987, $400,000 until July 1, 1988, and$500,000on28.6and after July 1, 1988or one-half the applicable financial 28.7 requirement set forth in section 60A.07, whichever is less. The 28.8 securities shall be retained under the control of the 28.9 commissioner as long as any policies of the depositing company 28.10 remain in force. 28.11 (2) [SECURITIES DEFINED.] For the purpose of this 28.12 subdivision, the word "securities" means bonds or other 28.13 obligations of, or bonds or other obligations insured or 28.14 guaranteed by, the United States, any state of the United 28.15 States, any municipality of this state, or any agency or 28.16 instrumentality of the foregoing. 28.17 (3) [PROTECTION OF DEPOSIT FROM LEVY.] No judgment 28.18 creditor or other claimant may levy upon any securities held on 28.19 deposit with, or for the account of, the commissioner. Upon the 28.20 entry of an order by a court of competent jurisdiction for the 28.21 rehabilitation, liquidation or conservation of any depositing 28.22 company as provided in chapter 60B, that company's deposit 28.23 together with any accrued income thereon shall be transferred to 28.24 the commissioner as rehabilitator, liquidator, or conservator. 28.25 Sec. 24. Minnesota Statutes 1996, section 60A.111, 28.26 subdivision 1, is amended to read: 28.27 Subdivision 1. [REPORT.] Annually, or more frequently if 28.28 determined by the commissioner to be necessary for the 28.29 protection of policyholders, each foreign, alienand domestic 28.30 insurance company other than a life insurance company shall 28.31 report to the commissioner the ratio of its qualified assets to 28.32 its required liabilities. 28.33 Sec. 25. Minnesota Statutes 1996, section 60A.13, 28.34 subdivision 1, is amended to read: 28.35 Subdivision 1. [ANNUAL STATEMENTS REQUIRED.] Every 28.36 insurance company, including fraternal benefit societies, and 29.1 reciprocal exchanges, doing business in this state, shall 29.2transmit tofile with the commissioner, annually, on or before 29.3 March 1, the appropriate verified National Association of 29.4 Insurance Commissioners' annual statement blank, prepared in 29.5 accordance with the association's instructions handbook and 29.6 following those accounting procedures and practices prescribed 29.7 by the association's accounting practices and procedures manual, 29.8 unless the commissioner requires or finds another method of 29.9 valuation reasonable under the circumstances. Another method of 29.10 valuation permitted by the commissioner must be at least as 29.11 conservative as those prescribed in the association's manual. 29.12 All companies required to file an annual statement under this 29.13 subdivision must also file with the commissioner a copy of their 29.14 annual statement on computer diskette. All Minnesota domestic 29.15 insurers required to file annual statements under this 29.16 subdivision must also file quarterly statements with the 29.17 commissioner for the first, second, and third calendar quarter 29.18 on or before 45 days after the end of the applicable quarter, 29.19 prepared in accordance with the association's instruction 29.20 handbook. All companies required to file quarterly statements 29.21 under this subdivision must also file a copy of their quarterly 29.22 statement on computer diskette. In addition, the commissioner 29.23 may require the filing of any other information determined to be 29.24 reasonably necessary for the continual enforcement of these 29.25 laws. The statement may be limited to the insurer's business 29.26 and condition in the United States unless the commissioner finds 29.27 that the business conducted outside the United States may 29.28 detrimentally affect the interests of policyholders in this 29.29 state. The statements shall also contain a verified schedule 29.30 showing all details required by law for assessment and 29.31 taxation. The statement or schedules shall be in the form and 29.32 shall contain all matters the commissioner may prescribe, and it 29.33 may be varied as to different types of insurers so as to elicit 29.34 a true exhibit of the condition of each insurer. 29.35 Sec. 26. Minnesota Statutes 1996, section 60A.19, 29.36 subdivision 1, is amended to read: 30.1 Subdivision 1. [REQUIREMENTS.] Any insurance company of 30.2 another state, upon compliance with all laws governing such 30.3 corporations in general and with the foregoing provisions so far 30.4 as applicable and the following requirements, shall be admitted 30.5 to do business in this state: 30.6 (1) It shall deposit with the commissioner a certified copy 30.7 of its charter or certificate of incorporation and its bylaws, 30.8 and a statement showing its financial condition and business, 30.9 verified by its president and secretary or other proper 30.10 officers; 30.11 (2) It shall furnish the commissioner satisfactory evidence 30.12 of its legal organization and authority to transact the proposed 30.13 business and that its capital, assets, deposits with the proper 30.14 official of its own state, amount insured, number of risks, 30.15 reserve and other securities, and guaranties for protection of 30.16 policyholders, creditors, and the public, comply with those 30.17 required of like domestic companies; 30.18 (3) By a duly executed instrument filed in the office of 30.19 the commissioner, it shall appoint the commissioner and 30.20 successors in office its lawful attorneys in fact and therein 30.21 irrevocably agree that legal process in any action or proceeding 30.22 against it may be served upon them with the same force and 30.23 effect as if personally served upon it, so long as any of its 30.24 liability exists in this state; 30.25 (4) It shall appoint, as its agents in this state, 30.26 residents thereof, and obtain from the commissioner a license to 30.27 transact business; 30.28 (5) Regardless of what lines of business an insurer of 30.29 another state is seeking to write in this state, the lines of 30.30 business it is licensed to write in its state of incorporation 30.31 shall be the basis for establishing the financial requirements 30.32 it must meet for admission in this state or for continuance of 30.33 its authority to write business in this state; 30.34 (6) No insurer of another state shall be admitted to do 30.35 business in this state for a line of business that it is not 30.36 authorized to write in its state of incorporation, unless the 31.1 statutes of that state prohibit all insurers from writing that 31.2 line of business. 31.3 Sec. 27. [60B.085] [IMMUNITY AND INDEMNIFICATION OF THE 31.4 RECEIVER AND EMPLOYEES.] 31.5 Subdivision 1. [SCOPE.] The persons entitled to protection 31.6 under this section are: 31.7 (1) all receivers responsible for the conduct of a 31.8 delinquency proceeding under this chapter, including present and 31.9 former receivers; and 31.10 (2) their employees, meaning all present and former special 31.11 deputies and assistant special deputies, and all persons whom 31.12 the commissioner, special deputies, or assistant special 31.13 deputies have employed to assist in a delinquency proceeding 31.14 under this chapter. Attorneys, accountants, auditors, and other 31.15 professional persons or firms, who are retained by the receiver 31.16 as independent contractors and their employees shall not be 31.17 considered employees of the receiver for purposes of this 31.18 section. 31.19 Subd. 2. [IMMUNITY FROM LIABILITY.] The receiver and the 31.20 receiver's employees shall have official immunity and shall be 31.21 immune from suit and liability, both personally and in their 31.22 official capacities, for a claim for damage to or loss of 31.23 property or personal injury or other civil liability caused by 31.24 or resulting from an alleged act, error, or omission of the 31.25 receiver or an employee arising out of or by reason of their 31.26 duties or employment. Nothing in this subdivision shall be 31.27 construed to hold the receiver or an employee immune from suit 31.28 or liability for damage, loss, injury, or liability caused by 31.29 the intentional or willful and wanton misconduct of the receiver 31.30 or an employee. 31.31 Subd. 3. [INDEMNIFICATION.] If a legal action is commenced 31.32 against the receiver or any employee, whether against the 31.33 receiver or employee personally or in their official capacity, 31.34 alleging property damage, property loss, personal injury, or 31.35 other civil liability caused by or resulting from an alleged 31.36 act, error, or omission of the receiver or an employee arising 32.1 out of or by reason of their duties or employment, the receiver 32.2 and employee must be indemnified from the assets of the insurer 32.3 for all expenses, attorneys' fees, judgments, settlements, 32.4 decrees, or amounts due and owing or paid in satisfaction or 32.5 incurred in the defense of the legal action unless it is 32.6 determined upon a final adjudication on the merits that the 32.7 alleged act, error, or omission of the receiver or employee 32.8 giving rise to the claim did not arise out of or by reason of 32.9 the receiver's or employee's duties or employment, or was caused 32.10 by intentional or willful and wanton misconduct. 32.11 (a) Attorney's fees and related expenses incurred in 32.12 defending a legal action for which immunity or indemnity is 32.13 available under this section must be paid from the assets of the 32.14 insurer, as they are incurred, in advance of the final 32.15 disposition of the action upon receipt of an undertaking by or 32.16 on behalf of the receiver or employee to repay the attorneys' 32.17 fees and expenses if it is ultimately determined upon a final 32.18 adjudication on the merits that the receiver or employee is not 32.19 entitled to immunity or indemnity under this section. 32.20 (b) Indemnification for expense payments, judgments, 32.21 settlements, decrees, attorneys' fees, surety bond premiums, or 32.22 other amounts paid or to be paid from the insurer's assets 32.23 according to this section is an administrative expense of the 32.24 insurer. 32.25 (c) In the event of an actual or threatened litigation 32.26 against a receiver or an employee for which immunity or 32.27 indemnity may be available under this section, a reasonable 32.28 amount of funds which in the judgment of the commissioner may be 32.29 needed to provide immunity or indemnity must be segregated and 32.30 reserved from the assets of the insurer as security for the 32.31 payment of indemnity until all applicable statutes of limitation 32.32 have run and all actual or threatened actions against the 32.33 receiver or an employee have been completely and finally 32.34 resolved, and all obligations of the insurer and the 32.35 commissioner under this section have been satisfied. 32.36 (d) In lieu of segregation and reserving of funds, the 33.1 commissioner may, in the commissioner's discretion, obtain a 33.2 surety bond or make other arrangements that will enable the 33.3 commissioner to fully secure the payment of all obligations 33.4 under this section. 33.5 Subd. 4. [SETTLEMENT COVERAGE.] If a legal action against 33.6 an employee for which indemnity may be available under this 33.7 section is settled before final adjudication on the merits, the 33.8 insurer must pay the settlement amount on behalf of the 33.9 employee, or indemnify the employee for the settlement amount, 33.10 unless the commissioner determines: 33.11 (1) that the claim did not arise out of or by reason of the 33.12 employee's duties or employment; or 33.13 (2) that the claim was caused by the intentional or willful 33.14 and wanton misconduct of the employee. 33.15 Subd. 5. [SETTLEMENT APPROVAL.] In a legal action in which 33.16 the receiver is a defendant, that portion of a settlement 33.17 relating to the alleged act, error, or omission of the receiver 33.18 is subject to the approval of the court before which the 33.19 delinquency proceeding is pending. The court shall not approve 33.20 that portion of the settlement if it determines: 33.21 (1) that the claim did not arise out of or by reason of the 33.22 receiver's duties or employment; or 33.23 (2) that the claim was caused by the intentional or willful 33.24 and wanton misconduct of the receiver. 33.25 Subd. 6. [CONSTRUCTION.] Nothing contained or implied in 33.26 this section operates, or shall be construed or applied, to 33.27 deprive the receiver or an employee of immunity, indemnity, 33.28 benefits of law, rights, or any defense otherwise available. 33.29 Sec. 28. Minnesota Statutes 1996, section 60B.21, 33.30 subdivision 2, is amended to read: 33.31 Subd. 2. [FIXING OF RIGHTS.] Upon issuance of the order, 33.32 the rights and liabilities of any such insurer and of its 33.33 creditors, policyholders, shareholders, members, and all other 33.34 persons interested in its estate are fixed as of the date of 33.35 filing of the petition for liquidation, except as provided in 33.36 sections 60B.22, 60B.25, clause (22), and 60B.39. 34.1 Sec. 29. Minnesota Statutes 1996, section 60B.25, is 34.2 amended to read: 34.3 60B.25 [POWERS OF LIQUIDATOR.] 34.4 The liquidator shall report to the court monthly, or at 34.5 other intervals specified by the court, on the progress of the 34.6 liquidation in whatever detail the court orders. The liquidator 34.7 shall coordinate activities with those of each guaranty 34.8 association having an interest in the liquidation and shall 34.9 submit a report detailing how coordination will be achieved to 34.10 the court for its approval within 30 days following appointment, 34.11 or within the time which the court, in its discretion, may 34.12 establish. Subject to the court's control, the liquidator may: 34.13 (1) Appoint a special deputy to act under sections 60B.01 34.14 to 60B.61 and determine the deputy's compensation. The special 34.15 deputy shall have all powers of the liquidator granted by this 34.16 section. The special deputy shall serve at the pleasure of the 34.17 liquidator. 34.18 (2) Appoint or engage employees and agents, actuaries, 34.19 accountants, appraisers, consultants, and other personnel deemed 34.20 necessary to assist in the liquidation without regard to chapter 34.21 14. 34.22 (3) Fix the compensation of persons under clause (2), 34.23 subject to the control of the court. 34.24 (4) Defray all expenses of taking possession of, 34.25 conserving, conducting, liquidating, disposing of, or otherwise 34.26 dealing with the business and property of the insurer. If the 34.27 property of the insurer does not contain sufficient cash or 34.28 liquid assets to defray the costs incurred, the liquidator may 34.29 advance the costs so incurred out of the appropriation made to 34.30 the department of commerce. Any amounts so paid shall be deemed 34.31 expense of administration and shall be repaid for the credit of 34.32 the department of commerce out of the first available money of 34.33 the insurer. 34.34 (5) Hold hearings, subpoena witnesses and compel their 34.35 attendance, administer oaths, examine any person under oath and 34.36 compel any person to subscribe to testimony after it has been 35.1 correctly reduced to writing, and in connection therewith 35.2 require the production of any books, papers, records, or other 35.3 documents which the liquidator deems relevant to the inquiry. 35.4 (6) Collect all debts and money due and claims belonging to 35.5 the insurer, wherever located, and for this purpose institute 35.6 timely action in other jurisdictions, in order to forestall 35.7 garnishment and attachment proceedings against such debts; do 35.8 such other acts as are necessary or expedient to collect, 35.9 conserve, or protect its assets or property, including sell, 35.10 compound, compromise, or assign for purposes of collection, upon 35.11 such terms and conditions as the liquidator deems best, any bad 35.12 or doubtful debts; and pursue any creditor's remedies available 35.13 to enforce claims. 35.14 (7) Conduct public and private sales of the property of the 35.15 insurer in a manner prescribed by the court. 35.16 (8) Use assets of the estate to transfer coverage 35.17 obligations to a solvent assuming insurer, if the transfer can 35.18 be arranged without prejudice to applicable priorities under 35.19 section 60B.44. 35.20 (9) Acquire, hypothecate, encumber, lease, improve, sell, 35.21 transfer, abandon, or otherwise dispose of or deal with any 35.22 property of the insurer at its market value or upon such terms 35.23 and conditions as are fair and reasonable, except that no 35.24 transaction involving property the market value of which exceeds 35.25 $10,000 shall be concluded without express permission of the 35.26 court. The liquidator may also execute, acknowledge, and 35.27 deliver any deeds, assignments, releases, and other instruments 35.28 necessary or proper to effectuate any sale of property or other 35.29 transaction in connection with the liquidation. In cases where 35.30 real property sold by the liquidator is located other than in 35.31 the county where the liquidation is pending, the liquidator 35.32 shall cause to be filed with the county recorder for the county 35.33 in which the property is located a certified copy of the order 35.34 of appointment. 35.35 (10) Borrow money on the security of the insurer's assets 35.36 or without security and execute and deliver all documents 36.1 necessary to that transaction for the purpose of facilitating 36.2 the liquidation. 36.3 (11) Enter into such contracts as are necessary to carry 36.4 out the order to liquidate, and affirm or disavow any contracts 36.5 to which the insurer is a party. 36.6 (12) Continue to prosecute and institute in the name of the 36.7 insurer or in the liquidator's own name any suits and other 36.8 legal proceedings, in this state or elsewhere, and abandon the 36.9 prosecution of claims the liquidator deems unprofitable to 36.10 pursue further. If the insurer is dissolved under section 36.11 60B.23, the liquidator may apply to any court in this state or 36.12 elsewhere for leave to be substituted for the insurer as 36.13 plaintiff. 36.14 (13) Prosecute any action which may exist in behalf of the 36.15 creditors, members, policyholders, or shareholders of the 36.16 insurer against any officer of the insurer, or any other person. 36.17 (14) Remove any records and property of the insurer to the 36.18 offices of the commissioner or to such other place as is 36.19 convenient for the purposes of efficient and orderly execution 36.20 of the liquidation. 36.21 (15) Deposit in one or more banks in this state such sums 36.22 as are required for meeting current administration expenses and 36.23 dividend distributions. 36.24 (16) Deposit with the state board of investment for 36.25 investment pursuant to section 11A.24, all sums not currently 36.26 needed, unless the court orders otherwise. 36.27 (17) File any necessary documents for record in the office 36.28 of any county recorder or record office in this state or 36.29 elsewhere where property of the insurer is located. 36.30 (18) Assert all defenses available to the insurer as 36.31 against third persons, including statutes of limitations, 36.32 statutes of frauds, and the defense of usury. A waiver of any 36.33 defense by the insurer after a petition for liquidation has been 36.34 filed shall not bind the liquidator. 36.35 (19) Exercise and enforce all the rights, remedies, and 36.36 powers of any creditor, shareholder, policyholder, or member, 37.1 including any power to avoid any transfer or lien that may be 37.2 given by law and that is not included within sections 60B.30 and 37.3 60B.32. 37.4 (20) Intervene in any proceeding wherever instituted that 37.5 might lead to the appointment of a receiver or trustee, and act 37.6 as the receiver or trustee whenever the appointment is offered. 37.7 (21) Enter into agreements with any receiver or 37.8 commissioner of any other state relating to the rehabilitation, 37.9 liquidation, conservation, or dissolution of an insurer doing 37.10 business in both states. 37.11 (22) Collect from an insured any unpaid earned premium or 37.12 retrospectively rated premium due the insurer based on the 37.13 termination of coverage under section 60B.22. Premium on surety 37.14 business is considered earned at inception if no policy term can 37.15 be determined. All other premium will be considered earned and 37.16 will be prorated over the determined policy term, regardless of 37.17 any provision in the bond, guaranty, contract, or other 37.18 agreement. 37.19(22)(23) Exercise all powers now held or hereafter 37.20 conferred upon receivers by the laws of this state not 37.21 inconsistent with sections 60B.01 to 60B.61. 37.22(23)(24) The enumeration in this section of the powers and 37.23 authority of the liquidator is not a limitation, nor does it 37.24 exclude the right to do such other acts not herein specifically 37.25 enumerated or otherwise provided for as are necessary or 37.26 expedient for the accomplishment of or in aid of the purpose of 37.27 liquidation. 37.28(24)(25) The power of the liquidator of a health 37.29 maintenance organization includes the power to transfer coverage 37.30 obligations to a solvent and voluntary health maintenance 37.31 organization, insurer, or nonprofit health service plan, and to 37.32 assign provider contracts of the insolvent health maintenance 37.33 organization to an assuming health maintenance organization, 37.34 insurer, or nonprofit health service plan permitted to enter 37.35 into such agreements. The liquidator is not required to meet 37.36 the notice requirements of section 62D.121. Transferees of 38.1 coverage obligations or provider contracts shall have no 38.2 liability to creditors or obligees of the health maintenance 38.3 organization except those liabilities expressly assumed. 38.4 Sec. 30. [60B.365] [REINSURER'S LIABILITY.] 38.5 Subdivision 1. [GENERALLY.] The amount recoverable by the 38.6 liquidator from reinsurers must not be reduced as a result of 38.7 the delinquency proceedings, regardless of any provision in the 38.8 reinsurance contract or other agreement. 38.9 Subd. 2. [PAYMENTS.] Payments by the reinsurer must be 38.10 made directly to the ceding insurer or its receiver, except 38.11 where the contract of insurance or reinsurance specifically 38.12 provides for another payee for the reinsurance in the event of 38.13 insolvency of the ceding insurer according to the applicable 38.14 requirements of statutes, rules, or orders of the domiciliary 38.15 state of the ceding insurer. The receiver and reinsurer are 38.16 entitled to recover from a person who unsuccessfully makes a 38.17 claim directly against the reinsurer the receiver's attorneys' 38.18 fees and expenses incurred in preventing any collection by the 38.19 person. 38.20 Sec. 31. Minnesota Statutes 1996, section 60B.44, 38.21 subdivision 2, is amended to read: 38.22 Subd. 2. [ADMINISTRATION COSTS.] The costs and expenses of 38.23 administration, including but not limited to the following: The 38.24 actual and necessary costs of preserving or recovering the 38.25 assets of the insurer; compensation for all services rendered in 38.26 the liquidation; any necessary filing fees; the fees and mileage 38.27 payable to witnesses; and reasonable attorney's fees. This 38.28 includes administration costs incurred by a guaranty association. 38.29 Sec. 32. Minnesota Statutes 1996, section 60B.44, 38.30 subdivision 4, is amended to read: 38.31 Subd. 4. [LOSS CLAIMS; INCLUDING CLAIMS NOT COVERED BY A 38.32 GUARANTY ASSOCIATION.] All claims under policies or contracts of 38.33 coverage for losses incurred including third party claims, and 38.34 all claims against the insurer for liability for bodily injury 38.35 or for injury to or destruction of tangible property which are 38.36 not under policies or contracts. All claims under life 39.1 insurance and annuity policies, whether for death proceeds, 39.2 annuity proceeds, or investment values, shall be treated as loss 39.3 claims. That portion of any loss for which indemnification is 39.4 provided by other benefits or advantages recovered or 39.5 recoverable by the claimant shall not be included in this class, 39.6 other than benefits or advantages recovered or recoverable in 39.7 discharge of familial obligations of support or by way of 39.8 succession at death or as proceeds of life insurance, or as 39.9 gratuities. No payment made by an employer to an employee shall 39.10 be treated as a gratuity. Claims not covered by a guaranty 39.11 association are loss claims.If any portion of a claim is39.12covered by a reinsurance treaty or similar contractual39.13obligation, that claim shall be entitled to a pro rata share,39.14based upon the relationship the claim amount bears to all claims39.15payable under the treaty or contract, of the proceeds received39.16under that treaty or contractual obligation.39.17Claims receiving pro rata payments shall not, as to any39.18remaining unpaid portion of their claim, be treated in a39.19different manner than if no such payment had been received.39.20 Sec. 33. Minnesota Statutes 1996, section 60B.44, is 39.21 amended by adding a subdivision to read: 39.22 Subd. 4a. [WAGES.] (a) Debts due to employees for services 39.23 performed, not to exceed $1,000 to each employee, which have 39.24 been earned within one year before the filing of the petition 39.25 for liquidation, subject to payment of applicable federal, 39.26 state, or local government taxes required by law to be withheld 39.27 from the debts. Officers are not entitled to the benefit of 39.28 this priority. In cases where there are no claims and no 39.29 potential claims of the federal government in the estate, these 39.30 claims will have priority over claims in subdivision 4. 39.31 (b) The priority in paragraph (a) is in lieu of any other 39.32 similar priority authorized by law as to wages or compensation 39.33 of employees. 39.34 Sec. 34. Minnesota Statutes 1996, section 60B.44, 39.35 subdivision 6, is amended to read: 39.36 Subd. 6. [RESIDUAL CLASSIFICATION.] All other claims 40.1 including claims ofthe federal orany state or local 40.2 government, not falling within other classes under this 40.3 section. Claims, including those of any governmental body for a 40.4 penalty or forfeiture, shall be allowed in this class only to 40.5 the extent of the pecuniary loss sustained from the act, 40.6 transaction, or proceeding out of which the penalty or 40.7 forfeiture arose, with reasonable and actual costs occasioned 40.8 thereby. The remainder of such claims shall be postponed to the 40.9 class of claims under subdivision 9. 40.10 Sec. 35. Minnesota Statutes 1996, section 60D.20, 40.11 subdivision 2, is amended to read: 40.12 Subd. 2. [DIVIDENDS AND OTHER DISTRIBUTIONS.] (a) Subject 40.13 to the limitations and requirements of this subdivision, the 40.14 board of directors of any domestic insurer within an insurance 40.15 holding company system may authorize and cause the insurer to 40.16 declare and pay any dividend or distribution to its shareholders 40.17 as the directors deem prudent from the earned surplus of the 40.18 insurer. An insurer's earned surplus, also known as unassigned 40.19 funds, shall be determined in accordance with the accounting 40.20 procedures and practices governing preparation of its annual 40.21 statement, minus 25 percent of earned surplus attributable to40.22net unrealized capital gains. Dividends which are paid from 40.23 sources other than an insurer's earned surplus as of the end of 40.24 the immediately preceding quarter for which the insurer has 40.25 filed a quarterly or annual statement as appropriate, or are 40.26 extraordinary dividends or distributions may be paid only as 40.27 provided in paragraphs (d), (e), and (f). 40.28 (b) The insurer shall notify the commissioner within five 40.29 business days following declaration of a dividend declared 40.30 pursuant to paragraph (a) and at least ten days prior to its 40.31 payment. The commissioner shall promptly consider the 40.32 notification filed pursuant to this paragraph, taking into 40.33 consideration the factors described in subdivision 4. 40.34 (c) The commissioner shall review at least annually the 40.35 dividends paid by an insurer pursuant to paragraph (a) for the 40.36 purpose of determining if the dividends are reasonable based 41.1 upon (1) the adequacy of the level of surplus as regards 41.2 policyholders remaining after the dividend payments, and (2) the 41.3 quality of the insurer's earnings and extent to which the 41.4 reported earnings include extraordinary items, such as surplus 41.5 relief reinsurance transactions and reserve destrengthening. 41.6 (d) No domestic insurer shall pay any extraordinary 41.7 dividend or make any other extraordinary distribution to its 41.8 shareholders until: (1) 30 days after the commissioner has 41.9 received notice of the declaration of it and has not within the 41.10 period disapproved the payment; or (2) the commissioner has 41.11 approved the payment within the 30-day period. 41.12 (e) For purposes of this section, an extraordinary dividend 41.13 or distribution includes any dividend or distribution of cash or 41.14 other property, whose fair market value together with that of 41.15 other dividends or distributions made within the preceding 12 41.16 months exceeds the greater of (1) ten percent of the insurer's 41.17 surplus as regards policyholdersas of the 31st day of December41.18next precedingon December 31 of the preceding year; or (2) the 41.19 net gain from operations of the insurer, if the insurer is a 41.20 life insurer, or the net income, if the insurer is not a life 41.21 insurer, not including realized capital gains, for the 12-month 41.22 period endingthe 31st day of December next precedingon 41.23 December 31 of the preceding year, but does not include pro rata 41.24 distributions of any class of the insurer's own securities. 41.25 (f) Notwithstanding any other provision of law, an insurer 41.26 may declare an extraordinary dividend or distribution that is 41.27 conditional upon the commissioner's approval, and the 41.28 declaration shall confer no rights upon shareholders until: (1) 41.29 the commissioner has approved the payment of such a dividend or 41.30 distribution; or (2) the commissioner has not disapproved the 41.31 payment within the 30-day period referred to above. 41.32 Sec. 36. Minnesota Statutes 1996, section 60K.02, 41.33 subdivision 1, is amended to read: 41.34 Subdivision 1. [REQUIREMENT.] No person shall act or 41.35 assume to act as an insurance agent in the solicitation or 41.36 procurement of applications for insurance, nor in the sale of 42.1 insurance or policies of insurance, nor in any manner aid as an 42.2 insurance agent in the negotiation of insurance by or with an 42.3 insurer, including resident agents or reciprocal or 42.4 interinsurance exchanges and fraternal benefit societies, until 42.5 that person obtains from the commissioner a license for that 42.6 purpose. The license must specifically set forth the name of 42.7 the person authorized to act as an agent and the class or 42.8 classes of insurance for which that person is authorized to 42.9 solicit or countersign policies. An insurance agent may qualify 42.10 for a licensein the following classesto sell: (1) life and 42.11 health;and(2) life and health and variable contracts; (3) 42.12 property and casualty; (4) travel baggage; (5) bail bonds; (6) 42.13 title insurance; and (7) farm property and liability. 42.14 No insurer shall appoint or reappoint a natural person, 42.15 partnership, or corporation to act as an insurance agent on its 42.16 behalf until that natural person, partnership, or corporation 42.17 obtains a license as an insurance agent. 42.18 Sec. 37. Minnesota Statutes 1996, section 60K.03, 42.19 subdivision 2, is amended to read: 42.20 Subd. 2. [RESIDENT AGENT.] The commissioner shall issue a 42.21 resident insurance agent's license to a qualified resident of 42.22 this state as follows: 42.23 (a) A person may qualify as a resident of this state if 42.24 that person resides in this state or the principal place of 42.25 business of that person is maintained in this state. 42.26 Application for a license claiming residency in this state for 42.27 licensing purposes constitutes an election of residency in this 42.28 state. A license issued upon an application claiming residency 42.29 in this state is void if the licensee, while holding a resident 42.30 license in this state, also holds, or makes application for, a 42.31 resident license in, or thereafter claims to be a resident of, 42.32 any other state or jurisdiction or if the licensee ceases to be 42.33 a resident of this state; provided, however, if the applicant is 42.34 a resident of a community or trade area, the border of which is 42.35 contiguous with the state line of this state, the applicant may 42.36 qualify for a resident license in this state and at the same 43.1 time hold a resident license from the contiguous state. 43.2 (b) The commissioner shall subject each applicant who is a 43.3 natural person to a written examination as to the applicant's 43.4 competence to act as an insurance agent. The examination must 43.5 be held at a reasonable time and place designated by the 43.6 commissioner. 43.7 (c) The examination shall be approved for use by the 43.8 commissioner and shall test the applicant's knowledge of the 43.9 lines of insurance, policies, and transactions to be handled 43.10 under the class of license applied for, of the duties and 43.11 responsibilities of the licensee, and pertinent insurance laws 43.12 of this state. 43.13 (d) The examination shall be given only after the applicant 43.14 has completed a program of classroom studies in a school, which 43.15 shall not include a school sponsored by, offered by, or 43.16 affiliated with an insurance company or its agents; except that 43.17 this limitation does not preclude a bona fide professional 43.18 association of agents, not acting on behalf of an insurer, from 43.19 offering courses. The course of study shall consist of 30 hours 43.20 of classroom study devoted to the basic fundamentals of 43.21 insurance for those seeking a Minnesota license for the first 43.22 time,; three hours devoted to state laws, regulations, and rules 43.23 applicable to the line or lines of insurance for which licensure 43.24 is being applied; 15 hours devoted to specific life and health 43.25 topics for those seeking a life and health license,; and 15 43.26 hours devoted to specific property and casualty topics for those 43.27 seeking a property and casualty license. The program of studies 43.28 or study course shall have been approved by the commissioner in 43.29 order to qualify under this paragraph. If the applicant has 43.30 been previously licensed for the particular line of insurance in 43.31 the state of Minnesota, the requirement of a program of studies 43.32 or a study course shall be waived. A certification of 43.33 compliance by the organization offering the course shall 43.34 accompany the applicant's license application. This program of 43.35 studies in a school or a study course shall not apply to farm 43.36 property perils and farm liability applicants, or to agents 44.1 writing such other lines of insurance as the commissioner may 44.2 exempt from examination by order. 44.3 (e) The applicant must pass the examination with a grade 44.4 determined by the commissioner to indicate satisfactory 44.5 knowledge and understanding of the class or classes of insurance 44.6 for which the applicant seeks qualification. The commissioner 44.7 shall inform the applicant as to whether or not the applicant 44.8 has passed. Examination results are valid for a period of three 44.9 years from the date of the examination. The applicant must pass 44.10 the examination with a grade determined by the commissioner. 44.11 (f) An applicant who has failed to pass an examination may 44.12 take subsequent examinations. Examination fees for subsequent 44.13 examinations shall not be waived. 44.14 (g) Any applicant for a license covering the same class or 44.15 classes of insurance for which the applicant was licensed under 44.16 a similar license in this state, other than a temporary license, 44.17 within the three years preceding the date of the application 44.18 shall be exempt from the requirement of a written examination, 44.19 unless the previous license was revoked or suspended by the 44.20 commissioner. An applicant whose license is not renewed under 44.21 section 60K.12 is exempt from the requirement of a written 44.22 examination. 44.23 Sec. 38. Minnesota Statutes 1996, section 60K.03, 44.24 subdivision 3, is amended to read: 44.25 Subd. 3. [NONRESIDENT AGENT.] The commissioner shall issue 44.26 a nonresident insurance agent's license to a qualified person 44.27 who is a resident of another state or country as follows: 44.28 (a) A person may qualify for a license under this section 44.29 as a nonresident only if that person holds a license in another 44.30 state, province of Canada, or other foreign country which, in 44.31 the opinion of the commissioner, qualifies that person for the 44.32 same activity as that for which a license is sought. 44.33 (b) The commissioner shall not issue a license to a 44.34 nonresident applicant until that person files with the 44.35 commissioner a designation of the commissioner and the 44.36 commissioner's successors in office as the applicant's true and 45.1 lawful attorney upon whom may be served all lawful process in an 45.2 action, suit, or proceeding instituted by or on behalf of an 45.3 interested person arising out of the applicant's insurance 45.4 business in this state. This designation constitutes an 45.5 agreement that this service of process is of the same legal 45.6 force and validity as personal service of process in this state 45.7 upon that applicant. 45.8 Service of process upon a licensee in an action or 45.9 proceeding begun in a court of competent jurisdiction of this 45.10 state may be made in compliance with section 45.028, subdivision 45.11 2. 45.12 (c) A nonresident agent shall be held to the same knowledge 45.13 of insurance law, regulations, and rules as that required of a 45.14 resident agent according to subdivision 2, paragraph (d). 45.15(c)(d) A nonresident license terminates automatically when 45.16 the resident license for that class of license in the state, 45.17 province, or foreign country in which the licensee is a resident 45.18 is terminated for any reason. 45.19 Sec. 39. Minnesota Statutes 1996, section 60K.08, is 45.20 amended to read: 45.21 60K.08 [BROKERAGE BUSINESS.] 45.22 (a) Every insurance agent duly licensed to transact 45.23 business in this state shall have the right to procure the 45.24 insurance of risks, or parts of risks, in the class or classes 45.25 of insurance for which the agent is licensed in other insurers 45.26 duly authorized to transact business in this state, but the 45.27 insurance shall only be consummated through a duly 45.28 appointedresidentagent of the insurer taking the risk. 45.29 (b) If the law of another state imposes on a nonresident 45.30 agent who is a resident agent of Minnesota any obligation of 45.31 countersignature by a resident agent of that state, then any 45.32 licensed nonresident agent of that state will be obliged to have 45.33 the same kind of policies countersigned by a resident agent of 45.34 Minnesota. 45.35 (c) If the law of another state requires a nonresident 45.36 agent who is a resident agent of Minnesota to pay a portion of 46.1 the premium to or share commissions with a licensed resident 46.2 agent of that state, thenthein the same cases a licensed 46.3 resident agent of Minnesotawhen consummating and countersigning46.4 shall be required to countersign the policies for a licensed 46.5 nonresident agent of that state and shall receivefive percent46.6of the total premium or 25 percent of the commission, whichever46.7is lessthe same portion of the premium or share of the 46.8 commission as required by the laws of the nonresident agent's 46.9 state. 46.10 Sec. 40. Minnesota Statutes 1996, section 60K.14, 46.11 subdivision 4, is amended to read: 46.12 Subd. 4. [SUITABILITY OF INSURANCE.] In recommending the 46.13 purchase of any life, endowment, individual accident and 46.14 sickness, long-term care, annuity, life-endowment, or Medicare 46.15 supplement insurance to a customer, an agent must have 46.16 reasonable grounds for believing that the recommendation is 46.17 suitable for the customer and must make reasonable inquiries to 46.18 determine suitability. The suitability of a recommended 46.19 purchase of insurance will be determinedby reference to the46.20totality of the particular customer's circumstancesupon the 46.21 basis of the facts disclosed by the customer as to the 46.22 customer's other insurance and financial situation and needs, 46.23 including, but not limited to, the customer'sincomefinancial 46.24 status, the customer's need for insurance, and the values, 46.25 benefits, and costs of the customer's existing insurance 46.26 program, if any, when compared to the values, benefits, and 46.27 costs of the recommended policy or policies. 46.28 Sec. 41. Minnesota Statutes 1996, section 60K.19, 46.29 subdivision 7, is amended to read: 46.30 Subd. 7. [CRITERIA FOR COURSE ACCREDITATION.] (a) The 46.31 commissioner may accredit a course only to the extent it is 46.32 designed to impart substantive and procedural knowledge of the 46.33 insurance field. The burden of demonstrating that the course 46.34 satisfies this requirement is on the individual or organization 46.35 seeking accreditation. The commissioner shall approve any 46.36 educational program approved by Minnesota Continuing Legal 47.1 Education relating to the insurance field. The commissioner is 47.2 authorized to establish a procedure for renewal of course 47.3 accreditation. 47.4 (b) The commissioner shall approve or disapprove 47.5 professional designation examinations that are recommended for 47.6 approval by the advisory task force. In order for an agent to 47.7 receive full continuing education credit for a professional 47.8 designation examination, the agent must pass the examination. 47.9 An agent may not receive credit for classroom instruction 47.10 preparing for the professional designation examination and also 47.11 receive continuing education credit for passing the professional 47.12 designation examination. 47.13 (c) The commissioner may not accredit a course: 47.14 (1) that is designed to prepare students for a license 47.15 examination; 47.16 (2) in mechanical office or business skills, including 47.17 typing, speedreading, use of calculators, or other machines or 47.18 equipment; 47.19 (3) in sales promotion, including meetings held in 47.20 conjunction with the general business of the licensed agent; 47.21 (4) in motivation, the art of selling, psychology, or time 47.22 management; or 47.23 (5) which can be completed by the student at home or 47.24 outside the classroom without the supervision of an instructor 47.25 approved by the department of commerce, except that home-study 47.26 courses may be accredited by the commissioner if the student is 47.27 a nonresident agent residing in a state which is not contiguous 47.28 to Minnesota. 47.29 (d) The commissioner has discretion to establish a pilot 47.30 program to explore delivery of accredited courses using new 47.31 delivery technology, including interactive technology. This 47.32 pilot program expires August 1, 2000. 47.33 Sec. 42. Minnesota Statutes 1996, section 60K.19, 47.34 subdivision 8, is amended to read: 47.35 Subd. 8. [MINIMUM EDUCATION REQUIREMENT.] Each person 47.36 subject to this section shall complete a minimum of 30 credit 48.1 hours of courses accredited by the commissioner during each 48.2 24-month licensing periodafter the expiration of the person's48.3initial licensing period, two hours of which must be devoted to 48.4 state law, regulations, and rules applicable to the line or 48.5 lines of insurance for which the agent is licensed. At least 15 48.6 of the 30 credit hours must be completed during the first 12 48.7 months of the 24-month licensing period. Any person whose 48.8 initial licensing period extends more than six months shall 48.9 complete 15 hours of courses accredited by the commissioner 48.10 during the initial license period. Any person teaching or 48.11 lecturing at an accredited course qualifies for 1-1/2 times the 48.12 number of credit hours that would be granted to a person 48.13 completing the accredited course. No more than 15 credit hours 48.14 per licensing period may be credited to a person for courses 48.15 sponsored by, offered by, or affiliated with an insurance 48.16 company or its agents. Courses sponsored by, offered by, or 48.17 affiliated with an insurance company or agent may restrict its 48.18 students to agents of the company or agency. 48.19 Sec. 43. Minnesota Statutes 1996, section 61A.28, 48.20 subdivision 6, is amended to read: 48.21 Subd. 6. [STOCKS, OBLIGATIONS, AND OTHER INVESTMENTS.] (a) 48.22 Common stocks, common stock equivalents, or securities 48.23 convertible into common stock or common stock equivalents of a 48.24 business entity organized under the laws of the United States or 48.25 any state thereof, or the Dominion of Canada or any province 48.26 thereof, if the net earnings of the business entity after the 48.27 elimination of extraordinary nonrecurring items of income and 48.28 expense and before income taxes and fixed charges over the five 48.29 immediately preceding completed fiscal years, or its period of 48.30 existence if less than five years, has averaged not less than 48.31 1-1/4 times its average annual fixed charges applicable to the 48.32 period. 48.33 (b) Preferred stock of, or common or preferred stock 48.34 guaranteed as to dividends by a business entity organized under 48.35 the laws of the United States or any state thereof, or the 48.36 Dominion of Canada or any province thereof, under the following 49.1 conditions: (1) No investment may be made under this paragraph 49.2 in a stock upon which any dividend, current or cumulative, is in 49.3 arrears; (2) the company may not invest in stocks under this 49.4 paragraph and in common stocks under paragraph (a) if the 49.5 investment causes the company's aggregate investments in the 49.6 common or preferred stocks to exceed 25 percent of the company's 49.7 total admitted assets, provided that no more than 20 percent of 49.8 the company's admitted assets may be invested in common stocks 49.9 under paragraph (a); and (3) the company may not invest in any 49.10 preferred stock or common stock guaranteed as to dividends, 49.11 which is rated in the four lowest categories established by the 49.12 securities valuation office of the National Association of 49.13 Insurance Commissioners, if the investment causes the company's 49.14 aggregate investment in the lower rated preferred or common 49.15 stock guaranteed as to dividends to exceed five percent of its 49.16 total admitted assets. 49.17 (c) Warrants, options, and rights to purchase stock if the 49.18 stock, at the time of the acquisition of the warrant, option, or 49.19 right to purchase, would qualify as an investment under 49.20 paragraph (a) or (b), whichever is applicable. A company shall 49.21 not invest in a warrant, option, or right to purchase stock if, 49.22 upon purchase and immediate exercise thereof, the acquisition of 49.23 the stock violates any of the concentration limitations 49.24 contained in paragraphs (a) and (b). 49.25 (d) In addition to amounts that may be invested under 49.26 subdivision 8 and without regard to the percentage limitation 49.27 applicable to stocks, warrants, options, and rights to purchase, 49.28 the securities of any face amount certificate company, unit 49.29 investment trust, or management type investment company, 49.30 registered or in the process of registration under the 49.31 Investment Company Act of 1940 as from time to time amended. In 49.32 addition, the company may transfer assets into one or more of 49.33 its separate accounts for the purpose of establishing, or 49.34 supporting its contractual obligations under, the accounts in 49.35 accordance with the provisions of sections 61A.13 to 61A.21. A 49.36 company may not invest in a security authorized under this 50.1 paragraph if the investment causes the company's aggregate 50.2 investments in the securities to exceed five percent of its 50.3 total admitted assets, except that for a health service plan 50.4 corporation operating under chapter 62C, and for a health 50.5 maintenance organization operating under chapter 62D, the 50.6 company's aggregate investments may not exceed 20 percent of its 50.7 total admitted assets. No more than five percent of the allowed 50.8 investment by health service plan corporations or health 50.9 maintenance organizations may be invested in funds that invest 50.10 in assets not backed by the federal government. When investing 50.11 in money market mutual funds, nonprofit health service plans 50.12 regulated under chapter 62C, and health maintenance 50.13 organizations regulated under chapter 62D, shall establish a 50.14 trustee custodial account for the transfer of cash into the 50.15 money market mutual fund. 50.16 (e) Investment grade obligations that are: 50.17 (1) bonds, obligations, notes, debentures, repurchase 50.18 agreements, or other evidences of indebtedness of a business 50.19 entity, organized under the laws of the United States or any 50.20 state thereof, or the Dominion of Canada or any province 50.21 thereof; and 50.22 (2) rated in one of the four highest rating categories by 50.23 at least one nationally recognized statistical rating 50.24 organization, or are rated in one of the two highest categories 50.25 established by the securities valuation office of the National 50.26 Association of Insurance Commissioners. 50.27 (f) Noninvestment grade obligations: A company may acquire 50.28 noninvestment grade obligations as defined in subclause (i) 50.29 (hereinafter noninvestment grade obligations) which meet the 50.30 earnings test set forth in subclause (ii). A company may not 50.31 acquire a noninvestment grade obligation if the acquisition will 50.32 cause the company to exceed the limitations set forth in 50.33 subclause (iii). 50.34 (i) A noninvestment grade obligation is an obligation of a 50.35 business entity, organized under the laws of the United States 50.36 or any state thereof, or the Dominion of Canada or any province 51.1 thereof, that is not rated in one of the four highest rating 51.2 categories by at least one nationally recognized statistical 51.3 rating organization, or is not rated in one of the two highest 51.4 categories established by the securities valuation office of the 51.5 National Association of Insurance Commissioners. 51.6 (ii) Noninvestment grade obligations authorized by this 51.7 subdivision may be acquired by a company if the business entity 51.8 issuing or assuming the obligation, or the business entity 51.9 securing or guaranteeing the obligation, has had net earnings 51.10 after the elimination of extraordinary nonrecurring items of 51.11 income and expense and before income taxes and fixed charges 51.12 over the five immediately preceding completed fiscal years, or 51.13 its period of existence of less than five years, has averaged 51.14 not less than 1-1/4 times its average annual fixed charges 51.15 applicable to the period; provided, however, that if a business 51.16 entity issuing or assuming the obligation, or the business 51.17 entity securing or guaranteeing the obligation, has undergone an 51.18 acquisition, recapitalization, or reorganization within the 51.19 immediately preceding 12 months, or will use the proceeds of the 51.20 obligation for an acquisition, recapitalization, or 51.21 reorganization, then such business entity shall also have, on a 51.22 pro forma basis, for the next succeeding 12 months, net earnings 51.23 averaging 1-1/4 times its average annual fixed charges 51.24 applicable to such period after elimination of extraordinary 51.25 nonrecurring items of income and expense and before taxes and 51.26 fixed charges; no investment may be made under this section upon 51.27 which any interest obligation is in default. 51.28 (iii) Limitation on aggregate interest in noninvestment 51.29 grade obligations. A company may not invest in a noninvestment 51.30 grade obligation if the investment will cause the company's 51.31 aggregate investments in noninvestment grade obligations to 51.32 exceed the applicable percentage of admitted assets set forth in 51.33 the following table: 51.34 Percentage of 51.35 Effective Date Admitted Assets 51.36 January 1, 1992 20 52.1 January 1, 1993 17.5 52.2 January 1, 1994 15 52.3 Nothing in this paragraph limits the ability of a company 52.4 to invest in noninvestment grade obligations as provided under 52.5 subdivision 12. 52.6 (g) Obligations for the payment of money under the 52.7 following conditions: (1) The obligation must be secured, 52.8 either solely or in conjunction with other security, by an 52.9 assignment of a lease or leases on property, real or personal; 52.10 (2) the lease or leases must be nonterminable by the lessee or 52.11 lessees upon foreclosure of any lien upon the leased property; 52.12 (3) the rents payable under the lease or leases must be 52.13 sufficient to amortize at least 90 percent of the obligation 52.14 during the primary term of the lease; and (4) the lessee or 52.15 lessees under the lease or leases, or a governmental entity or 52.16 business entity, organized under the laws of the United States 52.17 or any state thereof, or the Dominion of Canada, or any province 52.18 thereof, that has assumed or guaranteed any lessee's performance 52.19 thereunder, must be a governmental entity or business entity 52.20 whose obligations would qualify as an investment under 52.21 subdivision 2 or paragraph (e) or (f). A company may acquire 52.22 leases assumed or guaranteed by a noninvestment grade lessee 52.23 unless the value of the lease, when added to the other 52.24 noninvestment grade obligations owned by the company, exceeds 15 52.25 percent of the company's admitted assets. 52.26 (h) A company may sellexchange-tradedcall options against 52.27 stocks or other securities owned by the company and may purchase 52.28exchange-tradedcall options in a closing transaction against a 52.29 call option previously written by the company. In addition to 52.30 the authority granted by paragraph (c), to the extent and on the 52.31 terms and conditions the commissioner determines to be 52.32 consistent with the purposes of this chapter, a company may 52.33 purchase or sell other exchange-traded call options, and may 52.34 sell or purchase exchange-traded put options. 52.35 (i) A company may not invest in a security or other 52.36 obligation authorized under this subdivision if the investment, 53.1 valued at cost at the date of purchase, causes the company's 53.2 aggregate investment in any one business entity to exceed two 53.3 percent of the company's admitted assets. 53.4 (j) For nonprofit health service plan corporations 53.5 regulated under chapter 62C, and for health maintenance 53.6 organizations regulated under chapter 62D, a company may invest 53.7 in commercial paper rated in one of the two highest rating 53.8 categories by at least one nationally recognized statistical 53.9 rating organization, or rated in one of the two highest 53.10 categories established by the securities valuation office of the 53.11 National Association of Insurance Commissioners, if the 53.12 investment, valued at cost at the date of purchase, does not 53.13 cause the company's aggregate investment in any one business 53.14 entity to exceed six percent of the company's admitted assets. 53.15 Sec. 44. Minnesota Statutes 1996, section 61A.28, 53.16 subdivision 9a, is amended to read: 53.17 Subd. 9a. [HEDGING.] A domestic life insurance company may 53.18 enter into financial transactions solely for the purpose of 53.19managingreducing theinterest raterisk associated withthe53.20company'sassets and liabilities that the company has acquired 53.21 or incurred or has legally contracted to acquire or incur, and 53.22 not for speculative or other purposes. For purposes of this 53.23 subdivision, "financial transactions" include, but are not 53.24 limited to, futures, options to buy or sell fixed income 53.25 securities, repurchase and reverse repurchase agreements, and 53.26 interest rate swaps, caps, and floors. This authority is in 53.27 addition to any other authority of the insurer. 53.28 Sec. 45. Minnesota Statutes 1996, section 61A.28, 53.29 subdivision 12, is amended to read: 53.30 Subd. 12. [ADDITIONAL INVESTMENTS.] Investments of any 53.31 kind, without regard to the categories, conditions, standards, 53.32 or other limitations set forth in the foregoing subdivisions and 53.33 section 61A.31, subdivision 3, except that the prohibitions in 53.34 clause (d) of subdivision 3 remains applicable, may be made by a 53.35 domestic life insurance company in an amount not to exceed the 53.36 lesser of the following: 54.1 (1) Five percent of the company's total admitted assets as 54.2 of the end of the preceding calendar year, or 54.3 (2) Fifty percent of the amount by which its capital and 54.4 surplus as of the end of the preceding calendar year exceeds 54.5 $675,000. Except as provided in section 61A.281, a company's 54.6 total investment under this section in the common stock of any 54.7 corporation, other than the stock of the types of corporations 54.8 specified in section 61A.284, may not exceed ten percent of the 54.9 common stock of the corporation. No investment may be made 54.10 under the authority of this clause or clause (1) by a company 54.11 that has not completed five years of actual operation since the 54.12 date of its first certificate of authority. 54.13 If, subsequent to being made under the provisions of this 54.14 subdivision, an investment is determined to have become 54.15 qualified or eligible under any of the other provisions of this 54.16 chapter, the company may consider the investment as being held 54.17 under the other provision and the investment need no longer be 54.18 considered as having been made under the provisions of this 54.19 subdivision. 54.20 In addition to the investments authorized by this 54.21 subdivision, with the written order of the commissioner, a 54.22 domestic life insurance company may make qualified investments 54.23 in anyadditional securities or property of the type authorized54.24by subdivision 6, paragraph (e), (f), or (g), with the written54.25order of the commissionerother type of investment or exceed any 54.26 limitations of quality, quantity, or percentage of admitted 54.27 assets contained in this section, section 61A.29 or 61A.31, or 54.28 other provision governing the investments of a domestic life 54.29 insurance company. This approval is at the discretion of the 54.30 commissioner, provided that the additional investments allowed 54.31 by the commissioner's written order may not exceed five percent 54.32 of the company's admitted assets.This authorization does not54.33negate or reduce the investment authority granted in subdivision54.346, paragraph (e), (f), or (g), or this subdivision.54.35 Sec. 46. Minnesota Statutes 1996, section 61A.32, is 54.36 amended to read: 55.1 61A.32 [DOMESTIC MUTUAL AND STOCK AND MUTUAL COMPANIES; 55.2 VOTING RIGHTS OF MEMBERS.] 55.3 Every person insured by a domestic mutual life insurance 55.4 company, and every participating policyholder of a domestic 55.5 stock and mutual life insurance company as defined in sections 55.6 61A.33 to 61A.36, shall be a member, entitled to one vote and 55.7 one vote additional for each $1,000 of insurance in excess of 55.8 the first $1,000; provided, that no member shall be entitled to 55.9 more than 100 votes; and, provided, further, that in the case of 55.10 group insurance on employees such group shall be deemed to be a 55.11 single member and the employer shall be deemed to be such member 55.12 for the purpose of voting, having not to exceed 100 votes, 55.13 provided, that in cases where the employees pay all or any part 55.14 of the premium, either directly or by payroll deductions, the 55.15 employees shall be allowed to choose their representative, who 55.16 shall exercise a voting power in proportion to the percentage of 55.17 premium paid by such employees. Every member shall be notified 55.18 of its annual meetings by a written notice mailed to the 55.19 member's address, or by an imprint on the back of the policy, 55.20 premium notice, receipt or certificate of renewal, as follows: 55.21 "The insured is hereby notified that by virtue of this 55.22 policy the insured is a member of the .......... Insurance 55.23 Company, and that the annual meetings of said company are held 55.24 at its home office on the ..... day of ..... in each year, at 55.25 .......... o'clock." 55.26 The blanks shall be duly filled in print. Any such member 55.27 may vote by proxy by filing written proxy appointment with the 55.28 secretary of the company at its home office at least five days 55.29 before the first meeting at which it is to be used. Such proxy 55.30 appointment may be for a specified period of time not to exceed 55.31 one year. A proxy may be revoked by a member at any time by 55.32 written notice to the secretary of the company or by executing a 55.33 new proxy appointment and filing it as required herein: 55.34 provided, however, that any member may always appear personally 55.35 and exercise rights as a member at any meeting of the company. 55.36 No person or group of persons other than the chief 56.1 executive officer of a domestic mutual life insurance company, 56.2 or the officer's designee, shall seek to obtain proxies from the 56.3 members of the domestic mutual life insurance company for the 56.4 purposes of affecting a change of control of the domestic mutual 56.5 life insurance company unless that person or group has filed 56.6 with the commissioner and has sent to the domestic mutual life 56.7 insurance company a statement containing the information 56.8 required by section 60D.17. Section 60D.17, subdivisions 2 to 56.9 7, apply in the event of any such solicitation. 56.10 A domestic mutual life insurance company may by its 56.11 articles of incorporation or bylaws provide for a representative 56.12 system of voting in any meeting of members. The articles or 56.13 bylaws may provide for the selection of representatives from 56.14 districts as therein specified, such representatives to 56.15 represent approximately equal numbers of members with power to 56.16 exercise all the voting powers, rights and privileges of the 56.17 members they represent with the same force and effect as might 56.18 be exercised by the members themselves. In such a 56.19 representative system the votes cast by the representative shall 56.20 be one vote for each member, notwithstanding the amount of 56.21 insurance carried, and proxy voting shall not be permitted; 56.22 provided, however, that any member may always appear personally 56.23 and exercise rights as a member of the company at any meeting of 56.24 the membership. 56.25 Sec. 47. Minnesota Statutes 1996, section 61A.60, 56.26 subdivision 1, is amended to read: 56.27 Subdivision 1. [NOTICE FORM; AGENT SALES.] The notice 56.28 required where sections 61A.53 to 61A.60 refer to this 56.29 subdivision is as follows: 56.30 IMPORTANT NOTICE 56.31 56.32 DEFINITION REPLACEMENT is any transaction where, in connection 56.33 with the purchase of New Insurance or a New 56.34 Annuity, you LAPSE, SURRENDER, CONVERT to 56.35 Paid-up Insurance, Place on Extended Term, 56.36 or BORROW all or part of the policy loan 57.1 values on an existing insurance policy or an 57.2 annuity. (See reverse side for DEFINITIONS.) 57.5 IF YOU In connection with the purchase of this insurance 57.6 INTEND TO or annuity, if you have REPLACED or intend to 57.7 REPLACE REPLACE your present life insurance coverage 57.8 COVERAGE or annuity(ies), you should be certain that you 57.9 understand all the relevant factors involved. 57.11 You should BE AWARE that you may be required to 57.12 provideEVIDENCE OF INSURABILITY and 57.14 (1) If your HEALTH condition has CHANGED since 57.15 the application was taken on your present 57.16 policies, you may be required to pay ADDITIONAL 57.17 PREMIUMS under the NEW POLICY, or be DENIED 57.18 coverage. 57.20 (2) Your present occupation or activitiesmay not 57.21be covered or could require additional premiums. 57.23 (3) The INCONTESTABLE and SUICIDE CLAUSE will 57.24 begin anew in a new policy. This could RESULT 57.25 in aCLAIM under the new policy BEING DENIED 57.26 that would otherwise have been paid. 57.28 (4) Current lawDOESMAY NOT REQUIRE your present 57.29 insurer(s) to REFUND any premiums. 57.31 (5) It is to your advantage to OBTAIN INFORMATION 57.32 regarding your existing policies or annuity 57.33 contracts [FROM THE INSURER OR AGENT FROM WHOM 57.34 YOU PURCHASED THE POLICY OR ANNUITY CONTRACT.] 57.36 (If you are purchasing an annuity, clauses (1), 58.1 (2), and (3) above would not apply to the new 58.2 annuity contract.) 58.4 THE INSURANCE OR ANNUITY I INTEND TO PURCHASE FROM 58.5 _______________________________________INSURANCE CO. 58.6 MAY REPLACE OR ALTER EXISTING LIFE INSURANCE 58.7 POLICY(IES) OR ANNUITY CONTRACT(S). 58.9 The following policy(ies) or annuity contract(s) 58.10 may be replaced as a result of this transaction: 58.12Insurer Insured 58.13as it appears on the policy as it appears on the policy 58.14or contract or contract 58.15 ______________________________ ______________________________ 58.16 ______________________________ ______________________________ 58.17 ______________________________ ______________________________ 58.18 ______________________________ ______________________________ 58.19Policy or contract number Insured birthdate 58.20 ______________________________ ______________________________ 58.21 ______________________________ ______________________________ 58.22 ______________________________ ______________________________ 58.23 ______________________________ ______________________________ 58.24 The proposed policy or contract is: 58.25 ______________________________________ $_______________ 58.26 type of policy- or contract-generic name face amount 58.28 ________________________________________________________ 58.29 signature of applicant date 58.31 ________________________________________________________ 58.32 address of applicant city state 58.34 I certify that this form was given to and completed by 58.36 ________________________________________________________ 58.37 (applicant-please print or type) 58.39 prior to taking an application and that I am leaving a 58.40 signed copy for the applicant. 58.42 ___________________________________________________ 58.43 agent's signature date 58.45 ___________________________________________________ 58.46 address 59.1 ___________________________________________________ 59.2 city state 59.3Note important statement on reverse side 59.4 Sec. 48. Minnesota Statutes 1996, section 61B.19, 59.5 subdivision 3, is amended to read: 59.6 Subd. 3. [LIMITATION OF COVERAGE.] Sections 61B.18 to 59.7 61B.32 do not provide coverage for: 59.8 (1) a portion of a policy or contract under which the 59.9 investment risk is borne by the policy or contract holder; 59.10 (2) a policy or contract of reinsurance, unless assumption 59.11 certificates have been issued and the insured has consented to 59.12 the assumption as provided under section 60A.09, subdivision 4a; 59.13 (3) a policy or contract issued by an assessment benefit 59.14 association operating under section 61A.39, or a fraternal 59.15 benefit society operating under chapter 64B; 59.16 (4) any obligation to nonresident participants of a covered 59.17 retirement plan or to the plan sponsor, employer, trustee, or 59.18 other party who owns the contract; in these cases, the 59.19 association is obligated under this chapter only to participants 59.20 in a covered plan who are residents of the state of Minnesota on 59.21 the date of impairment or insolvency; 59.22 (5) an annuity contract issued in connection with and for 59.23 the purpose of funding a structured settlement of a liability 59.24 claim, where the liability insurer remains liable; 59.25 (6) a portion of an unallocated annuity contract which is 59.26 not issued to or in connection with a specific employee, union, 59.27 or association of natural persons benefit plan or a governmental 59.28 lottery, including but not limited to, a contract issued to, or 59.29 purchased at the direction of, any governmental bonding 59.30 authority, such as a municipal guaranteed investment contract; 59.31 (7) a plan or program of an employer, association, or 59.32 similar entity to provide life, health, or annuity benefits to 59.33 its employees or members to the extent that the plan or program 59.34 is self-funded or uninsured, including benefits payable by an 59.35 employer, association, or similar entity under: 59.36 (i) a multiple employer welfare arrangement as defined in 60.1 the Employee Retirement Income Security Act of 1974, United 60.2 States Code, title 29, section 1002(40)(A), as amended; 60.3 (ii) a minimum premium group insurance plan; 60.4 (iii) a stop-loss group insurance plan; or 60.5 (iv) an administrative services only contract; 60.6 (8) any policy or contract issued by an insurer at a time 60.7 when it was not licensed or did not have a certificate of 60.8 authority to issue the policy or contract in this state; 60.9 (9) an unallocated annuity contract issued to an employee 60.10 benefit plan protected under the federal Pension Benefit 60.11 Guaranty Corporation;and60.12 (10) a portion of a policy or contract to the extent that 60.13 it provides dividends or experience rating credits except to the 60.14 extent the dividends or experience rating credits have actually 60.15 become due and payable or have been credited to the policy or 60.16 contract before the date of impairment or insolvency, or 60.17 provides that a fee or allowance be paid to a person, including 60.18 the policy or contract holder, in connection with the service 60.19 to, or administration of, the policy or contract.; and 60.20 (11) a contractual agreement that establishes the member 60.21 insurer's obligations to provide a book value accounting 60.22 guaranty for defined contribution benefit plan participants by 60.23 reference to a portfolio of assets that is owned by the benefit 60.24 plan or its trustee, which in each case is not an affiliate of 60.25 the member insurer. 60.26 Sec. 49. Minnesota Statutes 1996, section 62A.04, 60.27 subdivision 3, is amended to read: 60.28 Subd. 3. [OPTIONAL PROVISIONS.] Except as provided in 60.29 subdivision 4, no such policy delivered or issued for delivery 60.30 to any person in this state shall contain provisions respecting 60.31 the matters set forth below unless such provisions are in the 60.32 words in which the same appear in this section. The insurer 60.33 may, at its option, use in lieu of any such provision a 60.34 corresponding provision of different wording approved by the 60.35 commissioner which is not less favorable in any respect to the 60.36 insured or the beneficiary. Any such provision contained in the 61.1 policy shall be preceded individually by the appropriate caption 61.2 appearing in this subdivision or, at the option of the insurer, 61.3 by such appropriate individual or group captions or subcaptions 61.4 as the commissioner may approve. 61.5 (1) A provision as follows: 61.6 CHANGE OF OCCUPATION: If the insured be injured or 61.7 contract sickness after having changed occupations to one 61.8 classified by the insurer as more hazardous than that stated in 61.9 this policy or while doing for compensation anything pertaining 61.10 to an occupation so classified, the insurer will pay only such 61.11 portion of the indemnities provided in this policy as the 61.12 premiums paid would have purchased at the rates and within the 61.13 limits fixed by the insurer for such more hazardous occupation. 61.14 If the insured changes occupations to one classified by the 61.15 insurer as less hazardous than that stated in this policy, the 61.16 insurer, upon receipt of proof of such change of occupation will 61.17 reduce the premium rate accordingly, and will return the excess 61.18 pro rata unearned premium from the date of change of occupation 61.19 or from the policy anniversary date immediately preceding 61.20 receipt of such proof, whichever is the more recent. In 61.21 applying this provision, the classification of occupational risk 61.22 and the premium rates shall be such as have been last filed by 61.23 the insurer prior to the occurrence of the loss for which the 61.24 insurer is liable or prior to date of proof of change in 61.25 occupation with the state official having supervision of 61.26 insurance in the state where the insured resided at the time 61.27 this policy was issued; but if such filing was not required, 61.28 then the classification of occupational risk and the premium 61.29 rates shall be those last made effective by the insurer in such 61.30 state prior to the occurrence of the loss or prior to the date 61.31 of proof of change of occupation. 61.32 (2) A provision as follows: 61.33 MISSTATEMENT OF AGE: If the age of the insured has been 61.34 misstated, all amounts payable under this policy shall be such 61.35 as the premium paid would have purchased at the correct age. 61.36 (3) A provision as follows: 62.1 OTHER INSURANCE IN THIS INSURER: If an accident or 62.2 sickness or accident and sickness policy or policies previously 62.3 issued by the insurer to the insured be in force concurrently 62.4 herewith, making the aggregate indemnity for ..... (insert type 62.5 of coverage or coverages) in excess of $..... (insert maximum 62.6 limit of indemnity or indemnities) the excess insurance shall be 62.7 void and all premiums paid for such excess shall be returned to 62.8 the insured or to the insured's estate, or, in lieu thereof: 62.9 Insurance effective at any one time on the insured under a 62.10 like policy or policies in this insurer is limited to the one 62.11 such policy elected by the insured, or the insured's beneficiary 62.12 or estate, as the case may be, and the insurer will return all 62.13 premiums paid for all other such policies. 62.14 (4) A provision as follows: 62.15 INSURANCE WITH OTHER INSURERS: If there be other valid 62.16 coverage, not with this insurer, providing benefits for the same 62.17 loss on a provision of service basis or on an expense incurred 62.18 basis and of which this insurer has not been given written 62.19 notice prior to the occurrence or commencement of loss, the only 62.20 liability under any expense incurred coverage of this policy 62.21 shall be for such proportion of the loss as the amount which 62.22 would otherwise have been payable hereunder plus the total of 62.23 the like amounts under all such other valid coverages for the 62.24 same loss of which this insurer had notice bears to the total 62.25 like amounts under all valid coverages for such loss, and for 62.26 the return of such portion of the premiums paid as shall exceed 62.27 the pro rata portion for the amount so determined. For the 62.28 purpose of applying this provision when other coverage is on a 62.29 provision of service basis, the "like amount" of such other 62.30 coverage shall be taken as the amount which the services 62.31 rendered would have cost in the absence of such coverage. 62.32 If the foregoing policy provision is included in a policy 62.33 which also contains the next following policy provision there 62.34 shall be added to the caption of the foregoing provision the 62.35 phrase "EXPENSE INCURRED BENEFITS." The insurer may, at its 62.36 option, include in this provision a definition of "other valid 63.1 coverage," approved as to form by the commissioner, which 63.2 definition shall be limited in subject matter to coverage 63.3 provided by organizations subject to regulation by insurance law 63.4 or by insurance authorities of this or any other state of the 63.5 United States or any province of Canada, and by hospital or 63.6 medical service organizations, and to any other coverage the 63.7 inclusion of which may be approved by the commissioner. In the 63.8 absence of such definition such term shall not include group 63.9 insurance, automobile medical payments insurance, or coverage 63.10 provided by hospital or medical service organizations or by 63.11 union welfare plans or employer or employee benefit 63.12 organizations. For the purpose of applying the foregoing policy 63.13 provision with respect to any insured, any amount of benefit 63.14 provided for such insured pursuant to any compulsory benefit 63.15 statute (including any workers' compensation or employer's 63.16 liability statute) whether provided by a governmental agency or 63.17 otherwise shall in all cases be deemed to be "other valid 63.18 coverage" of which the insurer has had notice. In applying the 63.19 foregoing policy provision no third party liability coverage 63.20 shall be included as "other valid coverage." 63.21 (5) A provision as follows: 63.22 INSURANCE WITH OTHER INSURERS: If there be other valid 63.23 coverage, not with this insurer, providing benefits for the same 63.24 loss on other than an expense incurred basis and of which this 63.25 insurer has not been given written notice prior to the 63.26 occurrence or commencement of loss, the only liability for such 63.27 benefits under this policy shall be for such proportion of the 63.28 indemnities otherwise provided hereunder for such loss as the 63.29 like indemnities of which the insurer had notice (including the 63.30 indemnities under this policy) bear to the total amount of all 63.31 like indemnities for such loss, and for the return of such 63.32 portion of the premium paid as shall exceed the pro rata portion 63.33 for the indemnities thus determined. 63.34 If the foregoing policy provision is included in a policy 63.35 which also contains the next preceding policy provision there 63.36 shall be added to the caption of the foregoing provision the 64.1 phrase -- "OTHER BENEFITS." The insurer may, at its option, 64.2 include in this provision a definition of "other valid 64.3 coverage," approved as to form by the commissioner, which 64.4 definition shall be limited in subject matter to coverage 64.5 provided by organizations subject to regulation by insurance law 64.6 or by insurance authorities of this or any other state of the 64.7 United States or any province of Canada, and to any other 64.8 coverage the inclusion of which may be approved by the 64.9 commissioner. In the absence of such definition such term shall 64.10 not include group insurance, or benefits provided by union 64.11 welfare plans or by employer or employee benefit organizations. 64.12 For the purpose of applying the foregoing policy provision with 64.13 respect to any insured, any amount of benefit provided for such 64.14 insured pursuant to any compulsory benefit statute (including 64.15 any workers' compensation or employer's liability statute) 64.16 whether provided by a governmental agency or otherwise shall in 64.17 all cases be deemed to be "other valid coverage" of which the 64.18 insurer has had notice. In applying the foregoing policy 64.19 provision no third party liability coverage shall be included as 64.20 "other valid coverage." 64.21 (6) A provision as follows: 64.22 RELATION OF EARNINGS TO INSURANCE: If the total monthly 64.23 amount of loss of time benefits promised for the same loss under 64.24 all valid loss of time coverage upon the insured, whether 64.25 payable on a weekly or monthly basis, shall exceed the monthly 64.26 earnings of the insured at the time disability commenced or the 64.27 insured's average monthly earnings for the period of two years 64.28 immediately preceding a disability for which claim is made, 64.29 whichever is the greater, the insurer will be liable only for 64.30 such proportionate amount of such benefits under this policy as 64.31 the amount of such monthly earnings or such average monthly 64.32 earnings of the insured bears to the total amount of monthly 64.33 benefits for the same loss under all such coverage upon the 64.34 insured at the time such disability commences and for the return 64.35 of such part of the premiums paid during such two years as shall 64.36 exceed the pro rata amount of the premiums for the benefits 65.1 actually paid hereunder; but this shall not operate to reduce 65.2 the total monthly amount of benefits payable under all such 65.3 coverage upon the insured below the sum of $200 or the sum of 65.4 the monthly benefits specified in such coverages, whichever is 65.5 the lesser, nor shall it operate to reduce benefits other than 65.6 those payable for loss of time. 65.7 The foregoing policy provision may be inserted only in a 65.8 policy which the insured has the right to continue in force 65.9 subject to its terms by the timely payment of premiums (1) until 65.10 at least age 50, or, (2) in the case of a policy issued after 65.11 age 44, for at least five years from its date of issue. The 65.12 insurer may, at its option, include in this provision a 65.13 definition of "valid loss of time coverage," approved as to form 65.14 by the commissioner, which definition shall be limited in 65.15 subject matter to coverage provided by governmental agencies or 65.16 by organizations subject to regulation by insurance law or by 65.17 insurance authorities of this or any other state of the United 65.18 States or any province of Canada, or to any other coverage the 65.19 inclusion of which may be approved by the commissioner or any 65.20 combination of such coverages. In the absence of such 65.21 definition such term shall not include any coverage provided for 65.22 such insured pursuant to any compulsory benefit statute 65.23 (including any workers' compensation or employer's liability 65.24 statute), or benefits provided by union welfare plans or by 65.25 employer or employee benefit organizations. 65.26 (7) A provision as follows: 65.27 UNPAID PREMIUM: Upon the payment of a claim under this 65.28 policy, any premium then due and unpaid or covered by any note 65.29 or written order may be deducted therefrom. 65.30 (8) A provision as follows: 65.31 CANCELLATION: The insurer may cancel this policy at any 65.32 time by written notice delivered to the insured or mailed to the 65.33 insured's last address as shown by the records of the insurer, 65.34 stating when, not less than five days thereafter, such 65.35 cancellation shall be effective; and after the policy has been 65.36 continued beyond its original term the insured may cancel this 66.1 policy at any time by written notice delivered or mailed to the 66.2 insurer, effective upon receipt or on such later date as may be 66.3 specified in such notice. In the event of cancellation, the 66.4 insurer will return promptly the unearned portion of any premium 66.5 paid.IfRegardless of whether it is the insurer or the insured 66.6 who cancels,the earned premium shall be computed by the use of66.7the short-rate table last filed with the state official having66.8supervision of insurance in the state where the insured resided66.9when the policy was issued. If the insurer cancels,the earned 66.10 premium shall be computed pro rata, unless the mode of payment 66.11 is monthly or less, or if the unearned amount is for more than 66.12 one month. Cancellation shall be without prejudice to any claim 66.13 originating prior to the effective date of cancellation. 66.14 (9) A provision as follows: 66.15 CONFORMITY WITH STATE STATUTES: Any provision of this 66.16 policy which, on its effective date, is in conflict with the 66.17 statutes of the state in which the insured resides on such date 66.18 is hereby amended to conform to the minimum requirements of such 66.19 statutes. 66.20 (10) A provision as follows: 66.21 ILLEGAL OCCUPATION: The insurer shall not be liable for 66.22 any loss to which a contributing cause was the insured's 66.23 commission of or attempt to commit a felony or to which a 66.24 contributing cause was the insured's being engaged in an illegal 66.25 occupation. 66.26 (11) A provision as follows: 66.27 NARCOTICS: The insurer shall not be liable for any loss 66.28 sustained or contracted in consequence of the insured's being 66.29 under the influence of any narcotic unless administered on the 66.30 advice of a physician. 66.31 Sec. 50. Minnesota Statutes 1996, section 62A.135, 66.32 subdivision 5, is amended to read: 66.33 Subd. 5. [SUPPLEMENT TO ANNUAL STATEMENTSSUPPLEMENTAL 66.34 FILINGS.] Each insurer that has fixed indemnity policies in 66.35 force in this state shall,as a supplement to the annual66.36statement required by section 60A.13upon request by the 67.1 commissioner, submit, in a form prescribed by the 67.2 commissioner,theexperience datafor the calendar yearshowing 67.3 its incurred claims, earned premiums, incurred to earned loss 67.4 ratio, and the ratio of the actual loss ratio to the expected 67.5 loss ratio for each fixed indemnity policy form in force in 67.6 Minnesota. The experience data must be provided on both a 67.7 Minnesota only and a national basis. If in the opinion of the 67.8 company's actuary, the deviation of the actual loss ratio from 67.9 the expected loss ratio for a policy form is due to unusual 67.10 reserve fluctuations, economic conditions, or other nonrecurring 67.11 conditions, the insurer should also file that opinion with 67.12 appropriate justification. 67.13 If the data submitted does not confirm that the insurer has 67.14 satisfied the loss ratio requirements of this section, the 67.15 commissioner shall notify the insurer in writing of the 67.16 deficiency. The insurer shall have 30 days from the date of 67.17 receipt of the commissioner's notice to file amended rates that 67.18 comply with this section or a request for an exemption with 67.19 appropriate justification. If the insurer fails to file amended 67.20 rates within the prescribed time and the commissioner does not 67.21 exempt the policy form from the need for a rate revision, the 67.22 commissioner shall order that the insurer's filed rates for the 67.23 nonconforming policy be reduced to an amount that would have 67.24 resulted in a loss ratio that complied with this section had it 67.25 been in effect for the reporting period of the supplement. The 67.26 insurer's failure to file amended rates within the specified 67.27 time of the issuance of the commissioner's order amending the 67.28 rates does not preclude the insurer from filing an amendment of 67.29 its rates at a later time. 67.30 Sec. 51. Minnesota Statutes 1996, section 62A.316, is 67.31 amended to read: 67.32 62A.316 [BASIC MEDICARE SUPPLEMENT PLAN; COVERAGE.] 67.33 (a) The basic Medicare supplement plan must have a level of 67.34 coverage that will provide: 67.35 (1) coverage for all of the Medicare part A inpatient 67.36 hospital coinsurance amounts, and 100 percent of all Medicare 68.1 part A eligible expenses for hospitalization not covered by 68.2 Medicare, after satisfying the Medicare part A deductible; 68.3 (2) coverage for the daily copayment amount of Medicare 68.4 part A eligible expenses for the calendar year incurred for 68.5 skilled nursing facility care; 68.6 (3) coverage for the copayment amount of Medicare eligible 68.7 expenses under Medicare part B regardless of hospital 68.8 confinement, subject to the Medicare part B deductible amount; 68.9 (4) 80 percent of the hospital and medical expenses and 68.10 supplies incurred during travel outside the United States as a 68.11 result of a medical emergency; 68.12 (5) coverage for the reasonable cost of the first three 68.13 pints of blood, or equivalent quantities of packed red blood 68.14 cells as defined under federal regulations under Medicare parts 68.15 A and B, unless replaced in accordance with federal regulations; 68.16and68.17 (6) 100 percent of the cost of immunizations and routine 68.18 screening procedures for cancer screening including mammograms 68.19 and pap smears; and 68.20 (7) 80 percent of coverage for all physician prescribed 68.21 medically appropriate and necessary equipment and supplies used 68.22 in the management and treatment of diabetes. Coverage must 68.23 include persons with gestational, type I, or type II diabetes. 68.24 (b) Only the following optional benefit riders may be added 68.25 to this plan: 68.26 (1) coverage for all of the Medicare part A inpatient 68.27 hospital deductible amount; 68.28 (2) a minimum of 80 percent of eligible medical expenses 68.29 and supplies not covered by Medicare part B, not to exceed any 68.30 charge limitation established by the Medicare program or state 68.31 law; 68.32 (3) coverage for all of the Medicare part B annual 68.33 deductible; 68.34 (4) coverage for at least 50 percent, or the equivalent of 68.35 50 percent, of usual and customary prescription drug expenses; 68.36 (5) coverage for the following preventive health services: 69.1 (i) an annual clinical preventive medical history and 69.2 physical examination that may include tests and services from 69.3 clause (ii) and patient education to address preventive health 69.4 care measures; 69.5 (ii) any one or a combination of the following preventive 69.6 screening tests or preventive services, the frequency of which 69.7 is considered medically appropriate: 69.8 (A) fecal occult blood test and/or digital rectal 69.9 examination; 69.10 (B) dipstick urinalysis for hematuria, bacteriuria, and 69.11 proteinuria; 69.12 (C) pure tone (air only) hearing screening test, 69.13 administered or ordered by a physician; 69.14 (D) serum cholesterol screening every five years; 69.15 (E) thyroid function test; 69.16 (F) diabetes screening; 69.17 (iii) any other tests or preventive measures determined 69.18 appropriate by the attending physician. 69.19 Reimbursement shall be for the actual charges up to 100 69.20 percent of the Medicare-approved amount for each service, as if 69.21 Medicare were to cover the service as identified in American 69.22 Medical Association current procedural terminology (AMA CPT) 69.23 codes, to a maximum of $120 annually under this benefit. This 69.24 benefit shall not include payment for a procedure covered by 69.25 Medicare; 69.26 (6) coverage for services to provide short-term at-home 69.27 assistance with activities of daily living for those recovering 69.28 from an illness, injury, or surgery: 69.29 (i) For purposes of this benefit, the following definitions 69.30 apply: 69.31 (A) "activities of daily living" include, but are not 69.32 limited to, bathing, dressing, personal hygiene, transferring, 69.33 eating, ambulating, assistance with drugs that are normally 69.34 self-administered, and changing bandages or other dressings; 69.35 (B) "care provider" means a duly qualified or licensed home 69.36 health aide/homemaker, personal care aid, or nurse provided 70.1 through a licensed home health care agency or referred by a 70.2 licensed referral agency or licensed nurses registry; 70.3 (C) "home" means a place used by the insured as a place of 70.4 residence, provided that the place would qualify as a residence 70.5 for home health care services covered by Medicare. A hospital 70.6 or skilled nursing facility shall not be considered the 70.7 insured's place of residence; 70.8 (D) "at-home recovery visit" means the period of a visit 70.9 required to provide at-home recovery care, without limit on the 70.10 duration of the visit, except each consecutive four hours in a 70.11 24-hour period of services provided by a care provider is one 70.12 visit; 70.13 (ii) Coverage requirements and limitations: 70.14 (A) at-home recovery services provided must be primarily 70.15 services that assist in activities of daily living; 70.16 (B) the insured's attending physician must certify that the 70.17 specific type and frequency of at-home recovery services are 70.18 necessary because of a condition for which a home care plan of 70.19 treatment was approved by Medicare; 70.20 (C) coverage is limited to: 70.21 (I) no more than the number and type of at-home recovery 70.22 visits certified as necessary by the insured's attending 70.23 physician. The total number of at-home recovery visits shall 70.24 not exceed the number of Medicare-approved home care visits 70.25 under a Medicare-approved home care plan of treatment; 70.26 (II) the actual charges for each visit up to a maximum 70.27 reimbursement of $40 per visit; 70.28 (III) $1,600 per calendar year; 70.29 (IV) seven visits in any one week; 70.30 (V) care furnished on a visiting basis in the insured's 70.31 home; 70.32 (VI) services provided by a care provider as defined in 70.33 this section; 70.34 (VII) at-home recovery visits while the insured is covered 70.35 under the policy or certificate and not otherwise excluded; 70.36 (VIII) at-home recovery visits received during the period 71.1 the insured is receiving Medicare-approved home care services or 71.2 no more than eight weeks after the service date of the last 71.3 Medicare-approved home health care visit; 71.4 (iii) Coverage is excluded for: 71.5 (A) home care visits paid for by Medicare or other 71.6 government programs; and 71.7 (B) care provided by family members, unpaid volunteers, or 71.8 providers who are not care providers; and 71.9 (7) coverage for at least 50 percent, or the equivalent of 71.10 50 percent, of usual and customary prescription drug expenses to 71.11 a maximum of $1,200 paid by the issuer annually under this 71.12 benefit. An issuer of Medicare supplement insurance policies 71.13 that elects to offer this benefit rider shall also make 71.14 available coverage that contains the rider specified in clause 71.15 (4). 71.16 Sec. 52. Minnesota Statutes 1996, section 62A.50, 71.17 subdivision 3, is amended to read: 71.18 Subd. 3. [DISCLOSURES.] No long-term care policy shall be 71.19 offered or delivered in this state, whether or not the policy is 71.20 issued in this state, and no certificate of coverage under a 71.21 group long-term care policy shall be offered or delivered in 71.22 this state, unless a statement containing at least the following 71.23 information is delivered to the applicant at the time the 71.24 application is made: 71.25 (1) a description of the benefits and coverage provided by 71.26 the policy and the differences between this policy, a 71.27 supplemental Medicare policy and the benefits to which an 71.28 individual is entitled under parts A and B of Medicare; 71.29 (2) a statement of the exceptions and limitations in the 71.30 policy including the following language, as applicable, in bold 71.31 print: "THIS POLICY DOES NOT COVER ALL NURSING CARE FACILITIES 71.32 OR NURSING HOME, HOME CARE, OR ADULT DAY CARE EXPENSES AND DOES 71.33 NOT COVER RESIDENTIAL CARE. READ YOUR POLICY CAREFULLY TO 71.34 DETERMINE WHICH FACILITIES AND EXPENSES ARE COVERED BY YOUR 71.35 POLICY."; 71.36 (3) a statement of the renewal provisions including any 72.1 reservation by the insurer of the right to change premiums; 72.2 (4) a statement that the outline of coverage is a summary 72.3 of the policy issued or applied for and that the policy should 72.4 be consulted to determine governing contractual provisions; 72.5 (5) an explanation of the policy's loss ratio including at 72.6 least the following language: "This means that, on the average, 72.7 policyholders may expect that $........ of every $100 in premium 72.8 will be returned as benefits to policyholders over the life of 72.9 the contract."; 72.10 (6) a statement of the out-of-pocket expenses, including 72.11 deductibles and copayments for which the insured is responsible, 72.12 and an explanation of the specific out-of-pocket expenses that 72.13 may be accumulated toward any out-of-pocket maximum as specified 72.14 in the policy; 72.15 (7) the following language, in bold print: "YOUR PREMIUMS 72.16 CAN BE INCREASED IN THE FUTURE. THE RATE SCHEDULE THAT LISTS 72.17 YOUR PREMIUM NOW CAN CHANGE."; 72.18(8) the following language, if applicable, in bold print:72.19"IF YOU ARE NOT HOSPITALIZED PRIOR TO ENTERING A NURSING HOME OR72.20NEEDING HOME CARE, YOU WILL NOT BE ABLE TO COLLECT ANY BENEFITS72.21UNDER THIS PARTICULAR POLICY.";72.22(9)(8) the following language in bold print, with any 72.23 provisions that are inapplicable to the particular policy 72.24 omitted or crossed out: "THIS POLICY HAS A WAITING PERIOD OF 72.25 ..... (CALENDAR OR BENEFIT) DAYS FOR NURSING CARE SERVICES AND A 72.26 WAITING PERIOD OF ..... (CALENDAR OR BENEFIT) DAYS FOR HOME CARE 72.27 SERVICES. THIS MEANS THAT THIS POLICY WILL NOT COVER YOUR CARE 72.28 FOR THE FIRST ..... (CALENDAR OR BENEFIT) DAYS AFTER YOU ENTER A 72.29 NURSING HOME, OR THE FIRST ..... (CALENDAR OR BENEFIT) DAYS 72.30 AFTER YOU BEGIN TO USE HOME CARE SERVICES. YOU WOULD NEED TO 72.31 PAY FOR YOUR CARE FROM OTHER SOURCES FOR THOSE WAITING 72.32 PERIODS."; and 72.33(10)(9) a signed and completed copy of the application for 72.34 insurance is left with the applicant at the time the application 72.35 is made. 72.36 Sec. 53. Minnesota Statutes 1996, section 62B.04, 73.1 subdivision 1, is amended to read: 73.2 Subdivision 1. [CREDIT LIFE INSURANCE.] (1)The initial73.3amount of credit life insurance shall not exceed the amount of73.4principal repayable under the contract of indebtedness plus an73.5amount equal to one monthly payment. Thereafter, if the73.6indebtedness is repayable in substantially equal installments73.7according to a predetermined schedule, the amount of insurance73.8on which the premium is calculated shall be equal to the73.9scheduled indebtedness plus one monthly payment. If the73.10contract of indebtedness provides for a variable rate of finance73.11charge or interest, the initial rate or the scheduled rates73.12based on the initial index must be used in determining the73.13scheduled amount of indebtedness and subsequent changes to the73.14rate must be disregarded in determining whether the contract is73.15repayable in substantially equal installments according to a73.16predetermined schedule.73.17(2) Notwithstanding clause (1),The amount of credit life 73.18 insurancewritten in connection with credit transactions73.19repayable over a specified term exceeding 63 monthsshall not 73.20 exceed the greater of: (i) the actual amount of unpaid 73.21 indebtedness as it exists from time to time; or (ii) where an 73.22 indebtedness is repayable in substantially equal installments 73.23 according to a predetermined schedule, the scheduled amount of 73.24 unpaid indebtedness, less any unearned interest or finance 73.25 charges, plus an amount equal to two monthly payments. If the 73.26 credit transaction provides for a variable rate of finance 73.27 charge or interest, the initial rate or the scheduled rates 73.28 based on the initial index must be used in determining the 73.29 scheduled amount of unpaid indebtedness and subsequent changes 73.30 in the rate must be disregarded in determining whether the 73.31 contract is repayable in substantially equal installments 73.32 according to a predetermined schedule. 73.33(3)(2) Notwithstandingclausesclause (1)and (2), 73.34 insurance on educational, agricultural, and horticultural credit 73.35 transaction commitments may be written on a nondecreasing or 73.36 level term plan for the amount of the loan commitment. 74.1(4)(3) If the contract of indebtedness provides for a 74.2 variable rate of finance charge or interest, the initial rate or 74.3 the scheduled rates based on the initial index shall be used in 74.4 determining the scheduled amount of indebtedness, and subsequent 74.5 changes to the rate shall be disregarded in determining whether 74.6 the contract is repayable in substantially equal installments 74.7 according to a predetermined schedule. 74.8 Sec. 54. Minnesota Statutes 1996, section 62B.04, 74.9 subdivision 2, is amended to read: 74.10 Subd. 2. [CREDIT ACCIDENT AND HEALTH INSURANCE.] (a) The 74.11 total amount of periodic indemnity payable by credit accident 74.12 and health insurance in the event of disability, as defined in 74.13 the policy, shall not exceed the aggregate of the periodic 74.14 scheduled unpaid installments of the indebtedness; and the 74.15 amount of each periodic indemnity payment shall not exceed the 74.16 original indebtedness divided by the number of periodic 74.17 installments. If the credit transaction provides for a variable 74.18 rate of finance charge or interest, the initial rate or the 74.19 scheduled rates based on the initial index must be used in 74.20 determining the aggregate of the periodic scheduled unpaid 74.21 installments of the indebtedness. 74.22 (b) If for any reason a policy of disability insurance will 74.23 not or may not provide the policyholder or certificate holder 74.24 with coverage for the total amount of indebtedness on the 74.25 related loan or debt in the event of any one instance of 74.26 disability, the applicant must be given a written disclosure on 74.27 or accompanying the application. If the disclosure is on the 74.28 application, it must be immediately above the signature line, 74.29 within a box and the word "WARNING" must be in 14-point bold 74.30 face capital letters. The rest of the text must be in capital 74.31 letters and bold face 10-point print. If the disclosure is on a 74.32 separate sheet, it must be on an 8 1/2 inch by 11 inch sheet of 74.33 paper with the word "WARNING" in 14-point bold face capital 74.34 letters with the remaining text in 10-point bold faced capital 74.35 letters. If a separate disclosure is used, it must be signed by 74.36 the applicant with one copy provided to the applicant and one 75.1 copy maintained by the insurer for at least the term of the 75.2 policy, if coverage is issued. The disclosure must state: 75.3 WARNING: IF YOU BECOME DISABLED AS DEFINED IN THE 75.4 POLICY/CERTIFICATE, THIS DISABILITY INSURANCE POLICY/CERTIFICATE 75.5 MAY NOT COVER YOUR ENTIRE INDEBTEDNESS. IF YOU BECOME DISABLED 75.6 AT A POINT WHERE THE NUMBER OF MONTHLY INSTALLMENT PAYMENTS 75.7 REMAINING EXCEEDS THE PERIOD OF COVERAGE BEING PROVIDED BY THIS 75.8 POLICY/CERTIFICATE, THE BENEFITS AVAILABLE WILL BE LESS THAN THE 75.9 AMOUNT NECESSARY TO PAY OFF YOUR LOAN. IF YOU WANT COVERAGE FOR 75.10 THE FULL AMOUNT OF YOUR INDEBTEDNESS OR HAVE ANY QUESTIONS ABOUT 75.11 THE EXTENT OR NATURE OF YOUR COVERAGE, YOU SHOULD DISCUSS THEM 75.12 WITH YOUR AGENT AND/OR ENROLLER BEFORE SUBMITTING YOUR 75.13 APPLICATION. 75.14 (c) Any policy or certificate of disability insurance which 75.15 contains a critical period must make available for any single 75.16 instance of disability monthly indemnity benefit payments for 75.17 the term of the loan, 24 months, or the term of the disability, 75.18 whichever is less. For the purposes of this section, a critical 75.19 period is when there is a limited number of monthly benefit 75.20 payments that may be paid to the beneficiary or the policyholder 75.21 or certificate holder as a result of any one instance of 75.22 disability. 75.23 (d) Unless the policy or certificate provides for such 75.24 coverage, nothing in this section shall be interpreted as 75.25 requiring an insurer to provide coverage for the final payment 75.26 of a balloon loan or for a period that exceeds the age 75.27 limitation in the policy or certificate or for amounts that 75.28 exceed the insurer's maximum liability limits. 75.29 Sec. 55. Minnesota Statutes 1996, section 62E.12, is 75.30 amended to read: 75.31 62E.12 [MINIMUM BENEFITS OF COMPREHENSIVE HEALTH INSURANCE 75.32 PLAN.] 75.33 The association through its comprehensive health insurance 75.34 plan shall offer policies which provide the benefits of a number 75.35 one qualified plan and a number two qualified plan, except that 75.36 the maximum lifetime benefit on these plans shall be 76.1$1,500,000$2,000,000, and an extended basic plan and a basic 76.2 Medicare plan as described in sections 62A.31 to 62A.44 and 76.3 62E.07. The requirement that a policy issued by the association 76.4 must be a qualified plan is satisfied if the association 76.5 contracts with a preferred provider network and the level of 76.6 benefits for services provided within the network satisfies the 76.7 requirements of a qualified plan. If the association uses a 76.8 preferred provider network, payments to nonparticipating 76.9 providers must meet the minimum requirements of section 72A.20, 76.10 subdivision 15. They shall offer health maintenance 76.11 organization contracts in those areas of the state where a 76.12 health maintenance organization has agreed to make the coverage 76.13 available and has been selected as a writing carrier. 76.14 Notwithstanding the provisions of section 62E.06 and unless 76.15 those charges are billed by a provider that is part of the 76.16 association's preferred provider network, the state plan shall 76.17 exclude coverage of services of a private duty nurse other than 76.18 on an inpatient basis and any charges for treatment in a 76.19 hospital located outside of the state of Minnesota in which the 76.20 covered person is receiving treatment for a mental or nervous 76.21 disorder, unless similar treatment for the mental or nervous 76.22 disorder is medically necessary, unavailable in Minnesota and 76.23 provided upon referral by a licensed Minnesota medical 76.24 practitioner. 76.25 Sec. 56. Minnesota Statutes 1996, section 62Q.16, is 76.26 amended to read: 76.27 62Q.16 [MIDMONTH TERMINATION PROHIBITED.] 76.28 The termination of a person's coverage under any health 76.29 plan as defined in section 62A.011, subdivision 3,with the76.30exception of individual health plans, issued or renewed on or76.31after January 1, 1995,must provide coverage until the end of 76.32 the month in which coverage was terminated. This section does 76.33 not apply to individual health plans issued or renewed on or 76.34 after January 1, 1995, or health plans contracted for under the 76.35 authority of section 43A.23. 76.36 Sec. 57. Minnesota Statutes 1996, section 65A.01, 77.1 subdivision 3, is amended to read: 77.2 Subd. 3. [POLICY PROVISIONS.] On said policy following 77.3 such matter as provided in subdivisions 1 and 2, printed in the 77.4 English language in type of such size or sizes and arranged in 77.5 such manner, as is approved by the commissioner of commerce, the 77.6 following provisions and subject matter shall be stated in the 77.7 following words and in the following sequence, but with the 77.8 convenient placing, if desired, of such matter as will act as a 77.9 cover or back for such policy when folded, with the blanks below 77.10 indicated being left to be filled in at the time of the issuing 77.11 of the policy, to wit: 77.12 (Space for listing the amounts of insurance, rates and 77.13 premiums for the basic coverages provided under the standard 77.14 form of policy and for additional coverages or perils provided 77.15 under endorsements attached. The description and location of 77.16 the property covered and the insurable value(s) of any 77.17 building(s) or structure(s) covered by the policy or its 77.18 attached endorsements; also in the above space may be stated 77.19 whether other insurance is limited and if limited the total 77.20 amount permitted.) 77.21 In consideration of the provisions and stipulations herein 77.22 or added hereto and of the premium above specified this company, 77.23 for a term of ..... from ..... (At 12:01 a.m. Standard Time) to 77.24 ..... (At 12:01 a.m. Standard Time) at location of property 77.25 involved, to an amount not exceeding the amount(s) above 77.26 specified does insure ..... and legal representatives 77.27 ........................................... 77.28 (In above space may be stated whether other insurance is 77.29 limited.) (And if limited the total amount permitted.) 77.30 Subject to form No.(s) ..... attached hereto. 77.31 This policy is made and accepted subject to the foregoing 77.32 provisions and stipulations and those hereinafter stated, which 77.33 are hereby made a part of this policy, together with such 77.34 provisions, stipulations and agreements as may be added hereto 77.35 as provided in this policy. 77.36 The insurance effected above is granted against all loss or 78.1 damage by fire originating from any cause, except as hereinafter 78.2 provided, also any damage by lightning and by removal from 78.3 premises endangered by the perils insured against in this 78.4 policy, to the property described hereinafter while located or 78.5 contained as described in this policy, or pro rata for five days 78.6 at each proper place to which any of the property shall 78.7 necessarily be removed for preservation from the perils insured 78.8 against in this policy, but not elsewhere. The amount of said 78.9 loss or damage, except in case of total loss on buildings, to be 78.10 estimated according to the actual value of the insured property 78.11 at the time when such loss or damage happens. 78.12 If the insured property shall be exposed to loss or damage 78.13 from the perils insured against, the insured shall make all 78.14 reasonable exertions to save and protect same. 78.15 This entire policy shall be void if, whether before a loss, 78.16 the insured has willfully, or after a loss, the insured has 78.17 willfully and with intent to defraud, concealed or 78.18 misrepresented any material fact or circumstance concerning this 78.19 insurance or the subject thereof, or the interests of the 78.20 insured therein. 78.21 This policy shall not cover accounts, bills, currency, 78.22 deeds, evidences of debt, money or securities; nor, unless 78.23 specifically named hereon in writing, bullion, or manuscripts. 78.24 This company shall not be liable for loss by fire or other 78.25 perils insured against in this policy caused, directly or 78.26 indirectly by: (a) enemy attack by armed forces, including 78.27 action taken by military, naval or air forces in resisting an 78.28 actual or immediately impending enemy attack; (b) invasion; (c) 78.29 insurrection; (d) rebellion; (e) revolution; (f) civil war; (g) 78.30 usurped power; (h) order of any civil authority except acts of 78.31 destruction at the time of and for the purpose of preventing the 78.32 spread of fire, providing that such fire did not originate from 78.33 any of the perils excluded by this policy. 78.34 Other insurance may be prohibited or the amount of 78.35 insurance may be limited by so providing in the policy or an 78.36 endorsement, rider or form attached thereto. 79.1 Unless otherwise provided in writing added hereto this 79.2 company shall not be liable for loss occurring: 79.3 (a) while the hazard is increased by any means within the 79.4 control or knowledge of the insured; or 79.5 (b) while the described premises, whether intended for 79.6 occupancy by owner or tenant, are vacant or unoccupied beyond a 79.7 period of 60 consecutive days; or 79.8 (c) as a result of explosion or riot, unless fire ensue, 79.9 and in that event for loss by fire only. 79.10 Any other peril to be insured against or subject of 79.11 insurance to be covered in this policy shall be by endorsement 79.12 in writing hereon or added hereto. 79.13 The extent of the application of insurance under this 79.14 policy and the contributions to be made by this company in case 79.15 of loss, and any other provision or agreement not inconsistent 79.16 with the provisions of this policy, may be provided for in 79.17 writing added hereto, but no provision may be waived except such 79.18 as by the terms of this policy is subject to change. 79.19 No permission affecting this insurance shall exist, or 79.20 waiver of any provision be valid, unless granted herein or 79.21 expressed in writing added hereto. No provision, stipulation or 79.22 forfeiture shall be held to be waived by any requirements or 79.23 proceeding on the part of this company relating to appraisal or 79.24 to any examination provided for herein. 79.25 This policy shall be canceled at any time at the request of 79.26 the insured, in which case this company shall, upon demand and 79.27 surrender of this policy, refund the excess of paid premium 79.28 above the customary short rates for the expired time. This 79.29 policy may be canceled at any time by this company by giving to 79.30 the insured30 days'a written notice of cancellation with or 79.31 without tender of the excess of paid premium above the pro rata 79.32 premium for the expired time, which excess, if not tendered, 79.33 shall be refunded on demand. Notice of cancellation shall state 79.34 that said excess premium (if not tendered) will be refunded on 79.35 demand. 79.36 If loss hereunder is made payable, in whole or in part, to 80.1 a designated mortgagee or contract for deed vendor not named 80.2 herein as insured, such interest in this policy may be canceled 80.3 by giving to such mortgagee or vendor a ten days' written notice 80.4 of cancellation. 80.5 Notwithstanding any other provisions of this policy, if 80.6 this policy shall be made payable to a mortgagee or contract for 80.7 deed vendor of the covered real estate, no act or default of any 80.8 person other than such mortgagee or vendor or the mortgagee's or 80.9 vendor's agent or those claiming under the mortgagee or vendor, 80.10 whether the same occurs before or during the term of this 80.11 policy, shall render this policy void as to such mortgagee or 80.12 vendor nor affect such mortgagee's or vendor's right to recover 80.13 in case of loss on such real estate; provided, that the 80.14 mortgagee or vendor shall on demand pay according to the 80.15 established scale of rates for any increase of risks not paid 80.16 for by the insured; and whenever this company shall be liable to 80.17 a mortgagee or vendor for any sum for loss under this policy for 80.18 which no liability exists as to the mortgagor, vendee, or owner, 80.19 and this company shall elect by itself, or with others, to pay 80.20 the mortgagee or vendor the full amount secured by such mortgage 80.21 or contract for deed, then the mortgagee or vendor shall assign 80.22 and transfer to the company the mortgagee's or vendor's 80.23 interest, upon such payment, in the said mortgage or contract 80.24 for deed together with the note and debts thereby secured. 80.25 This company shall not be liable for a greater proportion 80.26 of any loss than the amount hereby insured shall bear to the 80.27 whole insurance covering the property against the peril involved. 80.28 In case of any loss under this policy the insured shall 80.29 give immediate written notice to this company of any loss, 80.30 protect the property from further damage, and a statement in 80.31 writing, signed and sworn to by the insured, shall within 60 80.32 days be rendered to the company, setting forth the value of the 80.33 property insured, except in case of total loss on buildings the 80.34 value of said buildings need not be stated, the interest of the 80.35 insured therein, all other insurance thereon, in detail, the 80.36 purposes for which and the persons by whom the building insured, 81.1 or containing the property insured, was used, and the time at 81.2 which and manner in which the fire originated, so far as known 81.3 to the insured. 81.4 The insured, as often as may be reasonably required, shall 81.5 exhibit to any person designated by this company all that 81.6 remains of any property herein described, and, after being 81.7 informed of the right to counsel and that any answers may be 81.8 used against the insured in later civil or criminal proceedings, 81.9 the insured shall, within a reasonable period after demand by 81.10 this company, submit to examinations under oath by any person 81.11 named by this company, and subscribe the oath. The insured, as 81.12 often as may be reasonably required, shall produce for 81.13 examination all records and documents reasonably related to the 81.14 loss, or certified copies thereof if originals are lost, at a 81.15 reasonable time and place designated by this company or its 81.16 representatives, and shall permit extracts and copies thereof to 81.17 be made. 81.18 In case the insured and this company, except in case of 81.19 total loss on buildings, shall fail to agree as to the actual 81.20 cash value or the amount of loss, then, on the written demand of 81.21 either, each shall select a competent and disinterested 81.22 appraiser and notify the other of the appraiser selected within 81.23 20 days of such demand. In case either fails to select an 81.24 appraiser within the time provided, then a presiding judge of 81.25 the district court of the county wherein the loss occurs may 81.26 appoint such appraiser for such party upon application of the 81.27 other party in writing by giving five days' notice thereof in 81.28 writing to the party failing to appoint. The appraisers shall 81.29 first select a competent and disinterested umpire; and failing 81.30 for 15 days to agree upon such umpire, then a presiding judge of 81.31 the above mentioned court may appoint such an umpire upon 81.32 application of party in writing by giving five days' notice 81.33 thereof in writing to the other party. The appraisers shall 81.34 then appraise the loss, stating separately actual value and loss 81.35 to each item; and, failing to agree, shall submit their 81.36 differences, only, to the umpire. An award in writing, so 82.1 itemized, of any two when filed with this company shall 82.2 determine the amount of actual value and loss. Each appraiser 82.3 shall be paid by the selecting party, or the party for whom 82.4 selected, and the expense of the appraisal and umpire shall be 82.5 paid by the parties equally. 82.6 It shall be optional with this company to take all of the 82.7 property at the agreed or appraised value, and also to repair, 82.8 rebuild or replace the property destroyed or damaged with other 82.9 of like kind and quality within a reasonable time, on giving 82.10 notice of its intention so to do within 30 days after the 82.11 receipt of the proof of loss herein required. 82.12 There can be no abandonment to this company of any property. 82.13 The amount of loss for which this company may be liable 82.14 shall be payable 60 days after proof of loss, as herein 82.15 provided, is received by this company and ascertainment of the 82.16 loss is made either by agreement between the insured and this 82.17 company expressed in writing or by the filing with this company 82.18 of an award as herein provided. It is moreover understood that 82.19 there can be no abandonment of the property insured to the 82.20 company, and that the company will not in any case be liable for 82.21 more than the sum insured, with interest thereon from the time 82.22 when the loss shall become payable, as above provided. 82.23 No suit or action on this policy for the recovery of any 82.24 claim shall be sustainable in any court of law or equity unless 82.25 all the requirements of this policy have been complied with, and 82.26 unless commenced within two years after inception of the loss. 82.27 This company is subrogated to, and may require from the 82.28 insured an assignment of all right of recovery against any party 82.29 for loss to the extent that payment therefor is made by this 82.30 company; and the insurer may prosecute therefor in the name of 82.31 the insured retaining such amount as the insurer has paid. 82.32 Assignment of this policy shall not be valid except with 82.33 the written consent of this company. 82.34 IN WITNESS WHEREOF, this company has executed and attested 82.35 these presents. 82.36 83.1 ........................ ........................ 83.2 (Signature) (Signature) 83.3 ........................ ........................ 83.4 (Name of office) (Name of office) 83.5 Sec. 58. Minnesota Statutes 1996, section 65A.01, is 83.6 amended by adding a subdivision to read: 83.7 Subd. 3c. [TIME REQUIREMENTS.] (a) In the event of a 83.8 policy less than 60 days old that is not being renewed, or a 83.9 policy that it is being canceled for nonpayment of premium, the 83.10 notice must be mailed to the insured so that it is received at 83.11 least ten days before the effective cancellation date. If a 83.12 policy is being canceled for underwriting considerations, the 83.13 insured must be informed of the source from which the 83.14 information was received. 83.15 (b) In the event of a mid-term cancellation, for reasons 83.16 listed in subdivision 3a, or according to policy provisions, the 83.17 insured must receive a 30-day notice. 83.18 (c) In the event of a nonrenewal, a 60-day notice must be 83.19 sent to the insured, containing the specific underwriting or 83.20 other reason for the indicated actions. 83.21 This subdivision does not apply to commercial policies 83.22 regulated under sections 60A.36 and 60A.37. 83.23 Sec. 59. Minnesota Statutes 1996, section 65A.27, 83.24 subdivision 4, is amended to read: 83.25 Subd. 4. "Homeowner's insurance" means insurance coverage, 83.26 as provided in section 60A.06, subdivision 1, clause (1)(c), 83.27 normally written by the insurer as a standard homeowner's 83.28 package policy or as a standard residential renter's package 83.29 policy. This definition includes, but is not limited to, 83.30 policies that are generally described as homeowners' policies, 83.31 mobile/manufactured homeowners' policies, dwelling owner 83.32 policies, condominium owner policies, and tenant policies. 83.33 Sec. 60. Minnesota Statutes 1996, section 65A.29, 83.34 subdivision 4, is amended to read: 83.35 Subd. 4. [FORM REQUIREMENTS.] Any notice or statement 83.36 required by subdivisions 1 to 3, or any other notice canceling a 84.1 homeowner's insurance policy must be written in language which 84.2 is easily readable and understandable by a person of average 84.3 intelligence and understanding. The statement of reason must be 84.4 sufficiently specific to convey, clearly and without further 84.5 inquiry, the basis for the insurer's refusal to renew or to 84.6 write the insurance coverage. 84.7 The notice or statement must also inform the insured of: 84.8 (1) the possibility of coverage through the Minnesota 84.9 property insurance placement facility under sections 65A.31 to 84.10 65A.42; 84.11 (2) the right to object to the commissioner under 84.12 subdivision 9; and 84.13 (3) the right to the return of unearned premium in 84.14 appropriate situations under subdivision 10. 84.15 Sec. 61. Minnesota Statutes 1996, section 65B.48, 84.16 subdivision 5, is amended to read: 84.17 Subd. 5. (a) Every owner of a motorcycle registered or 84.18 required to be registered in this state or operated in this 84.19 state by the owner or with the owner's permission shall provide 84.20 and maintain security for the payment of tort liabilities 84.21 arising out of the maintenance or use of the motorcycle in this 84.22 state. Security may be provided by a contract of liability 84.23 insurance complying with section 65B.49, subdivision 3, or by 84.24 qualifying as a self insurer in the manner provided in 84.25 subdivision 3. 84.26 (b) At the time an application for motorcycle insurance 84.27 without personal injury protection coverage is completed, there 84.28 must be attached to the application a separate form containing a 84.29 written notice in at least 10-point bold type, if printed, or in 84.30 capital letters, if typewritten that states: 84.31 "Under Minnesota law, a policy of motorcycle coverage 84.32 issued in the State of Minnesota must provide liability 84.33 coverage only, and there is no requirement that the policy 84.34 provide personal injury protection (PIP) coverage in the 84.35 case of injury sustained by the insured. No PIP coverage 84.36 provided by an automobile insurance policy you may have in 85.1 force will extend to provide coverage in the event of a 85.2 motorcycle accident." 85.3 Sec. 62. [65B.492] [TOTAL DISABILITY; WAIVER OF WAGE LOSS 85.4 REIMBURSEMENT.] 85.5 A plan of reparation security issued to or renewed with a 85.6 person who is totally disabled may contain a waiver of wage loss 85.7 reimbursement coverage, provided that the rate for any plan for 85.8 which this coverage has been excluded or reduced must be reduced 85.9 accordingly. For purposes of this section, the term "total 85.10 disability" means the inability of an insured who is ill or 85.11 injured to engage in any paid employment or work. The 85.12 reparation obligor may request the insured to provide written 85.13 certification of the disability by a licensed practicing 85.14 physician so long as the written certification is required no 85.15 more frequently than on an annual basis. This section applies 85.16 to self-insurance. 85.17 Sec. 63. Minnesota Statutes 1996, section 65B.56, 85.18 subdivision 1, is amended to read: 85.19 Subdivision 1. [MEDICAL EXAMINATIONS AND DISCOVERY OF 85.20 CONDITION OF CLAIMANT.] Any person with respect to whose injury 85.21 benefits are claimed under a plan of reparation security shall, 85.22 upon request of the reparation obligor from whom recovery is 85.23 sought, submit to a physical examination by a physician or 85.24 physicians selected by the obligor as may reasonably be required. 85.25 The costs of any examinations requested by the obligor 85.26 shall be borne entirely by the requesting obligor. Such 85.27 examinations shall be conducted withinthe city, town, or85.28statutory city75 miles of the residence of the injured person. 85.29 If there is no qualified physician to conduct the examination 85.30 withinthe city, town, or statutory city75 miles of the 85.31 residence of the injured person, then such examination shall be 85.32 conducted at another place of the closest proximity to the 85.33 injured person's residence. Obligors are authorized to include 85.34 reasonable provisions in policies for mental and physical 85.35 examination of those injured persons. 85.36 If requested by the person examined, a party causing an 86.1 examination to be made shall deliver to the examinee a copy of 86.2 every written report concerning the examination rendered by an 86.3 examining physician to that person, at least one of which 86.4 reports must set out in detail the findings and conclusions of 86.5 such examining physician. 86.6 An injured person shall also do all things reasonably 86.7 necessary to enable the obligor to obtain medical reports and 86.8 other needed information to assist in determining the nature and 86.9 extent of the injured person's injuries and loss, and the 86.10 medical treatment received. If the claimant refuses to 86.11 cooperate in responding to requests for examination and 86.12 information as authorized by this section, evidence of such 86.13 noncooperation shall be admissible in any suit or arbitration 86.14 filed for damages for such personal injuries or for the benefits 86.15 provided by sections 65B.41 to 65B.71. 86.16 The provisions of this section apply before and after the 86.17 commencement of suit. 86.18 Sec. 64. Minnesota Statutes 1996, section 67A.231, is 86.19 amended to read: 86.20 67A.231 [DEPOSIT OF FUNDS; INVESTMENT; LIMITATIONS.] 86.21 The directors of any township mutual insurance company may 86.22 authorize the treasurer to invest any of its funds and 86.23 accumulations in: 86.24 (a) Bonds, notes, mortgages, or other obligations 86.25 guaranteed by the full faith and credit of the United States of 86.26 America and those for which the credit of the United States is 86.27 pledged to pay principal, interest or dividends, including 86.28 United States agency and instrumentality bonds, debentures, or 86.29 obligations; 86.30 (b) Bonds, notes, evidence of indebtedness, or other public 86.31 authority obligations guaranteed by this state; 86.32 (c) Bonds, notes, evidence of the indebtedness or other 86.33 obligations guaranteed by the full faith and credit of any 86.34 county, municipality, school district, or other duly authorized 86.35 political subdivision of this state; 86.36 (d) Bonds or other interest bearing obligations, payable 87.1 from revenues, provided that the bonds or other interest bearing 87.2 obligations are at the time of purchase rated among the highest 87.3 four quality categories used by a nationally recognized rating 87.4 agency for rating the quality of similar bonds or other interest 87.5 bearing obligations, and are not rated lower by any other such 87.6 agency; or obligations of a United States agency or 87.7 instrumentality that have been rated in one of the two highest 87.8 categories established by the Securities Valuation Office of the 87.9 National Association of Insurance Commissioners. A company may 87.10 not invest more than 20 percent of its admitted assets in the 87.11 obligations of any one corporation. This is not applicable to 87.12 bonds or other interest bearing obligations in default as to 87.13 principal; 87.14 (e) Investments in the obligations stated in paragraphs 87.15 (a), (b), (c), and (d), may be made either directly or in the 87.16 form of securities of, or other interests in, an investment 87.17 company registered under the Federal Investment Company Act of 87.18 1940. Investment company shares authorized pursuant to this 87.19 subdivision shall not exceed 20 percent of the company's 87.20 surplus. These obligations must be carried at the lower of cost 87.21 or market on the annual statement filed with the commissioner 87.22 and adjusted to market on an annual basis; 87.23 (f) Loans upon improved and unencumbered real property in 87.24 this state worth at least twice the amount loaned thereon, not 87.25 including buildings, unless insured by property insurance 87.26 policies payable to and held by the security holder; 87.27 (g) Real estate, including land, buildings and fixtures, 87.28 located in this state and used primarily as home office space 87.29 for the insurance company; 87.30 (h) Demand or time deposits or savings accounts in 87.31 federally insured depositories located in this state to the 87.32 extent that the deposit or investment is insured by the Federal 87.33 Deposit Insurance Corporation, Federal Savings and Loan 87.34 Corporation, or the National Credit Union Administration. An 87.35 additional deposit not to exceed 50 percent of the township 87.36 mutual insurance company's policyholder surplus may be located 88.1 in these depositories if covered by private deposit insurance 88.2 written by an insurer licensed by the department of commerce; 88.3 (i) Guarantee fund certificates of a mutual insurer which 88.4 reinsures the business of the township mutual insurance 88.5 company. The commissioner may by rule limit the amount of 88.6 guarantee fund certificates which the township mutual insurance 88.7 company may purchase and this limit may be a function of the 88.8 size of the township mutual insurance company; and 88.9 (j) Up to $1,500 in stock of an insurer which issues 88.10 directors and officers liability insurance to township mutual 88.11 insurance company directors and officers. 88.12 Sec. 65. Minnesota Statutes 1996, section 72A.20, 88.13 subdivision 34, is amended to read: 88.14 Subd. 34. [SUITABILITY OF INSURANCE FOR CUSTOMER.] In 88.15 recommending or issuing life, endowment, individual accident and 88.16 sickness, long-term care, annuity, life-endowment, or Medicare 88.17 supplement insurance to a customer, an insurer, either directly 88.18 or through its agent, must have reasonable grounds for believing 88.19 that the recommendation is suitable for the customer, upon the 88.20 basis of facts disclosed by the customer as to the customer's 88.21 other insurance and financial situation and needs, including, 88.22 but not limited to, the customer's financial status, the 88.23 customer's need for insurance, and the values, benefits, and 88.24 costs of the customer's existing insurance program, if any, when 88.25 compared to the values, benefits, and costs of the recommended 88.26 policy or policies. 88.27 In the case of group insurance marketed on a direct 88.28 response basis without the use of direct agent contact, this 88.29 subdivision is satisfied if the insurer has reasonable grounds 88.30 to believe that the insurance offered is generally suitable for 88.31 the group to whom the offer is made. 88.32 Sec. 66. Minnesota Statutes 1996, section 72B.04, 88.33 subdivision 10, is amended to read: 88.34 Subd. 10. [FEES.] A fee of $40 is imposed for each initial 88.35 license or temporary permit and $25 for each renewal thereof or 88.36 amendment thereto.A fee of $20 is imposed for each examination89.1taken.A fee of $20 is imposed for the registration of each 89.2 nonlicensed adjuster who is required to register under section 89.3 72B.06. All fees shall be transmitted to the commissioner and 89.4 shall be payable to thestate treasurerdepartment of commerce. 89.5If a fee is paid for an examination and if within one year from89.6the date of that payment no written request for a refund is89.7received by the commissioner or the examination for which the89.8fee was paid is not taken, the fee is forfeited to the state of89.9Minnesota.89.10 Sec. 67. Minnesota Statutes 1996, section 79.34, 89.11 subdivision 1, is amended to read: 89.12 Subdivision 1. [CONDITIONS REQUIRING MEMBERSHIP.] The 89.13 nonprofit association known as the workers' compensation 89.14 reinsurance association may be incorporated under chapter 317A 89.15 with all the powers of a corporation formed under that chapter, 89.16 except that if the provisions of that chapter are inconsistent 89.17 with sections 79.34 to 79.40, sections 79.34 to 79.40 govern. 89.18 Each insurer as defined by section 79.01, subdivision 2, shall, 89.19 as a condition of its authority to transact workers' 89.20 compensation insurance in this state, be a member of the 89.21 reinsurance association and is bound by the plan of operation of 89.22 the reinsurance association; provided, that all affiliated 89.23 insurers within a holding company system as defined in chapter 89.24 60D are considered a single entity for purposes of the exercise 89.25 of all rights and duties of membership in the reinsurance 89.26 association. Each self-insurer approved under section 176.181 89.27 and each political subdivision that self-insures shall, as a 89.28 condition of its authority to self-insure workers' compensation 89.29 liability in this state, be a member of the reinsurance 89.30 association and is bound by its plan of operation; provided that: 89.31 (1) all affiliated companies within a holding company 89.32 system, as determined by the commissioner of labor and industry 89.33 in a manner consistent with the standards and definitions in 89.34 chapter 60D, are considered a single entity for purposes of the 89.35 exercise of all rights and duties of membership in the 89.36 reinsurance association; and 90.1 (2) all group self-insurers granted authority to 90.2 self-insure pursuant to section 176.181 are considered single 90.3 entities for purposes of the exercise of all the rights and 90.4 duties of membership in the reinsurance association. As a 90.5 condition of its authority to self-insure workers' compensation 90.6 liability, and for losses incurred after December 31, 1983, the 90.7 state is a member of the reinsurance association and is bound by 90.8 its plan of operation. The commissioner of employee relations 90.9 represents the state in the exercise of all the rights and 90.10 duties of membership in the reinsurance association. The state 90.11 treasurer shall pay the premium to the reinsurance association 90.12 from the state compensation revolving fund upon warrants of the 90.13 commissioner of employee relations, except that the University 90.14 of Minnesota shall pay its portion of workers' compensation 90.15 reinsurance premiums directly to the workers' compensation 90.16 reinsurance association. For the purposes of this section, 90.17 "state" means the administrative branch of state government, the 90.18 legislative branch, the judicial branch, the University of 90.19 Minnesota, and any other entity whose workers' compensation 90.20 liability is paid from the state revolving fund. The 90.21 commissioner of finance may calculate, prorate, and charge a 90.22 department or agency the portion of premiums paid to the 90.23 reinsurance association for employees who are paid wholly or in 90.24 part by federal funds, dedicated funds, or special revenue 90.25 funds. The reinsurance association is not a state agency. 90.26 Actions of the reinsurance association and its board of 90.27 directors and actions of the commissioner of labor and industry 90.28 with respect to the reinsurance association are not subject to 90.29 chapters 13, 14, and 15. Unless specifically exempted in 90.30 sections 79.34 to 79.40, the insurance and reinsurance 90.31 operations of the reinsurance association are subject to all of 90.32 the provisions of chapters 45, 60A, and 60B. The commissioner 90.33 of commerce has the same powers with respect to the board as the 90.34 commissioner has with respect to private insurers under chapters 90.35 60A, 60B, and any other chapter that provides the commissioner 90.36 of commerce with authority to regulate insurers operating in 91.1 Minnesota. Any provision in the reinsurance association's plan 91.2 of operation inconsistent with these chapters must be amended 91.3 within 60 days of the effective date of this section. The 91.4 reinsurance association is considered an insurer for purposes of 91.5 chapters 72A, 79, and 176. Before December 31, 1997, the 91.6 commissioner may prescribe, or allow the association, additional 91.7 time for compliance with specific provisions of chapters 60A and 91.8 60B. The commissioner may exempt the reinsurance association 91.9 from such requirements of chapters 60A and 60B as the 91.10 commissioner deems appropriate. All property owned by the 91.11 association is exempt from taxation. The reinsurance 91.12 association is not obligated to make any payments or pay any 91.13 assessments to any funds or pools established pursuant to this 91.14 chapter or chapter 176 or any other law. 91.15 Sec. 68. Minnesota Statutes 1996, section 79A.01, 91.16 subdivision 10, is amended to read: 91.17 Subd. 10. [COMMON CLAIMS FUND.] "Common claims fund," with 91.18 respect to group self-insurers, means the cash, cash 91.19 equivalents, or investment accounts maintained by themutual91.20 self-insurance group to pay its workers' compensation 91.21 liabilities. 91.22 Sec. 69. Minnesota Statutes 1996, section 79A.01, is 91.23 amended by adding a subdivision to read: 91.24 Subd. 11. [DIMINUTIVE APPLICANTS.] "Diminutive applicants" 91.25 to group self-insurance means applicants to existing 91.26 self-insurance groups whose equity and premium are both less 91.27 than five percent of the total group's equity and premium. 91.28 Sec. 70. Minnesota Statutes 1996, section 79A.02, 91.29 subdivision 1, is amended to read: 91.30 Subdivision 1. [MEMBERSHIP.] For the purposes of assisting 91.31 the commissioner, there is established a workers' compensation 91.32 self-insurers' advisory committee of five members that are 91.33 employers authorized to self-insure in Minnesota. Three of the 91.34 members and three alternates shall be elected by the 91.35 self-insurers' security fund board of trustees and two members 91.36 and two alternates shall be appointed by the commissioner. 92.1 Sec. 71. Minnesota Statutes 1996, section 79A.02, 92.2 subdivision 4, is amended to read: 92.3 Subd. 4. [RECOMMENDATIONS TO COMMISSIONER REGARDING 92.4 REVOCATION.] After each fifth anniversary from the date each 92.5 individual and group self-insurer becomes certified to 92.6 self-insure, the committee shall review all relevant financial 92.7 data filed with the department of commerce that is otherwise 92.8 available to the public and make a recommendation to the 92.9 commissioner about whether each self-insurer's certificate 92.10 should be revoked. For group self-insurers who have been in 92.11 existence for five years or more and have been granted renewal 92.12 authority, a level of funding in the common claims fund must be 92.13 maintained at not less than the greater of either: (1) one 92.14 year's claim losses paid in the most recent year; or (2) 92.15 one-third of the security deposit posted with the department of 92.16 commerce according to section 79A.04, subdivision 2. This 92.17 provision supersedes any requirements under section 79A.03, 92.18 subdivision 10, and Minnesota Rules, part 2780.5000. 92.19 Sec. 72. Minnesota Statutes 1996, section 79A.03, 92.20 subdivision 6, is amended to read: 92.21 Subd. 6. [APPLICATIONS FOR GROUP SELF-INSURANCE.] (a) Two 92.22 or more employers may apply to the commissioner for the 92.23 authority to self-insure as a group, using forms available from 92.24 the commissioner. This initial application shall be accompanied 92.25 by a copy of the bylaws or plan of operation adopted by the 92.26 group. Such bylaws or plan of operation shall conform to the 92.27 conditions prescribed by law or rule. The commissioner shall 92.28 approve or disapprove the bylaws within 60 days unless a 92.29 question as to the legality of a specific bylaw or plan 92.30 provision has been referred to the attorney general's office. 92.31 The commissioner shall make a determination as to the 92.32 application within 15 days after receipt of the requested 92.33 response from the attorney general's office. 92.34 (b) After the initial application and the bylaws or plan of 92.35 operation have been approved by the commissioner or at the time 92.36 of the initial application, the group shall submit the names of 93.1 employers that will be members of the group; an indemnity 93.2 agreement providing for joint and several liability for all 93.3 group members for any and all workers' compensation claims 93.4 incurred by any member of the group, as set forth in Minnesota 93.5 Rules, part 2780.9920, signed by an officer of each member; and 93.6 an accounting review performed by a certified public 93.7 accountant. A certified financial audit may be filed in lieu of 93.8 an accounting review. 93.9 (c) When a group has obtained its authority to self-insure, 93.10 additional applicants who wish to join the group must apply for 93.11 approval by submitting: (1) an application; (2) an indemnity 93.12 agreement providing for joint and several liability as set forth 93.13 in Minnesota Rules, part 2780.9920, signed by an officer of the 93.14 applicant; and (3) a certified financial audit performed by a 93.15 certified public accountant at least 45 days before joining the 93.16 group. An accounting review performed by a certified public 93.17 accountant may be filed in lieu of a certified audit. 93.18 New diminutive applicants to the group, as defined in 93.19 section 79A.01, subdivision 11, applying for membership in 93.20 groups in existence longer than one year, who have a combined 93.21 equity of all group members in excess of 15 times the last 93.22 retention limit selected by the group with the workers' 93.23 compensation reinsurance association, and have posted 125 93.24 percent of the group's total estimated future liability, must 93.25 submit the items in this paragraph at least ten days before 93.26 joining the group. 93.27 If the cumulative total of premium added to the group by 93.28 diminutive new members is greater than 50 percent in a fiscal 93.29 year of the group, all subsequent new members' applications must 93.30 be submitted at least 45 days before joining the group. 93.31 In all cases of new membership, evidence that cash premiums 93.32 equal to not less than 20 percent of the current year's modified 93.33 premium of each applicant have been paid into a common claims 93.34 fund, maintained by the group in a designated depository must be 93.35 filed with the department at least ten days before joining the 93.36 group. 94.1 Sec. 73. Minnesota Statutes 1996, section 79A.03, 94.2 subdivision 7, is amended to read: 94.3 Subd. 7. [FINANCIAL STANDARDS.] A self-insurer group 94.4proposing to self-insureshall have and maintain: 94.5 (a) A combined net worth of all of the members of an amount 94.6 at least equal to the greater of ten times the retention 94.7 selected with the workers' compensation reinsurance association 94.8 or one-third of the current annual modified premium of the 94.9 members. 94.10 (b) Sufficient assets, net worth, and liquidity to promptly 94.11 and completely meet all obligations of its members under chapter 94.12 176 or this chapter. In determining whether a group is in sound 94.13 financial condition, consideration shall be given to the 94.14 combined net worth of the member companies; the consolidated 94.15 long-term and short-term debt to equity ratios of the member 94.16 companies; any excess insurance other than reinsurance with the 94.17 workers' compensation reinsurance association, purchased by the 94.18 group from an insurer licensed in Minnesota or from an 94.19 authorized surplus line carrier; other financial data requested 94.20 by the commissioner or submitted by the group; and the combined 94.21 workers' compensation experience of the group for the last four 94.22 years. 94.23 Sec. 74. Minnesota Statutes 1996, section 79A.03, 94.24 subdivision 9, is amended to read: 94.25 Subd. 9. [FILING REPORTS.] (a) Incurred losses, paid and 94.26 unpaid, specifying indemnity and medical losses by 94.27 classification, payroll by classification, and current estimated 94.28 outstanding liability for workers' compensation shall be 94.29 reported to the commissioner by each self-insurer on a calendar 94.30 year basis, in a manner and on forms available from the 94.31 commissioner. Payroll information must be filed by April 1 of 94.32 the following year, and loss information and total workers'94.33compensation liability must be filed by August 1 of the94.34following year. 94.35 (b) Each self-insurer shall, under oath, attest to the 94.36 accuracy of each report submitted pursuant to paragraph (a). 95.1 Upon sufficient cause, the commissioner shall require the 95.2 self-insurer to submit a certified audit of payroll and claim 95.3 records conducted by an independent auditor approved by the 95.4 commissioner, based on generally accepted accounting principles 95.5 and generally accepted auditing standards, and supported by an 95.6 actuarial review and opinion of the future contingent 95.7 liabilities. The basis for sufficient cause shall include the 95.8 following factors: where the losses reported appear 95.9 significantly different from similar types of businesses; where 95.10 major changes in the reports exist from year to year, which are 95.11 not solely attributable to economic factors; or where the 95.12 commissioner has reason to believe that the losses and payroll 95.13 in the report do not accurately reflect the losses and payroll 95.14 of that employer. If any discrepancy is found, the commissioner 95.15 shall require changes in the self-insurer's or workers' 95.16 compensation service company record keeping practices. 95.17 (c)With theAn annuallossstatus report due August 1, 95.18 by each self-insurer shallreport to the commissioner any95.19workers' compensation claim from the previous year where the95.20full, undiscounted value is estimated to exceed $50,000,be 95.21 filed in a manner and on forms prescribed by the commissioner. 95.22 (d) Each individual self-insurer shall, within four months 95.23 after the end of its fiscal year, annually file with the 95.24 commissioner its latest 10K report required by the Securities 95.25 and Exchange Commission. If an individual self-insurer does not 95.26 prepare a 10K report, it shall file an annual certified 95.27 financial statement, together with such other financial 95.28 information as the commissioner may require to substantiate data 95.29 in the financial statement. 95.30 (e) Each member of the group shall, within four months 95.31 after the end of each fiscal year for that group, file the most 95.32 recent annual financial statement, reviewed by a certified 95.33 public accountant in accordance with the Statements on Standards 95.34 for Accounting and Review Services, Volume 2, the American 95.35 Institute of Certified Public Accountants Professional 95.36 Standards, or audited in accordance with generally accepted 96.1 auditing standards, together with such other financial 96.2 information the commissioner may require. In addition, the 96.3 group shall file, within four months after the end of each 96.4 fiscal year for that group, combining financial statements of 96.5 the group members, compiled by a certified public accountant in 96.6 accordance with the Statements on Standards for Accounting and 96.7 Review Services, Volume 2, the American Institute of Certified 96.8 Public Accountants Professional Standards. The combining 96.9 financial statements shall include, but not be limited to, a 96.10 balance sheet, income statement, statement of changes in net 96.11 worth, and statement of cash flow. Each combining financial 96.12 statement shall include a column for each individual group 96.13 member along with a total column. 96.14 Where a group has 50 or more members, the group shall file, 96.15 in lieu of the combining financial statements, a combined 96.16 financial statement showing only the total column for the entire 96.17 group's balance sheet, income statement, statement of changes in 96.18 net worth, and statement of cash flow. Additionally, the group 96.19 shall disclose, for each member, the total assets, net worth, 96.20 revenue, and income for the most recent fiscal year. The 96.21 combining and combined financial statements may omit all 96.22 footnote disclosures. 96.23 (f) In addition to the financial statements required by 96.24 paragraphs (d) and (e), interim financial statements or 10Q 96.25 reports required by the Securities and Exchange Commission may 96.26 be required by the commissioner upon an indication that there 96.27 has been deterioration in the self-insurer's financial 96.28 condition, including a worsening of current ratio, lessening of 96.29 net worth, net loss of income, the downgrading of the company's 96.30 bond rating, or any other significant change that may adversely 96.31 affect the self-insurer's ability to pay expected losses. Any 96.32 self-insurer that files an 8K report with the Securities and 96.33 Exchange Commission shall also file a copy of the report with 96.34 the commissioner within 30 days of the filing with the 96.35 Securities and Exchange Commission. 96.36 Sec. 75. Minnesota Statutes 1996, section 79A.03, 97.1 subdivision 10, is amended to read: 97.2 Subd. 10. [ANNUAL AUDIT AND REFUNDS.] (a) The accounts and 97.3 records of the group self-insurer's fund shall be audited 97.4 annually. Audits shall be made by certified public accountants, 97.5 based on generally accepted accounting principles and generally 97.6 accepted auditing standards, and supported by actuarial review 97.7 and opinion of the future contingent liabilities, in order to 97.8 determine the solvency of the self-insurer's fund. All audits 97.9 required by this subdivision shall be filed with the 97.10 commissioner 90 days after the close of the fiscal year for the 97.11 group self-insurer. The commissioner may require a special 97.12 audit to be made at other times if the financial stability of 97.13 the fund or the adequacy of its monetary reserves is in question. 97.14 (b) One hundred percent of any surplus money for a fund 97.15 year in excess of 125 percent of the amount necessary to fulfill 97.16 all obligations under chapter 176 for that fund year may be 97.17 declared refundable to a member at any time after 18 months 97.18 following the end of such fund year. There can be no more than 97.19 one refund in any 12-month period. When all claims of any one 97.20 fund year have been fully paid, as certified by an actuary, all 97.21 surplus money from that fund year may be declared refundable. 97.22 Sec. 76. Minnesota Statutes 1996, section 79A.03, is 97.23 amended by adding a subdivision to read: 97.24 Subd. 13. [ANNUAL REQUIREMENTS.] The financial 97.25 requirements set forth in subdivisions 3, 4, 5, and 7 must be 97.26 met on an annual basis. 97.27 Sec. 77. Minnesota Statutes 1996, section 79A.06, 97.28 subdivision 5, is amended to read: 97.29 Subd. 5. [PRIVATE EMPLOYERS WHO HAVE CEASED TO BE 97.30 SELF-INSURED.] Private employers who have ceased to be private 97.31 self-insurers shall discharge their continuing obligations to 97.32 secure the payment of compensation which is accrued during the 97.33 period of self-insurance, for purposes of Laws 1988, chapter 97.34 674, sections 1 to 21, by compliance with all of the following 97.35 obligations of current certificate holders: 97.36 (1) Filing reports with the commissioner to carry out the 98.1 requirements of this chapter; 98.2 (2) Depositing and maintaining a security deposit for 98.3 accrued liability for the payment of any compensation which may 98.4 become due, pursuant to chapter 176. However, if a private 98.5 employer who has ceased to be a private self-insurer purchases 98.6 an insurance policy from an insurer authorized to transact 98.7 workers' compensation insurance in this state which provides 98.8 coverage of all claims for compensation arising out of injuries 98.9 occurring during the period the employer was self-insured, 98.10 whether or not reported during that period, the policy will 98.11 discharge the obligation of the employer to maintain a security 98.12 deposit for the payment of the claims covered under the policy. 98.13 The policy may not be issued by an insurer unless it has 98.14 previously been approved as to form and substance by the 98.15 commissioner; and 98.16 (3) Paying within 30 days all assessments of which notice 98.17 is sent by the security fund, for a period of seven years from 98.18 the last day its certificate of self-insurance was in effect. 98.19 Thereafter, the private employer who has ceased to be a private 98.20 self-insurer may either: (a) continue to pay within 30 days all 98.21 assessments of which notice is sent by the security fund until 98.22 it has no incurred liabilities for the payment of compensation 98.23 arising out of injuries during the period of self-insurance; or 98.24 (b) pay the security fund a cash payment equal to four percent 98.25 of the net present value of all remaining incurred liabilities 98.26 for the payment of compensation under sections 176.101 and 98.27 176.111 as certified by a member of the casualty actuarial 98.28 society. Assessments shall be based on the benefits paid by the 98.29 employer during the calendar year immediately preceding the 98.30 calendar year in which the employer's right to self-insure is 98.31 terminated or withdrawn. 98.32 (4) With respect to a self-insurer who terminates its 98.33 self-insurance authority after the effective date of this 98.34 clause, that member shall obtain and file with the commissioner 98.35 an actuarial opinion of its outstanding liabilities as 98.36 determined by an associate or fellow of the Casualty Actuarial 99.1 Society. The opinion must separate liability for indemnity 99.2 benefits from liability from medical benefits, and must discount 99.3 each up to four percent per annum to net present value. Within 99.4 30 days after notification of approval of the actuarial opinion 99.5 by the commissioner, the member shall pay to the security fund 99.6 an amount equal to 120 percent of that discounted outstanding 99.7 indemnity liability, multiplied by the greater of the average 99.8 annualized assessment rate since inception of the security fund 99.9 or the annual rate at the time of the most recent assessment 99.10 before termination. 99.11 (5) A former member who terminated its self-insurance 99.12 authority before the effective date of this clause who has paid 99.13 assessments to the self-insurers' security fund for seven years, 99.14 and whose annualized assessment is $500 or less, may buy out of 99.15 its outstanding liabilities to the self-insurers' security fund 99.16 by an amount calculated as follows: 1.35 multiplied by the 99.17 indemnity case reserves at the time of the calculation, 99.18 multiplied by the then current self-insurers' security fund 99.19 annualized assessment rate. 99.20 (6) A former member who terminated its self-insurance 99.21 authority before the effective date of this clause, and who is 99.22 paying assessments within the first seven years after ceasing to 99.23 be self-insured under clause (3), may elect to buy out its 99.24 outstanding liabilities to the self-insurers' security fund by 99.25 obtaining and filing with the commissioner an actuarial opinion 99.26 of its outstanding liabilities as determined by an associate or 99.27 fellow of the Casualty Actuarial Society. The opinion must 99.28 separate liability for indemnity benefits from liability from 99.29 medical benefits, and must discount each up to four percent per 99.30 annum to net present value. Within 30 days after notification 99.31 of approval of the actuarial opinion by the commissioner, the 99.32 member shall pay to the security fund an amount equal to 120 99.33 percent of that discounted outstanding indemnity liability, 99.34 multiplied by the greater of the average annualized assessment 99.35 rate since inception of the security fund or the annual rate at 99.36 the time of the most recent assessment. 100.1 (7) A former member who has paid the security fund 100.2 according to clauses (4) to (6) and subsequently receives 100.3 authority from the commissioner to again self-insure shall be 100.4 assessed under section 79A.12, subdivision 2, only on indemnity 100.5 benefits paid on injuries that occurred after the former member 100.6 received authority to self-insure again; provided that the 100.7 member furnishes verified data regarding those benefits to the 100.8 security fund. 100.9 In addition to proceedings to establish liabilities and 100.10 penalties otherwise provided, a failure to comply may be the 100.11 subject of a proceeding before the commissioner. An appeal from 100.12 the commissioner's determination may be taken pursuant to the 100.13 contested case procedures of chapter 14 within 30 days of the 100.14 commissioner's written determination. 100.15 Any current or past member of the self-insurers' security 100.16 fund is subject to service of process on any claim arising out 100.17 of chapter 176 or this chapter in the manner provided by section 100.18 5.25, or as otherwise provided by law. The issuance of a 100.19 certificate to self-insure to the private self-insured employer 100.20 shall be deemed to be the agreement that any process which is 100.21 served in accordance with this section shall be of the same 100.22 legal force and effect as if served personally within this state. 100.23 Sec. 78. Minnesota Statutes 1996, section 79A.21, 100.24 subdivision 2, is amended to read: 100.25 Subd. 2. [REQUIRED DOCUMENTS.] All first year applications 100.26 must be accompanied by the following: 100.27 (a) A detailed business plan including the risk profile of 100.28 the proposed membership, underwriting guidelines, marketing 100.29 plan, minimum financial criteria for each member, and financial 100.30 projections for the first year of operation. 100.31 (b) A plan describing the method in which premiums are to 100.32 be charged to the employer members. The plan shall be 100.33 accompanied by copies of the member's workers' compensation 100.34 insurance policies in force at the time of application. In 100.35 developing the premium for the group, the commercial 100.36 self-insurance group shall base its premium on the Minnesota 101.1 workers' compensation insurers association's manual of rules, 101.2 loss costs, and classifications approved for use in Minnesota by 101.3 the commissioner. Each member applicant shall, on a form 101.4 approved by the commissioner, complete estimated payrolls for 101.5 the first 12-month period that the applicant will be 101.6 self-insured. Premium volume discounts per the plan will be 101.7 permitted if they can be shown to be consistent with actuarial 101.8 standards. 101.9 (c) A schedule indicating actual or anticipated operational 101.10 expenses of the commercial self-insurance group. No authority 101.11 to self-insure will be granted unless, over the term of the 101.12 policy year, at least 65 percent of total revenues from all 101.13 sources for the year are available for the payment of its claim 101.14 and assessment obligations. For purposes of this calculation, 101.15 claim and assessment obligations include the cost of allocated 101.16 loss expenses as well as special compensation fund and 101.17 commercial self-insurance group security fund assessments but 101.18 exclude the cost of unallocated loss expenses. 101.19 (d) An indemnity agreement from each member who will 101.20 participate in the commercial self-insurance group, signed by an 101.21 officer of each member, providing for joint and several 101.22 liability for all claims and expenses of all of the members of 101.23 the commercial self-insurance group arising in any fund year in 101.24 which the member was a participant on a form approved by the 101.25 commissioner. The indemnity agreement shall provide for 101.26 assessments according to the group's bylaws on an individual and 101.27 proportionate basis. 101.28 (e) A copy of the commercial self-insurance group bylaws. 101.29 (f) Evidence of the security deposit required under section 101.30 79A.24, accompanied by the actuarial certification study for the 101.31 minimum security deposit as required under section 79A.24. 101.32 (g) Each initial member of the commercial self-insurance 101.33 group shall submit to the commercial self-insurance group 101.34 accountant its most recent annual financial statement. 101.35 Financial statements for a period ending more than six months 101.36 prior to the date of the application must be accompanied by an 102.1 affidavit, signed by a company officer under oath, stating that 102.2 there has been no material lessening of the net worth nor other 102.3 adverse changes in its financial condition since the end of the 102.4 period. Individual group members constituting at least 75 102.5 percent of the group's annual premium shall submit reviewed or 102.6 audited financial statements. The remaining members may submit 102.7 compilation level statements. Statements for a period ending 102.8 more than 12 months prior to the date of application cannot be 102.9 accepted. 102.10 (h) A compiled combined financial statement of all group 102.11 members prepared by the commercial self-insurance group's 102.12 accountant and a list of members included in such statements. 102.13 (i) A copy of each member's accountant's report letter from 102.14 the reports used in compiling the combined financial statements. 102.15 (j) A list of all members and the percentage of premium 102.16 each represents to the total group's annual premium for the 102.17 policy year. 102.18 Sec. 79. Minnesota Statutes 1996, section 79A.22, 102.19 subdivision 7, is amended to read: 102.20 Subd. 7. [INVESTMENTS.] (a) Any securities purchased by 102.21 the common claims fund shall be in such denominations and with 102.22 dates of maturity to ensure securities may be redeemable at 102.23 sufficient time and in sufficient amounts to meet the fund's 102.24 current and long-term liabilities. 102.25(b) Cash assets of the common claims fund may be invested102.26in the following securities:102.27(1) direct obligations of the United States government,102.28except mortgage-backed securities of the Government National102.29Mortgage Association;102.30(2) bonds, notes, debentures, and other instruments which102.31are obligations of agencies and instrumentalities of the United102.32States including, but not limited to, the federal National102.33Mortgage Association, the federal Home Loan Mortgage102.34Corporation, the federal Home Loan Bank, the Student Loan102.35Marketing Association, and the Farm Credit System, and their102.36successors, but not including collateralized mortgage103.1obligations or mortgage pass-through instruments;103.2(3) bonds or securities that are issued by the state of103.3Minnesota and that are secured by the full faith and credit of103.4the state;103.5(4) certificates of deposit which are insured by the103.6federal Deposit Insurance Corporation and are issued by a103.7Minnesota depository institution;103.8(5) obligations of, or instruments unconditionally103.9guaranteed by, Minnesota depository institutions whose long-term103.10debt rating is at least AA-, or Aa3, or their equivalent by at103.11least two nationally recognized rating agencies.103.12 (b) Cash assets of the self-insurer's fund may be invested 103.13 as provided in section 60A.11 for a casualty insurance company, 103.14 provided that investment in real estate of or indebtedness from 103.15 any member company or affiliates prohibited. In addition, 103.16 investment in the following is allowed: 103.17 (1) savings accounts or certificates of deposit in a duly 103.18 chartered commercial bank located within the state of Minnesota 103.19 and insured through the Federal Deposit Insurance Corporation; 103.20 (2) share accounts or savings certificates in a duly 103.21 chartered savings and loan association located within the state 103.22 of Minnesota and insured through the Federal Savings and Loan 103.23 Insurance Corporation; 103.24 (3) direct obligations of the United States Treasury, such 103.25 as notes, bonds, or bills; 103.26 (4) a bond or security issued by the state of Minnesota and 103.27 backed by the full faith and credit of the state; 103.28 (5) a credit union where the employees of the self-insurer 103.29 are members if the credit union is located in Minnesota, 103.30 licensed by the state of Minnesota, and insured through the 103.31 Federal Deposit Insurance Corporation; or 103.32 (6) real estate, common stock, preferred stock, or 103.33 corporate bonds listed on the New York, American Stock Exchange 103.34 or NASDAQ Stock Market, so long as these investments are not 103.35 issued by any member company or affiliate and the total in all 103.36 other allowable categories make up at least 75 percent of the 104.1 total required in the common claims fund. 104.2 Sec. 80. Minnesota Statutes 1996, section 79A.22, is 104.3 amended by adding a subdivision to read: 104.4 Subd. 13. [COMMON CLAIMS FUND; FIVE-YEAR EXCEPTION.] For 104.5 commercial group self-insurers who have been in existence for 104.6 five years or more, a level of funding in the common claims fund 104.7 must be maintained at not less than the greater of either: 104.8 (1) one year's claim losses paid in the most recent year; 104.9 or 104.10 (2) one-third of the security deposit posted with the 104.11 department of commerce according to section 79A.24, subdivision 104.12 2. 104.13 This provision supersedes any requirements under 104.14 subdivisions 11 and 12 and Minnesota Rules, part 2780.5000. 104.15 Sec. 81. Minnesota Statutes 1996, section 79A.23, 104.16 subdivision 1, is amended to read: 104.17 Subdivision 1. [REQUIRED REPORTS TO COMMISSIONER.] Each 104.18 commercial self-insurance group shall submit the following 104.19 documents to the commissioner. 104.20 (a) An annual report shall be submitted by April 1 showing 104.21 the incurred losses, paid and unpaid, specifying indemnity and 104.22 medical losses by classification, payroll by classification, and 104.23 current estimated outstanding liability for workers' 104.24 compensation on a calendar year basis, in a manner and on forms 104.25 available from the commissioner. In addition each group will 104.26 submit a quarterly interim loss report showing incurred losses 104.27 for all its membership. 104.28 (b) Each commercial self-insurance group shall submit 104.29 within 45 days of the end of each quarter: 104.30 (1) a schedule showing all the members who participate in 104.31 the group, their date of inception, and date of withdrawal, if 104.32 applicable; 104.33 (2) a separate section identifying which members were added 104.34 or withdrawn during that quarter; and 104.35 (3) an internal financial statement and copies of the 104.36 fiscal agent's statements supporting the balances in the common 105.1 claims fund. 105.2 (c) The commercial self-insurance group shall submit an 105.3 annual certified financial audit report of the commercial 105.4 self-insurance group fund by April 1 of the following year. The 105.5 report must be accompanied by an expense schedule showing the 105.6 commercial self-insurance group's operational costs for the same 105.7 year including service company charges, accounting and actuarial 105.8 fees, fund administration charges, reinsurance premiums, 105.9 commissions, and any other costs associated with the 105.10 administration of the group program. 105.11 (d) An officer of the commercial self-insurance group 105.12 shall, under oath, attest to the accuracy of each report 105.13 submitted under paragraphs (a), (b), and (c). Upon sufficient 105.14 cause, the commissioner shall require the commercial 105.15 self-insurance group to submit a certified audit of payroll and 105.16 claim records conducted by an independent auditor approved by 105.17 the commissioner, based on generally accepted accounting 105.18 principles and generally accepted auditing standards, and 105.19 supported by an actuarial review and opinion of the future 105.20 contingent liabilities. The basis for sufficient cause shall 105.21 include the following factors: 105.22 (1) where the losses reported appear significantly 105.23 different from similar types of groups; 105.24 (2) where major changes in the reports exist from year to 105.25 year, which are not solely attributable to economic factors; or 105.26 (3) where the commissioner has reason to believe that the 105.27 losses and payroll in the report do not accurately reflect the 105.28 losses and payroll of the commercial self-insurance group. 105.29 If any discrepancy is found, the commissioner shall require 105.30 changes in the commercial self-insurance group's business plan 105.31 or service company recordkeeping practices. 105.32 (e) Each commercial self-insurance group shall submit by 105.33AugustSeptember 15 a copy of the group's annual federal and 105.34 state income tax returns or provide proof that it has received 105.35 an exemption from these filings. 105.36 (f) With the annual loss report each commercial 106.1 self-insurance group shall report to the commissioner any 106.2 worker's compensation claim where the full, undiscounted value 106.3 is estimated to exceed $50,000, in a manner and on forms 106.4 prescribed by the commissioner. 106.5 (g) Each commercial self-insurance group shall submit by 106.6 May 1 a list of all members and the percentage of premium each 106.7 represents to the total group's premium for the previous 106.8 calendar year. 106.9 (h) Each commercial self-insurance group shall submit by 106.10 May 1 the following documents prepared by the group's certified 106.11 public accountant: 106.12 (1) a compiled combined financial statement of group 106.13 members and a list of members included in this statement; and 106.14 (2) a report that the statements which were combined have 106.15 met the requirements of subdivision 2. 106.16 (i) If any group member comprises over 25 percent of total 106.17 group premium, that member's financial statement must be 106.18 reviewed or audited, andmust be submitted to the commissioner, 106.19 at the commissioner's option, must be filed with the department 106.20 of commerce by May 1 of the following year. 106.21 (j) Each commercial self-insurance group shall submit a 106.22 copy of each member's accountant's report letter from the 106.23 reports used in compiling the combined financial statements. 106.24 Sec. 82. Minnesota Statutes 1996, section 79A.23, 106.25 subdivision 2, is amended to read: 106.26 Subd. 2. [REQUIRED REPORTS FROM MEMBERS TO GROUP.] Each 106.27 member of the commercial self-insurance group shall, by April 1, 106.28 submit to the group its most recent annual financial statement, 106.29 together with other financial information the group may 106.30 require. These financial statements submitted must not have a 106.31 fiscal year end date older than January 15 of the group's 106.32 calendar year end. Individual group members constituting at 106.33 least7550 percent of the group's annual premium shall submit 106.34 to the group reviewed or audited financial statements. The 106.35 remaining members may submit compilation level statements. 106.36 Sec. 83. Minnesota Statutes 1996, section 79A.24, 107.1 subdivision 1, is amended to read: 107.2 Subdivision 1. [ANNUAL SECURING OF LIABILITY.] Each year 107.3 every commercial self-insurance group shall secure its estimated 107.4 futureincurred liabilitiesliability for the payment of 107.5 compensation and the performance of the obligations of its 107.6 membership imposed under chapter 176. A new deposit must be 107.7 posted within 30 days of the filing of the commercial 107.8 self-insurance group's annual actuarial report with the 107.9 commissioner. 107.10 Sec. 84. Minnesota Statutes 1996, section 79A.24, 107.11 subdivision 2, is amended to read: 107.12 Subd. 2. [MINIMUM DEPOSIT.] The minimum deposit is 150 107.13 percent of the commercial self-insurance group's estimated 107.14 futureincurred liabilitiesliability for the payment of 107.15 compensation as determined by an actuary. If all the members of 107.16 the commercial self-insurance group have submitted reviewed or 107.17 audited financial statements to the group's accountant, this 107.18 minimum deposit shall be 110 percent of the commercial 107.19 self-insurance group's estimated futureincurred107.20liabilitiesliability for the payment of workers' compensation 107.21 as determined by an actuary. The group must file a letter with 107.22 the commissioner from the group's accountant which confirms that 107.23 the compiled combined financial statements were prepared from 107.24 members reviewed or audited financial statements only before the 107.25 lower security deposit is allowed. Each actuarial study shall 107.26 include a projection of future losses during a one-year period 107.27 until the next scheduled actuarial study, less payments 107.28 anticipated to be made during that time. Deduction should be 107.29 made for the total amount which is estimated to be returned to 107.30 the commercial self-insurance group from any specific excess 107.31 insurance coverage, aggregate excess insurance coverage, and any 107.32 supplementary benefits which are estimated to be reimbursed by 107.33 the special compensation fund. Supplementary benefits will not 107.34 be reimbursed by the special compensation fund unless the 107.35 special compensation fund assessment pursuant to section 176.129 107.36 is paid and the required reports are filed with the special 108.1 compensation fund. In the case of surety bonds, bonds shall 108.2 secure administrative and legal costs in addition to the 108.3 liability for payment of compensation reflected on the face of 108.4 the bond. In no event shall the security be less than the 108.5 group's selected retention limit of the workers' compensation 108.6 reinsurance association. The posting or depositing of security 108.7 under this section shall release all previously posted or 108.8 deposited security from any obligations under the posting or 108.9 depositing and any surety bond so released shall be returned to 108.10 the surety. Any other security shall be returned to the 108.11 depositor or the person posting the bond. 108.12 Sec. 85. Minnesota Statutes 1996, section 79A.24, 108.13 subdivision 4, is amended to read: 108.14 Subd. 4. [CUSTODIAL ACCOUNTS.] (a) All surety bonds, 108.15 irrevocable letters of credit, and documents showing issuance of 108.16 any irrevocable letter of credit shall be deposited in 108.17 accordance with the provisions of section 79A.071. 108.18 (b) Upon the commissioner sending a request to renew, 108.19 request to post, or request to increase a security deposit, a 108.20 perfected security interest is created in the commercial 108.21 self-insurance group's and member's assets in favor of the 108.22 commissioner to the extent of any then unsecured portion of the 108.23 commercial self-insurance group's incurred liabilities. The 108.24 perfected security interest is transferred to any cash or 108.25 securities thereafter posted by the commercial self-insurance 108.26 group with the state treasurer and is released only upon either 108.27 of the following: 108.28 (1) the acceptance by the commissioner of a surety bond or 108.29 irrevocable letter of credit for the full amount of the incurred 108.30 liabilities for the payment of compensation; or 108.31 (2) the return of cash or securities by the commissioner. 108.32 The commercial self-insurance group loses all right, title, and 108.33 interest in and any right to control all assets or obligations 108.34 posted or left on deposit as security. In the event of a 108.35 declaration of bankruptcy or insolvency by a court of competent 108.36 jurisdiction, or in the event of the issuance of a certificate 109.1 of default by the commissioner, the commissioner shall liquidate 109.2 the deposit as provided in this chapter, and transfer it to the 109.3 commercial self-insurance group security fund for application to 109.4 the commercial self-insurance group's incurred liability. 109.5 (c) No securities in physical form on deposit with the 109.6 state treasurer or the commissioner or custodial accounts 109.7 assigned to the state shall be released or exchanged without an 109.8 order from the commissioner. No security can be exchanged more 109.9 than once every 90 days. 109.10 (d) Any securities deposited with the state treasurer or 109.11 with a custodial account assigned to the state treasurer or 109.12 letters of credit or surety bonds held by the commissioner may 109.13 be exchanged or replaced by the depositor with any other 109.14 acceptable securities or letters of credit or surety bond of 109.15 like amount so long as the market value of the securities or 109.16 amount of the surety bonds or letter of credit equals or exceeds 109.17 the amount of the deposit required. If securities are replaced 109.18 by surety bond, the commercial self-insurance group must 109.19 maintain securities on deposit in an amount sufficient to meet 109.20 all outstanding workers' compensation liability arising during 109.21 the period covered by the deposit of the replaced securities. 109.22(e) The commissioner shall return on an annual basis to the109.23commercial self-insurance group all amounts of security109.24determined by the commissioner to be in excess of the statutory109.25requirements for the group to self-insure, including that109.26necessary for administrative costs, legal fees, and the payment109.27of any future workers' compensation claims.109.28 Sec. 86. Minnesota Statutes 1996, section 79A.26, 109.29 subdivision 2, is amended to read: 109.30 Subd. 2. [BOARD OF TRUSTEES.] The commercial security fund 109.31 shall be governed by a board consisting of a minimum of three 109.32 and maximum of five trustees. The trustees shall be 109.33 representatives of commercial self-insurance groups who shall be 109.34 elected by the participants of the commercial security fund, 109.35 each group having one vote. The trustees initially elected by 109.36 the participants shall serve staggered terms of either two or 110.1 three years. Thereafter, trustees shall be elected to 110.2 three-year terms and shall serve until their successors are 110.3 elected and assume office pursuant to the bylaws of the 110.4 commercial security fund. Two additional trustees shall be 110.5 appointed by the commissioner.These trustees shall serve110.6four-year terms.Initially, one of these trustees shall serve a 110.7 two-year term. Thereafter, the trustees shall be appointed to 110.8 four-year terms, and shall serve until their successors are 110.9 appointed and assume office according to the bylaws of the 110.10 commercial security fund. In addition to the trustees elected 110.11 by the participants or appointed by the commissioner, the 110.12 commissioner of labor and industry or the commissioner's 110.13 designee shall be an ex officio, nonvoting member of the board 110.14 of trustees. A member of the board of trustees may designate 110.15 another person to act in the member's place as though the member 110.16 were acting and the designee's actions shall be deemed those of 110.17 the member. 110.18 Sec. 87. Minnesota Statutes 1996, section 79A.31, 110.19 subdivision 1, is amended to read: 110.20 Subdivision 1. [WITHDRAWAL.] Any group self-insurer that 110.21 is a memberas of August 1, 1995,of the self-insurers' security 110.22 fund established under section 79A.09, mayuntil January 1,110.231996,elect to withdraw from that fund and become a member of 110.24 the commercial self-insurance group security fund established 110.25 under section 79A.26. The transferring group shall be subject 110.26 to the provisions and requirements of sections 79A.19 to 79A.32 110.27 as of the date of transfer. Additional security may be required 110.28 pursuant to section 79A.24. Group self-insurers electing to 110.29 transfer to the commercial self-insurance group fund shall not 110.30 be subject to the provisions of section 79A.06, subdivision 5, 110.31 including, but not limited to, assessments by the self-insurers' 110.32 security fund. Notice of transfer must be filed by November 1 110.33 for all transfers that must be effective at midnight on December 110.34 31. 110.35 Sec. 88. [WARRANTY PRODUCTS AND EXTENDED SERVICE 110.36 CONTRACTS; STUDY.] 111.1 The commissioner of commerce shall conduct a study to 111.2 determine the appropriate regulatory framework for warranty 111.3 products and extended service contracts offered for sale in 111.4 Minnesota. 111.5 The commissioner shall make a written report to the 111.6 legislature on or before February 15, 1998, discussing the types 111.7 of warranty and extended service contracts available to 111.8 Minnesota consumers. The report must also include 111.9 recommendations as to how these products should be regulated in 111.10 Minnesota, including a discussion as to when these products 111.11 should be regulated as insurance. In examining these issues, 111.12 the commissioner may seek the advice of representatives from the 111.13 attorney general's office, the retail merchants industry, public 111.14 utilities, and the insurance industry. 111.15 Sec. 89. [APPLICATION.] 111.16 (a) Section 27, subdivision 2, applies to a suit based in 111.17 whole or in part on an alleged act, error, or omission that 111.18 takes place on or after the effective date of the section. 111.19 (b) No legal action lies against the receiver or any 111.20 employee based in whole or in part on any alleged act, error, or 111.21 omission that took place before the effective date of the 111.22 section, unless suit is filed and valid service of process is 111.23 obtained within 12 months after the effective date of the 111.24 section. 111.25 (c) Section 27, subdivisions 3 to 5, apply to a suit that 111.26 is pending on or filed after the effective date of the section 111.27 without regard to when the alleged act, error, or omission took 111.28 place. 111.29 (d) Section 30 applies to all contracts entered into, 111.30 renewed, extended, or amended on or after its effective date and 111.31 to obligations arising from any business written or transaction 111.32 occurring covered by reinsurance after the effective date 111.33 according to any contract including those in existence before 111.34 the effective date. 111.35 Sec. 90. [REPEALER.] 111.36 Minnesota Statutes 1996, sections 60A.11, subdivision 24a; 112.1 60B.44, subdivision 3; 65A.29, subdivision 12; and 79A.04, 112.2 subdivision 8, are repealed. 112.3 Sec. 91. [EFFECTIVE DATE.] 112.4 Sections 1, 2, 25, 36, 41, 47, 49, 52, 57, 59, 66, and 86 112.5 are effective the day after final enactment. 112.6 Sections 37, 38, and 42 are effective January 1, 1998. 112.7 ARTICLE 2 112.8 AFFORDABILITY OF HEALTH COVERAGE 112.9 Section 1. [62A.310] [ASSESSMENT OF PROPOSED HEALTH 112.10 COVERAGE MANDATES.] 112.11 Subdivision 1. [DEFINITIONS.] For purposes of this 112.12 section, the following terms have the meanings given: 112.13 (1) "mandated health benefit proposal" means a proposal 112.14 that would statutorily require a health plan to do the following: 112.15 (i) provide coverage or increase the amount of coverage for 112.16 the treatment of a particular disease, condition, or other 112.17 health care need; or 112.18 (ii) provide coverage or increase the amount of coverage of 112.19 a particular type of health care treatment or service or of 112.20 equipment, supplies, or drugs used in connection with a health 112.21 care treatment or service. 112.22 "Mandated benefit proposal" does not include health benefit 112.23 proposals amending the scope of practice of a licensed health 112.24 care professional; 112.25 (2) "commissioner" means the commissioner of health; and 112.26 (3) "health plan" means a health plan as defined in section 112.27 62A.011, subdivision 3, but includes coverage listed in clauses 112.28 (7) and (10), of that definition. 112.29 Subd. 2. [HEALTH COVERAGE MANDATE ASSESSMENT PROCESS.] The 112.30 commissioners of health and commerce, in consultation with the 112.31 commissioners of human services and employee relations, shall 112.32 establish and administer a process for the review, assessment, 112.33 and analysis of mandated health benefit proposals. The purpose 112.34 of the assessment is to provide the legislature with a complete 112.35 and timely analysis of all ramifications of any mandated health 112.36 benefit proposal. The assessment must include, in addition to 113.1 any other relevant information, the following: 113.2 (1) scientific and medical information on the proposed 113.3 health benefit, on the potential for harm or benefit to the 113.4 patient, and on the comparative benefit or harm from alternative 113.5 forms of treatment; and 113.6 (2) public health, economic, fiscal, and consumer 113.7 information on the impact of the proposed mandate on persons 113.8 receiving health services in Minnesota, on the relative cost 113.9 effectiveness of the benefit, and on the health care system in 113.10 general. 113.11 The commissioners of health and commerce shall summarize 113.12 the nature and quality of available information in these areas, 113.13 and, if possible, shall provide any preliminary information to 113.14 the public as part of the public hearing process required in 113.15 subdivision 5. The commissioners may conduct research into 113.16 these issues, or may certify existing research as sufficient to 113.17 meet the informational needs of the legislature. 113.18 Subd. 3. [REQUESTS FOR ASSESSMENT.] Whenever a legislative 113.19 measure containing a mandated health benefit proposal is 113.20 introduced as a bill or offered as an amendment to a bill or is 113.21 likely to be introduced or offered as an amendment, the chairs 113.22 of the standing committees having jurisdiction over the proposal 113.23 shall request that the commissioner complete an assessment of 113.24 the proposal in order to facilitate any committee action by 113.25 either house of the legislature. Any person or organization may 113.26 also request that the commissioner complete an assessment. If 113.27 multiple requests are received, the commissioner shall consult 113.28 with the chairs of the standing legislative committees having 113.29 jurisdiction over mandated health benefit proposals to 113.30 prioritize the requests. 113.31 Subd. 4. [ASSESSMENT OF PROPOSED MANDATES; REPORT TO THE 113.32 LEGISLATURE.] The commissioners of health and commerce shall 113.33 conduct an assessment of each mandated health benefit proposal 113.34 selected for assessment and submit a report to the legislature 113.35 no later than 180 days after the request. The commissioners 113.36 shall, in consultation with the chairs of the standing 114.1 committees having jurisdiction over the proposal, develop a 114.2 reporting date for each proposal to be assessed. If the 114.3 commissioners of health and commerce determine that the 114.4 assessment of a particular mandated health benefit proposal 114.5 should be completed entirely or in part by one of the two 114.6 commissioners, the commissioners may agree to have the 114.7 appropriate commissioner complete the assessment and submit the 114.8 report to the legislature. The commissioner responsible for 114.9 completing an assessment may seek the assistance and advice of 114.10 consultants, contractors, researchers, community leaders, or 114.11 other persons or organizations with relevant expertise. The 114.12 commissioner may certify existing research as sufficient to meet 114.13 the informational needs of the legislature. Prior to completion 114.14 of an assessment report, the commissioners must gather the 114.15 information required under subdivisions 2 and 5. 114.16 Subd. 5. [CITIZENS ADVISORY TASK FORCE.] The commissioner 114.17 of health shall appoint a citizens advisory task force in 114.18 accordance with section 15.014, subdivision 2, to provide 114.19 comments and recommendations to the commissioner on health 114.20 benefit mandate proposals. In preparing these comments and 114.21 recommendations, it shall be the purpose of the task force to 114.22 determine which approach to a proposed mandated benefit best 114.23 serves the general public interest. Members should be impartial 114.24 consumers of health care services. The citizens advisory task 114.25 force shall consist of at least one member from each regional 114.26 coordinating board. The citizens advisory task force shall 114.27 solicit comments and recommendations on a mandated health 114.28 benefit proposal from any interested persons and organizations 114.29 and may hold public hearings. The citizens advisory task force 114.30 shall submit its comments and recommendations to the 114.31 commissioner. 114.32 Subd. 6. [ADVICE AND RECOMMENDATIONS.] The commissioner 114.33 may appoint an ad hoc advisory panel of providers, consumer 114.34 representatives, health plan companies, medical technology 114.35 companies, economists, actuaries, and other expert persons to 114.36 assist the commissioner in completing a mandate review. 115.1 Subd. 7. [REPORT.] The commissioners shall provide a 115.2 summary report of their findings and recommendations to the 115.3 relevant committee chairs, to the author of the proposed benefit 115.4 mandate, or the entity which requested the assessment. 115.5 Subd. 8. [LICENSE FEE OFFSET.] The commissioners of health 115.6 and commerce shall increase license fees for health plan 115.7 companies under their jurisdiction in an amount sufficient to 115.8 offset the costs of the mandate assessment process. The 115.9 increase of the fees for each health plan company shall be based 115.10 on the market share of that health plan company. The funds 115.11 generated under this subdivision are appropriated to the 115.12 commissioners of health and commerce, as needed, to operate the 115.13 mandate assessment process.