Minnesota Legislature
Office of the Revisor of Statutes
Minnesota Session Laws - 2003, Regular Session
Key: (1) language to be deleted (2) new language
CHAPTER 40-S.F.No. 350
An act relating to insurance; regulating notices of
terminations of certain health coverages; regulating
the FAIR plan; amending Minnesota Statutes 2002,
sections 62A.14; 62A.301; 62C.14, subdivision 5;
65A.29, subdivision 4; 65A.32; 65A.33, subdivisions 4,
6, 9, by adding subdivisions; 65A.34; 65A.35; 65A.36;
65A.37; 65A.375; 65A.38, subdivisions 1, 5; 65A.40;
65A.41; 65A.42; repealing Minnesota Statutes 2002,
section 65A.33, subdivision 5.
BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF MINNESOTA:
Section 1. Minnesota Statutes 2002, section 62A.14, is
amended to read:
62A.14 [HANDICAPPED CHILDREN.]
Subdivision 1. [INDIVIDUAL FAMILY POLICIES.] An individual
hospital or medical expense insurance policy delivered or issued
for delivery in this state more than 120 days after May 16,
1969, or an individual health maintenance contract delivered or
issued for delivery in this state after August 1, 1984, which
provides that coverage of a dependent child shall terminate upon
attainment of the limiting age for dependent children specified
in the policy or contract shall also provide in substance that
attainment of such limiting age shall not operate to terminate
the coverage of such child while the child is and continues to
be both (a) incapable of self-sustaining employment by reason of
mental retardation, mental illness or disorder, or physical
handicap and (b) chiefly dependent upon the policyholder for
support and maintenance, provided proof of such incapacity and
dependency is furnished to the insurer or health maintenance
organization by the policyholder or enrollee within 31 days of
the child's attainment of the limiting age and subsequently as
may be required by the insurer or organization but not more
frequently than annually after the two-year period following the
child's attainment of the limiting age. Any notice regarding
termination of coverage due to attainment of the limiting age
must include all the information in this section.
Subd. 2. [GROUP POLICIES.] A group hospital or medical
expense insurance policy delivered or issued for delivery in
this state more than 120 days after May 16, 1969, or a group
health maintenance contract delivered or issued for delivery in
this state after August 1, 1984, which provides that coverage of
a dependent child of an employee or other member of the covered
group shall terminate upon attainment of the limiting age for
dependent children specified in the policy or contract shall
also provide in substance that attainment of such limiting age
shall not operate to terminate the coverage of such child while
the child is and continues to be both (a) incapable of
self-sustaining employment by reason of mental retardation,
mental illness or disorder, or physical handicap and (b) chiefly
dependent upon the employee or member for support and
maintenance, provided proof of such incapacity and dependency is
furnished to the insurer or organization by the employee or
member within 31 days of the child's attainment of the limiting
age and subsequently as may be required by the insurer or
organization but not more frequently than annually after the
two-year period following the child's attainment of the limiting
age. Any notice regarding termination of coverage due to
attainment of the limiting age must include information about
this provision.
Sec. 2. Minnesota Statutes 2002, section 62A.301, is
amended to read:
62A.301 [COVERAGE OF FULL-TIME STUDENTS.]
If an insurer provides individual or group accident and
health coverage for dependents after what otherwise would be the
limiting age based on full-time student status the insurer must
include in its definition of full-time student, any student who
by reason of illness, injury, or physical or mental disability
as documented by a physician is unable to carry what the
educational institution considers a full-time course load so
long as the student's course load is at least 60 percent of what
otherwise is considered by the institution to be a full-time
course load. Any notice regarding termination of coverage due
to attainment of the limiting age must include information about
this provision.
For purposes of this section, "insurer" means an insurer
providing accident and health insurance regulated under this
chapter, a nonprofit health service plan corporation regulated
under chapter 62C, a health maintenance organization regulated
under chapter 62D, or a fraternal benefit society regulated
under chapter 64B.
Sec. 3. Minnesota Statutes 2002, section 62C.14,
subdivision 5, is amended to read:
Subd. 5. [HANDICAPPED DEPENDENTS.] A subscriber's
individual contract or any group contract delivered or issued
for delivery in this state and providing that coverage of a
dependent child of the subscriber or a dependent child of a
covered group member shall terminate upon attainment of a
specified age shall also provide in substance that attainment of
that age shall not terminate coverage while the child is (a)
incapable of self-sustaining employment by reason of mental
retardation, mental illness or disorder, or physical handicap,
and (b) chiefly dependent upon the subscriber or employee for
support and maintenance, provided proof of incapacity and
dependency is furnished by the subscriber within 31 days of
attainment of the age, and subsequently as required by the
corporation, but not more frequently than annually after a two
year period following attainment of the age. Any notice
regarding termination of coverage due to attainment of the
limiting age must include information about this provision.
Sec. 4. Minnesota Statutes 2002, section 65A.29,
subdivision 4, is amended to read:
Subd. 4. [FORM REQUIREMENTS.] Any notice or statement
required by subdivisions 1 to 3, or any other notice canceling a
homeowner's insurance policy must be written in language which
is easily readable and understandable by a person of average
intelligence and understanding. The statement of reason must be
sufficiently specific to convey, clearly and without further
inquiry, the basis for the insurer's refusal to renew or to
write the insurance coverage.
The notice or statement must also inform the insured of:
(1) the possibility of coverage through the Minnesota
property insurance placement facility FAIR plan under sections
65A.31 to 65A.42;
(2) the right to object to the commissioner under
subdivision 9; and
(3) the right to the return of unearned premium in
appropriate situations under subdivision 10.
Sec. 5. Minnesota Statutes 2002, section 65A.32, is
amended to read:
65A.32 [PURPOSES.]
The purposes of sections 65A.31 to 65A.42 are:
(1) to encourage stability in the property and liability
insurance market for property located in this state;
(2) to encourage maximum use, in obtaining property and
liability insurance, as defined in sections 65A.31 to 65A.42, of
the normal insurance market provided by the private property and
casualty insurance industry;
(3) to encourage the improvement of the condition of
properties located in this state and to further orderly
community development generally;
(4) to provide for an organization known as the Minnesota
property insurance placement facility FAIR plan, which will
assure fair access to insurance requirements (FAIR plan) in
order that no property shall be is denied property or liability
insurance through the FAIR plan due to the condition of the
property, except after a physical inspection of such the
property and a fair evaluation of its individual underwriting
characteristics;
(5) to publicize the purposes and procedures of the FAIR
plan to the end that no one may fail to seek its assistance
through lack of knowledge of its existence; and
(6) to provide for the formulation and administration by
the Minnesota property insurance placement facility FAIR plan of
a reinsurance arrangement whereby property and casualty insurers
shall share equitably the responsibility for insuring insurable
property for which property and liability insurance cannot be
obtained through the normal insurance markets.
Sec. 6. Minnesota Statutes 2002, section 65A.33,
subdivision 4, is amended to read:
Subd. 4. "Minnesota property insurance placement
facility FAIR plan," hereinafter referred to as the facility, or
"plan," means the organization formed by insurers to assist
applicants in securing property or liability insurance and to
administer the FAIR plan.
Sec. 7. Minnesota Statutes 2002, section 65A.33, is
amended by adding a subdivision to read:
Subd. 5a. [MEMBER.] "Member" means any insurer as defined
in subdivision 2.
Sec. 8. Minnesota Statutes 2002, section 65A.33,
subdivision 6, is amended to read:
Subd. 6. "Premiums written" means gross direct written
premiums charged during the second preceding calendar year with
respect to property in this state on all policies of property or
liability insurance and the property or liability insurance
premium components of all multiperil policies, as computed by
the facility, less return premiums, dividends paid or credited
to policyholders, or the unused or unabsorbed portions of
premium deposits for fire, allied lines, homeowners, the
nonliability component of farm policies, and the nonliability
component of commercial multiperil policies, as reported by the
members to the NAIC.
Sec. 9. Minnesota Statutes 2002, section 65A.33,
subdivision 9, is amended to read:
Subd. 9. [BOARD.] "Board" means the governing board of
directors of the Minnesota property insurance placement facility
FAIR plan.
Sec. 10. Minnesota Statutes 2002, section 65A.33, is
amended by adding a subdivision to read:
Subd. 10. [NAIC.] "NAIC" means the National Association of
Insurance Commissioners.
Sec. 11. Minnesota Statutes 2002, section 65A.34, is
amended to read:
65A.34 [APPLICATION FOR PLAN COVERAGE.]
Subdivision 1. [APPLICATION.] Any person having an
insurable interest in real or tangible personal property who has
been canceled, nonrenewed, or otherwise rejected for coverage in
the private market shall be entitled to may submit an
application for coverage to the facility plan. If an inspection
of the premises is performed, it must be done at no cost to the
applicant.
Subd. 2. [INSPECTIONS.] Before the plan may deny coverage
due to the condition of the property or write coverage with a
condition charge, it must first inspect the property for which
coverage has been requested. The manner and scope of the
inspections of Minnesota FAIR plan business shall must be
prescribed by the facility plan with the approval of the
commissioner.
Subd. 3. [INITIAL INSPECTION REPORT.] An inspection report
shall must be made for each property inspected. The
report shall must cover pertinent structural and occupancy
features as well as the general condition of the building and
surrounding structures. A representative photograph of the
property may be taken during the inspection.
Subd. 4. [CONDITION CHARGES.] Either during the inspection
or immediately thereafter after the inspection, an employee of
the FAIR plan shall inform the applicant as to the features that
result in a condition charge if the risk is accepted. No
inspector shall have has the authority to advise whether
the facility plan will provide the coverage.
Subd. 5. [COMPLETED INSPECTION REPORT.] Within ten
business days after the inspection, the FAIR plan shall prepare
or have prepared a completed inspection report that includes
conditions that are subject to a condition charge under the
rating plan approved by the commissioner. A copy of the
inspection report must be made available to the applicant or the
applicant's agent upon request.
Subd. 6. Before the facility may deny coverage or write
coverage with a condition charge, it must cause an inspection to
be made of any risk submitted to it, without cost to the owner.
Sec. 12. Minnesota Statutes 2002, section 65A.35, is
amended to read:
65A.35 [ADMINISTRATION.]
Subdivision 1. [MEMBERSHIP.] Each insurer which is
authorized to write and is engaged in writing within this state,
on a direct basis, property or liability insurance or any
component thereof of this insurance contained in a multiperil
policy, including homeowners and commercial multiperil policies,
shall participate in the facility, as hereinafter
described, plan as a condition of its authority to write such
kinds of insurance within this state.
Subd. 2. [PURPOSES.] The purposes of the facility shall be
twofold, as more fully set forth in this section Minnesota FAIR
plan are:
(1) to formulate and administer, subject to the approval of
the commissioner, a plan assuring fair access to insurance
requirements in order that no property shall be is denied
property or liability insurance through the normal insurance
market provided by the private property and casualty insurance
industry FAIR plan due to the condition of the property, except
after a physical inspection of such the property and a fair
evaluation of its individual underwriting characteristics; and
(2) to formulate and administer, subject to the approval of
the commissioner, a reinsurance arrangement whereby the members
of the facility shall Minnesota FAIR plan share equitably the
responsibility for insuring property which is insurable but for
which property or liability insurance cannot be obtained through
normal insurance markets.
Subd. 3. [PLAN OF OPERATION.] The plan of operation of the
facility Minnesota FAIR plan, consistent with the provisions of
sections 65A.31 to 65A.42 and the purpose of the facility, which
shall plan must provide for the FAIR plan, the reinsurance
arrangement, and the economical and efficient administration of
the facility Minnesota FAIR plan, including, but not limited to,
management of the facility plan, establishment of necessary
facilities within this state, assessment of members to defray
losses and expenses, commission arrangements, reasonable
underwriting standards, acceptance and cession of reinsurance,
and procedures for determining amounts of insurance to be
provided.
The plan of operation shall be is subject to approval by
the commissioner.
Subd. 4. [AMENDMENT OF THE PLAN OF OPERATION.] The
facility Minnesota FAIR plan shall, amend the plan of operation
on its own initiative, subject to prior approval by the
commissioner, or at the direction of the commissioner, amend the
Plan of Operation.
Subd. 5. [ADMINISTRATION.] (1) The facility shall be
Minnesota FAIR plan is administered by a board of nine
directors, five of whom are elected by the members of
the facility plan and four who represent the public. Public
directors may include licensed insurance agents. Public
directors are appointed by the commissioner. At least one
elected director shall be a domestic stock insurer, and at least
one director shall be a domestic nonstock insurer. No less than
two elected directors must be representatives of domestic
insurers. In the election of directors, each member of
the facility shall be Minnesota FAIR plan is allotted votes
bearing the same ratio to the total number of votes to be cast
as its degree of participation in the facility plan bears to the
total participation.
(2) Any vacancy among the elected directors shall must be
filled by a vote of the other elected directors.
(3) If at any time the members fail to elect the required
number of directors to the board, or a vacancy remains unfilled
for more than 15 days, the commissioner may appoint the
directors necessary to constitute a full board of directors.
(4) Vacancies among directors appointed by the commissioner
shall must be filled by appointment by the commissioner. A
person so appointed serves until the end of the term of the
director the person is replacing.
(5) All public directors serve for a period of two years.
The terms of all public directors begin on January July 1 of the
year their appointments begin.
(6) The plan of operation must provide for adequate
compensation of public directors. A per diem amount and a
procedure for reimbursement of expenses incurred in the
discharge of their duties must be included in the plan. Private
directors whose employers compensate them while serving on the
board or who would submit their compensation to their employers
are not eligible for compensation under the plan.
Subd. 6. [PARTICIPATION.] All members of the
facility Minnesota FAIR plan shall participate in its expenses,
losses, and equity distribution in the proportion that the
premiums written as herein defined in this subdivision, but
excluding that portion, if any, of premiums which is
attributable to the reinsurance arrangement maintained by the
facility, by each such member during the second preceding
calendar year bear to the aggregate premiums written in this
state by all members of the facility plan. Such Participation
by each member in the facility shall be plan is determined
annually by the facility plan on the basis of such premiums
written during the second preceding calendar year as disclosed
in the annual statements and other reports filed by the member
with the commissioner NAIC.
Sec. 13. Minnesota Statutes 2002, section 65A.36, is
amended to read:
65A.36 [UNDERWRITING.]
Subdivision 1. [EVALUATION OF RISK.] Agents are not
permitted to bind coverage. The facility Minnesota FAIR plan
shall issue a policy if the risk meets preliminary underwriting
requirements. The facility plan may request an inspection
report to obtain further underwriting information. If the
inspection reveals that the applicant is not eligible for the
coverage applied for, the facility plan shall inform the
applicant within 59 days of the inception of the policy that the
policy will be rescinded under section 65A.01, subdivision 3,
paragraph (b), or canceled under section 65A.38. If the
applicant is eligible for other coverage provided by
the facility plan, the facility plan will offer to replace the
rescinded or canceled policy with a policy providing coverage
for which the applicant is eligible.
Before the 60th day after the inception of the policy, the
facility FAIR plan shall advise the applicant that:
(a) (1) the risk is acceptable with or without a condition
charge or adjustment of policy limits. If a condition charge
applies, the facility plan will tell the insured what
improvements are necessary in order to remove the charge;
(b) (2) the risk is not acceptable unless improvements
noted by the facility plan are made by the applicant and
confirmed by the facility plan; or
(c) (3) the risk is not acceptable for the reasons stated
by the facility plan.
Subd. 2. [PREMIUM INVOICE.] If the risk is accepted, an
invoice will be delivered to the applicant requiring payment
remittance of the appropriate premium amount. After receipt of
the invoiced premium, the facility shall issue an insurance
policy to the applicant within five business days.
Subd. 3. [DECLINING A RISK.] In the event a risk is
declined because it fails to meet reasonable underwriting
standards, the applicant shall must be so notified. Reasonable
underwriting standards shall include, but are not be limited to,
the following:
(a) (1) the physical condition of the property, such as its
construction, heating, wiring, evidence of previous
fires, significant unrepaired damage, or general deterioration;
(b) its (2) the present use or housekeeping of the property
such as vacancy, overcrowding, storage of rubbish, or flammable
materials; or
(c) (3) other specific characteristics of ownership,
condition, occupancy, or maintenance which are violative of
public policy and result in increased exposure to loss.
Neighborhood or area location or any environmental hazard
beyond the control of the property owner shall are not be deemed
to be acceptable criteria for declining a risk.
Subd. 4. [APPEAL OF PLAN DECISION.] In the event that a
risk is declined on the basis that it does not meet reasonable
underwriting standards, or the coverage will be written on
condition that the property be improved, the facility plan
shall, within five business days, send copies of the inspection
report to the applicant and the commissioner, and shall advise
the applicant of the right to and the procedure for an appeal to
the governing board and to the commissioner.
Subd. 5. [ACTION ON COMPLETED APPLICATION.] The facility
plan must within five business days of the receipt of a
completed application advise the applicant that the risk has
been declined, the risk has been accepted, or that the risk
meets preliminary underwriting standards and a policy has been
issued limit of coverage has been adjusted to reflect the
insurable value of the subject property.
Sec. 14. Minnesota Statutes 2002, section 65A.37, is
amended to read:
65A.37 [POLICY FORMS.]
All policies shall must be on standard policy forms at loss
costs published by Insurance Services Office, issued for a term
of one year, and approved by the commissioner. All homeowners,
cooperative housing insurance, and condominium unit owners
insurance policies must be on forms published by Insurance
Services Office and approved by the commissioner.
Sec. 15. Minnesota Statutes 2002, section 65A.375, is
amended to read:
65A.375 [RATES FOR COOPERATIVE HOUSING AND NEIGHBORHOOD
REAL ESTATE TRUSTS.]
The commissioner shall set the insurance rates for
cooperative housing, organized under chapter 308A, and for
neighborhood real estate trusts, characterized as nonprofit
ownership of real estate with resident control. The rates must
be actuarially sound. All other rates used by the Minnesota
FAIR plan must be approved by the commissioner prior to use.
Sec. 16. Minnesota Statutes 2002, section 65A.38,
subdivision 1, is amended to read:
Subdivision 1. The facility Minnesota FAIR plan shall not
cancel a policy issued under sections 65A.31 to 65A.42 except
for:
(a) (1) for cause which would have been grounds for
nonacceptance of the risk under the program had the cause been
known to the facility plan at the time of acceptance;
(b) (2) for nonpayment of premium; or
(c) (3) with the approval of the governing board.
Sec. 17. Minnesota Statutes 2002, section 65A.38,
subdivision 5, is amended to read:
Subd. 5. Cancellation of a commercial property insurance
policy issued by the facility Minnesota FAIR plan must comply
with sections 60A.35 to 60A.38.
Sec. 18. Minnesota Statutes 2002, section 65A.40, is
amended to read:
65A.40 [EDUCATION PROGRAMS.]
The facility plan will undertake a continuing public
education program, in cooperation with producers and others, to
assure that the Minnesota FAIR Plan Act receives adequate public
attention.
Sec. 19. Minnesota Statutes 2002, section 65A.41, is
amended to read:
65A.41 [AGENTS.]
Subdivision 1. [GENERALLY.] A person licensed under
chapter 60K may submit an application for coverage to
the facility Minnesota FAIR plan and receive a commission from
the facility plan for submitting the application premiums paid
for coverage. However, the licensee is not an agent of
the facility Minnesota FAIR plan for purposes of state law. All
checks or similar instruments submitted in payment of facility
plan premiums must be made payable to the facility Minnesota
FAIR plan and not the agent.
Subd. 2. [DUTY TO SUBMIT APPLICATION.] An agent or broker
shall not refuse to submit an application for basic property
insurance coverage to the facility Minnesota FAIR plan if
licensed to write and actively engaged in writing such insurance.
Sec. 20. Minnesota Statutes 2002, section 65A.42, is
amended to read:
65A.42 [IMMUNITY FROM LIABILITY.]
There shall be is no civil or criminal liability on the
part of, and no cause of action of any nature shall arise arises
against insurers, the facility Minnesota FAIR plan, the
governing board, or employees of the facility plan or the
commissioner or the commissioner's authorized representatives,
for any acts or omissions by them if the acts or omissions were
in good faith and within the scope of their responsibilities
under sections 65A.31 to 65A.42. The inspection reports and
communications of the inspection vendors and the facility
Minnesota FAIR plan are not public documents.
Sec. 21. [REPEALER.]
Minnesota Statutes 2002, section 65A.33, subdivision 5, is
repealed.
Sec. 22. [EFFECTIVE DATE; APPLICATION.]
Sections 1 to 3 are effective August 1, 2003, and apply to
all notices regarding termination of coverage due to attainment
of the limiting age sent on or after that date.
Presented to the governor May 9, 2003
Signed by the governor May 13, 2003, 1:20 p.m.
Official Publication of the State of Minnesota
Revisor of Statutes