November 8, 2007, Introduced by Reps. Hune, Virgil Smith and Gaffney and referred to the Committee on Insurance.
A bill to amend 1956 PA 218, entitled
"The insurance code of 1956,"
by amending sections 3104 and 3107 (MCL 500.3104 and 500.3107),
section 3104 as amended by 2002 PA 662 and section 3107 as amended
by 1991 PA 191.
THE PEOPLE OF THE STATE OF MICHIGAN ENACT:
Sec. 3104. (1) An unincorporated, nonprofit association to be
known as the catastrophic claims association, hereinafter referred
to as the association, is created. Each insurer engaged in writing
insurance coverages that provide the security required by section
3101(1) within this state, as a condition of its authority to
transact insurance in this state, shall be a member of the
association and shall be bound by the plan of operation of the
association. Each insurer engaged in writing insurance coverages
that provide the security required by section 3103(1) within this
state, as a condition of its authority to transact insurance in
this state, shall be considered a member of the association, but
only for purposes of premiums under subsection (7)(d). Except as
expressly provided in this section, the association is not subject
to any laws of this state with respect to insurers, but in all
other respects the association is subject to the laws of this state
to the extent that the association would be if it were an insurer
organized and subsisting under chapter 50.
(2) The association shall provide and each member shall accept
indemnification for 100% of the amount of ultimate loss sustained
under personal protection insurance coverages in excess of the
following amounts in each loss occurrence:
(a) For a motor vehicle accident policy issued or renewed
before July 1, 2002, $250,000.00.
(b) For a motor vehicle accident policy issued or renewed
during the period July 1, 2002 to June 30, 2003, $300,000.00.
(c) For a motor vehicle accident policy issued or renewed
during the period July 1, 2003 to June 30, 2004, $325,000.00.
(d) For a motor vehicle accident policy issued or renewed
during the period July 1, 2004 to June 30, 2005, $350,000.00.
(e) For a motor vehicle accident policy issued or renewed
during the period July 1, 2005 to June 30, 2006, $375,000.00.
(f) For a motor vehicle accident policy issued or renewed
during the period July 1, 2006 to June 30, 2007, $400,000.00.
(g) For a motor vehicle accident policy issued or renewed
during the period July 1, 2007 to June 30, 2008, $420,000.00.
(h) For a motor vehicle accident policy issued or renewed
during the period July 1, 2008 to June 30, 2009, $440,000.00.
(i) For a motor vehicle accident policy issued or renewed
during the period July 1, 2009 to June 30, 2010, $460,000.00.
(j) For a motor vehicle accident policy issued or renewed
during the period July 1, 2010 to June 30, 2011, $480,000.00.
(k) For a motor vehicle accident policy issued or renewed
during the period July 1, 2011 to June 30, 2013, $500,000.00.
Beginning July 1, 2013, this $500,000.00 amount shall be increased
biennially on July 1 of each odd-numbered year, for policies issued
or renewed before July 1 of the following odd-numbered year, by the
lesser of 6% or the consumer price index, and rounded to the
nearest $5,000.00. This biennial adjustment shall be calculated by
the association by January 1 of the year of its July 1 effective
date.
(3) An insurer may withdraw from the association only upon
ceasing to write insurance that provides the security required by
section 3101(1) in this state.
(4) An insurer whose membership in the association has been
terminated by withdrawal shall continue to be bound by the plan of
operation, and upon withdrawal, all unpaid premiums that have been
charged to the withdrawing member are payable as of the effective
date of the withdrawal.
(5) An unsatisfied net liability to the association of an
insolvent member shall be assumed by and apportioned among the
remaining members of the association as provided in the plan of
operation. The association has all rights allowed by law on behalf
of the remaining members against the estate or funds of the
insolvent member for sums due the association.
(6) If a member has been merged or consolidated into another
insurer or another insurer has reinsured a member's entire business
that provides the security required by section 3101(1) in this
state, the member and successors in interest of the member remain
liable for the member's obligations.
(7) The association shall do all of the following on behalf of
the members of the association:
(a) Assume 100% of all liability as provided in subsection
(2).
(b) Establish procedures by which members shall promptly
report to the association each claim that, on the basis of the
injuries or damages sustained, may reasonably be anticipated to
involve the association if the member is ultimately held legally
liable for the injuries or damages. Solely for the purpose of
reporting claims, the member shall in all instances consider itself
legally liable for the injuries or damages. The member shall also
advise the association of subsequent developments likely to
materially affect the interest of the association in the claim.
(c) Maintain relevant loss and expense data relative to all
liabilities of the association and require each member to furnish
statistics, in connection with liabilities of the association, at
the times and in the form and detail as may be required by the plan
of operation.
(d) In a manner provided for in the plan of operation,
calculate and charge to members of the association a total premium
sufficient to cover the expected losses and expenses of the
association that the association will likely incur during the
period for which the premium is applicable. The premium shall
include an amount to cover incurred but not reported losses for the
period and may be adjusted for any excess or deficient premiums
from previous periods. Excesses or deficiencies from previous
periods may be fully adjusted in a single period or may be adjusted
over several periods in a manner provided for in the plan of
operation. Each member shall be charged an amount equal to that
member's total written car years of insurance providing the
security required by section 3101(1) or 3103(1), or both, written
in this state during the period to which the premium applies,
multiplied by the average premium per car. The average premium per
car shall be the total premium calculated divided by the total
written car years of insurance providing the security required by
section 3101(1) or 3103(1) written in this state of all members
during the period to which the premium applies. A member shall be
charged a premium for a historic vehicle that is insured with the
member of 20% of the premium charged for a car insured with the
member. For a car insured with a member where the insured has
waived personal protection insurance benefits under section
3107(2), the member shall be charged a premium of 20% of the
premium charged for a car insured with the member where the insured
has not had personal protection insurance benefits waived under
section 3107(2). As used in this subdivision:
(i) "Car" includes a motorcycle but does not include a historic
vehicle.
(ii) "Historic vehicle" means a vehicle that is a registered
historic vehicle under section 803a or 803p of the Michigan vehicle
code, 1949 PA 300, MCL 257.803a and 257.803p.
(e) Require and accept the payment of premiums from members of
the association as provided for in the plan of operation. The
association shall do either of the following:
(i) Require payment of the premium in full within 45 days after
the premium charge.
(ii) Require payment of the premiums to be made periodically to
cover the actual cash obligations of the association.
(f) Receive and distribute all sums required by the operation
of the association.
(g) Establish procedures for reviewing claims procedures and
practices of members of the association. If the claims procedures
or practices of a member are considered inadequate to properly
service the liabilities of the association, the association may
undertake or may contract with another person, including another
member, to adjust or assist in the adjustment of claims for the
member on claims that create a potential liability to the
association and may charge the cost of the adjustment to the
member.
(8) In addition to other powers granted to it by this section,
the association may do all of the following:
(a) Sue and be sued in the name of the association. A judgment
against the association shall not create any direct liability
against the individual members of the association. The association
may provide for the indemnification of its members, members of the
board of directors of the association, and officers, employees, and
other persons lawfully acting on behalf of the association.
(b) Reinsure all or any portion of its potential liability
with reinsurers licensed to transact insurance in this state or
approved by the commissioner.
(c) Provide for appropriate housing, equipment, and personnel
as may be necessary to assure the efficient operation of the
association.
(d) Pursuant to the plan of operation, adopt reasonable rules
for the administration of the association, enforce those rules, and
delegate authority, as the board considers necessary to assure the
proper administration and operation of the association consistent
with the plan of operation.
(e) Contract for goods and services, including independent
claims management, actuarial, investment, and legal services, from
others within or without this state to assure the efficient
operation of the association.
(f) Hear and determine complaints of a company or other
interested party concerning the operation of the association.
(g) Perform other acts not specifically enumerated in this
section that are necessary or proper to accomplish the purposes of
the association and that are not inconsistent with this section or
the plan of operation.
(9) A board of directors is created, hereinafter referred to
as the board, which shall be responsible for the operation of the
association consistent with the plan of operation and this section.
(10) The plan of operation shall provide for all of the
following:
(a) The establishment of necessary facilities.
(b) The management and operation of the association.
(c) Procedures to be utilized in charging premiums, including
adjustments from excess or deficient premiums from prior periods.
(d) Procedures governing the actual payment of premiums to the
association.
(e) Reimbursement of each member of the board by the
association for actual and necessary expenses incurred on
association business.
(f) The investment policy of the association.
(g) Any other matters required by or necessary to effectively
implement this section.
(11) Each board shall include members that would contribute a
total of not less than 40% of the total premium calculated pursuant
to subsection (7)(d). Each director shall be entitled to 1 vote.
The initial term of office of a director shall be 2 years.
(12) As part of the plan of operation, the board shall adopt
rules providing for the composition and term of successor boards to
the initial board, consistent with the membership composition
requirements in subsections (11) and (13). Terms of the directors
shall be staggered so that the terms of all the directors do not
expire at the same time and so that a director does not serve a
term of more than 4 years.
(13) The board shall consist of 5 directors, and the
commissioner shall be an ex officio member of the board without
vote.
(14) Each director shall be appointed by the commissioner and
shall serve until that member's successor is selected and
qualified. The chairperson of the board shall be elected by the
board. A vacancy on the board shall be filled by the commissioner
consistent with the plan of operation.
(15) After the board is appointed, the board shall meet as
often as the chairperson, the commissioner, or the plan of
operation shall require, or at the request of any 3 members of the
board. The chairperson shall retain the right to vote on all
issues. Four members of the board constitute a quorum.
(16) An annual report of the operations of the association in
a form and detail as may be determined by the board shall be
furnished to each member.
(17) Not more than 60 days after the initial organizational
meeting of the board, the board shall submit to the commissioner
for approval a proposed plan of operation consistent with the
objectives and provisions of this section, which shall provide for
the economical, fair, and nondiscriminatory administration of the
association and for the prompt and efficient provision of
indemnity. If a plan is not submitted within this 60-day period,
then the commissioner, after consultation with the board, shall
formulate and place into effect a plan consistent with this
section.
(18) The plan of operation, unless approved sooner in writing,
shall be considered to meet the requirements of this section if it
is not disapproved by written order of the commissioner within 30
days after the date of its submission. Before disapproval of all or
any part of the proposed plan of operation, the commissioner shall
notify the board in what respect the plan of operation fails to
meet the requirements and objectives of this section. If the board
fails to submit a revised plan of operation that meets the
requirements and objectives of this section within the 30-day
period, the commissioner shall enter an order accordingly and shall
immediately formulate and place into effect a plan consistent with
the requirements and objectives of this section.
(19) The proposed plan of operation or amendments to the plan
of operation are subject to majority approval by the board,
ratified by a majority of the membership having a vote, with voting
rights being apportioned according to the premiums charged in
subsection (7)(d) and are subject to approval by the commissioner.
(20) Upon approval by the commissioner and ratification by the
members of the plan submitted, or upon the promulgation of a plan
by the commissioner, each insurer authorized to write insurance
providing the security required by section 3101(1) in this state,
as provided in this section, is bound by and shall formally
subscribe to and participate in the plan approved as a condition of
maintaining its authority to transact insurance in this state.
(21) The association is subject to all the reporting, loss
reserve, and investment requirements of the commissioner to the
same extent as would a member of the association.
(22) Premiums charged members by the association shall be
recognized in the rate-making procedures for insurance rates in the
same manner that expenses and premium taxes are recognized.
(23) The commissioner or an authorized representative of the
commissioner may visit the association at any time and examine any
and all the association's affairs.
(24) The association does not have liability for losses
occurring before July 1, 1978.
(25) As used in this section:
(a) "Consumer price index" means the percentage of change in
the consumer price index for all urban consumers in the United
States city average for all items for the 24 months prior to
October 1 of the year prior to the July 1 effective date of the
biennial adjustment under subsection (2)(k) as reported by the
United States department of labor, bureau of labor statistics, and
as certified by the commissioner.
(b) "Motor vehicle accident policy" means a policy providing
the coverages required under section 3101(1).
(c) "Ultimate loss" means the actual loss amounts that a
member is obligated to pay and that are paid or payable by the
member, and do not include claim expenses. An ultimate loss is
incurred by the association on the date that the loss occurs.
Sec.
3107. (1) Except as provided in subsection (2), personal
Personal protection insurance benefits are payable for the
following:
(a)
Allowable Except as
provided in subsection (2), allowable
expenses consisting of all reasonable charges incurred for
reasonably necessary products, services, and accommodations for an
injured person's care, recovery, or rehabilitation. Allowable
expenses within personal protection insurance coverage shall not
include charges for a hospital room in excess of a reasonable and
customary charge for semiprivate accommodations except if the
injured person requires special or intensive care, or for funeral
and burial expenses in the amount set forth in the policy which
shall not be less than $1,750.00 or more than $5,000.00.
(b)
Work Except as provided in
subsection (3), work loss
consisting of loss of income from work an injured person would have
performed during the first 3 years after the date of the accident
if he or she had not been injured. Work loss does not include any
loss after the date on which the injured person dies. Because the
benefits received from personal protection insurance for loss of
income are not taxable income, the benefits payable for such loss
of income shall be reduced 15% unless the claimant presents to the
insurer in support of his or her claim reasonable proof of a lower
value of the income tax advantage in his or her case, in which case
the
lower value shall apply. Beginning March 30, 1973 for the
period beginning October 1, 2005 through September 30, 2006, the
benefits payable for work loss sustained in a single 30-day period
and the income earned by an injured person for work during the same
period
together shall not exceed $1,000.00 $4,400.00, which maximum
shall apply pro rata to any lesser period of work loss. Beginning
October 1, 1974 2006, the maximum shall be adjusted annually to
reflect changes in the cost of living under rules prescribed by the
commissioner but any change in the maximum shall apply only to
benefits arising out of accidents occurring subsequent to the date
of change in the maximum.
(c) Expenses not exceeding $20.00 per day, reasonably incurred
in obtaining ordinary and necessary services in lieu of those that,
if he or she had not been injured, an injured person would have
performed during the first 3 years after the date of the accident,
not for income but for the benefit of himself or herself or of his
or her dependent.
(2) A person who is 65 years of age or older and enrolled in
medicare part A or part B may waive coverage for personal
protection insurance benefits by signing a waiver on a form
provided by the insurer. An insurer shall offer a reduced premium
rate to a person who waives coverage under this subsection for
personal protection insurance benefits. Waiver of coverage for
personal protection insurance benefits applies only to personal
protection insurance benefits payable to the person or persons who
have signed the waiver form. As used in this subsection, "medicare"
means the medicare act, 42 USC 1395 to 1395hhh.
(3) (2)
A person who is 60 years of age or older and in the
event of an accidental bodily injury would not be eligible to
receive work loss benefits under subsection (1)(b) may waive
coverage for work loss benefits by signing a waiver on a form
provided by the insurer. An insurer shall offer a reduced premium
rate to a person who waives coverage under this subsection for work
loss benefits. Waiver of coverage for work loss benefits applies
only to work loss benefits payable to the person or persons who
have signed the waiver form.