Bill Summary – FastDemocracy

SENATE BILL NO. 793
     March 14, 2024, Introduced by Senators CAVANAGH, BAYER, POLEHANKI, SHINK, GEISS,
       MCBROOM, RUNESTAD, WOJNO, MCCANN, IRWIN, KLINEFELT and CHANG and
       referred to the Committee on Finance, Insurance, and Consumer Protection.
          A bill to amend 1956 PA 218, entitled
    "The insurance code of 1956,"
    by amending sections 134 and 3104 (MCL 500.134 and 500.3104),
    section 134 as amended by 1990 PA 256 and section 3104 as amended
    by 2019 PA 21.
                   THE PEOPLE OF THE STATE OF MICHIGAN ENACT:
       Sec. 134. (1) Every certificate of authority or license in
 force immediately prior to before January 1, 1957 and existing
 under any act repealed by this act is valid until its original
 expiration date, unless earlier terminated in accordance with this
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 act.
        (2) Any plan of operation adopted by an association or
 facility, and any premium or assessment levied against an insurer
 member of that association or facility, is hereby validated valid
 retroactively to the date of its original adoption or levy and
 shall continue continues in force and effect according to the terms
 of the plan of operation, premium, or assessment until otherwise
 changed by the commissioner director or the board of directors of
 the association or facility pursuant to this act.
        (3) An association or facility or the board of directors of
 the association or facility is not a state agency and the money of
 an association or facility is not state money.
        (4) A Except as otherwise provided in section 3104, a record
 of an association or facility shall be exempted is exempt from
 disclosure pursuant to under section 13 of the freedom of
 information act, Act No. 442 of the Public Acts of 1976, being
 section 15.243 of the Michigan Compiled Laws 1976 PA 442, MCL
 15.243.
        (5) Any premium or assessment levied by an association or
 facility, or any premium or assessment of a similar association or
 facility formed under a law in force outside this state, is not a
 burden or special burden for purposes of a calculation under
 section 476a, and any premium or assessment paid to an association
 or facility shall not be included in determining the aggregate
 amount a foreign insurer pays to the commissioner department of
 treasury under section 476a.
        (6) As used in this section, "association or facility" means
 an association of insurers created under this act and any other
 association or facility formed under this act as a nonprofit
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 organization of insurer members, including, but not limited to, the
 following:
       (a) The Michigan worker's compensation placement facility
 created under chapter 23.
       (b) The Michigan basic property insurance association created
 under section chapter 29.
       (c) The catastrophic claims association created under chapter
 31.
       (d) The Michigan automobile insurance placement facility
 created under chapter 33.
       (e) The Michigan life and health insurance guaranty
 association created under chapter 77.
       (f) The property and casualty guaranty association created
 under chapter 79.
       (g) The assigned claims facility created under section 3171.
       Sec. 3104. (1) The catastrophic claims association is created
 as an unincorporated, nonprofit association. Each insurer engaged
 in writing insurance coverages that provide the security required
 by section 3101(1) 3101 in this state, as a condition of its
 authority to transact insurance in this state, shall be a member of
 the association and is bound by the plan of operation of the
 association. An insurer engaged in writing insurance coverages that
 provide the security required by section 3103(1) in this state, as
 a condition of its authority to transact insurance in this state,
 is considered to be 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
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 the extent that the association would be if it were an insurer
 organized and subsisting under chapter 50.
       (2) For all motor vehicle accident policies issued or renewed
 before July 2, 2020 and for a motor vehicle accident policy issued
 or renewed after July 1, 2020 to which section 3107c(1)(d) applies,
 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.
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       (k) For a motor vehicle accident policy issued or renewed
 during the period July 1, 2011 to June 30, 2013, $500,000.00.
       (l) For a motor vehicle accident policy issued or renewed
 during the period July 1, 2013 to June 30, 2015, $530,000.00.
       (m) For a motor vehicle accident policy issued or renewed
 during the period July 1, 2015 to June 30, 2017, $545,000.00.
       (n) For a motor vehicle accident policy issued or renewed
 during the period July 1, 2017 to June 30, 2019, $555,000.00.
       (o) For a motor vehicle accident policy issued or renewed
 during the period July 1, 2019 to June 30, 2021, $580,000.00.
       (p) For a motor vehicle accident policy issued or renewed
 during the period July 1, 2021 to June 30, 2023, $600,000.00.
       (q) For a motor vehicle accident policy issued or renewed
 during the period July 1, 2023 to June 30, 2025, $635,000.00.
 Beginning July 1, 2021, 2025, this $580,000.00 $635,000.00 amount
 must 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. The association shall calculate
 this biennial adjustment by January 1 of the year of its July 1
 effective date.
       (3) An insurer may withdraw from the association only on
 ceasing to write insurance that provides the security required by
 section 3101(1) 3101 in this state.
       (4) An insurer whose membership in the association has been
 terminated by withdrawal continues to be bound by the plan of
 operation, and on withdrawal, all unpaid premiums that have been
 charged to the withdrawing member are payable as of the effective
 date of the withdrawal.
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        (5) An unsatisfied net liability to the association of an
 insolvent member must 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 money 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) 3101 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 must 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 relating 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 required by the plan of
 operation.
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       (d) In a manner provided for in the plan of operation, and
 subject to the director's approval, 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 total premium must include an amount to cover incurred but not
 reported losses for the period and must be adjusted for any excess
 or deficient premiums from previous periods. Excesses or
 deficiencies from previous periods must either be fully adjusted in
 a single period or be adjusted over several periods in a manner
 provided for in the plan of operation. The director may disapprove
 any total premium amount or any other amount, including a deficit
 recoupment amount, that the director considers to be excessive,
 inadequate, or unfairly discriminatory. Each member must be charged
 an amount equal to that member's total written car years of
 insurance providing the security required by section 3101(1) 3101
 or 3103(1), or both, written in this state during the period to
 which the premium applies, with the total written car years of
 insurance multiplied by the applicable average premium per car. The
 average premium per car is the total premium, as adjusted for any
 excesses or deficiencies, divided by the total written car years of
 insurance providing the security required by section 3101(1) 3101
 or 3103(1), or both, written in this state of all members during
 the period to which the premium applies, excluding cars insured
 under a policy with a coverage limit under section 3107c(1)(a),
 (b), or (c), cars as to which an election to not maintain personal
 protection insurance benefits has been made under section 3107d, or
 as to which an exclusion under section 3109a(2) applies. , except
 for any portion of total premium that is an adjustment for a
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 deficiency in a previous period. A member may not be charged a
 premium for a car insured under a policy with a coverage limit
 under section 3107c(1)(a), (b), or (c), as to which an election to
 not maintain personal protection insurance benefits has been made
 under section 3107d, or as to which an exclusion under section
 3109a(2) applies. , other than for the portion of the total premium
 attributable to an adjustment for a deficiency in a previous
 period. A member must 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.
       (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 money 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.
       (h) Cooperate with the department of treasury to allow the
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 department of treasury to manage the investment of all money held
 by the association.
       (i) (h) Provide any records necessary or requested by the
 director for the actuarial examination under subsection (21).
       (j) (i) Subject to subsection (23), obey an order of the
 director for a refund under subsection (22).
       (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 does 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 director.
       (c) Provide for appropriate housing, equipment, and personnel
 as 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 in or outside of this state to assure the efficient
 operation of the association.
       (f) Hear and determine complaints of a company or other
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 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 and shall operate the
 association consistent with the plan of operation and this section.
       (10) The plan of operation must 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.
 The plan must require that any deficiency from a prior period be
 amortized over not fewer than 15 years.
       (d) Procedures for a refund to members of the association, for
 distribution to insureds as provided in subsection (24), as ordered
 by the director under subsection (22). The procedures must provide
 for a distribution of a refund attributable to a historic vehicle
 equal to 20% of the refund for a car that is not a historic
 vehicle.
       (e) Procedures governing the actual payment of premiums to the
 association.
       (f) Reimbursement of each member of the board by the
 asso