2012 -- S 2594

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LC01223

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STATE OF RHODE ISLAND

IN GENERAL ASSEMBLY

JANUARY SESSION, A.D. 2012

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A N A C T

RELATING TO FINANCIAL INSTITUTIONS - DEPARTMENT OF BUSINESS

REGULATION

     Introduced By: Senators Lanzi, Miller, Ruggerio, Gallo, and Walaska

     Date Introduced: March 01, 2012

     Referred To: Senate Corporations

It is enacted by the General Assembly as follows:

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     SECTION 1. Section 19-14.10-13 of the General Laws in Chapter 19-14.10 entitled "An

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Act Adopting the Federal Secure and Fair Enforcement for Mortgage Licensing Act of 2009" is

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hereby amended to read as follows:

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     19-14.10-13. Enforcement authorities, violations and penalties. -- (a) In order to

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ensure the effective supervision and enforcement of this chapter the director or the director's

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designee may, pursuant to chapter 42-35:

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      (1) Deny, suspend, revoke, condition or decline to renew a license for a violation of this

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chapter, rules or regulations issued under this chapter or order or directive entered under this

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chapter.

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      (2) Deny, suspend, revoke, condition or decline to renew a license if an applicant or

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licensee fails at any time to meet the requirements of section 19-14.10-6 or 19-14.10-9, or

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withholds information or makes a material misstatement in an application for a license or renewal

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of a license.

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      (3) Order restitution against persons subject to this chapter for violations of this chapter.

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      (4) Impose fines on persons subject to this chapter pursuant to subsections (b), (c) and

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(d) of this section.

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      (5) Issue orders or directives under this chapter as follows:

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      (i) Order or direct persons subject to this chapter to cease and desist from conducting

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business, including immediate temporary orders to cease and desist.

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      (ii) Order or direct persons subject to this chapter to cease any harmful activities or

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violations of this chapter, including immediate temporary orders to cease and desist.

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      (iii) Enter immediate temporary orders to cease business under a license or interim

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license issued pursuant to the authority granted under this chapter if the director or the director's

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designee determines that such license was erroneously granted or the licensee is currently in

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violation of this chapter;

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      (iv) Order or direct such other affirmative action as the director or the director's designee

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deems necessary.

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      (2)(b) The director or the director's designee may impose a civil penalty on a mortgage

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loan originator and any lender or loan broker licensed under chapter 19-14 or 19-14.1 which

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employs such mortgage loan originator, if the director or the director's designee finds, on the

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record after notice and opportunity for hearing, that such mortgage loan originator has violated or

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failed to comply with any requirement of this chapter or any regulation prescribed by the director

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or the director's designee under this chapter or order issued under authority of this chapter. In

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addition, the director or the director's designee may impose a civil penalty on a lender or loan

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broker licensed under chapter 19-14 or 19-14.1 which employs any mortgage loan originator

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licensed under this chapter, if the director or the director's designee finds, on the record after

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notice and opportunity for hearing, that such lender or loan broker has violated or failed to

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comply with any requirement of this chapter or any such regulation or order.

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      (3) The maximum amount of penalty for each act or omission described in subsection (b)

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of this section shall be twenty-five thousand five hundred dollars ($25,000).

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      (4) Each violation or failure to comply with any directive or order of the director or the

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director's designee is a separate and distinct violation or failure.

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     SECTION 2. Section 27-1-40.1 of the General Laws in Chapter 27-1 entitled "Domestic

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Insurance Companies" is hereby amended to read as follows:

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     27-1-40.1. Mutual insurance holding companies. -- (a) Any mutual insurance company

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created under the laws of this state (whether pursuant to section 7-1-5 or by special act of the

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general assembly) and any foreign mutual insurance company which has been domesticated or

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redomesticated pursuant to Chapter 2.2 of this title which meets or exceeds all capital and surplus

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funds required by law for the transaction of business in Rhode Island may, in any manner

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permitted by subsection (b) of this section, reorganize into a mutual insurance holding company

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structure upon adoption of a plan of reorganization by two-thirds (2/3) vote of the board of

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directors or other governing body, approval of a plan of reorganization by the director of the

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department of business regulation, and the affirmative vote of one half (1/2) of those members or

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policyholders, constituting a quorum, present in person or by proxy at a meeting called by the

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board of directors or other governing body. Unless otherwise provided in its charter, bylaws or in

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the plan of reorganization, each member or policyholder shall have one vote, and in the case of

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any policy or contract of group life or other group insurance, the employer or other person to

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whom or in whose name the master policy or contract has been issued shall be deemed to be the

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member or policyholder and shall be entitled to one vote for each policy or contract of group

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insurance irrespective of the number of individuals insured.

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      (b) A plan of reorganization of a mutual insurance company into a mutual insurance

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holding company structure may provide for the reorganization to be effected in one of the

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following manners:

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      (1) A domestic mutual insurance company may form a mutual insurance holding

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company in accordance with the provisions of section 7-1-5 except that the approval of the plan

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of reorganization by the director of the department of business regulation shall be deemed to

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constitute the approval of the director of the department of business regulation required under

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section 7-1-5. Upon this formation, the domestic mutual insurance company shall be converted to

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a stock insurance company and shall issue to the mutual insurance holding company all of the

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authorized shares of the voting stock of the stock insurance company. The articles of

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incorporation and bylaws of the mutual insurance holding company formed in this manner shall

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provide for all then current policyholders of the converted mutual insurance company to become

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members of the mutual insurance holding company and to retain this membership interest so long

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as the policyholder has a policy in force with the converted mutual insurance company. The

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articles of incorporation and bylaws of the mutual insurance holding company also shall set forth

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the terms and conditions under which future policyholders of the stock insurance company shall

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become members of the mutual insurance holding company. The mutual insurance holding

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company at all times shall retain a majority of the issued and outstanding shares of each class of

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voting stock of the stock insurance company.

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      (2) A domestic mutual insurance company may merge its policyholders' membership

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interests into a mutual insurance holding company previously formed under the provisions of this

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section. Upon the merger, the domestic mutual insurance company shall be converted to a stock

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insurance company and shall issue to the mutual insurance holding company all of the authorized

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shares of voting stock of the stock insurance company. In connection with the merger and in

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accordance with the articles of incorporation and bylaws of the mutual insurance holding

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company, the then current policyholders of the converted mutual insurance company shall

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become members of the mutual insurance holding company and shall retain membership interest

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so long as the policyholder has a policy in force with the converted mutual insurance company.

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The mutual insurance holding company at all times shall retain a majority of the issued and

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outstanding shares of each class of voting stock of the stock insurance company.

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      (3) A domestic mutual insurance company may establish a subsidiary stock insurance

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company in accordance with the provisions of section 7-1-5 (approval of the plan of

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reorganization by the director of the department of business regulation constituting any approval

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required under section 7-1-5) and then transfer to the subsidiary stock insurance company

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substantially all of its assets and liabilities. Upon this transfer, all persons who prior to the

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transfer held policy rights with respect to or other rights as creditors of the mutual insurance

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company shall have those rights solely with respect to the subsidiary stock insurance company

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created and the corresponding liability or obligation of the mutual insurance company to those

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persons shall be assumed by the subsidiary stock insurance company. All policyholders of the

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mutual insurance company at the time of the transfer of assets and liabilities shall continue to

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have a membership interest in the mutual insurance company and the articles of incorporation and

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bylaws of the mutual insurance company shall be amended to provide this. The articles of

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incorporation and bylaws of the mutual insurance company shall also be amended to set forth the

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terms and conditions under which future policyholders of the subsidiary stock insurance company

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shall become members of the mutual insurance company. The mutual insurance company after

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this shall be considered a mutual insurance holding company for the purposes of this section and

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at all times shall retain a majority of the issued and outstanding shares of each class of voting

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stock of the subsidiary stock insurance company.

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      (c) The plan of reorganization shall specify in any detail as may be required by the

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director of the department of business regulation the manner under subsection (b) in which the

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mutual holding company structure shall be created, the capital structure of the stock insurance

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company and the mutual insurance holding company, the management of the stock insurance

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company and the mutual insurance holding company, the purposes for the reorganization, the

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articles of incorporation and bylaws of both the mutual insurance holding company and the stock

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insurance company, and the terms of and use of proceeds from any proposed sale of capital stock

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by the stock insurance company.

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      (d) The corporate existence of any mutual insurance company reorganizing into a mutual

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insurance holding company structure under this section shall not terminate, but the reorganized

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institution shall be deemed to be a continuation of entity of this reorganized mutual insurance

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company.

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      (e) The director of the department of business regulation may employ staff personnel as

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well as professional consultants and other persons to assist in the review of the plan of

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reorganization and may hold public hearings as, in the director's discretion, are desirable prior to

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granting approval of the plan of reorganization. All reasonable costs related to the review of the

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plan of reorganization, including the costs attributable to staff personnel and professional

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consultants, shall be borne by the mutual insurance company filing a plan of reorganization for

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approval.

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      (f) The department of business regulation shall issue rules and regulations implementing

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this section, which shall be administered by the director of the department of business regulation.

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      (g) Subject to applicable provisions of this title, a mutual insurance holding company

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formed pursuant to this section may: (1) invest in the stock of one or more domestic or foreign

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insurance companies; (2) acquire a domestic or foreign insurance company through consolidation

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or merger of the institution with its subsidiary insurance company; (3) merge with another mutual

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insurance holding company; (4) invest in a corporation, the purchase of the capital stock of which

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is permitted for a mutual insurance company under the laws of this state; (5) exercise any other

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power or engage in any activity permitted to a mutual insurance company organized under the

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laws of this state; and (6) exercise the powers and engage directly or indirectly in those activities

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as are now or may after this be permitted for business corporations under Chapter 1.1 of this title

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7.

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      (h) A mutual insurance holding company formed pursuant to this section, subsequent to

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its formation, shall be subject to the provisions of Chapter 35 of this title.

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     SECTION 3. Section 27-10.1-2 of the General Laws in Chapter 27-10.1 entitled "Motor

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Vehicle Damage Appraisers" is hereby amended to read as follows:

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     27-10.1-2. "Motor vehicle physical damage appraiser" defined. -- (a) "Motor vehicle

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physical damage appraiser" means any person, partnership, association, or corporation that

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practices as a business the appraising of damages to motor vehicles insured under automobile

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physical damage policies on or on behalf of third party claimants.

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      (b) A Rhode Island resident business entity acting as a motor vehicle physical damage

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appraiser may elect to obtain a motor vehicle physical damage appraiser license surplus line

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broker license. Application shall be made using the uniform business entity application. Prior to

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approving the application, the commissioner shall find both of the following:

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      (1) The business entity has paid the appropriate fees.

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      (2) The business entity has designated a licensed motor vehicle physical damage

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appraiser responsible for the business entity's compliance with the insurance laws and rules of

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this state.

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     SECTION 4. Section 42-14-2.1 of the General Laws in Chapter 42-14 entitled

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"Department of Business Regulation" is hereby amended to read as follows:

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     42-14-2.1. Reporting by certain insurers -- Settlements. -- (a) Every insurer or entity

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exempt pursuant to section 2.6 of chapter 16 of title 27 or entity permissibly self insured pursuant

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to subsection 2(c) of chapter 14.1 of title 42 providing professional liability insurance to licensed

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healthcare professionals or licensed healthcare facilities shall send a complete report to the board

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of medical licensure and discipline established pursuant to chapter 37 of title 5, or the board of

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examiners in dentistry established pursuant to chapter 31.1 of title 5 and the department of

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business regulation as to any claim, notice, settlement, judgment, or arbitration award of a claim

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or action for damages for death or personal injury caused by such person's negligence, error, or

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omission in practice or his or her rendering of unauthorized professional services. The report shall

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be sent within thirty (30) days after service of such arbitration award on the parties or notice of

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the claim, settlement, judgment, or arbitration award.

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      (b) Notwithstanding any other provision of law, an insurer or entity exempt pursuant to

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section 2.6 of chapter 16 of title 27 or entity permissibly self insured pursuant to subsection 2(c)

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subsection (2) of chapter 14.1 of title 42 providing professional liability coverage to licensed

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healthcare professionals or licensed healthcare facilities shall have the contractual right to settle

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any claim up to the limits of the policy without the insured's consent, unless the policy by its

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express terms prohibits the insurer from settling any claim without the consent of the insured.

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      (c) All insurers doing business in the state of Rhode Island or entity exempt pursuant to

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section 2.6 of chapter 16 of title 27 or entity permissibly self insured pursuant to subsection 2(c)

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subsection (2) of chapter 14.1 of title 42 providing professional liability insurance for health care

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professionals or licensed healthcare facilities shall file an annual report with the commissioner of

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insurance. This report must be filed for each year by March 1 of the next year. The information

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required for each year shall include, for each rating class:

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      (1) The number of insured;

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      (2) The total premiums paid;

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      (3) The total number of claims made, the years in which the incidents giving rise to the

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claims occurred, and the total number of those claims outstanding at the end of the year;

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      (4) The total amount of claims paid, the years in which the incidents giving rise to the

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claims occurred, and the amount of the costs which can be identified with these claims for

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investigation, processing, and defense of these claims; and

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      (5) The number of lawsuits filed.

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     SECTION 5. This act shall take effect upon passage.

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LC01223

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EXPLANATION

BY THE LEGISLATIVE COUNCIL

OF

A N A C T

RELATING TO FINANCIAL INSTITUTIONS - DEPARTMENT OF BUSINESS

REGULATION

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     This act would correct typographical errors in four banking and insurance statutes.

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     This act would take effect upon passage.

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LC01223

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