Chapter 371

2008 -- S 2444

Enacted 07/08/08

 

A N A C T

RELATING TO INSURANCE

          

     Introduced By: Senator Kevin A. Breene

     Date Introduced: February 13, 2008

 

It is enacted by the General Assembly as follows:

 

     SECTION 1. Section 27-2.4-5 of the General Laws in Chapter 27-2.4 entitled "Producer

Licensing Act" is hereby amended to read as follows:

 

     27-2.4-5. Exceptions to licensing. -- (a) Nothing in this chapter shall be construed to

require an insurer to obtain an insurance producer license. In this section, the term "insurer" does

not include an insurer's officers, directors, employees, subsidiaries or affiliates.

      (b) A license as an insurance producer shall not be required of the following:

      (1) An officer, director or employee of an insurer or of an insurance producer, provided

that the officer, director or employee does not receive any commission or fees on policies written

or sold to insure risks residing, located or to be performed in this state; and:

      (i) The officer, director or employee's activities are executive, administrative,

managerial, clerical or a combination of these, and are only indirectly related to the sale,

solicitation or negotiation of insurance; or

      (ii) The officer, director or employee's function relates to underwriting, loss control,

inspection or the processing, adjusting, investigating or settling of a claim on a contract of

insurance; or

      (2) The officer, director or employee is acting in the capacity of a special agent or

agency supervisor assisting insurance producers where the person's activities are limited to

providing technical advice and assistance to licensed insurance producers and do not include the

sale, solicitation or negotiation of insurance;

      (3) A person who secures and furnishes information: (i) for the purpose of group life

insurance, group property and casualty insurance, group annuities, group or blanket accident and

health insurance; or (ii) for the purpose of enrolling individuals under plans, issuing certificates

under plans or assisting in administering plans; or (iii) performs administrative services related to

mass marketed property and casualty insurance; where no commission or fee is paid to the person

for the service;

      (4) An employer or association or its officers, directors, employees, or the trustees of an

employee trust plan, to the extent that the employers, officers, employees, director or trustees are

engaged in the administration or operation of a program of employee benefits for the employer's

or association's own employees or the employees of its subsidiaries or affiliates, which program

involves the use of insurance issued by an insurer, as long as the employers, associations,

officers, directors, employees or trustees are not in any manner compensated, directly or

indirectly, by the company issuing the contracts;

      (5) Employees of insurers or organizations employed by insurers who are engaging in

the inspection, rating or classification of risks, or in the supervision of the training of insurance

producers and who are not individually engaged in the sale, solicitation or negotiation of

insurance;

      (6) A person whose activities in this state are limited to advertising without the intent to

solicit insurance in this state through communications in printed publications or other forms of

electronic mass media whose distribution is not limited to residents of the state, provided that the

person does not sell, solicit or negotiate insurance that would insure risks residing, located or to

be performed in this state;

      (7) A person who is not a resident of this state who sells, solicits or negotiates a contract

of insurance for commercial property and casualty risks to an insured with risks located in more

than one state insured under that contract, provided that that person is licensed as an insurance

producer to sell, solicit or negotiate that insurance in the state where the insured maintains its

principal place of business and the contract of insurance insurers risks located in that state;

      (8) A salaried full-time employee who counsels or advises his or her employer relative to

the insurance interests of the employer or of the subsidiaries or business affiliates of the employer

provided that the employee does not sell or solicit insurance or receive a commission;

      (9) A person engaged or employed as an attorney licensed to practice law in Rhode

Island and provided those persons do not sell, solicit or negotiate insurance;

      (10) An actuary or a certified public accountant engaged or employed in a consulting

capacity performing duties incidental to that position and provided those persons do not sell,

solicit or negotiate insurance;

      (11) A licensed public adjuster acting within the scope of an applicable license and

provided those persons do not sell, solicit or negotiate insurance; or

      (12) Rental car companies and their employees principally engaged in the rental of motor

vehicles and which offer in connection with and incidental to the rental of those motor vehicles

various optional insurance coverage during the term of the rental agreement which shall be no

more than forty-five (45) sixty (60) days.

 

     SECTION 2. Section 27-6-39 of the General Laws in Chapter 27-6 entitled "Fire and

Marine Insurance Rating" is hereby amended to read as follows:

 

     27-6-39. Examination of rating and advisory organizations and underwriting and

reinsurance groups. -- The commissioner shall, at least once in five (5) years, make or cause to

be made an examination of each rating organization licensed in this state as provided in section

27-6-23 and the commissioner may, as often as he or she may deem it expedient, make or cause

to be made an examination of each advisory organization referred to in section 27-6-33 and of

each group, association, or other organization referred to in section 27-6-37. The total cost of

those examinations shall be borne by the examined organization and shall be one hundred thirty-

five percent (135%) one hundred fifty percent (150%) of the total salaries paid to the examining

personnel of the banking and insurance division engaged in those examinations less any salary

reimbursements and shall be paid to the insurance commissioner to and for the use of the state.

This assessment shall be in addition to any taxes and fees payable to the state. The officers,

manager, agents, and employees of the rating organization, advisory organization, or group,

association, or other organization may be examined at any time under oath and shall exhibit all

books, records, accounts, documents, or agreements governing its method of operation. In lieu of

any examination the commissioner may accept the report of an examination made by the

insurance supervisory official of another state, pursuant to the laws of that state.

 

     SECTION 3. Section 27-9-36 of the General Laws in Chapter 27-9 entitled "Casualty

Insurance Rating" is hereby amended to read as follows:

 

     27-9-36. Examination of rating and advisory organizations and underwriting and

reinsurance groups. -- The commissioner may, as often as he or she may deem it necessary,

make or cause to be made an examination of each rating organization licensed in this state as

provided in section 27-9-22 and the commissioner may, as often as he or she may deem it

expedient, make or cause to be made an examination of each advisory organization referred to in

section 27-9-30 and of each group, association, or other organization referred to in section 27-9-

34, including any workers' compensation assigned risk servicing carrier or carriers. The total cost

of those examinations shall be borne by the organizations so examined and shall be one hundred

thirty-five percent (135%) of the total salaries paid to the examining personnel of the banking and

insurance division engaged in those examinations less any salary reimbursements and shall be

paid to the insurance commissioner to and for the use of the state. This assessment shall be in

addition to any taxes and fees payable to the state. All such examinations shall be performed in

accordance with the requirements of section 27-13.1-1 et seq. The officers, managers, agents, and

employees of any rating organization, advisory organization, or group, association, or other

organization of insurers, including workers' compensation assigned risk servicing carrier or

carriers, may be examined at any time under oath and shall exhibit all books, records, accounts,

documents, or agreements governing its method of operation. In lieu of any examination the

commissioner may accept the report of an examination made by the insurance supervisory official

of another state, pursuant to the laws of that state.

 

     SECTION 4. Section 27-16-1.2 of the General Laws in Chapter 27-16 entitled

"Unauthorized Insurance Business" is hereby amended to read as follows:

 

     27-16-1.2. Certificate of compliance -- Exceptions. -- (a) It shall be unlawful for any

insurer to transact insurance business in this state as set forth in subsection (b) of this section

without a certificate of compliance from the commissioner; provided, that this section shall not

apply to:

      (1) The lawful transaction of surplus lines insurance;

      (2) The lawful transaction of reinsurance by insurers;

      (3) Transactions in this state involving a policy lawfully solicited, written, and delivered

outside of this state covering only subjects of insurance not resident, located, or expressly to be

performed in this state at the time of issuance, and which transactions are subsequent to the

issuance of the policy;

      (4) Attorneys acting in the ordinary relation of attorney and client in the adjustment of

claims or losses;

      (5) Transactions in this state involving group life and group sickness and accident or

blanket sickness and accident insurance or group annuities where the master policy of the groups

was lawfully issued and delivered in and pursuant to the laws of a state in which the insurer was

authorized to do an insurance business, to a group organized for purposes other than the

procurement of insurance, and where the policyholder is domiciled or has a bona fide situs;

      (6) Transactions in this state involving any policy of insurance or annuity contract issued

prior to May 15, 1973;

      (7) Transactions in this state relative to a policy issued outside of this state involving

insurance on vessels, craft, or hulls, cargoes, marine protection, and indemnity or other risk,

including strikes and war risks commonly insured under ocean or wet marine forms of policy;

      (8) Transactions in this state involving contracts of insurance issued to one or more

industrial insured. An industrial insured is defined as an insured:

      (i) Which procures the insurance of any risk by the use of the services of a full-time

employee acting as insurance manager or buyer or the services of a regularly and continuously

retained qualified insurance consultant;

      (ii) Whose aggregate annual premiums on all risks excluding workers' compensation and

group total at least twenty-five thousand dollars ($25,000); and

      (iii) Which has at least twenty-five (25) full-time employees; and

      (9) (i) Transactions in this state involving life insurance, health insurance, or annuities

provided to educational or religious or charitable institutions organized and operated without

profit to any private shareholder or individual for the benefit of the institutions and individuals

engaged in the service of the institutions;

      (ii) This exemption shall be conditional upon the company complying with the following

requirements:

      (A) Payment of an annual registration fee of five hundred dollars ($500);

      (B) Filing a copy of any policy or contract form, including annuities issued to any Rhode

Island residents with the commissioner of insurance. Each policy and contract form, including

annuities, shall contain (on its front and declaration page) in at least twelve (12) point type the

following notice:

      NOTICE TO RHODE ISLAND RESIDENTS

      THIS CONTRACT HAS BEEN PLACED WITH AN INSURER NOT LICENSED TO

DO BUSINESS IN THE STATE OF RHODE ISLAND BUT ELIGIBLE AS AN UNLICENSED

REGISTERED INSURER PURSUANT TO THE UNAUTHORIZED BUSINESS STATUTE.

THE INSURER IS NOT A MEMBER OF THE RHODE ISLAND LIFE AND HEALTH

GUARANTY ASSOCIATION. SHOULD THE INSURER BECOME INSOLVENT, THE

PROTECTION AND BENEFITS OF THE ASSOCIATION ARE NOT AVAILABLE.

      (C) Filing a copy of its annual statement, prepared pursuant to the laws of its state of

domicile, and any other financial material that may be requested by the commissioner; and

      (D) The company agrees to appoint the commissioner of insurance, and his or her

successors in office, as its attorney to receive service of legal process issued against it in Rhode

Island. The appointment is to be irrevocable and to bind the commissioner, and any successors in

interest, and to remain in effect as long as there is in force in this state any contract issued by the

company or any obligations arising from a contract.

      (10) Rental car companies and their employees principally engaged in the rental of motor

vehicles and which offer in connection with and incidental to the rental of motor vehicles various

optional insurance coverage during the term of the rental, which shall be no more than forty-five

(45) sixty (60) days.

      (11) Transactions that are insurance securitization or reinsurance transactions entered

into by a protected cell of a protected cell company organized under the Protected Cell

Companies Act, chapter 64 of this title, as those terms are defined or utilized in that chapter.

      (b) Any of the following acts in this state effected by mail or otherwise, by or on behalf

of an insurer, is deemed to constitute the transaction of an insurance business in this state. The

venue of an act committed by mail is at the point where the matter transmitted by mail is

delivered and takes effect. Unless indicated, "insurer," as used in this section, includes all

corporations, associations, partnerships, and individuals engaged as principals in the business of

insurance and also includes interinsurance exchanges and mutual benefit societies:

      (1) The making or proposing to make, as an insurer an insurance contract;

      (2) The making of or proposing to make, as guarantor or surety, any contract of guaranty

or suretyship as a vocation and not merely incidental to any other legitimate business or activity

of the guarantor or surety;

      (3) The taking or receiving of any application for insurance;

      (4) The receiving or collection of any premium, commission, membership fees,

assessments, dues, or other consideration for an insurance or any part of an insurance;

      (5) The issuance or delivery of contracts of insurance to residents of this state or to

persons authorized to do business in this state;

      (6) Directly or indirectly acting as an agent or insurance producer for or representing or

aiding on behalf of another any person or insurer in the solicitation, negotiation, procurement, or

effectuation of insurance or renewals of insurance or in the dissemination of information as to

coverage or rates, forwarding of applications, delivery of policies or contracts, inspection of risks,

fixing of rates or investigation or adjustment of claims or losses, or in the transaction of matters

subsequent to effectuation of the contract and arising out of it, or in any other manner

representing or assisting a person or insurer in the transaction of insurance with respect to

subjects of insurance, resident, located, or to be performed in this state. The provisions of this

subsection shall not operate to prohibit full-time salaried employees of a corporate insured from

acting in the capacity of an insurance manager or buyer in placing insurance in behalf of the

employer;

      (7) The transaction of any kind of insurance business specifically recognized as

transacting an insurance business within the meaning of the statutes relating to insurance; or

      (8) The transacting or proposing to transact any insurance business in substance

equivalent to any of these in a manner designed to evade the provisions of the statutes.

      (c) The failure of an insurer transacting insurance business in this state to obtain a

certificate of compliance shall not impair the validity of any act or contract of the insurer and

shall not prevent the insurer from defending any action at law or suit in equity in any court of this

state, but no insurer transacting insurance business in this state without a certificate of authority

shall be permitted to maintain an action in any court of this state to enforce any right, claim, or

demand arising out of the transaction of insurance business until the insurer shall have obtained a

certificate of authority.

      (d) In the event of the failure of any unauthorized insurer to pay any claim or loss within

the provisions of the insurance contract, any person who assisted or in any manner aided directly

or indirectly in the procurement of the insurance contract shall be liable to the insured for the full

amount of the claim or loss in the manner provided by the provisions of the insurance contract.

 

     SECTION 5. Section 27-44-9 of the General Laws in Chapter 27-44 entitled "Casualty,

Liability and Fire and Marine Insurance Rating" is hereby amended to read as follows:

 

     27-44-9. Licensing of advisory organizations. -- (a) License required. - No advisory

organization shall provide any service relating to the rates of any insurer subject to this chapter,

and no insurer shall utilize the services of the organization for those purposes unless the

organization has become licensed under subsection (d) of this section.

      (b) Authorized activities. - A licensed advisory organization may perform any of the

authorized activities enumerated in section 27-44-11 except no advisory organization may make

any filings on behalf of any insurer.

      (c) Availability of services. - No advisory organization shall refuse to supply any

services for which it is licensed in this state to any insurer authorized to do business in this state

and offering to pay the fair and usual compensation for the services.

      (d) License. - An advisory organization shall submit at the time of application:

      (1) A copy of its constitution, articles of association or incorporation, and the bylaws,

plan of operation, or other rules and regulations governing its activities;

      (2) A list of its members and subscribers;

      (3) The name and address of one or more residents of this state upon whom notices,

process affecting it, or orders of the director may be served; and

      (4) Any other relevant information and documents that the director may require.

      (e) Change of circumstances. - Every registered advisory organization shall promptly

notify the director of every material change in the facts or in the documents upon which its

registration was based.

      (f) License; fee. - If the director finds that the applicant and the natural persons through

whom it acts are competent, trustworthy, and technically qualified to provide the services

proposed, and that all requirements of law are met, he or she shall issue a license specifying the

authorized activity of the applicant. The annual fee for the license shall be forty dollars ($40.00)

one hundred dollars ($100). The director shall not issue a license if the proposed activity would

tend to create a monopoly or to substantially lessen competition.

      (g) Duration. - Licenses issued pursuant to this section shall remain in effect for three (3)

years unless sooner suspended or revoked. All in force licenses shall be transitioned into a three

(3) year licensing cycle beginning June 1, 2006, to expire every three (3) years thereafter, license

fees may be prorated for the initial renewal period as deemed appropriate by the director. The

director, after a hearing, may revoke or suspend the license of an advisory organization that does

not comply with the requirements and standards of this chapter.

 

     SECTION 6. Section 46-12.9-8 of the General Laws in Chapter 46-12.9 entitled "Rhode

Island Underground Storage Tank Financial Responsibility Act" is hereby amended to read as

follows:

 

     46-12.9-8. Review board. -- (a) There is hereby authorized, created and established the

"underground storage tank review board," to approve, modify, or deny disbursements to eligible

parties and to have such other powers as are provided herein.

      (b) The review board shall consist of ten (10) nine (9) members, as follows: the director

of the department of environmental management or his or her designee who shall be a

subordinate within the department of environmental management;. the director of the department

of business regulation or his or her designee who shall be a subordinate within the division of

insurance and who shall be a nonvoting member. The governor, with the advice and consent of

the senate, shall appoint eight (8) public members one of whom shall have expertise and

experience in financial matters. In making these appointments the governor shall give due

consideration to recommendations from the American Petroleum Institute, the Independent Oil

Marketers Association, the Oil Heat Institute, the Environment Council, the Independent Oil

Dealers Association and the Rhode Island Marine Trade Association. The newly appointed

members will serve for a term of three (3) years commencing on the day they are qualified. Any

vacancy which may occur on the board shall be filled by the governor, with the advice and

consent of the senate, for the remainder of the unexpired term in the same manner as the

member's predecessor as prescribed in this section. The members of the board shall be eligible to

succeed themselves. Members shall serve until their successors are appointed and qualified. No

one shall be eligible for appointment unless he or she is a resident of this state. The members of

the board shall serve without compensation. Those members of the board as of the effective date

of this act [July 15, 2005]who were appointed to the board by members of the general assembly

shall cease to be members of the board on the effective date of this act, and the governor shall

thereupon nominate three (3) members, each of whom shall serve the balance of the unexpired

term of his or her predecessor. Those members of the board as of the effective date of this act

[July 15, 2005]who were appointed to the board by the governor shall continue to serve the

balance of their current terms. Thereafter, the appointments shall be made by the governor as

prescribed in this section.

      (c) When claims are pending, the review board shall meet at the call of the chair no less

than four (4) times per year. All meetings shall be held consistent with chapter 46 of title 42.

      (d) The review board and its corporate existence shall continue until terminated by law.

Upon termination of the existence of the review board, all its rights and properties shall pass to

and be vested in the state.

      (e) The review board shall have the following powers and duties, together with all

powers incidental thereto or necessary for the performance of those stated in this chapter:

      (1) To elect or appoint officers and agents of the review board, and to define their duties:

      (2) To make and alter bylaws, not inconsistent with this chapter, for the administration of

the affairs of the review board. Such bylaws may contain provisions indemnifying any person

who is or was a director or a member of the review board, in the manner and to the extent

provided in section 7-6-6 of the Rhode Island nonprofit corporation act;

      (3) To approve and submit an annual report within ninety (90) days after the end of each

fiscal year to the governor, the speaker of the house of representatives, the president of the senate,

and the secretary of state, of its activities during that fiscal year. The report shall provide: an

operating statement summarizing meetings or hearings held, including meeting minutes, subjects

addressed, and decisions rendered; a summary of the review board's actions, fees levied, collected

or received as prescribed in sections 46-12.9-7 and 46-12.9-11, claims submitted, verified,

approved, modified, and denied as prescribed in section 46-12.9-7, and reconsideration hearings

held as prescribed in section 46-12.9-9; a synopsis of any law suits or other legal matters related

to the authority of the review board; and a summary of performance during the previous fiscal

year including accomplishments, shortcomings and remedies; a briefing on anticipated activities

in the upcoming fiscal year; and findings and recommendations for improvements; and a

summary of any training courses held pursuant to subdivision (f)(15) of this section. The report

shall be posted electronically as prescribed in section 42-20-8.2.

      (4) To conduct a training course for newly appointed and qualified members and new

designees of ex-officio members within six (6) months of their qualification or designation. The

course shall be developed by the executive director, approved by the board, and conducted by the

executive director. The board may approve the use of any board or staff members or other

individuals to assist with training. The training course shall include instruction in the following

areas: the provisions of chapters 46-12.9, 42-46, 36-14, and 38-2; and the boards rules and

regulations. The director of the department of administration shall, within ninety (90) days of the

effective date of this act [July 15, 2005] prepare and disseminate training materials relating to the

provisions of chapters 36-14, 38-2, and 42-46.

      (f) Upon the passage of this act and the appointment and qualification of the three (3)

new members prescribed in subsection (b) of this section, the board shall elect from among its

members a chair. Thereafter, the board shall elect annually in February a chair from among the

members. The board may elect from among its members such other officers as it deems

necessary.

      (g) Six (6) members of the board shall constitute a quorum and the vote of the majority

of the members present shall be necessary and shall suffice for any action taken by the board. No

vacancy in the membership of the board shall impair the right of a quorum to exercise all of the

rights and perform all of the duties of the board.

      (h) Members of the board shall be removable by the governor pursuant to section 36-17

and removal solely for partisan or personal reasons unrelated to capacity or fitness for the office

shall be unlawful.

 

     SECTION 7. This act shall take effect upon passage.

     

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LC01760

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