Chapter 405
2022 -- S 2746 SUBSTITUTE A AS AMENDED
Enacted 06/30/2022

A N   A C T
RELATING TO INSURANCE -- SURPLUS LINES INSURANCE

Introduced By: Senator Roger Picard

Date Introduced: March 24, 2022

It is enacted by the General Assembly as follows:
     SECTION 1. Section 27-3-38 of the General Laws in Chapter 27-3 entitled "Surplus Lines
Insurance" is hereby amended to read as follows:
     27-3-38. Surplus line brokers -- License -- Affidavit of inability to obtain insurance --
Reports and records -- Premium tax -- Notice to purchasers.
     (a) The insurance commissioner may issue a surplus line broker's license to any person
authorizing the licensee to procure, subject to the restrictions provided in this section, policies of
insurance, except life and health and accident, except as allowed under § 27-3-38.3, from eligible
surplus lines insurers. Residents of this state must hold a an property and casualty insurance
producer license to qualify for a surplus lines broker license. This license may be denied,
suspended, or revoked by the insurance commissioner whenever, in the commissioner's judgment,
any of the bases under § 27-2.4-14 exist. Before any license is issued by the insurance commissioner
and before each renewal of a license, there shall be filed in his or her office a written application
by the person desiring the license in the form, and containing any information, that the insurance
commissioner may prescribe. For the purposes of carrying out the provisions of the Nonadmitted
and Reinsurance Reform Act of 2010, the commissioner is authorized to utilize the national
insurance producer database of the National Association of Insurance Commissioners (NAIC), or
any other equivalent uniform national database, for the licensure of a person as a surplus lines
producer and for renewal of such license. For insureds whose home state is this state, a person shall
not procure a contract of surplus lines insurance with a nonadmitted insurer unless the person
possesses a current surplus lines insurance license issued by the commissioner.
     (b) A Rhode Island resident business entity acting as a surplus line broker may elect to
obtain a surplus line broker license. Application shall be made using the uniform business entity
application. Prior to approving the application, the commissioner shall find both of the following:
     (1) The business entity has paid the appropriate fees.
     (2) The business entity has designated a licensed surplus line broker responsible for the
business entity's compliance with the insurance laws and rules of this state.
     (c) When any policy of insurance is procured under the authority of that license, there shall
be executed, both by the licensee and by the insured, affidavits setting forth facts showing that the
insured, or a licensed Rhode Island producer, were unable, after diligent effort, to procure from no
less than three (3) admitted insurers the full amount of insurance required to protect the property
owned or controlled by the insured or the risks insured. Provided, however, the aforementioned
affidavit shall not be required when insuring the following interest: amusement parks and devices,
environmental improvement and/or remediation sites, vacant property or property under
renovation, demolition operations, event cancellation due to weather, railroad liability,
discontinued products, fireworks and pyrotechnics, warehouseman's legal liability, excess property
coverage, private flood, and contingent liability. In addition, no such affidavit is required for
exempt commercial purchasers as defined by the Nonadmitted and Reinsurance Reform Act of
2010. For purposes of this section, residual market mechanisms shall not be considered authorized
insurers. Prior to renewing, continuing, or extending any policy, the licensed surplus line broker
must confirm that the insurer is on the insurance commissioner's list of approval surplus line
insurers in this state.
     (d) The licensee shall keep a complete and separate record of all policies procured from
approved surplus lines insurers under the license and these records shall be open to the examination
of both the insurance commissioner and tax administrator at all reasonable times and shall show
the exact amount of each kind of insurance permitted under this section which has been procured
for each insured; the gross premiums charged by the insurers for each kind of insurance permitted
under this section which were returned to each insured; the name of the insurer or insurers which
issued each of these policies; the effective dates of these policies; and the terms for which these
policies were issued. The licensee shall file a yearly report with the insurance commissioner on a
form prescribed by the insurance commissioner showing the business procured under the surplus
line license for the preceding calendar year, and the report shall be due annually on or before April
1.
     (e) Every person, firm, or corporation licensed pursuant to the provisions of this section
shall file with the insurance commissioner, at the time of the insurance producer license renewal,
sufficient information, as determined by the insurance commissioner, whether a licensee or a person
acting on the licensee's behalf, has paid to the tax administrator, for all policies procured by the
licensee pursuant to the license during the next preceding calendar year, a tax, computed at the rate
of four percent (4%) on the gross premiums charged the insured by the insurers, less the amount of
premiums returned to the insured. The tax administrator shall provide to the insurance
commissioner, upon request, information needed to determine compliance with this subsection.
The content and nature of the information to be disclosed shall be determined and approved by the
tax administrator, shall be the minimum necessary to determine compliance, and shall be kept
confidential by the insurance commissioner.
     (f) Every application form for insurance from a surplus lines insurer, every affidavit form
executed by the insured, and every policy (on its front and declaration pages) issued by the surplus
lines insurer, shall contain in ten-point (10) type the following notice:
     NOTICE
     THIS INSURANCE CONTRACT HAS BEEN PLACED WITH AN INSURER NOT
LICENSED TO DO BUSINESS IN THE STATE OF RHODE ISLAND BUT APPROVED AS A
SURPLUS LINES INSURER. THE INSURER IS NOT A MEMBER OF THE RHODE ISLAND
INSURERS INSOLVENCY FUND. SHOULD THE INSURER BECOME INSOLVENT, THE
PROTECTION AND BENEFITS OF THE RHODE ISLAND INSURERS INSOLVENCY FUND
ARE NOT AVAILABLE.
     SECTION 2. Section 27-4.4-4 of the General Laws in Chapter 27-4.4 entitled "The
Standard Nonforfeiture Law for Individual Deferred Annuities" is hereby amended to read as
follows:
     27-4.4-4. Minimum values.
     (a) The minimum values as specified in §§ 27-4.4-5 -- 27-4.4-8 and 27-4.4-10 of any paid-
up annuity, cash surrender, or death benefits available under an annuity contract shall be based
upon minimum nonforfeiture amounts as defined in this section.
     (b) The minimum nonforfeiture amount at any time at or prior to the commencement of
any annuity payments shall be equal to an accumulation up to that time at rates of interest as
provided in subsection (d) of this section, the net considerations as defined in this section paid prior
to that time, decreased by the sum of:
     (1) Any prior withdrawals from or partial surrenders of the contract accumulated at rates
of interest as provided in subsection (d) of this section; and
     (2) The amount of any indebtedness to the company on the contract, including interest due
and accrued;
     (3) An annual contract charge of fifty dollars ($50.00), accumulated at rates of interest as
provided in subsection (d) of this section; and
     (4) Any premium tax paid by the company for the contract, accumulated at rates of interest
as provided in subsection (d) of this section.
     (c) The net considerations for a given contract year used to define the minimum
nonforfeiture amount shall be an amount equal to eighty-seven and one-half percent (87.5%) of the
gross considerations credited to the contract during that contract year.
     (d) The interest rate used in determining minimum nonforfeiture amounts shall be an
annual rate of interest determined as the lesser of three percent (3%) per annum and the following,
which shall be specified in the contract if the interest rate will be reset:
     (1) The five-(5) year (5) Constant Maturity Treasury Rate reported by the Federal Reserve
as of a date, or average over a period, rounded to the nearest one twentieth of one percent (1/20%),
specified in the contract no longer than fifteen (15) months prior to the contract issue date or
redetermination date under subdivision (4) of this subsection;
     (2) Reduced by one hundred twenty-five (125) basis points;
     (3) Where the resulting interest rate is not less than one percent (1%); and
     (4) The interest rate shall apply for an initial period and may be redetermined for additional
periods. The redetermination date, basis and period, if any, shall be stated in the contract. The basis
is the date or average over a specified period that produces the value of the five-(5) year (5)
Constant Maturity Treasury Rate to be used at each redetermination date.
     (e) During the period or term that a contract provides substantive participation in an equity
indexed benefit, it may increase the reduction described in subsection (d)(2) of this section above
by up to an additional one hundred (100) basis points to reflect the value of the equity index benefit.
The present value at the contract issue date, and at each redetermination date thereafter, of the
additional reduction shall not exceed the market value of the benefit. The commissioner of
insurance may require a demonstration that the present value of the reduction does not exceed the
market value of the benefit. Lacking such a demonstration that is acceptable to the commissioner,
the commissioner may disallow or limit the additional reduction.
     (f) The commissioner of insurance may adopt rules to implement the provisions of
subsection (e) of this section and to provide for further adjustments to the calculation of minimum
nonforfeiture amounts for contracts that provide substantive participation in an equity index benefit
and for other contracts that the commissioner determines adjustments are justified.
     SECTION 3. Section 27-7.1-11.1 of the General Laws in Chapter 27-7.1 entitled "Workers'
Compensation Insurance" is hereby amended to read as follows:
     27-7.1-11.1. Challenge and review of application of rating system.
     (a) An advisory organization and every insurer subject to this chapter which that makes its
own rate shall provide within this state reasonable means where any person aggrieved by the
application of its rating system may upon that person's written request be heard in person or by the
person's authorized representative representative's written request to review the manner in which
the rating system has been applied in connection with the insurance afforded the aggrieved person.
     (b) Any party affected by the action of an advisory organization or the insurer may, within
thirty (30) days after written notice of that action, make application, in writing, for an appeal to the
director, setting forth the basis for the appeal and the grounds to be relied upon by the applicant. If
the advisory organization or insurer fails to grant or reject the request within thirty (30) days after
it is made, the applicant may proceed in the same manner as if the application has been rejected.
     (c) The director shall review the application and, if the director finds that the application is
made in good faith and that it sets forth on its face grounds which that reasonably justify holding
a hearing, the director shall conduct a hearing held not less than ten (10) days after written notice
to the applicant and to an advisory organization or insurer. The director, after a hearing, shall affirm
or reverse the action of an advisory organization or insurer.
     (d) If, after a hearing held under this section, it is determined that the rates charged by an
insurer are in excess of the appropriate rate, the overcharge shall be refunded to the insured.
     SECTION 4. Section 27-29-4 of the General Laws in Chapter 27-29 entitled "Unfair
Competition and Practices" is hereby amended to read as follows:
     27-29-4. Unfair methods of competition and unfair or deceptive acts or practices
defined.
     The following are defined as unfair methods of competition and unfair and deceptive acts
or practices in the business of insurance:
     (1) Misrepresentations and false advertising of policies or contracts. Making, issuing,
circulating, or causing to be made, issued, or circulated, any estimate, illustration, circular, or
statement, sales presentation, omission, or comparison misrepresenting the terms of any policy
issued or to be issued or the benefits, conditions, or advantages promised by any policy or the
dividends or share of the surplus to be received on any policy, or making any false or misleading
statement as to the dividends or share of surplus previously paid on any policy, or making any
misleading representation or any misrepresentation as to the financial condition of any insurer, or
as to the legal reserve system upon which any life insurer operates, or using any name or title of
any policy or class of policies misrepresenting the true nature of that policy or class of policies, or
making any misrepresentation to any policyholder insured in any company including any
intentional misquote of a premium rate, for the purpose of inducing or tending to induce the
policyholder to lapse, forfeit, or surrender his or her insurance, or misrepresenting for the purpose
of effecting a pledge or assignment of or effecting a loan against any policy, or misrepresenting
any policy as being share or stock;
     (2) False information and advertising generally. Making, publishing, disseminating,
circulating, or placing before the public or causing, directly or indirectly, to be made, published,
disseminated, circulated, or placed before the public in a newspaper, magazine, or other
publication, or in the form of a notice, circular, pamphlet, letter, or poster, or over any radio or
television station, or in any other way, an advertisement, announcement, or statement containing
any assertion, representation, or statement with respect to the business of insurance or with respect
to any person in the conduct of his or her insurance business that is untrue, deceptive, or misleading;
     (3) Defamation. Making, publishing, disseminating, or circulating, directly or indirectly,
or aiding, abetting, or encouraging the making, publishing, disseminating, or circulating of any oral
or written statement or any pamphlet, circular, article of literature that is false or maliciously critical
of or derogatory to the financial condition of an insurer, and that is calculated to injure any person
engaged in the business of insurance;
     (4) Boycott, coercion, and intimidation. Entering into any agreement to commit, or by any
concerted action committing, any act of boycott, coercion, or intimidation resulting in or tending
to result in unreasonable restraint of, or monopoly in, the business of insurance;
     (5)(i) False financial statements. Knowingly filing with any supervisory or other public
official, or knowingly making, publishing, disseminating, circulating, or delivering to any person,
or placing before the public or causing directly or indirectly, to be made, published, disseminated,
circulated, delivered to any person, or placed before the public any false material statement of
financial condition of an insurer; or
     (ii) Knowingly making any false entry of a material fact in any book, report, or statement
of any insurer or knowingly omitting to make a true entry of any material fact pertaining to the
business of the insurer in any book, report, or statement of the insurer;
     (6) Stock operations and advisory board contracts. Issuing or delivering or permitting
agents, officers, or employees to issue or deliver agency company stock or other capital stock, or
benefit certificates or shares in any common law corporation, or securities of any special or advisory
board contracts or other contracts of any kind promising returns and profits as an inducement to
insurance;
     (7)(i) Unfair discrimination. Making or permitting any unfair discrimination between
individuals of the same class and equal expectation of life in the rates charged for any policy of life
insurance or of life annuity or in the dividends or other benefits payable on any such policy or life
annuity, or in any other of the terms and conditions of the policy;
     (ii) Making or permitting any unfair discrimination between individuals of the same class
and of essentially the same hazard in the amount of premium, policy fees, or rates charged for any
policy or contract of accident or health insurance or in the benefits payable under any policy or
contract, or in any of the terms or conditions of that policy, or in any other manner;
     (iii) Making or permitting any unfair discrimination between individuals or risks of the
same class and of essentially the same hazards by refusing to issue, refusing to renew, canceling,
or limiting the amount of insurance coverage on a property or casualty risk because of the
geographic location of the risk, unless:
     (A) The refusal, cancellation, or limitation is for a business purpose that is not a pretext for
unfair discrimination; or
     (B) The refusal, cancellation, or limitation is required by law or regulation;
     (iv) Making or permitting any unfair discrimination between individuals or risks of the
same class and of essentially the same hazards by refusing to issue, refusing to renew, canceling,
or limiting the amount of insurance coverage on a residential property risk, or the personal property
contained in the residential property risk, because of the age of the residential property, unless:
     (A) The refusal, cancellation, or limitation is for a business purpose that is not a pretext for
unfair discrimination; or
     (B) The refusal, cancellation, or limitation is required by law or regulation;
     (v) Refusing to insure, refusing to continue to insure, or limiting the amount of coverage
available to an individual because of the sex or marital status of the individual; nothing in this
subsection shall prohibit an insurer from taking marital status into account for the purpose of
defining persons eligible for dependent benefits;
     (vi) To terminate, or to modify coverage, or to refuse to issue or refuse to renew any
property or casualty policy solely because the applicant or insured or any employee of either is
mentally or physically impaired; provided, that this subsection shall not apply to accident and health
insurance sold by a casualty insurer and, provided that this subsection shall not be interpreted to
modify any other provision of law relating to the termination, modification, issuance or renewal of
any insurance policy or contract; or
     (vii) Making or permitting any unfair discrimination by treating persons in a domestic
partnership as defined in § 27-29-2, differently than persons in a marriage for the purposes of
premiums, policy fees, or rates charged for policies of casualty, fire, homeowners, accident and
sickness, marine, or automobile insurance;
     (8)(i)
     (i) Rebates. Except as otherwise expressly provided by law, knowingly permitting or
offering to make or making any policy or agreement as to the policy other than as plainly expressed
in the policy issued on it, or paying or allowing or giving or offering to pay, allow, or give, directly
or indirectly, as inducement to the policy, any rebate of premiums payable on the policy, or any
special favor or advantage in the dividends or other benefits on the policy, or any valuable
consideration or inducement not specified in the policy, or giving, selling, or purchasing or offering
to give, sell, or purchase as inducement to the policy, or in connection with the policy, any stocks,
bonds, or other securities of any insurance company or other corporation, association, or
partnership, or any dividends or profits accrued on the security, or anything of value not specified
in the policy;
     (ii) Nothing in subdivision subsection (7) of this section or paragraph subsection 8(i) of
this subdivision section shall be construed as including within the definition of discrimination or
rebates any of the following practices:
     (A) In the case of any contract of life insurance policies or life annuity, annuities paying
bonuses to policyholders or abating their premiums in whole or in part out of surplus accumulated
from nonparticipating insurance; provided, that any bonuses or abatement of premiums shall be fair
and equitable to policyholders and for the best interests of the company and its policyholders;
     (B) In the case of life insurance policies issued on the industrial debit plan, making
allowance to policyholders who have continuously for a specified period made premium payments
directly to an office of the insurer in an amount that fairly represents the saving in collection
expenses; and
     (C) Readjustment of the rate of premium for a group insurance policy based on the loss or
expense experience under it, at the end of the first or any subsequent policy year of insurance under
the policy, which may be made retroactive only for the policy year;
     (D) Engaging in an arrangement that would not violate § 106 of the Bank Holding
Company Act Amendments of 1972 (12 U.S.C. § 1972), as interpreted by the Board of Governors
of the Federal Reserve System, or § 5(q) of the Home Owners' Loan Act, 12 U.S.C. § 1464(q);
     (E) The offer or provision by insurers or producers, by or through employees, affiliates, or
third-party representatives, of value-added products or services at no or reduced cost when such
products or services are not specified in the policy of insurance if the product or service:
     (I) Relates to the insurance coverage; and
     (II) Is primarily designed to satisfy one or more of the following:
     (aa) Provide loss mitigation or loss control;
     (bb) Reduce claim costs or claim settlement costs;
     (cc) Provide education about liability risks or risk of loss to persons or property;
     (dd) Monitor or assess risk, identify sources of risk, or develop strategies for eliminating
or reducing risk;
     (ee) Enhance health;
     (ff) Enhance financial wellness through items such as education or financial planning
services;
     (gg) Provide post-loss services;
     (hh) Incent behavioral changes to improve the health or reduce the risk of death or disability
of a customer (defined for purposes of this subsection as policyholder, potential policyholder,
certificate holder, potential certificate holder, insured, potential insured, or applicant); or
     (ii) Assist in the administration of the employee or retiree benefit insurance coverage.
     (III) The cost to the insurer or producer offering the product or service to any given
customer must be reasonable in comparison to that customer's premiums or insurance coverage for
the policy class.
     (IV) If the insurer or producer is providing the product or service offered, the insurer or
producer must ensure that the customer is provided with contact information to assist the customer
with questions regarding the product or service.
     (V) The commissioner may adopt regulations when implementing the permitted practices
set forth in this statute to ensure consumer protection. Such regulations, consistent with applicable
law, may address, among other issues, consumer data protections and privacy, consumer disclosure,
and unfair discrimination.
     (VI) The availability of the value-added product or service must be based on documented
objective criteria and offered in a manner that is not unfairly discriminatory. The documented
criteria must be maintained by the insurer or producer and produced upon request by the
department.
     (VII) If an insurer or producer does not have sufficient evidence, but has a good-faith belief
that the product or service meets the criteria in subsection (8)(ii)(E)(II) of this section, the insurer
or producer may provide the product or service in a manner that is not unfairly discriminatory as
part of a pilot or testing program for no more than one year. An insurer or producer must notify the
department of such a pilot or testing program offered to consumers in this state prior to launching
and may proceed with the program unless the department objects within twenty-one (21) days of
notice.;
     (F)(I) Offering or giving non-cash gifts, items, or services, including meals to or charitable
donations on behalf of a customer, in connection with the marketing, sale, purchase, or retention of
contracts of insurance, as long as the cost does not exceed an amount determined to be reasonable
by the commissioner per policy year per term. The offer must be made in a manner that is not
unfairly discriminatory. The customer may not be required to purchase, continue to purchase, or
renew a policy in exchange for the gift, item, or service.
     (II) Offering or giving non-cash gifts, items, or services including meals to or charitable
donations on behalf of a customer, to commercial or institutional customers in connection with the
marketing, sale, purchase, or retention of contracts of insurance, as long as the cost is reasonable
in comparison to the premium or proposed premium and the cost of the gift or service is not
included in any amounts charged to another person or entity. The offer must be made in a manner
that is not unfairly discriminatory. The customer may not be required to purchase, continue to
purchase, or renew a policy in exchange for the gift, item, or service.
     (III) Conducting raffles or drawings to the extent permitted by state law, as long as there is
no financial cost to entrants to participate, the drawing or raffle does not obligate participants to
purchase insurance, the prizes are not valued in excess of a reasonable amount determined by the
commissioner, and the drawing or raffle is open to the public. The raffle or drawing must be offered
in a manner that is not unfairly discriminatory. The customer may not be required to purchase,
continue to purchase, or renew a policy in exchange for the gift, item, or service.;
     (iii) An insurer, producer or representative of either may not offer or provide insurance as
an inducement to the purchase of another policy or otherwise use the words "free", "no cost", or
words of similar import, in an advertisement.
     (9)(i) Free choice of insurance producer or insurer. When any person, firm, or corporation
engaged in the business of lending money on the security of real or personal property, or in the
business of negotiating, purchasing, selling, or holding loans on the security of real property, or in
the business of building, selling, or financing the sale or purchase of real property, or any trustee,
director, officer, agent, or other employee of that person, firm, or corporation, requires that property
insurance be procured for the property, the borrower, debtor, or purchaser shall have free choice of
insurance producer and insurer through or by which the insurance is to be placed or written, subject
only to the right of the builder, creditor, lender, or seller:
     (A) To require evidence, to be produced at a reasonable time prior to commencement or
renewal of risk, that the insurance providing reasonable coverage has been obtained in an amount
equal to the amount required by the builder, creditor, lender, or seller;
     (B) To require insurance in an insurer authorized to do business and having a licensed
resident insurance producer agent in this state; and
     (C) To refuse to accept insurance in a particular insurer on reasonable grounds related to
solvency;
     (ii) When any contractor or subcontractor is required to procure a surety bond or policy of
insurance with respect to any building or construction contract that is about to be, or that has been
bid or entered into, the contractor or subcontractor shall have free choice of insurance producer and
insurer through or by which the surety bond or insurance is to be written; provided, that the owner
or contractor shall have the right: (A) To require evidence, to be produced at a reasonable time
prior to commencement or renewal of risk, that the insurance providing reasonable coverage has
been obtained in an amount equal to the amount required by the builder, creditor, lender, or seller;
(B) To require insurance in an insurer authorized to do business and having a licensed resident
insurance producer in this state; and (C) To refuse to accept insurance in a particular insurer on
reasonable grounds related to solvency; provided, that the owner or contractor shall have the right
to approve the form, sufficiency, or manner of execution of the surety bond or policy or insurance
furnished by the insurance company or insurance producer selected by the contractor or
subcontractor;
     (iii) No person who lends money or extends credit may:
     (A) Solicit insurance for the protection of real property after a person indicates interest in
securing a first mortgage credit extension until that person has received a commitment in writing
from the lender as to a loan or credit extension;
     (B) Unreasonably reject a policy furnished by the borrower for the protection of the
property securing the creditor lien. A rejection shall not be deemed unreasonable if it is based on
reasonable standards, uniformly applied, relating to the extent of coverage required and the
financial soundness and the services of an insurer. The standards shall not discriminate against any
particular type of insurer, nor shall the standards call for rejection of a policy because it contains
coverage in addition to that required in the credit transaction;
     (C) Require that any borrower, mortgagor, purchaser, insurer, or insurance producer pay a
separate charge, in connection with the handling of any policy required as security for a loan on
real estate, or pay a separate charge to substitute the policy of one insurer for that of another. This
subsection does not include the interest that may be charged on premium loans or premium
advancements in accordance with the terms of the loan or credit document;
     (D) Use or disclose, without the prior written consent of the borrower, mortgagor, or
purchaser taken at a time other than the making of the loan or extension of credit, information
relative to a policy that is required by the credit transaction, for the purpose of replacing the
insurance; or
     (E) Require any procedures or conditions of duly licensed insurance producers or insurers
not customarily required of those insurance producers or insurers affiliated or in any way connected
with the person who lends money or extends credit;
     (iv) Every person who lends money or extends credit and who solicits insurance on real
and personal property subject to paragraph (iii) of this subdivision subsection (9)(iii) of this
section shall explain to the borrower in writing that the insurance related to the credit extension
may be purchased from an insurer or insurance producer of the borrower's choice, subject only to
the lender's right to reject a given insurer or insurance producer as provided in paragraph (iii)
subsection (9)(iii)(B) of this subdivision section. Compliance with disclosures as to insurance
required by truth-in-lending laws or comparable state laws shall be compliance with this subsection;
     (v) This requirement for a commitment shall not apply in cases where the premium for the
required insurance is to be financed as part of the loan or extension of credit involving personal
property transactions;
     (vi) The commissioner shall have the power to examine and investigate those insurance-
related activities of any person or insurer that the commissioner believes may be in violation of this
section. Any affected person may submit to the commissioner a complaint or material pertinent to
the enforcement of this section;
     (vii) Nothing in this section shall prevent a person who lends money or extends credit from
placing insurance on real or personal property in the event the mortgagor, borrower, or purchaser
has failed to provide required insurance in accordance with the terms of the loan or credit document;
     (viii) Nothing contained in this section shall apply to credit life or credit accident and health
insurance.;
     (10) Notice of free choice of insurance producer or insurer. Every debtor, borrower, or
purchaser of property with respect to which insurance of any kind on the property is required in
connection with a debt or loan secured by the property or in connection with the sale of the property,
shall be informed in writing by the builder, creditor, lender, or seller, of his or her right of free
choice in the selection of the insurance producer and insurer through or by which the insurance is
to be placed. There shall be no interference, either directly or indirectly, with the borrower's,
debtor's, or purchaser's free choice of an insurance producer and of an insurer that complies with
the requirements of this section, and the builder, creditor, lender, seller, owner, or contractor shall
not refuse the policy tendered by the borrower, debtor, purchaser, contractor, or subcontractor.
Upon notice of any refusal of the tendered policy, the insurance commissioner shall order the
builder, creditor, lender, seller, owner, or contractor to accept the tendered policy, if the
commissioner determines that the refusal is not in accordance with the requirements of this section.
Failure to comply with an order of the insurance commissioner shall be deemed a violation of this
section;
     (11) Using insurance information to detriment of another. Whenever the instrument
requires that the purchaser, mortgagor, or borrower furnish insurance of any kind on real property
being conveyed or is collateral security to a loan, the mortgagee, vendor, or lender shall refrain
from disclosing or using any and all insurance information to his or her or its own advantage and
to the detriment of either the borrower, purchaser, mortgagor, insurance company, or agency
complying with the requirements relating to insurance;
     (12) Prohibited group enrollments. No insurer shall offer more than one group policy of
insurance through any person unless that person is licensed, at a minimum, as an insurance
producer. This prohibition shall not apply to employer-employee relationships, or to any of these
enrollments;
     (13) Failure to maintain complaint handling procedures. No insurer shall fail to maintain a
complete record of all the complaints it received since the date of its last examination pursuant to
the general laws providing for examination of insurers. This record shall indicate the total number
of complaints, their classification by line of insurance, the nature of each complaint, the disposition
of each complaint, and the time it took to process each complaint. For the purposes of this
subsection, "complaint" means any written communication primarily expressing a grievance;
     (14) Misrepresentation in insurance applications. Making false or fraudulent statements or
representations on or relative to an application for a policy, for the purpose of obtaining a fee,
commission, money, or other benefit from any insurers, insurance producer, or individual person;
     (15) Requiring that repairs be made to an automobile at a specified auto body repair shop
or interfering with the insured's or claimant's free choice of repair facility. The insured or claimant
shall be promptly informed by the insurer of his or her free choice in the selection of an auto body
repair shop. Once the insured or claimant has advised the insurer that an auto body repair shop has
been selected, the insurer may not recommend that a different auto body repair shop be selected to
repair the automobile. An auto body repair shop may file a complaint with the department of
business regulation alleging a violation of this subsection (15). Whenever the department of
business regulation has reason to believe that an insurer has violated this subsection (15), the
department shall conduct an investigation and may convene a hearing. A complaint filed by an auto
body repair shop must be accompanied by a statement written and signed by the insured or claimant
setting forth the factual basis of the complaint, and the insured or claimant must voluntarily appear
and testify at any administrative proceedings on the complaint; and
     (16) Requiring that motor vehicle glass repair be made at a specified motor vehicle glass
repair shop or interfering with the insured's or claimant's free choice of a licensed repair facility.
The insured or claimant shall be promptly informed by the insurer of his or her free choice in the
selection of a licensed motor vehicle glass repair shop. The insurer shall not require a person to use
or employ unfair or deceptive acts or practices, threaten, coerce, or intimidate to induce a person to
use or select a particular licensed motor vehicle glass repair shop to provide motor vehicle glass
repair services. An insurer shall not knowingly contract with, refer motor vehicle glass repair
services to, or otherwise negotiate with an unlicensed motor vehicle glass repair shop, as defined
in chapter 38.5 of title 5. Once the insured or claimant has advised the insurer that a motor vehicle
glass repair shop has been selected, the insurer may not recommend that a different motor vehicle
glass repair shop be selected to repair the motor vehicle glass, and an insurer shall not assign or
dispatch the repair work or forward a related policy or policyholder's contact or repair scheduling
information to a different licensed motor vehicle glass repair shop without the knowledge and
consent of the insured. An insured may at any point in time elect to change the insured's choice of
licensed motor vehicle glass repair shop. However, an insurer authorized to conduct business in the
state may provide directly, or through other means, including electronic transmissions, specific,
truthful, and non-deceptive information regarding the features and benefits available to the insured
under the policy to assist the insured in selecting a licensed motor vehicle glass repair shop or
scheduling a licensed motor vehicle glass repair shop to perform motor vehicle glass repair, or enter
into any preferred provider agreements and/or participate in direct repair programs or direct repair
networks with licensed motor vehicle glass repair shops. A motor vehicle glass repair shop may
file a complaint with the department of business regulation alleging a violation of this subsection
(16). Whenever the department of business regulation has reason to believe that an insurer has
violated this subsection (16), the department shall conduct an investigation and may convene a
hearing. A complaint filed by a motor vehicle glass repair shop must be accompanied by a statement
written and signed by the insured or claimant setting forth the factual basis of the complaint, and
the insured or claimant must voluntarily appear and testify at any administrative proceedings on
the complaint.
     SECTION 5. Section 27-34.2-6 of the General Laws in Chapter 27-34.2 entitled "Long-
Term-Care Insurance" is hereby amended to read as follows:
     27-34.2-6. Disclosure and performance standards for long-term-care insurance.
     (a) The director may adopt regulations that establish:
     (1) Standards for full and fair disclosure setting forth the manner, content, and required
disclosures for the sale of long-term-care insurance policies, terms of renewability, initial and
subsequent conditions of eligibility, nonduplication of coverage provisions, coverage of
dependents, preexisting conditions, termination of insurance, continuation or conversion,
probationary periods, limitations, exceptions, reductions, elimination periods, requirements for
replacement, recurrent conditions, and definitions of terms; and
     (2) Reasonable rules and regulations that are necessary, proper, or advisable to the
administration of this chapter including the procedure for the filing or submission of policies
subject to this chapter. This provision may not abridge any other authority granted the director by
law.
     (b) No long-term-care insurance policy may:
     (1) Be cancelled, nonrenewed, or terminated on the grounds of the age or the deterioration
of the mental or physical health of the insured individual or certificate holder; or
     (2) Contain a provision establishing a new waiting period in the event existing coverage is
converted to or replaced by a new or other form within the same company, except with respect to
an increase in benefits voluntarily selected by the insured individual or group policyholder; or
     (3) Provide coverage for skilled nursing care only or provide more coverage for skilled
care in a facility than coverage for lower levels of care.
     (c) A long-term-care policy must provide:
     (1) Home health care healthcare benefits that are at least fifty percent (50%) of those
provided for care in a nursing facility. The evaluation of the amount of coverage shall be based on
aggregate days of care covered for home health care when compared to days of care covered for
nursing home care; and
     (2) Home health care healthcare benefits which that meet the National Association of
Insurance Commissioners' minimum standards for home health care healthcare benefits in long-
term-care insurance policies.
     (d)(1) No long-term-care insurance policy or certificate other than a policy or certificate
issued to a group as defined in § 27-34.2-4(4)(i) shall use a definition of "preexisting condition"
which is more restrictive than the following: "preexisting condition" means a condition for which
medical advice or treatment was recommended by, or received from a provider of health care
healthcare services, within six (6) months preceding the effective date of coverage of an insured
person;
     (2) No long-term-care insurance policy or certificate other than a policy or certificate issued
to a group as defined in § 27-34.2-4(4)(i) may exclude coverage for a loss or confinement which
that is the result of a preexisting condition, unless the loss or confinement begins within six (6)
months following the effective date of coverage of an insured person;
     (3) The director may extend the limitation periods set forth in subdivisions § 27-34.2-6
subsections (d)(1) and (d)(2) of this section of this subsection as to specific age group categories
in specific policy forms upon findings that the extension is in the best interest of the public;
     (4) The definition of "preexisting condition" does not prohibit an insurer from using an
application form designed to elicit the complete health history of an applicant, and, on the basis of
the answers on that application, from underwriting in accordance with that insurer's established
underwriting standards. Unless otherwise provided in the policy or certificate, a preexisting
condition, regardless of whether it is disclosed on the application, need not be covered until the
waiting period described in subdivision § 27-34.2-6 subsection d)(2) of this section of this
subsection expires. No long-term-care insurance policy or certificate may exclude or use waivers
or riders of any kind to exclude, limit or reduce coverage or benefits for specifically named or
described preexisting diseases or physical conditions beyond the waiting period described in
subdivision § 27-34.2-6 subsection (d)(2) of this section of this subsection, unless the waiver or
rider has been specifically approved by the director as set forth in § 27-34.2-8. This shall not permit
exclusion or limitation of benefits on the basis of Alzheimer's disease, other dementias, or organic
brain disorders.
     (e)(1) No long-term-care insurance policy may be delivered or issued for delivery in this
state if the policy:
     (i) Conditions eligibility for any benefits on a prior hospitalization or institutionalization
requirement; or
     (ii) Conditions eligibility for benefits provided in an institutional care setting on the receipt
of a higher level of institutional care.; or
     (iii) Conditions eligibility for any benefits other than waiver of premium, post-
confinement, post-acute care, or recuperative benefits on a prior institutionalization requirement.
     (2)(i) A long-term-care insurance policy containing post-confinement, post-acute care or
recuperative benefits shall clearly label in a separate paragraph of the policy or certificate entitled
"Limitations or Conditions on Eligibility for Benefits" such limitations or conditions, including any
required number of days of confinement or rider shall not condition eligibility for non-institutional
benefits on the prior or continuing receipt of skilled care services.
     (ii) A long-term care insurance policy or rider that conditions eligibility of noninstitutional
benefits on the prior receipt of institutional care shall not require a prior institutional stay of more
than thirty (30) days.
     (3) No long-term insurance policy or rider that provides benefits only following
institutionalization shall condition such benefits upon admission to a facility for the same or related
conditions within a period of less than thirty (30) days after discharge from the institution.
     (f) The commissioner may adopt regulations establishing loss ratio standards for long-
term-care insurance policies provided that a specific reference to long-term-care insurance policies
is contained in the regulation.
     (g) Right to return -- Free look. Long term care insurance applicants shall have the right to
return the policy or certificate within thirty (30) days of its delivery and to have the premium
refunded if, after examination of the policy or certificate, the applicant is not satisfied for any
reason. Long term care insurance policies and certificates shall have a notice prominently printed
on the first page or attached to the policy or certificate stating in substance that the applicant shall
have the right to return the policy or certificate within thirty (30) days of its delivery and to have
the premium refunded if, after examination of the policy or certificate other than a certificate issued
pursuant to a policy issued to a group defined in § 27-34.2-4(4)(i), the applicant is not satisfied for
any reason. This subsection shall also apply to denials of applications and any refund must be made
within thirty (30) days of the return or denial.
     (g)(1) Long-term-care insurance applicants shall have the right to return the policy,
certificate, or rider to the company or an agent/insurance producer of the company within thirty
(30) days of its receipt and to have the premium refunded if, after examination of the policy,
certificate, or rider, the applicant is not satisfied for any reason.
     (2) Long-term-care insurance policies, certificates, and riders shall have a notice
prominently printed on the first page or attached thereto including specific instructions to
accomplish a return. This requirement shall not apply to certificates issued pursuant to a policy
issued to a group defined in § 27-34.2-4. The following free look statement or language
substantially similar shall be included:
     "You have thirty (30) days from the day you receive this policy, certificate, or rider to
review it and return it to the company if you decide not to keep it. You do not have to tell the
company why you are returning it. If you decide not to keep it, simply return it to the company at
its administration office. Or you may return it to the agent/insurance producer that you bought it
from. You must return it within thirty (30) days of the day you first received it. The company will
refund the full amount of any premium paid within thirty (30) days after it receives the returned
policy, certificate, or rider. The premium refund will be sent directly to the person who paid it. The
returned policy, certificate, or rider will be void as if it had never been issued."
     (h)(1) An outline of coverage shall be delivered to a prospective applicant for long-term-
care insurance at the time of initial solicitation through means which that prominently direct the
attention of the recipient to the document and its purpose;
     (2) The commissioner shall prescribe a standard format, including style, arrangement, and
overall appearance, and the content of an outline of coverage;
     (3) In the case of insurance producer solicitations, an insurance producer must deliver the
outline of coverage prior to the presentation of an application or enrollment form;
     (4) In the case of direct response solicitations, the outline of coverage must be presented in
conjunction with any application or enrollment form;
     (5) In the case of a policy issued to a group defined in subdivision § 27-34.2-4(4)(i) of this
act chapter, an outline of coverage shall not be required to be delivered, provided that the
information described in subdivision §§ 27-34.2-6(6)(i) -- subdivision through 27-34.2-6(6)(vi)
subsections (h)(6)(i) -- (h)(6)(vi) of this section is contained in other materials relating to
enrollment. Upon request, these other materials shall be made available to the commissioner.;
     (6) The outline of coverage shall include:
     (i) A description of the principal benefits and coverage provided in the policy;
     (ii) A description of the eligibility triggers for benefits and how those triggers are met;
     (ii)(iii) A statement of the principal exclusions, reductions, and limitations contained in the
policy;
     (iii)(iv) A statement of the terms under which the policy or certificate, or both, may be
continued in force or discontinued, including any reservation in the policy of a right to change
premiums. Continuation or conversion provisions of group coverage shall be specifically described;
     (iv)(v) A statement that the outline of coverage is only a summary, not a contract of
insurance, and that the policy or group master policy contains governing contractual provisions;
     (v)(vi) A description of the terms under which the policy or certificate may be returned and
the premium refunded; and
     (vi)(vii) A brief description of the relationship of cost of care and benefits.; and .
     (vii)(viii) A statement that discloses to the policyholder or certificate holder whether the
policy is intended to be a federally tax-qualified long-term-care insurance contract under §
7702B(b) of the Internal Revenue Code of 1986, as amended, et seq.
     (i) A certificate issued pursuant to a group long-term-care insurance policy which policy is
delivered or issued for delivery in this state shall include:
     (1) A description of the principal benefits and coverage provided in the policy;
     (2) A statement of the principal exclusions, reductions, and limitations contained in the
policy; and
     (3) A statement that the group master policy determines governing contractual provisions.
     (4)(j) If an application for a long-term-care insurance contract or certificate is approved,
the issuer shall deliver the contract or certificate of insurance to the applicant no later than thirty
(30) days after the date of approval.
     (j)(k) At the time of policy delivery, a policy summary shall be delivered for an individual
life insurance or annuity policy which that provides long-term-care benefits within the policy or
by rider. In the case of direct response solicitations, the insurer shall deliver the policy summary
upon the applicant's request, but regardless of request shall make the delivery no later than at the
time of policy delivery. In addition to complying with all applicable requirements, the summary
shall also include:
     (1) An explanation of how the long-term-care benefit interacts with other components of
the policy, including deductions from death benefits;
     (2) An illustration of the amount of benefits, the length of benefits, and the guaranteed
lifetime benefits, including a statement that any long-term-care inflation projection option required
by § 27-34.2-13, is not available under the policy for each covered person;
     (3) Any exclusions, reductions, and limitations on benefits of long-term-care benefits; and
     (4) A statement that any long-term-care inflation protection option required by 230-RICR-
20-35-1 is not available under this policy. If inflation protection was not required to be offered, or
if inflation protection was required to be offered but was rejected, a statement that inflation
protection is not available under this policy that provides long-term-care benefits, and an
explanation of other options available under the policy, if any, to increase the funds available to
pay for the long-term-care benefits.
     (4)(5) If applicable to the policy type, the summary shall also include:
     (i) A disclosure of the effects of exercising other rights under the policy;
     (ii) A disclosure of guarantees related to long term care costs of insurance charges A
disclosure of guarantees, fees or other costs related to long-term-care costs of insurance charges in
the base policy and any riders; and
     (iii) Current and projected periodic and maximum lifetime benefits.
     (5)(6) The provisions of the policy summary listed above may be incorporated into a basic
illustration or into the life insurance policy summary which that is required to be delivered in
accordance with chapter 4 of this title and the rules and regulations promulgated under § 27-4-23.
     (k)(l) Any time a long-term benefit, funded through a life insurance vehicle by the
acceleration of the death benefit, is in benefit payment status, a monthly report shall be provided to
the policyholder. The report shall include:
     (1) Any long-term-care benefits paid out during the month;
     (2) Any costs or changes that apply or will apply to the policy or any riders;
     (2)(3) An explanation of any changes in the policy, e.g., death benefits or cash values, due
to long-term-care benefits being paid out; and
     (3)(4) The amount of long-term-care benefits existing or remaining.
     (l)(m) Any policy or rider advertised, marketed, or offered as long-term care or nursing
home insurance shall comply with the provisions of this chapter.
     (m)(n) If a claim under a long-term-care insurance contract is denied, the issuer shall,
within sixty (60) days of the date of a written request by the policyholder or certificate holder, or a
representative thereof:
     (1) Provide a written explanation of the reasons for the denial; and
     (2) Make available all information directly related to the denial.
     (o) Any policy, certificate, or rider advertised, marketed or offered as long-term care or
nursing home insurance, as defined in § 27-34.2-4, shall comply with the provisions of this chapter.
     SECTION 6. Section 27-65-1 of the General Laws in Chapter 27-65 entitled "Commercial
Special Risks" is hereby amended to read as follows:
     27-65-1. Commercial special risks.
     (a) Commercial special risks. Notwithstanding any other provisions of this title to the
contrary and except as limited in subsection (b) of this section, insurers shall not be required to file
with, nor to receive approval from, the insurance division of the department of business regulation
for policy forms or rates used in the insurance of commercial special risks located in this state.
Commercial special risks are defined as:
     (1) Risks written as commercial lines insurance, defined as insurance issued for purposes
other than for personal, family, or household and that are written on an excess or umbrella basis;
     (2) Those risks, or portions of them, written as commercial lines insurance, defined as
insurance issued for purposes other than for personal, family, or household and that are not rated
according to manuals, rating plans, or schedules including "A" rates;
     (3) Risks written as commercial lines insurance that employ or retain the services of a "risk
manager" and that also meet any one of the following criteria:
     (i) Net worth over ten million dollars ($10,000,000);
     (ii) Net revenue/sales of over five million dollars ($5,000,000);
     (iii) More than twenty-five (25) employees per individual company or fifty (50) employees
per holding company in the aggregate;
     (iv) Aggregates premiums of over thirty thousand dollars ($30,000), excluding group life,
group health, workers' compensation and professional liability (including, but not limited to, errors
and omissions and directors and officers liability);
     (v) Is a not for profit or public entity with an annual budget or assets of at least twenty-five
million dollars ($25,000,000); or
     (vi) Is a municipality with a population of over twenty thousand (20,000);
     (4) Specifically designated commercial special risks including:
     (i) All risks classified as highly protected risks.
     "Highly protected risk" means a fire resistive building that meets the highest standards of
fire safety according to insurance company underwriting requirements;
     (ii) All commercial insurance aviation risks;
     (iii) All credit property insurance risks that are defined as "insurance of personal property
of a commercial debtor against loss, with the creditor as sole beneficiary" or "insurance of personal
property of a commercial debtor, with the creditor as primary beneficiary and the debtor as
beneficiary of proceeds not paid to the creditor." For the purposes of this definition, "personal
property" means furniture, fixtures, furnishings, appliances, and equipment designed for use in a
business, trade, or profession and not used by a debtor for personal or household use;
     (iv) All boiler and machinery and equipment breakdown risks;
     (v) All inland marine risks written as commercial lines insurance defined as insurance
issued for purposes other than for personal, family, or household;
     (vi) All fidelity and surety risks;
     (vii) All crime and burglary and theft risks; and
     (viii) All directors and officers, fiduciary liability, employment practices liability, kidnap
and ransom, and management liability risks.
     (b) Notwithstanding subsection (a) of this section, the following lines of business shall
remain subject to all filing and approval requirements contained in this title even if written for risks
which qualify as commercial special risks:
     (1) Life insurance;
     (2) Annuities;
     (3) Accident and health insurance;
     (4) Automobile insurance that is mandated by statute;
     (5) Workers' compensation and employers' liability insurance; and
     (6) Issuance through residual market mechanisms.
     (c) Any insurer that provides coverage to a commercial special risk shall disclose to the
insured that forms used and rates charges are exempt from filing and approval requirements by this
subsection section. Records of all such disclosures shall be maintained by the insurer.
     (d) Brokers for exempt commercial policyholders as defined in subdivision subsection
(a)(3) of this section shall be exempt from the due diligence requirements of § 27-3-38(bc).
     (e) Notwithstanding any other provisions of this title, the requirements of § 27-5-2 shall
not apply to any policy insuring one or more commercial special risks located in this state.
     SECTION 7. Title 27 of the General Laws entitled "INSURANCE" is hereby amended by
adding thereto the following chapter:
CHAPTER 6.1
LENDER PLACED INSURANCE
     27-6.1-1. Purpose.
     The purpose of this chapter is to:
     (1) Promote the public welfare by regulating lender-placed insurance on real property.
     (2) Create a legal framework within which lender-placed insurance on real property may
be written in this state.
     (3) Help maintain the separation between lenders/servicers and insurers/insurance
producers.
     (4) Minimize the possibilities of unfair competitive practices in the sale, placement,
solicitation, and negotiation of lender-placed insurance.
     27-6.1-2 Scope.
     (a) This chapter applies to insurers and insurance producers engaged in any transaction
involving lender-placed insurance as defined in this chapter.
     (b) All lender-placed insurance written in connection with mortgaged real property,
including manufactured and mobile homes, is subject to the provisions of this chapter, except:
     (1) Transactions involving extensions of credit primarily for business, commercial, or
agricultural purposes.
     (2) Insurance offered by the lender or servicer and elected by the mortgagor at the
mortgagor's option.
     (3) Insurance purchased by a lender or servicer on real estate owned property.
     (4) Insurance for which no specific charge is made to the mortgagor or the mortgagor's
account.
     27-6.1-3. Definitions.
     As used in this chapter:
     (1) "Affiliate" means a person that directly, or indirectly through one or more
intermediaries, controls or is controlled by, or is under common control with, the person specified.
     (2) "Commissioner" shall have the meaning established in § 42-14-5.
     (3) "Individual lender-placed insurance" means coverage for individual real property
evidenced by a certificate of coverage under a master lender-placed insurance policy or a lender-
placed insurance policy for individual real property.
     (4) "Insurance producer" means a person or entity (or its affiliates) required to be licensed
under the laws of this state to sell, solicit, or negotiate insurance.
     (5) "Insurer" means an insurance company, association, or exchange authorized to issue
lender-placed insurance in this state (or its affiliates).
     (6) "Investor" means a person or entity (and its affiliates) holding a beneficial interest in
loans secured by real property.
     (7) "Lapse" means the moment in time in which a mortgagor has failed to secure or
maintain valid and/or sufficient insurance upon mortgaged real property as required by a mortgage
agreement.
     (8) "Lender" means a person or entity (and its affiliates) making loans secured by an
interest in real property.
     (9) "Lender-placed insurance" means insurance obtained by a lender or servicer when a
mortgagor does not maintain valid and/or sufficient insurance upon mortgaged real property as
required by the terms of the mortgage agreement. It may be purchased unilaterally by the lender or
servicer, who is the named insured, subsequent to the date of the credit transaction, providing
coverage against loss, expense, or damage to collateralized property as a result of fire, theft,
collision, or other risks of loss that would either impair a lender, servicer, or investor's interest or
adversely affect the value of collateral covered by limited dual interest insurance. It is purchased
according to the terms of the mortgage agreement as a result of the mortgagor's failure to provide
evidence of required insurance.
     (10) "Loss ratio" means the ratio of incurred losses to earned premium.
     (11) "Master lender-placed insurance policy" means a group policy issued to a lender or
servicer providing coverage for all loans in the lender or servicer's loan portfolio as needed.
     (12) "Mortgage agreement" means the written document that sets forth an obligation or a
liability of any kind secured by a lien on real property and due from, owing, or incurred by a
mortgagor to a lender on account of a mortgage loan, including the security agreement, deed of
trust, and any other document of similar effect, and any other documents incorporated by reference.
     (13) "Mortgage loan" means a loan, advance, guarantee, or other extension of credit from
a lender to a mortgagor.
     (14) "Mortgage transaction" means a transaction by the terms of which the repayment of
money loaned or payment of real property sold is to be made at a future date or dates.
     (15) "Mortgagee" means the person who holds mortgaged real property as security for
repayment of a mortgage agreement.
     (16) "Mortgagor" means the person who is obligated on a mortgage loan pursuant to a
mortgage agreement.
     (17) "Person" means an individual or entity.
     (18) "Real estate owned property" means property owned or held by a lender or servicer
following foreclosure under the related mortgage agreement or the acceptance of a deed in lieu of
foreclosure.
     (19) "Replacement cost value (RCV)" is the estimated cost to replace covered property at
the time of loss or damage without deduction for depreciation. RCV is not market value, but it is
instead the cost to replace covered property to its pre-loss condition.
     (20) "Servicer" means a person or entity (and its affiliates) contractually obligated to
service one or more mortgage loans for a lender or investor. The term "servicer" includes entities
involved in subservicing arrangements.
     27-6.1-4. Term of Insurance Policy.
     (a) Lender-placed insurance shall become effective no earlier than the date of lapse of
insurance upon mortgaged real property subject to the terms of a mortgage agreement and/or any
other state or federal law requiring the same.
     (b) Individual lender-placed insurance shall terminate on the earliest of the following dates:
     (1) The date the insurance that is acceptable under the mortgage agreement becomes
effective, subject to the mortgagor providing sufficient evidence of such acceptable insurance.
     (2) The date the applicable real property no longer serves as collateral for a mortgage loan
pursuant to a mortgage agreement.
     (3) Such other date as specified by the individual policy or certificate of insurance.
     (4) Such other date as specified by the lender or servicer.
     (5) The termination date of the policy.
     (c) An insurance charge shall not be made to a mortgagor for lender-placed insurance for
a term longer than the scheduled term of the lender-placed insurance, nor may an insurance charge
be made to the mortgagor for lender-placed insurance before the effective date of the lender-placed
insurance.
     27-6.1-5. Calculation of coverage and payment of premiums.
     (a) Any lender-placed insurance coverage, and subsequent calculation of premium, should
be based upon the replacement cost value of the property as best determined as follows:
     (1) The dwelling coverage amount set forth in the most recent evidence of insurance
coverage provided by the mortgagee ("last known coverage amount" or "LKCA"), if known to the
lender or servicer.
     (2) The insurer shall inquire of the insured, at least once, ,as to the LKCA; and if it is not
able to obtain the LKCA from the insured or in another manner, the insurer may proceed as set
forth below.
     (3) If the LKCA is unknown, the replacement cost of the property serving as collateral as
calculated by the insurer, unless the use of replacement cost for this purpose is prohibited by other
state or federal law.
     (4) If the LKCA is unknown and the replacement cost is not available or its use is
prohibited, the unpaid principal balance of the mortgage loan.
     (b) In the event of a covered loss, any replacement cost coverage provided by an insurer in
excess of the unpaid principal balance of the mortgage loan shall be paid to the mortgagor.
     (c) An insurer shall not write lender-placed insurance for which the premium rate differs
from that determined by the schedules of the insurer on file with the commissioner as of the
effective date of any such policy.
     27-6.1-6. Prohibited Practices.
     (a) An insurer or insurance producer shall not issue lender-placed insurance on mortgaged
property that the insurer or insurance producer or an affiliate of the insurer or insurance producer
owns, performs the servicing for, or owns the servicing right to the mortgaged property.
     (b) An insurer or insurance producer shall not compensate a lender, insurer, investor, or
servicer (including through the payment of commissions) on lender-placed property insurance
policies issued by the insurer.
     (c) An insurer or insurance producer shall not share lender-placed insurance premium or
risk with the lender, investor, or servicer that obtained the lender-placed insurance.
     (d) An insurer or insurance producer shall not offer contingent commissions, profit sharing,
or other payments dependent on profitability or loss ratios to any person affiliated with a servicer
or the insurer in connection with lender-placed insurance.
     (e) An insurer shall not provide free or below-cost outsourced services to lenders, investors,
or servicers, and an insurer will not outsource its own functions to lenders, insurance producers,
investors, or servicers on an above-cost basis.
     (f) An insurer or insurance producer shall not make any payments, including, but not
limited to, the payment of expenses to a lender, insurer, investor, or servicer for the purpose of
securing lender-placed insurance business or related outsourced services.
     27-6.1-7. Non-circumvention.
     Nothing in this chapter shall be construed to allow an insurance producer or an insurer
solely underwriting lender-placed insurance to circumvent the requirements set forth within this
chapter. This chapter shall apply to all insurers and insurance producers involved in lender-placed
insurance.
     27-6.1-8. Evidence of Coverage.
     (a) Lender-placed insurance shall be set forth in an individual policy or certificate of
insurance. A copy of the individual policy, certificate of insurance, or other evidence of insurance
coverage shall be mailed, first-class mailed, or delivered in person to the last known address of the
mortgagor or delivered in accordance with chapter 14 of title 42. Notwithstanding any other
statutory or regulatory required information, the individual policy or certificate of insurance
coverage shall include the following information:
     (1) The address and identification of the insured property;
     (2) The coverage amount or amounts if multiple coverages are provided;
     (3) The effective date of the coverage;
     (4) The term of coverage;
     (5) The premium charge for the coverage;
     (6) Contact information for filing a claim; and
     (7) A complete description of the coverage provided.
     27-6.1-9. Filing, Approval and Withdrawal of Forms and Rates.
     (a) All policy forms and certificates of insurance to be delivered or issued for delivery in
this state and the schedules of premium rates pertaining thereto shall be filed with the
commissioner.
     (b) The commissioner shall review the rates to determine whether the rates are excessive,
inadequate, or unfairly discriminatory. This analysis shall include a determination as to whether
expenses included by the insurer in the rate are appropriate.
     (c) All insurers shall re-file lender-placed property insurance rates at least once every four
(4) years.
     (d) All insurers writing lender-placed insurance shall have separate rates for lender-placed
insurance and voluntary insurance obtained by a mortgage servicer on real estate owned property.
     (e) Upon the introduction of a new lender-placed insurance program, the insurer shall
reference its experience in existing programs in the associated filings. Nothing in this chapter shall
limit an insurer's discretion, as actuarially appropriate, to distinguish different terms, conditions,
exclusions, eligibility criteria, or other unique or different characteristics. Moreover, an insurer
may, where actuarially acceptable, rely upon models or, in the case of flood filings where applicable
experience is not credible, on Federal Emergency Management Agency (FEMA) National Flood
Insurance Program (NFIP) data.
     (f) No later than April 1 of each year, each insurer with at least one hundred thousand
dollars ($100,000) in direct written premium for lender-placed insurance in this state during the
prior calendar year shall report to the commissioner the following information for the prior calendar
year. This report shall be separately produced for each lender-placed program and presented on
both an individual-jurisdiction and countrywide basis containing the following information:
     (1) Actual loss ratio;
     (2) Earned premium;
     (3) Any aggregate schedule rating debit/credit to earned premium;
     (4) Itemized expenses;
     (5) Paid losses; and
     (6) Loss reserves, including case reserves and reserves for incurred but not reported losses.
     (g) Except in the case of lender-placed flood insurance, to which this paragraph does not
apply, if an insurer experiences an annual loss ratio of less than thirty-five percent (35%) in any
lender-placed program for two (2) consecutive years, it shall submit a rate filing (either adjusting
its rates or supporting their continuance) to the commissioner no more than ninety (90) days after
the submission of the data required pursuant to subsection (f) of this section.
     (h) Except as specifically set forth in this section, rate and form filing requirements shall
be subject to the insurance laws of this state.
     27-6.1-10. Enforcement and judicial review.
     The commissioner shall have all rights and powers to enforce the provisions of this chapter
as provided by § 42-14-16 of the general laws of this state. All proceedings, including judicial
review, shall be conducted in accordance with the administrative procedures act, chapter 35 of title
42 of the general laws. Any penalties shall be assessed in accordance with § 42-14-16.
     27-6.1-11. Regulatory authority.
     The commissioner may, after notice and hearing, promulgate reasonable regulations and
orders to carry out and effectuate the provisions of this chapter.
     27-6.1-12. Severability provisions.
     If any provision of this chapter, or the application of the provision to any person or
circumstance, is for any reason held to be invalid, the remainder of the chapter and the application
of such provision to other persons or circumstances shall not be affected thereby.
     SECTION 8. Section 27-3-39 of the General Laws in Chapter 27-3 entitled "Surplus Lines
Insurance" is hereby repealed.
     27-3-39. Surplus line broker's bond.
     (a) No license to act as a resident surplus line broker in this state shall be issued until a
certificate of the general treasurer is deposited with the insurance commissioner on a blank
furnished by the insurance commissioner, stating that the licensee has filed with the general
treasurer a bond in the penal sum of twenty-five thousand dollars ($25,000) executed by the licensee
as principal and by a surety company authorized to transact business in this state as surety, and
conditioned upon the licensee faithfully complying with all of the requirements of § 27-3-38.
     (b) Any bond required by this section shall be continuous while the principal is licensed to
act as a surplus line broker in this state; provided, that before the bond may be cancelled, the
insurance commissioner must have been notified in writing by the surety of the proposed
cancellation at least thirty (30) days prior to the date cancellation is to become effective; and,
provided, that in the event of cancellation, any license covered by the bond shall be suspended by
the insurance commissioner pending the substitution of a similar bond for the cancelled bond. The
surety shall be released from further liability under any bond covering a license revoked,
terminated, or expired as to any acts committed after the date that license is revoked, terminated,
or expired. The aggregate liability of the surety for any and all claims or recoveries that arise under
any bond shall in no event exceed the amount of the penal sum of the bond. The commissioner may
promulgate standards and procedures for collecting under bonds issued pursuant to this section.
     (c) Authorized surplus line agents or brokers of a licensed firm may meet the requirements
of this section with a bond in the name of the licensed firm, continuous in form and in the amounts
set forth in subsection (a).
     SECTION 9. Section 27-4-6 of the General Laws in Chapter 27-4 entitled "Life Insurance
Policies and Reserves" is hereby repealed.
     27-4-6. Terms to be stated in policy -- Rebates prohibited.
     (a) No life insurance corporation doing business in this state, nor any insurance producer
of the corporation, shall permit, offer, or make any contract of insurance or agreement as to any
contract other than as plainly expressed in the policy issued on the contract or agreement; nor shall
any company or any officer, insurance producer, or representative of the company or producer pay,
allow, or give, or offer to pay, allow, or give, directly or indirectly, as inducement to any person to
insure, or give, sell, or purchase, or offer to give, sell, or purchase as an inducement or in connection
with any insurance, any stocks, bonds, or other securities of any insurance company or other
corporation, association, or partnership, or any dividends or profits accruing on the securities, or
any valuable consideration or inducement of any kind not specified in the policy, nor shall any
person knowingly receive as an inducement any rebate of premium, or any special favor or
advantage in the dividends or other benefits, or any paid employment or contract for services of
any kind, or any valuable consideration or inducement of any kind, not specified in the policy.
     (b) Nothing in this section shall be construed to forbid a company transacting industrial
insurance on a weekly payment plan from returning to policyholders who have made premium
payments for a period of at least one year, directly to the company at its home or district offices, a
percentage of the premium which the company would have paid for the weekly collection of the
premiums.
     SECTION 10. Section 27-6-46 of the General Laws in Chapter 27-6 entitled "Fire and
Marine Insurance Rating" is hereby repealed.
     27-6-46. Terms to be stated in policy -- Rebates prohibited.
     No insurer, or any officer, insurance producer, or representative of an insurer, shall make
any contract for insurance, on property on risks located within this state, or against any liability,
casualty, accident, or hazard that may arise or occur in this state, or any agreement as to that
contract, other than as plainly expressed in the policy issued or to be issued on the agreement or
contract; or shall any insurer, or officer, insurance producer, or representative of an insurer, directly
or indirectly, in any manner, pay or allow or offer to pay or allow to the insured named in the policy
or to any employee of the insured as an inducement to that insurance, or after the insurance shall
have been effected, any rebate from the premium which is specified in the policy or any special
favor or advantage in the dividends or other benefit to accrue on the policy; or any valuable
consideration or inducement not specified in the policy or contract of insurance, or give, sell, or
purchase, as an inducement to that insurance, or in connection with that insurance, any stock, bonds,
or other securities of any insurance or other corporation or association, or any dividends or profits
accrued on the securities, or anything of value not specified in the policy, or shall any insurance
producer or his or her representatives, or any other person, directly or indirectly, either by sharing
commissions or in any manner pay or allow or offer to pay or allow to the insured named in the
policy, or to any employee of the insured, as an inducement to that insurance, or after the insurance
shall have been effected, any rebate from the premium which is specified in the policy, or shall any
insured, or party, or applicant for insurance, his or her or its employee, agent, or representative
knowingly receive or accept, or agree to accept, or agree to receive or accept, directly or indirectly,
any rebate of premium or any part of the premium or all or any part of any commission on the
premium, or any favor or advantage, or share in any benefit to accrue under any contract of
insurance, or any valuable consideration or inducement, other than what is specified in the policy;
provided, that nothing in this section shall prevent any insurer from the distribution of surplus,
dividends, savings, or the unused or unabsorbed portion of premiums and premium deposits to
participating policyholders, or shall this section prevent any insurer, or its insurance producer, from
paying commissions to a licensed insurance producer who shall have negotiated for the insurance,
or shall it prevent any licensed insurance producer from sharing or dividing a commission earned
or received by the insurance producer with any other licensed insurance producers who shall have
aided the insurance producer in respect to the insurance for the negotiation of which that
commission shall have been earned or paid; but no insurer or agent, or broker shall pay or allow
commissions or brokerage to any person acting as an insurance producer in this state who is
required by law to be licensed but is not licensed. Sections 27-8-7 -- 27-8-10 shall not apply to the
kinds of insurance subject to the provisions of this chapter.
     SECTION 11. Section 27-9-44 of the General Laws in Chapter 27-9 entitled "Casualty
Insurance Rating" is hereby repealed.
     27-9-44. Terms to be stated in policy -- Rebates prohibited.
     No insurer, or any officer, insurance producer, or their representative, shall make any
contract for insurance, on property or risks located within this state, or against any liability,
casualty, accident, or hazard that may arise or occur in this state, or any agreements as to any
contract, other than as plainly expressed in the policy issued or to be issued on the agreement or
contract; nor shall any insurer, or officer, insurance producer, or their representative, directly or
indirectly, in any manner, pay or allow or offer to pay or allow to the insured named in the policy
or to any employee of the insured as an inducement to the insurance, or after the insurance shall
have been effected, any rebate from the premium which is specified in the policy or any special
favor or advantage in the dividends or other benefit to accrue on the policy, or any valuable
consideration or inducement, not specified in the policy or contract of insurance, or give, sell, or
purchase, as an inducement to the insurance, or in connection with the insurance, any stock, bonds,
or other securities of any insurance or other corporation or association, or any dividends or profits
accrued on the stock, bonds, or securities, or anything of value, not specified in the policy, nor shall
any insurance producer or representative, or any other person, directly or indirectly, either by
sharing commissions or in any manner, pay or allow or offer to pay or allow to the insured named
in the policy, or to any employee of the insured, as an inducement to the insurance, or after the
insurance shall have been effected, any rebate from the premium which is specified in the policy,
nor shall any insured, or party, or applicant for insurance, his, her or its employee, agent, or
representative, knowingly receive or accept, or agree to accept, or agree to receive or accept,
directly or indirectly, any rebate of a premium or any part of the premium or all or any part of any
commission on the premium, or any favor or advantage, or share in any benefit to accrue under any
contract of insurance, or any valuable consideration or inducement, other than what is specified in
the policy; provided, that nothing in this section shall prevent any insurer from the distribution of
surplus, dividends, savings, or the unused or unabsorbed portion of premiums and premium
deposits to participating policyholders, nor shall this section prevent any insurer, or its agent, from
paying commissions to a licensed insurance producer who shall have negotiated for the insurance,
nor shall it prevent any licensed insurance producer from sharing or dividing a commission earned
or received by the insurance producer with any other licensed insurance producer who shall have
aided the insurance producer in respect to the insurance for the negotiation of which the commission
shall have been earned or paid; but no insurer, or insurance producer shall pay or allow
commissions or brokerage to any person acting as an insurance producer in this state who is
required by law to be licensed but is not licensed. As used in this section, the word "insurance"
includes suretyship and the word "policy" includes bond. Sections 27-8-7 -- 27-8-10 shall not apply
to the kinds of insurance subject to the provisions of this chapter.
     SECTION 12. This act shall take effect upon passage.
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LC005311/SUB A/2
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