2005 Legislation
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HOUSE BILL NO. 119 – Insurance Dept/enforcemnt authority


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Bill Status

H0119...........................................................by BUSINESS
INSURANCE DEPARTMENT - Repeals and amends existing law relating to the
Department of Insurance to provide further enforcement authority; to revise
a notice provision; to provide that the director may order an insurer to
desist a prohibited practice; to remove language referencing findings based
upon hearings; and to repeal language applicable to desist orders for
prohibited conduct.
02/04    House intro - 1st rdg - to printing
02/07    Rpt prt - to Bus
02/18    Rpt out - rec d/p - to 2nd rdg
02/21    2nd rdg - to 3rd rdg
02/23    3rd rdg - PASSED - 44-26-0
      AYES -- Andrus, Barraclough, Bastian, Bell, Bilbao, Black, Block,
      Boe, Bradford, Cannon, Chadderdon, Collins, Deal, Edmunson, Eskridge,
      Field(18), Field(23), Garrett, Henbest, Henderson, Jaquet, Jones,
      LeFavour, Martinez, Miller, Mitchell, Nonini, Pasley-Stuart, Pence,
      Ring, Ringo, Rusche, Sayler, Shepherd(2), Shirley, Skippen,
      Smith(30), Smith(24), Smylie, Snodgrass, Stevenson, Trail, Wills, Mr.
      NAYS -- Anderson, Barrett, Bayer, Bedke, Bolz, Clark, Crow, Denney,
      Ellsworth, Hart, Harwood, Kemp, Lake, Loertscher, Mathews, McGeachin,
      McKague, Moyle, Nielsen, Raybould, Roberts, Rydalch, Sali, Schaefer,
      Shepherd(8), Wood
      Absent and excused -- None
    Floor Sponsor - Miller
    Title apvd - to Senate
02/24    Senate intro - 1st rdg - to Com/HuRes
03/04    Rpt out - rec d/p - to 2nd rdg
03/07    2nd rdg - to 3rd rdg
03/11    3rd rdg - PASSED - 32-0-2, 1 vacancy
      AYES -- Andreason, Brandt, Broadsword, Bunderson, Burkett,
      Burtenshaw, Cameron, Coiner, Compton, Corder, Darrington, Davis,
      Gannon, Geddes, Goedde, Jorgenson, Kelly, Keough, Langhorst, Little,
      Lodge, Malepeai, Marley, McGee, McKenzie, Pearce, Richardson,
      Schroeder, Stegner, Stennett, Werk, Williams
      NAYS -- None
      Absent and excused -- Hill, Sweet, (District 21 seat vacant)
    Floor Sponsor - Broadsword
    Title apvd - to House
03/14    To enrol
03/15    Rpt enrol - Sp signed
03/16    Pres signed
03/17    To Governor
03/21    Governor signed
         Session Law Chapter 78
         Effective: 07/01/05

Bill Text

  ]]]]              LEGISLATURE OF THE STATE OF IDAHO             ]]]]
 Fifty-eighth Legislature                   First Regular Session - 2005
                              IN THE HOUSE OF REPRESENTATIVES
                                     HOUSE BILL NO. 119
                                   BY BUSINESS COMMITTEE
  1                                        AN ACT
 11        ERENCE.
 12    Be It Enacted by the Legislature of the State of Idaho:
 13        SECTION  1.  That  Section  41-213, Idaho Code, be, and the same is hereby
 14    amended to read as follows:
 15        41-213.  ENFORCEMENT. (1) The director may institute such suits  or  other
 16    lawful  proceedings as he may deem necessary for the enforcement of any provi-
 17    sion of this title 41, Idaho Ccode. If the director believes that  any  person
 18    has  engaged  in  or  is about to engage in any act or practice constituting a
 19    violation of any provision of title 41, Idaho Code, any other law the director
 20    has authority to enforce, or any rule or order of the director,  the  director
 21    may,  in accordance with the procedures set forth in title 41, Idaho Code, and
 22    chapter 52, title 67, Idaho Code:
 23        (a)  Issue an order requiring the person to cease and desist from any pro-
 24        hibited act or practice;
 25        (b)  Issue an order affecting a person's license for such reasons  as  set
 26        forth in title 41, Idaho Code;
 27        (c)  Issue  an  order  imposing  an  administrative penalty as provided in
 28        title 41, Idaho Code; and
 29        (d)  Initiate any action in district court for  the  same  relief  or  any
 30        relief authorized by title 41, Idaho Code.
 31        (2)  If  the  director  believes  that any person is violating or about to
 32    violate any provision of this title 41, Idaho Ccode, or any order or  require-
 33    ment  of  the  director  issued or promulgated pursuant to authority expressly
 34    granted the director by any provision of this title 41,  Idaho  Ccode,  or  by
 35    other law, the director may bring an action against such person in the name of
 36    the  people  of the state of Idaho in a district court of this state to enjoin
 37    such person from continuing such violation or doing  any  act  in  furtherance
 38    thereof.  In  the  action  the court may enter such order or judgment granting
 39    such preliminary or final injunction as the court determines to be proper.
 40        (3)  If the director has reason to believe that any  person  has  violated
 41    any  provision of this title 41, Idaho Ccode, or any provision of other law as
 42    applicable to insurance operations, for which criminal prosecution is provided
 43    and would be in order, he shall give the information relative thereto  to  the
  1    attorney general or county attorney having jurisdiction of any such violation.
  2    The  attorney  general or county attorney shall promptly institute such action
  3    or proceedings against such person as the information may require or justify.
  4        (4)  Whenever the director may deem it necessary, he shall employ counsel,
  5    or call upon the attorney general of this state for  legal  counsel  and  such
  6    assistance as may be necessary.
  7        SECTION  2.  That  Section 41-1237, Idaho Code, be, and the same is hereby
  8    amended to read as follows:
  9        41-1237.  MISREPRESENTATION -- ACTION AND PENALTIES. (1) If within  thirty
 10    twenty-one (3021) days following the giving of the notice provided for in sec-
 11    tion 41-1236, of this act Idaho Code, the insurer has not ceased such dissemi-
 12    nation,  and if the director has reason to believe that such insurer is solic-
 13    iting, issuing or delivering contracts of insurance to residents of this state
 14    or collecting premiums on such contracts or performing any  other  transaction
 15    in  connection with such insurance, and that a proceeding by him in respect to
 16    such matters would be to in the interest of the public, he shall  take  action
 17    against  such  order  the  insurer under the provisions of section 41-1319 (to
 18    desist order for the prohibited practices) of this code.
 19        (2)  If upon such hearing the director finds that the insurer has  misrep-
 20    resented  as  referred to in section 41-1236, of this act Idaho Code, he shall
 21    by order on such hearing require the insurer to cease  and  desist  from  such
 22    violation,  and shall mail a copy of the order by registered or certified mail
 23    to the insurer at its principal place of business  last  of  record  with  the
 24    director and to the insurance supervisory officer of the insurer's domiciliary
 25    state  or  province. Each violation thereafter of such desist order shall sub-
 26    ject the insurer to a penalty of two thousand dollars ($2,000), to  be  recov-
 27    ered by a civil action brought against the insurer by the director. Service of
 28    process upon the insurer in such action may be made upon the director pursuant
 29    to section 41-1207, of this Idaho Ccode, or in any other lawful manner.
 30        SECTION  3.  That  Section 41-1319, Idaho Code, be, and the same is hereby
 31    repealed.
 32        SECTION 4.  That Section 41-1327, Idaho Code, be, and the same  is  hereby
 33    amended to read as follows:
 34        41-1327.  VIOLATIONS  -- PENALTY. Any person who violates any provision of
 35    this chapter as to which a penalty is not expressly provided, or who  violates
 36    a  cease  and  desist  order  issued by the director under section 41-1319213,
 37    Idaho Code, after such order has become final, shall be subject  to  penalties
 38    as  prescribed  by  or referred to in section 41-117, Idaho Code (general pen-
 39    alty).
 40        SECTION 5.  That Section 41-4805, Idaho Code, be, and the same  is  hereby
 41    amended to read as follows:
 43    tion groups chartered in states other than this state and seeking to do  busi-
 44    ness  as  a  risk  retention group in this state must observe and abide by the
 45    laws of this state as follows:
 46        (1)  Before transacting any insurance business or offering  any  insurance
 47    policies in this state, a risk retention group shall submit to the director of
 48    this state:
  1        (a)  A  statement identifying the state or states in which the risk reten-
  2        tion group is chartered and licensed as a liability insurance company, the
  3        date of chartering, the risk retention group's principal  place  of  busi-
  4        ness, and such other information including information concerning its mem-
  5        bership  as the director of this state may require to verify that the risk
  6        retention group is qualified as defined  in  subsection  (11)  of  section
  7        41-4803, Idaho Code;
  8        (b)  A  copy  of its plan of operations or feasibility study and revisions
  9        of such plan or study submitted to its state of domicile;  provided,  how-
 10        ever,  that  the provision relating  to the submission of a plan of opera-
 11        tion or feasibility study shall not apply with  respect  to  any  line  or
 12        classification  of  liability  insurance  which was defined in the product
 13        liability risk retention act of 1981 before  October  27,  1986,  and  was
 14        offered  before such date by any risk retention group which had been char-
 15        tered and operating for not less than three (3) years before such date;
 16        (c)  A statement of registration which  designates  the  director  as  its
 17        agent  for  the purpose of receiving service of legal documents or process
 18        against the risk retention group.
 19        (2)  Any risk retention group doing business in this  state  shall  submit
 20    the following financial information to the director:
 21        (a)  A  copy  of the group's financial statement submitted to its state of
 22        domicile, which shall be certified by an independent public accountant and
 23        contain a statement  of  opinion  on  loss  and  loss  adjustment  expense
 24        reserves made by a member of the American academy of actuaries or a quali-
 25        fied  loss  reserve specialist operating under criteria established by the
 26        national association of insurance commissioners;
 27        (b)  A copy of each examination of the risk retention group  as  certified
 28        by the director or public official conducting the examination;
 29        (c)  Upon  request  by  the  director,  a copy of any audit performed with
 30        respect to the risk retention group; and
 31        (d)  Such information as may be required to verify the group's  continuing
 32        qualification  as  a risk retention group as defined in subsection (11) of
 33        section 41-4803, Idaho Code.
 34        (3)  All risk retention groups operating in this state, and  all  premiums
 35    paid  for any coverage within this state to any risk retention group, shall be
 36    subject to the same premium tax provisions, including any interest, fines, and
 37    penalties for nonpayment, as are applicable to foreign admitted insurers.   To
 38    the  extent  any agents or brokers are utilized, they shall report and pay the
 39    taxes for the premiums for risks which they have placed with or on  behalf  of
 40    any risk retention group not chartered in this state. To the extent any agents
 41    or  brokers  are  not utilized, or agents or brokers that are utilized fail to
 42    pay said premium tax, each risk retention group shall pay the  tax  for  risks
 43    insured  within the state.  Further, each risk retention group shall report to
 44    the director all premiums paid to it for risks insured within this state.
 45        (4)  Any risk retention groups and its agents and representatives are sub-
 46    ject to and shall comply with the provisions of section  41-1329,  Idaho  Code
 47    (unfair claim settlement practices).
 48        (5)  Any  risk  retention group formed in this state shall comply with and
 49    be subject to chapter 13, title 41, Idaho Code (trade practices  and  frauds).
 50    The  director  may  issue  orders enjoining prohibited practices in accordance
 51    with section 41-1319213, Idaho Code, or section 41-1321, Idaho  Code,  or  may
 52    apply  directly to the district court for Ada county, state of Idaho, for such
 53    injunctive relief as he deems appropriate.
 54        (6)  Any risk retention group must submit to an examination by the  direc-
 55    tor of this state to allow him to determine the group's financial condition if
  1    the  director of the jurisdiction in which the group is chartered has not ini-
  2    tiated an examination or does not initiate an examination  within  sixty  (60)
  3    days  after  a  request  by  the director of this state.  Any such examination
  4    shall be coordinated to avoid unjustified repetition or duplication and  shall
  5    be conducted in an expeditious manner.
  6        (7)  Any policy issued by a risk retention group shall contain in 10 point
  7    or  larger  type  on  the  front  page and the declaration page, the following
  8    notice:
  9                                        NOTICE
 10             This policy has been issued by your risk retention group.   Your
 11        risk  retention group may not be subject to all of the insurance laws
 12        and regulations of your state.  State insurance  insolvency  guaranty
 13        funds are not available for your risk retention group.
 14        (8)  In addition to other restrictions that may be applicable, the follow-
 15    ing acts by a risk retention  group are hereby prohibited:
 16        (a)  The  solicitation  or  sale of insurance by a risk retention group to
 17        any person who is not eligible for membership in such group; and
 18        (b)  The solicitation or sale of insurance by, or  operation  of,  a  risk
 19        retention  group  that  is in a hazardous financial condition or is finan-
 20        cially impaired.
 21        (9)  No risk retention group shall be allowed to do business in this state
 22    if an insurance company is directly or indirectly a member or  owner  of  such
 23    risk  retention  group, other than in the case of a risk retention group whose
 24    members are all insurance companies.
 25        (10) No risk retention group may offer any insurance policy  or  insurance
 26    coverage  that  has been declared unlawful by the Idaho supreme court or is in
 27    conflict with chapter 5 or chapter 25, title 41, Idaho Code.
 28        (11) A risk retention group not chartered in this state and doing business
 29    in this state must comply with a lawful order issued in a  voluntary  dissolu-
 30    tion  proceeding  or  in a delinquency proceeding commenced by another state's
 31    insurance director if there has been a finding of financial  impairment  after
 32    an examination pursuant to subsection (6) of this section.

Statement of Purpose / Fiscal Impact

                     STATEMENT  OF  PURPOSE

                           RS 14435C1

This proposal amends existing law to specifically list the
Director's enforcement powers in a single code section, and to
clarify that enforcement orders issued by the Director are subject
to the procedural requirements for notice, hearings and appeals set
forth in the Idaho Administrative Procedures Act (chapter 52, title
67, Idaho Code).  The Administrative Procedures Act and rules set
forth specific and detailed requirements governing administrative
procedures, and the Department is seeking to clarify that those
procedures apply to administrative enforcement actions taken by the
Department of Insurance.  This proposal also repeals a code section
providing for cease and desist orders issued for violations of
Chapter 13 of Title 41, Idaho Code, and includes the power to issue
an administrative cease and desist order among the Director's
general enforcement powers.  This change will make the Director's
power to issue a cease and desist order subject to the same
administrative procedure requirements as are other types of
administrative actions taken by the Director, and will also clarify
that the Director's power to order a party to desist from violating
the law is not limited to violations of Chapter 13 or other
provisions specifically referencing a cease and desist order.  The
proposal also changes the time that an unauthorized insurer must
comply with a cease and desist order from 30 days to 21 days in
order to make this time period consistent with the general
requirements of chapter 2 and the Idaho Administrative Procedures
                         FISCAL  IMPACT


Name:     Shad Priest
Agency:   Insurance, Dept. of
Phone:    334-4214

Statement of Purpose/Fiscal Impact                     H 119