First Regular Session
Sixty-second General Assembly
LLS NO. 99-0244.01 Julie Hoerner HOUSE BILL 99-1133
STATE OF COLORADO
BY REPRESENTATIVE McElhany;
also SENATOR Owen.
BUSINESS AFFAIRS & LABOR
A BILL FOR AN ACT
101 CONCERNING RATE FILING REQUIREMENTS FOR INSURERS PROVIDING
102 COVERAGE TO EXEMPT COMMERCIAL POLICYHOLDERS.
Bill Summary
(Note: This summary applies to this bill as introduced and does
not necessarily reflect any amendments that may be subsequently
adopted.)
Makes legislative findings that:
An exempt commercial policyholder, employing personnel
specializing in insurance practices and risk management, is
a sophisticated consumer and does not need the state to
regulate rates or form certification for casualty and
property insurance for such consumer's benefits; and
Not regulating rate or form certification requirements for
insurers selling to exempt commercial policyholders will
allow competitive underwriting.
Requires the division of insurance to promulgate rules defining an
exempt commercial policyholder. Recommends that the division receive
suggestions from risk management professionals, insurance managers or
buyers, insurance representatives, and qualified insurance consultants in
creating rules defining exempt commercial policyholders.
Exempts insurers selling property and casualty coverage to exempt
commercial policyholders from rate regulation and approval requirements
and form certification requirements of the division of insurance. Provides
for review and regulation by the commissioner of insurance for insurers
charging anticompetitive rates as defined in Colorado law.
Requires that policies sold to exempt commercial policyholders
contain a conspicuous disclaimer that the policy is exempt from rate filing
and form certification with the division of insurance and that rate
information is available from the insurer upon reasonable request by the
[ ] denotes HOUSE amendment. { } denotes SENATE amendment.
Capital letters indicate new material to be added to existing statute.
Dashes through the words indicate material to be deleted from existing statute.
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commissioner of insurance or the insured.
Allows the commissioner to promulgate rules as necessary to
administer the new provisions.
1 Be it enacted by the General Assembly of the State of Colorado:
2 SECTION 1. Article 4 of title 10, Colorado Revised Statutes, is
3 amended BY THE ADDITION OF A NEW PART to read:
4 PART 14
5 EXEMPTION FOR RATE AND APPROVAL
6 REQUIREMENTS FOR INSURERS PROVIDING
7 COVERAGE TO EXEMPT COMMERCIAL POLICYHOLDERS
8 10-4-1401. Legislative declaration. THE GENERAL ASSEMBLY
9 DECLARES THAT THE HEALTH, WELFARE, AND SAFETY OF THE PEOPLE OF
10 THE STATE OF COLORADO MAY NOT BE ENHANCED BY THE REGULATION OF
11 INSURANCE BETWEEN SOPHISTICATED COMMERCIAL ENTITIES AND
12 INSURERS. THE GENERAL ASSEMBLY ALSO FINDS THAT THERE ARE
13 COMMERCIAL ENTITIES THAT UTILIZE PERSONNEL TRAINED IN RISK
14 MANAGEMENT, INSURANCE COVERAGE ISSUES, AND INSURANCE INDUSTRY
15 KNOWLEDGE WHO ARE CAPABLE OF NEGOTIATING AND ENTERING INTO
16 INSURANCE COVERAGE AGREEMENTS WITHOUT THE NEED FOR STATE
17 REGULATION IN THIS AREA. THEREFORE, THE PURPOSE OF THIS PART 14 IS
18 TO EXEMPT INSURERS NEGOTIATING WITH AND INSURING SOPHISTICATED
19 COMMERCIAL ENTITIES FROM RATE FILING AND FORM CERTIFICATION
20 REQUIREMENTS. THIS EXEMPTION WILL ALLOW COMPETITIVE
21 UNDERWRITING AND RATING OF POLICIES.
22 10-4-1402. Rules. (1) (a) THE COMMISSIONER SHALL
23 PROMULGATE RULES NECESSARY FOR THE IMPLEMENTATION AND
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1 ADMINISTRATION OF THIS ARTICLE. SUCH RULES SHALL INCLUDE WITHOUT
2 LIMITATION, THE DEFINITION OF WHAT ORGANIZATIONS AND ENTITIES
3 QUALIFY AS EXEMPT COMMERCIAL POLICYHOLDERS. SUCH DEFINITION
4 SHALL REQUIRE SUCH ORGANIZATIONS TO BE THOSE PURCHASING TYPE II
5 KINDS OF INSURANCE AS SPECIFIED IN SECTION 10-4-401 (3) (b). FOR
6 PURPOSES OF PROMULGATING SUCH RULES, THE COMMISSIONER SHALL
7 CONSIDER RECOMMENDATIONS FROM RISK MANAGEMENT PROFESSIONALS,
8 INSURER REPRESENTATIVES, PRODUCERS, BUYERS, QUALIFIED INSURANCE
9 CONSULTANTS, CONSUMERS OF INSURANCE PRODUCTS, AND ANY OTHER
10 PERSONS AS NECESSARY.
11 (b) (I) FOR THE PURPOSES OF PROMULGATING THE DEFINITION OF
12 AN EXEMPT COMMERCIAL POLICYHOLDER, THE COMMISSIONER SHALL
13 MANDATE THAT AN EXEMPT COMMERCIAL POLICYHOLDER PROCURE ITS
14 INSURANCE THROUGH USE OF A RISK MANAGER EMPLOYED BY OR
15 RETAINED BY THE EXEMPT COMMERCIAL POLICYHOLDER. THE
16 QUALIFICATIONS OF THE RISK MANAGER SHALL BE DEFINED BY THE
17 DIVISION PURSUANT TO THIS SECTION; AND
18 (II) THE COMMISSIONER SHALL DEFINE ALL OTHER CRITERIA OF AN
19 EXEMPT COMMERCIAL POLICYHOLDER WHICH CRITERIA SHALL INCLUDE
20 BUT ARE NOT LIMITED TO THE FOLLOWING, AND EACH EXEMPT
21 COMMERCIAL POLICYHOLDER SHALL MEET AT LEAST ONE OF SUCH
22 CRITERIA:
23 (A) THE MINIMUM AMOUNT FOR AGGREGATE INSURANCE PREMIUM
24 SALES FOR THE EXEMPT COMMERCIAL POLICYHOLDER;
25 (B) THE MINIMUM NET WORTH OF THE EXEMPT COMMERCIAL
26 POLICYHOLDER;
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1 (C) THE MINIMUM DOLLAR AMOUNT FOR ANNUAL NET REVENUES
2 OR SALES FOR THE EXEMPT COMMERCIAL POLICYHOLDER;
3 (D) THE MINIMUM NUMBER OF EMPLOYEES OF THE EXEMPT
4 COMMERCIAL POLICYHOLDER PER INDIVIDUAL INSURED, OR IF THE EXEMPT
5 COMMERCIAL POLICYHOLDER IS A MEMBER OF AN AFFILIATED GROUP THE
6 MINIMUM NUMBER OF EMPLOYEES IN THE EMPLOYING GROUP;
7 (E) A NOT-FOR-PROFIT OR PUBLIC ENTITY'S MINIMUM ANNUAL
8 BUDGET OR ASSETS; OR
9 (F) A MUNICIPALITY'S MINIMUM POPULATION.
10 (2) THE DEFINITION OF AN EXEMPT COMMERCIAL POLICYHOLDER
11 SHALL BE REVIEWED PERIODICALLY BY THE COMMISSIONER WITH THE
12 RECOMMENDATIONS FROM RISK MANAGEMENT PROFESSIONALS, INSURER
13 REPRESENTATIVES, PRODUCERS, BUYERS, QUALIFIED INSURANCE
14 CONSULTANTS, CONSUMERS OF INSURANCE PRODUCTS, AND ANY OTHER
15 PERSON AS THE COMMISSIONER DEEMS NECESSARY.
16 (3) THE COMMISSIONER SHALL PROMULGATE RULES THAT DEFINE
17 THE DISCLOSURE REQUIREMENTS FOR INSURANCE POLICIES ISSUED TO
18 EXEMPT COMMERCIAL POLICYHOLDERS. EACH INSURANCE POLICY ISSUED
19 TO AN EXEMPT COMMERCIAL POLICYHOLDER SHALL CONTAIN A
20 CONSPICUOUS DISCLAIMER PRINTED IN AT LEAST TEN-POINT, BOLD-FACED
21 TYPE, THAT STATES THAT THE POLICY IS EXEMPT FROM THE RATE FILING
22 AND APPROVAL AND THE FORM FILING AND CERTIFICATION REQUIREMENTS
23 OF THE DIVISION OF INSURANCE.
24 (4) RULES PROMULGATED UNDER THIS SECTION SHALL BE
25 PROMULGATED IN ACCORDANCE WITH ARTICLE 4 OF TITLE 24, C.R.S., AND
26 INITIALLY COMPLETED BY JANUARY 15, 2000.
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1 10-4-1403. Exemption from rate filing and approval and form
2 certification requirements. (1) THE REQUIREMENTS OF SECTIONS
3 10-4-403, 10-4-404, 10-4-404.5, 10-4-405, 10-4-406, 10-4-414, 10-4-419,
4 AND 10-4-421 SHALL NOT APPLY TO INSURERS OF EXEMPT COMMERCIAL
5 POLICYHOLDERS.
6 (2) IF THE INSURANCE COMMISSIONER DETERMINES, AFTER
7 PROVIDING AN OPPORTUNITY FOR COMMENT AND A PUBLIC HEARING, THAT
8 A LINE OF INSURANCE IS ANTICOMPETITIVE AS DEFINED IN SECTION
9 10-4-415, OR IS NOT BEING ADEQUATELY SERVICED BY INSURERS, THE
10 COMMISSIONER MAY REQUIRE THAT THE RATE FOR THAT PARTICULAR LINE
11 OF INSURANCE BE FILED PURSUANT TO SECTION 10-4-418.
12 (3) THE INSURANCE COMMISSIONER SHALL REVIEW ANNUALLY ANY
13 LINE OF INSURANCE FOUND PREVIOUSLY TO BE ANTICOMPETITIVE, AS
14 DEFINED IN SECTION 10-4-415, TO DETERMINE WHETHER RATE FILING AND
15 APPROVAL REQUIREMENTS MAY AGAIN BE ELIMINATED BECAUSE THE LINE
16 HAS SUBSEQUENTLY BECOME COMPETITIVE. SUCH REVIEW SHALL INCLUDE
17 THE OPPORTUNITY FOR COMMENT AND A PUBLIC HEARING.
18 10-4-1404. Multistate insurance risks - choice of law. WHERE
19 THE EXEMPT COMMERCIAL POLICYHOLDER OPERATES IN MORE THAN ONE
20 STATE, THE POLICY MAY INCLUDE PROVISIONS WITHIN THE INSURANCE
21 CONTRACT THAT DETERMINE DISPUTES ARISING FROM CLAIMS HANDLING
22 AND PROCEDURES, CANCELLATION OF THE POLICY, OR NONRENEWAL OF
23 THE POLICY, WHICH DISPUTES SHALL BE GOVERNED BY THE STATE WITH
24 THE LARGEST PERCENTAGE OF PREMIUMS CHARGED UNDER THE POLICY.
25 SECTION 2. 10-4-403, Colorado Revised Statutes, is amended
26 BY THE ADDITION OF A NEW SUBSECTION to read:
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1 10-4-403. Standards for rates - competition - procedure -
2 requirement for independent actuarial opinions regarding 1991
3 legislation. (7) THIS SECTION SHALL NOT APPLY TO INSURERS PROVIDING
4 COVERAGE TO EXEMPT COMMERCIAL POLICYHOLDERS, AS DEFINED
5 PURSUANT TO SECTION 10-4-1402 AND RULES ADOPTED BY THE
6 COMMISSIONER PURSUANT TO THAT SECTION.
7 SECTION 3. 10-4-404, Colorado Revised Statutes, is amended
8 BY ADDITION OF A NEW SUBSECTION to read:
9 10-4-404. Rate administration. (7) THIS SECTION SHALL NOT
10 APPLY TO INSURERS PROVIDING COVERAGE FOR EXEMPT COMMERCIAL
11 POLICYHOLDERS, AS DEFINED PURSUANT TO SECTION 10-4-1402 AND RULES
12 ADOPTED BY THE COMMISSIONER PURSUANT TO THAT SECTION.
13 SECTION 4. 10-4-404.5, Colorado Revised Statutes, is amended
14 to read:
15 10-4-404.5. Rating plans - property and casualty type II
16 insurers - rules. (1) The commissioner may promulgate rules and
17 regulations for type II insurers which THAT establish reasonable standards
18 for rating plans, including experience rating plans, schedule rating plans,
19 and expense reduction plans, and which THAT are designed to modify
20 rates in the development of premiums for individual risks insured in the
21 property and casualty insurance market. Such rules and regulations may
22 permit recognition of expected differences in loss and expense
23 characteristics and shall be designed so that such plans are reasonable and
24 equitable in their application and are not unfairly discriminatory. Such
25 rules and regulations shall not prevent the development of new rating
26 methods which THAT would otherwise comply with this part 4. The rules
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1 and regulations may establish maximum charges against and credits to the
2 experience rating of an insured that may result from the application of a
3 rating plan. The rules and regulations may encourage the use of loss
4 control programs, safety programs, and other methods of risk
5 management and may require insurers to maintain documentation of the
6 basis for the charges and credits applied under any plan. The rules and
7 regulations may also require the rating plans to include merit rating to the
8 extent feasible.
9 (2) THIS SECTION SHALL NOT APPLY TO INSURERS PROVIDING
10 COVERAGE FOR EXEMPT COMMERCIAL POLICYHOLDERS, AS DEFINED
11 PURSUANT TO SECTION 10-4-1402 AND RULES ADOPTED BY THE
12 COMMISSIONER PURSUANT TO THAT SECTION.
13 SECTION 5. 10-4-405, Colorado Revised Statutes, is amended
14 BY THE ADDITION OF A NEW SUBSECTION to read:
15 10-4-405. Filing of rating information - certain coverages.
16 (6) THIS SECTION SHALL NOT APPLY TO POLICIES ISSUED TO EXEMPT
17 COMMERCIAL POLICYHOLDERS, AS DEFINED PURSUANT TO SECTION
18 10-4-1402 AND RULES ADOPTED BY THE COMMISSIONER PURSUANT TO
19 THAT SECTION.
20 SECTION 6. 10-4-406, Colorado Revised Statutes, is amended
21 BY THE ADDITION OF A NEW SUBSECTION to read:
22 10-4-406. Review of filings - certain coverages. (6) THIS
23 SECTION SHALL NOT APPLY TO INSURERS PROVIDING COVERAGE FOR
24 EXEMPT COMMERCIAL POLICYHOLDERS, AS DEFINED PURSUANT TO SECTION
25 10-4-1402 AND RULES ADOPTED BY THE COMMISSIONER PURSUANT TO
26 THAT SECTION.
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1 SECTION 7. 10-4-414, Colorado Revised Statutes, is amended
2 BY THE ADDITION OF A NEW SUBSECTION to read:
3 10-4-414. Examinations. (6) THIS SECTION SHALL NOT APPLY TO
4 INSURERS PROVIDING COVERAGE FOR EXEMPT COMMERCIAL
5 POLICYHOLDERS, AS DEFINED PURSUANT TO SECTION 10-4-1402 AND RULES
6 ADOPTED BY THE COMMISSIONER PURSUANT TO THAT SECTION.
7 SECTION 8. 10-4-418, Colorado Revised Statutes, is amended
8 BY THE ADDITION OF A NEW SUBSECTION to read:
9 10-4-418. Enforcement procedures - penalties. (7) THIS
10 SECTION SHALL APPLY TO INSURERS PROVIDING COVERAGE FOR EXEMPT
11 COMMERCIAL POLICYHOLDERS, AS DEFINED PURSUANT TO SECTION
12 10-4-1402 AND RULES ADOPTED BY THE COMMISSIONER PURSUANT TO
13 THAT SECTION, THAT THE COMMISSION DETERMINES TO BE
14 ANTICOMPETITIVE, AS DEFINED IN SECTION 10-4-415.
15 SECTION 9. 10-4-419 (1) and (2) (e), Colorado Revised Statutes,
16 are amended, and the said 10-4-419 is further amended BY THE
17 ADDITION OF A NEW SUBSECTION, to read:
18 10-4-419. Claims-made policy forms. (1) No insurer shall use
19 or issue any policy, certificate, or contract of insurance or any portion
20 thereof which THAT provides coverage on a claims-made basis unless it
21 has been certified by the insurer and the insurer has filed a certification
22 with the commissioner that such policy endorsement or disclosure form
23 or any portion thereof which THAT provides coverage on a claims-made
24 basis conforms to Colorado law pursuant to subsection (2) of this section
25 and any rules and regulations promulgated pursuant to subsection (3) of
26 this section.
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1 (2) A claims-made policy shall not be delivered or issued for
2 delivery to any person in this state unless:
3 (e) The policy requires insurers to furnish policyholders, upon
4 their request and within thirty days thereafter, sufficient information
5 about closed or paid claims, claims for which the company has
6 established reserves, and claims for which the company has received
7 notices of occurrences which THAT could give rise to claims to allow the
8 insured to determine how much of his THE INSURED'S aggregate coverage
9 remains available under the policy;
10 (6.5) THIS SECTION SHALL NOT APPLY TO INSURERS PROVIDING
11 COVERAGE FOR EXEMPT COMMERCIAL POLICYHOLDERS, AS DEFINED
12 PURSUANT TO SECTION 10-4-1402 AND RULES ADOPTED BY THE
13 COMMISSIONER PURSUANT TO THAT SECTION.
14 SECTION 10. 10-4-421, Colorado Revised Statutes, is amended
15 to read:
16 10-4-421. Notice of rate increases and decreases. (1) In the
17 event that a rate filing for type II insurance for commercial liability
18 includes a rate increase or decrease, the filing entity shall clearly identify
19 in a cover letter accompanying the rate filing the specific portion of the
20 rate filing which THAT represents such an increase or decrease and shall
21 state clearly the percentage of any such proposed increase or decrease.
22 (2) THIS SECTION SHALL NOT APPLY TO INSURERS PROVIDING
23 COVERAGE FOR EXEMPT COMMERCIAL POLICYHOLDERS AS DEFINED
24 PURSUANT TO SECTION 10-4-1402 AND RULES ADOPTED BY THE
25 COMMISSIONER PURSUANT TO THAT SECTION.
26 SECTION 11. 10-5-103, Colorado Revised Statutes, is amended
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1 BY THE ADDITION OF A NEW SUBSECTION to read:
2 10-5-103. Conditions for export. (2) THE DILIGENCE
3 REQUIREMENTS OF THIS SECTION SHALL NOT APPLY TO TRANSACTIONS
4 WITH EXEMPT COMMERCIAL POLICYHOLDERS AS DEFINED PURSUANT TO
5 SECTION 10-4-1402.
6 SECTION 12. 10-5-101.1 (1) (b), Colorado Revised Statutes, is
7 amended to read:
8 10-5-101.1. Legislative declaration. (1) The general assembly
9 finds and declares that property and casualty insurance transactions with
10 nonadmitted insurers are so affected with a public interest as to require
11 regulation, taxation, supervision, and control of such transactions and
12 matters relating thereto, as provided in this article, in order to:
13 (b) Provide for the public, EXCEPT FOR TRANSACTIONS RELATED
14 TO DUE DILIGENCE REQUIREMENTS OF THIS SECTION FOR EXEMPT
15 COMMERCIAL POLICYHOLDERS DEFINED PURSUANT TO SECTION 10-4-1402,
16 to the extent that insurance is not procurable from admitted insurers,
17 orderly, reasonable, and regulated access to such insurance from
18 approved nonadmitted insurers through qualified, licensed, and
19 supervised surplus line agents and brokers;
20 SECTION 13. 10-5-106, Colorado Revised Statutes, is amended
21 to read:
22 10-5-106. When export declared eligible. The commissioner
23 may, by rule and regulation, declare eligible for export generally,
24 notwithstanding the provisions of section 10-5-103 (1) (b) and (1) (c), any
25 class of insurance coverage or risk for which the commissioner finds that
26 there is no reasonable or adequate market among insurers licensed in this
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1 state. FOR THE PURPOSES OF THIS SECTION, THE DILIGENCE REQUIREMENTS
2 OF THIS ARTICLE SHALL NOT APPLY TO TRANSACTIONS WITH EXEMPT
3 COMMERCIAL POLICYHOLDERS, AS DEFINED PURSUANT TO SECTION
4 10-4-1402.
5 SECTION 14. Effective date - applicability. (1) This act shall
6 take effect January 15, 2000, unless a referendum petition is filed during
7 the ninety-day period after final adjournment of the general assembly that
8 is allowed for submitting a referendum petition pursuant to article V,
9 section 1 (3) of the state constitution. If such a referendum petition is
10 filed against this act or an item, section, or part of this act within such
11 period, then the act, item, section, or part, if approved by the people, shall
12 take effect on the date of the official declaration of the vote thereon by
13 proclamation of the governor.
14 (2) The provisions of this act shall apply to all property and
15 casualty insurance policies proposed to an exempt commercial
16 policyholder or entered into with an exempt commercial policyholder on
17 or after the applicable effective date of this act.