HB-5701, As Passed House, June 6, 2012

SUBSTITUTE FOR

HOUSE BILL NO. 5701

(As amended June 6, 2012)

[A bill to amend 1956 PA 218, entitled

"The insurance code of 1956,"

by amending the title, the heading of chapter 61, and sections

3301, 3330, 4501, 6101, 6105, 6110, and 6111 (MCL 500.3301,

500.3330, 500.4501, 500.6101, 500.6105, 500.6110, and

500.6111), the title as amended by 2002 PA 304, section 4501 as

amended by 2012 PA 39, sections 6101, 6105, and 6110 as added

by 1992 PA 174, and section 6111 as amended by 2004 PA 316, and by

adding sections 6104, 6104a, 6104b, 6107a, and 6108; and to repeal acts

and parts of acts.]

THE PEOPLE OF THE STATE OF MICHIGAN ENACT:

TITLE

An act to revise, consolidate, and classify the laws relating

to the insurance and surety business; to regulate the incorporation

or formation of domestic insurance and surety companies and

associations and the admission of foreign and alien companies and

associations; to provide their rights, powers, and immunities and

to prescribe the conditions on which companies and associations

organized, existing, or authorized under this act may exercise

their powers; to provide the rights, powers, and immunities and to

prescribe the conditions on which other persons, firms,

corporations, associations, risk retention groups, and purchasing

groups engaged in an insurance or surety business may exercise

their powers; to provide for the imposition of a privilege fee on

domestic insurance companies and associations and the state

accident fund; to provide for the imposition of a tax on the

business of foreign and alien companies and associations; to

provide for the imposition of a tax on risk retention groups and

purchasing groups; to provide for the imposition of a tax on the

business of surplus line agents; to provide for the imposition of

regulatory fees on certain insurers; to provide for assessment fees

on certain health maintenance organizations; to modify tort

liability arising out of certain accidents; to provide for limited

actions with respect to that modified tort liability and to

prescribe certain procedures for maintaining those actions; to

require security for losses arising out of certain accidents; to

provide for the continued availability and affordability of

automobile insurance and homeowners insurance in this state and to

facilitate the purchase of that insurance by all residents of this

state at fair and reasonable rates; to provide for certain

reporting with respect to insurance and with respect to certain

claims against uninsured or self-insured persons; to prescribe

duties for certain state departments and officers with respect to

that reporting; to provide for certain assessments; to establish

and continue certain state insurance funds; to modify and clarify

the status, rights, powers, duties, and operations of the nonprofit

malpractice insurance fund; to provide for the departmental

supervision and regulation of the insurance and surety business

within this state; to provide for regulation over worker's

compensation self-insurers; to provide for the conservation,

rehabilitation, or liquidation of unsound or insolvent insurers; to

provide for the protection of policyholders, claimants, and

creditors of unsound or insolvent insurers; to provide for

associations of insurers to protect policyholders and claimants in

the event of insurer insolvencies; to prescribe educational

requirements for insurance agents and solicitors; to provide for

the regulation of multiple employer welfare arrangements; to create

an automobile insurance fraud and theft prevention authority to

reduce insurance fraud and the number of automobile thefts in this

state; to prescribe the powers and duties of the automobile

insurance fraud and theft prevention authority; to provide certain

powers and duties upon certain officials, departments, and

authorities of this state; to provide for an appropriation; to

repeal acts and parts of acts; and to provide penalties for the

violation of this act.

Sec. 3301. (1) Every insurer authorized to write automobile

insurance in this state shall participate in an organization for

the purpose of doing all of the following:

(a) Providing the guarantee that automobile insurance coverage

will be available to any person who is unable to procure that

insurance through ordinary methods.

(b) Preserving to the public the benefits of price competition

by encouraging maximum use of the normal private insurance system.

fraud and theft prevention authority.

(2) The organization created under this chapter shall be

called the "Michigan automobile insurance placement facility".

Sec. 3330. (1) The board of governors shall have all power to

direct the operation of the facility, including, at a minimum, all

of the following:

(a) To sue and be sued in the name of the facility. A judgment

against the facility shall not create any liabilities in the

individual participating members of the facility.

(b) To delegate ministerial duties, to hire a manager, to hire

legal counsel, and to contract for goods and services from others.

participation ratios pursuant to section 3303 to cover anticipated

costs of operation and administration of the facility, to provide

for equitable servicing fees, and to share losses, profits, and

expenses pursuant to the plan of operation.

(d) To impose limitations on cancellation or nonrenewal by

participating members of facility-placed business, in addition to

the limitations imposed by chapters 21 and 32.

(e) To provide for a limited number of participating members

to receive equitable distribution of applicants; or to provide for

House Bill No. 5701 (H-2) as amended June 6, 2012

a limited number of participating members to service applicants in

a plan of sharing of losses in accordance with the subsection

3320(1)(c) and the plan operation.

(f) To provide for standards of performance of service for the

participating members designated pursuant to subdivision (e).

(g) To adopt a plan of operation and any amendments to the

plan, not inconsistent with this chapter, necessary to assure the

fair, reasonable, equitable, and nondiscriminatory manner of

administering the facility, including compliance with chapter 21,

and to provide for such other matters as are necessary or advisable

to implement this chapter, including matters necessary to comply

with the requirements of chapter 21.

(h) [until december 31, 2017, To] annually assess participating

members and self-insurers

an aggregate amount not to exceed $21,000,000.00 to cover

anticipated costs of operation and administration of the Michigan

automobile insurance fraud and theft prevention authority.

(2) The board of governors shall institute or cause to be

instituted by the facility or on its behalf an automatic data

processing system for recording and compiling data relative to

individuals insured through the facility. An automatic data

processing system established under this subsection shall, to the

greatest extent possible, be made compatible with the automatic

data processing system maintained by the secretary of state, to

provide for the identification and review of individuals insured

through the facility.

(3) On or before January 1, 2013, the board of governors shall

amend the plan of operation to establish appropriate procedures

necessary to make assessments for and to carry out the

administrative duties and functions of the Michigan automobile

insurance fraud and theft prevention authority as provided in

chapter 61.

Sec. 4501. As used in this chapter:

(a) "Authorized agency" means the department of state police;

a city, village, or township police department; a county sheriff's

department; a United States criminal investigative department or

agency; the prosecuting authority of a city, village, township,

county, or state or of the United States; the office of financial

and insurance regulation; the Michigan automobile insurance fraud

and theft prevention authority; or the department of state.

(b) "Financial loss" includes, but is not limited to, loss of

earnings, out-of-pocket and other expenses, repair and replacement

costs, investigative costs, and claims payments.

benefit contract of a self-funded plan, health maintenance

organization contract, nonprofit dental care corporation

certificate, or health care corporation certificate.

(d) "Insurer" means a property-casualty insurer, life insurer,

third party administrator, self-funded plan, health insurer, health

maintenance organization, nonprofit dental care corporation, health

care corporation, reinsurer, or any other entity regulated by the

insurance laws of this state and providing any form of insurance.

(e) "Michigan automobile insurance fraud and theft prevention

authority" means the Michigan automobile insurance fraud and theft

prevention authority created under section 6104.

(f) ~~(e)~~ "Organization" means an organization or internal

department of an insurer established to detect and prevent

insurance fraud.

(g) ~~(f)~~ "Person" includes an individual, insurer, company,

association, organization, Lloyds, society, reciprocal or inter-

insurance exchange, partnership, syndicate, business trust,

corporation, and any other legal entity.

(h) ~~(g)~~ "Practitioner" means a licensee of this state

authorized to practice medicine and surgery, psychology,

chiropractic, or law, any other licensee of the state, or an

unlicensed health care provider whose services are compensated,

directly or indirectly, by insurance proceeds, or a licensee

similarly licensed in other states and nations, or the practitioner

of any nonmedical treatment rendered in accordance with a

recognized religious method of healing.

(i) ~~(h)~~ "Runner", "capper", or "steerer" means a person who

receives a pecuniary or other benefit from a practitioner, whether

directly or indirectly, for procuring or attempting to procure a

client, patient, or customer at the direction or request of, or in

cooperation with, a practitioner whose intent is to obtain benefits

under a contract of insurance or to assert a claim against an

insured or an insurer for providing services to the client,

patient, or customer. Runner, capper, or steerer does not include a

practitioner who procures clients, patients, or customers through

the use of public media.

(j) ~~(i)~~ "Statement" includes, but is not limited to, any

notice statement, proof of loss, bill of lading, receipt for

payment, invoice, account, estimate of property damages, bill for

services, claim form, diagnosis, prescription, hospital or doctor

record, X-rays, test result, or other evidence of loss, injury, or

expense.

CHAPTER 61

AUTOMOBILE INSURANCE FRAUD AND THEFT PREVENTION AUTHORITY

Sec. 6101. As used in this chapter:

(a) "Authority" means the ~~automobile theft prevention~~

~~authority~~ Michigan automobile insurance fraud and theft prevention

authority.

(b) "Automobile insurance fraud" means a fraudulent insurance

act as described in section 4503 that is committed in connection

with an application for or a policy of automobile insurance.

automobile insurance fraud and theft prevention authority.

~~(c) "Economic automobile theft" means automobile theft~~

~~perpetrated for financial gain.~~

(d) "Car years" means net direct private passenger and

commercial nonfleet vehicle years of insurance providing the

security required by section 3101(1) written in this state for the

calendar year ending the December 31 of the second prior year as

reported to the statistical agent of each insurer.

(e) "Facility" means the Michigan automobile insurance

placement facility created under chapter 33.

Sec. 6104. (1) Beginning January 1, 2013, the Michigan

automobile insurance fraud and theft prevention authority is

created within the facility. The facility shall provide staff for

the authority and shall carry out the administrative duties and

functions as directed by the board of directors.

(2) The Michigan automobile insurance fraud and theft

prevention authority is not a state agency, and the money of the

authority is not state money. A record of the authority is exempt

from disclosure under section 13 of the freedom of information act,

1976 PA 442, MCL 15.243.

(3) The Michigan automobile insurance fraud and theft

prevention authority shall do all of the following:

(a) Provide financial support to state or local law

enforcement agencies for programs designed to reduce the incidence

of automobile insurance fraud and theft.

(b) Provide financial support to state or local prosecutorial

agencies for programs designed to reduce the incidence of

automobile insurance fraud and theft.

(4) The Michigan automobile insurance fraud and theft

prevention authority may provide financial support to law

enforcement, prosecutorial, insurance, education, or training

associations for programs designed to reduce the incidence of

automobile insurance fraud and theft.

(5) The purposes, powers, and duties of the Michigan

automobile insurance fraud and theft prevention authority shall be

vested in and exercised by a board of directors. The board of

directors shall consist of 15 members as follows:

(a) Nine members who represent automobile insurers in this

state subject to the following:

(i) At least 2 members who represent insurer groups with

350,000 or more car years.

(ii) At least 2 members who represent insurer groups with less

than 350,000 but 100,000 or more car years.

(iii) At least 1 member who represents insurer groups with less

than 100,000 car years.

(b) The commissioner or his or her designee.

(d) Two members who represent law enforcement agencies in this

state.

(e) One member who represents prosecuting attorneys in this

state.

(f) One member who represents the general public.

(6) The insurer members on the board under subsection (5)

shall be elected by automobile insurers doing business in this

state from a list of nominees proposed by the board of governors of

the facility. In preparing the list of nominees for the insurer

members, the board of governors of the facility shall solicit

nominations from automobile insurers doing business in this state.

(7) The law enforcement members on the board under subsection

(5) shall be appointed by the governor with the advice and consent

of the senate. In appointing the law enforcement members, the

governor shall comply with all of the following:

(a) He or she shall solicit input from various law enforcement

associations in this state.

(b) He or she shall not appoint a member who represents the

same type of law enforcement agency as the other member who

represents law enforcement agencies on the board.

House Bill No. 5701 (H-2) as amended June 6, 2012

law enforcement agency to the board for more than 2 consecutive

terms.

(8) The prosecuting attorney member on the board under

subsection (5) shall be appointed by the governor with the advice

and consent of the senate. In appointing the prosecuting attorney

member, the governor shall solicit input from various prosecuting

attorney associations in this state.

(9) The public member on the board under subsection (5) shall

be appointed by the governor with the advice and consent of the

senate. The public member shall be a resident of this state and

shall not be employed by or under contract with any state or local

unit of government or any insurer.

(10) Except as otherwise provided in this subsection, members

of the board shall serve for a term of 4 years and until their

successors are appointed and qualified. For the members first

elected or appointed under this section, 3 insurer members and 1

law enforcement member shall serve for a term of 2 years; 3 insurer

members, the prosecuting attorney member, and the general public

member shall serve for a term of 3 years; and 3 insurer members and

1 law enforcement member shall serve for a term of 4 years.

[(11) THE BOARD IS DISSOLVED ON JANUARY 1, 2018.]

Sec. 6104a. (1) Members of the board shall serve without

compensation for their membership on the board, except that members

of the board shall receive reasonable reimbursement for necessary

travel and expenses.

(2) A majority of the members of the board shall constitute a

quorum for the transaction of business at a meeting, or the

exercise of a power or function of the authority, notwithstanding

the existence of 1 or more vacancies. Notwithstanding any other

provision of law, action may be taken by the authority at a meeting

upon a vote of the majority of its members present in person or

through the use of amplified telephonic equipment, if authorized by

the bylaws or plan of operation of the board. The authority shall

meet at the call of the chair or as may be provided in the bylaws

of the authority. Meetings of the authority may be held anywhere

within the state of Michigan.

(3) The board shall adopt a plan of operation by a majority

vote of the board. Vacancies on the board shall be filled in

accordance with the plan of operation.

(4) The board shall conduct its business at meetings that are

held in this state, open to the public, and held in a place that is

available to the general public. However, the board may establish

reasonable rules to minimize disruption of a meeting of the board.

At least 10 days but not more than 60 days before a meeting, the

board shall provide public notice of the meeting at the board's

principal office and on a publicly accessible internet website. The

board shall include in the public notice of its meeting the address

where minutes of the board may be inspected by the public. The

board may meet in a closed session for any of the following

purposes:

(a) To consider the hiring, dismissal, suspension, or

disciplining of officers or employees of the authority.

(b) To consult with its attorney.

House Bill No. 5701 (H-2) as amended June 6, 2012

regarding privacy or confidentiality.

` (5) The board shall display information concerning the

authority's operations and activities, including, but not limited

to, the annual financial report required under section 6110, on a

publicly accessible internet website.

(6) The board shall keep minutes of each board meeting. The

board shall make the minutes open to public inspection and

available at the address designated on the public notice of its

meetings. The board shall make copies of the minutes available to

the public at the reasonable estimated cost for printing and

copying. The board shall include all of the following in the

minutes:

(a) The date, time, and place of the meeting.

(b) The names of board members who are present and board

members who are absent.

that was open to the public.

(d) All roll call votes taken at the meeting.

Sec. 6104b. [(1)] On or before January 1, 2013, the department of

state police shall transfer all assets of the automobile theft

prevention authority to the facility for the benefit of the

Michigan automobile insurance fraud and theft prevention authority.

[(2) On or before December 31, 2017, the authority shall transfer all assets of the authority to the department of state police for the benefit of the automobile theft prevention authority.

(3) After December 31, 2017, the automobile theft prevention authority board of directors shall reinstate and operate the automobile theft prevention authority in the same manner that it was operated before January 1, 2013.

(4) On January 1, 2018, the Michigan automobile insurance fraud and theft prevention authority, as housed in the facility, is dissolved.]

Sec. 6105. The ~~authority~~ board shall have the powers necessary

~~or convenient~~ to carry out ~~and effectuate the purposes and~~

~~provisions of this chapter and the purposes of the authority and~~

~~the powers delegated by other laws~~ its duties under this act,

including, but not limited to, the power to do the following:

(a) Sue and be sued ~~; to have a seal and alter the same at~~

~~pleasure; to have perpetual succession; to make, execute, and~~

~~deliver contracts, conveyances, and other instruments necessary or~~

~~convenient to the exercise of its powers; and to make and amend~~

~~bylaws~~ in the name of the authority.

(b) Solicit and accept gifts, grants, loans, ~~funds collected~~

~~and placed in the automobile theft prevention fund,~~ and other aids

from any person or the federal, state, or a local government or any

agency thereof.

(d) Procure insurance against any loss in connection with its

property, assets, or activities.

(e) Invest any money held in reserve or sinking funds, or any

money not required for immediate use or disbursement, at its

discretion and to name and use depositories for its money.

(f) Contract for goods and services and engage personnel as is

necessary. ~~, including the services of private consultants,~~

~~managers, counsel, auditors, and others for rendering professional,~~

~~management, and technical assistance and advice, payable out of any~~

~~money of the fund legally available for this purpose.~~

(g) Indemnify and procure insurance indemnifying any member of

the board from personal loss or accountability from liability

resulting from a member's action or inaction as a member of the

board.

(h) ~~Do all other things necessary or convenient to achieve the~~

~~objectives and purposes of the authority, this chapter, or other~~

~~laws~~ Perform other acts not specifically enumerated in this section

House Bill No. 5701 (H-2) as amended June 6, 2012

that are necessary or proper to accomplish the purposes of the

authority and that are not inconsistent with this section or the

plan of operation.

[

House Bill No. 5701 (H-2) as amended June 6, 2012

Sec. 6107a. (1) Section 6107 does not apply from January 1, 2013 to December 31, 2017.

(2) Before April 1 of 2013, 2014, 2015, 2016, and 2017, each insurer and each self-insurer engaged in writing insurance coverages that provide the security required by section 3101(1) within this state, as a condition of its authority to transact insurance in this state, shall pay to the facility, for deposit into the account of the authority, an assessment determined by the facility as provided in the plan of operation. The assessment to each insurer and self-insurer shall be based on the ratio of its car years written to the statewide total car years for all insurers and self-insurers.

(3) Money received pursuant to subsection (1), and all other money received by the authority, shall be segregated from other money of the facility, if applicable, and shall only be expended as directed by the board.

(4) From the money received annually under subsection (1), the board shall not reduce the amount of money available to provide financial support for programs designed to reduce the incidence of automobile theft below $6,000,000.00.

(5) AN INSURER SHALL NOT INCREASE THE PREMIUMS CHARGED TO ITS INSUREDS SO AS TO RECOUP PAYMENTS TO THE FACILITY UNDER SUBSECTION (1) UNTIL AFTER THE FIRST REPORTS HAVE BEEN FILED UNDER SECTIONS 6110 AND 6111.]

Sec. 6108. (1) Each insurer authorized to transact automobile

insurance in this state, as a condition of its authority to

transact insurance in this state, shall report automobile insurance

fraud data to the authority using the format and procedures set

forth by the board.

(2) The department of state police shall cooperate with the

authority and shall provide available motor vehicle fraud and theft

statistics to the authority upon request.

Sec. 6110. ~~(1) The authority shall develop and implement a~~

~~plan of operation.~~

~~(2) The plan of operation shall include an assessment of the~~

~~scope of the problem of automobile theft, including particular~~

~~areas of the state where the problem is greatest; an analysis of~~

~~various methods of combating the problem of automobile theft and~~

~~economic automobile theft; a plan for providing financial support~~

~~to combat automobile theft and economic automobile theft; and an~~

~~estimate of the funds required to implement the plan.~~

~~(3) The authority shall report annually on or before February~~

~~1 to the governor and the legislature on its activities in the~~

~~preceding year.~~Beginning January 1 of the year after the effective

date of the amendatory act that added section 6104, the authority

shall prepare and publish an annual financial report and an annual

report to the legislature on its efforts to prevent automobile

insurance fraud and cost savings that have resulted from its

efforts.

House Bill No. 5701 (H-2) as amended June 6, 2012

Sec. 6111. By July 1 of every ~~odd~~ even numbered year, the

~~automobile theft prevention~~ authority shall prepare a report that

details the theft of automobiles and automobile insurance fraud

occurring in this state for the previous 2 years, assesses the

impact of the thefts and fraud on rates charged for automobile

insurance, summarizes prevention programs, and outlines allocations

made by the authority. The ~~director of the department of state~~

~~police,~~ members of the board, insurers, and the commissioner shall

cooperate in the development of the report as requested by the

~~automobile theft prevention~~ authority and shall make available

records and statistics concerning automobile thefts, including the

number of automobile thefts, number of prosecutions and convictions

involving automobile thefts, and automobile theft recidivism, and

automobile insurance fraud, including the number of instances of

suspected and confirmed insurance fraud, number of prosecutions and

convictions involving automobile insurance fraud, and automobile

insurance fraud recidivism. The ~~automobile theft prevention~~

authority shall evaluate the impact automobile theft and automobile

insurance fraud has on the citizens of this state and the costs

incurred by the citizens through insurance, police enforcement,

prosecution, and incarceration due to automobile thefts and

automobile insurance fraud. The report required by this section

shall be submitted to the senate and house of representatives

standing committees on insurance issues and the commissioner.

[

]

House Bill No. 5701 (H-2) as amended June 6, 2012

Enacting section [1]. The title and sections 4501, 6101, 6105,

[ ] 6110, and 6111 of the insurance code of 1956, 1956 PA 218,

MCL 500.4501, 500.6101, 500.6105, [ ] 500.6110, and 500.6111,

as amended by this amendatory act, and sections 6104a[, 6107a,] and 6108

the insurance code of 1956, 1956 PA 218, as added by this

amendatory act, take effect January 1, 2013.