Session 2000
Effective: July 1, 2000
SENATE BILL No. 574
An Act concerning insurance; relating to deceptive practices
involving discount cards; re-
lating to licensure of agents; relating to
risk-based capital requirements; relating to re-
ciprocal insurance companies; relating to
mortgage insurance guaranty companies;
amending K.S.A. 40-1601, 40-1602, 40-1603,
40-1604, 40-1605, 40-1606, 40-1607, 40-
1608, 40-1610, 40-1611, 40-1612 and 40-1613
and K.S.A. 1999 Supp. 40-240, 40-2c01,
40-1620, 40-1622 and 40-3502 and repealing the
existing sections; also repealing K.S.A.
40-1614.
Be it enacted by the Legislature of the State of Kansas:
New Section 1. As used in this
act:
(a) "Discount card" means a card or any
other purchasing mechanism
or device, which is not insurance, that purports to offer discounts
or access
to discounts in health-related purchases from health care
providers.
(b) "Health care provider" means any
person licensed to practice any
branch of the healing arts by the state board of healing arts, any
person
who holds a temporary permit to practice any branch of the healing
arts
issued by the state board of healing arts, a medical care facility
licensed
by the department of health and environment, a podiatrist licensed
by
the state board of healing arts, an optometrist licensed by the
board of
examiners in optometry, a pharmacist licensed by the state board of
phar-
macy, a pharmacy registered with the state board of pharmacy, a
dentist
licensed by the Kansas dental board, a respiratory therapist, a
professional
corporation organized pursuant to the professional corporation law
of
Kansas by persons who are authorized by such law to form such a
cor-
poration and who are health care providers as defined by this
subsection,
a Kansas limited liability company organized for the purpose of
rendering
professional services by its members who are health care providers
as
defined by this subsection and who are legally authorized to render
the
professional services for which the limited liability company is
organized,
a partnership of persons who are health care providers under this
sub-
section, a Kansas not-for-profit corporation organized for the
purpose of
rendering professional services by persons who are health care
providers
as defined by this subsection.
(c) "Person" means an individual,
corporation, business trust, estate,
trust, partnership, association, joint venture, limited liability
company,
government, government subdivision or agency or any other legal,
gov-
ernmental or commercial entity.
New Sec. 2. It shall be unlawful
for any person to sell, market, pro-
mote, advertise or otherwise distribute any discount card
where:
(a) The discount card does not expressly
state in bold and prominent
type that such discount is not insurance;
(b) any discount offered by such discount
card is not specifically au-
thorized by a separate contract with each health care provider
listed in
conjunction with the discount card; or
(c) the discount or range of discounts
offered by such discount card
or the access to any range of discounts offered by such discount
card are
misleading, deceptive or fraudulent, regardless of the literal
wording used
on such discount card.
New Sec. 3. (a) Any person may
maintain an action to enjoin any
violation of this act, for the recovery of damages or both.
(b) Any person subject to liability under
this act shall be deemed, as
a matter of law, to have conducted business or activities within
the state
of Kansas sufficient to subject such person to the personal
jurisdiction of
any court in this state.
(c) An action for violation of this act
may be brought:
(1) In the county where the plaintiff
resides;
(2) in the county where the plaintiff
conducts business; or
(3) in any county where the discount card
was sold, marketed, pro-
moted, advertised or otherwise distributed.
(d) (1) If the court shall find
that the defendant is violating or has
violated any provision of this act, the court shall enjoin the
defendant
from such violation or any continuation thereof.
(2) Except as required for the recovery
of actual damages under
clause (B) of paragraph (3) of subsection (d), it shall not be
necessary in
any such action, that actual damage to the plaintiff be alleged or
proved.
(3) In addition to injunctive relief, the
plaintiff in the action shall be
entitled to recover from the defendant:
(A) An amount equal to $100 per discount
card sold or distributed
within the state of Kansas, or $10,000, whichever is greater;
(B) three times the amount of the actual
damages, if any, sustained;
(C) reasonable attorney's fees;
(D) costs; and
(E) any other relief which the court
deems proper.
(e) All actions under this act shall be
commenced within two years
after the date on which the violation occurred or within two years
after
the person bringing the action discovered, or in the exercise of
reasonable
diligence, should have discovered, the occurrence of the violation
of this
act. The period of limitation provided in this section may be
extended for
a period of 180 days if the person bringing the action proves by a
pre-
ponderance of the evidence that the failure to timely commence the
ac-
tion was caused by the defendant engaging in conduct solely
calculated
to induce the plaintiff to refrain from or postpone the
commencement of
the action.
(f) The remedies prescribed in this
section are cumulative and in
addition to any other applicable criminal, civil or administrative
penalties.
New Sec. 4. Any person who sells,
markets, promotes, advertises or
otherwise distributes any discount card in Kansas shall designate a
resi-
dent agent, who is a resident of Kansas, for service of process and
such
resident agent shall register with the secretary of state.
New Sec. 5. If any provision of
sections 1 through 4 or the applica-
tion thereof to any person or circumstances is held invalid, the
validity of
such provision to other persons and circumstances shall not be
affected
thereby.
New Sec. 6. Sections 1 through 5
shall be known as the Kansas dis-
count card deceptive practice act.
Sec. 7. K.S.A. 1999 Supp. 40-240 is
hereby amended to read as fol-
lows: 40-240. (a) Any person desiring as agent to engage in the
insurance
business, as herein set out, shall apply to the commissioner of
insurance
of this state, in the manner hereinafter prescribed, for an
insurance
agent's license, authorizing such agent to engage in and transact
such
business. The applicant for such license shall file with the
commissioner
of insurance such applicant's written application for a license
authorizing
the applicant to engage in the insurance business and the applicant
shall
make sworn answers to such interrogatories as the commissioner of
in-
surance may require on uniform forms and supplements prepared by
the
commissioner. A nonrefundable fee in the amount of $30 shall
accompany
such application. Such applicant, if an individual, shall
establish:
(1) That the applicant certifies, by
evidence satisfactory to the com-
missioner, that the applicant is a graduate of an accredited
four-year high
school or its equivalent. This requirement shall not apply to any
person
holding a valid agent's license as of July 1, 1971, or a full-time
student
enrolled in an accredited high school in this state while and to
the extent
such student is participating in an insurance project sponsored by
a bona
fide junior achievement program; and
(2) that the applicant is of good
business reputation and is worthy of
a license.
(b) Corporations, associations,
partnerships, sole proprietorships and
other legal entities acting as insurance agents and holding a
direct agency
appointment from an insurance company or companies or health
main-
tenance organization are required to obtain an insurance agent's
license.
Application for such license shall be made to the commissioner on a
form
prescribed by such commissioner. Before granting the license, the
com-
missioner shall determine that:
(1) Each officer, director, partner and
employee of the applicant who
is acting as an insurance agent is licensed as an insurance
agent;
(2) the applicant has disclosed to the
insurance department all offi-
cers, directors and partners whether or not they are licensed as
insurance
agents;
(3) the applicant has disclosed to the
insurance department all offi-
cers, directors, partners and employees who are licensed as
insurance
agents; and
(4) the applicant has designated a
licensed officer, employee, partner
or other person to be responsible for the organization's compliance
with
the insurance laws and rules and regulations of this state.
(c) The insurance department may require
any documents reasonably
necessary to verify the information contained in the
application.
(d) (1) Agents licensed pursuant to
subsection (b) shall advise the
commissioner of any officers, directors, partners or employees who
are
licensed as individual insurance agents and are not disclosed at
the time
application is made for a license within 30 working days of their
affiliation
with the licensee. Failure to provide the commissioner with such
infor-
mation shall subject the licensee to a monetary penalty of $10 per
day for
each working day the required information is late subject to a
maximum
of $50 per person per licensing year.
(2) Officers, directors, partners or
employees disclosed at the time of
the original application or reported thereafter whose affiliation
with the
licensee is terminated shall be reported to the commissioner within
30
days of the effective date of termination. Failure to report such
termi-
nation shall subject the licensee to the penalty prescribed in
paragraph
(1) of this subsection.
(e) An applicant whose application for
a license is denied shall be
given an opportunity for a hearing in accordance with the
provisions of
the Kansas administrative procedure act.
Sec. 8. K.S.A. 1999 Supp. 40-2c01
is hereby amended to read as
follows: 40-2c01. As used in this act:
(a) "Adjusted RBC report" means an RBC
report which has been
adjusted by the commissioner in accordance with K.S.A. 1999 Supp.
40-
2c04, and amendments thereto.
(b) "Corrective order" means an order
issued by the commissioner
specifying corrective actions which the commissioner has determined
are
required to address a RBC level event.
(c) "Domestic insurer" means any
insurance company or risk reten-
tion group which is licensed and organized in this state.
(d) "Foreign insurer" means any insurance
company or risk retention
group not domiciled in this state which is licensed or registered
to do
business in this state pursuant to article 41 of chapter 40 of the
Kansas
Statutes Annotated or K.S.A. 40-209, and amendments thereto.
(e) "NAIC" means the national association
of insurance commission-
ers.
(f) "Life and health insurer" means any
insurance company licensed
under article 4 or 5 of chapter 40 of the Kansas Statutes Annotated
or a
licensed property and casualty insurer writing only accident and
health
insurance.
(g) "Property and casualty insurer" means
any insurance company
licensed under articles 9, 10, 11, 12, 12a, 15 or 16 of chapter 40
of the
Kansas Statutes Annotated, but shall not include monoline
mortgage
guaranty insurers, financial guaranty insurers and title
insurers.
(h) "Negative trend" means, with respect
to a life and health insurer,
a negative trend over a period of time, as determined in accordance
with
the "trend test calculation" included in the RBC instructions
defined in
subsection (j).
(i) "RBC" means risk-based capital.
(j) "RBC instructions" mean the
risk-based capital instructions prom-
ulgated by the NAIC, which are in effect on December 31,
1998 1999,
and adopted as rules and regulations by the
commissioner.
(k) "RBC level" means an insurer's
company action level RBC, reg-
ulatory action level RBC, authorized control level RBC, or
mandatory
control level RBC where:
(1) "Company action level RBC" means,
with respect to any insurer,
the product of 2.0 and its authorized control level RBC;
(2) "regulatory action level RBC" means
the product of 1.5 and its
authorized control level RBC;
(3) "authorized control level RBC" means
the number determined
under the risk-based capital formula in accordance with the RBC
instruc-
tions; and
(4) "mandatory control level RBC" means
the product of .70 and the
authorized control level RBC.
(l) "RBC plan" means a comprehensive
financial plan containing the
elements specified in K.S.A. 1999 Supp. 40-2c06, and amendments
thereto. If the commissioner rejects the RBC plan, and it is
revised by
the insurer, with or without the commissioner's recommendation,
the
plan shall be called the "revised RBC plan."
(m) "RBC report" means the report
required by K.S.A. 1999 Supp.
40-2c02, and amendments thereto.
(n) "Total adjusted capital" means the
sum of:
(1) An insurer's capital and surplus or
surplus only if a mutual insurer;
and
(2) such other items, if any, as the RBC
instructions may provide.
(o) "Commissioner" means the commissioner
of insurance.
New Sec. 9. As used in this
act:
(a) "Attorney-in-fact" means the person
designated and authorized by
subscribers as having authority to obligate them on reciprocal
insurance
contracts.
(b) "Commissioner" means the commissioner
of insurance.
(c) "Person" means any association,
aggregate of individuals, busi-
ness, company, corporation, individual, joint-stock company,
Lloyds-type
of organization, organization, cooperative, partnership, receiver,
trustee
or society, with power to enter into contractual undertakings
within or
without the state.
(d) "Reciprocal" means an aggregation of
subscribers under a com-
mon name.
(e) "Reciprocal insurance" means
insurance resulting from the mu-
tual exchange of insurance contracts among persons in an
unincorporated
association under a common name through an attorney-in-fact
having
authority to obligate each person both as insured and insurer.
(f) "Subscriber" means a person obligated
under a reciprocal insur-
ance agreement.
New Sec. 10. Every reciprocal shall
have and use a business name
that includes the word "reciprocal," "interinsurer,"
"interinsurance,"
"exchange," "underwriters" or "underwriting." The name of the
recip-
rocal shall not be so similar to any other name or title previously
adopted
by a similar organization, or by any other insurance company or
associa-
tion, as in the opinion of the commissioner of insurance is
calculated to
result in confusion or deception.
New Sec. 11. The board of directors
exercising the subscribers'
rights in a domestic reciprocal shall be selected under rules
adopted by
the subscribers. At least 3/4 of the board of directors of a
domestic recip-
rocal shall be composed of subscribers or representatives of
subscribers,
other than the attorney-in-fact or any person employed by,
representing
or having a financial interest in the attorney-in-fact. An
individual shall
not be considered to be employed by, representing or having a
financial
interest in the attorney-in-fact if such individual is a subscriber
or a rep-
resentative of a subscriber of the reciprocal. The board of
directors shall
supervise the finances of the reciprocal and the reciprocal's
operations to
the extent required to assure their conformity with the
subscriber's agree-
ment and power of attorney and shall exercise any other powers
conferred
on it by the subscriber's agreement. The board of directors may
also be
referred to as a subscribers advisory committee, board of trustees
or by
such other name as the board chooses.
New Sec. 12. (a) Every subscriber
of a domestic reciprocal may ex-
ecute a subscriber's agreement and power of attorney setting forth
the
rights, privileges and obligations of the subscriber as an
underwriter and
as a policyholder, and the powers and duties of the
attorney-in-fact. If a
domestic reciprocal does not require execution of a subscriber's
agree-
ment and power of attorney, the reciprocal shall include on its
policies a
statement that the subscriber shall be bound by the terms and
conditions
of the then current subscriber's agreement and power of attorney on
file
with the attorney-in-fact and the commissioner of insurance, and
each
subscriber shall by operation of law be bound by such subscriber's
agree-
ment and power of attorney as if individually executed. Without
additional
execution, notice or acceptance, every subscriber of a reciprocal
agrees
to be bound by any modification of the terms of the power of
attorney
and subscriber's agreement which is jointly made by the
attorney-in-fact
and the board of directors pursuant to K.S.A. 40-1616, and
amendments
thereto, and which shall be on file with the attorney-in-fact and
the com-
missioner of insurance. The subscriber's agreement and power of
attorney
shall contain in substance the following provisions:
(1) A designation and appointment of the
attorney-in-fact to act for
and bind the subscriber in all transactions relating to or arising
out of the
operations of the reciprocal;
(2) a provision empowering the
attorney-in-fact:
(A) To accept service of process on
behalf of the reciprocal; and
(B) to appoint the commissioner as an
agent of the reciprocal upon
whom may be served all lawful process against or notice to the
reciprocal;
and
(3) the maximum amount to be deducted
from advance premiums or
deposits to be paid the attorney-in-fact, and the items of expense,
in
addition to losses, to be paid by the reciprocal.
(b) The subscriber's agreement may:
(1) Provide for the right of substitution
of the attorney-in-fact and
revocation of the power of attorney;
(2) impose any restrictions upon the
exercise of the power agreed
upon by the subscribers;
(3) provide for the exercise of any right
reserved to the subscribers
directly or through the board of directors; or
(4) contain other lawful provisions
deemed to be advisable.
New Sec. 13. Any modification of
the terms of the power of attorney
and subscriber's agreement of a domestic reciprocal shall be made
jointly
by the attorney-in-fact and the board of directors. Any such
modification
shall be filed with the attorney-in-fact and the commissioner of
insurance.
By operation of law any such filing shall bind all subscribers the
same as
if each subscriber individually had adopted and executed the
modified,
altered or amended subscriber's agreement and power of attorney.
No
modification shall be effective retroactively, nor shall such
modification
affect any insurance contract issued prior to the date of such
modification.
New Sec. 14. A reciprocal may
return to its subscribers any savings
or credit which accrues to such subscriber's accounts.
New Sec. 15. Upon the liquidation
of a domestic reciprocal, the as-
sets remaining after discharge of its indebtedness and policy
obligations,
the return of any contributions of the attorney-in-fact or any
other person
made as provided in K.S.A. 40-1606, and amendments thereto, and
the
return of any unused deposits, savings or credits, shall be
distributed. The
distribution shall be made to the persons who were its subscribers
within
the 12 months prior to the final termination of such reciprocal's
license
in accordance with a formula approved by the commissioner of
insurance
or the court.
New Sec. 16. No reciprocal shall issue
any assessable insurance poli-
cies. The subscribers of a reciprocal shall not be personally
liable for the
payment of the reciprocal's debts or obligations. Any judgment
against a
reciprocal shall be binding only upon the reciprocal and not upon
each
of the reciprocal's subscribers.
Sec. 17. K.S.A. 40-1601 is hereby
amended to read as follows: 40-
1601. Individuals, partnerships and corporations
Persons of this state,
hereby designated subscribers, are hereby authorized to exchange
recip-
rocal or interinsurance contracts with each other, or with
individuals,
partnerships and corporations persons of
other states and countries, pro-
viding indemnity among themselves from any loss which may be the
sub-
ject of legal insurance, excepting life insurance.
Sec. 18. K.S.A. 40-1602 is hereby
amended to read as follows: 40-
1602. Such Reciprocal insurance contracts
may be executed by an attor-
ney in fact, herein designated attorney
attorney-in-fact, duly authorized
and acting for such the subscribers of a
reciprocal, and such attorney
attorney-in-fact may be a corporation. The office or offices
of such attor-
ney attorney-in-fact may be maintained at
such place or places as may be
designated by the subscribers in the power of attorney.
Such contracts
and the exchange thereof and such subscribers, their
attorneys and rep-
resentatives shall be regulated by this article and by no
other law relating
to insurance unless such law is referred to in this
article, and no law
hereafter enacted shall apply to them unless they be
expressly designated
therein.
Sec. 19. K.S.A. 40-1603 is hereby
amended to read as follows: 40-
1603. Such attorney (a) The
attorney-in-fact of a domestic reciprocal
shall file with the commissioner of insurance of this
state a declaration
verified by the oath of such attorney
attorney-in-fact, or when such at-
torney attorney-in-fact is a corporation by
the oath of a chief officer
thereof, setting forth:
(a) (1) The name
of the attorney attorney-in-fact, and the
name or
title of the office under which such contracts are to be
issued. Said name
or title shall not be so similar to any other name or title
previously adopted
by a similar organization, or by any insurance company or
association, as
in the opinion of the commissioner of insurance is
calculated to result in
confusion or deception. The office or offices through which
such indem-
nity contracts shall be exchanged shall be classified as
reciprocal or in-
terinsurance exchanges of the domestic
reciprocal.
(b) (2) The kind
or kinds of insurance to be effected or exchanged.
(c) A copy of the form of policy
contract or agreement under or by
which such insurance is to be effected or exchanged and
which comprises
the standard provisions, as provided in the law of this
state. Such contract
or agreement shall, in lieu of complying with the language
and form pre-
scribed, be held to conform thereto in substance if such
contract or agree-
ment includes a provision or endorsement reciting that the
policy shall
be construed as if in the language and form prescribed by
law. The at-
torney may insert in the policy prescribed by the laws of
this state any
provision or condition which is required by the plan of
reciprocal or in-
terinsurance.
(d) (3) A copy of
the form of power of attorney and subscriber's agree-
ment or other authority of such attorney
attorney-in-fact under which
such insurance is to be effected or exchanged.
(e) (4) The
location of the office or offices from which such contracts
or agreements are to be issued.
(f) (5) That
except as to the kinds of insurance hereinafter specifically
mentioned in this subdivision, applications shall have been made
for in-
demnity upon at least one hundred 100
separate risks aggregating not
less than one and one-half million dollars
$1,500,000, represented by
executed contracts or bona fide applications to become concurrently
ef-
fective. In the case of employers' liability or
workmen's workers compen-
sation insurance, applications shall have been made for indemnity
upon
at least one hundred 100 separate risks,
covering a total annual payroll of
not less than two and one-half million dollars
$2,500,000, as represented
by executed contracts or bona fide applications to become
concurrently
effective. In the case of automobile insurance,
applications shall have
been made for indemnity upon at least one thousand motor
vehicles,
represented by executed contracts or bona fide applications
to become
concurrently effective on any or all classes of automobile
insurance ef-
fected by such subscribers through said
attorney.
(g) (6) That
there is in the possession of such attorney
attorney-in-
fact, and available for the payment of losses, assets
conforming to the
requirements of section 40-1605 hereof K.S.A.
40-1605 and amendments
thereto.
(h) (7) A
financial statement in form prescribed for the annual state-
ment.
(i) (8) An
instrument authorizing service of process as provided in
this article.
(b) No declaration shall be required
under this section for any recip-
rocal organized in this state as a result of a conversion under
the provi-
sions of K.S.A. 40-1620 and amendments thereto.
Sec. 20. K.S.A. 40-1604 is hereby
amended to read as follows: 40-
1604. There shall be filed with the commissioner of insurance
of this state
a statement under oath by the attorney
attorney-in-fact giving the maxi-
mum amount of indemnity upon any single risk, and such
attorney shall
attorney-in-fact, whenever and as often as
he such attorney-in-fact shall
be required, shall file with the commissioner of insurance a
statement
verified by his such attorney-in-fact's
oath, to the effect that the exchange
reciprocal has not assumed on any one risk an amount greater
than ten
(10) percentum 10% of its surplus, unless
the excess shall be reinsured
(1) in some other insurance company duly authorized to transact
similar
business in this state or as otherwise provided in the insurance
code; or
(2) as provided by the laws of the state in which the principal
office of
the attorney reciprocal is located.
Sec. 21. K.S.A. 40-1605 is hereby
amended to read as follows: 40-
1605. There shall be maintained at all times, unearned
premiums or (a)
At all times, each reciprocal shall maintain the same unearned
premium
and loss or claim reserves, in cash or securities authorized
by the laws of
the state in which the principal office of the attorney is
located, for the
investment of similar funds of insurance companies doing
the same kind
of business, in an amount equal to a pro rata amount of the
premium or
deposits collected from subscribers on all unexpired risks.
In addition to
the assets previously provided in this section there shall
also be main-
tained as a claim or loss reserve, cash or such securities
sufficient to
discharge all liability on all outstanding losses arising
under policies is-
sued, the same to be calculated in accordance with the laws
of the state
relating to similar reserves for companies insuring similar
risks. Any re-
ciprocal exchange the reciprocal is domiciled,
as required for domestic
stock and mutual companies writing the same classes of
insurance.
(b) No reciprocal shall be licensed to
transact the business of insur-
ance in this state unless such reciprocal shall have and
maintain a surplus
equal to the capital and surplus required of a domestic stock
insurance
company transacting the same kinds of insurance and may
provide for the
issuance of a nonassessable policy. Any
reciprocal exchange issuing non-
assessable policies
(c) Each reciprocal shall have
lawful securities on deposit, for the
protection of all subscribers or creditors, or both, of the
exchange recip-
rocal, with the department of insurance of this or any other
state in the
United States in an amount equal to the minimum capital stock
required
of a domestic stock insurance company transacting the same kinds
of
insurance. Until May 1, 1989, companies which were
authorized to do
business in Kansas after January 1, 1969, but before
January 1, 1984, shall
be required to have surplus and deposit equal to that which
was required
by this section prior to the passage of this act. After May
1, 1989, such
companies shall comply with the paid-up capital stock,
surplus and deposit
requirements provided by this act.
Until May 1, 1989, companies doing
business in this state on January
1, 1969, shall be required to have a surplus and deposit
equal to that
required of such companies prior to the passage of this
act. On and after
May 1, 1989, companies doing business in this state on
January 1, 1969,
shall be required to have a surplus and deposit equal to
that required of
all other companies to whom this section applies
immediately prior to the
passage of this act.
On and after May 1, 1994, companies
doing business in this state on
January 1, 1969, shall comply with the surplus and deposit
requirements
provided by this act.
No reciprocal exchange shall issue any
assessable insurance policies.
Sec. 22. K.S.A. 40-1606 is hereby
amended to read as follows: 40-
1606. If at any time it appears that the amount of funds required
in section
40-1605 K.S.A. 40-1605, and amendments
thereto, has not been accu-
mulated or maintained, then the subscribers or their
attorney for them
shall immediately advance such sums as are needed to comply
with the
provisions of this section, and the
attorney-in-fact or any other interested
party may advance to a reciprocal any funds required in such
reciprocal's
operations. The funds so advanced shall not be treated as a
liability at the
exchange, and shall not be withdrawn of the
reciprocal and interest shall
not be paid or funds repaid except with the approval of the
supervising
insurance official of the state wherein the exchange is
domiciled, and such
advances in which the reciprocal is domiciled.
Any such advance and
interest shall be repaid only out of the surplus funds of
the exchange
reciprocal.
Sec. 23. K.S.A. 40-1607 is hereby
amended to read as follows: 40-
1607. Concurrently with the filing of the declaration provided for
by the
terms of K.S.A. 40-1603 and any amendments
thereto, the attorney at-
torney-in-fact shall file with the commissioner of insurance
an instrument
in writing, executed by him such
attorney-in-fact for the subscribers
re-
ciprocal conditioned that upon the issuance of the
certificate of authority
provided for in K.S.A. 40-1610, and amendments thereto,
service of pro-
cess may be had upon the commissioner of insurance
in all suits in this
state arising out of such policies, contracts or agreements, which
service
shall be valid and binding upon all subscribers exchanging
at any time
reciprocal or interinsurance contracts through such
attorney. Three cop-
ies of such process shall be served, accompanied by a fee
of three dollars,
and shall require the defendant to answer by a certain day,
not less than
forty days from its date, and the commissioner of insurance
shall file one
copy, forward one copy to the said attorney, and return one
copy with his
admission of service. Subscribers of any reciprocal or
interinsurance
exchange the reciprocal. Such service of
process shall be executed in ac-
cordance with the provisions of K.S.A. 40-218 and amendments
thereto.
Any reciprocal operating under the laws of this state may
sue or be sued
in the declared name of such exchange the
reciprocal.
Sec. 24. K.S.A. 40-1608 is hereby
amended to read as follows: 40-
1608. The attorney in fact attorney-in-fact of
a reciprocal, or any em-
ployee having the care and handling of the funds and securities of
any
reciprocal exchange a reciprocal, shall
give maintain a good and sufficient
bond running to the governing committee board
of directors of the re-
ciprocal conditioned for the faithful accounting and
disbursement of all
money that may come into his such
attorney-in-fact's or employee's hands;
such bond may be executed by a surety company or may be a
personal
bond approved by the commissioner of insurance of the state
where such
exchange is domiciled; and such bond to. Such
bond shall be in an amount
fixed in an amount and to be approved by
the advisory committee board
of directors or other governing body of such
exchange reciprocal. In lieu
of filing the bond, the attorney-in-fact may maintain on deposit
with the
commissioner an equivalent amount in approved securities which
are sub-
ject to the same conditions as the bond.
Sec. 25. K.S.A. 40-1610 is hereby
amended to read as follows: 40-
1610. Each attorney by whom or through whom are issued any
policies
of or contracts for indemnity of the character specified in
this article
reciprocal shall procure from the commissioner of
insurance annually a
certificate of authority, stating that all of the
requirements of this article
have been complied with, and upon. Upon
such compliance and the pay-
ment of the fees required by this article, the commissioner
of insurance
shall issue such certificate of authority. The commissioner
of insurance
may revoke or suspend any certificate of authority issued hereunder
in
case of breach of any of the conditions imposed by this article
after rea-
sonable notice has been given said attorney, to
the reciprocal in writing,
so that he such reciprocal may appear and
show cause why such action
should not be taken. Any attorney who may have procured a
certificate
of authority hereunder may renew such certificate annually
thereafter:
Provided, however, That
any The certificate of authority shall continue
in
full force and effect until such certificate is suspended or
revoked or the
a new certificate of authority be is
issued or specifically refused.
Sec. 26. K.S.A. 40-1611 is hereby
amended to read as follows: 40-
1611. Such attorney Each reciprocal shall
pay to the commissioner of
insurance levies and taxes in the amount and as specified in K.S.A.
40-
252, 40-1703, 40-1704 and 75-1508, and amendments thereto.
The pre-
mium taxes which are set out in subsection 3, of subsection
B, of K.S.A.
40-252 , for mutual insurance companies organized under the
laws of any
other state, territory or country writing similar lines of
insurance, shall be
applicable to such attorney-in-fact of a reciprocal or
interinsurance
exchange doing business or seeking authority to do business
in this state.
All such levies and taxes on premiums shall be applicable to
premiums
received on or after January 1, 1957. The above fees, levies and
taxes shall
be in lieu of all license fees and taxes of whatever character in
this state
and such attorney-in-fact in calculating all such
levies and taxes such re-
ciprocal shall be permitted to deduct therefrom premiums
returned on
account of cancellations, all premiums received for reinsurance
from any
other company authorized to do business in this state, and savings
paid
or credited to subscriber policyholders.
Sec. 27. K.S.A. 40-1612 is hereby
amended to read as follows: 40-
1612. In addition to the laws hereinbefore referred to
in provisions of
this article, the requirements and provisions set
out forth in the following
sections of articles 2 and 20 of the Kansas
Statutes Annotated, or any and
amendments thereto, which govern other types of insurance
companies
shall apply to reciprocal or interinsurance
exchanges reciprocals to the
extent that such provisions do not conflict with the provisions
of this
article: Sections 40-208, 40-209, 40-214, 40-215,
40-216, 40-218, 40-220,
40-221 40-221a, 40-222, 40-223, 40-224,
40-225, 40-226, 40-227, 40-228,
40-229, 40-229a, 40-231, 40-233, 40-234, 40-234a,
40-235, 40-236, 40-
237, 40-238, 40-239, 40-240, 40-241, 40-242,
40-243, 40-244, 40-245, 40-
246 except as to contracts written through traveling salaried
representa-
tives to whom no commissions are paid, 40-246a, 40-247, 40-248,
40-249,
40-250, 40-251, 40-253, 40-254, 40-256, 40-281, 40-2,125,
40-2,126, 40-
2,127, 40-2,128, 40-2,156, 40-2,156a, 40-2,157, 40-2,159,
40-952, 40-
2001, 40-2002, 40-2003, 40-2004, 40-2005 and 40-2006. All
of the
requirements, provisions and regulations set out in the
foregoing sections
of articles 2 and 20 and which apply to insurance companies
are hereby
made to apply to reciprocal or interinsurance exchanges and
such recip-
rocal or interinsurance exchanges shall comply with and be
governed and
regulated by the provisions of such foregoing
sections, 40-2006 and 40-
2404 and article 2a of the Kansas Statutes Annotated, and
amendments
thereto, and any other provision of law pertaining to insurance
which
specifically refers to reciprocals.
Sec. 28. K.S.A. 40-1613 is hereby
amended to read as follows: 40-
1613. Reciprocal or interinsurance exchanges may, pursuant
to Under
authority given by the commissioner of insurance,
a reciprocal may en-
gage in the business of writing fidelity and surety bonds but only
upon
the condition that such reciprocal or interinsurance
exchange shall have
and maintain a an amount of surplus equal
to the total of capital and
surplus required of domestic stock insurance companies transacting
the
same kind of business and any such reciprocal or
interinsurance exchange
shall be deemed a stock insurance company for the purposes of
sections
K.S.A. 40-214, 40-239 to 40-247, both
sections inclusive, 40-252, 40-1107
and 40-1108 of the Kansas Statutes Annotated or
any and amendments
thereto. No fidelity or surety bond shall be issued by any such
reciprocal
or interinsurance exchange until the form
thereof of such bond shall have
been submitted to and accepted by the commissioner
of insurance. Any
fidelity or surety bonds executed pursuant to this act shall be
received
and accepted as company, corporation or corporate bonds.
Sec. 29. K.S.A. 1999 Supp. 40-1620
is hereby amended to read as
follows: 40-1620. (a) Any insurance company may convert to a
Kansas
insurance reciprocal in accordance with a plan for the conversion
of the
insurance company into an insurance reciprocal filed with and
approved
by the commissioner.
(b) The commissioner may establish
reasonable requirements and
procedures for the submission and approval of a conversion plan
author-
ized by subsection (a).
(c) No conversion plan shall be approved
under this section unless
such conversion plan includes:
(1) A provision for the conversion of
existing stockholder or policy-
holder interests in the insurance company into reciprocal or
exchange
subscriber interests in the insurance reciprocal so that each
subscriber's
interest in the resulting Kansas insurance reciprocal shall be
fairly pro-
portionate to such subscriber's interest in the insurance
company;
(2) a provision for the amendment of the
insurance company's exist-
ing articles of incorporation or other chartering document to a
sub-
scriber's agreement which complies with the provisions of K.S.A.
40-1602
and 40-1603, 40-1603 and section 12 and
amendments thereto;
(3) a copy of the proposed subscriber's
agreement;
(4) proof of the approval or adoption of
the conversion plan by not
less than 75% 2/3 of the shares or
policyholders entitled to vote, repre-
sented either in person or by proxy, at a duly called regular or
special
meeting of the stockholders or policyholders of the insurance
company
at which a quorum, as determined by the bylaws or other
chartering
documents of the insurance company, is
present:;
(5) a transition plan for the change of
governance of the insurance
company from the board of directors and officer structure of the
insur-
ance company to the insurance reciprocal which shall be governed
by
article 16 of chapter 40 of the Kansas Statutes Annotated and
amend-
ments thereto; and
(6) any other information required by the
commissioner.
(d) The commissioner shall approve the
conversion plan if the com-
missioner finds that the proposed conversion will:
(1) Not be detrimental to the interests
of the stockholders or poli-
cyholders of the insurance company;
(2) not be detrimental to the interests
of the state of Kansas; and
(3) not render the insurer incapable of
fulfilling the insurer's con-
tractual obligations.
(e) Upon approval of a conversion plan
under this section, the com-
missioner shall issue a new or amended certificate of authority,
which
shall be deemed to be the final act of conversion at which time the
in-
surance company shall concurrently become an insurance reciprocal.
The
insurance reciprocal shall be deemed to be a continuation of the
insurance
company and deemed to have been organized at the time the
converted
insurance company was organized.
(f) Each insurance reciprocal created
pursuant to this section shall
comply with all provisions of K.S.A. 40-1612, and amendments
thereto.
(g) Any conversion of an insurance
company to a reciprocal shall not
be subject to the provisions of K.S.A. 40-3304, and amendments
thereto.
(h) For the purposes of this
section:
(1) "Commissioner" means the
commissioner of insurance.
(2), "insurance
company" means a stock or mutual insurance
company.
(3) "Insurance reciprocal" means
a reciprocal or interinsurance
exchange established to exchange reciprocal or
interinsurance contracts
with subscribers to provide indemnity among
themselves.
Sec. 30. K.S.A. 1999 Supp. 40-1622
is hereby amended to read as
follows: 40-1622. The provisions of K.S.A. 1999 Supp. 40-1620 and
40-
1621, and sections 9, 10, 11, 12, 13, 14, 15 and 16 and
amendments
thereto, shall be supplemental to article 16 of chapter 40 of the
Kansas
Statutes Annotated and amendments thereto.
Sec. 31. K.S.A. 1999 Supp. 40-3502
is hereby amended to read as
follows: 40-3502. As used in this act the following terms shall
have the
meanings respectively ascribed to them herein:
(a) "Mortgage guaranty insurance company"
means any corporation,
company, association, reciprocal exchange, persons or partnerships
writ-
ing contracts of mortgage guaranty insurance and shall be governed
by
the provisions of this act and the other provisions of chapter 40
of the
Kansas Statutes Annotated applicable to companies organized or
oper-
ating under the provisions of K.S.A. 40-1101 et seq., and
amendments
thereto, to the extent such other provisions are not inconsistent
with the
requirements of this act.
(b) "Mortgage guaranty insurance" means
and includes: (1) Insur-
ance against financial loss by reason of nonpayment of principal,
interest
or other sums agreed to be paid under the terms of any note or bond
or
other evidence of indebtedness secured by a mortgage, deed of
trust, or
other instrument constituting a lien or charge on real estate, when
the
improvement on such real estate is a residential building or a
condomin-
ium or townhouse unit or buildings designed for occupancy by not
more
than four families;
(2) insurance against financial loss by
reason of nonpayment of prin-
cipal, interest or other sums agreed to be paid under the terms of
any
note or bond or other evidence of indebtedness secured by a
mortgage,
deed of trust or other instrument constituting a lien or charge on
real
estate, when the improvement on such real estate is a building or
build-
ings designed for occupancy by five or more families or designed to
be
occupied for industrial or commercial purposes; or
(3) insurance against financial loss by
reason of nonpayment of rent
or other sums agreed to be paid under the terms of a written lease
for
the possession, use or occupancy of real estate, when the
improvement
on such real estate is a building or buildings designed to be
occupied for
industrial or commercial purposes.
(c) "Authorized real estate security"
means an amortized note, bond
or other evidence of indebtedness, not exceeding
(97%) (100%) of the
fair market value of the real estate, secured by a mortgage, deed
of trust,
or other instrument which constitutes, or is equivalent to, a first
lien or
charge on real estate, when: (1) The real estate loan secured in
such
manner is one of a type which a bank, savings and loan association,
or an
insurance company, which is supervised and regulated by a
department
of this state or an agency of the federal government, is authorized
to make,
or would be authorized to make, disregarding any requirement
applicable
to such an institution that the amount of the loan not exceed a
certain
percentage of the value of the real estate;
(2) the improvement on such real estate
is a building or buildings
designed for occupancy as specified by paragraphs (1) or (2) of
subsection
(b); and
(3) the lien on such real estate may be
subject to and subordinate to
the following:
(i) The lien of any public bond,
assessment or tax, when no install-
ment, call or payment of or under such bond, assessment or tax is
delin-
quent; and
(ii) outstanding mineral, oil, water or
timber rights, rights-of-way,
easements or rights-of-way of support, sewer rights, building
restrictions
or other restrictions or covenants, conditions or regulations of
use, or
outstanding leases upon such real property under which rents or
profits
are reserved to the owner thereof.
(d) "Contingency reserve" means an
additional premium reserve es-
tablished to protect policyholders against the effect of adverse
economic
cycles.
(e) "Single risk" means the insurance
provided with respect to each
separate loan or lease covered by an individual policy of mortgage
guar-
anty insurance or an individual certificate issued pursuant to
K.S.A. 40-
3511, and amendments thereto.
Sec. 32. K.S.A. 40-1601, 40-1602,
40-1603, 40-1604, 40-1605, 40-
1606, 40-1607, 40-1608, 40-1610, 40-1611, 40-1612, 40-1613 and
40-1614
and K.S.A. 1999 Supp. 40-240, 40-2c01, 40-1620, 40-1622 and
40-3502
are hereby repealed.
Sec. 33. This act shall take effect
and be in force from and after its
publication in the statute book.