Ch. 102             1997 Session Laws of Kansas             357

An Act relating to insurance; directors; numbers; election and term; oath; relating to the
payment of certain insurance proceeds; amending K.S.A. 40-305, 40-3901 and 40-3903
and repealing the existing sections.

Be it enacted by the Legislature of the State of Kansas:

Section 1. K.S.A. 40-305 is hereby amended to read as follows: 40-
305. The affairs of any such insurance company, now existing or hereafter
organized under the laws of this state, shall be managed by a board of
not more than twenty-five nor less than five directors, all of whom shall
be stockholders, and a majority of whom shall be residents of this state.
The persons named as such in the charter shall constitute the directors
for the first year. Thereafter the directors shall be elected at the annual
meeting of the stockholders, which shall be held at such time as may be
provided in the bylaws. The bylaws shall also provide for the election of
at least one member and not more than one-third of the members of the
board of directors each year, to serve for not more than five years. Any
vacancy in the board shall be filled by the remaining members until the
next annual meeting of the stockholders, at which time a successor shall
be elected to fill the unexpired term. directors. The board of directors
shall consist of one or more members, the number of which shall be fixed
by the bylaws, unless the articles of incorporation establish the number
of directors, in which case a change in the number of directors shall be
made only by amendment of the articles.

The directors shall be elected by ballot, and each full-paid share of
stock shall be entitled to one vote. Shares may be voted by proxy, signed
by the person legally entitled to vote the same. Each stockholder shall
have the right to cast as many votes in the aggregate as shall equal the
number of shares of stock held by him, multiplied by the number of
directors to be elected, and each stockholder may cast the whole number
of votes for one candidate, or may divide his votes among two or more
candidates. The director shall take the oath of office as in other corpo-
rations. The bylaws shall specify the A majority of the total number of
directors necessary to shall constitute a quorum, which shall be not less
than five members, except that if the board of directors consists of nine
members or less, a majority may constitute a quorum for the transaction
of business, unless the articles of incorporation or the bylaws require a
greater number.

Sec. 2. K.S.A. 40-3901 is hereby amended to read as follows: 40-
3901. (a) The governing body of any city is hereby authorized to establish,
by ordinance, a procedure for the payment of $5,000 or 10%, whichever
is less, not to exceed 15% of the proceeds of any insurance policy based
upon a covered claim payment made for damage or loss to a building or
other structure, caused by or arising out of any fire or explosion. fire,

358             1997 Session Laws of Kansas             Ch. 102

explosion or windstorm. The ordinance shall apply only to a covered claim
payment which is in excess of 75% of the face value of the policy covering
a building or other insured structure.

(b) The insurer shall first shall pay all amounts due the holder of a
first real estate mortgage against the building or other structure pursuant
to the terms of the policy and endorsements thereto and then shall with-
hold from the covered claim payment the sum of $5,000 or 10% of the
covered claim payment a sum not to exceed the amount authorized pur-
suant to subsection (a), whichever is less and shall pay such moneys to
the city to deposit into an interest-bearing account, unless the city has
issued a certificate pursuant to K.S.A. 40-3905 40-3906, and amendments
thereto.

(c) The city shall release the insured's proceeds and any interest
which has accrued on such proceeds received under subsection (b) within
30 days after receipt of such moneys, unless the city has instituted legal
proceedings under the provisions of K.S.A. 12-1752, and amendments
thereto. If the city has proceeded under the provisions of K.S.A. 12-1752,
and amendments thereto, all moneys in excess of that necessary to comply
with the provisions of K.S.A. 12-1750 et seq., and amendments thereto,
for the removal of the building or structure, less salvage value, shall be
paid to the insured.

Sec. 3. K.S.A. 40-3903 is hereby amended to read as follows: 40-
3903. (a) The governing body of any county is hereby authorized to es-
tablish, by resolution, a procedure for the payment of $5,000 or 10%,
whichever is less, not to exceed 15% of the proceeds of any insurance
policy based upon a covered claim payment made for damage or loss to
a building or other structure, caused by or arising out of any fire or,
explosion. This or windstorm. The resolution shall not apply to cities
which have adopted an ordinance under the provisions of K.S.A. 40-3901,
and amendments thereto. The resolution shall apply only to a covered
claim payment which is in excess of 75% of the face value of the policy
covering a building or other insured structure.

(b) The insurer shall first shall pay all amounts due the holder of a
first real estate mortgage against the building or other structure pursuant
to the terms of the policy and endorsements thereto and then shall with-
hold from the covered claim payment of the sum of $5,000 or 10% of the
covered claim payment, whichever is less, not to exceed the amount au-
thorized pursuant to subsection (a) and shall pay such moneys to the
county to deposit into an interest-bearing account, unless the city has
issued a certificate pursuant to K.S.A. 40-3906, and amendments thereto.

(c) The county shall release the insured's proceeds and any interest
which has accrued on such proceeds received under subsection (b) within
30 days after receipt of such moneys, unless the county has instituted
legal proceedings, using the procedure under K.S.A. 12-1752, and amend-

Ch. 102             1997 Session Laws of Kansas             359

ments thereto, insofar as the same can be made applicable. If the county
has instituted legal proceedings, all moneys in excess of that necessary
for the removal of the building or structure, less salvage value, shall be
paid to the insured.

Sec. 4. K.S.A. 40-305, 40-3901 and 40-3903 are hereby repealed.

Sec. 5. This act shall take effect and be in force from and after its
publication in the statute book.

Approved April 10, 1997.