Ch. 24 1997 Session Laws of Kansas 71
An Act relating to insurance companies; concerning agents and
brokers; concerning fines
and penalties assessed by the commissioner of insurance; amending
K.S.A. 40-2,125, 40- 755, 40-938, 40-1119, 40-2407 and 40-3311 and
repealing the existing sections; also repealing K.S.A. 40-226,
40-939, 40-1120, 40-1705, 40-2214, 40-2236, 40-3205, 40-3206,
40-3811, 40-4113, 40-4210 and 40-4511.
Be it enacted by the Legislature of the State of
Kansas:
Section 1. K.S.A. 40-2,125 is hereby amended to read as follows:
40-
2,125. (a) If the commissioner determines after notice and
opportunity
for a hearing that any person has engaged or is engaging in any act
or
practice constituting a violation of any provision of Kansas
insurance stat-
utes or any rule and regulation or order thereunder, the
commissioner, may
by order,require that such person cease and
desist from the unlawful
act or practice and take such affirmative action as in the judgment
of the
commissioner will carry out the purposes of the violated or
potentially
72 1997 Session Laws of Kansas Ch. 24
violated provision. in the exercise of
discretion, order any one or more of
the following:
(1) Payment of a monetary penalty of not more than $1,000 for
each
and every act or violation, unless the person knew or reasonably
should
have known such person was in violation of the Kansas insurance
statutes
or any rule and regulation or order thereunder, in which case the
penalty
shall be not more than $2,000 for each and every act or
violation;
(2) suspension or revocation of the person's license or
certificate if
such person knew or reasonably should have known that such person
was
in violation of the Kansas insurance statutes or any rule and
regulation
or order thereunder; or
(3) that such person cease and desist from the unlawful act
or practice
and take such affirmative action as in the judgment of the
commissioner
will carry out the purposes of the violated or potentially violated
provi-
sion.
(b) If any person fails to file any report or other
information with the
commissioner as required by statute or fails to respond to any
proper
inquiry of the commissioner, the commissioner, after notice and
oppor-
tunity for hearing, may impose a penalty of up to $500 for each
violation
or act, along with an additional penalty of up to $100 for each
week
thereafter that such report or other information is not provided to
the
commissioner.
(b) (c) If the commissioner makes
written findings of fact that there
is a situation involving an immediate danger to the public health,
safety
or welfare or the public interest will be irreparably harmed by
delay in
issuing an order under subsection (a)(3), the commissioner
may issue an
emergency temporary cease and desist order. Such order, even when
not
an order within the meaning of K.S.A. 77-502 and amendments
thereto,
shall be subject to the same procedures as an emergency order
issued
under K.S.A. 77-536 and amendments thereto. Upon the entry of
such
an order, the commissioner shall promptly notify the person subject
to
the order that: (1) It has been entered, (2) the reasons therefor
and (3)
that upon written request within 15 days after service of the order
the
matter will be set for a hearing which shall be conducted in
accordance
with the provisions of the Kansas administrative procedure act. If
no hear-
ing is requested and none is ordered by the commissioner, the order
will
remain in effect until it is modified or vacated by the
commissioner. If a
hearing is requested or ordered, the commissioner, after notice of
and
opportunity for hearing to the person subject to the order, shall
by written
findings of fact and conclusions of law vacate, modify or make
permanent
the order.
(c) If, after notice and an opportunity for hearing, the
commissioner
finds that a person has violated the insurance laws of this state
or a rule
and regulation of the commissioner, the commissioner, in addition
to any
specific power applicable to such violation, may:
Ch. 24 1997 Session Laws of Kansas 73
(1) Censure the person; or
(2) issue an order against any person who violates the
insurance laws
of this state, or a rule and regulation, or order of the
commissioner, im-
posing an administrative penalty up to a maximum of $5,000 for
each
violation but not to exceed $25,000 for the same violation
occurring within
any six consecutive calendar months unless such person knew or
reason-
ably should have known the act was a violation of the insurance
laws, rules
and regulations or order of the commissioner. If the person knew
or
reasonably should have known the act was a violation as
aforementioned,
the commissioner may impose a penalty up to a maximum of $10,000
for
each violation but not to exceed $50,000 for the same violation
occurring
within any six consecutive calendar months.
(d) For purposes of this section:
(1) ``Person'' means any individual, corporation, association,
partner-
ship, reciprocal exchange, inter-insurer, Lloyd's insurer,
fraternal benefit
society and any other legal entity engaged in the business of
insurance,
but or any person purchasing an interest in a
life insurance policy which
is licensed pursuant to K.S.A. 40-2,141 and amendments thereto,
rating
organization, third party administrator, nonprofit dental service
corpo-
ration, nonprofit medical and hospital service corporation,
automobile
club, premium financing company, health maintenance organization,
in-
surance holding company, mortgage guaranty insurance company,
risk
retention or purchasing group, prepaid legal and dental service
plan, cap-
tive insurance company, automobile self-insurer or reinsurance
interme-
diary. The term ``person'' shall not include insurance agents
licensed pur-
suant to K.S.A. 40-241 or 40-246, and amendments thereto,
insurance
brokers licensed pursuant to K.S.A. 40-3701 et seq., and
amendments
thereto, or employees of licensed agents or brokers. Person
also means
mutual nonprofit hospital service organizations, nonprofit medical
service
corporations, nonprofit medical and hospital service corporations,
as de-
fined in articles 18, 19 and 19c of chapter 40 of the Kansas
Statutes
Annotated and amendments thereto; administrators, as defined in
article
38 of chapter 40 of the Kansas Statutes Annotated and
amendments
thereto; and health maintenance organizations, as defined in
article 32 of
chapter 40 of the Kansas Statutes Annotated and amendments
thereto
and prepaid service plans as defined in article 42 of chapter 40 of
the
Kansas Statutes Annotated and amendments thereto.
(2) ``Commissioner'' means the commissioner of insurance of
this
state.
Sec. 2. K.S.A. 40-755 is hereby amended to read as follows:
40-755.
(a) Reports shall be filed in accordance with K.S.A.
40-225, and amend- As part of
the annual statement
ments thereto, subject to penalty as provided in K.S.A. 40-226,
and
amendments thereto, for failure to file. (b)
herein required, each society shall, on or before the first day of
March,
74 1997 Session Laws of Kansas Ch. 24
file with the commissioner of insurance a valuation of its
certificates in
force on December 31 last preceding, providing the commissioner
of
insurance may, in the exercise of discretion for cause shown,
extend the
time for filing such valuation for not more than two calendar
months.
Such valuation shall be done in accordance with the standards
specified
in K.S.A. 40-754. Such valuation and underlying data shall be
certified by
a qualified actuary or, at the expense of the society, verified by
the actuary
of the department of insurance of the state of domicile of the
society.
Sec. 3. K.S.A. 40-938 is hereby amended to read as follows:
40-938.
No person or organization shall willfully withhold information
from, or
knowingly give false or misleading information to, the
commissioner, any
statistical agency designated by the commissioner, any rating
organization,
or any insurer, which will affect the rates or premiums chargeable
under
this act. A violation of this section shall subject the one
guilty of such
If the commissioner
violation to the penalties provided in K.S.A. 40-939.
finds that any person or organization has violated this section,
the com-
missioner, after notice and the opportunity for hearing, may impose
a
penalty of not more than $500 for each such violation. If the
commissioner
determines that such violation was willful, the commissioner may
impose
a penalty of not more than $2,000 for each such violation. Such
penalties
may be in addition to any other penalty provided by
law.
Sec. 4. K.S.A. 40-1119 is hereby amended to read as follows:
40-
1119. No person or organization shall willfully withhold
information from,
or knowingly give false or misleading information to the
commissioner,
any statistical agency designated by the commissioner, any rating
organ-
ization, or any insurer, which will affect the rates or premiums
chargeable
under this act. A violation of this section shall subject
the one guilty of If the com-
such violation to the penalties provided in K.S.A.
40-1120.
missioner finds that any person or organization has violated this
section,
the commissioner, after notice and the opportunity for hearing, may
im-
pose a penalty of not more than $500 for each such violation. If
the com-
missioner determines that such violation was willful, the
commissioner
may impose a penalty of not more than $2,000 for each such
violation.
Such penalties may be in addition to any other penalty provided by
law.
Sec. 5. K.S.A. 40-2407 is hereby amended to read as follows:
40-
2407. (a) If, after such hearing, the commissioner shall determine
that
the person charged has engaged in an unfair method of competition
or
an unfair or deceptive act or practice, the commissioner shall
render an
order requiring such person to cease and desist from engaging in
such
method of competition, act or practice and if the act or practice
is a
violation of K.S.A. 40-2404 and amendments thereto, the
commissioner
may in the exercise of discretion order any one or more of the
following:
(1) Payment of a monetary penalty of not more than
$100 $1,000 for
each and every act or violation;, but not
to exceed an aggregate penalty
Ch. 24 1997 Session Laws of Kansas 75
of $2,500 $10,000, unless the person
knew or reasonably should have
known such person was in violation of this act, in which case the
penalty
shall be not more than $1,000 $5,000 for
each and every act or violation,
but not to exceed an aggregate of $10,000
$50,000 in any six-month pe-
riod;
(2) suspension or revocation of the person's license if such
person
knew or reasonably should have known such person was in violation
of
this act; or
(3) redress of the injury by requiring the refund of any
premiums
paid by, the payment of any moneys withheld from, any consumer
and
appropriate public notification of the violation. In applying this
penalty
any requirement for the payment of moneys may include reasonable
in-
terest at a rate not to exceed the rate specified in K.S.A.
40-2,126 and
amendments thereto, with such interest commencing no earlier than
the
date the consumer's complaint was received by the commissioner
and
actual costs incurred by the consumer in effecting the payment
associated
directly with the injury.
(b) After the expiration of the time allowed for filing a
petition for
review if no such petition has been duly filed within such time,
the com-
missioner may at any time, after notice and opportunity for hearing
in
accordance with the provisions of the Kansas administrative
procedure
act, reopen and alter, modify or set aside, in whole or in part,
any order
issued under this section, whenever in the commissioner's opinion
con-
ditions of fact or of law have so changed as to require such action
or if
the public interest shall so require.
Sec. 6. K.S.A. 40-3311 is hereby amended to read as follows:
40-
3311. (a) Any insurer, without just cause, failing to file
any registration Every director or
officer of an in-
statement within the time prescribed in subsections (a) and (d) of
K.S.A.
40-3305 and amendments thereto shall be subject to a penalty of
$100
for each day's delay. The maximum penalty under this section is
$10,000.
The commissioner may reduce the penalty if the insurer demonstrates
to
the commissioner that the imposition of the penalty would
constitute a
financial hardship to the insurer. (b)
surance holding company system who knowingly violates, participates
in,
or assents to, or who knowingly shall permit any of the officers or
agents
of the insurer to engage in transactions or make investments which
have
not been properly reported or submitted pursuant to subsection (a)
of
K.S.A. 40-3305 or subsections (c) or (d) of K.S.A. 40-3306 and
amend-
ments thereto, or which otherwise violates this act, shall pay, in
such
directors' or officers' individual capacity, a civil forfeiture of
not more
than $5,000 per violation, after notice and hearing before the
commis-
sioner. In determining the amount of the civil forfeiture, the
commis-
sioner shall take into account the appropriateness of the
forfeiture with
76 1997 Session Laws of Kansas Ch. 24
respect to the gravity of the violation, the history of previous
violations,
and such other matters as justice may require.
(c) (b) Whenever it appears to the
commissioner that any insurer
subject to this act or any director, officer, employee or agent
thereof has
engaged in any transaction or entered into a contract which is
subject to
K.S.A. 40-3306 and amendments thereto and which would not have
been
approved had such approval been requested, the commissioner may
order
the insurer to cease and desist immediately any further activity
under that
transaction or contract. After notice and hearing the commissioner
may
also order the insurer to void any such contracts and restore the
status
quo if such action is in the best interest of the policyholders,
creditors or
the public.
(d) (c) Whenever it appears to the
commissioner that any insurer or
any director, officer, employee or agent thereof has committed a
willful
violation of this act, the commissioner may cause criminal
proceedings to
be instituted by the district court for the county in which the
principal
office of the insurer is located or if such insurer has no such
office in this
state, then by the district court for Shawnee county against such
insurer
or the responsible director, officer, employee or agent thereof.
Any in-
surer which willfully violates this act may be fined not more than
$50,000.
Any individual who willfully violates this act may be fined in
individual
capacity not more than $10,000 or, be imprisoned for not more than
one
to three years, or both.
(e) (d) Any officer, director or
employee of an insurance holding com-
pany system who knew or reasonably should have known they were
sub-
scribing to or making or causing to be made any false statements,
false
reports or false filings with the intent to deceive the
commissioner in the
performance of duties under this act, upon conviction thereof,
shall be
imprisoned for not more than five to 10 years or fined $100,000, or
both.
Any fines imposed shall be paid by the officer, director or
employee in
such person's individual capacity.
Sec. 7. K.S.A. 40-226, 40-2,125, 40-755, 40-938, 40,939,
40-1119, 40-
1120, 40-1705, 40-2214, 40-2236, 40-2407, 40-3205, 40-3206,
40-3311,
40-3811, 40-4113, 40-4210 and 40-4511 are hereby repealed.
Sec. 8. This act shall take effect and be in force from and
after its
publication in the statute book.
Approved March 31, 1997.