PRINTER'S NO. 694
No. 651 Session of 1989
INTRODUCED BY SALVATORE, ANDREZESKI AND LYNCH, MARCH 7, 1989
REFERRED TO BANKING AND INSURANCE, MARCH 7, 1989
AN ACT
1 Amending the act of July 31, 1968 (P.L.738, No.233), entitled
2 "An act relating to establishment of an Industry Placement
3 Facility to make available basic property insurance against
4 fire and other perils for residential and business properties
5 located in certain areas of the Commonwealth of Pennsylvania
6 through the cooperative efforts of the Commonwealth and the
7 private property insurance industry; providing for a sharing
8 by the Commonwealth of insured losses resulting from riots
9 and other civil disorders through the formation of the
10 Pennsylvania Civil Disorder Authority; levying an assessment
11 on all policies of basic property insurance written in the
12 Commonwealth; and conferring powers and imposing duties upon
13 the Insurance Commissioner and upon certain property
14 insurers," adding provisions relating to homeowners policy
15 coverage.
16 The General Assembly of the Commonwealth of Pennsylvania
17 hereby enacts as follows:
18 Section 1. The title and section 102(4) and (6) of the act
19 of July 31, 1968 (P.L.738, No.233), known as The Pennsylvania
20 Fair Plan Act, are amended to read:
21 AN ACT
22 Relating to establishment of an Industry Placement Facility to
23 make available basic property or homeowners policy insurance
24 against fire and other perils for residential and business
1 properties located in certain areas of the Commonwealth of
2 Pennsylvania through the cooperative efforts of the
3 Commonwealth and the private property insurance industry;
4 providing for a sharing by the Commonwealth of insured losses
5 resulting from riots and other civil disorders through the
6 formation of the Pennsylvania Civil Disorder Authority;
7 levying an assessment on all policies of basic property or
8 homeowners policy insurance written in the Commonwealth; and
9 conferring powers and imposing duties upon the Insurance
10 Commissioner and upon certain property insurers.
11 Section 102. Purposes.--The purposes of this act are:
12 * * *
13 (4) To provide for the formulation and administration by an
14 Industry Placement Facility of a plan assuring fair access to
15 insurance requirements (Fair Plan) in order that no property
16 shall be denied basic property or homeowners policy insurance
17 through the normal insurance market provided by the private
18 property insurance industry except after a physical inspection
19 of such property and a fair evaluation of its individual
20 underwriting characteristics;
21 * * *
22 (6) To provide for the formulation and administration by the
23 Industry Placement Facility of a reinsurance arrangement whereby
24 property insurers shall share equitably the responsibility for
25 insuring insurable property for which basic property or
26 homeowners policy insurance cannot be obtained through the
27 normal insurance market; and
28 * * *
29 Section 2. Section 103(9) of the act is amended and the
30 section is amended by adding a clause to read:
19890S0651B0694 - 2 -
1 Section 103. Definitions.--As used in this act, unless the
2 context otherwise requires:
3 * * *
4 (9) "Insurer" means any insurance company or group of
5 companies under common ownership which is authorized to engage
6 in the insurance business under the laws of any State, and also
7 includes any pool or association of insurance companies formed,
8 associated or otherwise created for the purpose of sharing risks
9 written in accordance with this act[.];
10 (10) "Homeowners policy" means a package policy for dwelling
11 and contents risks combining fire and allied line coverage with
12 comprehensive personal liability and theft insurance for
13 homeowners and tenants. This policy carries an indivisible
14 premium in that the premium is not separately stated or broken
15 down for the various hazards insured against.
16 Section 3. Sections 201(b) and (e), 202(1), (7) and (10),
17 203 and 305(b) of the act are amended to read:
18 Section 201. Industry Placement Facility.--* * *
19 (b) Purposes. The purposes of the facility shall be twofold,
20 as more fully set forth in this article:
21 (1) To formulate and administer, subject to the approval of
22 the commissioner, a plan assuring fair access to insurance
23 requirements (Fair Plan) in order that no property in urban
24 areas shall be denied basic property or homeowners policy
25 insurance through the normal insurance market provided by the
26 private property insurance industry, except after a physical
27 inspection of such property and a fair evaluation of its
28 individual underwriting characteristics; and
29 (2) To formulate and administer, subject to the approval of
30 the commissioner, a reinsurance arrangement whereby the members
19890S0651B0694 - 3 -
1 of the facility shall share equitably the responsibility for
2 insuring property in urban areas which is insurable but for
3 which basic property or homeowners policy insurance cannot be
4 obtained through the normal insurance market.
5 * * *
6 (e) Administration. (1) The facility shall be governed by a
7 board of seven directors, elected annually by the members of the
8 facility. Each member of the facility shall be allotted votes
9 bearing the same ratio to the total number of votes to be cast
10 as its degree of participation in the facility bears to the
11 total participation. Pending the determination of the degree of
12 participation of the members in the facility, each member of the
13 facility shall be allotted votes bearing the same ratio to the
14 total number of votes to be cast as each member's written
15 premium on basic property or homeowners policy insurance during
16 calendar year 1967 bears to the statewide total written premium
17 for basic property or homeowners policy insurance during such
18 year. The first board shall be elected at a meeting of the
19 members or their authorized representatives.
20 (2) Any vacancy on the board shall be filled by a vote of
21 the other directors.
22 (3) If at any time the members fail to elect the required
23 number of directors or a vacancy remains unfilled for more than
24 fifteen days, the commissioner may appoint the directors
25 necessary to constitute a full board.
26 * * *
27 Section 202. Fair Plan. The Fair Plan shall contain
28 provision that: (1) Any person having an insurable interest in
29 real or tangible personal property at a fixed location in an
30 urban area, his representative, an insurance agent or broker, or
19890S0651B0694 - 4 -
1 an insurer, may request the facility for an inspection of the
2 property by representatives of the Inspection Bureau, such
3 inspection to be without cost to the applicant for insurance.
4 The request for such inspection need not be made in writing. No
5 such risk shall be written at surcharged rates or be denied
6 insurance coverage for basic property or homeowners policy
7 insurance by an insurer unless such an inspection has first been
8 made.
9 * * *
10 (7) If no insurer to which an inspection report has been
11 forwarded pursuant to clause (3) above agrees promptly to
12 provide basic property or homeowners policy insurance for the
13 property in question, or if no insurer has been designated by
14 the applicant, the facility shall take appropriate action to
15 ascertain whether any member of the facility will provide basic
16 property or homeowners policy insurance for the subject property
17 at the applicable premium rate, including approved surcharges
18 for physical characteristics.
19 * * *
20 (10) No agent or broker shall be permitted to refuse an
21 application for basic property or homeowners policy insurance
22 within an urban area if he is licensed to write and is actively
23 engaged in writing such insurance.
24 * * *
25 Section 203. Distribution of Risks.--(a) The facility shall
26 have the power, on behalf of its members--
27 (1) to direct one or more of its members to issue policies
28 of basic property or homeowners policy insurance to applicants;
29 (2) to assume reinsurance from its members; and
30 (3) to cede reinsurance.
19890S0651B0694 - 5 -
1 (b) Any member of the facility may cede to the facility
2 basic property or homeowners policy insurance covering property
3 in urban areas, to the extent and on the terms and conditions
4 set forth in the plan of operation of the facility.
5 (c) If the facility has been unable to obtain basic property
6 or homeowners policy insurance for any property through the
7 voluntary action of its members pursuant to section 202 above,
8 it shall promptly determine:
9 (1) whether the property is insurable (environmental hazard,
10 being any hazardous condition that might give rise to loss under
11 an insurance contract but which is beyond the control of the
12 property owners, shall not be considered by the facility in
13 determining insurable condition); and
14 (2) whether there is any unpaid premium due from the
15 applicant for prior insurance on the property.
16 If the facility determines that the property is insurable and
17 that no such unpaid premium is due, it shall promptly cause one
18 or more of its members to issue a policy or policies of basic
19 property or homeowners policy insurance at the applicable
20 premium rate, including approved surcharges for physical
21 characteristics, in the full insurable value of the property,
22 for a term of one year, subject to total reinsurance of such
23 risk by the facility.
24 Section 305. Reimbursement Payments to Federal Reinsurance
25 Facility; Necessity for Claim by Federal Reinsurance Facility;
26 Limitation on Amount of Payments.--* * *
27 (b) The total amount of any such payments made during any
28 calendar year shall not exceed five per cent of the aggregate
29 property or homeowners policy insurance premiums earned in the
30 Commonwealth during the preceding calendar year on those lines
19890S0651B0694 - 6 -
1 of insurance reinsured by the Federal reinsurance facility in
2 the Commonwealth during the current year.
3 Section 4. The heading of Article IV and sections 401 and
4 402 of the act are amended to read:
5 ARTICLE IV
6 Basic Property or Homeowners Insurance Assessment
7 Section 401. Basic Property or Homeowners Insurance
8 Assessment.--In order to provide for the payment of the
9 principal of and interest on bonds of the authority, issued
10 pursuant to section 306 of this act, an assessment is hereby
11 levied on each insurer which is a member of the Industry
12 Placement Facility. The amount of such assessment shall be two
13 per cent of the aggregate gross premiums received by such
14 insurer for policies of basic property or homeowners policy
15 insurance, or any component thereof, including homeowners and
16 commercial multiple peril policies, written within this
17 Commonwealth.
18 Section 402. Payment to Pennsylvania Civil Disorder
19 Authority.--Every insurer shall, on or before the fifteenth day
20 of April of each year, compute and pay to the Treasurer of the
21 Pennsylvania Civil Disorder Authority the aggregate assessments
22 due upon the gross premiums received by it for basic property or
23 homeowners policy insurance written within the Commonwealth
24 during the calendar year immediately preceding said payment
25 date. Said aggregate assessments shall bear interest at the rate
26 of six per cent per annum from the date the same are due and
27 payable to the authority until payment is made.
28 Section 5. Section 502 of the act, amended October 7, 1975
29 (P.L.370, No.104), is amended to read:
30 Section 502. Effective Date.--(a) This act shall take
19890S0651B0694 - 7 -
1 effect upon the effective date of the establishment of the
2 Federal reinsurance facility.
3 (b) (1) Policies issued pursuant to the direction of and
4 other obligations incurred by the Industry Placement Facility
5 shall not be impaired by the termination of the Federal
6 reinsurance facility and such Industry Placement Facility shall
7 be continued for the purpose of servicing such policies and
8 performing such obligations;
9 (2) All bonds issued and other obligations incurred by the
10 Pennsylvania Civil Disorder Authority shall not be impaired by
11 the termination of the Federal reinsurance facility and such
12 authority shall be continued for the purpose of servicing such
13 bonds and performing such obligations; and
14 (3) The collection of the basic property or homeowners
15 policy insurance assessment shall terminate as provided in
16 section 405 of this act.
17 Section 6. This act shall take effect in 30 days.
L12L40JLW/19890S0651B0694 - 8 -