Citations Affected: IC 27-1;
IC 27-4-1-2
; IC 27-5; IC 27-5.1;
IC 27-6;
IC 27-8-8-2
;
IC 34-30-17-1
.
Synopsis: Farm mutual insurance. Replaces and repeals the current
law concerning farm mutual insurance companies, providing for
standard and extended companies. Makes conforming amendments.
Makes a technical change.
Effective: July 1, 2003.
January 21, 2003, read first time and referred to Committee on Insurance, Corporations and
Small Business.
A BILL FOR AN ACT to amend the Indiana Code concerning
insurance.
Class II(k) insurance.
(c) A domestic mutual company that organized after June 30, 1977,
must maintain a surplus of not less than one million two hundred fifty
thousand dollars ($1,250,000). However, when it organizes, it must:
(1) have a surplus of not less than two million dollars
($2,000,000);
(2) for the one (1) or more kinds of insurance under Class I that
it intends to market, have received applications for insurance from
not less than four hundred (400) persons, each application for an
amount not less than one thousand dollars ($1,000), and have
received the first year's premium due on a policy to be issued on
each such application; and
(3) for the one (1) or more kinds of insurance under Class II or
Class III that it intends to market, have received applications for
insurance covering not less than eight hundred (800) separate
risks in not less than forty (40) policies to be issued to not less
than forty (40) members, and have received premiums amounting
to not less than one hundred thousand dollars ($100,000) for those
policies.
(d) A domestic mutual company must deposit with the department
in cash or in obligations of the United States:
(1) twenty-five thousand dollars ($25,000), if it organized before
June 30, 1955;
(2) fifty thousand dollars ($50,000), if it organized after June 29,
1955, and before March 7, 1967; or
(3) one hundred thousand dollars ($100,000), if it organized after
March 6, 1967.
This subsection does not apply to a farm mutual insurance company
that is organized under IC 27-5 (before its repeal) or IC 27-5.1.
(e) If the commissioner determines that the continued operation of
a domestic mutual company may be hazardous to the policyholders or
the general public, the commissioner may, upon the commissioner's
determination, issue an order requiring the insurer to increase the
insurer's capital and surplus based on the type, volume, and nature of
the business transacted.
reinsurance specified in both Class II and Class III of
IC 27-1-5-1.
(e) (b) Any domestic company authorized to insure against loss or
damage by fire, which has been actively engaged in the fire insurance
business continuously for ten (10) years or more, or whose predecessor
or predecessors, if any prior to merger or consolidation, shall have been
so engaged for such period, may, if it complies with the provisions of
this subsection (e) and without complying with the capitalization and
surplus requirements of section 14 or section 15 of this chapter, insure
against loss or damage to dwellings and appurtenant structures and to
the contents thereof and any other personal property of a similar nature
of the insured or of the members of his household, resulting from any
peril, and may, in connection with making such insurance, also make
insurance against the legal liability of the insured or of the members of
his household, and for any medical, surgical and hospital expenses of
any person other than the insured or such members, arising out of
nonbusiness pursuits of the insured or such members or out of the
condition of, or acts performed by the insured or such members on such
dwellings and appurtenant structures and the real estate on which each
is located. Where a company is entitled to make such additional
insurance solely by virtue of this subsection, (e), it shall not make such
insurance unless it has made reinsurance arrangements satisfactory to
the commissioner whereby all of such additional insurance is reinsured
with a company which is qualified under IC 27-1 to make reinsurance
of such additional kind of insurance. The charter powers and licenses
of any domestic insurer meeting the requirements set out in this
subsection (e) may be broadened and extended hereunder to include the
right, power and authority to make any one or more of the kinds of
insurance permitted by this subsection.
(f) (c) No policy issued by a mutual company including a farmer's
farm mutual insurance company, shall be required to contain a
provision limiting the time within which suit against the insurer on
such policy must be filed.
insurance producer, if the officer, director, or employee does not
receive any commission on policies written or sold to insure risks
that reside, are located, or are to be performed in Indiana, and if:
(A) the officer, director, or employee's activities are executive,
administrative, managerial, clerical, or a combination of these,
and are only indirectly related to the sale, solicitation, or
negotiation of insurance;
(B) the officer, director, or employee's function relates to
underwriting, loss control, inspection, or the processing,
adjusting, investigating, or settling of a claim on a contract of
insurance; or
(C) the officer, director, or employee is acting in the capacity
of a special agent or agency supervisor assisting insurance
producers and the officer, director, or employee's activities are
limited to providing technical advice and assistance to
licensed insurance producers and do not include the sale,
solicitation, or negotiation of insurance.
(2) A person who secures and furnishes information for the
purpose of:
(A) group life insurance, group property and casualty
insurance, group annuities, group or blanket accident and
sickness insurance;
(B) enrolling individuals under plans;
(C) issuing certificates under plans or otherwise assisting in
administering plans; or
(D) performing administrative services related to mass
marketed property and casualty insurance;
where no commission is paid to the person for the service.
(3) A person identified in clauses (A) through (C) who is not in
any manner compensated, directly or indirectly, by a company
issuing a contract, to the extent that the person is engaged in the
administration or operation of a program of employee benefits for
the employer's or association's employees, or for the employees of
a subsidiary or affiliate of the employer or association, that
involves the use of insurance issued by an insurer:
(A) An employer or association.
(B) An officer, director, or employee of an employer or
association.
(C) The trustees of an employee trust plan.
(4) An:
(A) employee of an insurer; or
(B) organization employed by insurers;
applies to all forms of casualty insurance including fidelity, surety, and
guaranty bonds, to all forms of motor vehicle insurance, to all forms of
fire, marine, and inland marine insurance, and to any and all
combinations of the foregoing or parts thereof, on risks or operations
in this state, except:
(1) reinsurance, other than joint reinsurance to the extent stated
in section 14 of this chapter;
(2) accident and health insurance;
(3) insurance of vessels or craft, their cargoes, marine builders'
risks, marine protection and indemnity, or other risks commonly
insured under marine, as distinguished from inland marine,
insurance policies;
(4) insurance against loss or damage to aircraft or against liability
arising out of the ownership, maintenance, or use of aircraft;
(5) worker's compensation insurance; and
(6) abstract and title insurance.
(b) Inland marine insurance includes insurance defined by statute,
or by interpretation of statute, or if not so defined or interpreted, by
ruling of the commissioner of insurance (referred to as the
commissioner), or as established by general custom of the business, as
inland marine insurance.
(c) This chapter shall not apply to farmers' farm mutual insurance
companies organized and operating under IC 27-5 (before its repeal)
or IC 27-5.1 unless and only to the extent that IC 27-5 IC 27-5.1
specifically provides that such companies are subject to
(1) this chapter.
(2) Acts 1947, c.60; or
(3) Acts 1947, c.111.
is necessary for any of the following:
(1) To pay the farm mutual insurance company's accrued
liabilities.
(2) To meet or defray the farm mutual insurance company's
anticipated needs.
(3) To add to or restore the policyholder surplus of the farm
mutual insurance company.
Sec. 3. "Certificate of authority" has the meaning set forth in
IC 27-1-2-3
(v).
Sec. 4. "Commissioner" means the insurance commissioner
appointed under
IC 27-1-1-2.
Sec. 5. "Department" means the department of insurance
created by
IC 27-1-1-1.
Sec. 6. "Extended company" means a farm mutual insurance
company that is authorized to provide coverage as described in
IC 27-5.1-4.
Sec. 7. "Farm mutual insurance company" means a company
(as defined in
IC 27-1-2-3
) that is authorized to provide insurance
coverage under this article.
Sec. 8. "First class city" refers to a first class city as classified
under
IC 36-4-1-1.
Sec. 9. "Initial charge" means a charge that is collected by a
farm mutual insurance company before or at the time of the
issuance or renewal of an insurance policy under this article.
Sec. 10. "Person" means an individual or a business entity.
Sec. 11. "Policyholder" means a person who is insured by a
farm mutual insurance company.
Sec. 12. "Policyholder surplus" means a fund consisting of the
accumulated assets of a farm mutual insurance company that
exceed the farm mutual insurance company's accrued losses and
expenses.
Sec. 13. "Premium" means money given in consideration to a
farm mutual insurance company on account of or in connection
with an insurance policy for a specified policy period.
Sec. 14. "Premium plus assessment" refers to an insurance
policy under which the policyholder is:
(1) obligated to pay a premium; and
(2) subject to potential assessment.
Sec. 15. "Principal office" means the primary office maintained
by a farm mutual insurance company in Indiana.
Sec. 16. "Standard company" means a farm mutual insurance
company that may provide insurance coverage under
IC 27-5.1-3.
The term does not include an extended company.
Chapter 2. Farm Mutual Insurance Companies
Sec. 1. This chapter applies to a farm mutual insurance
company regulated under this article.
Sec. 2. (a) A farm mutual insurance company that holds a
certificate of authority to do business in Indiana on June 30, 2003,
is a standard company under this article unless the company:
(1) elects to become an extended company under
IC 27-5.1-4
;
and
(2) is authorized by the commissioner to do business as an
extended company.
(b) A standard company under subsection (a) may elect to
become an extended company at any time by:
(1) complying with
IC 27-5.1-4-2
(b); and
(2) submitting to an exam that may be conducted at the
discretion of the commissioner.
(c) An election made under this section is effective upon the date
the commissioner issues a new certificate of authority.
Sec. 3. (a) If a proposed farm mutual insurance company does
not hold a certificate of authority to do business in Indiana on June
30, 2003, an application may be made to the commissioner on a
form prescribed by the commissioner for a certificate of authority
for the proposed farm mutual insurance company to do business in
Indiana as one (1) of the following:
(1) A standard company.
(2) An extended company.
(b) Three (3) copies of the application described in subsection
(a) must be submitted to the commissioner. The application must
contain the following concerning the proposed farm mutual
insurance company:
(1) The name.
(2) The location and address of the principal office.
(3) The names and addresses of the officers and directors.
(4) A copy of the articles of incorporation.
(5) A copy of the bylaws.
(c) A standard company, not earlier than three (3) years after
it is granted a certificate of authority to do business as a standard
company, may elect to obtain a certificate of authority to do
business as an extended company if the standard company:
(1) has an annual direct written premium of more than one
million dollars ($1,000,000); and
(2) complies with
IC 27-5.1-4-2.
classification of directors into three (3) groups, and the terms of the
directors may be staggered. A vacancy on the board of directors
may be filled for the unexpired term through an appointment made
by the remaining directors.
(c) The board of directors of a farm mutual insurance company
shall, by vote of a majority of the directors, elect the officers
designated in the farm mutual insurance company's bylaws. The
directors may also elect any additional officers that the directors
determine are necessary. An officer elected under this subsection
is not required to be a director.
(d) The term of an officer elected under subsection (c) may not
be less than one (1) year or more than three (3) years. An outgoing
officer shall hold office until the officer's successor is either elected
or selected and qualified.
(e) The board of directors of a farm mutual insurance company
shall hold a separate meeting of the board of directors immediately
after the farm mutual insurance company's annual meeting.
Sec. 13. (a) Unless a farm mutual insurance company's articles
of incorporation specify otherwise, the articles of incorporation of
a farm mutual insurance company may be amended by an
affirmative vote of two-thirds (2/3) of the farm mutual insurance
company's policyholders who are voting in person or by proxy at
any policyholder meeting if the policyholders are given at least
thirty (30) days notice of:
(1) the meeting; and
(2) the subject matter of the proposed amendments.
(b) After a farm mutual insurance company has adopted an
amendment to the farm mutual insurance company's articles of
incorporation, three (3) copies of the amendment must be filed with
the commissioner.
(c) The commissioner shall determine whether to approve an
amendment specified under subsection (b) and, if the amendment
is approved, shall return a copy of the filed amendment and a
certificate of approval to the farm mutual insurance company.
Sec. 14. (a) Bylaws of a farm mutual insurance company may be
amended by the company in accordance with the company's
articles of incorporation. All amendments to the bylaws must be
filed with the commissioner.
(b) Bylaws of a farm mutual insurance company may not be
inconsistent with this article, other applicable laws, or the
company's articles of incorporation.
Sec. 15. The commissioner may charge a farm mutual insurance
company a reasonable fee, as provided in
IC 27-1-3-15
, for a filing
under this article.
Sec. 16. (a) A farm mutual insurance company may not deliver
or issue for delivery an insurance policy or an endorsement or a
rider to an insurance policy until a copy of the form and the rates
charged for the insurance policy are filed with and approved by the
commissioner.
(b) A farm mutual insurance company may use any form or rate
filed with the commissioner unless the commissioner notifies the
company in writing that the form is disapproved not more than
thirty (30) days after the commissioner's receipt of the rate or form
filing. The commissioner may disapprove a rate or form for the
following reasons:
(1) An inconsistency with this article or another applicable
state law.
(2) A provision that is:
(A) deceptive;
(B) ambiguous; or
(C) misleading.
(c) If the commissioner disapproves a rate or form under this
section, the commissioner shall notify the farm mutual insurance
company of the reason that the rate or form was disapproved. The
farm mutual insurance company may request a hearing before the
commissioner under IC 4-21.5 concerning the disapproval.
(d) A farm mutual insurance company may seek judicial review
under
IC 4-21.5-5
of the commissioner's final disapproval of a rate
or form under this section.
(e) The commissioner may charge a farm mutual insurance
company a reasonable fee as provided in
IC 27-1-3-15
for the filing
of a rate or form.
Sec. 17. (a) The commissioner may examine the affairs of a farm
mutual insurance company under
IC 27-1-3.1.
(b) The commissioner may take an action that may protect a
policyholder's interest if the commissioner determines that a farm
mutual insurance company conducts business in a manner that is:
(1) contrary to law applying to a farm mutual insurance
company; or
(2) detrimental to policyholder interests.
Sec. 18. (a) If the commissioner determines from:
(1) a statement filed by a farm mutual insurance company;
(2) an examination under section 17 of this chapter; or
(3) other information obtained by the commissioner;
that a farm mutual insurance company is conducting business in an
unsafe manner or that a farm mutual insurance company's assets
are insufficient to justify continuing the business, the commissioner
shall send written notice of the commissioner's concerns regarding
the farm mutual insurance company to the officers and directors
of the farm mutual insurance company.
(b) Not more than thirty (30) days after receiving a notice under
subsection (a), the farm mutual insurance company's officers and
directors shall:
(1) remedy; or
(2) establish a plan to remedy;
the commissioner's concerns.
(c) If:
(1) a farm mutual insurance company does not remedy or
establish a plan to remedy the commissioner's concerns under
subsection (b); or
(2) the commissioner determines that the continuation of a
farm mutual insurance company is not in the best interests of
the company's policyholders;
the commissioner shall institute proceedings in the circuit court of
the county in which the farm mutual insurance company has its
principal office to enjoin the farm mutual insurance company from
conducting any further business transactions.
(d) If the commissioner seeks a permanent injunction against a
farm mutual insurance company under subsection (c), the
commissioner shall also institute proceedings to settle and wind up
the affairs of the farm mutual insurance company and liquidate
and dissolve the farm mutual insurance company, as provided in
IC 27-9.
Sec. 19. (a) A person, including a person described in subsection
(b), that has a risk that is insurable under this article in a territory
in which a farm mutual insurance company operates may apply for
insurance coverage with the farm mutual insurance company. If
the farm mutual insurance company accepts the person as a
policyholder, the person becomes a policyholder of the farm
mutual insurance company and is entitled to all the rights and
privileges of a policyholder.
(b) Any of the following that own property within the territory
of a farm mutual insurance company may apply for insurance,
enter into an agreement for a policy, and hold a policy issued by a
farm mutual insurance company:
(1) A corporation.
(2) An estate.
(3) An association.
(c) An officer, a trustee, a board member, or a legal
representative of an entity described in subsection (b) may be
recognized as acting for or on behalf of the entity for the purpose
of membership.
Sec. 20. A person that solicits or negotiates insurance on behalf
of a farm mutual insurance company must be licensed as an
insurance producer under
IC 27-1-15.6.
Sec. 21. (a) Two (2) or more farm mutual insurance companies
may merge into one (1) farm mutual insurance company upon
approval of a merger plan by the policyholders of each farm
mutual insurance company as provided in subsection (b).
(b) Before a merger described in subsection (a) may take place:
(1) the board of directors of each farm mutual insurance
company must approve a merger plan; and
(2) the merger plan must be approved by the affirmative vote
of two-thirds (2/3) of the policyholders of each farm mutual
insurance company who vote in person or by proxy.
(c) Before a meeting at which a proposed merger under this
section may be considered:
(1) the policyholders of a farm mutual insurance company for
which the merger is proposed must be provided, by first class
mail:
(A) written notice of the date, time, and location of the
meeting;
(B) written notice that a proposed merger will be discussed
and voted on at the meeting; and
(C) a copy or summary of the merger plan; and
(2) a general notice stating:
(A) the date, time, and location of the meeting; and
(B) that a proposed merger or transfer will be discussed
and voted on at the meeting;
must be published in a newspaper of general circulation in the
county in which the principal office of the farm mutual
insurance company is located.
Sec. 22. (a) Each farm mutual insurance company that decides
to merge under section 21 of this chapter must file the following
documents with the commissioner:
(1) A petition for merger.
(2) The farm mutual insurance company's merger plan.
(3) Articles of merger.
(4) A copy of the minutes of a meeting at which the merger
plan was approved.
(5) Proof of compliance with section 21 of this chapter.
(b) The commissioner shall:
(1) review a filing submitted under subsection (a); and
(2) schedule a hearing under IC 4-21.5 if the commissioner
considers a hearing necessary.
The commissioner may waive a hearing under this subsection if the
commissioner determines that a proposed merger does not
prejudice the interests of policyholders of the farm mutual
insurance company.
(c) If the commissioner determines under subsection (b) that a
hearing is necessary, the commissioner shall provide written notice
of the hearing to the farm mutual insurance company that filed the
petition for merger. The commissioner may require the farm
mutual insurance company to provide the farm mutual insurance
company's policyholders with written notice of the hearing,
including the date, time, and place of the hearing.
(d) If the commissioner requires a farm mutual insurance
company to provide its policyholders with notice of a hearing
under subsection (c), the notice must meet the following
requirements:
(1) Be published in at least two (2) daily newspapers that the
commissioner may designate.
(2) Be published in the newspapers designated under
subdivision (1):
(A) not less than one (1) time per week;
(B) for two (2) successive weeks; and
(C) on the same day of the week.
(3) The last publication of notice must appear not more than
five (5) calendar days before the date of the hearing.
(e) The commissioner may require a farm mutual insurance
company to provide more notice than is required by subsection (d)
if the commissioner determines that more notice is required under
the circumstances concerning the farm mutual insurance company.
(f) In a hearing conducted under this section, the commissioner
may examine a farm mutual insurance company's business affairs
by:
(1) requiring and compelling the production of documents,
records, books, papers, contracts, or other evidence; and
(2) compelling the attendance of, and examining under oath,
a director, an officer, an agent, an employee, a solicitor, or an
attorney of the farm mutual insurance company, or another
person.
(g) A person who has an interest in a hearing conducted under
this section may appear and testify at the hearing.
(h) The commissioner shall approve and authorize a proposed
merger if the commissioner determines the following:
(1) That the interests of policyholders of the merging farm
mutual insurance companies are properly protected.
(2) That a reasonable objection to the proposed merger does
not exist.
(i) The commissioner may order a modification of the merger
plan or articles of merger for a proposed merger if the
commissioner determines that the modification is in the best
interest of policyholders.
(j) The commissioner may hire experts the commissioner
considers necessary to review a merger plan filed under this
section.
(k) A farm mutual insurance company that files a petition for
merger shall pay the costs of a hearing under this section.
Sec. 23. (a) The commissioner may establish the time frame in
which a farm mutual insurance company must perform the terms
of a merger plan approved under section 22 of this chapter.
(b) After a farm mutual insurance company that is a party to a
merger under sections 21 and 22 of this chapter performs the terms
of the merger plan, the surviving farm mutual insurance company
shall file with the commissioner written notice of the surviving
farm mutual insurance company's compliance with the merger
plan.
(c) The commissioner shall determine whether the terms of a
merger plan are performed adequately by a farm mutual insurance
company that is a party to a merger under sections 21 and 22 of
this chapter. If the commissioner determines that the terms of the
merger plan are met, the commissioner shall issue the following to
the surviving farm mutual insurance company:
(1) A certified copy of the certificate of merger.
(2) A certified copy of the articles of merger.
(d) The commissioner may charge a farm mutual insurance
company the fee set forth in
IC 27-1-3-15
for a filing made under
this section.
Sec. 24. Upon the commissioner's issuance of a certificate of
merger under section 23 of this chapter, the farm mutual insurance
companies that are parties to the merger plan become a single
surviving farm mutual insurance company. The separate existence
of each farm mutual insurance company that is a party to the
merger plan ceases upon the issuance of the certificate of merger.
Sec. 25. (a) A person that intends to enter into a contract for the
exclusive or dominant right to manage or control a farm mutual
insurance company shall file notice of the contract with the
commissioner at least thirty (30) days before entering into the
contract.
(b) The commissioner may approve a contract or proposed
contract described in subsection (a) only if the contract is not
detrimental to:
(1) the policyholders of the farm mutual insurance company;
or
(2) the public.
(c) If the commissioner disapproves a contract or proposed
contract described in subsection (a), the commissioner shall
provide written notice of the disapproval to the parties to the
contract. A person that entered into a contract described in
subsection (a) may not manage or control the farm mutual
insurance company under the contract after receiving notice of the
commissioner's disapproval of the contract.
(d) A person that enters into a contract for the exclusive or
dominant right to manage or control a farm mutual insurance
company is the managing general agent (as defined in
IC 27-1-33-4
) of the farm mutual insurance company and shall
comply with the requirements that apply to a managing general
agent under IC 27.
Sec. 26. If the commissioner determines, after notice and a
hearing under IC 4-21.5, that a farm mutual insurance company
has violated a provision of this article or a rule or order issued
under this article, the commissioner may issue an order requiring
the farm mutual insurance company to refrain from the unlawful
practice or to take an affirmative action that the commissioner
considers necessary to carry out the purposes of this article.
Sec. 27. (a) A decision, a determination, or an order of the
commissioner under section 26 of this chapter is subject to judicial
review under
IC 4-21.5-5.
(b) If a farm mutual insurance company does not seek judicial
review of the commissioner's determination to issue an order
under section 26 of this chapter less than thirty (30) days after the
commissioner notifies the farm mutual insurance company of the
commissioner's determination, the order is final.
(c) If a farm mutual insurance company seeks judicial review of
the commissioner's determination under section 26 of this chapter
and the commissioner's determination is upheld, the order is final.
Sec. 28. If a farm mutual insurance company willfully violates
a provision of an order under section 26 of this chapter, the
commissioner may do the following:
(1) Impose a civil penalty on the farm mutual insurance
company of not more than ten thousand dollars ($10,000).
(2) Suspend or revoke the farm mutual insurance company's
certificate of authority.
(3) Institute proceedings to enjoin the farm mutual insurance
company from conducting further business.
(4) Institute proceedings to wind up the affairs of the farm
mutual insurance company.
Sec. 29. (a) A farm mutual insurance company may not waive:
(1) a term of an insurance policy; or
(2) a right or defense of the farm mutual insurance company;
unless the farm mutual insurance company states in a letter or
other written or printed document to a policyholder that the farm
mutual insurance company intends to specifically waive the term,
right, or defense.
(b) A letter or other written or printed document required
under subsection (a) must include the signature of an officer or
other representative of the farm mutual insurance company who
is authorized to execute the particular type of waiver.
(c) A letter or other written or printed document under this
section is the only admissible evidence of a waiver by the farm
mutual insurance company.
Sec. 30. (a) A policyholder of a farm mutual insurance company
operating on a premium plus assessment basis under this article is
liable for the policyholder's share of the amount necessary to:
(1) pay the losses and necessary expenses incurred by the
farm mutual insurance company; and
(2) maintain an adequate reserve or safety fund as determined
by the farm mutual insurance company's directors;
while the policyholder's insurance policy is in effect.
(b) Notwithstanding subsection (a), a farm mutual insurance
company shall limit a policyholder's contingent liability during any
one (1) year to an amount not to exceed the limitation set forth in
the farm mutual insurance company's bylaws. The limitation set
forth in the farm mutual insurance company's bylaws under this
subsection must be an amount equal to not less than three percent
(3%) of the insurance carried by the policyholder.
Sec. 31. (a) A farm mutual insurance company may collect an
assessment from a policyholder in the manner prescribed by the
farm mutual insurance company's bylaws.
(b) After a farm mutual insurance company that operates on a
premium plus assessment basis receives:
(1) notice of a loss or damage to a policyholder's property; or
(2) a judgment against the farm mutual insurance company;
the directors of the farm mutual insurance company shall verify
the loss, damage, or judgment and shall, subject to the limitation
set forth in the farm mutual insurance company's bylaws under
section 30 of this chapter, assess each policyholder an amount
proportionate to the amount of risk the policyholder has with the
farm mutual insurance company.
Sec. 32. (a) If a policyholder is assessed and fails to pay the
assessment, the farm mutual insurance company may, upon
providing written notice of failure to pay:
(1) suspend the farm mutual insurance company's liability for
loss under the policyholder's insurance policy for the time
during which the assessment is not paid; or
(2) cancel the policyholder's insurance policy if the assessment
is not paid less than thirty (30) days after notice of the
assessment is sent to the policyholder.
The farm mutual insurance company may deduct the assessment
from the policyholder's deposit before returning the remainder of
a deposit, if any, to the policyholder.
(b) If an assessment is paid by a policyholder after a farm
mutual insurance company takes an action under subsection (a),
the farm mutual insurance company may reinstate the
policyholder's insurance policy effective beginning on the date on
which the payment is received, but a deduction or credit may not
be made to an assessment because of the suspension of the
insurance policy.
(c) A farm mutual insurance company may file an action to
compel a policyholder to pay an assessment.
Sec. 33. (a) A policyholder is not liable for an assessment of
losses or expenses that are incurred by a farm mutual insurance
company after the policyholder has terminated the policyholder's
insurance policy.
(b) A former policyholder is not liable for an assessment for
obligations incurred by a farm mutual insurance company before
the policyholder terminated the insurance policy on which the
assessment is made unless the farm mutual insurance company
gives the former policyholder notice of the assessment less than one
(1) year after the date of termination of the insurance policy.
Sec. 34. (a) A premium plus assessment insurance policy must
expressly and prominently state on the face page of the insurance
policy that the insurance policy is a premium plus assessment
insurance policy.
(b) A suit or action for a loss under a premium plus assessment
insurance policy may not be commenced until:
(1) the loss is due in accordance with the premium plus
assessment insurance policy; or
(2) not less than sixty (60) days after proof of loss was given to
the farm mutual insurance company that issued the premium
plus assessment insurance policy.
(c) Requirements that a policyholder must meet to sustain a
legal cause of action under this section must be disclosed clearly
and prominently in the premium plus assessment insurance policy.
(d) Notwithstanding
IC 34-11-2-11
, the statute of limitations for
a claim on a premium plus assessment insurance policy under this
section is two (2) years after the date of the loss.
(e) The statute of limitations for a claim on a nonassessment
insurance policy is subject to the statutes of limitations applicable
to a similar cause of action under state law.
Sec. 35. (a) A farm mutual insurance company that operates on
a premium plus assessment basis must pay losses and judgments of
the farm mutual insurance company from premiums received or
amounts collected on promissory notes. The amount:
(1) deducted from a policyholder's premium paid; or
(2) demanded from a policyholder's promissory note;
must bear the same relationship to the total loss as the
policyholder's total premium bears to the total premiums collected
in the calendar year that the loss is incurred.
(b) If funds collected under subsection (a) are insufficient to
cover a loss or judgment, the directors of the farm mutual
insurance company may, subject to the limitation set forth in the
farm mutual insurance company's bylaws under section 30 of this
chapter, assess each policyholder in the same manner. However, a
farm mutual insurance company may not assess policyholders
more than one (1) time in a calendar year for losses incurred by the
farm mutual insurance company.
Sec. 36. (a) A farm mutual insurance company may borrow
money for the payment of accrued losses and expenses.
and
(3) that reflects the financial condition of the standard
company as of the end of the calendar year immediately
preceding the date of the annual statement.
(b) An annual statement prepared and filed under subsection (a)
must be presented at the annual meeting of the standard company.
(c) An annual statement filed under subsection (a) must be
accompanied by the filing fee set forth under
IC 27-1-3-15.
Chapter 4. Extended Farm Mutual Insurance Companies
Sec. 1. An extended company is subject to the requirements of
IC 27-5.1-2
and this chapter.
Sec. 2. (a) A farm mutual insurance company that was
authorized to provide insurance in Indiana on June 30, 2003, may
elect to obtain a certificate of authority as an extended company.
(b) An election under subsection (a) is made by:
(1) an affirmative vote by the board of directors of the farm
mutual insurance company:
(A) on a resolution to convert to an extended company;
and
(B) on an amendment of the articles of incorporation of the
farm mutual insurance company; and
(2) filing:
(A) the resolution;
(B) the amended articles of incorporation; and
(C) other information that the commissioner considers
necessary for review;
with the commissioner.
(c) The commissioner shall, upon:
(1) receiving a filing specified under subsection (b)(2); and
(2) determining that the farm mutual insurance company is in
compliance with the requirements of this article and other
applicable law;
issue an amended certificate of authority to the farm mutual
insurance company authorizing the farm mutual insurance
company as an extended company.
(d) A farm mutual insurance company, after receiving an
amended certificate of authority under subsection (c):
(1) is subject to the requirements of this chapter; and
(2) may commence the business of insurance as an extended
company.
Sec. 3. An extended company may:
(1) insure the property of policyholders of the extended
company against loss or damage that is caused by:
(A) fire;
(B) windstorm;
(C) causes specified under an extended coverage provision;
and
(D) other perils that are specified in the policy form;
(2) insure the property of policyholders of the extended
company against:
(A) loss of use;
(B) loss of occupancy;
(C) loss of rents; and
(D) additional expenses;
that result from direct loss or damage to covered property;
and
(3) provide other kinds of insurance that are approved by the
commissioner.
Sec. 4. An extended company shall comply with the following
financial and reinsurance requirements if the extended company
provides the types of insurance described in section 3 of this
chapter:
(1) The extended company shall maintain a policyholder
surplus as required under
IC 27-1-6-15.
(2) The net retention per risk that an extended company may
maintain may not exceed two-tenths percent (0.2%) of the
extended company's insurance in force.
Sec. 5. (a) An extended company:
(1) may collect a membership fee and an initial premium
charge that are prescribed by the board of directors of the
extended company; and
(2) shall collect, not less than annually, an amount that is
sufficient to enable the extended company to:
(A) pay losses and expenses; and
(B) create and maintain a policyholder surplus in
accordance with the articles of incorporation and bylaws
of the extended company.
(b) Collections under subsection (a) are subject to the following
requirements:
(1) Collections must be made through assessments or
premiums charged by the extended company on certain
insurance policies issued by the extended company as
determined by the board of directors of the extended
company.
(2) A policyholder that holds an insurance policy that is issued
on a basis other than a premium basis:
(A) may be charged an advance assessment that is payable
not later than the time at which the insurance policy is
issued, as determined by the board of directors of the
extended company; and
(B) may be assessed if a further assessment is required
under the articles of incorporation of the extended
company.
(c) The terms and conditions of assessments made under this
section must be clearly disclosed in the insurance policy.
Sec. 6. The following requirements apply to the policyholder
surplus of an extended company:
(1) The articles of incorporation of the extended company
must provide for the existence, maintenance, and use of the
policyholder surplus.
(2) The policyholder surplus may be used only for the
payment of losses and expenses considered necessary by the
board of directors of the extended company.
(3) The existence or maintenance of the policyholder surplus
does not relieve a policyholder of any assessment or other
obligation that the:
(A) policyholder owes to the extended company; or
(B) extended company has levied against the policyholder.
(4) If the extended company is dissolved, the policyholder
surplus must be treated in the same manner as any other asset
of the extended company.
Sec. 7. An extended company shall make investments in
accordance with
IC 27-1-13-3.
Sec. 8. (a) An extended company shall, not later than March 1,
prepare and file with the commissioner an annual statement:
(1) that is on a form prescribed by the commissioner;
(2) that is verified by an affidavit of the:
(A) president; and
(B) secretary;
of the board of directors of the extended company; and
(3) that reflects the condition of the extended company as of
the end of the calendar year immediately preceding the date
of the annual statement.
(b) An annual statement prepared and filed under subsection (a)
must be presented at the annual meeting of the extended company.
(c) An annual statement filed under subsection (a) must be
accompanied by the filing fee set forth in
IC 27-1-3-15.
has become an insolvent insurer, which if it were not a claim by
or for the benefit of a reinsurer, insurer, insurance pool or
underwriting association, would be a "covered claim" may be
filed directly with the receiver or liquidator of the insolvent
insurer, but in no event may any such claim be asserted in any
legal action against the insured of such insolvent insurer; nor (2)
any supplementary obligation including but not limited to
adjustment fees and expenses, attorney fees and expenses, court
costs, interest and bond premiums, whether arising as a policy
benefit or otherwise, prior to the appointment of a liquidator; nor
(3) any unpaid claim that is not both filed within one (1) year after
an order of liquidation and permitted to share in liquidation
distributions under
IC 27-9-3-33
if the insolvent insurer is a
domestic insurer or in accordance with the applicable provisions
of the law of the state of domicile if the insolvent insurer is not a
domestic insurer; nor (4) any claim by a person whose net worth
at the time an insured event occurred was more than five million
dollars ($5,000,000); nor (5) a claim against a person insured by
an insolvent insurer if the person's net worth at the time an
insured event occurred was more than fifty million dollars
($50,000,000); nor (6) any claim by a person who directly or
indirectly controls, is controlled, or is under common control with
an insolvent insurer on December 31 of the year before the order
of liquidation. All covered claims filed in the liquidation
proceedings shall be referred immediately to the association by
the liquidator for processing as provided in this chapter.
(5) The term "insolvent insurer" means (a) a member insurer
holding a valid certificate of authority to transact insurance in this
state either at the time the policy was issued or when the insured
event occurred and (b) against whom a final order of liquidation,
with a finding of insolvency, to which there is no further right of
appeal, has been entered by a court of competent jurisdiction in
the company's state of domicile. "Insolvent insurer" shall not be
construed to mean an insurer with respect to which an order,
decree, judgment or finding of insolvency whether preliminary or
temporary in nature or order to rehabilitation or conservation has
been issued by any court of competent jurisdiction prior to
January 1, 1972 or which is adjudicated to have been insolvent
prior to that date.
(6) The term "member insurer" means any person who is licensed
or holds a certificate of authority under
IC 27-1-6-18
or
IC 27-1-17-1
to transact in Indiana any kind of insurance for
which coverage is provided under section 3 of this chapter,
including the exchange of reciprocal or inter-insurance contracts.
The term includes any insurer whose license or certificate of
authority to transact such insurance in Indiana may have been
suspended, revoked, not renewed, or voluntarily surrendered. A
"member insurer" does not include farmers' farm mutual
insurance companies organized and operating pursuant to
IC 27-5, IC 27-5.1 other than IC 27-5-3 and IC 27-5-4-2. a farm
mutual insurance company to which
IC 27-5.1-2-6
applies.
(7) The term "net direct written premiums" means direct gross
premiums written in this state on insurance policies to which this
chapter applies, less return premiums thereon and dividends paid
or credited to policyholders on such direct business. "Net direct
premiums written" does not include premiums on contracts
between insurers or reinsurers.
(8) The term "person" means an individual, corporation, limited
liability company, partnership, reciprocal or inter-insurance
exchange, association, or voluntary organization.
or voluntarily withdrawn but does not include the following:
(1) A medical and hospital service organization.
(2) A health maintenance organization under IC 27-13.
(3) A fraternal benefit society under IC 27-11.
(4) The Indiana Comprehensive Health Insurance Association or
any other mandatory state pooling plan or arrangement.
(5) An assessment company or any other person that operates an
assessment plan (as defined in
IC 27-1-2-3
(y)).
(6) An interinsurance exchange authorized by
IC 27-6-6.
(7) A prepaid limited health service organization or a limited
service health maintenance organization under
IC 27-13-34.
(8) A special service health care delivery plan under
IC 27-8-7.
(9) A farmer's farm mutual insurance company under IC 27-5.
IC 27-5.1.
(10) Any person similar to any person described in subdivisions
(1) through (9).
"Premiums" means direct gross insurance premiums and annuity
considerations received on covered policies, less return premiums and
considerations, and dividends paid or credited to policyholders on
direct business. It does not include premiums and considerations on
contracts between insurers and reinsurers. For purposes of assessments
made under section 6 of this chapter, "premiums" for covered policies
shall not be reduced on account of any limitation on benefits for which
the association is obligated under section 5(l) of this chapter. However,
"premiums" for assessment purposes does not include that portion of
any premium exceeding five million dollars ($5,000,000) for any one
(1) unallocated annuity contract.
"Person" means any natural person, corporation, limited liability
company, partnership, association, voluntary organization, trust,
governmental organization or entity, or other business organization or
entity.
"Resident" means any person who resides in Indiana at the time the
association becomes obligated for an impaired or insolvent insurer.
Persons other than natural persons are considered to reside in the state
where their principal place of business is located.
"Unallocated annuity contract" means an annuity contract or group
annuity certificate that is not issued to and held by a natural person
(excluding a natural person acting as a trustee), except to the extent of
any annuity benefits guaranteed to a natural person by an insurer under
the contract or certificate. For the purposes of section 1.5 of this
chapter, an unallocated annuity contract shall not be considered a group
covered policy.