65-34,126. Third party liability insurance plan.
65-34,126
65-34,126. Third party liability insurance plan.(a) The commissioner of insurance shall adopt and implement a plan forapplicants for insurance who are in good faith entitled to insurancenecessary to achieve compliance with the financial responsibility requirementsfor third-party liability imposed by 40 CFR part 280, subpart H, and part 281adopted by the federal environmental protection agency. Insurers undertaking totransact the kinds of insurance specified in subsection (b) or (c) of K.S.A.40-1102 and amendments thereto and rating organizations which file rates forsuch insurance shallcooperate in the preparation and submission to the commissioner ofinsurance of a plan or plans for the insurance specified in this section.Such plan shall provide:
(1) Insurance necessary to achieve compliance with the financialresponsibility requirements for third-party liability imposed by 40 CFRpart 280, subpart H, and part 281;
(2) for the appointment by the plan of a servicing carrier which shall be:(A) An insurance company authorized to transact business in this state;(B) an insurance company which is listed with the commissioner pursuant toK.S.A. 40-246e and amendments thereto; or (C) arisk retention group, as defined byK.S.A. 40-4101 and amendments thereto, which meets the requirementsestablished under the federal liability risk retention act of 1986 (15U.S.C. 3901 et seq.) and has registered with the commissionerpursuant to K.S.A. 40-4103 and amendments thereto;
(3) reasonable rules governing theplan, including provisions requiring, at the request of the applicant,an immediate assumption of the risk by an insurer or insurers uponcompletion of an application, payment of the specified premium and depositof the application and the premium in the United States mail, postageprepaid and addressed to the plan's office;
(4) rates and rate modifications applicable to such risks, which ratesshall be established as provided by subsection (b);
(5) the limits of liability which the insurer shall be required to assume;
(6) coverage for only underground storage tanks located within this state;
(7) coverage for at least 12 months from the date of the original applicationwith respect to any underground storage tank which has been installed for lessthan 10 years, and may provide such coverage with respect to any such tankwhich has been installed 10 or more years, without requiring tank integritytests, soil tests or other tests for insurability if, within six monthsimmediately preceding application for insurance, the tank has been made tocomply with all provisions of federal and state law, and all applicable rulesand regulations adopted pursuant thereto, but the plan may providefor renewal or continuation of such coverage to be contingent uponsatisfactory evidence that the tank or tanks to be insured continue to bein compliance with such laws and rules and regulations;
(8) exclusion from coverage of any damages for noneconomic loss and anydamages resulting from intentionalacts of the insured or agents of the insured;
(9) to the extent allowed by law, subrogation of the insurer to allrights of recovery from other sources for damages covered by the plan or plans;
(10) an optional deductible of the first $2,500, $5,000 or $10,000 ofliability per occurrenceat any one location for compensation of third parties for bodily injury andproperty damage causedby either gradual or sudden and accidental releases from undergroundpetroleum storage tanks, but no such deductible shall apply to reasonableand necessary attorney fees and other reasonable and necessary expensesincurred in defending a claim for such compensation;
(11) coverage only of claims for occurrences that commenced during theterm of the policy and that are discovered and reported to the insurerduring the policy period or withinsix months after the effective date of the cancellation or termination of the policy;
(12) a method whereby applicants for insurance, insureds and insurers mayhave a hearing on grievances and the right of appeal to the commissioner;
(13) a method whereby adequate reserves are established for open claimsand claims incurred but not reported based on advice from an independentactuary retained by the plan at least annually, the cost of which shall beborne by the plan;
(14) a method whereby the plan shall compare the premiums earned to thelosses and expenses sustained by the plan for the preceding fiscal year andif, for that year: (A) There is any excess of losses and expenses overpremiums earned, plus amounts transferred pursuant to subsection (a)(15),an amount equal to such excess losses and expenses shall be transferredfrom the underground fund established byK.S.A. 65-34,114 and amendments thereto to the plan; or(B)there is anysurplus of premiums earned, plus amounts transferred pursuant to subsection(a)(15), over losses, including loss reserves, and expenses sustained,1/2 of such surplus shall be transferred to such fund from the plan and theremaining 1/2 ofsuch surplus shall berefunded from the plan to the insureds in proportion to the amount eachpaid into theplan during the preceding fiscal year;and
(15) a method whereby, during any fiscal year, whenever the losses andexpenses sustained by the plan exceed premiums earned, an amountequal to the excess of losses and expensesshall be transferred from theunderground fundestablished by K.S.A. 65-34,114 and amendments theretoto theplan upon receipt by the secretary of health and environment of evidence,satisfactory to the secretary, of the amount of the excess losses and expenses.
(b) The commissioner of insurance shall establish rates, effective January1 of each year, for coverage provided under the plan adopted pursuant tothis section. Such rates shall be reasonable, adequate and not unfairlydiscriminatory. Such rates shall be based on loss and expense experiencedeveloped by risks insured by the plan and shall be in an amount deemedsufficient by the commissioner to fund anticipated claims based uponreasonably prudent actuarial principles, except that:
(1) Due consideration shall be given to the loss and expense experiencedeveloped by similar plans operating or trust funds offering third partyliability coverage in other states and the voluntary market; and
(2) before January 1, 1992, the annual rate shall be not more than$500 for each tank for which coverageis provided under the plan with selection of a $10,000 deductible.
In establishing rates pursuant to this subsection, the commissioner shallestablish, as appropriate, lower rates for tanks complying with all federalstandards, including design, construction, installation, operation andrelease detection standards, with which such tanks are or will be requiredto comply by 40 C.F.R part 280 as in effect on the effective date of this act.
(c) The commissioner of insurance shall appoint a governing board forthe plan. The governing board shall meet at leastannually to review and prescribe operating rules of the plan. Such board shallconsist of five members appointed as follows: One representing domestic orforeign insurance companies, one representing independent insurance agents, onerepresenting underground storage tank owners and operators and two representingthe general public. No member representing the general public shall be, or beaffiliated with, an insurance company, independent insurance agent orunderground storage tank operator. Members shall be appointed for terms ofthree years, except that the initial appointmentshall include two members appointed for two-year terms and one memberappointed for a one-year term, as designated by the commissioner.
(d) Before adoption of a plan pursuant to this section, the commissionerof insurance shall hold a hearing thereon.
(e) An insurer participating in the plan adopted by thecommissioner of insurance pursuant to this section may pay a commissionwith respect to insurance assigned underthe plan to an agent licensed for any other insurer participating in theplan or to any insurer participating in the plan.
(f) The commissioner of insurance may adopt such rules and regulationsas necessary to administer the provisions of this section.
(g) The department of health and environment and the plan shall provideto each other such information as necessary to implement and administer theprovisions of this section. Any such information which is confidentialwhile in the possession of the department or plan shall remain confidentialafter being provided to the other pursuant to this subsection.
(h) This section shall be part of and supplemental to the Kansas storagetank act.
History: L. 1990, ch. 229, § 5;L. 1992, ch. 311, § 21;L. 2001, ch. 143, § 2; July 1.