General Assembly: 74 (1992 Regular GA) - Chapter 1117 - Insurance regulation


Published: 1992-04-22

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CH. 1116 LA WS OF THE SEVENTY -FOURTH G.A., 1992 SESSION

CHAPTER 1116 ELECTION OF JUDICIAL NOMINATING COMMISSIONERS

S.F.2265

AN ACT relating to elections of judicial nominating commissioners.

Be It Enacted by the General Assembly of the State of Iowa:

Section 1. Section 46.7, Code 1991, is amended to read as follows: 46.7 ELIGIBILITY TO VOTE.

146

To be eligible to vote in elections of judicial nominating commissioners, a member of the bar must be eligible to practice and must be a resident of the state of Iowa and of the appropri· ate congressional district or judicial election district as shown by the member's most recent filing with the supreme court for the purposes of showing compliance with the court's continuo ing legal education requirements, or for members of the bar eligible to practice who are not required to file such compliance, any paper on file by July 1 with the clerk of the supreme court, for the purpose of establishing eligibility to vote under this section, which the court determines to show the requisite residency requirements. A judge who has been admitted to the bar of the state of Iowa shall be considered a member of the bar.

Approved April 22, 1992

CHAPTER 1117 INSURANCE REGULATION

S.F.2286

AN ACT relating to insurance regulation, including the financial supervision and solvency over· sight of insurance companies by the commissioner of insurance and accreditation of the division of insurance as an approved insurance regulator by the national association of insurance commissioners, and providing penalties and an effective date.

Be It Enacted by the General Assembly of the State of Iowa:

Section 1. Section 507.1, Code 1991, is amended by striking the section and inserting in lieu thereof the following:

507.1 PURPOSE - DEFINITIONS. 1. The purpose of this chapter is to provide an effective and efficient system for examining

the activities, operations, financial condition, and affairs of all persons transacting the busi· ness of insurance in this state and all persons otherwise subject to the jurisdiction of the com- missioner. The chapter is intended to enable the commissioner to adopt a flexible system of examinations which directs resources as deemed appropriate and necessary for the adminis- tration of the insurance and insurance-related laws of this state.

2. As used in this chapter, unless the context otherwise requires: a. "Commissioner" means the commissioner of insurance of this state. b. "Company" means any person engaging in or proposing or attempting to engage in any

transaction or kind of insurance or surety business and any person or group of persons who may otherwise be subject to the administrative, regulatory, or taxing authority of the com- missioner.

c. "Division" means the division of insurance of the department of commerce. d. "Examiner" means any individual or firm authorized by the commissioner to conduct an

examination pursuant to this chapter.

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e. "Insurer" includes all companies or associations organized under chapter 508, 511, 512A, 512B, 514, 514B, 515, 515C, or 518A, associations subject to chapters 518 and 520, and compa- nies or associations admitted or seeking to be admitted to this state under any of those chapters.

f. "Person" means any individual, aggregation of individuals, trust, association, partnership, or corporation or an affiliate of any of these.

Sec. 2. Section 507.2, Code 1991, is amended by striking the section and inserting in lieu thereof the following:

507.2 AUTHORITY, SCOPE, AND SCHEDULING OF EXAMINATIONS. 1. The commissioner or any of the commissioner's examiners may conduct an examination

under this chapter of any company as often as the commissioner deems appropriate, but at a minimum, shall conduct an examination of any domestic insurer licensed in this state no less than once every five years. In scheduling and determining the nature, scope, and frequency of the examinations, the commissioner shall consider such matters as the results of financial statement analyses and ratios, changes in management or ownership, actuarial opinions, reports of independent certified public accountants, and other criteria as set forth in the examiners' handbook adopted by the national association of insurance commissioners and in effect when the commissioner exercises discretion under this section.

2. For purposes of completing an examination of any company pursuant to this chapter, the commissioner may examine or investigate any person, or the business of any person, insofar as the examination or investigation is, in the sole discretion of the commissioner, necessary or material to the examination of the company.

3. In lieu of an examination under this chapter of any foreign or alien insurer licensed in this state, the commissioner may accept an examination report on the company as prepared by the regulatory authority for insurance for the company's state of domicile or port-of-entry state until January 1, 1994. Thereafter, such reports shall only be accepted if the regulatory authority was at the time of the examination accredited under the national association of insur- ance commissioners' financial regulation standards and accreditation program or the exami- nation is performed under the supervision of an accredited regulatory authority or with the participation of one or more examiners who are employed by the accredited state and who, after a review of the examination work papers and report, state under oath that the examina- tion was performed in a manner consistent with standards and procedures required by their insurance department.

Sec. 3. Section 507.3, Code 1991, is amended by striking the section and inserting in lieu thereof the following:

507.3 CONDUCT OF EXAMINATIONS. 1. Upon determining that an examination should be conducted, the commissioner or the com-

missioner's designee may issue an examination warrant appointing one or more examiners to perform the examination and instructing them as to the scope of the examination. In conduct- ing the examination, the examiner shall observe those guidelines and procedures set forth in the examiners' handbook adopted by the national association of insurance commissioners. The commissioner may also employ other guidelines as the commissioner deems appropriate.

2. A company or person from whom information is sought and its officers, directors, and agents shall provide to the examiners appointed under subsection 1, timely, convenient, and free access at all reasonable hours at its offices to all books, records, accounts, papers, docu- ments, and any or all computer or other recordings relating to the property, assets, business, and affairs of the company being examined. The officers, directors, employees, and agents of the company or person shall facilitate the examination and aid in the examination so far as it is in their power to do so. The refusal of any company, by its officers, directors, employees, or agents, to submit to examinations or to comply with any reasonable written request of the examiners is grounds for suspension or revocation of, or nonrenewal of, any license or authority held by the company to engage in the business of insurance or other business subject to the commissioner's jurisdiction. Should a company decline or refuse to submit to an examination

CH. 1117 LA WS OF THE SEVENTY -FOURTH G.A., 1992 SESSION 148

as provided in this chapter, the commissioner shall immediately revoke its certificate of authority, and if the company is organized under the laws of this state, the commissioner shall report the commissioner's action to the attorney general, who shall immediately apply to the district court for the appointment of a receiver to administer the final affairs of the company.

3. The commissioner or any of the commissioner's examiners may issue subpoenas, administer oaths, and examine under oath any person as to any matter pertinent to the examination. Upon the failure or refusal of any person to obey a subpoena, the commissioner may petition a court of competent jurisdiction, and upon proper showing, the court may enter an order compelling the witness to appear and testify or produce documentary evidence. Failure to obey the court order is punishable as contempt of court.

4. When making an examination under this chapter, the commissioner may retain attorneys, appraisers, independent actuaries, independent certified public accountants, or other profes- sionals and specialists as examiners, the reasonable cost of which shall be borne by the com- pany which is the subject of the examination.

5. This chapter does not limit the commissioner's authority to terminate or suspend any examination in order to pursue other legal or regulatory action pursuant to the insurance laws of this state. Findings of fact and conclusions made pursuant to any examination are deemed to be prima facie evidence in any legal or regulatory action.

Sec. 4. Section 507.6, Code 1991, is amended by striking the section and inserting in lieu thereof the following:

507.6 CONFLICT OF INTEREST. 1. An examiner shall not be appointed by the commissioner if the examiner, either directly

or indirectly, has a conflict of interest or is affiliated with the management of or owns a pecuniary interest in any person subject to examination under this chapter. This section shall not be construed to automatically preclude an examiner from being any of the following:

a. A policyholder or claimant under an insurance policy. b. A grantor of a mortgage or similar instrument on the examiner's residence to a regu-

lated entity if done under customary terms and in the ordinary course of business. c. An investment owner in shares of regulated diversified investment companies. d. A settlor or beneficiary of a blind trust into which any otherwise impermissible holdings

have been placed. 2. Notwithstanding the requirements of subsection 1, the commissioner may retain from

time to time, on an individual basis, qualified actuaries, certified public accountants, or other similar individuals who are independently practicing their professions, even though the per- sons may from time to time be similarly employed or retained by persons subject to examina- tion under this chapter.

Sec. 5. Section 507.10, Code 1991, is amended by striking the section and inserting in lieu thereof the following:

507.10 EXAMINATION REPORTS. 1. GENERAL DESCRIPTION. All examination reports shall be comprised only of facts

appearing upon the books, records, or other documents of the company, its agents, or other persons examined, or as ascertained from the testimony of its officers or agents or other per- sons examined concerning its affairs, and such conclusions and recommendations as the examiners find reasonably warranted from the facts.

2. FILING OF EXAMINATION REPORT. No later than sixty days following completion of the examination, the examiner in charge shall file with the division a verified written report of examination under oath. Upon receipt of the verified report and after administrative review, the division shall transmit the report to the company examined, together with a notice which shall afford the company examined a reasonable opportunity of not more than thirty days to make a written submission or rebuttal with respect to any matters contained in the examina- tion report.

149 LA WS OF THE SEVENTY -FOURTH G.A., 1992 SESSION CH. 1117

3. ADOPTION OF REPORT ON EXAMINATION. Within twenty days of the end of the period allowed for the receipt of written submissions or rebuttals, the commissioner shall fully consider and review the report, together with any written submissions or rebuttals and any relevant portions of the examiner's work papers and enter an order which does one of the fol· lowing:

a. Adopts the examination report as filed or with modification or corrections. If the exami· nation report reveals that the company is operating in violation of any law or a rule or prior order of the commissioner, the commissioner may order the company to take any action the commissioner considers necessary and appropriate to cure the violation.

b. Rejects the examination report with directions to the examiners to reopen the examina· tion for purposes of obtaining additional data, documentation, or information, and refiling pur· suant to subsection 1 above.

c. Calls for an investigatory hearing with no less than twenty days notice to the company for purposes of obtaining additional documentation, data, information, and testimony.

4. ORDERS AND PROCEDURES. a. All orders entered pursuant to subsection 3, paragraph "a", shall be accompanied by find-

ings and conclusions resulting from the commissioner's consideration and review of the exami- nation report, relevant examiner work papers, and any written submissions or rebuttals. Any such order is a final administrative decision and may be appealed pursuant to chapter 17 A, and shall be served upon the company by certified mail, together with a copy of the adopted examination report. Within thirty days of the issuance of the adopted report, the company shall file affidavits executed by each of its directors stating under oath that they have received a copy of the adopted report and related orders.

b. Any hearing conducted under subsection 3, paragraph "c", by the commissioner or an authorized representative, shall be conducted as a nonadversarial, confidential, investigatory proceeding as necessary for the resolution of any inconsistencies, discrepancies, or disputed issues apparent upon the face of the filed examination report or indicated as a result of the commissioner's review of relevant work papers or by the written submission or rebuttal of the company. Within twenty days of the conclusion of any such hearing, the commissioner shall enter an order pursuant to subsection 3, paragraph "a".

(1) The commissioner shall not appoint an examiner as an authorized representative to con- duct the hearing. The hearing shall proceed expeditiously with discovery by the company limited to the examiner's work papers which tend to substantiate any assertions set forth in any written submission or rebuttal. The commissioner or a representative acting on the com- missioner's behalf may issue subpoenas for the attendance of any witnesses or the production of any documents deemed relevant to the investigation whether under the control of the divi- sion of insurance, the company, or other persons. The documents produced shall be included in the record and testimony taken by the commissioner or a representative acting on the com- missioner's behalf shall be under oath and preserved for the record.

This section does not require the division of insurance to disclose any information or records which would indicate or show the existence of any investigation or activity of a criminal justice agency.

(2) The hearing shall proceed with the commissioner or the commissioner's representative posing questions to the persons subpoenaed. Thereafter the company and the division may present testimony relevant to the investigation. Cross-examination shall be conducted only by the commissioner or the commissioner's representative. The company and the division shall be permitted to make closing statements and may be represented by counsel.

5. PUBLICATION AND USE. a. Upon the adoption of the preliminary examination report under subsection 3, paragraph

"a", the commissioner shall hold the content of the final examination report as private and confidential information not subject to disclosure and it is not a public record under chapter 22, for a period of twenty days except to the extent provided in subsection 2. After the twenty- day period has elapsed, the commissioner may open the final report for public inspection so long as no court of competent jurisdiction has stayed its publication.

CH. 1117 LA WS OF THE SEVENTY -FOURTH G.A., 1992 SESSION 150

b. The commissioner is not prevented from disclosing the content of an examination report, preliminary examination report or results, or any matter relating to the report, to an insur- ance department of any other state or country, or to law enforcement officials of this or any other state or an agency of the federal government at any time, so long as such agency or office receiving the report, or matters relating to the report, agrees in writing to maintain the confidentiality of the report or such matters in a manner consistent with this chapter.

c. If the commissioner determines that regulatory action is appropriate as a result of any examination, the commissioner may initiate any proceeding or action as provided by law.

Sec. 6. Section 507.14, unnumbered paragraph 1, Code Supplement 1991, is amended to read as follows:

A preliminary report, preliminary 6l' HRah of an examination of a domestic or foreign insurer, and all notes, work papers, or other documents related to an examination of an insurer are not public records under chapter 22 except when sought by the insurer to whom they relate! 6l' an insurance regulator of another state, or the national association Qf insurance commis- sioners, and shall be privileged and confidential in any judicial or administrative proceeding except any of the following:

Sec. 7. Section 507.17, Code 1991, is amended by striking the section and inserting in lieu thereof the following:

507.17 IMMUNITY FROM LIABILITY. 1. A cause of action does not arise nor shall any liability be imposed against the commis-

sioner, the commissioner's authorized representative, or any examiner appointed by the com- missioner for any statements made or conduct performed in good faith while carrying out the provisions of this chapter.

2. A cause of action does not arise, nor shall any liability be imposed against any person for the act of communicating or delivering information or data to the commissioner or the com- missioner's authorized representative, or an examiner pursuant to an examination made under this chapter, if the act of communication or delivery was performed in good faith and without fraudulent intent or the intent to deceive.

3. This section does not abrogate or modify in any way any common law or statutory privilege or immunity enjoyed by any person identified in subsection 1.

4. A person identified in subsection 1 is entitled to an award of attorney's fees and costs if the person is the prevailing party in a civil cause of action for libel, slander, or any other relevant tort arising out of activities in carrying out the provisions of this chapter and the party bringing the action was not substantially justified in doing so. For purposes of this sec- tion, a proceeding is substantially justified if the proceeding has a reasonable basis in law or fact at the time that it is initiated.

Sec. 8. Section 507C.1, subsection 4, unnumbered paragraph 1, Code 1991, is amended to read as follows:

The purpose of this chapter is the protection of the interests of inslued insureds, claimants, creditors, and the public, with minimum interference with the normal prerogatives of the owners and managers of insurers, through all of the following:

Sec. 9. Section 507C.1, subsection 4, Code 1991, is amended by adding the following new paragraph:

NEW PARAGRAPH. g. Providing for a comprehensive scheme for the rehabilitation and liquidation of insurance companies and those subject to this chapter as part of the regulation of the business of insurance, the insurance industry, and insurers in this state. Proceedings in cases of insurer insolvency and delinquency are deemed an integral aspect of the business of insurance and are of vital public interest and concern.

Sec. 10. Section 507C.2, subsections 9, 10, 11, and 13, Code 1991, are amended to read as follows:

151 LA WS OF THE SEVENTY -FOURTH G.A., 1992 SESSION CH. 1117

9. "General assets" means all real, personal, or other property, real er personal, not specifi- cally mortgaged, pledged, deposited, or otherwise encumbered for the security or benefit of specified persons or classes of persons. As to specifically encumbered property, "general assets" includes all property or its proceeds in excess of the amount necessary to discharge the sum or sums secured by the property or its proceeds. Assets held in trust and on deposit for the security or benefit of all policyholders or all policyholders and creditors, in more than a single state, shall be treated as general assets.

10. "Guaranty association" means the Iowa insurance guaranty association created in chap- ter 515B! the Iowa life and health insurance guaranty association created in chapter 508C, and any other similar entity either presently existing or to be created by the general assembly for the payment of claims of insolvent insurers. "Foreign guaranty association" means a simi- lar entity presently existing in or to be created in the future by the legislature of any other state.

11. "Insolvency" or "insolvent" means either any of the following: a. For an insurer issuing only assessable fire insurance policies, either of the following: (1) The inability to ~ any obligation within thirty days after i!. becomes payable. (2) !! an assessment ~ made, the inability to ~ the assessment within thirty days follow-

!!!.g the date specified in the first assessment notice issued after the date Q! loss. ~ For 6ft any other insurer that it is unable to pay its obligations when they are due, or

when its admitted assets do not exceed its liabilities plus the greater of: (1) Any capital and surplus required by law for its organization. (2) The total par or stated value of its authorized and issued capital stock. s~. As to an insurer licensed to do business in this state as of July I, 1984, which does not

meet the standard established under paragraph "a l(! the term "insolvency" or "insolvent" shall mean, for a period not to exceed three years from July I, 1984, that it is unable to pay its obligations when they are due or that its admitted assets do not exceed its liabilities plus any required capital contribution ordered by the commissioner under provisions of the insur- ance law.

For purposes of this subsection "liabilities" shall iBel-u6e includes but ~ not he limited to reserves required by statute or by the division's rules or specific requirements imposed by the commissioner upon a company at the time of or subsequent to admission.

13. "Preferred claim" means a claim with respect to which the terms of this chapter graftt accord priority of payment from the general assets of the insurer.

Sec. 11. Section 507C.4, subsection 3, paragraph b, Code 1991, is amended to read as follows: b. In an action on or incident to a reinsurance contract! if the person served is a reinsurer

who has at any time written a policy of reinsurance for an insurer against which a rehasilita tiim er li!)uiaation 0F-deF is in eHeet wheft the aetMm is eommeneea delinquency proceeding has been instituted, or is an agent or broker of or for the reinsurer and the action results from or ~ incident to the relationship with the reinsurer.

Sec. 12. Section 507C.4, subsection 3, Code 1991, is amended by adding the following new paragraphs:

NEW PARAGRAPH. d. In an action if the person served is or was at the time of the insti- tution of the delinquency proceeding against the insurer holding assets which are the subject of the proceeding and in which the receiver claims an interest on behalf of the insurer.

NEW PARAGRAPH. e. If the person served is obligated to the insurer in any way what- soever, in an action on or incident to the obligation.

Sec. 13. NEW SECTION. 507C.8A CONDITION ON RELEASE FROM DELINQUENCY PROCEEDINGS.

An insurer subject to a delinquency proceeding shall not be released from the delinquency proceeding unless the proceeding is converted into a rehabilitation or liquidation proceeding; shall not be permitted to solicit or accept new business, or request or accept the restoration of any suspended or revoked license or certificate of authority; and shall not be returned to the control of the insurer's shareholders or private management, or have any of the insurer's

CH. 1117 LA WS OF THE SEVENTY -FOURTH G.A., 1992 SESSION 152

assets returned to the control of its shareholders or private management, until all payments of or on account of the insurer's contractual obligations by all guaranty associations, along with all expenses of such obligations and interest on all such payments and expenses, have been repaid to the guaranty association or a plan of repayment by the insurer is approved by the guaranty association.

Sec. 14. Section 507C.11, Code 1991, is amended to read as follows: 507C.11 CONFIDENTIALITY OF HEARINGS. Notwithstanding chapter 22, in all administrative proceedings pursuant to sections 507C.9

and 507C.10 all records and documents pertaining to or a part of the record of the proceedings are confidential except as is necessary to obtain compliance with a proceeding. However, the records may be released if either of the following occurs:

1. The insurer requests that the records be made public. 2. After a hearing on the issue with the parties to the proceeding, the court orders that

the records be made public. Until such court order, the clerk of court shall hold all papers filed in a confidential file.

Sec. 15. Section 507C.13, subsection 2, Code 1991, is amended to read as follows: 2. An order issued under this section shall ~ requires accounting to the court by the

rehabilitator. Accountings shall be at intervals the court speeifieEl specifies in the order. Each accounting must include !! report concerning the rehabilitator's opinion as to whether !! pJan pursuant to section 507C.14, subsection ~ will be prepared. !! the rehabilitator includes !.!! any accounting that such !! plan ~ likely, the accounting shall also include !! proposed timeta· ble for the preparation and implementation Q! the plan.

Sec. 16. Section 507C.14, Code 1991, is amended by adding the following new subsection following subsection 2, and renumbering the remaining subsections:

NEW SUBSECTION. 2A. The rehabilitator, with the approval of the court, may appoint an advisory committee of policyholders, claimants, or other creditors including guaranty associ- ations, should the rehabilitator deem it to be necessary. Each member of the advisory com- mittee shall be reimbursed for necessary travel and actual expenses incurred in fulfilling the duties of the advisory committee. The rehabilitator shall not appoint any other committee related to proceedings pursuant to this chapter.

Sec. 17. Section 507C.15, subsections 1 and 2, Code 1991, are amended to read as follows: 1. A court !.!! this state, before which an action or proceeding in which the insurer is a party

or is obligated to defend a party is pending when a rehabilitation order against the insurer is entered, shall stay the action or proceeding for ninety days and any additional time as neces- sary for the rehabilitator to obtain proper representation and prepare for further proceed- ings. The rehabilitator shall take action respecting the pending litigation as necessary in the interests of justice and for the protection of creditors, policyholders, and the public. The rehabili- tator shall immediately consider all litigation pending outside this state and shall petition the courts having jurisdiction over that litigation for stays whenever necessary to protect the estate of the insurer.

2. A statute of limitations or defense of laches shall not run in an action by or against an insurer between the filing of a petition for appointment of a rehabilitator for that insurer and the order granting or denying that petition. An action by or against the insurer that might have been commenced when the petition was filed may be commenced for at least sixty days after the order of rehabilitation is entered or the petition is denied. The rehabilitator, upon the issuance of an order for rehabilitation pursuant to section 507C.13, may institute an action or proceeding on behalf of the insurer based upon !! cause Q! action for which the period of limitation has not expired at the time Q! the filing Q! the petition for an order to rehabilitate. The action or proceeding by the rehabilitator may be instituted within one year or !! longer period if provided by applicable law, of the issuance of the order for rehabilitation.

Sec. 18. Section 507C.16, Code 1991, is amended by adding the following new subsection:

153 LA WS OF THE SEVENTY -FOURTH G.A., 1992 SESSION CH. 1117

NEW SUBSECTION. 3. If the payment of obligations pursuant to a policy issued by the insurer is suspended in substantial part for a period of six months at any time after the appoint- ment of the rehabilitator, and the rehabilitator has not filed an application for a plan pursuant to section 507C.14, subsection 4, the rehabilitator shall petition the court for an order of liqui- dation on grounds of insolvency.

Sec. 19. Section 507C.18, Code 1991, is amended to read as follows: 507C.18 LIQUIDATION ORDERS. 1. An order to liquidate the business of a domestic insurer shall appoint the commissioner

as liquidator and shall direct the liquidator to immediately take possession of the assets of the insurer and to administer them under the general supervision of the court. The liquidator shall be ~ vested with the title to the property, contracts, and rights of action and the books and records of the insurer ordered liquidated, wherever located, as of the entry of the final order of liquidation. The filing or recording of the order with the clerk of the court and the recorder of deeds of the county in which its principal office or place or business is located, or, in the case of real estate with the recorder of deeds of the county where the property is located, shall be ~ notice as a deed, bill of sale, or other evidence of title duly filed or recorded with the recorder of deeds.

2. Upon issuance of the order, the rights and liabilities of an insurer and of its creditors, policyholders, shareholders, members~ and other persons interested in its estate shall become fixed as of the date of entry of the order of liquidation, except as provided in sections 507C.19 and 507C.37.

3. An order to liquidate the business of an alien insurer domiciled in this state shall must be in the same terms and have the same legal effect as an order to liquidate a domestic insurer, except that the assets and the business in the United States shall be the only assets and busi- ness included in the order.

4. At the time of petitioning for an order of liquidation, or at any time thereafter, the com- missioner, after making appropriate findings of an insurer's insolvency, may petition the court for a declaration of insolvency. After providing notice and hearing as it deems proper, the court may make the declaration.

5. An order issued under this section shall require accounting to the court by the liquida- tor. Accountings~ at l! minimum, must include all funds received or disbursed by the liquida- tor during the current period. An accounting shall be at iRteFvals speeified ift t.fte filed within one year Q! the liquidation order and at such other times as the court may require. ~ ll..: Within five days of the effective date of this section or, !! later, within five days after

the initiation of an appeal of an order of liquidation, which order has not been stayed, the com- missioner shall present for the court's approvall! plan for the continued performance Q! the defendant company's policy claims obligations, including the duty to defend insureds under liability insurance policies, during the pendency Q! an appeal. The plan shall provide for the continued performance and payment Q! policy claims obligations in the normal course of events, notwithstanding the grounds alleged !!! support Q! the order Q! liquidation including the ground of insolvency. !! the defendant company's financial condition will not, in the judgment of the commissioner, support the full performance of all policy claims obligations during the appeal pendency period, the plan may prefer the claims of certain policyholders and claimants over creditors and interested parties as well as other policyholders and claimants, as the commis- sioner finds to be fair and equitable considering the relative circumstances Q! such policyholders and claimants. The court shall examine the plan submitted by the commissioner and!!!! finds the plan to be in the best interests Q! the parties, the court shall approve the plan. No action shall lie against the commissioner or any Q! the commissioner's deputies, agents, clerks, assis- tants, or attorneys by any party based on preference !!! an appeal pendency plan approved by the court. ~ The appeal pendency plan shall not supersede or affect the obligations of any insurance

guaranty association.

CH. 1117 LA WS OF THE SEVENTY -FOURTH G.A., 1992 SESSION 154

~ Any such plans shall provide for equitable adjustments to be made by the liquidator to any distributions Q! assets to guaranty associations, in the event that the liquidator pays claims from assets of the estate, which would otherwise be the obligations of any particular guaranty association but for the appeal of the order of liquidation, such that all guaranty associations equally benefit on 11: .P!:Q rata basis from the assets Q! the estate. !! an order Q! liquidation ~ set aside upon an appeal, the company shall not be released from delinquency proceedings unless and until all funds advanced by 11: guaranty association, including reasonable administrative expenses in connection therewith relating to obligations of the company, shall be repaid in full, together with interest at the judgment rate Q! interest, or unless an arrangement for repay- ment thereof has been made with the consent of all applicable guaranty associations.

Sec. 20. Section 507C.21, subsection I, paragraph j, Code 1991, is amended to read as follows: j. Borrow money on the security of the insurer's assets or without security and execute and

deliver documents necessary to that transaction for the purpose of facilitating the liquida- tion. Money borrowed pursuant to this paragraph shall be repaid as an administrative expense and have priority over any other class! claims under the priority Q! distribution established in section 507C.42.

Sec.21. Section 507C.21, subsection I, Code 1991, is amended by adding the following new paragraph:

NEW PARAGRAPH. w. Audit the books and records of all agents of the insurer which relate to the business of the insurer.

Sec. 22. Section 507C.22, Code 1991, is amended by adding the following new subsection: NEW SUBSECTION. 2A. a. Notice to agents of the insurer and potential claimants who

are policyholders under subsection I, where applicable, shall include notice that coverage by state guaranty associations may be available for all or part of policy benefits in accordance with applicable state guaranty laws.

b. The liquidator shall promptly provide to the guaranty associations such information con- cerning the identities and addresses of the policyholders and their policy coverages as may be within the liquidator's possession or control, and otherwise cooperate with guaranty associ- ations to assist them in providing to the policyholders timely notice of the guaranty associa- tions' coverage of policy benefits including, as applicable, coverage of claims and continuation or termination of coverage.

Sec. 23. Section 507C.23, subsection 2, Code 1991, is amended to read as follows: 2. An agent failing to give ft6tiee 6P file a rep6f't of eemfllianee provide information as required

in subsection 1 may be subject to payment of a penalty of not more than one thousand dollars and may have the agent's license suspended. The penalty is to be imposed only after a hear- ing held by the commissioner.

Sec. 24. Section 507C.24, subsections 1 and 2, Code 1991, are amended to read as follows: 1. After the issuance of an order appointing a liquidator of a domestic insurer or of an alien

insurer domiciled in this state, action at law or equity shall not be brought against the insurer or liquidator in this state or elsewhere, nor shall existing actions be maintained or further presented after issuance of the order. The courts of this state shall give full faith and credit to injunctions against the liquidator or the insurer or the continuation of existing actions against the liquidator or the insurer, when the injunctions are included in an order to liquidate an insurer issued pursuant to corresponding provisions in other states. Whenever in the liquidator's judg- ment, protection of the estate of the insurer necessitates intervention in an action against the insurer that is pending outside this state, the liquidator may intervene in the action. The liq- uidator may defend! at the expense of the estate of the insurer! an action in which the liquida- tor intervenes under this section.

2. Within two years or such additional time as applicable law may permit, the liquidator may after the issuance of an order for liquidation institute an action or proceeding on behalf of the estate of the insurer upon any cause of action against which the period of limitation

155 LA WS OF THE SEVENTY -FOURTH G.A., 1992 SESSION CH. 1117

fixed by applicable law has not expired at the time of the filing of the petition upon which the order is entered. Where!! a period of limitation is fixed by agreement for instituting a suit or proceeding upon a claim, or for filing a claim, proof of claim, proof of loss, demand, notice, or the like, or where if in a proceeding! judicial or otherwise, a period of limitation is fixed in the proceeding or pursuant to applicable law for taking an action, filing a claim or pleading, or doing an act, and where in aBy ease if the period had not expired at the date of the filing of the petition, the liquidator may, for the benefit of the estate, take any action or do any act, required of or permitted to the insurer, within a period of one hundred eighty days subse- quent to the entry of an order for liquidation, or within a further period as is shown to the satisfaction of the court not to be unfairly prejudicial to the other party.

Sec. 25. Section 507C.27, Code 1991, is amended by adding the following new subsection: NEW SUBSECTION. 2A. A person receiving any property from the insurer or any benefit

of the insurer which is a fraudulent transfer under subsection 1 is personally liable for the property or benefit and shall account to the liquidator.

Sec. 26. Section 507C.30, subsection 2, Code 1991, is amended by adding the following new paragraph following paragraph b and relettering the remaining paragraphs:

NEW PARAGRAPH. c. The obligation of the insurer is owed to the affiliate of such per- son, or any other entity or association other than the person.

Sec. 27. Section 507C.34, subsection 1, Code 1991, is amended to read as follows: 1. Within one hundred twenty days of a final determination of insolvency under this chap-

ter as assets become available, the liquidator shall make application to the court for approval of a proposal to disburse assets out of marshaled assets to a guaranty association or foreign guaranty association having obligations because of the insolvency. An application and disburse- ment of assets shall be made from time to time as assets become available. If the liquidator determines that there are insufficient assets to disburse, the application required by this sec- tion shall be considered satisfied by a filing by the liquidator stating the reasons for this deter- mination.

Sec. 28. Section 507CAO, Code 1991, is amended to read as follows: 507CAO CLAIMS OF SURETY. If a creditor! whose claim against an insurer is secured in whole or in part, by the undertak-

ing of another person, fails to prove and file that claim, then the other person may do so in the creditor's name~ '!'-he surety and shall be subrogated to the rights of the creditor, whether the claim has been filed by the creditor or by the surety other person in the creditor's name to the extent that the surety- other person discharges the undertaking. However, in the absence of an agreement with the creditor to the contrary, the surety other person is \10t entitled to any distribution until the amount paid to the creditor on the undertaking plus the distribu- tions paid on the claim from the insurer's estate to the creditor eEfWlls equal the amount of the entire claim of the creditor. An excess received by the creditor shall be held by the credi- tor in trust for the surety other person. As used in this section, "SI:lFety" "other person" is not intended to apply to a guaranty association or foreign guaranty association.

Sec. 29. Section 507C.42, subsections 1, 2, 3, 4, and 5, Code 1991, are amended to read as follows:

1. CLASS 1. The costs and expenses of administration, including but not limited to the fol- lowing:

a. The actual and necessary costs of preserving or recovering the assets of the insurer. b. Compensation for all authorized services rendered in the liquidation. c. Necessary filing fees. d. The fees and mileage payable to witnesses. e. Reas6nable Authorized reasonable attorney's fees and other professional services ren-

dered !!! the liquidation.

CH. 1117 LA WS OF THE SEVENTY -FOURTH G.A., 1992 SESSION 156

f. The reasonable expenses of a guaranty association or foreign guaranty association in han- dling claims.

2. CLASS 2. l}ebts 4He Reasonable compensation to employees for services performed to the extent that they do not exceed 6fte thousana dellaffl two months of monetary compensa- tion and represent payment for services performed within one year before the filing of the petition for liquidation or, i! the rehabilitation preceded liquidation, within one year before the filing 2! the petition for rehabilitation. Officers and directors are not entitled to the benefit of this priority. The priority is in lieu of other similar priority which may be authorized by law as to wages or compensation of employees.

3. CLASS 3. Claims under policies! including claims 2! the federal or any state or local govern- ment, for losses incurred, including third-party claims, claims against the insurer for liability for bodily injury or for injury to or destruction of tangible property which are not under poli- cies, and claims of a guaranty association or foreign guaranty association. Claims under nonas- sessable policies for unearned premium. Claims under life insurance and annuity policies, whether for deathproceeds, annuity proceeds, or investment values shall be treated as loss claims. That portion of a loss, indemnification for which is provided by other benefits or advan- tages recovered by the claimant, shall not be included in this class, other than benefits or advan- tages recovered or recoverable in discharge of familial obligations of support or by way of succession at death or as proceeds of life insurance, or as gratuities. A payment by an employer to an employee is not a gratuity.

4. CLASS 4. ~ ~ nonassessable ptllicies fop uneamea flremium OF ~ flremium Premium refunds, and claims of general creditors, including claims 2! ceding and assuming reinsurers in their capacity as such, and subrogation claims.

5. CLASS 5. Claims of the federal or any state or local government except those under class 3. Claims, including those of a governmental body for a penalty or forfeiture, are allowed in this class only to the extent of the pecuniary loss sustained from the act, transaction, or proceed- ing out of which the penalty or forfeiture arose, with reasonable and actual costs incurred. The remainder of such claims shall be postponed to the class of claims under subsection 8.

Sec. 30. Section 507C.45, Code 1991, is amended by adding the following new subsection: NEW SUBSECTION. 3. Notwithstanding any other provision of this chapter, funds as iden-

tified in subsection 1, with the approval of the court, shall be made available to the commis- sioner for use in the detection and prevention of future insolvencies. The commissioner shall hold these funds and shall pay without interest, except as provided in section 507C.42, to the person entitled to the funds or the person's legal representative upon proof satisfactory to the commissioner of the person's right to the funds. The funds shall be held by the commis- sioner for a period of two years at which time the rights and duties to the unclaimed funds shall vest in the commissioner.

Sec. 31. Section 507C.46, subsection 2, Code 1991, is amended to read as follows: 2. Any other person may apply to the court at any time for an order under subsection 1. If

the application is denied, the applicant shall pay the costs and expenses ineluaing reasonable attomey's fee of the liquidator in resisting the application including ~ reasonable attorney's fee.

Sec. 32. Section 507C.52, subsection 1, Code 1991, is amended to read as follows: 1. Except as to special deposits and security on secured claims under section 507C.53, sub-

section 3, the domiciliary liquidator of an insurer domiciled in a reciprocal state shall be vested with the title to the assets, property, contracts, and rights of action, agents' balances, books, accounts, and other records of the insurer located in this state. The date of vesting is the date of the filing of the petition, if that date is specified by the domiciliary law for the vesting of property in the domiciliary state. Otherwise, the date of vesting shall be is the date of entry of the order directing possession to be taken. The domiciliary liquidator may immediately recover balances due from agents and obtain possession of the books, accounts, and other records of the insurer located in this state. Subjeet te seetion a(}7C.aa, the aomieiliary liquiaator may alse reeover all ~ assets et the iHsttreF loeated in this state.- The domiciliary liquidator ma)' also have the right to recover all other assets of the insurer located i!! this state, subject to section 507C.53.

157 LA WS OF THE SEVENTY -FOURTH G.A., 1992 SESSION CH. 1117

Sec. 33. Section 507C.55, subsection 2, Code 1991, is amended to read as follows: 2. Claims belonging to claimants residing in reciprocal states shall be proved either in the

liquidation proceeding in this state as provided in this chapter or in ancillary proceedings in the reciprocal states! if !I- claim filing procedure ~ established in the ancillary proceeding. If notice of the claims and opportunity to appear and be heard is afforded the domiciliary liquida- tor of this state as provided in section 507C.56, subsection 2, with respect to ancillary proceed- ings, the final allowance of claims by the courts in ancillary proceedings in reciprocal states shall be conclusive as to amount and as to priority against special deposits or other security located in such ancillary states, but shall not be conclusive with respect to priorities against general assets under section 507C.42.

Sec. 34. Section 507C.56, subsections 1 and 2, Code 1991, are amended to read as follows: 1. In a lifJ:uidatioH proeeediHg in a reeiproeal state agains-t an ~ domieiled ill that state

Promptly after the appointment of the commissioner as ancillary receiver for an insurer not domiciled in this state, the commissioner shall determine whether there are claimants resid- !!!g" in this state who are not protected by guaranty funds and whetilerthe protection of such claimants requires the establishing Q!!I- claim filing procedure i!! the ancillary proceeding. !! !I- claim filing procedure ~ established, claimants against the insurer who reside within this state may file claims either with the ancillary receiver in this state, or with the domiciliary liquidator. Claims shall be filed on or before the last dates fixed for the filing of claims in the domiciliary liquidation proceeding.

2. Claims belonging to claimants residing in this state may be proved either in the domiciliary state under the law of that state, or in ancillary proceedings in this state, provided !I- <;laim filing procedure ~ established in the ancillary proceeding. If a claimant elects to prove the claim in this state, the claimant shall file the claim with the liquidator in the manner provided in sections 507C.35 and 507C.36. The ancillary receiver shall make a recommendation to the court as under section 507C.43. The ancillary receiver shall also arrange a date for hearing if necessary under section 507C.39 and shall give notice to the liquidator in the domiciliary state, either by certified mail or by personal service at least forty days prior to the date set for hearing. Within thirty days after the giving of the notice, if the domiciliary liquidator gives notice in writing either by certified mail or by personal service to the ancillary receiver and to the claimant of an intention to contest the claim, the domiciliary liquidator is entitled to appear or to be represented in a proceeding in this state involving the adjudication of the claim.

Sec. 35. Section 510A.1, Code Supplement 1991, is amended to read as follows: 510A.1 SHORT TITLE. This chapter shall be known and may be cited as the "Business Producer Controlled Prop-

erty and Casualty Insurer Act."

Sec. 36. Section 510A.2, Code Supplement 1991, is amended by striking the section and inserting in lieu thereof the following:

510A.2 DEFINITIONS. As used in this chapter unless the context otherwise requires: 1. "Accredited state" means a state in which the insurance department or regulatory agency

has qualified as meeting the minimum financial regulatory standards promulgated and estab- lished by the national association of insurance commissioners.

2. "Control" or "controlled" has the meaning ascribed in section 521A.1, subsection 3. 3. "Controlled insurer" means a licensed insurer which is controlled, directly or indirectly,

by a producer. 4. "Controlling producer" means a producer who, directly or indirectly, controls an insurer. 5. "Independent casualty actuary" means a casualty actuary who is a member of the Ameri-

can academy of actuaries and who is not an employee, principal, the direct or indirect owner of, affiliated with, or in any way controlled by the insurer or producer.

6. "Licensed insurer" or "insurer" means any person duly licensed to transact a property and casualty insurance business in this state. The following are not licensed property and casualty insurers for the purposes of this chapter:

CH. 1117 LA WS OF THE SEVENTY -FOURTH G.A., 1992 SESSION 158

a. All risk retention groups as defined in the Superfund Amendments Reauthorization Act of 1986, Pub. L. No. 99-499, 100 Stat. 1613 (1986) and the Risk Retention Act, 15 U.S.C. § 3901 et seq. (1982 & Supp. 1986), or chapter 515E.

b. All residual market pools and joint underwriting authorities or associations. c. All captive insurers. For the purposes of this chapter, captive insurers are insurance com-

panies owned by another organization whose exclusive purpose is to insure risks of the parent organization and affiliated companies or, in the case of groups and associations, insurance organi- zations owned by the insureds whose exclusive purpose is to insure risks of any group and association members and any affiliates.

7. "Producer" means an insurance broker or brokers or any other person when, for any com- pensation, commission, or other thing of value, the person acts or aids in any manner in solicit- ing, negotiating, or procuring the making of an insurance contract on behalf of an insured other than the person.

Sec. 37. Section 510A.3, Code Supplement 1991, is amended by striking the section and inserting in lieu thereof the following:

510A.3 APPLICABILITY. This chapter applies to licensed insurers as defined in section 510A.2, either domiciled in

this state or domiciled in a state that is not an accredited state and having a substantially similar law. All provisions of the insurance holding company Act, to the extent those provi- sions are not superseded by this chapter, continue to apply to all persons associated with hold- ing companies subject to this chapter.

Sec. 38. Section 510AA, Code Supplement 1991, is amended by striking the section and inserting in lieu thereof the following:

510AA MINIMUM STANDARDS. 1. APPLICABILITY OF SECTION. a. This section applies if, in any calendar year, the aggregate amount of gross written

premium on business placed with a controlled insurer by a controlling producer is equal to or greater than five percent of the admitted assets of the controlled insurer, as reported in the controlled insurer's quarterly statement filed as of September 30 of the preceding year.

b. Notwithstanding paragraph "a", this section does not apply if both of the following apply: (1) The controlling producer does all of the following: (a) Places insurance only with the controlled insurer, or only with the controlled insurer

and members of the controlled insurer's holding company system, or the controlled insurer's parent, affiliate, or subsidiary, and receives no compensation based upon the amount of premiums written in connection with such insurance.

(b) Accepts insurance placements only from nonaffiliated subproducers and not directly from insureds.

(2) The controlled insurer, except for insurance business written through a residual market facility, accepts insurance business only from the controlling producer, a producer controlled by the controlled insurer, or a producer that is a subsidiary of the controlled insurer.

2. REQUIRED CONTRACT PROVISIONS. A controlled insurer shall not accept business from a controlling producer and a controlling producer shall not place business with a con- trolled insurer unless there is a written contract between the controlling producer and the controlled insurer specifying the responsibilities of each party which has been approved by the board of directors of the controlled insurer and filed with the commissioner. The contract must contain, at a minimum, the following provisions:

a. The controlled insurer may terminate the contract for cause, upon written notice to the controlling producer. The controlled insurer shall suspend the authority of the controlling producer to write business during the pendency of any dispute regarding the cause for the termination.

b. The controlling producer shall render accounts to the controlled insurer detailing all material transactions, including information necessary to support all commissions, charges, and other fees received by, or owing to, the controlling producer.

159 LA WS OF THE SEVENTY -FOURTH G.A., 1992 SESSION CH. 1117

c. The controlling producer shall remit all funds due under the terms of the contract to the controlled insurer on at least a monthly basis. The due date shall be fixed so that premiums or installments of premiums collected shall be remitted no later than ninety days after the effective date of any policy placed with the controlled insurer under this contract.

d. All funds collected for the controlled insurer's account shall be held by the controlling producer in a fiduciary capacity, in one or more appropriately identified bank accounts in banks that are members of the federal reserve system, in accordance with the provisions of the insur- ance law as applicable. However, funds of a controlling producer not required to be licensed in this state shall be maintained in compliance with the requirements of the controlling producer's domiciliary jurisdiction.

e. The controlling producer shall maintain separately identifiable records of business writ- ten for the controlled insurer.

f. The contract shall not be assigned in whole or in part by the controlling producer. g. The controlled insurer shall provide the controlling producer with its underwriting stan-

dards, rules, and procedures manuals setting forth the rates to be charged, and the conditions for the acceptance or rejection of risks. The controlling producer shall adhere to the standards, rules, procedures, rates, and conditions. The standards, rules, procedures, rates, and condi- tions shall be the same as those applicable to comparable business placed with the controlled insurer by a producer other than the controlling producer.

h. The rates and terms of the controlling producer's commissions, charges, or other fees and the purposes for those charges or fees. The rates of the commissions, charges, and other fees shall be no greater than those applicable to comparable business placed with the controlled insurer by producers other than controlling producers. For purposes of this paragraph and paragraph "g" of this subsection, "comparable business" includes the same lines of insurance, same kinds of insurance, same kinds of risks, similar policy limits, and similar quality of business.

i. If the contract provides that the controlling producer, on insurance business placed with the controlled insurer, is to be compensated contingent upon the insurer's profits on that busi- ness, then such compensation shall not be determined and paid until at least five years after the premiums on liability insurance are earned and at least one year after the premiums are earned on any other insurance. In no event shall the commissions be paid until the adequacy of the controlled insurer's reserves on remaining claims has been independently verified pur- suant to subsection 4, paragraph "a".

j. A limit on the controlling producer's writings in relation to the controlled insurer's sur- plus and total writings. The insurer may establish a different limit for each line or subline of business. The controlled insurer shall notify the controlling producer when the applicable limit is approached and shall not accept business from the controlling producer which would exceed the limit. The controlling producer shall not place business with the controlled insurer if it has been notified by the controlled insurer that the limit has been reached.

k. The controlling producer may negotiate but shall not bind reinsurance on behalf of the controlled insurer on business the controlling producer places with the controlled insurer, except that the controlling producer may bind facultative reinsurance contracts pursuant to obliga- tory facultative agreements if the contract with the controlled insurer contains underwriting guidelines including, for both reinsurance assumed and ceded, a list of reinsurers with which such automatic agreements are in effect, the coverages and amounts or percentages that may be reinsured, and commission schedules.

3. AUDIT COMMITTEE. A controlled insurer must establish an audit committee of the board of directors composed of independent directors. Prior to approval of the annual finan- cial statement, the audit committee shall meet with management, the insurer's independent certified public accountants, and an independent casualty actuary or other independent loss reserve specialist acceptable to the commissioner, to review the adequacy of the insurer's loss reserves.

CH. 1117 LA WS OF THE SEVENTY -FOURTH G.A., 1992 SESSION 160

4. REPORTING REQUIREMENTS. a. In addition to any other required loss reserve certification, the controlled insurer shall

annually, on April 1 of each year, file with the commissioner an opinion of an independent casualty actuary, or another independent loss reserve specialist acceptable to the commissioner, reporting loss ratios for each line of business written and attesting to the adequacy of loss reserves established for losses incurred and outstanding as of year-end on business placed by the producer, including incurred but not reported losses.

b. The controlled insurer shall annually report to the commissioner the amount of commis- sions paid to the producer, the percentage such amount represents of the net premiums writ- ten, and comparable amounts and percentage paid to noncontrolling producers for placements of the same kinds of insurance.

Sec. 39. NEW SECTION. 510A.5 DISCLOSURE. The producer, prior to the effective date of the policy, shall deliver written notice to the

prospective insured disclosing the relationship between the producer and the controlled insurer; except that, if the business is placed through a subproducer who is not a controlling producer, the controlling producer shall retain in the producer's records a signed commitment from the subproducer that the sub producer is aware of the relationship between the insurer and the producer and that the subproducer has notified or will notify the insured.

Sec. 40. Section 521A.5, subsection 3, Code Supplement 1991, is amended by striking the subsection and inserting in lieu thereof the following:

3. A domestic insurer shall not pay any extraordinary dividend or make any other extraor- dinary distribution to its shareholders until thirty days after the commissioner has received notice of the declaration of the dividend or distribution and has not disapproved such payment within the period, or at the time the commissioner has approved the payment within the thirty- day period.

For purposes of this subsection, an extraordinary dividend or distribution includes any divi- dend or distribution of cash or other property, whose fair market value together with that of other dividends or distributions made within the preceding twelve months exceeds the lesser of ten percent of the insurer's surplus related to policyholders as of the thirty-first day of Decem- ber next preceding, or the net gain from operations ofthe insurer, if the insurer is a life insurer, or the net income, if the insurer is not a life insurer, not including realized capital gains, for the twelve-month period ending the thirty-first day of December next preceding, but does not include pro rata distributions of any class of the insurer's own securities. In determining whether a dividend or distribution is extraordinary, an insurer may carry forward net income or gain from operations from the previous two calendar years that has not already been paid out as dividends. This carry-forward shall be computed by taking the net income or gain from operations from the second and third preceding calendar years, not including realized capital gains, less dividends paid in the second and immediately preceding calendar years.

Notwithstanding any other provision of law, an insurer may declare an extraordinary divi- dend or distribution which is conditional upon the commissioner's approval of the dividend or distribution and the declaration does not confer any rights upon shareholders until the com- missioner has approved the payment of the dividend or distribution or the commissioner has not disapproved the payment within the thirty-day period as provided in this subsection.

Sec. 41. The commissioner of insurance shall conduct a study relating to the issues involved with compulsory proof of financial responsibility for all operators of motor vehicles in this state. The study shall include an analysis of the impact of requiring such coverage, including the number of additional operators acquiring coverage, the effect on premium costs to con- sumers, the impact on expenses which would be incurred by insurance carriers as a result of losses paid under such policies, and other related issues.

The commissioner of insurance shall conduct at least one public hearing in each of the five new congressional districts during the 1992 legislative interim concerning the issue of compul- sory proof of financial responsibility for all operators of motor vehicles in this state. The

161 LA WS OF THE SEVENTY -FOURTH G.A., 1992 SESSION CH. 1119

commissioner shall provide adequate notice of such hearings and encourage participation by all citizens in this state. The commissioner shall make an accurate record or summary of each meeting and provide a complete report to the general assembly no later than January 20,1993, concerning the proceedings.

Sec. 42. Section 507.13, Code 1991, is repealed.

Sec. 43. Section 40 of this Act, as it amends section 521A.5, subsection 3, Code Supple- ment 1991, is effective October 31, 1993.

Approved April 22, 1992

CHAPTER 1118 CITIES SUBJECT TO CIVIL SERVICE

S.F.2293

AN ACT relating to cities subject to civil service.

Be It Enacted by the General Assembly of the State of Iowa:

Section 1. Section 400.1, Code 1991, is amended to read as follows: 400.1 APPOINTMENT OF COMMISSION. In cities having a population of eight thousand or over, having a paid fire department or

a paid police department, the mayor, one year after each regular municipal election, with the approval of the council, shall appoint three civil service commissioners who shall hold office, one until the first Monday in April of the second year, one until the first Monday in April of the fourth year, and one until the first Monday in April of the sixth year after such appoint- ment, whose successors shall be appointed for a term of six years.

For the purpose Q! determining the population of ~ city under this section, the federal census conducted in 1980 shall be used. This paragraph ~ void effective July h 2001.

Approved April 22, 1992

CHAPTER 1119 HEALTH CARE COVERAGE FOR WELL-BABY CARE

H.F.2158

AN ACT relating to group accident and sickness insurance, group nonprofit health service plans, and prepaid group plans of health maintenance organizations by mandating inclu- sion of newborn infant coverage for treatment, including routine well-baby care, under certain circumstances.

Be It Enacted by the General Assembly of the State of Iowa:

Section 1. NEW SECTION. 514H.7A COMMISSIONER'S AUTHORITY. 1. Upon the commissioner's determination under section 514H.7, subsection 1, paragraph

"b", to include well-baby care in basic benefit coverage policies, the commissioner shall do all of the following: