TITLE 27
Insurance
CHAPTER 27-75
Surplus Lines Insurance Multi-State Compliance Compact
SECTION 27-75-3
§ 27-75-3 Enactment of compact.
The surplus lines insurance multi-state compliance compact is enacted into law
and entered into by this state with all other states legally joining this
compact in the form substantially as follows:
ARTICLE I PURPOSES
The purposes of this compact are:
(1) To implement the express provisions of the Non-Admitted
and Reinsurance Reform Act (NRRA).
(2) To protect the premium tax revenues of the compacting
states through facilitating the payment and collection of premium tax on
non-admitted insurance; and to protect the interests of the compacting states
by supporting the continued availability of such insurance to consumers; and to
provide for allocation of premium tax for non-admitted insurance of multi-state
risks among the states in accordance with uniform allocation formulas to be
developed, adopted, and implemented by the commission.
(3) To streamline and improve the efficiency of the surplus
lines market by eliminating duplicative and inconsistent tax and regulatory
requirements among the states; and promote and protect the interest of surplus
lines licensees who assist such insureds and surplus lines insurers, thereby
ensuring the continued availability of surplus lines insurance to consumers.
(4) To streamline regulatory compliance with respect to
non-admitted insurance placements by providing for exclusive single-state
regulatory compliance for non-admitted insurance of multi-state risks, in
accordance with rules to be adopted by the commission, thereby providing
certainty regarding such compliance to all persons who have an interest in such
transactions, including, but not limited to, insureds, regulators, surplus
lines licensees, other insurance producers, and surplus lines insurers.
(5) To establish a clearinghouse for receipt and
dissemination of premium tax and clearinghouse transaction data related to
non-admitted insurance of multi-state risks, in accordance with rules to be
adopted by the commission.
(6) To improve coordination of regulatory resources and
expertise between state insurance departments and other state agencies, as well
as State surplus lines stamping offices, with respect to non-admitted insurance.
(7) To adopt uniform rules to provide for premium tax
payment, reporting, allocation, data collection and dissemination for
non-admitted insurance of multi-state risks and single-state risks, in
accordance with rules to be adopted by the commission, thereby promoting the
overall efficiency of the non-admitted insurance market.
(8) To adopt uniform mandatory rules with respect to
regulatory compliance requirements for:
(i) Foreign insurer eligibility requirements;
(ii) Surplus lines policyholder notices;
(9) To establish the surplus lines insurance multi-state
compliance compact commission.
(10) To coordinate reporting of clearinghouse transaction
data on non-admitted insurance of multi-state risks among compacting states and
contracting states.
(11) To perform these and such other related functions as may
be consistent with the purposes of the surplus lines insurance multi-state
compliance compact.
ARTICLE II DEFINITIONS
For purposes of this Compact the following definitions shall
apply:
(1) "Admitted insurer" means an insurer that is licensed, or
authorized, to transact the business of insurance under the law of the home
state; for purposes of this compact "admitted insurer" shall not include a
domestic surplus lines insurer as may be defined by applicable state law.
(2) "Affiliate" means, with respect to an insured, any entity
that controls, is controlled by, or is under common control with the insured.
(3) "Allocation formula" means the uniform methods
promulgated by the commission by which insured risk exposures will be
apportioned to each state for the purpose of calculating premium taxes due.
(4) "Bylaws" means those bylaws established by the commission
for its governance, or for directing or controlling the commission's actions or
conduct.
(5) "Clearinghouse" means the commission's operations
involving the acceptance, processing, and dissemination, among the compacting
states, contracting states, surplus lines licensees, insureds and other
persons, of premium tax and clearinghouse transaction data for Non- admitted
insurance of multi-state risks, in accordance with this compact and rules to be
adopted by the commission.
(6) "Clearinghouse transaction data" means the information
regarding non-admitted insurance of multi-state risks required to be reported,
accepted, collected, processed, and disseminated by surplus lines licensees for
surplus lines insurance and insureds for independently procured insurance under
this compact and rules to be adopted by the commission. Clearinghouse
transaction data includes information related to single-state risks if a state
elects to have the clearinghouse collect taxes on single-state risks for such
state.
(7) "Compacting State" means any state which has enacted this
compact legislation and which has not withdrawn pursuant to Article XIV,
Section 1, or been terminated pursuant to Article XIV, Section 2.
(8) "Commission" means the "surplus lines insurance
multi-state compliance compact commission" established by this compact.
(9) "Commissioner" means the chief insurance regulatory
official of a state including, but not limited to commissioner, superintendent,
director or administrator or their designee(s).
(10) "Contracting state" means any state which has not
enacted this compact legislation but has entered into a written contract with
the commission to utilize the services of and fully participate in the
clearinghouse.
(11) "Control" An entity has "control" over another entity if:
(i) The entity directly or indirectly or acting through one
or more other persons own, controls, or has the power to vote twenty-five
percent (25%) or more of any class of voting securities of the other entity; or
(ii) The entity controls, in any manner, the election of a
majority of the directors or trustees of the other entity.
(12) "Home state"
(i) In general. Except as provided in subparagraph (ii), the
term "home state" means, with respect to an insured:
(A) The state in which an insured maintains its principal
place of business or, in the case of an individual, the individual's principal
residence; or
(B) If one hundred percent (100%) of the insured risk is
located out of the state referred to in subparagraph (i)(A), the state to which
the greatest percentage of the insured's taxable premium for that insurance
contract is allocated.
(ii) Affiliated groups. If more than one insured from an
affiliated group are named insureds on a single non-admitted insurance
contract, the term "home state" means the home state, as determined pursuant to
subparagraph (i), of the member of the affiliated group that has the largest
percentage of premium attributed to it under such insurance contract.
(13) "Independently procured insurance" means insurance
procured by an insured directly from a surplus lines insurer or other
non-admitted insurer as permitted by the laws of the home state.
(14) "Insurer eligibility requirements" means the criteria,
forms and procedures established to qualify as a surplus lines insurer under
the law of the home state provided that such criteria, forms and procedures are
consistent with the express provisions of the NRRA on and after July 21, 2011.
(15) "Member" means the person or persons chosen by a
compacting state as its representative or representatives to the commission
provided that each compacting state shall be limited to one vote.
(16) "Multi-state risk" means a risk with insured exposures
in more than one state.
(17) "Non-compacting state" means any state which has not
adopted this compact.
(18) "Non-admitted insurance" means surplus lines insurance
and independently procured insurance.
(19) "Non-admitted insurer" means an insurer that is not
authorized or admitted to transact the business of insurance under the law of
the home state.
(20) "NRRA" means the non-admitted and reinsurance reform act
which is Title V, Subtitle B of the Dodd-Frank Wall Street Reform and Consumer
Protection Act.
(21) "Policyholder notice" means the disclosure notice or
stamp that is required to be furnished to the applicant or policyholder in
connection with a surplus lines insurance placement.
(22) "Premium tax" means with respect to non-admitted
insurance, any tax, fee, assessment, or other charge imposed by a government
entity directly or indirectly based on any payment made as consideration for
such insurance, including premium deposits, assessments, registration fees, and
any other compensation given in consideration for a contract of insurance.
(23) "Principal place of business" means with respect to
determining the home state of the insured, the state where the insured
maintains its headquarters and where the insured's high- level officers direct,
control and coordinate the business activities of the insured.
(24) "Purchasing group" means any group formed pursuant to
the liability risk retention act which has as one of its purposes the purchase
of liability insurance on a group basis, purchases such insurance only for its
group members and only to cover their similar or related liability exposure and
is composed of members whose businesses or activities are similar or related
with respect to the liability to which members are exposed by virtue of any
related, similar or common business, trade, product, services, premises or
operations and is domiciled in any state.
(25) "Rule" means a statement of general or particular
applicability and future effect promulgated by the commission designed to
implement, interpret, or prescribe law or policy or describing the
organization, procedure or practice requirements of the commission which shall
have the force and effect of law in the compacting states.
(26) "Single-state risk" means a risk with insured exposures
in only one state.
(27) "State" means any state, district or territory of the
United States of America.
(28) "State transaction documentation" means the information
required under the laws of the home state to be filed by surplus lines
licensees in order to report surplus lines insurance and verify compliance with
surplus lines laws, and by insureds in order to report independently procured
insurance.
(29) "Surplus lines insurance" means insurance procured by a
surplus lines licensee from a surplus lines insurer or other non-admitted
insurer as permitted under the law of the home state; for purposes of this
compact "surplus lines insurance" shall also mean excess lines insurance as may
be defined by applicable state law.
(30) "Surplus lines insurer" means a non-admitted insurer
eligible under the law of the home state to accept business from a surplus
lines licensee; for purposes of this compact "surplus lines insurer" shall also
mean an insurer which is permitted to write surplus lines insurance under the
laws of the state where such insurer is domiciled.
(31) "Surplus lines licensee" means an individual, firm or
corporation licensed under the law of the home state to place surplus lines
insurance.
ARTICLE III ESTABLISHMENT OF THE COMMISSION AND
VENUE
(a) The compacting states hereby create and establish a joint
public agency known as the "surplus lines insurance multi-state compliance
compact commission."
(b) Pursuant to Article IV, the commission shall have the
power to adopt mandatory rules which establish exclusive home state authority
regarding non-admitted insurance of multi- state risks, allocation formulas,
clearinghouse transaction data, a clearinghouse for receipt and distribution of
allocated premium tax and clearinghouse transaction data, and uniform
rulemaking procedures and rules for the purpose of financing, administering,
operating and enforcing compliance with the provisions of this compact, its
bylaws and rules.
(c) Pursuant to Article IV, the commission shall have the
power to adopt mandatory rules establishing foreign insurer eligibility
requirements and a concise and objective policyholder notice regarding the
nature of a surplus lines placement.
(d) The commission is a body corporate and politic, and an
instrumentality of the compacting states.
(e) The commission is solely responsible for its liabilities
except as otherwise specifically provided in this compact.
(f) Venue is proper and judicial proceedings by or against
the commission shall be brought solely and exclusively in a court of competent
jurisdiction where the principal office of the commission is located. The
commission may waive venue and jurisdictional defenses to the extent it adopts
or consents to participate in alternative dispute resolution proceedings.
ARTICLE IV AUTHORITY TO ESTABLISH MANDATORY RULES
The commission shall adopt mandatory rules which establish:
(1) Allocation formulas for each type of non-admitted
insurance coverage, which allocation formulas must be used by each compacting
state and contracting state in acquiring premium tax and clearinghouse
transaction data from surplus lines licensees and insureds for reporting to the
clearinghouse created by the compact commission. Such allocation formulas shall
be established with input from surplus lines licensees and be based upon
readily available data with simplicity and uniformity for the surplus line
licensee as a material consideration.
(2) Uniform clearinghouse transaction data reporting
requirements for all information reported to the clearinghouse.
(3) Methods by which compacting states and contracting states
require surplus lines licensees and insureds to pay premium tax and to report
clearinghouse transaction data to the clearinghouse, including, but not limited
to, processing clearinghouse transaction data through state stamping and
service offices, state insurance departments, or other state designated
agencies or entities.
(4) That non-admitted insurance of multi-state risks shall be
subject to all of the regulatory compliance requirements of the home state
exclusively. Home state regulatory compliance requirements applicable to
surplus lines insurance shall include, but not be limited to: (i) Person(s)
required to be licensed to sell, solicit, or negotiate surplus lines insurance;
(ii) Insurer eligibility requirements or other approved non-admitted insurer
requirements; (iii) Diligent search; (iv) State transaction documentation and
clearinghouse transaction data regarding the payment of premium tax as set
forth in this compact and rules to be adopted by the commission. Home state
regulatory compliance requirements applicable to independently procured
insurance placements shall include, but not be limited to, providing state
transaction documentation and clearinghouse transaction data regarding the
payment of premium tax as set forth in this compact and rules to be adopted by
the commission.
(5) That each compacting state and contracting state may
charge its own rate of taxation on the premium allocated to such state based on
the applicable allocation formula provided that the state establishes one
single rate of taxation applicable to all non-admitted insurance transactions
and no other tax, fee assessment or other charge by any governmental or quasi-
governmental agency be permitted. Notwithstanding the foregoing, stamping
office fees may be charged as a separate, additional cost unless such fees are
incorporated into a state's single rate of taxation.
(6) That any change in the rate of taxation by any compacting
state or contracting state be restricted to changes made prospectively on not
less than ninety (90) days advance notice to the compact commission.
(7) That each compacting state and contracting state shall
require premium tax payments either annually, semi-annually, or quarterly
utilizing one or more of the following dates only: March 1, June 1, September
1, and December 1.
(8) That each compacting state and contracting state prohibit
any other state agency or political subdivision from requiring surplus lines
licensees to provide clearinghouse transaction data and state transaction
documentation other than to the insurance department or tax officials of the
home state or one single designated agent thereof.
(9) The obligation of the home state by itself, through a
designated agent, surplus lines stamping or service office, to collect
clearinghouse transaction data from surplus line licensees and from insureds
for independently procured insurance, where applicable, for reporting to the
clearinghouse.
(10) A method for the clearinghouse to periodically report to
compacting states, contracting states, surplus lines and insureds who
independently procure insurance, all premium taxes owed to each of the
compacting states and contracting states, the dates upon which payment of such
premium taxes are due and a method to pay them through the clearinghouse.
(11) That each surplus line licensee is required to be
licensed only in the home state of each insured for whom surplus lines
insurance has been procured.
(12) That a policy considered to be surplus lines insurance
in the insured's home state shall be considered surplus lines insurance in all
compacting states and contracting states, and taxed as a surplus lines
transaction in all states to which a portion of the risk is allocated. Each
compacting state and contracting state shall require each surplus lines
licensee to pay to every other compacting state and contracting state premium
taxes on each multi-state risk through the clearinghouse at such tax rate
charged on surplus lines transactions in such other compacting states and
contracting states on the portion of the risk in each such compacting state and
contracting state as determined by the applicable uniform allocation formula
adopted by the commission. A policy considered to be independently procured
insurance in the insured's home state shall be considered independently
procured insurance in all compacting states and contracting states. Each
compacting state and contracting state shall require the insured to pay every
other compacting state and contracting state the independently procured
insurance premium tax on each multi-state risk through the clearinghouse
pursuant to the uniform allocation formula adopted by the commission.
(13) Uniform foreign insurer eligibility requirements as
authorized by the NRRA.
(14) A uniform policyholder notice.
(15) Uniform treatment of purchasing group surplus lines
insurance placements.
ARTICLE V POWERS OF THE COMMISSION
The commission shall have the following powers:
(1) To promulgate rules and operating procedures, pursuant to
Article VIII of this compact, which shall have the force and effect of law and
shall be binding in the compacting States to the extent and in the manner
provided in this compact;
(2) To bring and prosecute legal proceedings or actions in
the name of the commission, provided that the standing of any state insurance
department to sue or be sued under applicable law shall not be affected;
(3) To issue subpoenas requiring the attendance and testimony
of witnesses and the production of evidence, provided however, the commission
is not empowered to demand or subpoena records or data from non-admitted
insurers;
(4) To establish and maintain offices including the creation
of a clearinghouse for the receipt of premium tax and clearinghouse transaction
data regarding non-admitted insurance of multi-state risks, single-state risks
for states which elect to require surplus lines licensees to pay premium tax on
single state risks through the clearinghouse and tax reporting forms;
(5) To purchase and maintain insurance and bonds;
(6) To borrow, accept or contract for services of personnel,
including, but not limited to, employees of a compacting state or stamping
office, pursuant to an open, transparent, objective competitive process and
procedure adopted by the commission;
(7) To hire employees, professionals or specialists, and
elect or appoint officers, and to fix their compensation, define their duties
and give them appropriate authority to carry out the purposes of the compact,
and determine their qualifications, pursuant to an open, transparent, objective
competitive process and procedure adopted by the commission; and to establish
the commission's personnel policies and programs relating to conflicts of
interest, rates of compensation and qualifications of personnel, and other
related personnel matters;
(8) To accept any and all appropriate donations and grants of
money, equipment, supplies, materials and services, and to receive, utilize and
dispose of the same; provided that at all times the commission shall avoid any
appearance of impropriety and/or conflict of interest;
(9) To lease, purchase, accept appropriate gifts or donations
of, or otherwise to own, hold, improve or use, any property, real, personal or
mixed; provided that, at all times the commission shall avoid any appearance of
impropriety and/or conflict of interest;
(10) To sell convey, mortgage, pledge, lease, exchange,
abandon or otherwise dispose of any property real, personal or mixed;
(11) To provide for tax audit rules and procedures for the
compacting states with respect to the allocation of premium taxes including:
(i) Minimum audit standards, including sampling methods;
(ii) Review of internal controls;
(iii) Cooperation and sharing of audit responsibilities
between compacting states;
(iv) Handling of refunds or credits due to overpayments or
improper allocation of premium taxes;
(v) Taxpayer records to be reviewed including a minimum
retention period;
(vi) Authority of compacting states to review, challenge, or
re-audit taxpayer records.
(12) To enforce compliance by compacting states and
contracting states with rules and bylaws pursuant to the authority set forth in
Article XIV;
(13) To provide for dispute resolution among compacting
states and contracting states;
(14) To advise compacting states and contracting states on
tax-related issues relating to insurers, insureds, surplus lines licensees,
agents or brokers domiciled or doing business in non- compacting states,
consistent with the purposes of this compact;
(15) To make available advice and training to those personnel
in state stamping offices, state insurance departments or other state
departments for record keeping, tax compliance, and tax allocations; and to be
a resource for state insurance departments and other state departments;
(16) To establish a budget and make expenditures;
(17) To borrow money;
(18) To appoint and oversee committees, including advisory
committees comprised of members, state insurance regulators, state legislators
or their representatives, insurance industry and consumer representatives, and
such other interested persons as may be designated in this compact and the
bylaws;
(19) To establish an executive committee of not less than
seven (7) nor more than fifteen (15) representatives, which shall include
officers elected by the commission and such other representatives as provided
for herein and determined by the bylaws. Representatives of the executive
committee shall serve a one-year term. Representatives of the executive
committee shall be entitled to one vote each. The executive committee shall
have the power to act on behalf of the commission, with the exception of
rulemaking, during periods when the commission is not in session. The executive
committee shall oversee the day to day activities of the administration of the
compact, including the activities of the operations committee created under
this Article and compliance and enforcement of the provisions of the compact,
its bylaws, and rules, and such other duties as provided herein and as deemed
necessary.
(20) To establish an operations committee of not less than
seven (7) and not more than fifteen (15) representatives to provide analysis,
advice, determinations and recommendations regarding technology, software, and
systems integration to be acquired by the commission and to provide analysis,
advice, determinations and recommendations regarding the establishment of
mandatory rules to be adopted to be by the commission.
(21) To enter into contracts with contracting states so that
contracting states can utilize the services of and fully participate in the
clearinghouse subject to the terms and conditions set forth in such contracts;
(22) To adopt and use a corporate seal; and
(23) To perform such other functions as may be necessary or
appropriate to achieve the purposes of this compact consistent with the state
regulation of the business of insurance.
ARTICLE VI ORGANIZATION OF THE COMMISSION
(1) Membership, Voting and Bylaws
(i) Each compacting state shall have and be limited to one
member. Each state shall determine the qualifications and the method by which
it selects a member and set forth the selection process in the enabling
provision of the legislation which enacts this compact. In the absence of such
a provision the member shall be appointed by the governor of such compacting
state. Any member may be removed or suspended from office as provided by the
law of the state from which he or she shall be appointed. Any vacancy occurring
in the commission shall be filled in accordance with the laws of the compacting
state wherein the vacancy exists.
(ii) Each member shall be entitled to one vote and shall
otherwise have an opportunity to participate in the governance of the
commission in accordance with the bylaws.
(iii) The commission shall, by a majority vote of the
members, prescribe bylaws to govern its conduct as may be necessary or
appropriate to carry out the purposes and exercise the powers of the compact
including, but not limited to:
(A) Establishing the fiscal year of the commission;
(B) Providing reasonable procedures for holding meetings of
the commission, the executive committee, and the operations committee;
(C) Providing reasonable standards and procedures: (I) For
the establishment and meetings of committees, and (II) Governing any general or
specific delegation of any authority or function of the commission;
(D) Providing reasonable procedures for calling and
conducting meetings of the commission that consist of a majority of commission
members, ensuring reasonable advance notice of each such meeting and providing
for the right of citizens to attend each such meeting with enumerated
exceptions designed to protect the public's interest, the privacy of
individuals, and insurers' and surplus lines licensees' proprietary
information, including trade secrets. The commission may meet in camera only
after a majority of the entire membership votes to close a meeting in total or
in part. As soon as practicable, the commission must make public: (I) A copy of
the vote to close the meeting revealing the vote of each member with no proxy
votes allowed, and (II) Votes taken during such meeting;
(E) Establishing the titles, duties and authority and
reasonable procedures for the election of the officers of the commission;
(F) Providing reasonable standards and procedures for the
establishment of the personnel policies and programs of the commission.
Notwithstanding any civil service or other similar laws of any compacting
state, the bylaws shall exclusively govern the personnel policies and programs
of the commission;
(G) Promulgating a code of ethics to address permissible and
prohibited activities of commission members and employees;
(H) Providing a mechanism for winding up the operations of
the commission and the equitable disposition of any surplus funds that may
exist after the termination of the compact after the payment and/or reserving
of all of its debts and obligations;
(iv) The commission shall publish its bylaws in a convenient
form and file a copy thereof and a copy of any amendment thereto, with the
appropriate agency or officer in each of the compacting states.
(2) Executive committee, personnel and chairperson
(i) An executive committee of the commission ("executive
committee") shall be established. All actions of the executive committee,
including compliance and enforcement are subject to the review and ratification
of the commission as provided in the bylaws. The executive committee shall have
no more than fifteen (15) representatives, or one for each state if there are
less than fifteen (15) compacting states, who shall serve for a term and be
established in accordance with the bylaws.
(ii) The executive committee shall have such authority and
duties as may be set forth in the bylaws, including, but not limited to:
(A) Managing the affairs of the commission in a manner
consistent with the bylaws and purposes of the commission;
(B) Establishing and overseeing an organizational structure
within, and appropriate procedures for the commission to provide for the
creation of rules and operating procedures;
(C) Overseeing the offices of the commission; and
(D) Planning, implementing, and coordinating communications
and activities with other state, federal and local government organizations in
order to advance the goals of the commission.
(iii) The commission shall annually elect officers from the
executive committee, with each having such authority and duties, as may be
specified in the bylaws.
(iv) The executive committee may, subject to the approval of
the commission, appoint or retain an executive director for such period, upon
such terms and conditions and for such compensation as the commission may deem
appropriate. The executive director shall serve as secretary to the commission,
but shall not be a member of the commission. The executive director shall hire
and supervise such other persons as may be authorized by the commission.
(3) Operations Committee
(i) An operations committee shall be established. All actions
of the operations committee are subject to the review and oversight of the
commission and the executive committee and must be approved by the commission.
The executive committee will accept the determinations and recommendations of
the operations committee unless good cause is shown why such determinations and
recommendations should not be approved. Any disputes as to whether good cause
exists to reject any determination or recommendation of the operations
committee shall be resolved by the majority vote of the commission.
The operations committee shall have no more than fifteen (15)
representatives or one for each state if there are less than fifteen (15)
compacting states, who shall serve for a term and shall be established as set
forth in the bylaws.
The operations committee shall have responsibility for:
(A) Evaluating technology requirements for the clearinghouse,
assessing existing systems used by state regulatory agencies and state stamping
offices to maximize the efficiency and successful integration of the
clearinghouse technology systems with state and state stamping office
technology platforms and to minimize costs to the states, state stamping
offices and the clearinghouse.
(B) Making recommendations to the executive committee based
on its analysis and determination of the clearinghouse technology requirements
and compatibility with existing state and state stamping office systems,
(C) Evaluating the most suitable proposals for adoption as
mandatory rules, assessing such proposals for ease of integration by states,
and likelihood of successful implementation and to report to the executive
committee its determinations and recommendations.
(D) Such other duties and responsibilities as are delegated
to it by the bylaws, the executive committee or the commission.
(ii) All representatives of the operations committee shall be
individuals who have extensive experience and/or employment in the surplus
lines insurance business including, but not limited to, executives and
attorneys employed by surplus line insurers, surplus line licensees, law firms,
state insurance departments and/or state stamping offices. Operations committee
representatives from compacting states which utilize the services of a state
stamping office must appoint the chief operating officer or a senior manager of
the state stamping office to the operations committee.
(4) Legislative and Advisory Committees
(i) A legislative committee comprised of state legislators or
their designees shall be established to monitor the operations of, and make
recommendations to, the commission, including the executive committee;
provided, that the manner of selection and term of any legislative committee
member shall be as set forth in the bylaws. Prior to the adoption by the
commission of any uniform standard, revision to the bylaws, annual budget or
other significant matter as may be provided in the bylaws, the executive
committee shall consult with and report to the legislative committee.
(ii) The commission may establish additional advisory
committees as its bylaws may provide for the carrying out of its functions.
(5) Corporate records of the commission
The commission shall maintain its corporate books and records
in accordance with the bylaws.
(6) Qualified immunity, defense and indemnification
(i) The members, officers, executive director, employees and
representatives of the commission, the executive committee and any other
committee of the commission shall be immune from suit and liability, either
personally or in their official capacity, for any claim for damage to or loss
of property or personal injury or other civil liability caused by or arising
out of any actual or alleged act, error or omission that occurred, or that the
person against whom the claim is made had a reasonable basis for believing
occurred within the scope of commission employment, duties or responsibilities;
provided, that nothing in this paragraph shall be construed to protect any such
person from suit and/or liability for any damage, loss, injury or liability
caused by the intentional or willful or wanton misconduct of that person.
(ii) The commission shall defend any member, officer,
executive director, employee or representative of the commission, the executive
committee or any other committee of the commission in any civil action seeking
to impose liability arising out of any actual or alleged act, error or omission
that occurred within the scope of commission employment, duties or
responsibilities, or that the person against whom the claim is made had a
reasonable basis for believing occurred within the scope of commission
employment, duties or responsibilities; provided, that nothing herein shall be
construed to prohibit that person from retaining his or her own counsel; and
provided further, that the actual or alleged act, error or omission did not
result from that person's intentional or willful or wanton misconduct.
(iii) The commission shall indemnify and hold harmless any
member, officer, executive director, employee or representative of the
commission, executive committee or any other committee of the commission for
the amount of any settlement or judgment obtained against that person arising
out of any actual or alleged act, error or omission that occurred within the
scope of commission employment, duties or responsibilities, or that such
person had a reasonable basis for believing occurred within the scope of
commission employment, duties or responsibilities, provided that the actual
or alleged act, error or omission did not result from the intentional or
willful or wanton misconduct of that person.
ARTICLE VII MEETINGS AND ACTS OF THE COMMISSION
(a) The commission shall meet and take such actions as are
consistent with the provisions of this compact and the bylaws.
(b) Each member of the commission shall have the right and
power to cast a vote to which that compacting state is entitled and to
participate in the business and affairs of the commission. A member shall vote
in person or by such other means as provided in the bylaws. The bylaws may
provide for members' participation in meetings by telephone or other means of
communication.
(c) The commission shall meet at least once during each
calendar year. Additional meetings shall be held as set forth in the bylaws.
(d) Public notice shall be given of all meetings and all
meetings shall be open to the public, except as set forth in the rules or
otherwise provided in the compact.
(e) The commission shall promulgate rules concerning its
meetings consistent with the principles contained in the "Government in the
Sunshine Act," 5 U.S.C., Section 552b, as may be amended.
(f) The commission and its committees may close a meeting, or
portion thereof, where it determines by majority vote that an open meeting
would be likely to:
(1) Relate solely to the commission's internal personnel
practices and procedures;
(2) Disclose matters specifically exempted from disclosure by
federal and state statute;
(3) Disclose trade secrets or commercial or financial
information which is privileged or confidential;
(4) Involve accusing a person of a crime, or formally
censuring a person;
(5) Disclose information of a personal nature where
disclosure would constitute a clearly unwarranted invasion of personal privacy;
(6) Disclose investigative records compiled for law
enforcement purposes;
(7) Specifically relate to the commission's issuance of a
subpoena, or its participation in a civil action or other legal proceeding.
(g) For a meeting, or portion of a meeting, closed pursuant
to this provision, the commission's legal counsel or designee shall certify
that the meeting may be closed and shall reference each relevant exemptive
provision. The commission shall keep minutes which shall fully and clearly
describe all matters discussed in a meeting and shall provide a full and
accurate summary of actions taken, and the reasons therefore, including a
description of the views expressed and the record of a roll call vote. All
documents considered in connection with an action shall be identified in such
minutes. All minutes and documents of a closed meeting shall remain under seal,
subject to release by a majority vote of the commission.
ARTICLE VIII RULES AND OPERATING PROCEDURES:
RULEMAKING
Rulemaking Functions of the Commission:
1. Rulemaking Authority. The commission shall
promulgate reasonable rules in order to effectively and efficiently achieve the
purposes of this compact. Notwithstanding the foregoing, in the event the
commission exercises its rulemaking authority in a manner that is beyond the
scope of the purposes of this chapter, or the powers granted hereunder, then
such an action by the commission shall be invalid and have no force or effect.
2. Rulemaking Procedure. Rules shall be made pursuant
to a rulemaking process that substantially conforms to the "Model State
Administrative Procedure Act," of 1981 Act, Uniform Laws Annotated, Vol. 15,
p.1 (2000) as amended, as may be appropriate to the operations of the
Commission.
3. Effective Date. All rules and amendments, thereto,
shall become effective as of the date specified in each rule, operating
procedure or amendment.
4. Not later than thirty (30) days after a rule is
promulgated, any person may file a petition for judicial review of the rule;
provided, that the filing of such a petition shall not stay or otherwise
prevent the rule from becoming effective unless the court finds that the
petitioner has a substantial likelihood of success. The court shall give
deference to the actions of the commission consistent with applicable law and
shall not find the rule to be unlawful if the rule represents a reasonable
exercise of the commission's authority.
ARTICLE IX COMMISSION RECORDS AND ENFORCEMENT
(a) The commission shall promulgate rules establishing
conditions and procedures for public inspection and copying of its information
and official records, except such information and records involving the privacy
of individuals, insurers, insureds or surplus lines licensee trade secrets.
State transaction documentation and clearinghouse transaction data collected by
the clearinghouse shall be used for only those purposes expressed in or
reasonably implied under the provisions of this compact and the commission
shall afford this data the broadest protections as permitted by any applicable
law for proprietary information, trade secrets or personal data. The commission
may promulgate additional rules under which it may make available to federal
and state agencies, including law enforcement agencies, records and information
otherwise exempt from disclosure, and may enter into agreements with such
agencies to receive or exchange information or records subject to nondisclosure
and confidentiality provisions.
(b) Except as to privileged records, data and information,
the laws of any compacting state pertaining to confidentiality or nondisclosure
shall not relieve any compacting state member of the duty to disclose any
relevant records, data or information to the commission; provided that
disclosure to the commission shall not be deemed to waive or otherwise affect
any confidentiality requirement, and further provided that, except as otherwise
expressly provided in this chapter, the commission shall not be subject to the
compacting state's laws pertaining to confidentiality and nondisclosure with
respect to records, data and information in its possession. Confidential
information of the commission shall remain confidential after such information
is provided to any member, and the commission shall maintain the
confidentiality of any information provided by a member that is confidential
under that member's state law.
(c) The commission shall monitor compacting states for
compliance with duly adopted bylaws and rules. The commission shall notify
any non-complying compacting state in writing of its noncompliance with
commission bylaws or rules. If a non-complying compacting state fails to
remedy its noncompliance within the time specified in the notice of
noncompliance, the compacting state shall be deemed to be in default as set
forth in Article XIV.
ARTICLE X DISPUTE RESOLUTION
(a) Before a member may bring an action in a court of
competent jurisdiction for violation of any provision, standard or requirement
of the compact, the commission shall attempt, upon the request of a member, to
resolve any disputes or other issues that are subject to this compact and which
may arise between two (2) or more compacting states, contracting states or
non-compacting states, and the commission shall promulgate a rule providing
alternative dispute resolution procedures for such disputes.
(b) The commission shall also provide alternative dispute
resolution procedures to resolve any disputes between insureds or surplus lines
licensees concerning a tax calculation or allocation or related issues which
are the subject of this compact.
(c) Any alternative dispute resolution procedures shall be
utilized in circumstances where a dispute arises as to which state
constitutes the home state.
ARTICLE XI REVIEW OF COMMISSION DECISIONS
Regarding Commission decisions:
(1) Except as necessary for promulgating Rules to fulfill the
purposes of this compact, the commission shall not have authority to otherwise
regulate insurance in the compacting states.
(2) Not later than thirty (30) days after the commission has
given notice of any Rule or allocation formula, any third-party filer or
compacting state may appeal the determination to a review panel appointed by
the commission. The commission shall promulgate rules to establish procedures
for appointing such review panels and provide for notice and hearing. An
allegation that the commission, in making compliance or tax determinations
acted arbitrarily, capriciously, or in a manner that is an abuse of discretion
or otherwise not in accordance with the law, is subject to judicial review in
accordance with Article III, subsection (f).
(3) The commission shall have authority to monitor, review
and reconsider commission decisions upon a finding that the determinations or
allocations do not meet the relevant rule. Where appropriate, the commission
may withdraw or modify its determination or allocation after proper notice and
hearing, subject to the appeal process in subsection (2) above.
ARTICLE XII FINANCE
(a) The commission shall pay or provide for the payment of
the reasonable expenses of its establishment and organization. To fund the cost
of its initial operations the commission may accept contributions, grants, and
other forms of funding from the state stamping offices, compacting states and
other sources.
(b) The commission shall collect a fee payable by the insured
directly or through a surplus lines licensee on each transaction processed
through the compact clearinghouse, to cover the cost of the operations and
activities of the commission and its staff in a total amount sufficient to
cover the commission's annual budget.
(c) The commission's budget for a fiscal year shall not be
approved until it has been subject to notice and comment as set forth in
Article VIII of this compact.
(d) The commission shall be regarded as performing essential
governmental functions in exercising such powers and functions and in carrying
out the provisions of this compact and of any law relating thereto, and shall
not be required to pay any taxes or assessments of any character, levied by any
state or political subdivision thereof, upon any of the property used by it for
such purposes, or any income or revenue therefrom, including any profit from a
sale or exchange.
(e) The commission shall keep complete and accurate accounts
of all its internal receipts, including grants and donations, and disbursements
for all funds under its control. The internal financial accounts of the
commission shall be subject to the accounting procedures established under its
bylaws. The financial accounts and reports including the system of internal
controls and procedures of the commission shall be audited annually by an
independent certified public accountant. Upon the determination of the
commission, but not less frequently than every three (3) years, the review of
the independent auditor shall include a management and performance audit of the
commission. The commission shall make an annual report to the governor and
legislature of the compacting states, which shall include a report of the
independent audit. The commission's internal accounts shall not be confidential
and such materials may be shared with the commissioner, the controller, or the
stamping office of any compacting state upon request provided, however, that
any work papers related to any internal or independent audit and any
information regarding the privacy of individuals, and licensees' and insurers'
proprietary information, including trade secrets, shall remain confidential.
(f) No compacting state shall have any claim to or ownership
of any property held by or vested in the commission or to any commission funds
held pursuant to the provisions of this compact.
(g) The commission shall not make any political contributions
to candidates for elected office, elected officials, political parties nor
political action committees. The commission shall not engage in lobbying except
with respect to changes to this compact.
ARTICLE XIII COMPACTING STATES, EFFECTIVE DATE AND
AMENDMENT
(a) Any state is eligible to become a compacting state.
(b) The compact shall become effective and binding upon
legislative enactment of the compact into law by two (2) compacting states,
provided the commission shall become effective for purposes of adopting rules,
and creating the clearinghouse when there are a total of ten (10) compacting
states and contracting states or, alternatively, when there are compacting
states and contracting states representing greater than forty percent (40%) of
the surplus lines insurance premium volume based on records of the percentage
of surplus lines insurance premium based on records of the National Association
of Insurance Commissioners for the prior year. Thereafter, it shall become
effective and binding as to any other compacting state upon enactment of the
compact into law by that state. Notwithstanding the foregoing, the
clearinghouse operations and the duty to report clearinghouse transaction data
shall begin on the first January 1st or July 1st following the first
anniversary of the commission's effective date. For states which join the
compact subsequent to the effective date, a start date for reporting
clearinghouse transaction data shall be set by the commission provided Surplus
Lines Licensees and all other interested parties receive not less than ninety
(90) days advance notice.
(c) Amendments to the compact may be proposed by the
commission for enactment by the compacting states. No amendment shall become
effective and binding upon the commission and the compacting states unless and
until all compacting states enact the amendment into law.
(d)(1) If this commission does not take effect as set forth
in subsection (b) or becomes ineffective, the superintendent of insurance has
the authority to enter into a different multi-state agreement or contracts to
implement the requirements of the "Nonadmitted and Reinsurance Reform Act of
2010," 124 Stat. 1589, 15 U.S.C. 8201 et seq., or any successor or replacement
law.
(2) The superintendent of insurance shall not enter into a
multi-state agreement or contract under subdivision (d)(1) unless the division
of insurance has done all of the following:
(i) Completed a fiscal analysis of the impact of the
agreement or contract that examines the expected effects on Rhode Island's
gross receipt of premium tax;
(ii) Reviewed whether the contract will create additional
administrative burdens on the State of Rhode Island or surplus lines licensee;
(iii) Concluded, after conducting a public hearing, that
entering into the agreement or contract:
(A) Is in Rhode Island's financial best interest; and
(B) Is consistent with the requirements of the NRRA.
ARTICLE XIV WITHDRAWAL, DEFAULT AND TERMINATION
(a) Withdrawal
(1) Once effective, the compact shall continue in force and
remain binding upon each and every compacting state, provided that a compacting
state may withdraw from the compact ("withdrawing state") by enacting a statute
specifically repealing the statute which enacted the compact into law.
(2) The effective date of withdrawal is the effective date of
the repealing statute. However, the withdrawal shall not apply to any tax or
compliance determinations approved on the date the repealing statute becomes
effective, except by mutual agreement of the commission and the withdrawing
state unless the approval is rescinded by the commission.
(3) The member of the withdrawing state shall immediately
notify the executive committee of the commission in writing upon the
introduction of legislation repealing this compact in the withdrawing state.
(4) The commission shall notify the other compacting states
of the introduction of such legislation within ten (10) days after its receipt
of notice thereof.
(5) The withdrawing state is responsible for all obligations,
duties and liabilities incurred through the effective date of withdrawal,
including any obligations, the performance of which extend beyond the effective
date of withdrawal. To the extent those obligations may have been released or
relinquished by mutual agreement of the commission and the Withdrawing State,
the commission's determinations prior to the effective date of withdrawal shall
continue to be effective and be given full force and effect in the withdrawing
state, unless formally rescinded by the commission.
(6) Reinstatement following withdrawal of any compacting
state shall occur upon the effective date of the withdrawing state reenacting
the compact.
(b) Default
(1) If the commission determines that any compacting state
has at any time defaulted ("defaulting state") in the performance of any of its
obligations or responsibilities under this compact, the bylaws or duly
promulgated rules then after notice and hearing as set forth in the bylaws, all
rights, privileges and benefits conferred by this compact on the defaulting
state shall be suspended from the effective date of default as fixed by the
commission. The grounds for default include, but are not limited to, failure of
a compacting state to perform its obligations or responsibilities, and any
other grounds designated in commission rules. The commission shall immediately
notify the defaulting state in writing of the defaulting state's suspension
pending a cure of the default. The commission shall stipulate the conditions
and the time period within which the defaulting state must cure its default. If
the defaulting state fails to cure the default within the time period specified
by the commission, the defaulting state shall be terminated from the compact
and all rights, privileges and benefits conferred by this compact shall be
terminated from the effective date of termination.
(2) Decisions of the commission that are issued on the
effective date of termination shall remain in force in the defaulting state in
the same manner as if the defaulting state had withdrawn voluntarily pursuant
to subsection (a) of this Article.
(3) Reinstatement following termination of any compacting
state requires a reenactment of the compact.
(c) Dissolution of compact
(1) The compact dissolves effective upon the date of the
withdrawal or default of the compacting state which reduces membership in the
compact to one compacting state.
(2) Upon the dissolution of this compact, the compact becomes
null and void and shall have no further force or effect, and the business and
affairs of the commission shall be wound up and any surplus funds shall be
distributed in accordance with the rules and bylaws.
ARTICLE XV SEVERABILITY AND CONSTRUCTION
(a) The provisions of this compact shall be severable and if
any phrase, clause, sentence or provision is deemed unenforceable, the
remaining provisions of the compact shall be enforceable.
(b) The provisions of this compact shall be liberally
construed to effectuate its purposes.
(c) Throughout this compact the use of the singular shall
include the plural and vice-versa.
(d) The headings and captions of articles, sections and
sub-sections used in this compact are for convenience only and shall be ignored
in construing the substantive provisions of this compact.
ARTICLE XVI BINDING EFFECT OF COMPACT AND OTHER
LAWS
(a) Other laws
(1) Nothing herein prevents the enforcement of any other law
of a compacting state except as provided in subdivision (2) of this section.
(2) Decisions of the commission, and any rules, and any other
requirements of the commission shall constitute the exclusive rule, or
determination applicable to the compacting states. Any law or regulation
regarding non-admitted insurance of multi-state risks that is contrary to rules
of the commission is preempted with respect to the following:
(i) Clearinghouse transaction data reporting requirements;
(ii) Allocation formula;
(iii) Clearinghouse transaction data collection requirements;
(iv) Premium tax payment time frames and rules concerning
dissemination of data among the compacting states for non-admitted insurance of
multi-state risks and single-state risks;
(v) Exclusive compliance with surplus lines law of the home
state of the insured;
(vi) Rules for reporting to a clearinghouse for receipt and
distribution of clearinghouse transaction data related to non-admitted
insurance of multi-state risks;
(vii) Uniform foreign insurers eligibility requirements;
(viii) Uniform policyholder notice; and
(ix) Uniform treatment of purchasing groups procuring
non-admitted insurance.
(3) Except as stated in subdivision (2), any rule, uniform
standard or other requirement of the commission shall constitute the exclusive
provision that a commissioner may apply to compliance or tax determinations.
Notwithstanding the foregoing, no action taken by the commission shall abrogate
or restrict: (i) The access of any person to state courts; (ii) The
availability of alternative dispute resolution under Article X of this compact
(iii) Remedies available under state law related to breach of contract, tort,
or other laws not specifically directed to compliance or tax determinations;
(iv) State law relating to the construction of insurance contracts; or (v) The
authority of the attorney general of the state, including but not limited to
maintaining any actions or proceedings, as authorized by law.
(b) Binding effect of this compact
(1) All lawful actions of the commission, including all Rules
promulgated by the commission, are binding upon the compacting states, except
as provided herein.
(2) All agreements between the commission and the compacting
states are binding in accordance with their terms.
(3) Upon the request of a party to a conflict over the
meaning or interpretation of commission actions, and upon a majority vote of
the compacting states, the commission may issue advisory opinions regarding the
meaning or interpretation in dispute. This provision may be implemented by rule
at the discretion of the commission.
(4) In the event any provision of this compact exceeds the
constitutional limits imposed on the legislature of any compacting state, the
obligations, duties, powers or jurisdiction sought to be conferred by that
provision upon the commission shall be ineffective as to that state and those
obligations duties, powers or jurisdiction shall remain in the compacting state
and shall be exercised by the agency thereof to which those obligations,
duties, powers or jurisdiction are delegated by law in effect at the time this
compact becomes effective.
History of Section.
(P.L. 2011, ch. 20, § 1; P.L. 2011, ch. 29, § 1.)
