SB 895
Synchronizes the penalties, administrative orders, civil actions and other remedies available to the Director of the Department of Insurance throughout the insurance code; modifies law with respect to certain types of service contracts; and revises filing fees
LR Number:
Last Action:
5/12/2006 - H Calendar S Bills for Third Reading
Journal Page:
Calendar Position:
Effective Date:
August 28, 2006
House Handler:

Current Bill Summary

SS/SCS/SB 895 - This act substantially revises the law with respect to how the Department of Insurance enforces various violations of the state insurance code. The act attempts to synchronize the administrative remedies and penalties throughout the various insurance code chapters.

ADMINISTRATIVE ORDERS AND REMEDIES OF THE DEPARTMENT OF INSURANCE - If the director of the Department of Insurance determines that a person has violated or is attempting to violate a provision of the insurance code, the director may issue:

(1) An order directing the person to cease and desist from engaging in the act, practice, omission or course of business;

(2) A curative order or order directing the person to take other action necessary or appropriate to comply with the insurance laws of this state;

(3) Order a civil penalty or forfeiture; and

(4) Award reasonable costs of the investigation.

The act provides that the director shall provide the alleged violator notice of the director's intent to issue an order unless summary action is needed to protect consumers. The act provides for administrative hearings so that alleged violators can contest the issuance of the administrative orders. The act requires the director to issue findings of fact and conclusions of law before an order becomes final. Under the act, the director is authorized to issue subpoenas, compel attendance of witnesses, administer oaths, hear testimony of witnesses, receive evidence, and require the production of books, papers, records, correspondence and all other written instruments or documents relevant to the proceeding and authorized in contested cases under the provisions of chapter 536, RSMo. The act modifies the penalty for violating a cease and desist order issued by the Department of Insurance.

Currently, the law provides that a person who violates a cease and desist order may be punished by a maximum $1,000 fine and up to one year in jail. The act provides for a fine up to $100,000 and a term of imprisonment of 10 years (section 374.046).

REVOCATION OF CERTIFICATE OF AUTHORITY - The act allows the director to revoke a corporation's or insurer's certificate of authority for violating a provision of the insurance code or for felony or misdemeanor convictions. The director must provide the corporation or insurer with 30 days notice before revoking the certificate of authority and must provide such entity with a hearing if so requested (Section 374.047).

PETITION OF CIRCUIT COURT - The act allows the director to seek redress in county circuit courts and the court may issue injunctions, freeze assets or take other remedial measures outlined in the act. The act creates the consumer restitution fund for the purpose of preserving and distributing to aggrieved consumers, disgorgement or restitution funds obtained through enforcement proceedings brought by the director (Section 374.048).

CLASSIFICATION OF ADMINISTRATIVE PENALTIES – The act classifies various violations of the insurance code into five categories. The act establishes maximum fines for each category or level violation. All fines shall go to public schools as required by the Missouri Constitution (Section 374.049).

ADMINISTRATIVE HEARING COMMISSION HEARINGS - Under the act, any applicant refused a license by order of the director may file a petition with the administrative hearing commission alleging that the director has refused the license. The administrative hearing commission shall conduct hearings and make findings of fact and conclusions of law. The director shall have the burden of proving cause for refusal. The act provides for hearings by the administrative hearing commission for certain revocations and suspensions of licenses (Section 374.051).

ADMINISTRATIVE HEARINGS BEFORE THE DIRECTOR - The act provides for administrative hearings before the director for persons aggrieved by any order of the director (Section 374.055).

SHARING OF INFORMATION WITH OTHER REGULATORY BODIES - Under this act, the director is authorized to share records and information with and consult with members of the National Association of Insurance Commissioners, the Commissioner of Securities, State Securities Regulators, the Commissioner of Finance, the Attorney General, federal banking and securities regulators, the NASD, the United States Department of Justice, the Commodity Futures Trading Commission, and the Federal Trade Commission to effectuate greater uniformity in insurance and financial services regulation among state and federal governments, and self-regulatory organizations. The cooperation, coordination, consultation, and sharing of records and information authorized by this act includes:

(1) Establishing or employing one or more designees as a central electronic depository for licensing and rate and form filings with the director and for records required or allowed to be maintained;

(2) Encouraging insurance companies and producers to implement electronic filing through a central electronic depository;

(3) Developing and maintaining uniform forms;

(4) Conducting joint market conduct examinations and other investigations through collaboration and cooperation with other insurance regulators;

(5) Holding joint administrative hearings;

(6) Instituting and prosecuting joint civil or administrative enforcement proceedings; and

(7) Sharing and exchanging personnel (section 374.185).

MOTOR VEHICLE SERVICE CONTRACTS AND PRODUCT SERVICE AGREEMENTS - The act modifies the laws regarding motor vehicle service contracts and product service agreements. The act places the existing provisions relating to motor vehicle extended service contracts into a new chapter (chapter 407 to chapter 385)and creates similar provisions for product service agreements, to wit, the act prohibits persons from issuing or selling product service agreements without registering and paying a fee with the Director of the Department of Insurance; sets forth financial reserve requirements for service agreement providers; and requires providers to furnish written statements to consumers outlining their obligations, conveying terms and restrictions. The act requires providers of product service agreements to maintain accurate records of every transaction for a period of at least three years after the specified period of coverage has expired. Records must be made available to the department upon request. These provisions are similar to those contained in HB 1626 (2006).

FILING FEES - The act revises the fee schedules for health services corporations, health maintenance organizations and insurance companies. The act revises the filing fees for certain documents paid by those types of organizations. The act also provides that the assessments made against insurance companies for examination purposes shall include:

(1) The costs of compensation, including benefits, for the examiners, analysts, actuaries, and attorneys contributing to the examination of the company;

(2) Reasonable travel, lodging and meal expenses related to an on-site examination; and

(3) Other expenses related to the examination.

The act requires the director, if requested by the company being examined, to prepare an itemized report indicating all expenses that are assessed by the Department of Insurance. The act requires the director to pay such expenses from the insurance examiners fund. The act modifies the Department of Insurance Dedicated Fund to provide that the fund may be used for the regulation of the business of insurance and the operation of the division of consumer affairs (sections 354.150, 354.495, 374.150, 374.160, and 374.230).

The act repeals sections 374.261 to 374.267 which deal with the "Insurance Examiner's Sick Leave Fund".

REPORT OF CLAIMS PAID - This act requires health carriers to provide a report of the total of number of claims paid for previous 3 years and the total dollar amount of those claims when requested by an employer. In the case of an employer with multiple plans, the total dollar amounts shall be aggregated into one report. The report shall be provided within thirty days of the request. The information provided to the employer or the employer's producer of record shall be furnished in a manner that does not individually identify any employee or other person covered by the health benefit plan and shall comply with all applicable federal and state privacy laws regarding the disclosure of health records (Section 375.435). A similar provision is contained in SCS/HCS/HB 1101 (2006).

WEATHER-RELATED CLAIMS AND CLAIM INQUIRIES - This act prohibits homeowner insurance companies from considering as a claim any inquiry made by the insured as to whether the policy covers a certain loss or whether the policy provides a certain type or level of coverage. Insurers are also prohibited from canceling, refusing to write, or refusing to renew a policy on the basis of a weather-related claim. Further, insurers are prohibited from using a rating plan or a rating system which surcharges the insured's dwelling fire or homeowners insurance premium based upon the insured's weather-related claims or upon inquiries into whether the policy covers certain losses. This language is similar to language contained in SB 659 (2006)(sections 375.001 and 375.007).