Senate Bill No. 6014
(By Senators Tomblin, Mr. President, and Sprouse,
By Request of the Executive)
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[Introduced October 21, 2001; referred to the Committee on
Banking and Insurance; and then to the Committee on Finance.]
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A BILL to amend and reenact sections two, three, six and eight,
article twenty-b, chapter thirty-three of the code of West
Virginia, one thousand nine hundred thirty-one, as amended; to
amend and reenact sections two, three, four and five, article
twenty-c of said chapter; to further amend said article by
adding thereto a new section, designated section two-a; and to
amend and reenact section three, article twenty-d of said
chapter, all relating generally to medical malpractice
liability insurance; providing for ratemaking, rate filings,
rate review and reporting; reporting of medical malpractice
civil actions; imposing and collecting civil money penalty for
failure to report certain information pertaining to the civil
action; prohibiting cancellation of policy except for specified reasons and upon notice; specifying grounds for
nonrenewal of policies; requiring insurer to specify reasons
for cancellation and nonrenewal of policies; specifying
notice period for cancellation or nonrenewal of policy;
providing for administrative hearings and for judicial review
of orders of the commissioner; requiring tail insurance to be
offered upon cancellation or nonrenewal of malpractice
insurance policy and imposing civil money penalty failure to
offer tail insurance or any other violation concerning tail
insurance; and making various technical corrections.
Be it enacted by the Legislature of West Virginia:
That sections two, three, six and eight, article twenty-b,
chapter thirty-three of the code of West Virginia, one thousand
nine hundred thirty-one, as amended, be amended and reenacted; that
sections two, three, four and five, article twenty-c of said
chapter be amended and reenacted; that said article be further
amended by adding thereto a new section, designated section two-a;
and that section three, article twenty-d of said chapter be amended
and reenacted, all to read as follows:
ARTICLE 20B. RATES AND MALPRACTICE INSURANCE POLICIES.
§33-20B-2. Rate making.
Any and all modifications of rates made on or after the
effective date of this article the sixth day of June, one thousand
nine hundred eighty-six shall be made in accordance with the
following provisions:
(a) Due consideration shall be given to the past and
prospective loss experience within and outside this state. No
consideration shall be given to the prospective or projected loss
experience within or outside this state except as prescribed by the
regulations of the commissioner promulgated pursuant to subsection
(a), section six of this article.
(b) Due consideration shall be given to catastrophe hazards,
if any, to a reasonable margin for underwriting profit and
contingencies, to dividends, savings or unabsorbed premium deposits
allowed or returned by insurers to their policyholders, members or
subscribers and actual past expenses and demonstrable prospective
or projected expenses applicable to this state.
(c) Rates shall not be excessive, inadequate or unfairly
discriminatory.
(d) Any portion of a judgment entered as a result of a
statutory or common-law bad faith action, unfair claim settlement practice, or other extra contractual judgment, and any portion of
a judgment entered which awards punitive damages against an insurer
may not be included in the insurer's rate base, and may not be used
to justify a rate or rate change. Any portion of a settlement
entered as a result of a statutory or common-law bad faith action,
unfair claim settlement practice, or other extra contractual
liability identified as such and any portion of a settlement
wherein an insurer agrees to pay specific punitive damages may not
be used to justify a rate or rate change. The portion of the
taxable costs and attorney's fees, which is identified as being
related to extra contractual damages in these judgments and
settlements, may not be included in the insurer's rate base and may
not be used to justify a rate or rate change.
(e) Risks may not be grouped by territorial areas for the
establishment of rates and minimum premiums.
(f) The use of guide "A" rates and other nonapproved rates,
also known as "consent to rates," by an insurer are prohibited. No
insurer may require execution of a consent to rate endorsement for
the purpose of offering to issue or issuing a contract or coverage
to an insured, or continuing an existing contract or coverage, at a rate in excess of that provided by a filing otherwise applicable.
(d) (g) Except to the extent necessary to meet the provisions
of subdivision (c) of this section, uniformity among insurers, in
any matters within the scope of this section, is neither required
nor prohibited.
(e) (h) Rates made in accordance with this section may be used
subject to the provisions of this article.
§33-20B-3. Rate filings.
(a) Every filing for malpractice insurance made pursuant to
subsection (a), section four, article twenty of this chapter shall
state the proposed effective date thereof, the character and extent
of the coverage contemplated, and information in support of such
filing. The information furnished in support of a filing shall
include (i) the experience or judgment of the insurer or rating
organization making the filing; (ii) its interpretation of any
statistical data the filing relies upon; (iii) the experience of
other insurers or rating organizations; and (iv) any other relevant
factors required by the commissioner. When a filing is not
accompanied by the information required by this section upon which
the insurer supports such filing, the commissioner shall require such insurer to furnish such information and, in such event, the
waiting period prescribed by subsection (b) of this section shall
commence as of the date such information is furnished.
A filing and any supporting information shall be open to
public inspection as soon as the filing is received by the
commissioner. Any interested party may file a brief with the
commissioner supporting his position concerning the filing. Any
person or organization may file with the commissioner a signed
statement declaring and supporting his or its position concerning
the filing. Upon receipt of any such statement prior to the
effective date of the filing, the commissioner shall mail or
deliver a copy of such statement to the filer, which may file such
reply as it may desire to make. This section shall not be
applicable to any memorandum or statement of any kind by any
employee of the commissioner.
(b) Every such filing shall be on file for a waiting period of
sixty ninety days before it becomes effective, which period may be
extended by the commissioner for an additional period not to exceed
thirty days, if he or she gives written notice within such waiting
period to the insurer or rating organization which made the filing that he or she needs such additional time for the consideration of
such filing. Upon written application by such insurer or rating
organization, the commissioner may authorize a filing which he or
she has reviewed to become effective before the expiration of the
waiting period or any extension thereof. A filing shall be deemed
to meet the requirements of this article unless disapproved by the
commissioner within the waiting period or any extension thereof.
(c) No insurer shall make or issue a contract or policy of
malpractice insurance except in accordance with the filings which
are in effect for said insurer as provided in this article.
§33-20B-6. Rate review and reporting.
(a) The commissioner shall review annually the rules, rates
and rating plans filed and in effect for each insurer providing
five percent or more of the malpractice insurance coverage in this
state in the preceding calendar year to determine whether such
filings continue to meet the requirements of this article and
whether such filings are unfair or inappropriate given the loss
experience in this state in the preceding year.
Within two hundred forty days of the effective date of this
article, in the year one thousand nine hundred eighty-six, the commissioner shall promulgate legislative rules pursuant to article
three, chapter twenty-nine-a of this code, establishing procedures
for the fair and appropriate evaluation and determination of the
past loss experience and prospective or projected loss experience
of insurers within and outside this state, actual past expenses
incurred in this state and demonstrable prospective or projected
expenses applicable to this state.
(b) Within one hundred eighty days of the effective date of
this article, in the year one thousand nine hundred eighty-six, the
commissioner shall promulgate legislative rules pursuant to article
three, chapter twenty-nine-a of this code, establishing procedures
whereby each insurer providing five percent or more of the
malpractice insurance coverage in this state annually shall submit
to the commissioner the following information:
(1) The number of claims filed per category;
(2) The number of civil actions filed;
(3) The number of civil actions compromised or settled;
(4) The number of verdicts in civil actions;
(5) The number of civil actions appealed;
(6) The number of civil actions dismissed;
(7) The total dollar amount paid in claims compromised or
settled;
(8) The total dollar amount paid pursuant to verdicts in civil
actions;
(9) The number of claims closed without payment and the amount
held in reserve for all such claims;
(10) The total dollar amount expended for loss adjustment
expenses, commissions and brokerage expenses;
(11) The total dollar amount expended in defense and
litigation of claims;
(12) The total dollar amount held in reserve for anticipated
claims;
(13) Net profit or loss;
(14) Investment and other income on net realized capital gains
and loss reserves and unearned premiums; and
(15) The number of malpractice insurance polices canceled for
reasons other than nonpayment of premiums.
The commissioner shall establish, in such rules, methods of
allocating investment and other income among capital gains, loss
reserves, unearned premiums and other assets, if an insurer does not separately account for and allocate such income.
Any insurer who fails to submit any and all such information
to the commissioner, as required by this subsection, in accordance
with the regulations promulgated hereunder, shall be fined ten
thousand dollars for each of the first five such failures per year
and shall be fined one hundred thousand dollars for the sixth and
each subsequent such failure. per year
(c) Beginning in the year one thousand nine hundred
eighty-six, the commissioner shall report annually, during the
month of November, to the joint standing committee on the judiciary
the following information pertaining to each insurer providing five
percent or more of the malpractice insurance coverage in this
state:
(1) The loss experience within the state during the preceding
calendar year;
(2) The rules, rates and rating plans in effect on the date of
such report;
(3) The investment portfolio, including reserves, and the
annual rate of return thereon; and
(4) The information submitted to the commissioner pursuant to the regulations promulgated by authority of subsection (b) of this
section.
§33-20B-8. Insurers required to report results of civil actions
against physicians or podiatrists; penalties for
failure to report; notice and hearing.
(a) Every insurer issuing, or issuing for delivery in this
state, a professional liability policy or providing professional
liability insurance to a physician, osteopathic physician or
surgeon, podiatrist, or chiropractor, hospital, medical clinic,
health maintenance organization, professional limited liability
company, medical corporation, or partnership in this state, shall
submit to the commissioner, within thirty sixty days from the date
of entry of any judgment or dismissal without payment, or the date
a release is executed in connection with a settlement, or the date
a file is closed on of a civil action or any claim involving the
insured, the following information:
(1) The date of any judgment, dismissal, or settlement;
(2) Whether any appeal has been taken on the judgment and, if
so, by which party;
(3) The amount of any settlement or judgment against the
insured; and
(4) The amount of expenses associated with defense of any
claim;
(5) Whether allegations were made on behalf of the claimant in
connection with any claim that the insurer failed to negotiate in
good faith or had engaged in unfair claims settlement practices,
and, if so, how such allegations were resolved;
(6) Whether the claim was the subject of mediation;
(7) Whether any settlement of a claim was made in a lump sum
payment, a structured settlement, or a combination of the two;
(8) A description of any additional consideration given in
connection with a settlement, such as forgiveness of debt by health
care providers;
(9) A description of any special damages alleged in connection
with any claim;
(10) Whether a loss of consortium claim has been asserted in
connection with any claim; and
(11) Any such other information as the commissioner may
require.
For purposes of this section, "claim" means a third party
request for indemnification. Further, for purposes of this section "closed claim" means a claim that is resolved without civil action
on the basis of expiration of the statute of limitations, notice of
the claimant or counsel that the claim is not to be pursued, denial
of coverage, or closure of the file.
(b) Any additional resolution, including appellate decision or
other subsequent action, shall necessitate a supplemental report to
the commissioner, to be designated as such.
(c) The West Virginia insurance guaranty association created
pursuant to article twenty-six of this chapter, the state board of
risk and insurance management created pursuant to article twelve,
chapter twenty-nine of this code, the preferred and high risk
medical liability programs created pursuant to article twelve-b,
chapter twenty-nine of this code, and any physician, osteopathic
physician or surgeon, podiatrist, chiropractor, hospital, medical
clinic, health maintenance organization, professional limited
liability company, medical corporation, or partnership making
payment for any portion of a medical liability claim outside of
insurance, are subject to the reporting requirements of subsection
(a) of this section.
(b) (d) Any insurer person, partnership, corporation, association, insurance company, professional society or other
organization that fails to report any information on a payment
required to be reported under this section shall be subject to a
civil money penalty to be imposed by the insurance commissioner.
Upon a determination of the commissioner that there is probable
cause to believe that any person, partnership, corporation,
association, insurance company, professional society or other
organization has failed or refused to make a report required by
this section, the commissioner shall provide written notice to the
alleged violator stating the nature of the alleged violation. Upon
written request of the alleged violator within thirty days of the
date of the commissioner's written notice, the commissioner shall
notify the alleged violator of and the time and place of a hearing
at which the alleged violator shall may appear to show good cause
why a civil penalty should not be imposed. The hearing shall be
conducted in accordance with the provisions of article five,
chapter twenty-nine-a of this code.
(c) (e) If after notice and hearing as provided in subsection
(b) herein, the commissioner determines that a violation of this
section has occurred, the commissioner shall assess a civil penalty of not less than one thousand dollars nor more than ten thousand
dollars against such violator per violation. Anyone so assessed
shall be notified of the assessment in writing and the notice shall
specify the reasons for the assessment. If the alleged violator
requests a hearing, as provided in subsection (d), the commissioner
may not make his or her determination of violation and assessment
until the conclusion of the hearing. The amount of penalty
collected shall be deposited in the general revenue fund.
(d) (f) If an insurer who has been found to have violated the
provisions of this section any violator fails to pay the amount of
the penalty assessment to the commissioner within thirty days after
issuance of notice of the same, the attorney general commissioner
may institute a civil action in the circuit court of Kanawha County
to recover the amount of the assessment. In any such civil action,
the court's review of the commissioner's action shall be conducted
in accordance with the provisions of section four, article five,
chapter twenty-nine-a of this code.
(e) (g) No person or entity shall may be held liable in any
civil action with respect to any report made pursuant to this
section, if such report was made without knowledge of any falsity of the information contained therein.
ARTICLE 20C. CANCELLATION AND NONRENEWAL OF MALPRACTICE INSURANCE
POLICIES.
§33-20C-2. Cancellation prohibited except for specified reasons;
notice.
No insurer once having issued or delivered a policy providing
malpractice insurance in this state shall may cancel such policy,
except for one or more of the following reasons:
(a) The named insured fails to discharge any of his
obligations to pay premiums for such policy or any installment
thereof within a reasonable time of the due date;
(b) The policy was obtained through material
misrepresentation;
(c) The insured violates any of the material terms and
conditions of the policy;
(d) The insured's experiences render him an increased risk;
(e) (d) The unavailability of reinsurance, upon sufficient
proof thereof being supplied to the commissioner.
Any purported cancellation of a policy providing malpractice
insurance attempted in contravention of this section shall be is
void.
§33-20C-2a. Grounds for nonrenewal.
(a) An insurer may decline to renew a policy or contract for
any of the reasons for which cancellation is permissible, and, in
addition, where the insured's experiences render him or her an
increased risk as evidenced by additional procedures or facilities
over and above those set forth in the application or two or more
indemnity payments paid to a third party claimant. An insured may
not be deemed to be an increased risk for purposes of nonrenewal
solely because of defense costs incurred defending the insured.
(b) To the extent that an insurer desires to unilaterally
change insured-specific terms, such as limits of liability,
deductible, deductible collateral, or similar terms, or in the case
of an insurer purchasing another insurer's book of business, which
it desires to rewrite in accordance with its own terms, or in the
case of a transfer of an insured from one insurer to an affiliated
insurer, or in the case of an insurer who makes an underwriting
determination to cease underwriting certain speciality-wide or
state-wide risks, such changes shall also be considered a
permissible nonrenewal and will require notice to the insured as
set forth in section five of this article. Approved changes to base rates, discounts, credits, debits or surcharges do not
constitute a nonrenewal pursuant to this article.
(c) An insurer, rehabilitator or receiver may also nonrenew in
the event of a rehabilitation, receivership, liquidation,
delinquency proceeding or other insolvency, and shall provide
notice of the nonrenewal in accordance with such court order or in
accordance with section four herein, whichever provides the shorter
notice period.
(d) Any nonrenewal of a policy providing malpractice insurance
attempted in contravention of this section is void.
§33-20C-3. Insurer to specify reasons for cancellation and
nonrenewal.
In every instance in which a policy or contract of malpractice
insurance is canceled or nonrenewed by the insurer, the insurer or
his its duly authorized agent shall cite within the written notice
of the action the allowable reason in section two of this article,
in the event of a cancellation, or section two-a of this article in
the event of a nonrenewal, for which such action was taken and
shall state with specificity the circumstances giving rise to the
allowable reason so cited. The notice of the action shall further
state that the insured has a right to request a hearing, pursuant to section five of this article, within thirty days.
§33-20C-4. Notice period for cancellation; ninety-day notice
required for nonrenewal.
(a) No insurer shall fail to renew a policy or contract
providing malpractice insurance unless written notice of such
nonrenewal is forwarded to the insured by certified mail, return
receipt requested, not less than sixty ninety days prior to the
expiration date of such policy.
(b) No insurer shall cancel a policy or contract providing
malpractice insurance during the term of such policy unless written
notice of such cancellation is forwarded to the insured by
certified mail, return receipt requested, not more than thirty days
after the reason for such cancellation, as provided in section two
of this article, arose or occurred or the insurer learned that it
arose or occurred and not less than thirty days prior to the
effective cancellation date.
§33-20C-5. Hearings and review.
Any insured aggrieved by the cancellation or nonrenewal of a
policy or contract providing malpractice insurance may request a
hearing before the commissioner, or his designee, within thirty
days of the receipt of any such notice. The hearing shall be conducted pursuant to section thirteen, article two of this
chapter. The policy shall remain in effect until entry of the
commissioner's order. Any party aggrieved by an order of the
commissioner may seek judicial review in the circuit court of the
county in which the insured resides in accordance with section
fourteen, article two of this chapter.
ARTICLE 20D. TAIL INSURANCE.
§33-20D-3. Tail insurance to be offered upon cancellation;
availability of amortization; minimum premium
rates; penalties for noncompliance.
(a) Upon cancellation, nonrenewal or termination of any claims
made professional malpractice insurance policy, the insurer shall
offer to the insured tail insurance coverage. If the decision to
cancel, nonrenew or terminate is unilateral on the part of the
insurer, the insured shall receive a minimum credit for any
reporting endorsement load previously paid by the insured toward
the cost thereof.
(b) Upon cancellation, nonrenewal or termination of any claims
made professional malpractice insurance policy, the insurer shall
offer to any professional licensed and practicing in the state of
West Virginia, or who, upon retirement, last practiced in the state of West Virginia, the opportunity to amortize the payment of
premiums for tail insurance over a period of not more than
thirty-six months, in quarterly payments, at a rate to be
established by the insurance commissioner: Provided, That
quarterly premiums paid pursuant to this subsection shall not be
less than seven hundred fifty dollars.
(c) The first quarterly payment shall be payable
contemporaneous with the issuance of the tail coverage policy.
Subsequent payments shall be due and payable quarterly thereafter.
Upon default in making a payment when due, tail coverage shall
terminate, and the unpaid portion of the amortized premium shall be
immediately due and payable in full. If the entire premium is not
then paid in full, the tail coverage shall not terminate, but the
limit of liability will be reduced, pro rata, based on the amount
of the premium paid for such coverage.
(d) Any insurer who fails to offer tail insurance, or in any
other way violates the provisions of this article, shall be
assessed a penalty equal to the amount of the premium due.
(e) The offer of tail insurance coverage required by this
section shall expire forty-five days after the cancellation, termination or other expiration of the claims made professional
malpractice insurance policy, unless sooner accepted, in writing,
by the insured.
NOTE: The purpose of this bill is to change the factors on
which modifications of rates for medical malpractice liability
policies will be considered, including the prohibition of payments
associated with bad faith or unfair claim settlement practice
allegations being used to justify a request for rate increase; to
disallow territorial grouping for rates and disallowing the use of
consent to rates; to extend the deem period from sixty to ninety
days on rate increase requests; to add entities subject to the
reporting requirements on civil actions and claims and adding to
the information required to be reported to the insurance
commission; making the hearing on alleged violations of the
reporting requirements optional rather than mandatory; to add a new
section to article 20-c of chapter thirty-three, to be designated
2-a, requiring grounds for nonrenewal of medical malpractice
insurance policies by an insurer; to remove as a cause for
cancellation the insured's increased risk based on experience; to
enlarge the notice period for nonrenewal from sixty to ninety days
and to allow a hearing to be requested by an insured upon
nonrenewal; to prohibit termination in full of tail coverage upon
default in payment for the coverage, but reduce pro rata the limit
of liability based on the amount of premium paid prior to default
and allow the insured to receive credit for any amount paid toward
tail coverage prior to cancellation, nonrenewal or termination if
such actions are unilateral on the part of the insurer.
Strike-throughs indicate language that would be stricken from
the present law, and underscoring indicates new language that would
be added.
§33-20C-2a is new; therefore, strike-throughs and underscoring
have been omitted.