ENROLLED
Senate Bill No. 504
(By Senators Minard and Kessler)
____________
[Passed April 14, 2001; in effect ninety days from passage.]
____________
AN ACT to repeal sections four and twenty, article one, chapter
thirty-three of the code of West Virginia, one thousand nine
hundred thirty-one, as amended; to repeal sections eighteen,
nineteen, twenty, twenty-one, twenty-two, twenty-three,
twenty-four, twenty-five, twenty-six, twenty-seven,
twenty-eight, twenty-nine, thirty, thirty-one and thirty-two,
article three of said chapter; to amend and reenact section
one of said article; and to further amend said chapter by
adding thereto a new article, designated article forty-three,
all relating to the remedies available to West Virginia
residents harmed by unauthorized insurers; defining the
unlawful transaction of insurance; establishing the method for
service of process on unauthorized insurers; providing for injunctive relief; providing for administrative relief;
providing for civil relief; including payment of interest,
restitution and punitive damages; establishing criminal
penalties; bond requirements; requirements for proof of
federal regulation; establishing procedures for collection and
distribution of restitution to West Virginia residents harmed
by unauthorized insurers; procedure for enforcement of foreign
decrees; and exemptions.
Be it enacted by the Legislature of West Virginia:
That sections four and twenty, article one, chapter
thirty-three of the code of West Virginia, one thousand nine
hundred thirty-one, as amended, be repealed; that sections
eighteen, nineteen, twenty, twenty-one, twenty-two, twenty-three,
twenty-four, twenty-five, twenty-six, twenty-seven, twenty-eight,
twenty-nine, thirty, thirty-one and thirty-two, article three of
said chapter be repealed; that section one of said article be
amended and reenacted; and that said chapter be further amended by
adding thereto a new article, designated article forty-three, all
to read as follows:
ARTICLE 3. LICENSING, FEES AND TAXATION OF INSURERS.
§33-3-1. License required.
(a) No person may act as an insurer and no insurer may transact insurance in West Virginia except as authorized by a valid
license issued by the commissioner, except as to the transactions
as are expressly otherwise provided for in this chapter.
(b) No license may be required for an insurer, formerly
holding a valid license, to enable it to investigate and settle
losses under its policies lawfully written in West Virginia while
the license was in effect, or to liquidate the assets and
liabilities of the insurer as may have resulted from its former
authorized operations in West Virginia: Provided, That nothing
herein allows an insurer to issue new policies or renew policies of
insurance or collect premiums on those policies unless the insurer
is authorized by a valid license issued by the commissioner, except
as to the transactions that are otherwise provided for in this
chapter.
(c) An insurer not transacting new insurance business in West
Virginia but collecting premiums on and servicing of policies in
force as to residents of or risks located in West Virginia, and
where the policies were originally issued on nonresidents of or
risks located outside of this state, is transacting insurance in
West Virginia for the purpose of premium and annuity tax
requirements but is not required to have a license therefor.
(d) A domestic insurer or a foreign insurer from offices or by personnel or facilities located in this state may not solicit
insurance applications or otherwise transact insurance in another
state or country unless it holds a subsisting license granted to it
by the commissioner authorizing it to transact the same kind or
kinds of insurance in this state.
(e) Any officer, director, agent, representative or employee
of any insurer who willfully authorizes, negotiates, makes or
issues any insurance contract in violation of this section shall be
subject to the provisions set forth in article forty-three of this
chapter.
ARTICLE 43. UNAUTHORIZED INSURERS ACT.
§33-43-1. Short title.
This article may be cited as the "Unauthorized Insurers Act".
§33-43-2. Purpose of enactment of provisions regarding
unauthorized insurers.
The purpose of this article is to subject certain persons and
insurers to the jurisdiction of the commissioner and to the courts
of this state in suits by or on behalf of the state. The
Legislature declares that it is concerned with the protection of
residents of this state against unscrupulous acts by insurers not
authorized to transact an insurance business in this state. It is
the intent of the Legislature to maintain fair and honest insurance markets, to protect authorized insurers which are subject to
regulation from unfair competition by unauthorized insurers, and to
protect against the evasion of the insurance regulatory laws of
this state. The Legislature declares that it is a subject of
concern that certain insurers, while not licensed to transact
insurance in this state, are soliciting the sale of insurance and
selling insurance to residents of this state, thus presenting the
insurance commissioner with the problem of resorting to courts of
foreign jurisdictions for the purpose of enforcing the insurance
laws of this state for the protection of our citizens. The
Legislature declares that it is also a subject of concern that many
residents of this state hold policies of insurance issued or
delivered in this state by insurers not licensed to transact
insurance in this state, thus presenting to the residents the often
insurmountable obstacle of resorting to distant fora for the
purpose of asserting legal rights under these policies. In
furtherance of the state interest, the Legislature herein provides
a method of substituted service of process upon the insurers and
declares that in so doing it exercises its powers to protect its
residents and to define, for the purpose of this article, what
constitutes transacting insurance in this state.
§33-43-3. Definitions.
(a) "Administrator" or "third-party administrator" means, as
used in this article unless otherwise indicated, a person who for
residents of this state, or for residents of another jurisdiction
from a place of business in this state, performs administrative
functions including claims administration or payment, marketing,
premium accounting, premium billing, coverage verification,
underwriting authority or certificate issuance in regard to
insurance.
(b) "Assist" means to aid, counsel, represent, opine,
administer or, in any capacity, to help another.
(c) "Commissioner" means the insurance commissioner for the
state of West Virginia.
(d) "Effectuating" means to bring about; to effect.
(e) "Foreign decree" means any decree or order of a court
located in a reciprocal state or other state including a court of
the United States located therein, against any insurer incorporated
or authorized to do business in this state or against any
unauthorized insurer with its principal place of business located
in this state.
(f) "Insurance" is a contract whereby one undertakes to
indemnify another or to pay a specified amount upon determinable
contingencies.
(g) "Insured" means, as used in this article unless otherwise
indicated, any individual, member, named insured, beneficiary,
subscriber or group who has obtained insurance from an unauthorized
insurer or who is insured under a contract of insurance obtained
from an unauthorized insurer.
(h) "Insurer" means, as used in this article unless otherwise
indicated, any person engaged in the transaction of insurance.
(i) "Negotiation" means, as used in this article unless
otherwise indicated, the deliberation, discussion or conference
upon the terms of a proposed agreement; it is that which passes
between parties or their agents in the course of or incident to the
making of a contract; to conduct communications or conferences with
a view to reaching an agreement.
(j) "Person" means, as used in this article unless otherwise
indicated, any natural person or entity, including, but not limited
to, individuals, partnerships, associations, bona fide
associations, trusts, trustees, companies, insurers, unauthorized
insurers, organizations, societies, reciprocals, syndicates,
administrators, third-party administrators, agents, producers,
advertisers, customer service representatives, promoters, officers,
directors, lawyers, incorporators or any other legal entity.
(k) "Principal place of business" means the single state in which the policy for the direction, control and coordination of the
operations of the insurer as a whole are primarily exercised, with
consideration being given to, but not limited to:
(1) The state in which the primary executive and
administrative headquarters of the entity is located;
(2) The state in which the principal office of the chief
executive officer of the entity is located;
(3) The state in which the board of directors (or similar
governing body) of the entity conducts the majority of its
meetings;
(4) The state in which the executive or management committee
of the board of directors (or similar governing body) of the entity
conducts the majority of its meetings; and
(5) The state from which the management of the overall
operations of the entity is directed.
(l) "Procure" means to cause a thing to be done, to instigate,
contrive, bring about, effect or cause; to persuade, induce or
prevail upon; it is the act of obtaining, attainment or
acquisition.
(m) "Qualified party" means a state regulatory agency acting
in its capacity to enforce the insurance laws of its state.
(n) "Reciprocal state" means any state or territory of the United States the laws of which contain procedures substantially
similar to those specified in this section for the enforcement of
decrees or orders issued by courts located in the states or
territories of the United States, against any insurer incorporated
or authorized to do business in such state or territory or any
unauthorized insurer with its principal place of business in such
state or territory.
(o) "Solicitation" and "solicit" mean attempting to sell
insurance or asking or urging a person to apply for a particular
kind of insurance from a particular company, including without
limitation, providing rate comparisons of various insurers based on
information provided by the person.
(p) "Transaction of insurance" means that for purposes of this
article, any of the following acts in this state effected by mail
or otherwise is considered to constitute the transaction of an
insurance business in or from this state:
(1) The making of or proposing to make an insurance contract;
(2) The making of or proposing to make, as guarantor or
surety, any contract of guaranty or suretyship as a vocation and
not merely incidental to any other legitimate business or activity
of the guarantor or surety;
(3) The taking or receiving of an application for insurance;
(4) The receiving or collection of any premium, commission,
membership fees, assessments, dues or other consideration required
for obtaining or renewing insurance;
(5) The issuance or delivery in this state of certificates or
contacts of insurance to residents of this state or to persons
authorized to do business in this state;
(6) The solicitation, negotiation, procurement or effectuation
of insurance or renewals thereof;
(7) The dissemination of information as to coverage or rates,
or forwarding of applications, or delivery of policies or
contracts, or inspection of risks, the fixing of rates or
investigation or adjustment of claims or losses or the transaction
of matters subsequent to effectuation of the contract and arising
out of it, or any other manner of representing or assisting a
person or insurer in the transaction of insurance with respect to
any risk or exposure located or to be performed in this state;
(8) The transaction of any kind of insurance business
specifically recognized as transacting an insurance business within
the meaning of the statutes relating to insurance;
(9) The offering of insurance or the transacting of insurance
business; or
(10) Offering an agreement or contract which purports to alter, amend or void coverage of an insurance contract.
(q) "Unauthorized insurer" means a person or insurer engaged
in the transaction of insurance without a license in force pursuant
to the laws of this state unless exempted by the insurance laws of
this state, or any person assisting an unauthorized insurer.
§33-43-4. Unlawful transaction of insurance.
(a) It is unlawful for any person to engage in any act which
constitutes the transaction of insurance under the provisions of
this article unless authorized by a license in force pursuant to
the laws of this state, or unless exempted by the insurance laws of
this state. Any person or insurer engaged in any act which
constitutes the unauthorized transaction of insurance shall be
subject to the provisions contained in chapter thirty-three of the
code and the provisions and penalties set forth in this article.
(b) It is unlawful for any person to, directly or indirectly,
represent, aid, counsel, opine, administer, assist in any manner or
capacity or otherwise act as an agent for or on behalf of an
unauthorized insurer in the unauthorized transaction of insurance.
Any person who represents, aids or assists, in any manner or
capacity, an unauthorized insurer in violation of this article
shall be subject to the provisions and penalties set forth in this
article.
(c) An unauthorized insurer shall be bound by the terms of the
insurance contract, certificate or agreement as if the contract,
certificate or agreement were legally procured under the insurance
laws of this state.
(d) This article does not apply to: (i) Any transaction for
which a license is not required pursuant to section one, article
three of this code, including the lawful transaction of surplus
lines insurance and reinsurance by insurers; (ii) transactions in
this state relative to a policy issued or to be issued outside this
state involving insurance on cargo vessels, their craft or hulls,
their cargoes, marine builder's risk, commercial marine protection
and indemnity or other risk, including strikes and war risks
commonly insured under ocean marine forms of policy; (iii)
transactions in this state involving group life insurance, group
accident and sickness insurance or group annuities providing
coverage under policies that are recognized under articles fourteen
and sixteen, respectively, of this chapter where: (1) The master
policy of such groups was lawfully issued and delivered in and
pursuant to the laws of a state in which the insurer was authorized
to do an insurance business, to a group organized for purposes
other than the procurement of insurance, and where the policyholder
is domiciled or otherwise has a bona fide situs; and (2) except for group annuities, the insurer complies with section thirty-five,
article six of this chapter. The commissioner may require the
insurer which has issued such master policy to submit such
information as the commissioner requires in order to determine if
probable cause exists to convene a hearing to determine whether the
total charges for the insurance to the persons insured are
reasonable in relation to the benefits provided under such policy.
§33-43-5. Service of process on unauthorized insurers.
(a) Any act of transacting insurance by any unauthorized
insurer is equivalent to and constitutes an irrevocable appointment
by an unauthorized insurer, binding upon him or her, his or her
executor or administrator, or successor in interest, of the
secretary of state or his or her successor in office, to be the
true and lawful attorney of an unauthorized insurer upon whom may
be served all lawful process in any action, suit or proceeding in
any court by the commissioner, the state or an insured and upon
whom may be served any notice, order, pleading or process in any
proceeding before the commissioner and which arises out of
transacting an insurance business in this state by such an insurer.
Any act of transacting insurance in this state by any unauthorized
insurer or any person acting in furtherance of an unauthorized
insurer's business, signifies the agreement of the person or unauthorized insurer that any lawful process in such a court
action, suit or proceeding or any notice, order, pleading or
process in an administrative proceeding before the commissioner so
served is of the same legal force and validity as personal service
or process in this state upon an insurer.
(b) Service of process in an action must be made by delivering
to and leaving with the secretary of state, or some person in
apparent charge of his or her office, two copies thereof and by
payment to the secretary of state the fee prescribed by section
two, article one, chapter fifty-nine of this code together with any
other fees prescribed by law. Service upon the secretary of state
as attorney is service upon the principal.
(c) Upon receipt by the secretary of state of two copies of
the process to be served, and the payment of all relevant fees, the
secretary of state shall cause the process to be served in the
manner prescribed in subsection (d) of this section.
(d) The secretary of state shall forward a copy of the process
by registered or certified mail to the unauthorized insurer or any
person acting in furtherance of an unauthorized insurer's business
at its last-known principal place of business and shall keep a
record of all process so served upon the person or unauthorized
insurer. Service of process is sufficient, provided notice of service and a copy of the process are sent within ten days
thereafter by or on behalf of the moving party to the responding
party, at its last-known principal place of business by registered
or certified mail with return receipt requested. The moving party
shall file with the clerk of the court in which the action is
pending, or with the judge or magistrate of the court in case there
be no clerk, or in the official records of the commissioner if an
administrative proceeding before the commissioner, an affidavit of
compliance herewith, a copy of the process and either a return
receipt purporting to be signed by the defendant or responding
party or a person qualified to receive its registered or certified
mail in accordance with the rules and customs of the post-office
department; or, if acceptance was refused by the defendant or
responding party or an agent thereof, the original envelope bearing
a notation by the postal authorities that receipt was refused.
Service of process so made is considered to have been made within
the territorial jurisdiction of any court in this state.
(e) In addition to the manner provided in subsection (d) of
this section, service of process in any action, suit or
administrative proceeding shall be valid if served upon any person
who engages in any act which constitutes the transaction of
unauthorized insurance: Provided, That notice of service and a copy of process are sent within ten days thereafter, by or on
behalf of the moving party to the responding party at the
last-known principal place of business of the responding party, by
registered or certified mail with return receipt requested. The
moving party shall file with the clerk of the court in which the
action is pending, or with the judge or magistrate of the court in
case there be no clerk, or in the official records of the
commissioner if an administrative proceeding before the
commissioner, an affidavit of compliance herewith, a copy of the
process and either a return receipt purporting to be signed by the
responding party, or a person qualified to receive its registered
or certified mail in accordance with the rules and customs of the
post-office department; or, if acceptance was refused by the
responding party or an agent thereof, the original envelope bearing
a notation by the postal authorities that receipt was refused. In
the instance that service of process is refused by the responding
party or an agent thereof, service shall be considered sufficient
to bestow jurisdiction on the tribunal in which the action was
filed.
(f) The papers referred to in subsections (d) and (e) of this
section shall be filed within thirty days after the return receipt
or other official proof of delivery or the original envelope bearing a notation of refusal, as the case may be, is received by
the moving party. Service of process shall be complete ten days
after the process and the accompanying papers are filed in
accordance with this section.
(g) Nothing contained in this section shall limit or abridge
the right to serve any process, notice or demand upon any
unauthorized insurer or upon any person engaged in the transaction
of insurance in any other manner now or hereafter permitted by law.
(h) For the purposes of this section, "process" in an action
in a court includes only a summons or the initial documents served
in an action. The secretary of state is not required to serve any
documents in an action after the initial service of process.
§33-43-6. Injunctive relief.
(a) Whenever the commissioner believes, from evidence
satisfactory to him or her, that any insurer is violating or is
about to violate the provisions of this article, in addition to the
administrative remedies available in this article, the commissioner
may cause a complaint to be filed in any appropriate circuit court
of this state seeking to enjoin and restrain the insurer from
continuing the violation or engaging therein or doing any act in
furtherance thereof.
(b) The circuit court shall have jurisdiction of the proceeding and have the power to make and enter an order or
judgment awarding preliminary or final injunctive relief as in its
judgment is proper. The commissioner may elect to file a complaint
in any circuit where transactions have occurred or in the circuit
court of Kanawha County.
§33-43-7. Administrative relief.
(a) Any person engaged in any act which constitutes the
unauthorized transaction of insurance as set forth in this article
may, after notice and hearing pursuant to section thirteen, article
two of this chapter, be fined by the commissioner a sum not to
exceed twenty thousand dollars for each unauthorized act or
transaction of unauthorized insurance.
(b) Any person engaged in any act which constitutes the
unauthorized transaction of insurance as set forth in this article
may be assessed restitution by the insurance commissioner in an
amount sufficient to reimburse any and all insureds for the unpaid
claims, if, after notice and hearing pursuant to section thirteen,
article two of this chapter, the commissioner finds that the
unauthorized insurer has failed to pay claims of its insureds in
accordance with the terms of the contracts.
§33-43-8. Civil relief.
(a) No insurance contract entered into in violation of this article shall preclude the insured from enforcing his or her rights
under the contract in accordance with the terms and provisions of
the contract and the laws of this state against any unauthorized
insurer or any person assisting the unauthorized insurer to the
same degree those rights would have been enforceable had the
contract been lawfully procured.
(b) No insurance contract entered into in violation of this
article shall preclude a provider of health care services from
enforcing the rights of the insured under the contract in
accordance with the terms and provisions of the contract and the
laws of this state against any unauthorized insurer or any person
assisting the unauthorized insurer pursuant to an assignment of
rights executed between the insured and the health care provider.
(c) In an action against an unauthorized insurer upon a
contract of insurance issued or delivered to a resident of this
state or to a corporation authorized to do business in this state,
if the trier of fact finds by a preponderance of the evidence that
the unauthorized insurer has failed to make payment in accordance
with the terms of the contract, the trier of fact shall award to
the insured or the health care provider:
(1) Contract damages in accordance with the terms and
provisions of the contract and the laws of this state to the same degree those rights would have been enforceable had the contract
been lawfully procured;
(2) Simple interest at a rate of prime plus one percent on the
total amount awarded as restitution, accruing from the date payment
was due;
(3) If in addition to a finding that the unauthorized insurer
has failed to make payment in accordance with the terms of the
contract, the trier of fact finds by a preponderance of the
evidence that failure to make payment was without reasonable cause,
the trier of fact shall award the plaintiff a reasonable attorney
fee and include the fee in any judgment that may be rendered in the
action. The fee shall not exceed thirty-three percent of the
amount that the trier of fact finds the plaintiff is entitled to
recover against the unauthorized insurer;
(4) If in addition to a finding that the unauthorized insurer
has failed to make payment in accordance with the terms of the
contract, the trier of fact further finds that failure to make
payment was willful, wanton and malicious, the trier of fact may
award the plaintiff punitive damages in an amount that the trier of
fact finds the plaintiff is entitled to recover against the
insurer.
§33-43-9. Criminal penalties.
Any unauthorized insurer who violates the provisions of this
article is guilty of a felony and, upon conviction thereof, may be
fined not more than twenty thousand dollars per each unauthorized
act or transaction of unauthorized insurance or confined in the
state correctional facility not less than one nor more than five
years, or both fined and imprisoned.
§33-43-10. Defense of action or proceeding by unauthorized
insurer; bond requirements.
(a) Before any unauthorized insurer shall file or cause to be
filed any pleading in any action, suit or proceeding instituted
against it, or any notice, order, pleading or process in an
administrative proceeding before the commissioner instituted
against the insurer, the unauthorized insurer shall either:
(1) Deposit with the clerk of the court in which the action,
suit or proceeding is pending, or with the commissioner in an
administrative proceeding, cash or securities or file with the
clerk or the commissioner a bond with good and sufficient sureties,
to be approved by the court or the commissioner, in an amount to be
fixed by the court or commissioner sufficient to secure the payment
of any final judgment which may be rendered in the action or
administrative proceeding; or
(2) Deposit with the clerk of the court in which the action, suit or proceeding is pending, or with the commissioner in an
administrative proceeding, cash or securities or file with the
clerk or the commissioner a bond with good and sufficient sureties,
to be approved by the court or the commissioner, in an amount
required to procure a license to transact insurance in this state
pursuant to the provisions contained within article three of this
chapter.
(b) The court or the commissioner in any action, suit or
proceeding in which service is made in the manner provided in
subsection (d) or (e), section five of this article, may, in its,
his or her respective discretion, order the postponement as may be
necessary to afford the responding party reasonable opportunity to
comply with the provisions of subsection (a) of this section and
thereafter to defend the action or proceeding.
§33-43-11. Person providing specified coverage; proof of
regulation by a federal government agency.
(a) Any person who transacts insurance, transacts an insurance
business or provides insurance coverage in this state for the cost
of:
(1) Medical care;
(2) Surgery;
(3) Chiropractic;
(4) Physical therapy;
(5) Speech pathology;
(6) Audiology;
(7) Professional care of mental health;
(8) Dental care;
(9) Hospital care; or
(10) Ophthalmic care, whether the coverage provides for direct
payment, reimbursement or any other method of payment, is subject
to regulation by the commissioner and to the provisions of this
code unless he or she shows that while transacting insurance, or
transacting an insurance business or providing the coverage he or
she is subject to regulation by an agency of the federal government.
(b) A person may show that he or she is subject to regulation
by an agency of the federal government by providing the
commissioner with an advisory opinion issued pursuant to ERISA
Procedure 76-1, 41 Federal Register 36281 (Aug. 27, 1976).
§33-43-12. Collection, maintenance and distribution of restitution
to insureds.
All restitution ordered by the commissioner pursuant to the
authority set forth in section seven of this article and received
from unauthorized insurers shall be collected by the commissioner
and distributed to the affected insureds on a pro rata basis. The commissioner shall maintain a record reflecting the names of each
of the insureds for which the restitution was ordered, the total
amount of the unpaid claims for each of the insureds to which the
restitution will be paid and the actual amount of restitution to be
paid to the insured. The commissioner shall likewise maintain an
account into which restitution received shall be placed until it is
distributed to the affected insureds.
§33-43-13. Enforcement of foreign decrees.
(a) The commissioner may proceed in the courts of this state,
any reciprocal state or any other state to enforce an order or
decision in any court proceeding or in any administrative
proceeding before the commissioner.
(b) The commissioner shall determine which states and
territories qualify as reciprocal states.
(c) A certified copy of any foreign decree may be filed in the
office of the clerk of any circuit court of this state. The clerk
of the circuit court, upon verifying with the commissioner that the
decree or order qualified as a foreign decree, shall treat the
foreign decree in the same manner as a decree of a circuit court of
this state. A foreign decree, so filed, has the same effect and is
considered as a decree of a circuit court of this state, and is
subject to the same procedures, defenses and proceedings for reopening, vacating or staying a decree of a circuit court of this
state and may be enforced or satisfied in like manner.
(d) At the time of the filing of the foreign decree, counsel
for the commissioner shall make and file with the clerk of the
circuit court an affidavit setting forth the name and last known
post-office address of the defendant. Promptly upon the filing of
the foreign decree and the affidavit, the clerk of the circuit
court shall mail notice of the filing of the foreign decree to the
defendant at the address given and to the commissioner and shall
make a note of the mailing in the docket. In addition, counsel for
the commissioner may mail a notice of the filing of the foreign
decree to the defendant and to the commissioner and may file proof
of mailing with the clerk of the circuit court. Lack of mailing
notice of filing by the clerk of the circuit court may not affect
the enforcement proceedings if proof of mailing by the counsel for
the commissioner has been filed. No execution or other process for
enforcement of a foreign decree filing under this section may issue
until thirty days after the date the decree is filed.
(e) If the defendant shows the circuit court:
(1) That an appeal from the foreign decree is pending or will
be taken, or that a stay of execution has been granted, the court
shall stay enforcement of the foreign decree until the appeal is concluded, the time for appeal expires or the stay of execution
expires or is vacated upon proof that the defendant has furnished
the security for the satisfaction of the decree required by the
state in which it was rendered.
(2) Any ground upon which enforcement of a decree of any
circuit court of this state would be stayed, the court may stay
enforcement of the foreign decree.
(f) Any person filing a foreign decree shall pay to the clerk
of the circuit court such fees as are required by law.