Senate Bill No. 596
(By Senators Tomblin, Mr. President, and Kessler)
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[Introduced February 20, 2004; referred to the Committee on the
Judiciary.]
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A BILL to amend and reenact §29-12-5 of the code of West Virginia,
1931, as amended, relating to the powers and duties of the
board of directors of the state board of risk and insurance
management with respect to the purchase of or contracting for
insurance on state properties, activities and
responsibilities; clarifying the power of the board to
reasonably limit the amount, kind and types of insurance and
the conditions, limitations and exclusions of such insurance
covering state property, activities and responsibilities; and
giving the board of risk and insurance management general
powers to determine under what conditions an offer of property
or liability insurance coverage should be made to a political
subdivision, charitable or public service organization or an
emergency medical services agency.
Be it enacted by the Legislature of West Virginia:
That §29-12-5 of the code of West Virginia, 1931, as amended,
be amended and reenacted to read as follows:
ARTICLE 12. STATE INSURANCE.
§29-12-5. Powers and duties of board.
(a) (1) The board shall have general supervision and control
over the insurance of all state property, activities and
responsibilities, including, without limitation and in its
discretion as it deems necessary for the benefit of the insurance
program:
(i) The acquisition and cancellation thereof of state
insurance;
(ii) The determination of amount and the kind or kinds of
coverage; including, but not limited to,
(iii) The determination of the amount or limits for each kind
of coverage;
(iv) The determination of the conditions, limitations,
exclusions, endorsements, amendments and deductible forms of
insurance coverage;
(v) The inspections or examinations relating thereto, to the
coverage of state property, activities and responsibilities;
(vi) Reinsurance; and
(vii) Any and all matters, factors and considerations entering
into negotiations for advantageous rates on and coverage of all
such state property, activities and responsibilities.
(2) The board shall have the authority to employ an executive
director for an annual salary of seventy thousand dollars and such
other employees, including legal counsel, as may be necessary to
carry out its duties. The legal counsel may represent the board
before any judicial or administrative tribunal and perform such
other duties as may be requested by the board.
Any policy of insurance purchased or contracted for by the
board shall provide that the insurer shall be barred and estopped
from relying upon the constitutional immunity of the state of West
Virginia against claims or suits: Provided, That nothing herein
shall bar a state agency or state instrumentality from relying on
the constitutional immunity granted the state of West Virginia
against claims or suits arising from or out of any state property,
activity or responsibility not covered by a policy or policies of
insurance: Provided, however, That nothing herein shall bar the
insurer of political subdivisions from relying upon any statutory
immunity granted such political subdivisions against claims or
suits. The board may enter into any contracts necessary to the
execution of the powers granted to it by this article. It shall
endeavor to secure the maximum of reasonably broad protection
against loss, damage or liability to state property and on account
of state activities and responsibilities by proper, and adequate,
available and affordable insurance coverage and through the
introduction and employment of sound and accepted methods of protection and principles of insurance methods of protection and
principles of loss control and risk management. It is empowered
and directed to make a complete survey of all presently owned and
subsequently acquired state property subject to insurance coverage
by any form of insurance, which survey shall include and reflect
inspections, appraisals, exposures, fire hazards, construction, and
any other objectives or factors affecting or which might affect the
insurance protection and coverage required. It shall keep itself
currently informed on new and continuing state activities and
responsibilities within the insurance coverage herein contemplated.
The board shall work closely in cooperation with the state fire
marshal's office in applying the rules of that office insofar as
the appropriations and other factors peculiar to state property
will permit. The board is given power and authority to make rules
governing its functions and operations and the procurement of state
insurance.
The board is hereby authorized and empowered to negotiate and
effect settlement of any and all insurance claims arising on or
incident to losses of and damages to covered state properties,
activities and responsibilities hereunder and shall have authority
to execute and deliver proper releases of all such claims when
settled. The board may adopt rules and procedures for handling,
negotiating and settlement of all such claims. Any discussion or
consideration of the financial or personal information of an insured may be held by the board in executive session closed to the
public, notwithstanding the provisions of article nine-a, chapter
six of this code.
(b) If requested by a political subdivision, a charitable or
public service organization, or an emergency medical services
agency, the board is authorized may, but is not required to provide
property and liability insurance to insure their property,
activities and responsibilities. The board is authorized to enter
into any necessary contract of insurance contracts necessary to the
execution of the powers granted by this article or to further the
intent of this subsection article.
The property insurance provided by the board, pursuant to this
subsection, may also include insurance on property leased to or
loaned to the political subdivision, a charitable or public service
organization or an emergency medical services agency which is
required to be insured under a written agreement.
The cost of this insurance, as determined by the board, shall
be paid by the political subdivision, the charitable or public
service organization or the emergency medical services agency and
may include administrative expenses. For purposes of this section:
Provided, That if an emergency medical services agency is a
for-profit entity its claims history may not adversely affect other
participant's rates in the same class. All funds received by the
board (including, but not limited to, state agency premiums, mine subsidence premiums, and political subdivision premiums) shall be
deposited with the West Virginia investment management board with
the interest income and returns on investment a proper credit to
such property insurance trust fund or liability insurance trust
fund, as applicable.
"Political subdivision" as used in this subsection shall have
the same meaning as in section three, article twelve-a of this
chapter.
"Charitable" or public service organization as used in this
subsection means any hospital in this state which has been
certified as a critical access hospital by the federal centers for
medicare and medicaid upon the designation of the state office of
rural health policy, the office of community and rural health
services, the bureau for public health, or the department of health
and human resources, and any bona fide, not-for-profit, tax-exempt,
benevolent, educational, philanthropic, humane, patriotic, civic,
religious, eleemosynary, incorporated or unincorporated association
or organization or a rescue unit or other similar volunteer
community service organization or association, but does not include
any nonprofit association or organization, whether incorporated or
not, which is organized primarily for the purposes of influencing
legislation or supporting or promoting the campaign of any
candidate for public office.
"Emergency medical service agency" as used in this subsection shall have the same meaning as in section three, article four-c,
chapter sixteen of this code.
(c) (1) The board shall have general supervision and control
over the optional medical liability insurance programs providing
coverage to health care providers as authorized by the provisions
of article twelve-b of this chapter. The board is hereby granted
and may exercise all powers necessary or appropriate to carry out
and effectuate the purposes of this article.
(2) The board shall:
(A) Administer the preferred medical liability program and the
high risk medical liability program and exercise and perform other
powers, duties and functions specified in this article;
(B) Obtain and implement, at least annually, from an
independent outside source, such as a medical liability actuary or
a rating organization experienced with the medical liability line
of insurance, written rating plans for the preferred medical
liability program and high risk medical liability program on which
premiums shall be based;
(C) Prepare and annually review written underwriting criteria
for the preferred medical liability program and the high risk
medical liability program. The board may utilize review panels,
including, but not limited to, the same specialty review panels to
assist in establishing criteria;
(D) Prepare and publish, before each regular session of the Legislature, separate summaries for the preferred medical liability
program and high risk medical liability program activity during the
preceding fiscal year, each summary to be included in the board of
risk and insurance management audited financial statements as
"other financial information", and which shall include a balance
sheet, income statement and cash flow statement, an actuarial
opinion addressing adequacy of reserves, the highest and lowest
premiums assessed, the number of claims filed with the program by
provider type, the number of judgments and amounts paid from the
program, the number of settlements and amounts paid from the
program and the number of dismissals without payment;
(E) Determine and annually review the claims history debit or
surcharge for the high risk medical liability program;
(F) Determine and annually review the criteria for transfer
from the preferred medical liability program to the high risk
medical liability program;
(G) Determine and annually review the role of independent
agents, the amount of commission, if any, to be paid therefor, and
agent appointment criteria;
(H) Study and annually evaluate the operation of the preferred
medical liability program and the high risk medical liability
program, and make recommendations to the Legislature, as may be
appropriate, to ensure their viability, including, but not limited
to, recommendations for civil justice reform with an associated cost-benefit analysis, recommendations on the feasibility and
desirability of a plan which would require all health care
providers in the state to participate with an associated
cost-benefit analysis, recommendations on additional funding of
other state run insurance plans with an associated cost-benefit
analysis and recommendations on the desirability of ceasing to
offer a state plan with an associated analysis of a potential
transfer to the private sector with a cost-benefit analysis,
including impact on premiums;
(I) Establish a five-year financial plan to ensure an adequate
premium base to cover the long tail nature of the claims-made
coverage provided by the preferred medical liability program and
the high risk medical liability program. The plan shall be
designed to meet the program's estimated total financial
requirements, taking into account all revenues projected to be made
available to the program, and apportioning necessary costs
equitably among participating classes of health care providers.
For these purposes, the board shall:
(i) Retain the services of an impartial, professional actuary,
with demonstrated experience in analysis of large group malpractice
plans, to estimate the total financial requirements of the program
for each fiscal year and to review and render written professional
opinions as to financial plans proposed by the board. The actuary
shall also assist in the development of alternative financing options and perform any other services requested by the board or
the executive director. All reasonable fees and expenses for
actuarial services shall be paid by the board. Any financial plan
or modifications to a financial plan approved or proposed by the
board pursuant to this section shall be submitted to and reviewed
by the actuary and may not be finally approved and submitted to the
governor and to the Legislature without the actuary's written
professional opinion that the plan may be reasonably expected to
generate sufficient revenues to meet all estimated program and
administrative costs, including incurred but not reported claims,
for the fiscal year for which the plan is proposed. The actuary's
opinion for any fiscal year shall include a requirement for
establishment of a reserve fund;
(ii) Submit its final, approved five-year financial plan,
after obtaining the necessary actuary's opinion, to the governor
and to the Legislature no later than the first day of January
preceding the fiscal year. The financial plan for a fiscal year
becomes effective and shall be implemented by the executive
director on the first day of July of the fiscal year. In addition
to each final, approved financial plan required under this section,
the board shall also simultaneously submit an audited financial
statement based on generally accepted accounting practices (GAAP)
and which shall include allowances for incurred but not reported
claims: Provided, That the financial statement and the accrual-based financial plan restatement shall not affect the
approved financial plan. The provisions of chapter twenty-nine-a
of this code shall not apply to the preparation, approval and
implementation of the financial plans required by this section;
(iii) Submit to the governor and the Legislature a prospective
five-year financial plan beginning on the first day of January, two
thousand three, and every year thereafter, for the programs
established by the provisions of article twelve-b of this chapter.
Factors that the board shall consider include, but shall not be
limited to, the trends for the program and the industry; claims
history, number and category of participants in each program;
settlements and claims payments; and judicial results;
(iv) Obtain annually, certification from participants that
they have made a diligent search for comparable coverage in the
voluntary insurance market and have been unable to obtain the same;
(J) Meet on at least a quarterly basis to review
implementation of its current financial plan in light of the actual
experience of the medical liability programs established in article
twelve-b of this chapter. The board shall review actual costs
incurred, any revised cost estimates provided by the actuary,
expenditures and any other factors affecting the fiscal stability
of the plan and may make any additional modifications to the plan
necessary to ensure that the total financial requirements of these
programs for the current fiscal year are met;
(K) To analyze the benefit of and necessity for excess verdict
liability coverage;
(L) Consider purchasing reinsurance, in the amounts as it may
from time to time determine is appropriate, and the cost thereof
shall be considered to be an operating expense of the board;
(M) Make available to participants, optional extended
reporting coverage or tail coverage: Provided, That, at least five
working days prior to offering such coverage to a participant or
participants, the board shall notify the president of the Senate
and the speaker of the House of Delegates in writing of its
intention to do so, and such notice shall include the terms and
conditions of the coverage proposed;
(N) Review and approve, reject or modify rules that are
proposed by the executive director to implement, clarify or explain
administration of the preferred medical liability program and the
high risk medical liability program. Notwithstanding any
provisions in this code to the contrary, rules promulgated pursuant
to this paragraph are not subject to the provisions of sections
nine through sixteen, article three, chapter twenty-nine-a of this
code. The board shall comply with the remaining provisions of
article three and shall hold hearings or receive public comments
before promulgating any proposed rule filed with the secretary of
state: Provided, That the initial rules proposed by the executive
director and promulgated by the board shall become effective upon approval by the board notwithstanding any provision of this code;
(O) Enter into settlements and structured settlement
agreements whenever appropriate. The policy may not require as a
condition precedent to settlement or compromise of any claim the
consent or acquiescence of the policy holder. The board may own or
assign any annuity purchased by the board to a company licensed to
do business in the state;
(P) Refuse to provide insurance coverage for individual
physicians whose prior loss experience or current professional
training and capability are such that the physician represents an
unacceptable risk of loss if coverage is provided;
(Q) Terminate coverage for nonpayment of premiums upon written
notice of the termination forwarded to the health care provider not
less than thirty days prior to termination of coverage;
(R) Assign coverage or transfer insurance obligations and/or
risks of existing or in-force contracts of insurance to a third
party medical professional liability insurance carrier with the
comparable coverage conditions as determined by the board. Any
transfer of obligation or risk shall effect a novation of the
transferred contract of insurance and if the terms of the
assumption reinsurance agreement extinguish all liability of the
board and the state of West Virginia such extinguishment shall be
absolute as to any and all parties; and
(S) Meet and consult with and consider recommendations from the medical malpractice advisory panel established by the
provisions of article twelve-b of this chapter.
(d) If, after the first day of September, two thousand two,
the board has assigned coverages or transferred all insurance
obligations and/or risks of existing or in-force contracts of
insurance to a third party medical professional liability insurance
carrier, and the board otherwise has no covered participants, then
the board shall not thereafter offer or provide professional
liability insurance to any health care provider pursuant to the
provisions of subsection (c) of this section or the provisions of
article twelve-b of this chapter unless the Legislature adopts a
concurrent resolution authorizing the board to reestablish medical
liability insurance programs.
NOTE: The purpose of this bill is to provide for the duties
of the state board of risk and insurance management with respect to
the purchase of or contracting for insurance for state properties,
activities, and responsibilities and for property or liability
insurance for political subdivisions, charitable or public service
agencies, or emergency medical services agencies.
Strike-throughs indicate language that would be stricken from
the present law, and underscoring indicates new language that would
be added.