West Virginia Laws, Rules, and Regulations (ALL lines and PROPERTY insurance) (CH.5)

Foreign

• an insurance company that is incorporated in another state or territorial possession. •WV to FL

Insurable Interests in Property

•Any actual, lawful, and substantial economic interest in the safety or preservation of the subject of insurance free from loss, destruction, or pecuniary damage or impairment. •Insurable interest must exist at the time of the loss. •3 requirements: -legitimate financial interest - no potential for gain -potential for loss

Alien

•Insurance company that is incorporated outside the USA.

Stock companies

•Owned by the stockholders who provide the capital necessary to establish and operate the insurance company, and share profits or losses. •Nonparticipating policies: In which the policy owners do not share in profits or losses.

Valued Policy Law

•WV law requires that all settlement on all property policy total losses be settled for the full amount of the policy limits. •If loss isn't total, insurer is obligated to pay the amount of the loss up to policy limits. •This DOESN'T apply when there are 2 or more insurers covering the same loss.

Homeowners Insurance (Declination, Termination and Disclosure)

•if insurer chooses to decline any real or personal property insurance, the insurer must provide a written explanation to the insured. If insurer is cancelling coverage, the notice must include the following: -be in writing -delivered or sent by first class mail to named insured at last known address -include exact date of termination -include specific reasons for the action -in the event of nonrenewal, be sent at least 30 days prior to the end of policy period. •Insurers may not nonrenew policies that have been in force for 4 years of longer except for the same reasons to cancel a policy. Permissible reasons to cancellation of policies covering real or personal property: -nonpayment of premium -conviction of the insured for a crime -fraud or material misrepresentation -willful or reckless acts which increase the hazard -real property taxes delinquent for more than 2 years -substantial breach of the provisions of the policy. Reasons that may not be used for terminations or declination of property insurance: -race, religion, nationality, ethnic group, age, sex, or marital status. -legal occupation -age or location of residence

Certificate of Authority

•must be obtained before transacting insurance within the state.

Unfair claims methods and practices

•the following are defined as unfair claim settlement practices in the business of insurance: -misrepresenting material facts -failing to acknowledge and act open communications concerning policy claims -failing to affirm or deny coverage of claims within a reasonable time -failing to notify the claimant and the services provider whether claim has been accepted or denied *within 15 days from filing the proof of loss* -failing to begin investigation of any claim submitted by an insured *within 15 working days of receipt* -failing to provide a notice to the claimant *within 15 days* -failing to pay a claim in full *within 90 calendar days* •When a claim involves a medial professional liability claim, the insurer must make a written settlement offer or deny the claim within 10 working days after completing an investigation.

Domestic

• an insurance company that is incorporated in this state. • The company's home office is the same state in which it was formed - the company is domicile. •WV to WV

Qualifications Producer

•Commissioner will only issue, renew, or permit a license to a person who meets the following: - 18 years of age -not committed any act for denial, suspension, or revocation. -completed prelicensing course -successfully passed the examination -found trustworthy

Company Requirements

•insurer's cannot accept business from, or pay commissions to individual insurance producer who do not hold appointments as individual insurance producers for the insurer.

Payment of commissions

•the entire commission is payable on any insurance policy must be paid directly to the licensed producer who counter signs the policy. •It is illegal for any insurer or producer to pay directly or indirectly any commission (except a few exceptions)

Surplus Lines // Nonadmitted Insurance Act

•type of coverage that isn't readily available on admitted market. •Coverages are marketed through Nonadmitted insurers who specialize in offering insurance to the high-risk market. •Surplus lines insurers are not admitted, most states require they be on the state's "approved" list —————————- •Regulation regarding surplus lines is "The Nonadmitted Insurance Act". The term surplus lines is interchangeable with excess lines. •Surplus lines company is a Nonadmitted insurer. Coverage may be placed with surplus lines insurers only through properly licensed representatives.

Licensed and Unlicensed Companies

• any ensure conducting the business of insurance must hold a valid license issued by the insurance commissioners office. "Admitted insurer" means an insurer licensed to do insurance business in that state. •Nonadmitted means an insurer not licensed to do insurance in that state Transacting insurance includes the following: •Making or proposing to make an insurance contract •Making or proposing to make surety (bond) agreements. •Taking or receiving an application for insurance •Receiving or collecting premium, commissions or other considerations.

Fraud

• any person engaged in the business of insurance who has knowledge or a reasonable belief that fraud has been committed, must give the required information to the commissioner. • any person who suspects that a fraudulent insurance act has been committed must fill out a written report within 14 days of the act to the insurance fraud unit. The report needs to contain the following: -date of report -name, telephone and tax number of insurance company -policy claim number -insurance policy type. • if the report is filed by an individual and not an insurance company, the report must include the persons name, occupation and title, address and phone and fax numbers. Following information is required: -date of loss -location of loss -estimated value of claim for loss -whether claim was paid or not. The report should include a detailed description of the suspected fraudulent insurance act and any supporting documents, such as police reports, photographs, or falsified documents.

Unfair Trade Practices

• insurers and Insurance Producers may not engage in unfair methods of competition or unfair or deceptive acts or practice in the business of insurance. •the department may issue an order requiring the person to cease and desist from engaging in the method of competition, act, or predict for violation of insurance laws.

Misrepresentation

• it is illegal to issue publish, or circulate any illustration or sales material that is false, misleading or deceptive as to policy benefits or terms. •This refers to oral statements as well.

Admitted vs Nonadmitted

•Admitted or Authorized: Insurance company that has qualified and has received a Certificate of Authority to transact insurance in the state. •Nonadmitted or Nonauthorized: And insurance company that has not applied, or has applied and been denied, a certificate of authority and may not transact insurance

West Virginia Essential Insurance Coverage Act (FAIR PLAN)

•Basic property insurance for those unable to obtain it in the voluntary market. •Coverage is limited to losses by fire, lightning, riot, explosion, vehicle, smoke, hail, aircraft and wind. •FAIR PLAN offers coverage up to $200,000 for each private dwelling and up to $500,000 for each commercial property. Policies may be used for a 1 year term.

Examination of Records

•Commissioner has the authority to examine activities, operations, financial condition and affairs of all persons transacting insurance in WV. •Has authority to examine the affairs of any company as often as it seems appropriate. •Commissioner or an appointed examiner is required to visit each domestic insurance company and throughly examine its financial condition and methods of doing business at least once every 5 years. •Costs of examination are the responsibility of insurance company being examined. •Also required to examine every foreign/Alien insurance company licensed in the state every 5 years - but examinations DON'T need to be as detailed as for domestic insurers. •Any refusal to submit an examination is grounds for suspension, revocation, refusal or nonrenewal of any license or authority.

Mine Subsidence

•Coverage made available to all state residents for damage to structures caused by Mine Subsidence. •Any lateral or vertical movement, including collapse, resulting from the collapse of man made underground coal mines. DOESN'T INCLUDE LOSS BY: -earthquake -landslide -volcanic eruption -collapse of storm and sewer drains and rapid transit tunnels. •All property policies must include mine subsidence coverage with a superstar stated premium. Insured has the right to waive that coverage. •The deductible must be between $250-$500 and total insured vale cannot exceed $75,000. Amount of mine subsidence reinsurance cannot exceed amount of the fire insurance on the structure. •All insurers issuing mine subsidence insurance policies have subrogation rights.

Producer

•Individual appointed by an insurance company to solicit, negotiate, effect or counter sign insurance contracts on its behalf. •The producer is the agent of the INSURER, not the agent of the INSURED.

Coercion

•Intended to restrict fair trade or to create a monopoly. •Unfair trade practice in which an agent uses physical or mental force with the intent of inducing the applicant to purchase insurance.

Fingerprinting

•Since June 1st, 2015, all individuals applying for initial insurance license must submit fingerprints for a criminal history and a federal background checks. •Fingerprint results are valid for 30 days.

West Virginia Property & Casualty Insurance Guaranty Association

•The "phantom association" •nonprofit legal entity •Protects insureds against insolvent insurers •funded by member insurers •*pays up to specified limits* •You can't make this association a point of your sale when selling insurance products.

Licensing Purpose and Requirements

•WV insurance code describes the procedures for licensing of insurance producers. Written to simply improve efficiency, permits the use of new technology and reduces costs with using and renewing insurance licenses. •Person cannot sell, solicit or negotiate insurance in WV for any class unless person is licensed. Unlicensed people may not act as producers. •Officers, directors or employees of an insurer are exempt from the requirements of obtaining an insurance producer license, providing they receive no commission on policies written or sold.

False Advertisement

•advertisement cannot include any untrue, deceptive, or misleading statements that apply to the business of insurance or anyone who conducts it. •Prohibited to advertise or circulate any materials that are untrue, deceptive, or misleading. Misrepresenting includes: -terms, benefits, conditions, or advantages -any dividends to be received -financial condition of any person -the true purpose of an assignment or loan against a policy

Approval of Forms and Policies

•all policy forms, group insurance certificate forms, and application forms must be approved by the commissioner. •All policy forms must be filed for approval at least 60 days before their intended use. •Unless disapproved, forms are considered to be automatically approved after 60 days. Commissioner may disapprove for any following reasons: -violation of Code regulations -title contains misleading deceptive or ambiguous clauses -deceptive advertisement -unreasonable policy benefits -policy isn't broad enough to be in public interest

Appointment

•an insurance agent/producer cannot legally act as an agent of insurer unless he/she becomes an appointed agent of that insurer. •a producer who doesn't act as an agent of an authorized insurer DOES NOT need to become appointed. •To appoint an individual producer as its agent, the appointing insurer must file a notice of appointment within 15 days. •Commissioner has 30 days to verify the individual insurance producer is eligible for appointment. •Renewal appointment fees must be paid by midnight of May 31st •If producer is ineligible for appointment, commissioner must notify insurer within 5 days.

Comparative Negligence

•any action seeking damages for PI, PD, or wrongful death, recovery is predicted by principles of comparative negligence (comparative fault) and liability of each person who proximately caused the damages. •Comparative fault = the degree to which the fault of a person was a proximate cause of an alleged PI or death or damage to property.

Limitation of License

•any individual insurance producer may not act as a producer for an insurer unless he/she is appointed to do so. •The person who solicits the application for insurance is considered representative for INSURER, NOT INSURED. •the solicitor must report ALL business through their 1 producer. •Bo producer may apply for licenses for more than / solicitors.

Rebating

•any inducement offered to the insured in sale of insurance products that is not specified in the policy. •Both offer and acceptance of a rebate are illegal. Rebates may include: -rebates of premium -special favors or services -advantages in dividends -stocks, bonds, securities, and other dividends.

Nonrenewal

•any licensee found to be in violation of the terms in their license, such as writing controlled business or failing to complete required continuing education requirements, commissioner will be notified of the refusal to renew the license. •Licensees have 10 days to demand in writing a hearing about nonrenewal. This hearing must be held within 45 days.

Approval of Rates and Forms

•policy forms, riders, endorsements or other forms attached to the policy must FIRST be submitted to the commissioner's office for approval before use. •Insurer may begin using the form 60 days from the date of filing. •Insurers are required to file manuals of classifications and territorial rating plans with the commissioner prior to use. There is a 60 day waiting period before the filing will become effective, unless commissioner approves the filing before the end of the 60 days period.

Penalties

•commissioner may order the following penalties: -up to $1,000 for each unintentional violation, aggregate limit of $10,000 for all related acts -up to $5,000 for each willful violation, aggregate penalty of $100,000 for all related acts within 6 month period. -up to $10,000 for violations of unfair claim settlement regulations up to $250,000 of the violations occur frequently enough. •Revocation or suspension of license. • it's ensure violates licensing or other insurance laws in the state, the commissioner may pose a fun up to $10,000, revoke or suspend the insurers license or both •If insurer refuses to produce its financial accounts, records and files when required, within 30 days the commissioner may suspend or revoke the insurer's license.

Revocation and Suspension

•commissioner may revoke or suspend the license of any licensee in the state if after notice and hearing, commission determines licensed person has done the following: -violated any insurance law -misrepresented the terms -engaged in any pattern of unfair methods of competition -forged another person's name on an application -knowingly and willingly made a fraudulent statement -been convicted of any felony •Commissioner may order the licensee to pay a maximum civil pentathlon of $5,000. •If fee isn't pay within 30 days there can be suspension or revocation of license.

Notice and conduct of hearing

•commissioner's role is to enforce insurance laws and to protect the public from unfair trade practices, if the commissioner suspects an insurer or agent has committed a violation or is engaged in an unfair trade practice, he may issue a statement of charges and hold a hearing. •Commissioner must give at least 15 days notice of time, place and matter at a hearing to all persons directly affected by the hearing. •Commissioner may call and hold hearings for any purpose deemed necessary in performing his/her duties. •Hearings must be held within 45 days after the commissioner receives the written demand. •45 days after the hearing, the commissioner will enter an order based upon the findings of fact and conclusions reached during the hearing, •A rehearing may be granted to any party if written request is made. Request must be filed with commissioner within 30 days of the mailing order from first order.

Unfair discrimination

•discrimination in rates, premiums, or policy benefits for persons within the same class or with the same life expectancy is illegal.

Risk Retention Act of WV

•group of businesses with similar liability exposure that form its own insurance company. •insurance not available to the public. Only member of the group may purchase coverage from this insurer. When the Risk Retention Group files for a charter, it must identify the following: -initial members of the group -parties responsible for organizing the group -amount and type of capital -coverage to be offered -states in which group will offer coverage The Group must comply with certain state insurance laws, including: -WV Unfair Claims Practices Act -Laws prohibiting deceptive, false or fraudulent practices -financial examinations

Penalties

•if AFTER a hearing, The commissioner determines that the person charged has engaged in an unfair method of competition or an unfair deceptive act or practice, Commissioner will send the person a written copy of the violations any cease and desist order requiring the person to stop engaging in such method of competition, act, practice or violation. •Engaging in any unfair trade practice will result in a fine up to $1,000 for each violation + license suspension or revocation. •If person willfully and knowingly violated the law, the penalty will be a fine of $5,000 for each violation. Max aggregate amount for violations in a 6-month period is $100,000. The license will be suspended or revoked. •If person violates a cease and desist order while it is still in effect, the commissioner mag order a revocation or suspension of license/and or penalty up to $10,000 for each violation. •Suspended or revoked licenses may be reissued when violations have been satisfied and ceased. •if licensed is found violating Insurance Code repeats the violation ached commissioners order has been issued, within 20 days after the order is issued, the commission may revoke license. •if insurer made unfair claims settlement practices in its general business practice, the commissioner may order the revocation or suspension of license and/or penalty of $250,000

Termination of License Expiration

•licenses of individual producers, solicitors and adjusters expire on the last day of producer's birth nonetheless every 2 years •commissioner will renew the licenses of licensees who complete continuing education requirements.

Insurance Commissioner Broad Powers

•must be a citizen and resident of this state, is appointed to office for a term of 6 years by the governor, with advice and consent of the Senate. •commissioner is responsible for enforcing the Insurance Code and performing the duties needed to run the Insurance Department. Commissioner has the authority to do the following: -administer oaths and affirmations -subpoena witnesses and enforce their attendance -require and examine evidence of any documents and records. •Commissioner's authority extends outside the state.

Transacting Insurance

•no one is allowed to transact insurance in WV without being properly licensed. •No insurance company may accept any business from an unlicensed producer. •Transacting insurance that requires a license includes the following: - Negotiating -Selling -Soliciting

Qualifications Nonresident Licensing

•nonresident who otherwise comply with the state's licensing requirements may be licensed as a nonresident producer if: - person is currently licensed as a resident producer in good standing in his/her home state -person has submitted proper request for licensure and paid fees. -person holds a similar license that is awarded on same bias in home state

Defamation

•occurs when oral or written statement is made that is intended to injure a person engaged in insurance business. •Also applies to statements that are maliciously critical of the financial condition of any person or company.

Mutual Companies

•owned by policy owners and issue participating policies. •policy owners are entitled to dividends, which are a return of premiums and are nontaxable. •Dividends are generated when premiums and earnings combined exceed the actual costs of providing coverage, creating a surplus. •Dividends aren't always guaranteed.

Excessive Charges

•prevents producers from charging excessive fees in connection with insurance transactions. •Any producer making excessive charges is guilty of engaging in an unfair trade proactive and will be subject to the appropriate penalties.

Binders

•producers can place coverage in force before the insurer has an opportunity to issue the policy. •Binding coverage can be oral or in writing. •Temporary contract of insurance is valid for a short period of time. Binders cease at the earliest of the following: -rejection of the application -issuance of the policy -90 days following the issue date of binder.

Continuing Educational Requirements

•rules established to protect the public by maintaining high standards of professional competence in the insurance industry. •Each producer required to complete 24 hours of continuing education every 2 years, 3 hours of which must be in ethics. •Producers may carry over a maximum of 6 credit hours into the next reporting period. •If individual fails to meet continuing educational requirements commissioner will have their licenses automatically suspended, until satisfaction has been completed.