North Dakota 2025-2026 Regular Session

North Dakota Senate Bill SB2374 Compare Versions

Version 1 (Old)

Version 2 (New)

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2	2		Sixty-ninth
3	3		Legislative Assembly
4	4		of North Dakota
5	5		Introduced by
6	6		Senators Barta, Hogue, Klein
7	7		Representatives Lefor, Warrey, J. Johnson
8	8		A BILL for an Act to create and enact two new sections to chapter 26.1-30, two new sections to
9	9		chapter 26.1-39, a new section to chapter 26.1-44, and a new subsection to section 26.1-46-03
10	10		of the North Dakota Century Code, relating to mandatory arbitration endorsements for property
11	11		insurance, managed repair programs, civil remedy actions against property insurers, notice of
12	12		property insurance claims, and surplus lines insurance policies; to amend and reenact sections
13	13		26.1-02-05, 26.1-25-02.1, 26.1-25-16, 26.1-26-04.1, 26.1-44-03, 26.1-46-01, 26.1-46-08, and
14	14		26.1-46-08.1 of the North Dakota Century Code, relating to exceptions to unauthorized
15	15		insurance transactions, exceptions for large commercial risks in fire, property, and casualty
16	16		insurance rates, surplus lines insurance, risk retention groups and purchasing groups,
17	17		restrictions on insurance purchased by purchasing groups, and purchasing group taxation and
18	18		fees; to repeal section 26.1-44-03.3 of the North Dakota Century Code, relating to an exemption
19		-	from search requirements for licensed surplus line producers; to provide a legislative
20		-	management report; and to provide a penalty.
	19	+	from search requirements for licensed surplus line producers; and to provide a penalty.
21	20		BE IT ENACTED BY THE LEGISLATIVE ASSEMBLY OF NORTH DAKOTA:
22	21		SECTION 1. AMENDMENT. Section 26.1-02-05 of the North Dakota Century Code is
23	22		amended and reenacted as follows:
24	23		26.1-02-05. Unauthorized insurance prohibited - Exceptions.
25	24		An insurance company may not transact insurance business in this state, as set forth in
26	25		section 26.1-02-06, without a certificate of authority from the commissioner. This section does
27	26		not apply to:
28	27		1.The lawful transaction of surplus lines insurance.
29	28		2.The lawful transaction of reinsurance by insurers.
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31	30		ENGROSSED SENATE BILL NO. 2374
32	31		FIRST ENGROSSMENT
33		-	with ~~Conference Committee~~ Amendments
	32	+	with House Amendments
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57	55		3.Transactions involving a policy lawfully solicited, written, and delivered outside of this
58	56		state covering only subjects of insurance not resident, located, or expressly to be
59	57		performed in this state at the time of issuance, and which transactions are subsequent
60	58		to the issuance of such policy.
61	59		4.Transactions involving life insurance, health insurance, or annuities provided to
62	60		educational or religious or charitable institutions organized and operated without profit
63	61		to any private shareholder or individual, for the benefit of the institutions and
64	62		individuals engaged in the service of the institutions.
65	63		5.Attorneys acting in the ordinary relation of attorney and client in the adjustment of
66	64		claims or losses.
67	65		6.Transactions involving group life, accident, and health, or blanket accident and health
68	66		insurance, or group annuities if the master policy of the group was lawfully issued and
69	67		delivered in and pursuant to the laws of a state in which the insurance company was
70	68		authorized to do an insurance business, to a group organized for purposes other than
71	69		the procurement of insurance, and where the policyholder is domiciled or otherwise
72	70		has a bona fide situs.
73	71		7.Transactions involving any insurance policy or annuity contract issued before July 1,
74	72		1973.
75	73		8.Transactions relative to a policy issued or to be issued outside this state involving
76	74		insurance on vessels, craft or hulls, cargoes, marine builder's risk, marine protection
77	75		and indemnity or other risk, including strikes and war risks commonly insured under
78	76		ocean or wet marine forms of policy.
79	77		9.Transactions involving insurance contracts issued to one or more industrial insureds;
80	78		provided, that this does not relieve an industrial insured from taxation imposed upon
81	79		independently procured insurance. An industrial insured is an insured:
82	80		a.Which procures the insurance of any risk or risks other than life and annuity
83	81		contracts by use of the services of a full-time employee acting as an insurance
84	82		manager or buyer or the services of a regularly and continuously retained
85	83		qualified insurance consultant;
86	84		b.Whose aggregate annual premiums for insurance on all risks total at least
87	85		twenty-five thousand dollars; and
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121	119		c.Which has at least twenty-five full-time employees.
122	120		10.Transactions involving insurance contracts covering a large commercial risk as
123	121		defined in section 26.1 - 25 - 02.1, provided an industrial insured is not relieved from
124	122		taxation imposed upon independently procured insurance.
125	123		SECTION 2. AMENDMENT. Section 26.1-25-02.1 of the North Dakota Century Code is
126	124		amended and reenacted as follows:
127	125		26.1-25-02.1. Definitions.
128	126		1."Advisory organization" means any entity, including its affiliates or subsidiaries, which
129	127		either has two or more member insurers or is controlled either directly or indirectly by
130	128		two or more insurers, and which assists insurers in ratemaking-related activities as
131	129		enumerated in this chapter. Two or more insurers having a common ownership or
132	130		operating in this state under common management or control constitute a single
133	131		insurer for purposes of this definition.
134	132		2."Commercial risk" means any kind of risk which is not a personal risk.
135	133		3."Competitive market" means a commercial risk market that has not been found to be
136	134		noncompetitive as provided for in section 26.1-25-04. All commercial risk markets
137	135		except crop hail, farmowners, and medical malpractice insurance are presumed to be
138	136		competitive.
139	137		4."Developed losses" means losses including loss adjustment expenses, adjusted, using
140	138		standard actuarial techniques, to eliminate the effect of differences between current
141	139		payment or reserve estimates and those needed to provide actual ultimate loss
142	140		including loss adjustment expense payments.
143	141		5."Expenses" means that portion of a rate attributable to acquisition, field supervision,
144	142		collection expenses, general expenses, taxes, licenses, and fees.
145	143		6."Joint underwriting" means a voluntary arrangement established to provide insurance
146	144		coverage for a commercial risk pursuant to which two or more insurers jointly contract
147	145		with the insured at a price and under policy terms agreed upon between the insurers.
148	146		7."Large commercial risk" means an insured that has:
149	147		a.Total insured property values of twenty - five million dollars or more;
150	148		b.Total annual gross revenue of fifty million dollars or more; or
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183	181		c.A total premium of one hundred thousand dollars or more for property insurance,
184	182		one hundred thousand dollars or more for general liability insurance, or
185	183		two hundred thousand dollars or more for multiperil insurance.
186	184		d.The term does not include farming or ranching.
187	185		8."Loss trending" means any procedure for projecting developed losses to the average
188	186		date of loss for the period during which the policies are to be effective.
189	187		8.9."Noncompetitive market" means the crop hail, farmowners, and medical malpractice
190	188		insurance markets together with any other line of commercial risk insurance that has
191	189		not been found by the commissioner to have a reasonable degree of competitiveness
192	190		within the market considering:
193	191		a.Market concentration and changes in market concentration determined through
194	192		the use of the Herfindahl-Hirschman index and the United States department of
195	193		justice merger guidelines for an unconcentrated market;
196	194		b.The existence of financial and other barriers that prevent a company from
197	195		entering the market;
198	196		c.The number of insurers or groups of affiliated insurers providing coverage in the
199	197		market;
200	198		d.The extent to which any insurer or group of affiliated insurers controls the market;
201	199		e.Whether the total number of companies writing the line of insurance in this state
202	200		is sufficient to provide multiple insurance options in the market;
203	201		f.The availability of insurance coverage to consumers in the markets by specific
204	202		geographic area, by line of insurance, and by class of risk; and
205	203		g.The opportunities available in the market to acquire pricing and other consumer
206	204		information.
207	205		A determination that a market is noncompetitive may not be based solely on the
208	206		consideration of any one factor.
209	207		9.10."Personal risk" means homeowners, tenants, private passenger nonfleet automobiles,
210	208		mobile homes, and other property and casualty insurance for personal, family, or
211	209		household needs.
212	210		10.11."Pool" means a voluntary arrangement, established on an ongoing basis, pursuant to
213	211		which two or more insurers participate in the sharing of risks on a predetermined
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247	245		basis. The pool may operate through an association, syndicate, or other pooling
248	246		agreement.
249	247		11.12."Prospective loss costs" means that portion of a rate that does not include provisions
250	248		for expenses other than loss adjustment expenses, or profit, and are based on
251	249		historical aggregate losses and loss adjustment expenses adjusted through
252	250		development to their ultimate value and projected through trending to a future point in
253	251		time.
254	252		12.13."Rate" means that cost of insurance per exposure unit whether expressed as a single
255	253		member or as a prospective loss cost with an adjustment to account for the treatment
256	254		of expenses, profit, and individual insurer variation in loss experience, prior to any
257	255		application of individual risk variations based on loss or expense considerations, and
258	256		does not include minimum premium.
259	257		13.14."Residual market mechanism" means an arrangement, either voluntary or mandated
260	258		by law, involving participation by insurers in the equitable apportionment among them
261	259		of insurance which may be afforded applicants who are unable to obtain insurance
262	260		through ordinary methods.
263	261		14.15."Supplementary rating information" includes any manual or plan of rates, classification,
264	262		rating schedule, minimum premium, policy fee, rating rule, underwriting rule, statistical
265	263		plan, and any other similar information needed to determine the applicable rate in
266	264		effect or to be in effect.
267	265		15.16."Supporting information" means:
268	266		a.The experience and judgment of the filer and the experience or date of other
269	267		insurers or advisory organizations relied upon by the filer;
270	268		b.The interpretation of any other data relied upon by the filer; and
271	269		c.Descriptions of methods used in making the rates and any other information
272	270		required by the commissioner to be filed.
273	271		SECTION 3. AMENDMENT. Section 26.1-25-16 of the North Dakota Century Code is
274	272		amended and reenacted as follows:
275	273		26.1-25-16. Rebates prohibited - Exception.
276	274		1.No insurance producerAn insurance producer may not knowingly charge, demand, or
277	275		receive a premium for any insurance policy except in accordance with this chapter. No
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311	309		insurer or employee of an insurer, and no insurance producer, broker or agent may
312	310		pay, allow, or give, or offer to pay, allow, or give, directly or indirectly, as an
313	311		inducement to insurance, or after insurance has been effected, any rebate, discount,
314	312		abatement, credit, or reduction of the premium named in an insurance policy, or any
315	313		special favor or advantage in the dividends or other benefits to accrue on the policy, or
316	314		any valuable consideration or inducement whatever, not specified in the insurance
317	315		policy, except to the extent provided for in applicable filing. No insured named in an
318	316		insurance policy, nor any employee of the insured, may knowingly receive or accept,
319	317		directly or indirectly, any such rebate, discount, abatement, credit, or reduction of
320	318		premium, or any such special favor or advantage or valuable consideration or
321	319		inducement. This section does not prohibit the payment of commissions or other
322	320		compensation to licensed insurance producers, nor any insurer from allowing or
323	321		returning to its participating policyholders, members, or subscribers dividends,
324	322		savings, or unabsorbed premium deposits. As used in this section, "insurance"
325		-	includes suretyship and "policy" includes bond ~~and federal crop insurance~~.
	323	+	includes suretyship and "policy" includes bond.
326	324		2.Notwithstanding any other provision in this section, if the cost does not exceed an
327	325		aggregate retail value of one hundred dollars per person per year, an insurance
328	326		producer may give a gift, prize, promotional article, logo merchandise, meal, or
329	327		entertainment activity directly or indirectly to a person in connection with marketing,
330	328		promoting, or advertising the business. As used in this subsection, "person" means the
331	329		named insured, policy owner, or prospective client or the spouse of any of these
332	330		individuals, but the term does not include a certificate holder, child, or employee of the
333	331		named insured, policy owner, or prospective client. Subject to the limits of this
334	332		subsection, an insurance producer may give a gift card for specific merchandise or
335	333		services such as a meal, gasoline, or car wash but may not give cash, a cash card,
336	334		any form of currency, or any refund or discount in premium. An insurance producer
337	335		may not condition the giving of a gift, prize, promotional article, logo merchandise,
338	336		meal, or entertainment activity on obtaining a quote or a contract of insurance.
339	337		Notwithstanding the limitation in this subsection, an insurance producer may conduct
340	338		raffles or drawings, if there is no financial cost to an entrant to participate, the drawing
341	339		or raffle does not obligate a participant to purchase insurance, the prizes are not
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375	373		valued in excess of a reasonable amount determined by the commissioner, and the
376	374		drawing or raffle is open to the public. The raffle or drawing must be offered in a
377	375		manner that is not unfairly discriminatory and may not be contingent on the purchase,
378	376		continued purchase, or renewal of a policy. Notwithstanding the limitation in this
379	377		subsection, an insurance producer may make a donation to a nonprofit organization
380	378		that is exempt from federal taxation under Internal Revenue Code section 501(c)(3)
381	379		[26 U.S.C. 501(c)(3)] in any amount as long as the donation is not given as an
382	380		inducement to obtain a contract of insurance.
383	381		3.The provisions in this section may not be construed as including within the definition of
384	382		discrimination or rebates any of the following practices:
385	383		a.The offer or provision by an insurer or producer, by or through an employee, an
386	384		affiliate, or a third-party representative, of value-added products or services at no
387	385		or reduced cost if the products or services are not specified in the policy of
388	386		insurance if the product or service:
389	387		(1)Relates to the insurance coverage and is designed to satisfy one or more of
390	388		the following:
391	389		(a)Provide loss mitigation or loss control;
392	390		(b)Reduce claims costs or claim settlement costs;
393	391		(c)Provide education about liability risk or risk of loss to persons or
394	392		property;
395	393		(d)Monitor or assess risk, identify sources of risk, or develop strategies
396	394		for eliminating or reducing risk;
397	395		(e)Enhance health;
398	396		(f)Enhance financial wellness through items such as education of
399	397		financial planning services;
400	398		(g)Provide post-loss services;
401	399		(h)Incent behavioral changes to improve the health or reduce the risk of
402	400		death or disability of an individual defined as policyholder, potential
403	401		policyholder, certificate holder, potential certificate holder, insured,
404	402		potential insured, or applicant; or
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437	435		(i)Assist in the administration of the employee or retiree benefit
438	436		insurance coverage.
439	437		(2)If offered by the insurer or producer, the insurer or producer, upon request,
440	438		shall ensure the person is provided with contact information to assist the
441	439		person with questions regarding the product or service.
442	440		(3)Is based on fair documented criteria and offered in a manner not unfairly
443	441		discriminatory. The documented criteria must be maintained by the insurer
444	442		or producer and produced at the request of the commissioner.
445	443		(4)Is reasonable in comparison to that person's premiums or insurance
446	444		coverage for the policy class.
447	445		b.If an insurer or producer does not have sufficient evidence, but has a good-faith
448	446		belief the product or service meets the criteria in subdivision a, the provision by
449	447		the insurer or producer of a product or service in a manner that is not unfairly
450	448		discriminatory as part of a pilot or testing program no longer than one year. An
451	449		insurer or producer shall notify the department of the pilot or testing program
452	450		offered to consumers in this state before launching and may proceed with the
453	451		program unless the department objects within twenty-one days of notice.
454	452		4.An insurer, producer, or representative of an insurer or producer may not offer or
455	453		provide insurance as an inducement to the purchase of another policy or otherwise
456	454		use of the words "free" or "no cost" or words of similar import in an advertisement.
457	455		5.The commissioner may adopt regulations when implementing the permitted practices
458	456		set forth in this regulation to ensure consumer protection. Consistent with applicable
459	457		law, the topics addressed by the regulations may include consumer data protections
460	458		and privacy, consumer disclosure, and unfair discrimination.
	459	+	6.Subsections 1 and 2 do not apply to a large commercial risk.
461	460		SECTION 4. AMENDMENT. Section 26.1-26-04.1 of the North Dakota Century Code is
462	461		amended and reenacted as follows:
463	462		26.1-26-04.1. Fees for services - Rules.
464	463		1.Notwithstanding any other provision of this title, an insurance producer may charge a
465	464		fee for any services rendered in connection with the sale, solicitation, negotiation,
466	465		placement, or servicing of an insurance contract, if the following conditions are met:
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499	499		a.The fees may not be charged on a personal lines account, such as personal
500	500		homeowners and automobile, personal life, and health insurance.
501	501		b.Before rendering the services and accepting any payment, a written disclosure
502	502		must be provided to the party to be charged on a form approved by the
503	503		commissioner disclosing:
504	504		(1)The nature of the services for which the fees will be charged along with a
505	505		separate itemization of the amount of the fees;
506	506		(2)That the fees are charged in addition to any premiums paid;
507	507		(3)That if the insurance producer is also an appointed agent of an insurer with
508	508		which coverage is being considered for placement, a statement that the
509	509		insurance producer also represents the insurer in the transaction and owes
510	510		a duty of loyalty to the insurer; and
511	511		(4)That if the insurance producer is to receive a commission from the sale of
512	512		an insurance policy related to the services rendered, a statement clearly
513	513		and completely disclosing that the:
514	514		(a)Insurance producer will receive a commission from the insurer which
515	515		is paid from the premiums owed for the insurance; and
516	516		(b)Amount of commission received by the insurance producer may differ
517	517		depending on the product sold and the insurer.
518	518		c.The disclosure required by this section must be signed and dated by both the
519	519		producer and the party to be charged.
520	520		d.The producer shall retain the signed disclosure required by this section for not
521	521		less than five years following the completion of the service. A copy of the signed
522	522		disclosure must be available to the commissioner for inspection upon request.
523	523		e.The insurance producer may not pay or return, or offer to pay or return, all or part
524	524		of a fee charged as an inducement to purchase a specific policy, or coverage
525	525		within a policy, or coverage from a particular insurer.
526	526		f.Any fee charged under this section must bear a reasonable relationship to the
527	527		services provided and may not be discriminatory.
528	528		2.An insurance producer charging a fee for services rendered for risk management
529	529		services under this section owes the person to be charged a higher standard of care
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561	561		31 Sixty-ninth
562	562		Legislative Assembly
563	563		than the ordinary standard of care otherwise owed by an insurance producer to fully
564	564		advise the party to be charged as to the party's insurance needs, including the duty to
565	565		inform the person to be charged as to a potential source of risk and to recommend, if
566	566		available, insurance coverage for that risk.
567	567		3.An insurance producer may charge an individual, for personal or commercial lines, a
568	568		fee for paying agency-billed premiums and fees by credit card or other electronic
569	569		means, if the fee is disclosed to the client in writing and agreed to by the client in
570	570		writing.
571		-	4.Subdivisions b through d of subsection 1 do not apply to a large commercial risk as
	571	+	4.Subdivisions b through e of subsection 1 do not apply to a large commercial risk as
572	572		defined in section 26.1 - 25 - 02.1.
573	573		5.The commissioner may adopt rules determined necessary by the commissioner for the
574	574		administration of this section.
575	575		SECTION 5. A new section to chapter 26.1-30 of the North Dakota Century Code is created
576	576		and enacted as follows:
577	577		Mandatory arbitration endorsements for property insurance - Written acceptance -
578	578		Penalty.
579	579		1.A property insurance policy may be issued or delivered in this state with mandatory
580	580		binding arbitration provisions if the:
581	581		a.Mandatory binding arbitration provisions are contained in a separate
582	582		endorsement;
583	583		b.Named insured accepts the mandatory binding arbitration endorsement in writing
584	584		in accordance with subsection 2; and
585	585		c.Property insurance policy does not require mandatory binding arbitration upon
586	586		request.
587	587		2.The written acceptance of the insured required under subsection 1 must:
588	588		a.Be on a form separate from the policy application and other policy forms;
589	589		b.Clearly state the rights being waived in exchange for the premium discount,
590	590		including the right to a trial by jury; and
591	591		c.Include the following statement in at least twelve-point bold font:
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621	621		29 Sixty-ninth
622	622		Legislative Assembly
623	623		"By signing this form, I agree to resolve all covered property insurance claims
624	624		through mandatory binding arbitration. I understand that by agreeing to
625	625		mandatory binding arbitration:
626	626		I am giving up my right to have disputes resolved in court.
627	627		I am giving up my right to a jury trial.
628	628		I am accepting these terms in exchange for a premium discount of [dollar amount
629	629		or percentage of premium amount].
630	630		This agreement is binding on all insureds under the policy and remains effective
631	631		upon policy renewal, replacement, or reinstatement unless I request removal of
632	632		the mandatory binding arbitration endorsement in writing".
633	633		3.All arbitration proceedings under this section must:
634	634		a.Be conducted in this state if involving a resident of this state;
635	635		b.Be governed by state law; and
636	636		c.Not require arbitration in another state.
637	637		4.The acceptance or rejection of mandatory binding arbitration is valid and binding on all
638	638		insureds under the policy and remains effective upon policy renewal, replacement, or
639	639		reinstatement unless the named insured requests a change in writing.
640	640		5.This section applies to all property and casualty insurance policies issued or renewed
641	641		after the effective date of this Act.
642	642		6.This section does not apply to a:
643	643		a.Voluntary arbitration agreement entered after a dispute has arisen;
644	644		b.Large commercial risk as defined in section 26.1 - 25 - 02.1; or
645	645		c.Commercial surplus line insurance policy placed in accordance with section
646	646		26.1 - 44 - 03.
647	647		7.The commissioner shall enforce this section.
648	648		8.The commissioner may assess a penalty on an insurer in violation of this section, as
649	649		determined by the commissioner.
650	650		SECTION 6. A new section to chapter 26.1-30 of the North Dakota Century Code is created
651	651		and enacted as follows:
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681	681		29 Sixty-ninth
682	682		Legislative Assembly
683	683		Managed repair programs - Penalty.
684	684		1.A property insurance policy may be issued or delivered in this state with a managed
685	685		repair program provision offering premium incentives for managed repair program
686	686		participation. As used in this section, "managed repair program" means an insurance
687	687		policy providing a program with a specified reduction in premium or other specified
688	688		incentive for participation in a program restricting an insured's choice of repair vendors
689	689		or contractors for covered repairs.
690	690		2.An insurer offering a managed repair program shall:
691	691		a.Prominently disclose on the policy declarations page the policy restricts the
692	692		insured's right to choose repair vendors;
693	693		b.Specify any premium benefits for program participation;
694	694		c.Include a separate disclosure form, written in at least twelve-point font, which
695	695		explains the restrictions on vendor selection, including:
696	696		(1)The process for repairs under the program;
697	697		(2)The insured's rights and responsibilities; and
698	698		(3)Any warranty or guarantee provided for repairs.
699	699		3.This section does not apply to contractor referral or managed or direct repair programs
700	700		that do not provide a specified reduction in premium or other incentive.
701	701		4.This section applies to insurance policies issued or renewed after the effective date of
702	702		this Act.
703	703		5.The commissioner shall enforce this section.
704	704		6.The commissioner may assess a penalty on an insurer in violation of this section, as
705	705		determined by the commissioner.
706	706		SECTION 7. A new section to chapter 26.1-39 of the North Dakota Century Code is created
707	707		and enacted as follows:
708	708		Civil remedy actions against property insurers.
709	709		Notwithstanding any provision under title 26.1, before a named insured may proceed with a
710	710		bad faith claim against a property insurer, the named insured shall establish through an adverse
711	711		adjudication by a court of law the property insurer breached the insurance contract and a final
712	712		judgment or decree must have been rendered against the insurer.
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743	743		30 Sixty-ninth
744	744		Legislative Assembly
745	745		SECTION 8. A new section to chapter 26.1-39 of the North Dakota Century Code is created
746	746		and enacted as follows:
747	747		Notice of property insurance claim.
748	748		1.As used in this section:
749	749		a."Reopened claim" means a claim an insurer closed and reopened upon an
750	750		insured's request for additional reimbursement of damage arising out of the
751	751		original occurrence, and not previously identified or disclosed to the insurer.
752	752		b."Supplemental claim" means a claim for additional loss or costs from the same
753	753		occurrence the insurer previously compensated the insured.
754	754		2.A reopened claim under an insurance policy that provides property insurance,
755	755		including a policy issued by an eligible surplus lines insurer, for loss or damage is
756	756		barred unless notice of the claim was given to the insurer within one year after the
757	757		date of loss. A supplemental claim is barred unless notice of the supplemental claim
758	758		was given to the insurer of the policy within twelve months after the date of the last
759	759		payment issued by the insurer for that element of the loss.
760	760		3.The time limitations under subsection 2 are tolled during any term of deployment for a
761	761		named insured service member to a combat zone or combat support posting that
762	762		materially affects the ability of the named insured to file a claim, supplemental claim,
763	763		or reopened claim.
764	764		SECTION 9. AMENDMENT. Section 26.1-44-03 of the North Dakota Century Code is
765	765		amended and reenacted as follows:
766	766		26.1-44-03. Surplus lines insurance.
767	767		The placement of nonadmitted insurance is subject to this section only if the insured's home
768	768		state is this state. Surplus lines insurance may be placed by a surplus lines producer if:
769	769		1.Each insurer is an eligible surplus lines insurer;
770	770		2.Each insurer is authorized to write the kind of insurance in its domiciliary jurisdiction;
771	771		3.The full amount or type of insurance cannot be obtained from insurers who are
772	772		admitted to do business in this state. The full amount or type of insurance may be
773	773		procured from eligible surplus lines insurers provided that a diligent search is made
774	774		among The surplus lines producer is aware that:
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805	805		30 Sixty-ninth
806	806		Legislative Assembly
807	807		a.The full amount and type of insurance is not available from the insurers who are
808	808		admitted to transact and are actually writing the particular type of insurance in
809	809		this state if any are writing it; or
810	810		b.The risk was referred to the surplus lines producer by an insurance producer
811	811		licensed in this state.
812	812		4.At the time of placement the surplus lines producer has determined that the
813	813		nonadmitted insurer:
814	814		a.Has established satisfactory evidence of good repute and financial integrity and
815	815		has capital and surplus or its equivalent under the laws of its domiciliary
816	816		jurisdiction which equals the greater of:
817	817		(1)(a)The minimum capital and surplus requirements under the law of this
818	818		state; or
819	819		(b)Fifteen million dollars.
820	820		(2)The requirements of paragraph 1 may be satisfied by an insurer possessing
821	821		less than the minimum capital and surplus upon an affirmative finding of
822	822		acceptability by the commissioner. The finding must be based upon such
823	823		factors as quality of management, capital and surplus of any parent
824	824		company, company underwriting profit and investment income trends,
825	825		market availability, and company record and reputation within the industry.
826	826		The commissioner may not make an affirmative finding of acceptability
827	827		when the nonadmitted insurer's capital and surplus is less than four million
828	828		five hundred thousand dollars; or
829	829		b.For an insurer not domiciled in the United States or its territories, the insurer is
830	830		listed on the quarterly listing of alien insurers maintained by the national
831	831		association of insurance commissioners international insurers department; and
832	832		5.4.All other requirements of this chapter are met.
833	833		SECTION 10. A new section to chapter 26.1-44 of the North Dakota Century Code is
834	834		created and enacted as follows:
835	835		Surplus lines insurance policies.
836	836		A surplus lines insurer may not issue a policy designed to satisfy any law mandating
837	837		insurance coverage by a licensed insurance company.
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869	869		31 Sixty-ninth
870	870		Legislative Assembly
871	871		SECTION 11. AMENDMENT. Section 26.1-46-01 of the North Dakota Century Code is
872	872		amended and reenacted as follows:
873	873		26.1-46-01. Definitions.
874	874		As used in this chapter, unless the context requires otherwise:
875	875		1."Commissioner" means the North Dakota insurance commissioner or the
876	876		commissioner, director, or superintendent of insurance in any other state.
877	877		2."Completed operations liability" means liability arising out of the installation,
878	878		maintenance, or repair of any product at a site which is not owned or controlled by any
879	879		person who performs that work or any person who hires an independent contractor to
880	880		perform that work, but includes liability for activities which are completed or
881	881		abandoned before the date of the occurrence giving rise to the liability.
882	882		3."Domicile", for purposes of determining the state in which a purchasing group is
883	883		domiciled, means:
884	884		a.For a corporation or limited liability company, the state in which the purchasing
885	885		group is incorporated or organized.
886	886		b.For an entity which is not a corporation or limited liability company, the state of its
887	887		principal place of business.
888	888		4."Hazardous financial condition" means that, based on its present or reasonably
889	889		anticipated financial condition, a risk retention group, although not yet financially
890	890		impaired or insolvent, is unlikely to be able to do either of the following:
891	891		a.To meet obligations to policyholders with respect to known claims and reasonably
892	892		anticipated claims.
893	893		b.To pay other obligations in the normal course of business.
894	894		5."Insurance" means primary insurance, excess insurance, reinsurance, surplus lines
895	895		insurance, and any other arrangement for shifting and distributing risk which is
896	896		determined to be insurance under the laws of this state.
897	897		6.a."Liability" means legal liability for damages, including costs of defense, legal
898	898		costs and fees, and other claims expenses because of injuries to other persons,
899	899		damage to their property, or other damage or loss, including contractual claims
900	900		and expenses, to such other persons resulting from or arising out of either of the
901	901		following:
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933	933		31 Sixty-ninth
934	934		Legislative Assembly
935	935		a.(1)Any business whether profit or nonprofit, trade, product, services including
936	936		professional services, premises, or operations.
937	937		b.(2)Any activity of any state or local government, or any agency or political
938	938		subdivision thereof.
939	939		b.The term does not include personal risk liability and an employer's liability with
940	940		respect to its employees other than legal liability under the federal Employer's
941	941		Liability Act [45 U.S.C. 51 et seq.].
942	942		7."Personal risk liability" means liability for damages because of injury to any person,
943	943		damage to property, or other loss or damage resulting from any personal, familial, or
944	944		household responsibilities or activities, rather than from responsibilities or activities
945	945		referred to in subsection 56.
946	946		8."Plan of operation or a feasibility study" means an analysis which presents the
947	947		expected activities and results of a risk retention group, including, at a minimum, all of
948	948		the following:
949	949		a.For each state in which it intends to operate, the coverages, deductibles,
950	950		coverage limits, rates, and rating classification systems for each line of insurance
951	951		the group intends to offer.
952	952		b.Historical and expected loss experience of the proposed members and national
953	953		experience of similar exposures to the extent that this experience is reasonably
954	954		available.
955	955		c.Pro forma financial statements and projections.
956	956		d.Appropriate opinions by a qualified independent casualty actuary, including a
957	957		determination of minimum premium or participation levels required to commence
958	958		operations and to prevent a hazardous financial condition.
959	959		e.Identification of management, underwriting and claims procedures, marketing
960	960		methods, managerial oversight methods, reinsurance agreements, and
961	961		investment policies.
962	962		f.Such other matters as may be prescribed by the commissioner for liability
963	963		insurance companies authorized by the insurance laws of the state in which the
964	964		risk retention group is chartered.
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995	995		30 Sixty-ninth
996	996		Legislative Assembly
997	997		g.Information sufficient to verify that its members are engaged in businesses or
998	998		activities similar or related with respect to the liability to which such members are
999	999		exposed by virtue of any related, similar, or common business, trade, product,
1000	1000		services, premises, or operations.
1001	1001		h.Identification of each state in which the risk retention group has obtained, or
1002	1002		sought to obtain, a charter and license, and a description of its status in each
1003	1003		such state.
1004	1004		9."Product liability" means liability for damages because of any personal injury, death,
1005	1005		emotional harm, consequential economic damage, or property damage, including
1006	1006		damages resulting from the loss of use of property, arising out of the manufacture,
1007	1007		design, importation, distribution, packaging, labeling, lease, or sale of a product, but
1008	1008		does not include the liability of any person for those damages if the product involved
1009	1009		was in the possession of such a person when the incident giving rise to the claim
1010	1010		occurred.
1011	1011		10."Purchasing group" means any group which meets all of the following:
1012	1012		a.The group has as one of its purposes the purchase of liability insurance on a
1013	1013		group basis.
1014	1014		b.The group purchases such insurance only for its group members and only to
1015	1015		cover their similar or related liability exposure, as described in subdivision c.
1016	1016		c.The group is composed of members whose business or activities are similar or
1017	1017		related with respect to the liability to which members are exposed by virtue of any
1018	1018		related, similar, or common business, trade, product, services, premises, or
1019	1019		operations.
1020	1020		d.The group is domiciled in any state.
1021	1021		11."Risk retention group" means any corporation or other limited liability association:
1022	1022		a.Whose primary activity consists of assuming and spreading all, or any portion, of
1023	1023		the liability exposure of its group members.
1024	1024		b.Which is organized for the primary purpose of conducting the activity described
1025	1025		under subdivision a.
1026	1026		c.Which is chartered and licensed as a liability insurance company and authorized
1027	1027		to engage in the business of insurance under the laws of any state; or, before
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1059	1059		31 Sixty-ninth
1060	1060		Legislative Assembly
1061	1061		January 1, 1985, was chartered or licensed and authorized to engage in the
1062	1062		business of insurance under the laws of Bermuda or the Cayman Islands and,
1063	1063		before such date, had certified to the insurance commissioner of at least one
1064	1064		state that it satisfied the capitalization requirements of such state, except that any
1065	1065		such group shall be considered to be a risk retention group only if it has been
1066	1066		engaged in business continuously since that date and only for the purpose of
1067	1067		continuing to provide insurance to cover product liability or completed operations
1068	1068		liability as such terms were defined in the Product Liability Risk Retention Act of
1069	1069		1981 before the date of the enactment of the Liability Risk Retention Act of 1986.
1070	1070		d.Which does not exclude any person from membership in the group solely to
1071	1071		provide for members of such a group a competitive advantage over such a
1072	1072		person.
1073	1073		e.Which has as its owners only persons who comprise the membership of the risk
1074	1074		retention group and who are provided insurance by such group, or has as its sole
1075	1075		owner an organization which has as its members only persons who comprise the
1076	1076		membership of the risk retention group and its owners only persons who
1077	1077		comprise the membership of the risk retention group and who are provided
1078	1078		insurance by such group.
1079	1079		f.Whose members are engaged in businesses or activities similar or related with
1080	1080		respect to the liability of which such members are exposed by virtue of any
1081	1081		related, similar, or common business trade, product, services, premises, or
1082	1082		operations.
1083	1083		g.Whose activities do not include the provision of insurance other than:
1084	1084		(1)Liability insurance for assuming and spreading all or any portion of the
1085	1085		liability of its group members.
1086	1086		(2)Reinsurance with respect to the liability of any other risk retention group or
1087	1087		any members of such other group which is engaged in business or activities
1088	1088		so that the group or member meets the requirement described in
1089	1089		subdivision f from membership in the risk retention group which provides
1090	1090		such reinsurance.
1091	1091		h.The name of which includes the phrase "risk retention group".
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1123	1123		31 Sixty-ninth
1124	1124		Legislative Assembly
1125	1125		12."State" means any state of the United States or the District of Columbia.
1126	1126		SECTION 12. A new subsection to section 26.1-46-03 of the North Dakota Century Code is
1127	1127		created and enacted as follows:
1128	1128		A risk retention group that is not chartered in this state but is in compliance with this
1129	1129		section is deemed an authorized insurer for the satisfaction of any requirement, under
1130	1130		the laws of this state, that insurance coverage be placed with an authorized insurer.
1131	1131		SECTION 13. AMENDMENT. Section 26.1-46-08 of the North Dakota Century Code is
1132	1132		amended and reenacted as follows:
1133	1133		26.1-46-08. Restrictions on insurance purchased by purchasing groups.
1134	1134		1.A purchasing group may not purchase insurance from a risk retention group that is not
1135	1135		chartered in a state or from an insurer not admitted in the state in which the
1136	1136		purchasing group is located, unless the purchase is effected through a licensed
1137	1137		insurance producer acting pursuant to the surplus lines laws and regulations of such
1138	1138		state.
1139	1139		2.A purchasing group which obtains liability insurance from an insurer not admitted in
1140	1140		this state or a risk retention group shall inform each of the members of the group
1141	1141		which have a risk resident or located in this state that the risk is not protected by an
1142	1142		insurance insolvency guaranty fund in this state, and that the risk retention group or
1143	1143		insurer may not be subject to all insurance laws and rules of this state.
1144	1144		3.NoA purchasing group may not purchase insurance providing for a deductible or
1145	1145		self-insured retention applicable to the group as a whole; however, coverage may
1146	1146		provide for a deductible or self-insured retention applicable to individual members
1147	1147		unless the purchasing group uses a policyholder's disclosure statement approved by
1148	1148		the commissioner which clearly explains in simplified language the policy is subject to
1149	1149		a group deductible or self-insured retention and provides a detailed explanation of the
1150	1150		process of the satisfaction of the deductible or self-insured retention among members.
1151	1151		4.Purchases of insurance by purchasing groups are subject to the same standards
1152	1152		regarding aggregate limits which are applicable to all purchases of group insurance.A
1153	1153		purchasing group may not purchase insurance providing for a shared aggregate limit
1154	1154		applicable to the group as a whole unless the purchasing group uses a policyholder's
1155	1155		disclosure statement approved by the commissioner which clearly explains in
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1187	1187		31 Sixty-ninth
1188	1188		Legislative Assembly
1189	1189		simplified language the policy is subject to a group aggregate limit and coverage for
1190	1190		each individual member could be exhausted by claims from other members. The
1191	1191		insurance must allow for an individual member to purchase additional limits in the
1192	1192		event of exhaustion and this option must be described in the disclosure statement.
1193	1193		SECTION 14. AMENDMENT. Section 26.1-46-08.1 of the North Dakota Century Code is
1194	1194		amended and reenacted as follows:
1195	1195		26.1-46-08.1. Purchasing group taxation - Fees.
1196	1196		1.a.Premium taxes and taxes on premiums paid for coverage of risks resident or
1197	1197		located in this state by a purchasing group or any members of the purchasing
1198	1198		group must be:
1199	1199		1. (1)Imposed at the same rate and subject to the same interest, fines, and
1200	1200		penalties as that applicable to premium taxes and taxes on premiums paid
1201	1201		for similar coverage from a similar insurance source by other insureds; and
1202	1202		2. (2)Paid first by suchthe insurance source, and if not by suchthe source, by the
1203	1203		insurance producer for the purchasing group, and if not by suchthe
1204	1204		insurance producer, then by the purchasing group, and if not by such
1205	1205		purchasing group, then by each of its members.
1206	1206		b.To the extent any administrative fee is charged under subsection 2, the fee may
1207	1207		not be considered a premium and is not subject to premium tax.
1208	1208		2.A purchasing group's administrator, manager, or other related party may charge
1209	1209		reasonable fees provided the fees are:
1210	1210		a.For reimbursement of expenses incurred by the administrator, manager, or other
1211	1211		related party in performing its administrative duties for the purchasing group; and
1212	1212		b.Disclosed to all members of the risk purchasing group on a form approved by the
1213	1213		commissioner which states the nature of the administrative duties for which the
1214	1214		fees will be charged along with separate itemization of the amount of fees to be
1215	1215		paid by each member.
1216	1216		SECTION 15. REPEAL. Section 26.1-44-03.3 of the North Dakota Century Code is
1217	1217		repealed.
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1247		-	29 Sixty-ninth
1248		-	Legislative Assembly
1249		-	SECTION 16. INSURANCE COMMISSIONER STUDY - TOWING AND RECOVERY
1250		-	COVERAGE FOR VEHICLES WITH LIABILITY-ONLY INSURANCE - REPORT TO
1251		-	LEGISLATIVE MANAGEMENT.
1252		-	1.During the 2025-26 interim, the insurance commissioner may study the feasibility,
1253		-	benefits, and challenges of providing towing and recovery costs associated with
1254		-	vehicle liability-only insurance for towing operations. The study must be conducted
1255		-	with stakeholders from both the insurance industry and the towing industry. The study
1256		-	must include:
1257		-	a.An evaluation of the frequency and financial impact of the towing and recovery
1258		-	costs of vehicles without applicable insurance coverage.
1259		-	b. A review of the cost structures, fee practices, and reimbursement models
1260		-	associated with standard towing and recovery operations across this state.
1261		-	c.Consideration of the financial and operational implications of expanding coverage
1262		-	to include towing and recovery cost coverage for the at-fault vehicle with only
1263		-	liability coverage.
1264		-	d. An analysis of the regulatory, administrative, and consumer impacts resulting
1265		-	from the coverage expansion, including anticipated efficiencies or burdens.
1266		-	e. A review of approaches taken by other states regarding similar coverage options,
1267		-	including statutory or regulatory frameworks, and how those states balance the
1268		-	needs of insurers, towing providers, and consumers.
1269		-	f.An analysis of insurance protocols and preferred procedures regarding towing
1270		-	operations. For the purpose of establishing agreements and contracts between
1271		-	insurance companies and towing companies, preventing misunderstandings, and
1272		-	ensuring a seamless claims process.
1273		-	2.Before September 1, 2026, the insurance commissioner shall report its findings and
1274		-	recommendations together with any legislation required to implement the
1275		-	recommendations, to the legislative management.
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