2012 -- S 2594 SUBSTITUTE A

=======

LC01223/SUB A

=======

STATE OF RHODE ISLAND

IN GENERAL ASSEMBLY

JANUARY SESSION, A.D. 2012

____________

A N A C T

RELATING TO FINANCIAL INSTITUTIONS - DEPARTMENT OF BUSINESS

REGULATION

     Introduced By: Senators Lanzi, Miller, Ruggerio, Gallo, and Walaska

     Date Introduced: March 01, 2012

     Referred To: Senate Corporations

It is enacted by the General Assembly as follows:

1-1

     SECTION 1. Section 19-14.10-13 of the General Laws in Chapter 19-14.10 entitled "An

1-2

Act Adopting the Federal Secure and Fair Enforcement for Mortgage Licensing Act of 2009" is

1-3

hereby amended to read as follows:

1-4

     19-14.10-13. Enforcement authorities, violations and penalties. -- (a) In order to

1-5

ensure the effective supervision and enforcement of this chapter the director or the director's

1-6

designee may, pursuant to chapter 42-35:

1-7

      (1) Deny, suspend, revoke, condition or decline to renew a license for a violation of this

1-8

chapter, rules or regulations issued under this chapter or order or directive entered under this

1-9

chapter.

1-10

      (2) Deny, suspend, revoke, condition or decline to renew a license if an applicant or

1-11

licensee fails at any time to meet the requirements of section 19-14.10-6 or 19-14.10-9, or

1-12

withholds information or makes a material misstatement in an application for a license or renewal

1-13

of a license.

1-14

      (3) Order restitution against persons subject to this chapter for violations of this chapter.

1-15

      (4) Impose fines on persons subject to this chapter pursuant to subsections (b), (c) and

1-16

(d) of this section.

1-17

      (5) Issue orders or directives under this chapter as follows:

1-18

      (i) Order or direct persons subject to this chapter to cease and desist from conducting

1-19

business, including immediate temporary orders to cease and desist.

2-1

      (ii) Order or direct persons subject to this chapter to cease any harmful activities or

2-2

violations of this chapter, including immediate temporary orders to cease and desist.

2-3

      (iii) Enter immediate temporary orders to cease business under a license or interim

2-4

license issued pursuant to the authority granted under this chapter if the director or the director's

2-5

designee determines that such license was erroneously granted or the licensee is currently in

2-6

violation of this chapter;

2-7

      (iv) Order or direct such other affirmative action as the director or the director's designee

2-8

deems necessary.

2-9

      (2)(b) The director or the director's designee may impose a civil penalty on a mortgage

2-10

loan originator and any lender or loan broker licensed under chapter 19-14 or 19-14.1 which

2-11

employs such mortgage loan originator, if the director or the director's designee finds, on the

2-12

record after notice and opportunity for hearing, that such mortgage loan originator has violated or

2-13

failed to comply with any requirement of this chapter or any regulation prescribed by the director

2-14

or the director's designee under this chapter or order issued under authority of this chapter. In

2-15

addition, the director or the director's designee may impose a civil penalty on a lender or loan

2-16

broker licensed under chapter 19-14 or 19-14.1 which employs any mortgage loan originator

2-17

licensed under this chapter, if the director or the director's designee finds, on the record after

2-18

notice and opportunity for hearing, that such lender or loan broker has violated or failed to

2-19

comply with any requirement of this chapter or any such regulation or order.

2-20

      (3) (c) The maximum amount of penalty for each act or omission described in subsection

2-21

(b) of this section shall be twenty-five thousand five hundred dollars ($25,000).

2-22

      (4) (d) Each violation or failure to comply with any directive or order of the director or

2-23

the director's designee is a separate and distinct violation or failure.

2-24

     SECTION 2. Section 27-1-40.1 of the General Laws in Chapter 27-1 entitled "Domestic

2-25

Insurance Companies" is hereby amended to read as follows:

2-26

     27-1-40.1. Mutual insurance holding companies. -- (a) Any mutual insurance company

2-27

created under the laws of this state (whether pursuant to section 7-1-5 or by special act of the

2-28

general assembly) and any foreign mutual insurance company which has been domesticated or

2-29

redomesticated pursuant to Chapter 2.2 of this title which meets or exceeds all capital and surplus

2-30

funds required by law for the transaction of business in Rhode Island may, in any manner

2-31

permitted by subsection (b) of this section, reorganize into a mutual insurance holding company

2-32

structure upon adoption of a plan of reorganization by two-thirds (2/3) vote of the board of

2-33

directors or other governing body, approval of a plan of reorganization by the director of the

2-34

department of business regulation, and the affirmative vote of one half (1/2) of those members or

3-1

policyholders, constituting a quorum, present in person or by proxy at a meeting called by the

3-2

board of directors or other governing body. Unless otherwise provided in its charter, bylaws or in

3-3

the plan of reorganization, each member or policyholder shall have one vote, and in the case of

3-4

any policy or contract of group life or other group insurance, the employer or other person to

3-5

whom or in whose name the master policy or contract has been issued shall be deemed to be the

3-6

member or policyholder and shall be entitled to one vote for each policy or contract of group

3-7

insurance irrespective of the number of individuals insured.

3-8

      (b) A plan of reorganization of a mutual insurance company into a mutual insurance

3-9

holding company structure may provide for the reorganization to be effected in one of the

3-10

following manners:

3-11

      (1) A domestic mutual insurance company may form a mutual insurance holding

3-12

company in accordance with the provisions of section 7-1-5 except that the approval of the plan

3-13

of reorganization by the director of the department of business regulation shall be deemed to

3-14

constitute the approval of the director of the department of business regulation required under

3-15

section 7-1-5. Upon this formation, the domestic mutual insurance company shall be converted to

3-16

a stock insurance company and shall issue to the mutual insurance holding company all of the

3-17

authorized shares of the voting stock of the stock insurance company. The articles of

3-18

incorporation and bylaws of the mutual insurance holding company formed in this manner shall

3-19

provide for all then current policyholders of the converted mutual insurance company to become

3-20

members of the mutual insurance holding company and to retain this membership interest so long

3-21

as the policyholder has a policy in force with the converted mutual insurance company. The

3-22

articles of incorporation and bylaws of the mutual insurance holding company also shall set forth

3-23

the terms and conditions under which future policyholders of the stock insurance company shall

3-24

become members of the mutual insurance holding company. The mutual insurance holding

3-25

company at all times shall retain a majority of the issued and outstanding shares of each class of

3-26

voting stock of the stock insurance company.

3-27

      (2) A domestic mutual insurance company may merge its policyholders' membership

3-28

interests into a mutual insurance holding company previously formed under the provisions of this

3-29

section. Upon the merger, the domestic mutual insurance company shall be converted to a stock

3-30

insurance company and shall issue to the mutual insurance holding company all of the authorized

3-31

shares of voting stock of the stock insurance company. In connection with the merger and in

3-32

accordance with the articles of incorporation and bylaws of the mutual insurance holding

3-33

company, the then current policyholders of the converted mutual insurance company shall

3-34

become members of the mutual insurance holding company and shall retain membership interest

4-1

so long as the policyholder has a policy in force with the converted mutual insurance company.

4-2

The mutual insurance holding company at all times shall retain a majority of the issued and

4-3

outstanding shares of each class of voting stock of the stock insurance company.

4-4

      (3) A domestic mutual insurance company may establish a subsidiary stock insurance

4-5

company in accordance with the provisions of section 7-1-5 (approval of the plan of

4-6

reorganization by the director of the department of business regulation constituting any approval

4-7

required under section 7-1-5) and then transfer to the subsidiary stock insurance company

4-8

substantially all of its assets and liabilities. Upon this transfer, all persons who prior to the

4-9

transfer held policy rights with respect to or other rights as creditors of the mutual insurance

4-10

company shall have those rights solely with respect to the subsidiary stock insurance company

4-11

created and the corresponding liability or obligation of the mutual insurance company to those

4-12

persons shall be assumed by the subsidiary stock insurance company. All policyholders of the

4-13

mutual insurance company at the time of the transfer of assets and liabilities shall continue to

4-14

have a membership interest in the mutual insurance company and the articles of incorporation and

4-15

bylaws of the mutual insurance company shall be amended to provide this. The articles of

4-16

incorporation and bylaws of the mutual insurance company shall also be amended to set forth the

4-17

terms and conditions under which future policyholders of the subsidiary stock insurance company

4-18

shall become members of the mutual insurance company. The mutual insurance company after

4-19

this shall be considered a mutual insurance holding company for the purposes of this section and

4-20

at all times shall retain a majority of the issued and outstanding shares of each class of voting

4-21

stock of the subsidiary stock insurance company.

4-22

      (c) The plan of reorganization shall specify in any detail as may be required by the

4-23

director of the department of business regulation the manner under subsection (b) in which the

4-24

mutual holding company structure shall be created, the capital structure of the stock insurance

4-25

company and the mutual insurance holding company, the management of the stock insurance

4-26

company and the mutual insurance holding company, the purposes for the reorganization, the

4-27

articles of incorporation and bylaws of both the mutual insurance holding company and the stock

4-28

insurance company, and the terms of and use of proceeds from any proposed sale of capital stock

4-29

by the stock insurance company.

4-30

      (d) The corporate existence of any mutual insurance company reorganizing into a mutual

4-31

insurance holding company structure under this section shall not terminate, but the reorganized

4-32

institution shall be deemed to be a continuation of entity of this reorganized mutual insurance

4-33

company.

5-34

      (e) The director of the department of business regulation may employ staff personnel as

5-35

well as professional consultants and other persons to assist in the review of the plan of

5-36

reorganization and may hold public hearings as, in the director's discretion, are desirable prior to

5-37

granting approval of the plan of reorganization. All reasonable costs related to the review of the

5-38

plan of reorganization, including the costs attributable to staff personnel and professional

5-39

consultants, shall be borne by the mutual insurance company filing a plan of reorganization for

5-40

approval.

5-41

      (f) The department of business regulation shall issue rules and regulations implementing

5-42

this section, which shall be administered by the director of the department of business regulation.

5-43

      (g) Subject to applicable provisions of this title, a mutual insurance holding company

5-44

formed pursuant to this section may: (1) invest in the stock of one or more domestic or foreign

5-45

insurance companies; (2) acquire a domestic or foreign insurance company through consolidation

5-46

or merger of the institution with its subsidiary insurance company; (3) merge with another mutual

5-47

insurance holding company; (4) invest in a corporation, the purchase of the capital stock of which

5-48

is permitted for a mutual insurance company under the laws of this state; (5) exercise any other

5-49

power or engage in any activity permitted to a mutual insurance company organized under the

5-50

laws of this state; and (6) exercise the powers and engage directly or indirectly in those activities

5-51

as are now or may after this be permitted for business corporations under Chapter 1.1 of this title

5-52

7.

5-53

      (h) A mutual insurance holding company formed pursuant to this section, subsequent to

5-54

its formation, shall be subject to the provisions of Chapter 35 of this title.

5-55

     SECTION 3. Section 27-10.1-2 of the General Laws in Chapter 27-10.1 entitled "Motor

5-56

Vehicle Damage Appraisers" is hereby amended to read as follows:

5-57

     27-10.1-2. "Motor vehicle physical damage appraiser" defined. -- (a) "Motor vehicle

5-58

physical damage appraiser" means any person, partnership, association, or corporation that

5-59

practices as a business the appraising of damages to motor vehicles insured under automobile

5-60

physical damage policies on or on behalf of third party claimants.

5-61

      (b) A Rhode Island resident business entity acting as a motor vehicle physical damage

5-62

appraiser may elect to obtain a motor vehicle physical damage appraiser license surplus line

5-63

broker license. Application shall be made using the uniform business entity application. Prior to

5-64

approving the application, the commissioner shall find both of the following:

5-65

      (1) The business entity has paid the appropriate fees.

5-66

      (2) The business entity has designated a licensed motor vehicle physical damage

5-67

appraiser responsible for the business entity's compliance with the insurance laws and rules of

5-68

this state.

6-1

     SECTION 4. Section 42-14-2.1 of the General Laws in Chapter 42-14 entitled

6-2

"Department of Business Regulation" is hereby amended to read as follows:

6-3

     42-14-2.1. Reporting by certain insurers -- Settlements. -- (a) Every insurer or entity

6-4

exempt pursuant to section 2.6 of chapter 16 of title 27 or entity permissibly self insured pursuant

6-5

to subsection 2(c) of chapter 14.1 of title 42 providing professional liability insurance to licensed

6-6

healthcare professionals or licensed healthcare facilities shall send a complete report to the board

6-7

of medical licensure and discipline established pursuant to chapter 37 of title 5, or the board of

6-8

examiners in dentistry established pursuant to chapter 31.1 of title 5 and the department of

6-9

business regulation as to any claim, notice, settlement, judgment, or arbitration award of a claim

6-10

or action for damages for death or personal injury caused by such person's negligence, error, or

6-11

omission in practice or his or her rendering of unauthorized professional services. The report shall

6-12

be sent within thirty (30) days after service of such arbitration award on the parties or notice of

6-13

the claim, settlement, judgment, or arbitration award.

6-14

      (b) Notwithstanding any other provision of law, an insurer or entity exempt pursuant to

6-15

section 2.6 of chapter 16 of title 27 or entity permissibly self insured pursuant to subsection 2(c)

6-16

subsection (2) of chapter 14.1 of title 42 providing professional liability coverage to licensed

6-17

healthcare professionals or licensed healthcare facilities shall have the contractual right to settle

6-18

any claim up to the limits of the policy without the insured's consent, unless the policy by its

6-19

express terms prohibits the insurer from settling any claim without the consent of the insured.

6-20

      (c) All insurers doing business in the state of Rhode Island or entity exempt pursuant to

6-21

section 2.6 of chapter 16 of title 27 or entity permissibly self insured pursuant to subsection 2(c)

6-22

subsection (2) of chapter 14.1 of title 42 providing professional liability insurance for health care

6-23

professionals or licensed healthcare facilities shall file an annual report with the commissioner of

6-24

insurance. This report must be filed for each year by March 1 of the next year. The information

6-25

required for each year shall include, for each rating class:

6-26

      (1) The number of insured;

6-27

      (2) The total premiums paid;

6-28

      (3) The total number of claims made, the years in which the incidents giving rise to the

6-29

claims occurred, and the total number of those claims outstanding at the end of the year;

6-30

      (4) The total amount of claims paid, the years in which the incidents giving rise to the

6-31

claims occurred, and the amount of the costs which can be identified with these claims for

6-32

investigation, processing, and defense of these claims; and

6-33

      (5) The number of lawsuits filed.

7-34

     SECTION 5. This act shall take effect upon passage.

=======

LC01223/SUB A

========

EXPLANATION

BY THE LEGISLATIVE COUNCIL

OF

A N A C T

RELATING TO FINANCIAL INSTITUTIONS - DEPARTMENT OF BUSINESS

REGULATION

***

8-1

     This act would correct typographical errors in four banking and insurance statutes.

8-2

     This act would take effect upon passage.

=======

LC01223/SUB A

=======