71st OREGON LEGISLATIVE ASSEMBLY--2001 Regular Session
SA to SB 268
LC 597/SB 268-2
SENATE AMENDMENTS TO
SENATE BILL 268
By COMMITTEE ON BUSINESS, LABOR, AND ECONOMIC DEVELOPMENT
April 3
On page 1 of the printed bill, line 3, delete '735.425, ' and
insert '735.405, 735.410, 735.415, 735.420, 735.425, 735.435,'.
In line 4, delete '735.480,' and insert '735.470, 735.475,
735.480, 735.485, 735.490,'.
In line 5, after '744.175,' insert '744.225, 744.227,'.
On page 2, line 2, delete 'who sells, solicits or negotiates'
and insert 'required to be licensed to sell, solicit or
negotiate'.
In line 5, delete ', motor vehicle rental agency'.
In line 8, delete 'who sells, solicits or negotiates' and
insert 'required to be licensed to sell, solicit or negotiate'.
In line 31, after 'on' insert 'or fee for'.
In line 44, after 'commission' insert 'or fee'.
On page 4, line 22, delete '18 (2)' and insert '9'.
In line 34, delete 'an outside' and insert 'a private'.
On page 6, line 24, after 'annuities' insert a period and
delete the rest of the line.
Delete line 25.
In line 34, delete 'contract with'.
Delete lines 35 through 39 and insert 'participate with the
National Association of Insurance Commissioners, or any affiliate
or subsidiary that the National Association of Insurance
Commissioners oversees, in a centralized producer licensing
registry in which insurance agent and producer licenses and
appointments are centrally or simultaneously effected for all
states that require an insurance producer license. The director
may adopt by rule any uniform standards and procedures as are
necessary to participate in the registry, including the
centralized collection of fees for licenses or appointments that
are processed through the registry.'.
In line 44, after 'province' insert a comma and delete ' or'.
In line 45, after 'Mexico' insert 'or in a state that does not
grant nonresident producer licenses to residents of this state on
the same basis that this state grants nonresident agent licenses
under section 7 of this 2001 Act'.
On page 7, delete line 4 and insert 'in Canada, Mexico or the
person's state of residence.'.
In line 23, before the period insert 'or has satisfied
qualifications that the director establishes by rule in lieu of
the qualifications established in this subsection'.
In line 28, after 'Canada' delete the rest of the line and
insert ', in Mexico or in the person's state of residence.'.
On page 8, after line 28, insert:
' (4) The director may recognize one or more industry
designations as exempting an applicant from the prelicensing
education requirement or the examination required in section 5 of
this 2001 Act or both. For each industry designation that the
director recognizes and for the extent of the exemption to be
given, the director shall consider the content, quality and scope
of the educational program required for the designation as well
as other factors determined by the director to be relevant.'.
In line 29, delete '(4)' and insert '(5)'.
On page 10, line 5, delete 'establish' and insert 'make
arrangements, including contracting with a private service, for
establishing and operating'.
In line 8, delete '12' and insert '24'.
On page 11, line 20, after 'agency' insert ', by a Canadian
province or by the government of Mexico'.
On page 14, line 12, delete '(1)'.
Delete lines 17 through 21.
On page 16, after line 13, insert:
' { + SECTION 24b. + } ORS 744.225 is amended to read:
' 744.225. (1) All premium funds received by { - an - }
{ + a resident + } agent shall be accounted for and maintained
in a trust account separate from all other business and personal
funds.
' (2) Except as provided in subsection (3) of this section,
{ - an - } { + a resident + } agent shall not commingle or
otherwise combine premiums with any other moneys.
' (3) { - An - } { + A resident + } agent may commingle
with premium funds in the trust account required by subsection
(1) of this section any additional funds the agent deems prudent
for the purpose of advancing premiums, establishing reserves for
the paying of return premiums, or for any contingencies that may
arise in the course of receiving and transmitting premium or
return premium funds.
' (4) This section does not apply to:
' (a) Any financial institution or trust company, as those
terms are defined in ORS 706.008, or any entity licensed under
ORS chapter 725 or 726.
' (b) Any class of agents that the Director of the Department
of Consumer and Business Services designates by rule. The
director may exempt a class of agent from this section if the
director determines that the requirements of this section are
unduly burdensome to the agents in relation to the public good
served.
' { + SECTION 24c. + } ORS 744.227 is amended to read:
' 744.227. (1) In lieu of the trust account required by ORS
744.225, { - an - } { + a resident + } agent may keep a
certificate of deposit from an institution insured by the federal
government or an instrumentality thereof if the { + resident + }
agent has an average monthly balance of premium funds received
and held for the last 12 months of at least $2 million.
{ - An - } { + A resident + } agent who keeps a certificate of
deposit shall have satisfactory evidence of the certificate
available at all times for inspection by the Director of the
Department of Consumer and Business Services.
' (2) A certificate of deposit authorized under subsection (1)
of this section shall be for an amount at least equal to the
average monthly balance of premium funds received and held by the
{ + resident + } agent for the last 12 months. Nothing in this
subsection requires that the required amount of the certificate
of deposit be calculated, or the amount changed, more often than
once a month.
' (3) The director may adopt rules specifying what constitutes
satisfactory evidence for purposes of subsection (1) of this
section.
' (4) Authorization to use a certificate of deposit may be
revoked by the director at any time upon a determination that the
{ + resident + } agent has failed to comply with the provisions
of this section or rules adopted under subsection (3) of this
section. Upon revocation, the { + resident + } agent shall
comply immediately with the provisions of ORS 744.225.'.
On page 26, after line 24, insert:
' { + SECTION 44a. + } ORS 735.405 is amended to read:
' 735.405. As used in ORS 735.400 to 735.495:
' (1) 'Admitted insurer' means an insurer authorized to do an
insurance business in this state.
' (2) 'Capital' means funds paid in for stock or other evidence
of ownership.
' (3) 'Eligible surplus lines insurer' means a nonadmitted
insurer with which a surplus lines licensee may place surplus
lines insurance.
' (4) 'Export' means to place surplus lines insurance with a
nonadmitted insurer.
' { + (5) 'Insurance producer' has the meaning given that
term in section 2 of this 2001 Act. + }
' { - (5) - } { + (6) + } 'Kind of insurance' means one of
the types of insurance required to be reported in the annual
statement which must be filed with the Director of the Department
of Consumer and Business Services by authorized insurers.
' { - (6) - } { + (7) + } 'Nonadmitted insurer' means an
insurer not authorized to do an insurance business in this state.
This definition shall include insurance exchanges as authorized
under the laws of various states.
' { - (7) - } { + (8) + } 'Producing agent' means the
individual agent dealing directly with the party seeking
insurance.
' { - (8) - } { + (9) + } 'Surplus' means funds over and
above liabilities and capital of the insurer for the protection
of policyholders.
' { - (9) - } { + (10) + } 'Surplus lines licensee' means an
agent licensed under ORS chapter 744 to place insurance on risks
resident, located or to be performed in this state with
nonadmitted insurers eligible to accept such insurance.
' { + SECTION 44b. + } ORS 735.410 is amended to read:
' 735.410. { + (1) + } Insurance may be procured through a
surplus lines licensee from a nonadmitted insurer if:
' { - (1) - } { + (a) + } The insurer is an eligible surplus
lines insurer;
' { - (2) - } { + (b) + } { + A diligent search has first
been made among the insurers who are authorized to transact and
are actually writing the particular kind and class of insurance
in this state, and it is determined that + } the full amount or
kind of insurance cannot be obtained from { + those + } insurers
{ - who are admitted to do business in this state. Such full
amount or kind of insurance may be procured from eligible surplus
lines insurers, provided that a diligent search is made among the
insurers who are admitted to transact and are actually writing
the particular kind and class of insurance in this state - } ;
and
' { - (3) - } { + (c) + } All other requirements of ORS
735.400 to 735.495 are met.
' { + (2) Subsection (1) of this section does not apply to a
placement of surplus lines insurance outside this state by a
nonresident surplus lines licensee or by a nonresident surplus
lines insurance producer who is not licensed to transact surplus
lines insurance in this state when the insurance covers a risk
with exposures both in this state and outside this state, if both
of the following conditions are met:
' (a) If the nonresident surplus lines licensee or insurance
producer is licensed in the state as an insurance producer to
transact surplus lines policies in the state in which the
insurance is placed and is in good standing in that state; and
' (b) If the surplus lines policy complies with all of the
requirements for placement of nonadmitted insurance in the state
in which the insurance is placed.
' (3) The Director of the Department of Consumer and Business
Services by rule may establish requirements applicable to the
placement of surplus lines insurance outside this state by a
nonresident surplus lines licensee or by a nonresident surplus
lines insurance producer who is not licensed in this state, when
the insurance covers a risk with exposures both in this state and
outside this state. The rules may include such matters as the
procurement of surplus lines insurance, eligibility of the
insurer, the conditions under which surplus lines insurance may
be obtained, the necessary evidence of insurance, filing
requirements and other matters necessary for regulation of
surplus lines insurance transactions that affect risk exposures
in this state. The rules may not interfere with or hinder
implementation of the federal Gramm-Leach-Bliley Act (P.L.
106-102) with respect to licensing reciprocity among the
states. + }
' { + SECTION 44c. + } ORS 735.415 is amended to read:
' 735.415. { + (1) + } { - No - } { + A + } surplus lines
licensee { - shall - } { + may not + } place any coverage
with a nonadmitted insurer unless at the time of placement
{ - such - } { + the + } nonadmitted insurer has { + done all
of the following + }:
' { - (1) - } { + (a) + } Established satisfactory evidence
of good repute and financial integrity.
' { - (2) - } { + (b) + } Qualified under one of the
following { - paragraphs - } { + subparagraphs + }:
' { - (a) - } { + (A) + } Has capital and surplus or its
equivalent under the laws of its domiciliary jurisdiction { - ,
which - } { + that + } equals { + either + } { - : - }
' { - (A) - } the minimum capital and surplus requirements
under the laws of this state { - ; - } or
' { - (B) $3 million upon enactment, and $3.5 million three
years after enactment, and $4.5 million five years after
enactment, and - } $5 million { + , + } { - six years after
enactment, whichever is greater. After six years from
enactment, - } { + except that + } the requirements of this
{ - subparagraph - } { + paragraph + } may be satisfied by an
insurer possessing less than $5 million capital and surplus upon
an affirmative finding of acceptability by the Director of the
Department of Consumer and Business Services. The finding shall
be based upon such factors as quality of management, capital and
surplus of any parent company, company underwriting profit and
investment income trends and company record and reputation within
the industry. In no event shall the director make an affirmative
finding of acceptability when the surplus lines insurer's capital
and surplus is less than $3 million { - ; - } { + . + }
' { - (b) - } { + (B) + } Except as otherwise provided in
{ - paragraph (c) of this subsection - } { + subparagraph (C)
of this paragraph, + } an alien insurer qualifies under this
subsection if it maintains in the United States an irrevocable
trust fund in either a national bank or a member of the Federal
Reserve System, in an amount not less than $1.5 million for the
protection of all its policyholders in the United States and such
trust fund consists of cash, securities, irrevocable letters of
credit, or of investments of substantially the same character and
quality as those which are eligible investments for the capital
and statutory reserves of admitted insurers authorized to write
like kinds of insurance in this state. Such trust fund, which
shall be included in any calculation of capital and surplus or
its equivalent, shall have an expiration date which at no time
shall be less than five years { + . + } { - ; - }
' { - (c) - } { + (C) + } In the case of a group of insurers
that includes incorporated and individual unincorporated
underwriters, maintains a trust fund of not less than $50 million
as security to the full amount thereof for all policyholders and
creditors in the United States of each member of the group, and
such trust shall likewise comply with the terms and conditions
established in { - paragraph (b) of this subsection - }
{ + subparagraph (B) of this paragraph + } for alien
insurers { + , + } { - provided, however, - } { + except + }
that the incorporated members of the group shall not be engaged
in any business other than underwriting as a member of the group
and shall be subject to the same level of solvency regulation and
control by the group's domiciliary regulators as are the
unincorporated members { - ; or - } { + . + }
' { - (d) - } { + (D) + } In the case of an insurance
exchange created by the laws of individual states, maintains
capital and surplus, or the substantial equivalent thereof, of
not less than $15 million in the aggregate. For insurance
exchanges { - which - } { + that + } maintain funds for the
protection of all insurance exchange policyholders, each
individual syndicate shall maintain minimum capital and surplus,
or the substantial equivalent thereof, of not less than $1.5
million. In the event the insurance exchange does not maintain
funds for the protection of all insurance exchange policyholders,
each individual syndicate shall meet the minimum capital and
surplus requirements of { - paragraph (a) of this
subsection - } { + subparagraph (A) of this paragraph + }.
' { - (3) - } { + (c) + } Provided to the director no more
than six months after the close of the period reported upon a
certified copy of its current annual statement { - which - }
{ + that + } is:
' { - (a) - } { + (A) + } Filed with and approved by the
regulatory authority in the domicile of the nonadmitted insurer;
' { - (b) - } { + (B) + } Certified by an accounting or
auditing firm licensed in the jurisdiction of the insurer's
domicile; or
' { - (c) - } { + (C) + } In the case of an insurance
exchange, an aggregate combined statement of all underwriting
syndicates operating during the period reported.
' { + (2) When a nonresident surplus lines licensee or
nonresident surplus lines insurance producer who is not licensed
to transact surplus lines insurance in this state places surplus
lines insurance outside this state that covers a risk with
exposures both in this state and outside this state, the licensee
or insurance producer is not subject to the requirements of
subsection (1) of this section if the nonadmitted insurer with
which the coverage is placed:
' (a) Meets the requirements for nonadmitted placement of
insurance in the state in which the insurance is placed; or
' (b) Is an authorized or admitted insurer in the state in
which the insurance is placed. + }
' { + SECTION 44d. + } ORS 735.420 is amended to read:
' 735.420. (1) The Director of the Department of Consumer and
Business Services may declare a surplus lines insurer
{ + described in ORS 735.415 (1) + } ineligible if the director
has reason to believe that the surplus lines insurer:
' (a) Is in unsound financial condition;
' (b) Is no longer eligible under ORS 735.415;
' (c) Has willfully violated the laws of this state; or
' (d) Does not make reasonably prompt payment of just losses
and claims in this state or elsewhere.
' (2) The director shall promptly mail notice of all such
declarations to each surplus lines licensee.'.
In line 26, after 'insurance' insert 'in this state'.
In line 43, after 'under' insert 'subsection (1) of'.
After line 45, insert:
' (3) A nonresident surplus lines licensee or nonresident
insurance producer who places a surplus lines policy on a risk
with exposures located both in this state and outside this state
shall satisfy filing requirements established by the director by
rule. The director shall ensure that the rules facilitate
interstate regulation of surplus lines insurance transactions.
' { + SECTION 45a. + } ORS 735.435 is amended to read:
' 735.435. (1) Upon placing surplus lines insurance, the
surplus lines licensee shall promptly deliver to the insured or
the producing agent the policy, or if such policy is not then
available, a certificate as described in subsection (4) of this
section, cover note, binder or other evidence of insurance. The
certificate, as described in subsection (4) of this section,
cover note, binder or other evidence of insurance shall be
executed by the surplus lines licensee and shall show the
description and location of the subject of the insurance,
coverages including any material limitations other than those in
standard forms, a general description of the coverages of the
insurance, the premium and rate charged and taxes to be collected
from the insured, and the name and address of the insured and
surplus lines insurer or insurers and proportion of the entire
risk assumed by each, and the name of the surplus lines licensee
and the licensee's license number.
' (2) No surplus lines licensee shall issue or deliver any
evidence of insurance or represent that insurance will be or has
been written by any eligible surplus lines insurer, unless the
licensee has authority from the insurer to cause the risk to be
insured, or has received information from the insurer in the
regular course of business that such insurance has been granted.
' (3) If, after delivery of any such evidence of insurance,
there is any change in the identity of the insurers, or the
proportion of the risk assumed by any insurer, or any other
material change in coverage as stated in the surplus lines
licensee's original evidence of insurance, or in any other
material as to the insurance coverage so evidenced, the surplus
lines licensee shall promptly issue and deliver to the insured or
the original producing agent an appropriate substitute for, or
indorsement of the original document, accurately showing the
current status of the coverage and the insurers responsible
thereunder.
' (4) As soon as reasonably possible after the placement of any
such insurance the surplus lines licensee shall deliver a copy of
the policy or, if not available, a certificate of insurance to
the insured or producing agent to replace any evidence of
insurance theretofore issued. Each certificate or policy of
insurance shall contain or have attached thereto a complete
record of all policy insuring agreements, conditions, exclusions,
clauses, indorsements or any other material facts that would
regularly be included in the policy.
' (5) Any surplus lines licensee who fails to comply with the
requirements of this section shall be subject to the penalties
provided.
' (6) Every evidence of insurance negotiated, placed or
procured under the provisions of ORS 735.400 to 735.495 issued by
the surplus lines licensee shall bear the name of the licensee
and the following legend in bold type: 'This is evidence of
insurance procured and developed under the Oregon surplus lines
laws. It is NOT covered by the provisions of ORS 734.510 to
734.710 relating to the Oregon Insurance Guaranty Association. If
the insurer issuing this insurance becomes insolvent, the Oregon
Insurance Guaranty Association has no obligation to pay claims
under this evidence of insurance. '
' { + (7) The Director of the Department of Consumer and
Business Services by rule may establish requirements relating to
evidence of insurance and other applicable requirements governing
placement of insurance by a nonresident surplus lines licensee
outside this state that covers a risk with exposures located both
in this state and outside this state. + } ' .
On page 27, line 6, after the period insert 'The prohibition in
this subsection does not apply to a nonresident surplus lines
licensee or to a nonresident surplus lines producer who is not a
licensee in this state if:
' (a) The insurance contract covers a risk with exposures both
in this state and outside this state;
' (b) Procurement of the insurance contract described in
paragraph (a) of this subsection did not occur in this state; and
' (c) The licensee or producer is licensed to transact surplus
lines insurance in the state in which the insurance contract
described in paragraph (a) of this subsection was procured.'.
Delete line 10.
In line 11, delete '(a)' and delete 'sections 2 to 19 ' and
insert 'section 7'.
In line 13, delete 'paragraph' and insert 'subsection'.
Delete lines 15 through 26.
On page 28, after line 19, insert:
' (3) For the purpose of collecting taxes on insurance covering
the Oregon portion of risks when the insurance is placed outside
this state and covers a risk with exposures located both in this
state and outside this state, the director may establish by rule
requirements for filing reports on surplus lines insurance
transacted outside this state on risks with exposures located
both in this state and outside this state.
' { + SECTION 48a. + } ORS 735.470 is amended to read:
' 735.470. (1) The surplus lines licensee shall pay the
Director of the Department of Consumer and Business Services an
amount equal to the tax which would have been imposed under ORS
731.816 (1993 Edition) if that section were in effect and
operative, and the tax which is imposed by ORS 731.820, on
authorized insurers for the premiums shown in the report required
by ORS 735.465. The tax shall be collected by the surplus lines
licensee as specified by the director, in addition to the full
amount of the gross premium charged by the insurer for the
insurance. The tax on any portion of the premium unearned at
termination of insurance having been credited by the state to the
licensee shall be returned to the policyholder directly by the
surplus lines licensee or through the producing agent, if any.
The surplus lines licensee is prohibited from absorbing such tax
and from rebating for any reason, any part of such tax.
' (2) The surplus lines tax is due quarterly on the 45th day
following the calendar quarter in which the premium is collected.
The tax shall be paid to and reported on forms prescribed by the
director or upon the director's order paid to and reported on
forms prescribed by the surplus lines association.
' (3) Notwithstanding subsection (2) of this section, if a
surplus lines license is terminated or nonrenewed for any reason,
the taxes described in this section are due on the 30th day after
the termination or nonrenewal.
' (4) In applying ORS 731.816 (1993 Edition) for purposes of
this section, the rate shall be two percent rather than two and
one-quarter percent.
' { + (5) The director by rule shall establish procedures for
payment of taxes on the Oregon portion of risks covered by
surplus lines insurance policies transacted outside this state
that cover risks with exposures both in this state and outside
this state. + }
' { + SECTION 48b. + } ORS 735.475 is amended to read:
' 735.475. If the tax collectible by a surplus lines licensee
under ORS 735.400 to 735.495 is not paid within the time
prescribed, the same shall be recoverable in a suit brought by
the Director of the Department of Consumer and Business Services
against the surplus lines licensee { - and the surety on the
bond filed under ORS 735.450 - } .'.
Delete line 33.
In line 34, delete '(7)' and insert '(6)'.
In line 35, delete '(8)' and insert '(7)'.
After line 36, insert:
' { + SECTION 49a. + } ORS 735.485 is amended to read:
' 735.485. (1) A surplus lines insurer may be sued upon any
cause of action arising in this state under any surplus lines
insurance contract made by it or evidence of insurance issued or
delivered by the surplus lines licensee pursuant to the procedure
provided in ORS 735.490. Any surplus lines policy issued by the
surplus lines licensee shall contain a provision stating the
substance of this section and designating the person to whom
process shall be delivered.
' (2) Each surplus lines insurer assuming surplus lines
insurance shall be considered thereby to have subjected itself to
ORS 735.400 to 735.495.
' (3) The remedies provided in this section are in addition to
any other methods provided by law for service of process upon
insurers. { +
' (4) A surplus lines insurance contract covering risks with
exposures both in this state and outside this state that is
placed outside this state by a nonresident surplus lines
licensee, and the surplus lines insurer of the contract, are not
subject to the provisions of subsection (2) of this section or
ORS 735.490:
' (a) If the nonresident surplus lines licensee is currently
licensed as an insurance producer authorized to transact surplus
lines insurance contracts in the state in which the surplus lines
insurance contract is placed and is in good standing in that
state; and
' (b) If the surplus lines insurance contract complies with all
of the requirements for placement of nonadmitted insurance in the
state in which the surplus lines insurance contract is placed.
' (5) When a nonresident surplus lines insurance producer who
is not a surplus lines licensee in this state transacts outside
this state a surplus lines insurance contract covering risks with
exposures both in this state and outside this state, the producer
and the surplus lines insurer of the contract are subject to this
section and to ORS 735.490 or to rules adopted by the director in
lieu thereof unless:
' (a) The producer is currently licensed to transact surplus
lines policies in the state in which the surplus lines insurance
contract is placed and is in good standing in that state; and
' (b) The surplus lines insurance contract complies with all of
the requirements for placement of nonadmitted insurance in the
state in which the surplus lines insurance contract is
placed. + }
' { + SECTION 49b. + } ORS 735.490 is amended to read:
' 735.490. (1) An insurer transacting insurance under the
provisions of ORS 735.400 to 735.495 may be sued upon any cause
of action, arising under any policy of insurance so issued and
delivered by it, in the courts for the county where the agent who
registered or delivered such policy resides or transacts
business, by the service of summons and complaint made upon such
agent for such insurer.
' (2) Any such agent served with summons and complaint in any
such cause shall forthwith mail the summons and complaint, or a
true and complete copy thereof, by registered or certified mail
with proper postage affixed and properly addressed, to the
insurer being sued.
' (3) The insurer shall have 40 days from the date of the
service of the summons and complaint upon such agent in which to
plead, answer or defend any such cause.
' (4) Upon service of summons and complaint upon such agent for
such insurer, the court in which the action is begun shall be
deemed to have duly acquired personal jurisdiction of the
defendant insurer so served.
' { + (5) An insurer and policyholder may agree to waive the
provisions of subsections (1) to (4) of this section governing
service and venue with respect to a surplus lines insurance
contract for commercial property and casualty risk if the waiver
is specifically referred to in the contract or in an indorsement
attached to the contract. + } ' .
On page 42, line 6, delete '24' and insert '24c'.
In line 10, delete '24' and insert '24c'.
In line 13, delete '24' and insert '24c'.
In line 15, delete '24' and insert '24c'.
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