Chapter 175 Oregon Laws 2005

AN ACT

SB 837

Relating to self-insurance programs by public bodies; creating new provisions; and amending ORS 30.282, 278.215, 561.400 and 731.036.

Be It Enacted by the People of the State of Oregon:

SECTION 1. ORS 731.036 is amended to read:

731.036. The Insurance Code does not apply to any of the following to the extent of the subject matter of the exemption:

(1) A bail bondsman, other than a corporate surety and its agents.

(2) A fraternal benefit society that has maintained lodges in this state and other states for 50 years prior to January 1, 1961, and for which a certificate of authority was not required on that date.

(3) A religious organization providing insurance benefits only to its employees, which organization is in existence and exempt from taxation under section 501(c)(3) of the federal Internal Revenue Code on September 13, 1975.

(4) Public bodies, as defined in ORS 30.260, that either individually or jointly establish a self-insurance [fund] programfor tort liability in accordance with ORS 30.282.

(5) Public bodies, as defined in ORS 30.260, that either individually or jointly establish a self-insurance [fund] programfor property damage in accordance with ORS 30.282.

(6) Cities, counties, school districts, community college districts, community college service districts or districts, as defined in ORS 198.010 and 198.180, that either individually or jointly insure for health insurance coverage, excluding disability insurance, their employees or retired employees, or their dependents, or students engaged in school activities, or combination of employees and dependents, with or without employee or student contributions, if all of the following conditions are met:

(a) The individual or jointly self-insured program meets the following minimum requirements:

(A) In the case of a school district, community college district or community college service district, the number of covered employees and retired employees aggregates at least 1,000 individuals;

(B) In the case of an individual public body program other than a school district, community college district or community college service district, the number of covered employees and retired employees aggregates at least 500 individuals; and

(C) In the case of a joint program of two or more public bodies, the number of covered employees and retired employees aggregates at least 1,000 individuals, or the annual contributions to the program aggregate at least $500,000;

(b) The individual or jointly self-insured health insurance program includes all coverages and benefits required of group health insurance policies under ORS chapter 743;

(c) The individual or jointly self-insured program must have program documents that define program benefits and administration;

(d) Enrollees must be provided copies of summary plan descriptions including:

(A) Written general information about services provided, access to services, charges and scheduling applicable to each enrollee’s coverage;

(B) The program’s grievance and appeal process; and

(C) Other group health plan enrollee rights, disclosure or written procedure requirements established under ORS chapter 743;

(e) The financial administration of an individual or jointly self-insured program must include the following requirements:

(A) Program contributions and reserves must be held in separate accounts and used for the exclusive benefit of the program;

(B) The program must maintain adequate reserves. Reserves may be invested in accordance with the provisions of ORS chapter 293. Reserve adequacy must be [annually] calculated annually with proper actuarial calculations including the following:

(i) Known claims, paid and outstanding;

(ii) A history of incurred but not reported claims;

(iii) Claims handling expenses;

(iv) Unearned contributions; and

(v) A claims trend factor; and

(C) The program must maintain adequate reinsurance against the risk of economic loss in accordance with the provisions of ORS 742.065 unless the program has received written approval for an alternative arrangement for protection against economic loss from the Director of the Department of Consumer and Business Services;

(f) The individual or jointly self-insured program must have sufficient personnel to service the employee benefit program or must contract with a third party administrator licensed under ORS chapter 744 as a third party administrator to provide such services;

(g) The individual or jointly self-insured program shall be subject to assessment in accordance with ORS 735.614 and former enrollees shall be eligible for portability coverage in accordance with ORS 735.616;

(h) The public body, or the program administrator in the case of a joint insurance program of two or more public bodies, files with the Director of the Department of Consumer and Business Services copies of all documents creating and governing the program, all forms used to communicate the coverage to beneficiaries, the schedule of payments established to support the program and, annually, a financial report showing the total incurred cost of the program for the preceding year. A copy of the annual audit required by ORS 297.425 may be used to satisfy the financial report filing requirement; and

(i) Each public body in a joint insurance program is liable only to its own employees and no others for benefits under the program in the event, and to the extent, that no further funds, including funds from insurance policies obtained by the pool, are available in the joint insurance pool.

(7) All ambulance services.

(8) A person providing either or both of the services described in this subsection in connection with motor vehicles. The exemption under this subsection does not apply to an authorized insurer providing such services under an insurance policy. This subsection applies to the following services:

(a) Towing service.

(b) Emergency road service, which means adjustment, repair or replacement of the equipment, tires or mechanical parts of a motor vehicle in order to permit the motor vehicle to be operated under its own power.

(9)(a) A person described in this subsection who, in an agreement to lease or to finance the purchase of a motor vehicle, agrees to waive for no additional charge the amount specified in paragraph (b) of this subsection upon total loss of the motor vehicle because of physical damage, theft or other occurrence, as specified in the agreement. The exemption established in this subsection applies to the following persons:

(A) The seller of the motor vehicle, if the sale is made pursuant to a motor vehicle retail installment contract.

(B) The lessor of the motor vehicle.

(D) The assignee of a person described in this paragraph.

(b) The amount waived pursuant to the agreement shall be the difference, or portion thereof, between the amount received by the seller, lessor, lender or assignee, as applicable, which represents the actual cash value of the motor vehicle at the date of loss, and the amount owed under the agreement.

SECTION 2. ORS 30.282 is amended to read:

30.282. (1) The governing body of any local public body may procure insurance against:

(a) Tort liability of the public body and its officers, employees and agents acting within the scope of their employment or duties[, and]; or

(b) Property damage.

(2) In addition to, or in lieu [thereof] of procuring insurance, the governing body may establish a self-insurance [fund] program against [such] the tort liability of the public body and its officers, employees and agents [and] or against property damage. If the public body has authority to levy taxes, it may include in its levy an amount sufficient to establish and maintain [such a fund] a self-insurance program on an actuarially sound basis.

[(2)] (3) Notwithstanding any other provision of law, two or more local public bodies may jointly provide by intergovernmental agreement for anything [which subsection (1)] that subsections (1) and (2) of this section [authorizes] authorize individually.

[(3)] (4) As an alternative or in addition to establishment of a self-insurance [fund] program or purchase of insurance or both, the governing body of any local public body and the Oregon Department of Administrative Services may contract for payment by the public body to the department of assessments determined by the department to be sufficient, on an actuarially sound basis, to cover the potential liability of the public body and its officers, employees or agents acting within the scope of their employment or duties under ORS 30.260 to 30.300, and costs of administration, or to cover any portion of potential liability, and for payment by the department of valid claims against the public body and its officers, employees and agents acting within the scope of their employment or duties. The department may provide the public body evidence of insurance by issuance of a certificate or policy.

[(4)] (5) Assessments paid to the department under subsection [(3)] (4) of this section shall be paid into the Insurance Fund created under ORS 278.425, and claims paid and administrative costs incurred under subsection [(3)] (4) of this section shall be paid out of the Insurance Fund, and moneys in the Insurance Fund are continuously appropriated for those purposes. When notice of any claim is furnished as provided in the agreement, the claim shall be handled and paid, if appropriate, in the same manner as a claim against a state agency, officer, employee or agent, without regard to the amount the local public body has been assessed.

(6) A self-insurance program established by three or more public bodies under subsections (2) and (3) of this section is subject to the following requirements:

(a) The annual contributions to the program must amount in the aggregate to at least $1 million.

(b) The program must provide documentation that defines program benefits and administration.

(c) Program contributions and reserves must be held in separate accounts and used for the exclusive benefit of the program.

(d) The program must maintain adequate reserves. Reserve adequacy shall be calculated annually with proper actuarial calculations including the following:

(A) Known claims, paid and outstanding;

(B) Estimate of incurred but not reported claims;

(C) Claims handling expenses;

(D) Unearned contributions; and

(E) A claims trend factor.

(e) The program must maintain an unallocated reserve account equal to 25 percent of annual contributions, or $250,000, whichever is greater. As used in this paragraph, “unallocated reserves” means the amount of funds determined by a licensed independent actuary to be greater than what is required to fund outstanding claim liabilities, including an estimate of claims incurred but not reported.

(f) The program must make an annual independently audited financial statement available to the participants of the program.

(g) The program must maintain adequate excess or reinsurance against the risk of economic loss.

(h) The program, a third party administrator or an owner of a third party administrator may not collect commissions or fees from an insurer.

(7) A program operated under subsection (6) of this section that fails to meet any of the listed requirements for a period longer than 30 consecutive days shall be dissolved and any unallocated reserves returned in proportional amounts based on the contributions of the public body to the public bodies that established the program within 90 days of the failure.

(8) A public body as defined in ORS 30.260 (4)(b), (c) or (d) may bring an action against a program operated under subsection (6) of this section if the program fails to comply with the requirements listed in subsection (6) of this section.

SECTION 3. The amendments to ORS 30.282 by section 2 of this 2005 Act apply to a self-insurance fund or a self-insurance program established before, on or after the effective date of this 2005 Act.

SECTION 4. ORS 278.215 is amended to read:

278.215. (1) Any insurance or self-insurance provided by moneys from the Insurance Fund for or on account of the operation of motor vehicles within the state’s or public body’s control, shall provide the uninsured motorist coverage required under ORS 742.500 to 742.504 and, except as specified in ORS 278.205, may provide the personal injury protection benefits required under ORS 742.520 to 742.542.

(2) Any local public body, as defined in ORS 30.260, which establishes a self-insurance [fund] program under ORS 30.282 for or on account of the operation of motor vehicles within the local public body’s control, shall provide the uninsured motorist coverage required under ORS 742.500 to 742.504 and may provide the personal injury protection benefits required under ORS 742.520 to 742.542.

(3) The uninsured motorist coverage provided under this section shall be excess over any other collateral benefits to which an injured person is entitled, including, but not limited to, other uninsured motorist coverage, insurance benefits, governmental benefits or gratuitous benefits.

SECTION 5. ORS 561.400 is amended to read:

561.400. (1) There is established within the State Department of Agriculture a Natural Resources Division which shall have the duties and powers conferred by subsection (2) of this section, by ORS 568.210 to 568.808 and 568.900 to 568.933 and by the Director of Agriculture. The administrator of the division shall be appointed by the director under ORS 561.050 after consultation with the Soil and Water Conservation Commission.

(2) In addition to other duties and powers, the division is authorized:

(a) To review and approve or disapprove all projects, practices, budgets, contracts or regulations of soil and water conservation districts organized under ORS 568.300 to 568.790;

(b) To keep the directors of the soil and water conservation districts informed of the activities and experiences of other districts, to assist in the interchange of advice and information among the districts, and to promote cooperation among the districts;

(d) To solicit the cooperation and assistance of any department or agency of the United States or other department or agency of this state;

(e) To disseminate information concerning the activities and programs of soil and water conservation districts and encourage formation of such districts in areas where they would be desirable and feasible;

(f) To receive, from any source, materials, machinery and equipment and to transfer such to any soil and water conservation district under terms and conditions deemed appropriate, including payment by the district for costs of delivery or use;

(g) To receive from any public or private source, donations, gifts and grants for the furtherance of soil and water conservation, the provisions of ORS 568.225 or the protection of natural resources affecting agriculture, which moneys are continuously appropriated to the department for the administration of the Natural Resources Division and functions related thereto and for furnishing support and financial assistance for the projects and activities of soil and water conservation districts or other projects and activities relating to natural resources affecting agriculture or consistent with ORS 568.225;

(h) To establish the procedures for developing and implementing extended stream bank erosion plans under ORS 561.403;

(i) To review and evaluate documents and proposals of the federal government, agencies of the State of Oregon, counties, cities, other governmental bodies or subdivisions thereof relating to natural resources affecting agriculture or consistent with ORS 568.225; and

(j) To assist in the development of agricultural management procedures and practices relating to natural resources for the prevention of soil erosion and water contamination or enhancement of water quality and quantity.

(3) The administrator of the division shall coordinate any activities of the Natural Resources Division related to a watershed enhancement project approved by the Oregon Watershed Enhancement Board under ORS 541.375 with activities of other cooperating state and federal agencies participating in the project.

(4) In addition to or in lieu of the coverage provided pursuant to ORS 30.282 [(3)] (4), the Oregon Department of Administrative Services may provide to soil and water conservation districts and their officers, employees and agents acting within the scope of their employment or duties, protection against liability as part of the insurance provided to the State Department of Agriculture pursuant to ORS 278.120 to 278.215. The Oregon Department of Administrative Services shall determine any additional contributions to be apportioned to the State Department of Agriculture under ORS 278.110 for extending insurance to soil and water conservation districts, and the State Department of Agriculture shall pay the assessments from such moneys as may be available therefor.

Approved by the Governor June 7, 2005

Filed in the office of Secretary of State June 8, 2005

Effective date January 1, 2006

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