Plan of Operation
3901-1-18 Ohio fair plan - plan of operation.
| (A) |
Purpose
|
|
The purpose of this rule is for adoption by the superintendent of a plan of operation submitted by the
board of governors of the "Ohio Fair Plan Underwriting Association". The plan of operation has been
formulated for the purpose of making basic property and homeowners' insurance coverage, as identified
in section
3929.42
of the Revised Code, available for qualified property owned by persons who have been
unable to secure such insurance in the normal insurance market.
|
| (B) |
Authority
|
|
This rule is promulgated pursuant to the authority vested in the superintendent under
section 3901.041 of the Revised Code. This plan of operation is adopted pursuant to section
3929.43
of the Revised Code, and implements sections
3929.41 to
3929.49
of the Revised Code.
|
| (C) |
Definitions
|
|
| (1) |
"Association" means the "Ohio Fair Plan Underwriting Association" created under
section 3929.43
of the Revised Code.
|
| (2) |
"Basic property insurance" means insurance against direct loss to property as
defined and limited in standard fire policies and extended coverage endorsements
thereon, as approved by the superintendent, and insurance for such types, classes
and locations of property against the perils of vandalism, malicious mischief,
burglary, theft or liability, as the superintendent shall designate.
The association is also authorized to provide insurance against
the perils of burglary, robbery, and theft for properties. Such coverage is to be provided by
separate policies. Basic property insurance does not include automobile insurance
or insurance on manufacturing risks.
|
| (3) |
“Environmental hazard” means any hazardous condition that might give rise to
loss under an insurance contract, but which is beyond the control of the property
owner.
|
| (4) |
“Insurable risks” means property that meets the reasonable underwriting standards
of the association.
|
| (5) |
“Underwriting standards” means the underwriting standards for basic property
insurance and homeowners’ insurance which have been filed with the superintendent.
|
| (6) |
“Homeowners’ insurance” means insurance on owner-occupied dwellings providing
personal multi-peril property and liability coverages, commonly known as
homeowners’ insurance, subject to underwriting standards, exclusions,
deductibles, rates and conditions as are customarily used by member insurers
for similar coverages.
|
| (7) |
“Location” means real and personal property consisting of and contained in a
single building or in contiguous buildings under one ownership.
|
| (8) |
“Urban area” means the state of Ohio having been so designated by the superintendent.
|
| (9) |
“Superintendent” means the superintendent of insurance of the state of Ohio.
|
| (10) |
“Member insurer” means an insurer required to be a member of the association by
section 3929.43
of the Revised Code.
|
| (11) |
“Licensed agent” means any person licensed by the superintendent pursuant to
section 3905.01 of the Revised Code.
|
| (12) |
“Board” means the board of governors of the association authorized pursuant
to section 3929.43
of the Revised Code.
|
| (13) |
“Applicant” means any person applying for insurance from the association.
|
|
| (D) |
Notice of cancellation by members.
|
|
Member insurers shall provide written notice of cancellation or nonrenewal for any risk
eligible for insurance through the association, (except for non-payment of premium,
evidence of incendiarism, or misrepresentation) not less than thirty days prior to
cancellation or nonrenewal. The notice shall explain to the insured the procedures for
making application to the association. This thirty-day notice shall not apply to binders
of thirty days duration or less.
|
| (E) |
Insurance agents.
|
|
| (1) |
Upon request, a licensed agent shall assist any owner of property in
completing an application for insurance with the association.
|
| (2) |
No licensed agent, although licensed to represent one or more member
insurers of the association, shall hold himself out as an agent of the
association or have any authority to bind any risk for the association.
|
|
| (F) |
Maximum liability, limitations and special coverage.
|
|
| (1) |
The maximum limits of liability for basic property insurance and homeowners’
insurance per location through the association is one million five hundred
thousand dollars. The maximum limit of liability for residential crime
insurance is ten thousand dollars. The maximum limit of liability for
commercial crime insurance is fifteen thousand dollars.
|
| (2) |
The association may require that vandalism and malicious mischief coverage
be written in conjunction with extended coverage.
|
| (3) |
The association is authorized to issue mine subsidence insurance coverage
to its policyholders pursuant to sections 3929.50 to 3929.61 of the Revised
Code and as provided for in the plan of operations of the “Mine Subsidence
Insurance Underwriting Association.”
|
| (4) |
The association is not authorized to provide insurance coverage for
automobiles or manufacturing risks.
|
|
| (G) |
Inspections.
|
|
| (1) |
Any person having an insurable interest in real or tangible personal
property, or both, at a fixed location in Ohio, who has been unable to
obtain basic property insurance or homeowners’ insurance, shall be
granted upon application to the association, an inspection of the
property. The inspection shall be made only of
property requiring an inspection to determine eligibility for fair
plan coverage. The inspection shall be free of charge to the applicant.
|
| (2) |
All inspection reports shall be in writing and shall contain the
information necessary to determine eligibility for coverage pursuant
to the association’s underwriting guide as filed with the superintendent.
|
| (3) |
If an interior inspection is necessary to determine eligibility of property
described in an application submitted to the association:
|
|
| (a) |
The inspector or inspection company shall contact the new
applicant and arrange for the applicant or the person designated
by the applicant to be present during
the inspection. The inspector shall not recommend correction
of physical deficiencies or advise the applicant whether the
association will provide coverage. The inspection report shall
provide any information necessary for underwriting but shall
not refer to environmental hazards. Physical deficiencies
shall be reported on the inspection report. Vacancy or
unoccupancy shall be reported on the inspection report.
|
| (b) |
The inspection report shall contain information describing the
occupancy and other observations of the risk.
|
|
| (4) |
Subsequent to the inspection of a property, the association shall indicate
to the new applicant any condition charges which have been applied by the
association.
|
| (5) |
After the inspection report has been completed, a copy of the completed
inspection report, and any photograph, indicating the pertinent features of
the building, maintenance, and occupancy shall be sent within
ten days to the association.
|
| (6) |
The association shall, within ten business days after receipt of the
inspection report, advise the applicant and his licensed agent that:
|
|
| (a) |
The risk is acceptable, and if condition charges have been
imposed, the improvements necessary to remove the condition
charges; or
|
| (b) |
The risk will be acceptable if the improvements noted in the
report are made by the applicant; or
|
| (c) |
The risk is not acceptable for the reasons stated in the report.
|
|
| (7) |
The association shall not refuse to insure any risk because of an environmental
hazard.
|
| (8) |
The association may, for cause upon information or well-founded belief without
notice to the insured at any time during the policy term, cause a property
insured by it to be inspected for the purpose of determining whether the
property meets the association’s underwriting standards. Reinspections may
also be made upon the request of the insured, for statistical purposes, upon
change in type of occupancy, or upon a reasonable periodic schedule. The
association may, upon the basis of the report of reinspection, refuse to renew
or may cancel a policy in accordance with its terms and this plan of operation.
Any person aggrieved by such decision may appeal, in accordance with paragraph
(I) of this rule. The association need not afford an insured the opportunity to
be present during a reinspection nor furnish the insured with a copy of a
reinspection report. If an insured requests a copy of a reinspection report, the
association shall provide a copy to the insured.
|
| (9) |
If an inspection report shows that a property is in violation of any building,
housing, air pollution, sanitation, health, fire, or safety code, ordinance or
rule, or if an applicant otherwise has received written notice of any violation
of such a code, ordinance of rule, the applicant shall also submit to the
association a detailed plan that indicates the manner and estimated period of
time in which violation will be corrected. If the association is satisfied that
the violations are subject to correction within a reasonable period of time and
that the applicant otherwise meets the requirements of section
3929.44
of the Revised Code, it may issue a policy or binder to the applicant on the
condition that the plan be implemented and completed on schedule and that the
property be reinspected.
|
|
| (H) |
Application and issuance of policy.
|
|
| (1) |
Every policy written by the association shall include an additional policy
condition representing that:
|
|
| (a) |
At least two insurance companies authorized to do business in
Ohio have declined to grant the coverage requested in the
application; and
|
| (b) |
There are no outstanding taxes, assessments, penalties or
charges with respect to the property to be insured; and
|
| (c) |
The applicant has not received written notice from an authorized
public entity stating that his property is in violation of any
building, housing, air pollution, sanitation, health, fire or
safety code, ordinance or rule.
|
|
| (2) |
If the property is in violation of any such code, ordinance or rule, and if
the applicant has received such written notice of any such violation, the
applicant shall submit to the association a detailed plan that indicates the
manner and estimated period of time in which such violations will be corrected.
If the association is satisfied that the violations are subject to correction
within a reasonable period of time and that the applicant otherwise meets the
requirements of section 3929.44 of the Revised Code, it may cause a policy or
binder of basic property insurance to be issued to the applicant on the
condition that the plan be implemented on schedule and that the property be
reinspected.
|
| (3) |
The association is under no obligation to issue basic property insurance or
homeowners insurance to any person, unless that person and his property would
be insurable in the normal insurance market, and such property, except for its
location, would constitute an insurable risk in accordance with reasonable
underwriting standards. The association, in determining whether the property is
insurable, shall give no consideration to the condition of surrounding property
or properties, where such condition is not within the control of the applicant.
|
| (4) |
If a risk is accepted by the association, it shall deliver a policy or binder to
the applicant and if applicable, the licensed insurance agent, upon payment of the premium to
the association. The association shall pay the authorized commission to the
licensed agent as designated by the applicant. The association shall not pay
commission to a nonresident agent. The association may pay commission to a
licensed nonresident business entity agent for assistance provided by an individual
resident agent affiliated with that nonresident business entity agent.
|
| (5) |
The association, upon receipt of the applicable premium from the applicant, shall
issue the policy to be effective the day following receipt of the premium. The
policy shall be issued in the name of the association as provided in section
3929.481
of the Revised Code.
|
| (6) |
The policy shall be issued for a term of one year.
|
| (7) |
If the property is found to be an insurable risk but the inspection reveals
that there are one or more unsatisfactory conditions, charges will be imposed
in conformity with the rating plans on file with the superintendent. If the
unsatisfactory conditions are corrected, and such corrections are verified,
the charges shall be revised.
|
| (8) |
If the association determines that the property is not an acceptable risk, the
association shall, within ten days, send the applicant a written statement setting
forth in reasonable detail the features of the property or conditions which prevent
it from constituting an acceptable risk and the corrections to be made in order to
make the property an acceptable risk.
|
| (9) |
Upon completion of the required corrections by the applicant, the association, when
notified, shall promptly reinspect the property, if such reinspection is necessary
to determine eligibility.
|
|
| (I) |
Binders.
|
|
| (1) |
Each application shall clearly indicate the availability of a binder to an
applicant.
|
| (2) |
A binder shall be issued to the applicant upon payment to the association of the
minimum binder deposit premium and provided the application indicates that the
risk preliminarily meets the association's underwriting standards. The earliest a
binder shall be effective is at one minute after twelve a.m. the day following
receipt of the premium and completed application by the association.
|
| (3) |
If inspection is impossible through no fault of the inspection company,
the association may decline to offer coverage until such time as the property becomes
available for inspection.
|
| (4) |
The binder shall remain in effect until the risk is accepted by the association or
until cancelled and the reasons for cancellation given to the applicant.
|
| (5) |
Binders shall be issued for a definite period, not to exceed one year.
|
| (6) |
| (a) |
If an insurance policy is to be issued, the policy shall
commence on the effective date of the binder. Policies so
issued are not subject to flat cancellation.
|
| (b) |
If an insurance policy will not be issued, the full earned
premium must be charged subject to the rules governing
cancellation of policies.
|
| (c) |
A binder shall be void upon the acceptance of a risk by the
association and the payment of any additional premium
indicated by an inspection; or upon the cancellation of a
risk and notice of reasons for the cancellation given to the
applicant.
|
|
| (7) |
| (a) |
The association shall not cancel a policy or binder issued by
it, except:
|
|
| (i) |
For cause, which would have been grounds for
nonacceptance of the risk had such cause been
known to the association at the time of acceptance;
or
|
| (ii) |
For nonpayment; or
|
| (iii) |
At the request of an insured.
|
|
| (b) |
Notice of cancellation, together with the reasons therefore,
shall be sent to the insured.
|
| (c) |
Any cancellation notice to an insured shall be accompanied by
a statement that the insured has a right to appeal as provided
in paragraph (I) of this rule.
|
|
| (8) |
If a property meets all underwriting requirements, the association shall
compute the actual annual premium from rates approved by the superintendent
of insurance pursuant to Chapter 3935. of the Revised Code. A return premium will be
forwarded to the applicant if the provisional binder premium exceeds the actual
annual premium. The association shall request additional premium if the actual
annual premium exceeds the estimated provisional binder premium.
|
| (9) |
If a property does not meet all underwriting requirements, the association
shall cancel the binder on a pro rata basis. If an applicant requests
cancellation of a binder, the association shall cancel in accordance with
cancellation provisions of the coverage forms approved by the superintendent.
|
|
| (J) |
Right to appeal.
|
|
| (1) |
Any applicant or insured shall have the right to appeal any action or
decision of the association to the board of the association. Such appeal
to the board must be made in writing within thirty days after receipt of
notice of the action or decision of the association. Within forty-five days
from receipt of an appeal, the board, upon no less than ten days notice to
the insured, shall hold a hearing on the appeal. For good cause shown, by
the insured or the association, the hearing may be continued for not more
than sixty days. The board shall render its decision on the appeal and
notify the applicant or insured of its decision no later than ten days
after the hearing. Each denial of insurance to an applicant shall be
accompanied by a statement to the applicant and the licensed agent that
the applicant has the right to appeal.
|
| (2) |
Any applicant, insured, or member insurer shall have the right to appeal
to the superintendent any action or decision of the board. An appeal shall
be made within thirty days of the board’s action or decision. The decision
of the superintendent of an appeal is a final order and is subject to judicial
review as provided in Chapter 119. of the Revised Code.
|
|
| (K) |
Indemnification.
|
|
Each member of any association committee, each association officer, employee, or member
insurer, and each member of the board shall be indemnified against liability incurred in
connection with the affairs of the association. The conditions and limits of such
indemnification are provided in “Article IX of the Constitution,” “Articles of
Agreement” and “Bylaws of the Association.”
|
| (L) |
Fidelity coverage.
|
|
The association shall obtain fidelity coverage to reimburse the association for any pecuniary loss
it may sustain by any act or acts of fraud or dishonesty on the part of members of
the board, association officers or employees in the discharge of their duties.
|
| (M) |
Board of governors.
|
|
| (1) |
The association shall be governed by a board.
|
| (2) |
The board shall meet as often as may be required to perform the general
duties of administration of the association or on the call of the
superintendent. Seven members of the board shall constitute a quorum.
|
| (3) |
The board shall appoint a general manager as administrator who shall
serve at the pleasure of the board and perform such duties as the board
designates.
|
| (4) |
The board may promulgate guidelines consistent with state law and the
plan of operation to govern such internal operations as investments,
personnel, underwriting standards and claims practices. The guidelines
shall be in writing and filed with the superintendent.
|
| (5) |
The board shall undertake a public education program to assure that the
services of the association receive adequate public attention. In
accordance with division (I) of section
3929.43
of the Revised Code, the board shall adopt a written program for decreasing
the overall utilization of the association as a source of insurance.
|
|
| (N) |
Standing committees.
|
|
The board may appoint committees as it deems necessary to carry out the purpose and
operations of the association.
|
| (O) |
Relationship with member insurers.
|
|
| (1) |
The association shall operate as a joint underwriting association insuring
one hundred percent of the risk on behalf of its member insurers. It may
cede or purchase reinsurance in the name of the association or on behalf of
member insurers on eligible risks written through the association.
|
| (2) |
Each member insurer shall participate in the writings, expenses, assessments,
profits and losses of the association in the same proportion as a member
insurer’s premiums written bear to the aggregate premiums written by all
member insurers as determined by the board.
|
| (3) |
There shall be an annual meeting of the association and its member insurers
at a time and place fixed by the superintendent. Representatives of member
insurers on the board shall serve for a period of one year or until
successors are elected or designated.
|
| (4) |
A special meeting may be called at such time and place designated by the
superintendent or upon the written request to the superintendent.
|
| (5) |
Twenty days notice of an annual or special meeting shall be given in writing
by the board to member insurers. A majority of member insurers present at a
meeting shall constitute a quorum. Voting by proxy shall be permitted.
Notice of any meeting shall be accompanied by an agenda for the meeting.
|
| (6) |
Any matter may be proposed and voted upon by regular mail, email or other
electronic means provided such procedure
is unanimously authorized by the members of the board present and voting
at any meeting of the board. If so approved by the board, notice of any
proposal shall be mailed to member insurers not less than twenty days prior
to the final date fixed by the board for voting thereon.
|
| (7) |
At any regular or special meeting at which the vote of member insurers is
or may be required on any proposal, or any vote of member insurers which
may be taken by regular mail, email or other electronic means on any proposal,
votes shall be cast and counted on a weighted basis in accordance with each
member insurer’s respective habitational or commercial premiums written, as
the case may be.
|
|
| (P) |
Member insolvency.
|
|
| (1) |
In the event any member insurer fails to pay the assessment for its
proportionate part of any loss or expense because the member insurer
is insolvent, and the board determines that the assessment cannot be
collected within a reasonable period of time, the unpaid assessment
shall be paid by the remaining member insurers, each contributing in
the manner provided by division (E) of section
3929.43
of the Revised Code, but without regard to the premium writings of
the insolvent member insurer. The insolvent member insurer shall
remain liable to the association for the full amount of the assessment
and any collection made by the association against the assessment shall
be credited and paid back to the other member insurers in the same
proportions as shall have been utilized in calculating each member
insurer’s contribution toward the unpaid assessment.
|
| (2) |
No refund which would otherwise be paid under the plan of operation
shall be paid to a member when its membership has been terminated, or
to the liquidator, receiver, conservator, or statutory successor of a
member insurer until the assessment of the member insurer has been paid.
A refund shall be applied as a set-off against an assessment. Any
balance remaining shall be paid to the member insurer or to the
liquidator, receiver, conservator, or statutory successor of the
member insurer.
|
|
| (Q) |
Advance assessments and recoupments.
|
|
| (1) |
At such times as may be determined by the board and approved by the
superintendent, the board shall establish an annual rate of assessment
needed to cover any deficit arising out of the operation of the association.
The rate of assessment shall be based upon a reasonable estimate of a
deficit expected to occur. The association may levy advance assessments at
that rate against member insurers, payable in periodic installments, subject
to approval by the superintendent.
|
| (2) |
The board may at any time levy an assessment against member insurers to
provide necessary operating funds.
|
| (3) |
Each member insurer may recoup assessments levied against it by adjusting
its premiums for basic property insurance and homeowner’s insurance by the
addition of a rating factor computed from time to time by the board and
approved by the superintendent. The board shall notify all member insurers
of the amount of the rating factor and any changes to it.
|
| (4) |
Any member insurer implementing a change in rates pursuant to division
(D)(2) of section
3929.43
of the Revised Code, shall file the change with the superintendent. The
change shall not increase rates more than the amount authorized by the
association and approved by the superintendent pursuant to the plan.
|
|
| (R) |
Reinsurance.
|
|
No reinsurance plan or proposal of the association shall be implemented prior to
being filed with the superintendent.
|
| (S) |
Statistics.
|
|
| (1) |
Every insurance policy issued by the association shall be separately coded
for statistical purposes.
|
| (2) |
The association shall comply with any reporting requirements of the
superintendent in respect of its underwriting operations and experience.
The reports shall be made at least annually in such form and detail as
may be required by the superintendent under section 3935.03 of the
Revised Code.
|
| (3) |
The association shall report its loss and expense experience to a
statistical organization approved by the superintendent. Its loss and
expense experience shall be reported in a form and according to a plan
filed by the statistical organization with the superintendent.
|
| (4) |
The association shall submit to the superintendent periodic reports
concerning the number of risks inspected, the number of risks accepted,
the number of risks conditionally accepted, the number of reinspections
made and the number of risks declined.
|
|
| (T) |
Distribution of associated funds.
|
|
Ten days prior to the distribution to its member insurers of any funds held by the
association, notification shall be given to the superintendent.
|
| (U) |
Filing of policies and other documents.
|
|
All policies, endorsements, forms, manual rates or rating plans, minimum class rates,
rating schedules, rating rules, and every modification of the same shall be those filed
with the superintendent. The association may file special notice endorsements for review
by the superintendent. In the event that the superintendent approves a rating factor under
paragraph (P)(3) of this rule, such increment shall be applicable to all policies issued
by the association.
|
| (V) |
Annual and quarterly financial statements.
|
|
The association shall file annual and quarterly financial statements with the
superintendent in the form prescribed by the superintendent. Annual financial statements
shall be prepared and furnished to the superintendent on or before March first of the
following year.
|
| (W) |
Examination of books and records.
|
|
The superintendent or any person designated by the superintendent may examine the operation of the
association in accordance with section
3929.45
of the Revised Code. The expenses of the examination shall be paid by the association.
|
| (X) |
Investments.
|
|
The association shall invest its funds in accordance with section 3925.08 of the
Revised Code.
|
| (Y) |
General powers of superintendent.
|
|
| (1) |
The plan of operation and any amendment thereto shall be subject to the
approval of the superintendent and adopted pursuant to Chapter 119 of the
Revised Code.
|
| (2) |
The plan of operation shall be administered under the supervision of the
superintendent.
|
| (3) |
The association shall submit to the superintendent periodic reports as
the superintendent deems necessary.
|
|
| (Z) |
Severability.
|
|
If any paragraph, term or provision of this rule is adjudged invalid for any reason,
the judgement shall not affect, impair or invalidate any other paragraph, term or
provision of this rule, but the remaining paragraphs, terms and provisions shall be
and continue in full force and effect.
|
|