§ 58-37-35. The Facility; functions; administration.
§ 58‑37‑35. TheFacility; functions; administration.
(a) The operation ofthe Facility shall assure the availability of motor vehicle insurance to anyeligible risk and the Facility shall accept all placements made in accordancewith this Article, the plan of operation adopted pursuant thereto, and anyamendments to either.
(b) The Facility shallreinsure for each coverage available in the Facility to the standard percentageof one hundred percent (100%) or lesser equitable percentage established in theFacility's plan of operation as follows:
(1) For the followingcoverages of motor vehicle insurance and in at least the following amounts ofinsurance:
a. Bodily injuryliability: thirty thousand dollars ($30,000) each person, sixty thousanddollars ($60,000) each accident;
b. Property damageliability: twenty‑five thousand dollars ($25,000) each accident;
c. Medical payments:one thousand dollars ($1,000) each person; except that this coverage shall notbe available for motorcycles;
d. Uninsured motorist:thirty thousand dollars ($30,000) each person; sixty thousand dollars ($60,000)each accident for bodily injury; twenty‑five thousand dollars ($25,000)each accident property damage (one hundred dollars ($100.00) deductible);
e. Any other motorvehicle insurance or financial responsibility limits in the amounts required byany federal law or federal agency regulation; by any law of this State; or byany rule duly adopted under Chapter 150B of the General Statutes or by theNorth Carolina Utilities Commission.
(2) Additional cedingprivileges for motor vehicle insurance shall be provided by the Board ofGovernors up to the following:
a. Bodily injuryliability: one hundred thousand dollars ($100,000) each person, three hundredthousand dollars ($300,000) each accident;
b. Property damageliability: fifty thousand dollars ($50,000) each accident;
c. Medical payments:two thousand dollars ($2,000) each person; except that this coverage shall notbe available for motorcycles;
d. Underinsuredmotorist: one million dollars ($1,000,000) each person and each accident forbodily injury liability; and
e. Uninsured motorist:one million dollars ($1,000,000) each person and each accident for bodilyinjury and fifty thousand dollars ($50,000) each accident for property damage(one hundred dollars ($100.00) deductible).
(2a) For persons who mustmaintain liability coverage limits above those available under subdivision (2)of this subsection in order to obtain or continue coverage under personalexcess liability or personal "umbrella" insurance policies,additional ceding privileges for motor vehicle insurance shall be provided bythe Board of Governors up to the following:
a. Bodily injuryliability: two hundred fifty thousand dollars ($250,000) each person, fivehundred thousand dollars ($500,000) each accident.
b. Property damageliability: one hundred thousand dollars ($100,000) each accident.
c. Medical payments:five thousand dollars ($5,000) each person; except that this coverage shall notbe available for motorcycles.
d. Uninsured motorist:one hundred thousand dollars ($100,000) each accident for property damage (onehundred dollars ($100.00) deductible).
(3) Whenever theadditional ceding privileges are provided as in G.S. 58‑37‑35(b)(2)for any component of motor vehicle insurance, the same additional cedingprivileges shall be available to "all other" types of risks subjectto the rating jurisdiction of the North Carolina Rate Bureau.
(c) The Facility shallrequire each member to adjust losses for ceded business fairly and efficientlyin the same manner as voluntary business losses are adjusted and to effectsettlement where settlement is appropriate.
(d) The Facility shallbe administered by a Board of Governors. The Board of Governors shall consistof 12 members having one vote each from the classifications specified in thissubsection and the Commissioner, who shall serve ex officio without vote. EachFacility insurance company member serving on the Board shall be represented bya senior officer of the company. Not more than one company in a group under thesame ownership or management shall be represented on the Board at the sametime. Five members of the Board shall be selected by the member insurers, whichmembers shall be fairly representative of the industry. To insurerepresentative member insurers, one each shall be selected from the following:the American Insurance Association (or its successors), the Property CasualtyInsurers Association of America (or its successors), stock insurers notaffiliated with those trade associations, nonstock insurers not affiliated withthose trade associations, and the industry at large regardless of tradeaffiliation. The at‑large insurer shall be selected by the insurercompany members of the Board. The Commissioner shall appoint two members of theBoard who are Facility insurance company members domiciled in this State. TheCommissioner shall appoint five members of the Board who shall be fire andcasualty insurance agents licensed in this State and actively engaged in writingmotor vehicle insurance in this State. The term of office of the Board membersshall be three years. All members of the Board of Governors shall serve untiltheir successors are selected and qualified and the Commissioner may fill anyvacancy on the Board from any of the classifications specified in thissubsection until the vacancies are filled in accordance with this Article. TheBoard of Governors of the Facility shall also have as nonvoting members twopersons who are not employed by or affiliated with any insurance company or theDepartment and who are appointed by the Governor to serve at the Governor'spleasure.
(e) The Commissionerand member companies shall provide for a Board of Governors. The Board ofGovernors shall elect from its membership a chair and shall meet at the call ofthe chair or at the request of four members of the Board of Governors. Thechair shall retain the right to vote on all issues. Seven members of the Boardof Governors shall constitute a quorum. The same member may not serve as chairfor more than two consecutive years; provided, however, that a member maycontinue to serve as chair until a successor chair is elected and qualified.
(f) The Board ofGovernors shall have full power and administrative responsibility for the operationof the Facility. Such administrative responsibility shall include but not belimited to:
(1) Proper establishmentand implementation of the Facility.
(2) Employment of amanager who shall be responsible for the continuous operation of the Facility andsuch other employees, officers and committees as it deems necessary.
(3) Provision forappropriate housing and equipment to assure the efficient operation of theFacility.
(4) Promulgation ofreasonable rules and regulations for the administration and operation of theFacility and delegation to the manager of such authority as it deems necessaryto insure the proper administration and operation thereof.
(g) Except as may bedelegated specifically to others in the plan of operation or reserved to themembers, power and responsibility for the establishment and operation of theFacility is vested in the Board of Governors, which power and responsibilityinclude but is not limited to the following:
(1) To sue and be suedin the name of the Facility. No judgment against the Facility shall create anydirect liability in the individual member companies of the Facility.
(2) To receive andrecord cessions.
(3) To assess members onthe basis of participation ratios established in the plan of operation to coveranticipated or incurred costs of operation and administration of the Facilityat such intervals as are established in the plan of operation.
(4) To contract forgoods and services from others to assure the efficient operation of theFacility.
(5) To hear and determinecomplaints of any company, agent or other interested party concerning theoperation of the Facility.
(6) Upon the request ofany licensed fire and casualty agent meeting any two of the standards set forthbelow as determined by the Commissioner within 10 days of the receipt of theapplication, the Facility shall contract with one or more members within 20days of receipt of the determination to appoint such licensed fire and casualtyagent as designated agents in accordance with reasonable rules as areestablished by the plan of operation. The standards shall be:
a. Whether the agent'sevidence establishes that he has been conducting his business in a communityfor a period of at least one year;
b. Whether the agent'sevidence establishes that he had a gross premium volume during the 13 monthsnext preceding the date of his application of at least twenty thousand dollars($20,000) from motor vehicle insurance;
c. Whether the agent'sevidence establishes that the number of eligible risks served by him during the13 months next preceding the date of application was 200 or more;
d. Whether the agent'sevidence establishes a growth in eligible risks served and premium volumeduring his years of service as an agent;
e. Whether the agent'sevidence establishes that he made available to eligible risks premium financingor any other plan for deferred payment of premiums.
Withrespect to business produced by designated agents, adequate provision shall bemade by the Facility to assure that such business is rated using Facilityrates. All business produced by designated agents may be ceded to the Facility,except designated agents appointed before September 1, 1987, may placeliability insurance policies with a voluntary carrier, provided that allpolicies written by the voluntary carrier are retained by the voluntary carrierunless ceded to the Facility using Facility rates. Designated agents mustprovide the Facility with a list of such policies written by the voluntarycarrier at least annually, or as requested by the Facility, on a form approvedby the Facility. If no insurer is willing to contract with any such agent onterms acceptable to the Board, the Facility shall license such agent to writedirectly on behalf of the Facility. However, for this purpose the Facility doesnot act as an insurer, but acts only as the statutory agent of all of themembers of the Facility, which shall be bound on risks written by theFacility's appointed agent. The Facility may contract with one or moreservicing carriers and shall promulgate fair and reasonable underwritingprocedures to require that business produced by Facility agents and writtenthrough those servicing carriers shall be rated using Facility rates. Allbusiness produced by Facility agents may be ceded to the Facility. Anydesignated agent who is disabled or retiring or the estate of any deceaseddesignated agent may transfer the designation and the book of business to someother licensed fire and casualty agent meeting the requirements of this sectionand under rules established by the Facility, and a transfer from a designatedagent appointed before September 1, 1987, shall entitle the transfereedesignated agent to place liability insurance policies with a voluntarycarrier.
TheCommissioner shall require, as a condition precedent to the issuance, renewal,or continuation of a resident agent's license to any designated agent to actfor the company appointing such designated agent under contract with theFacility, that the designated agent file and thereafter maintain in force whileso licensed a bond in favor of the State of North Carolina executed by anauthorized corporate surety approved by the Commissioner, cash, mortgage onreal property, or other securities approved by the Commissioner, in the amountof ten thousand dollars ($10,000) for the use of aggrieved persons. Such bond,cash, mortgage, or other securities shall be conditioned on the accounting bythe designated agent (i) to any person requesting the designated agent toobtain motor vehicle insurance for moneys or premiums collected in connectiontherewith, and (ii) to the company providing coverage with respect to any suchmoneys or premiums under contract with the Facility. Any such bond shall remainin force until the surety is released from liability by the Commissioner, oruntil the bond is cancelled by the surety. Without prejudice to any liabilityaccrued prior to such cancellation, the surety may cancel the bond upon 30days' advance notice in writing filed with the Commissioner.
Noagent may be designated under this subdivision to any insurer that does notactively write voluntary market business.
(7) To maintain allloss, expense, and premium data relative to all risks reinsured in theFacility, and to require each member to furnish such statistics relative toinsurance reinsured by the Facility at such times and in such form and detailas may be required.
(8) To establish fairand reasonable procedures for the sharing among members of any loss on Facilitybusiness that cannot be recouped under G.S. 58‑37‑40(e) and othercosts, charges, expenses, liabilities, income, property and other assets of theFacility and for assessing or distributing to members their appropriate shares.The shares may be based on the member's premiums for voluntary business for theappropriate category of motor vehicle insurance or by any other fair andreasonable method.
(9) To receive ordistribute all sums required by the operation of the Facility.
(10) To accept all riskssubmitted in accordance with this Article.
(11) To establishprocedures for reviewing claims practices of member companies to the end thatclaims to the account of the Facility will be handled fairly and efficiently.
(12) To adopt and enforceall rules and to do anything else where the Board is not elsewhere hereinspecifically empowered which is otherwise necessary to accomplish the purposeof the Facility and is not in conflict with the other provisions of thisArticle.
(h) Each member companyshall authorize the Facility to audit that part of the company's business whichis written subject to the Facility in a manner and time prescribed by the Boardof Governors.
(i) The Board ofGovernors shall fix a date for an annual meeting and shall annually meet onthat date. Twenty days' notice of such meeting shall be given in writing to allmembers of the Board of Governors.
(j) There shall befurnished to each member an annual report of the operation of the Facility insuch form and detail as may be determined by the Board of Governors.
(k) Each member shall furnishstatistics in connection with insurance subject to the Facility as may berequired by the Facility. Such statistics shall be furnished at such time andin such form and detail as may be required but at least will include premiumscharged, expenses and losses.
(l) Theclassifications, rules, rates, rating plans and policy forms used on motorvehicle insurance policies reinsured by the Facility may be made by theFacility or by any licensed or statutory statistical organization or bureau onits behalf and shall be filed with the Commissioner. The Board of Governorsshall establish a separate subclassification within the Facility for"clean risks". For the purpose of this Article, a "cleanrisk" is any owner of a nonfleet private passenger motor vehicle asdefined in G.S. 58‑40‑10, if the owner, principal operator, andeach licensed operator in the owner's household have two years' drivingexperience as licensed drivers and if none of the persons has been assigned anySafe Driver Incentive Plan points under Article 36 of this Chapter during thethree‑year period immediately preceding either (i) the date ofapplication for a motor vehicle insurance policy or (ii) the date ofpreparation of a renewal of a motor vehicle insurance policy. The filings mayincorporate by reference any other material on file with the Commissioner.Rates shall be neither excessive, inadequate nor unfairly discriminatory. Ifthe Commissioner finds, after a hearing, that a rate is either excessive,inadequate or unfairly discriminatory, the Commissioner shall issue an orderspecifying in what respect it is deficient and stating when, within areasonable period thereafter, the rate is no longer effective. The order issubject to judicial review as set out in Article 2 of this Chapter. Pendingjudicial review of said order, the filed classification plan and the filedrates may be used, charged and collected in the same manner as set out in G.S.58‑40‑45 of this Chapter. The order shall not affect any contractor policy made or issued before the expiration of the period set forth in theorder. All rates shall be on an actuarially sound basis and shall becalculated, insofar as is possible, to produce neither a profit nor a loss.However, the rates made by or on behalf of the Facility with respect to"clean risks" shall not exceed the rates charged "cleanrisks" who are not reinsured in the Facility. The difference between theactual rate charged and the actuarially sound and self‑supporting ratesfor "clean risks" reinsured in the Facility may be recouped insimilar manner as assessments under G.S. 58‑37‑40(f). Rates shallnot include any factor for underwriting profit on Facility business, but shallprovide an allowance for contingencies. There shall be a strong presumptionthat the rates and premiums for the business of the Facility are neitherunreasonable nor excessive.
(m) In addition toannual premiums, the rules of the Facility shall allow semiannual and quarterlypremium terms. (1973,c. 818, s. 1; 1977, c. 710; c. 828, ss. 14‑19; 1977, 2nd Sess., c. 1135;1979, c. 676, ss. 1, 2; 1981, c. 776, ss. 2, 3; c. 776, ss. 2, 3; 1983, c. 416,ss. 3, 4; c. 690; 1985, c. 666, s. 49; 1985 (Reg. Sess., 1986), c. 1027, ss. 7,19, 33, 43; 1987, c. 869, ss. 3, 4(1), (2), 15; 1989, c. 67; 1991, c. 469, s.7; c. 562, s. 2; c. 709, s. 1; c. 720, s. 4; 1999‑132, ss. 6.2, 8.3, 8.4,8.7, 8.8; 1999‑228, s. 8; 2001‑236, s. 1; 2001‑423, s. 3;2002‑185, s. 6; 2002‑187, ss. 1.2, 1.3; 2005‑210, s. 19; 2005‑242,s. 1; 2006‑105, s. 1.7; 2006‑264, s. 83.)