PROPOSED RULEMAKING
INSURANCE DEPARTMENT
[31 PA. CODE CH. 117]
Anti-Arson Application
[27 Pa.B. 1845] The Insurance Department (Department) proposes to delete Chapter 117 (relating to anti-arson application) to read as set forth in Annex A. The Department proposes the deletions under sections 206, 506, 1501 and 1502 of The Administrative Code of 1929 (71 P. S. §§ 66, 186, 411 and 412), The Insurance Department Act of 1921 (40 P. S. §§ 1--321), The Insurance Company Law of 1921 (40 P. S. §§ 341--991) and the Anti-Arson Application Law (act) (40 P. S. §§ 1615.1--1615.11). The Department is publishing the deletion of the regulations as proposed rulemaking to allow for public comment. The regulations require an insurance company issuing a commercial monoline fire policy insuring property located in this Commonwealth against the peril of fire to secure a completed anti-arson application and specify the required content of the anti-arson application. The regulations further require an insured to update the information contained in the application and requires the company to retain the application for 5 years.
Purpose
The purpose of this rulemaking is to delete Chapter 117, to eliminate outdated regulations which do not serve any compelling public purpose. The regulations were promulgated in 1987 to implement the regulatory provisions of the act. Section 4 of the act (40 P. S. § 1615.4) mandates the use of the anti-arson application for commercial monoline fire policies, designated types of occupancies and designated geographic areas if, after public hearing, the Insurance Commissioner (Commissioner) designates the class as subject to an abnormally high number of claims resulting from arson. In 1986, the Commissioner designated the commercial monoline fire policy as particularly prone to arson and the Department promulgated the subject regulations to clarify the requirements relating to the anti-arson application. See 17 Pa.B. 20 (January 3, 1987).
Following careful review, the Department proposes the deletion of these regulations for the following reasons. First, under the regulations, only companies issuing commercial monoline fire policies need to secure anti-arson application information. Commercial fire insurance is usually sold as a package along with liability and other business lines of insurance; it is generally not issued as a single or monoline policy. Therefore, the regulations have limited practical application. Second, subsequent to the adoption of the regulations, no issues relating to arson affecting commercial monoline fire policies have been raised before the Commissioner. The lack of activity over a 10-year period indicates that the regulatory requirements in this area do not serve any compelling public interest. Third, because no method to accurately measure the effect of the anti-arson application requirement was ever implemented, the appropriateness and necessity of the requirement cannot be demonstrated at this time.
Under the act, the Commissioner retains the authority to require anti-arson applications at a future time if it is found that commercial monoline policies have become subject to an abnormally high number of claims resulting from arson.
Fiscal Impact
Property owned and insured by the Commonwealth or its political subdivisions is excluded from the purview of these regulations. Consequently, the Department has determined that the proposed deletion will have no fiscal impact on the Commonwealth or local government entities.
The deletion of the regulations will remove costs placed upon insurance companies, insurance agents and brokers and applicants for commercial fire insurance due to the elimination of the requirement that companies collect and maintain information on the anti-arson application. The impact is nevertheless expected to be unremarkable because commercial monoline policies insuring against the peril of fire are seldom issued.
Persons Regulated
The regulations apply to all insurance companies issuing policies of property insurance where coverage includes the peril of fire. Only companies issuing commercial monoline fire policies need to secure anti-arson application information under these regulations. Comments were received from the Insurance Federation of Pennsylvania, Inc. recommending the deletion of these regulations as outmoded and unnecessary.
Paperwork
The deletion of these regulations will not impose additional paperwork requirements on the Department, insurance companies, insurance agents or brokers, the Commonwealth or the general public. To the extent that commercial monoline fire insurance policies are issued insuring property in this Commonwealth, the deletion of these regulations will reduce paperwork for insurance companies, agents and brokers and applicants.
Effective/Sunset Date
The Department plans to adopt the date of final publication in the Pennsylvania Bulletin as the effective date. Because the rulemaking proposes the deletion of obsolete regulations, no sunset date has been assigned.
Contact Person
Questions or comments regarding the proposed rulemaking may be addressed in writing to Victor DiCicco, Chief, Field Investigations Division, Bureau of Enforcement, 1321 Strawberry Square, Harrisburg, PA 17120, (717) 783-2627, within 30 days of the publication of this notice in the Pennsylvania Bulletin.
Regulatory Review
Under section 5(a) of the Regulatory Review Act (71 P. S. § 745.5(a)), on March 28, 1997, the Department submitted a copy of this proposal to the Independent Regulatory Review Commission (IRRC) and to the Chairpersons of the House Committee on Insurance and the Senate Committee on Banking and Insurance. In addition to submitting this proposal, the Department has provided IRRC and the Committees with a copy of a detailed Regulatory Analysis Form prepared by the Department in compliance with Executive Order 1996-1. A copy of this material is available to the public upon request.
If IRRC has objections to any portion of the proposal, it will notify the Department within 30 days of the close of the public comment period. The notification shall specify the regulatory review criteria which have not been met by that portion. The Regulatory Review Act specifies detailed procedures for review, prior to final publication of the regulations by the Department, the General Assembly and the Governor of objections raised.
LINDA S. KAISER,
Insurance CommissionerFiscal Note: 11-150. No fiscal impact; (8) recommends adoption.
Annex A
TITLE 31. INSURANCE
PART VII. PROPERTY, FIRE AND CASUALTY INSURANCE
CHAPTER 117. [ANTI-ARSON APPLICATION] (Reserved) § 117.1. [Purpose and scope] (Reserved).
[(a) Purpose. This chapter interprets and implements the Anti-Arson Application Law (40 P. S. §§ 1615.1--1615.11), by providing the method by which insurance companies are to obtain the disclosure of information to control the incidence of arson fraud and designating the instances in which the use of anti-arson application is mandatory.
(b) Scope. This chapter applies to insurance companies issuing policies of property insurance in which coverage includes the peril of fire.]
§ 117.2. [Definitions] (Reserved).
[The following words and terms, when used in this chapter, have the following meanings, unless the context clearly indicates otherwise:
Act--The Anti-Arson Application Law (40 P. S. §§ 1615.1--1615.11).
Anti-arson application--An application for insurance covering the peril of fire that elicits the disclosure of information required by this chapter.
Commercial Monoline Fire Policy--An insurance policy on a commercial or industrial premise in which coverage is limited to the perils of fire, lightning and removal. The term also includes an insurance policy on a commercial or industrial premise in which coverage is limited to the perils of fire, lightning, removal and extended coverage--including windstorm or hail, smoke, explosion, riot or civil commotion, aircraft and vehicle, vandalism or malicious mischief.
Commissioner--The Insurance Commissioner of the Commonwealth.
Department--The Insurance Department of the Commonwealth.
Designated area--A geographic area designated in this chapter as having an abnormally high incidence of arson.
Designated occupancy--An occupancy designated in this chapter as having an abnormally high incidence of arson.
Insurance policy--Written evidence of new insurance, including a contract of insurance, providing coverage from the peril of fire. Except for the assignment of an existing insurance policy because of the transfer of a financial interest of 25% or more in the insured property, the renewal of an existing insurance policy does not constitute evidence of new insurance.
Insurance company--An insurer authorized to transact the business of insurance in this Commonwealth and empowered to issue policies of insurance against loss by the peril of fire, including the Pennsylvania Fair Plan created under The Pennsylvania Fair Plan Act (40 P. S. §§ 1600.101--1600.502).
Occupancy--The use of a property or the type of structure on a property.
Peril of fire--A peril characterized by burning including the peril of explosion.
Property--Real property and the buildings and improvements thereon.]
§ 117.3. [Anti-arson application--designation] (Reserved).
[(a) An insurance company issuing a Commercial Monoline Fire Policy to insure property against peril of fire after January 2, 1987 shall first secure from the insured a completed anti-arson application.
(b) The necessity of securing an anti-arson application from an insured does not preclude an insurance company from issuing a binder prior to acceptance of the risk.]
§ 117.4. [Anti-arson application--content] (Reserved).
[An anti-arson application shall comply with the following requirements:
(1) The anti-arson application shall be signed and affirmed by the insured and shall contain the following language:
I (we) certify that all information contained herein is true and correct to the best of my (our) knowledge and belief. I (we) acknowledge that this statement is signed under the pains and penalties of perjury and any material false statement contained herein is punishable pursuant to 18 Pa.C.S. § 4904(b). I (we) acknowledge that this application shall constitute a part of any policy issued whether attached or not and that any willful concealment or misrepresentation of a material fact or circumstance shall be deemed grounds to void any policy issued. I (we) acknowledge that I (we) must notify the insurer in writing of any change in the information contained in this application within 60 days.(2) The anti-arson application shall secure, at a minimum, the disclosure of the following information:
(i) The name and address of the applicant.
(ii) The applicant's relationship to the property.
(iii) The location of the property and type of occupancy.
(iv) If the applicant is other than an individual or sole proprietor, the name, address, position and percentage of interest of the following:
(A) Shareholders possessing an ownership interest of 25% or more, except for closed corporations in which case all owners shall be listed.
(B) Partners, including limited partners, possessing an ownership interest of 25% or more.
(C) Trustees and beneficiaries.
(v) The name and address of a mortgagee or a party who has an ownership interest in the property, other than ownership interests disclosed under subparagraph (iv), and the degree of interest of the party.
(vi) Mortgage payments on the property which are overdue by 3 months or more, the name of the mortgagee, the amount owed and the date due.
(vii) Other encumbrances against the property.
(viii) Tax liens against the property or business, and the nature, extent and due date of taxes which are unpaid or overdue for a period of 1 year or more.
(ix) Current fire, safety, health, building or construction code violations on the property to be insured and the nature of the violations.
(x) The existence of a conviction against anyone with a financial interest in the property under subparagraphs (iv) and (v) for arson, fraud or another crime which resulted in a loss on property owned now or during the last 5 years.
(xi) Losses during the past 5 years which exceeded $1,000 in damage to the property to be insured or to property in which anyone with a financial interest in the property to be insured under subparagraphs (iv) and (v) had an equity interest or held a mortgage--except mortgages procured through Federal or State chartered lending institutions--and the nature, location, date and extent of the losses.
(xii) An existing or expected vacancy in the occupation of the property to be insured; the date, degree and nature of the vacancy; and the existence of protection from unauthorized entry in or on to the property. The applicant need not report the specific units subject to routine and temporary vacancies in apartment buildings, hotels or other residential facilities, but shall report the overall vacancy rate and vacancies of specific units for a period of more than a 3 month duration.
(xiii) A governmental order issued to vacate or destroy the property, or the classification of the property as uninhabitable or structurally unsafe.
(xiv) Damage to the property in excess of $1,000.
(xv) A disruption in the service of water, sewage, electricity or heat to the property which exceeds a period of 60 days.
(xvi) The refusal to write coverage on the property, or the cancellation or nonrenewal of coverage on the property within the past 3 years.
(xvii) The existence of other insurance covering, or which will cover, this property, including the name of the other insurance company, the date, status and number of the policy and the amount of insurance.
(xviii) The dates and sale prices in real estate transactions involving the property in the past 3 years.
(xix) The amount of insurance requested, the method of valuation used to establish the amount of insurance and the name and address of the person who determined the value.
(xx) The estimated replacement cost and fair market value--exclusive of land--of the property.
(3) A recommended anti-arson application which satisfies the disclosure requirements in paragraph (2) and which may be used without the prior approval of the Commissioner is provided in Appendix A. A company electing to use this preapproved form shall notify the Department in writing of its election to do so within 30 days of its use. Use of an anti-arson application other than that provided in Appendix A requires the prior filing with and approval of the Commissioner prior to use.]
§ 117.5. [Notice of change in the information contained in the anti-arson application] (Reserved).
[(a) An insured shall notify the insurance company in writing of a change in the information contained in the anti-arson application within 60 days from the date of the change.
(b) Failure by the insured to notify the insurance company of a material change in information contained in the anti-arson application, or a material misrepresentation in notification, constitutes grounds to void the insurance policy.]
§ 117.6. [Required record retention] (Reserved).
[(a) An anti-arson application secured by an insurance company under this chapter shall be retained in the files of the company for a period of 5 years from the date the policy is issued.
(b) Upon written request of the Commissioner, the company shall, within 30 days from the date of the Commissioner's request, provide a written report of those applications for which coverage under the policy was denied due to a loss by fire. The company shall also provide the Commissioner copies of the applications, if requested.
(c) Upon written request of the State Police Fire Marshall, another appropriate law enforcement agency or the Fire Commissioner or Fire Chief of first, second, second class A and third class cities, the company shall provide copies of anti-arson applications relevant to the conduct of a fire investigation.]
§ 117.7. [Exclusions] (Reserved).
[This chapter does not apply to an insurance policy insuring against the peril of fire issued to cover any of the following:
(1) One- to four-family owner-occupied dwellings.
(2) Property owned and insured by the Commonwealth or its political subdivisions.]
§ 117.8. [Penalties] (Reserved).
[The Commissioner may impose a penalty of not more than $10,000 against an insurance company for a willful violation of the act.]
(Editor's Note: As part of this proposal, the Department is proposing to delete the text of Appendix A (relating to Anti-Arson Application) which appears at 31 Pa. Code pages 117-6--117-9, serial pages (115154) to 115156) and (155075).)
Appendix A. (Reserved)
[Pa.B. Doc. No. 97-558. Filed for public inspection April 11, 1997, 9:00 a.m.]
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