PROPOSED RULEMAKING
[31 PA. CODE CH. 103]
Uniform Bylaws for Mutual Fire Companies
[27 Pa.B. 3064] The Insurance Department (Department) proposes to delete Chapter 103 (relating to uniform bylaws for mutual fire companies) to read as set forth in Annex A. The deletion is being published as a proposed rulemaking to allow the opportunity for public comment. The deletion is proposed under the authority of sections 206, 506, 1501 and 1502 of The Administrative Code of 1929 (71 P. S. §§ 66, 186, 411 and 412); and section 506 of The Insurance Company Law of 1921 (40 P. S. § 636). The regulation was adopted under sections 501--553 of The Insurance Company Law (40 P. S. §§ 631--702) relating to fire and marine insurance. The regulation recommends that domestic assessment mutual fire insurance companies adopt uniform bylaws in the form attached to § 103.1 as Exhibit A. The regulation also encourages domestic assessment mutual fire insurance companies to use Pennsylvania's standard fire insurance policy.
Purpose
The purpose of this rulemaking is to delete Chapter 103 to eliminate obsolete, unnecessary, burdensome regulations.
The regulation was adopted on May 26, 1936, under sections 501--553 of The Insurance Company Law of 1921, which governs stock and mutual fire insurance companies. The regulation recommended, but did not mandate, the standardization of bylaws for one small subset of insurers--domestic mutual fire insurance companies that offer policies on an assessable basis. There is no public policy reason for standardizing the bylaws used by this type of insurer, when uniform bylaws are not imposed upon other types of fire insurance companies.
Further, the Commonwealth adopted a comprehensive corporations code at 15 Pa.C.S. (relating to Associations Code) (code) in 1988; all other types of insurers may adopt bylaws consistent with that code. Domestic mutual fire insurance companies should have the same flexibility to adopt bylaws as is available to other companies against whom they compete. In addition, Exhibit A does not completely list all provisions that a domestic mutual fire insurance company should include in its bylaws, consistent with the code. Thus, the regulation is outdated as well as incomplete.
This regulation is also unnecessary because sufficient regulatory provisions exist for reviewing bylaws under current statutes, rendering this regulation superfluous. After the deletion of this regulation, the Department will continue to have the statutory authority to review a fire insurer's bylaws at the time of its admission, during a financial examination of the company, and at any other time at the request of the Insurance Commissioner. See sections 1504(b) and 3121 of the code (relating to adoption, amendment and contents of bylaws; and bylaws); sections 903(a) and 904(b) of the Insurance Department Act of 1921 (40 P. S. §§ 323.3(a) and 323.4(b)); and section 320(a)(1) of the Insurance Company Law of 1921 (40 P. S. § 443(a)(1)). In addition, because the bylaws' provisions are encompassed within assessable policies, a mutual fire insurance company must submit its bylaws when it seeks review and approval of an assessable insurance policy. See section 354 of the Insurance Company Law of 1921 (40 P. S. § 477b). Accordingly, the regulation is not needed to maintain appropriate regulatory scrutiny of bylaws.
Finally, the regulation was intended to facilitate the review and approval of policy forms used by domestic assessment mutual fire insurance companies. Accordingly, the regulation recommended, but did not mandate, the use of the standard fire insurance policy found at section 506 of the Insurance Company Law of 1921 (40 P. S. § 636). However, the statute itself mandates that all insurance companies issuing fire insurance policies must adhere to the standard policy provisions set forth in section 506. Therefore, the regulation duplicates existing statutory authority governing the standard policy provisions of fire insurance contracts, and inaccurately suggests that use of the standard fire policy is optional, rather than mandatory.
Affected Parties
The regulation applies to domestic assessment mutual fire insurance companies.
Fiscal Impact
The proposed deletion of the regulation has no fiscal impact because the regulation contains only advisory recommendations, and because of the obsolescence of the regulations.
Paperwork
The proposed deletion of the regulation would impose no additional paperwork requirements on the Department or mutual insurance companies.
Effectiveness/Sunset Date
This rulemaking will become effective upon final publication in the Pennsylvania Bulletin. Because the rulemaking proposes to repeal obsolete, unnecessary regulations, no sunset date has been assigned.
Contact Person
Questions or comments regarding the proposed rulemaking may be addressed in writing to Elaine M. Leitzel, Administrative Officer, Office of Regulation of Companies, 1345 Strawberry Square, Harrisburg, PA 17120 (717) 787-8840, within 30 days of its publication in the Pennsylvania Bulletin.
Regulatory Review
Under section 5(a) of the Regulatory Review Act (71 P. S. § 745.5(a)), on June 18, 1997, the Department submitted a copy of this proposed rulemaking to the Independent Regulatory Review Commission (IRRC) and to the Chairpersons of the House Insurance Committee and the Senate Banking and Insurance Committee. In addition to submitting the rulemaking, 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 the material is available to the public upon request. If IRRC has objections to any portion of the proposed rulemaking, it will notify the Department within 30 days of the close of the public comment period. The notification shall specify the regulatory review criteria that have not been met by that portion. The Regulatory Review Act specifies detailed procedures for the Department, the Governor and the General Assembly to review these objections before final publication of the rulemaking.
LINDA S. KAISER,
Insurance CommissionerFiscal Note: 11-157. No fiscal impact; (8) recommends adoption.
Annex A
TITLE 31. INSURANCE
PART VI. MUTUAL INSURANCE
CHAPTER 103. [UNIFORM BYLAWS FOR MUTUAL FIRE COMPANIES] (Reserved) § 103.1. [Recommendations] (Reserved).
[(a) It is recommended that all domestic assessment mutual fire insurance companies adopt the uniform bylaws attached hereto as Exhibit A and made a part of this section.
(b) It is also recommended that such companies adopt the Standard Fire Insurance Policy of the Commonwealth.
EXHIBIT A
UNIFORM BYLAWS SECTION I. Duties of Officers:
Subsection 1. President. It shall be the duty of the President to preside at all meetings of the Company, of the Board of Directors and of the Executive Committee, to sign all policies of insurance and all papers to which the seal of the Company is affixed, and to perform such other duties as may be required of him by the Board of Directors. The President's signature to policies may be in facsimile. The President shall be ex-officio member of all committees.
Subsection 2. Vice President. The Vice President shall perform the duties of the President, in the latter's absence, and shall have such other duties as may be assigned by the Board of Directors or Executive Committee.
Subsection 3. Secretary. Subject to the provision and approval of the Board of Directors, the Secretary shall have general charge of the affairs of the Company. He shall keep a complete and accurate record of all transactions of the Company. He shall issue and sign all policies, permits and endorsements of the Company. He shall collect all assessments and any other money due the Company and shall turn same over to the Treasurer or deposit same as directed by the Treasurer. He shall make a complete and accurate report of the years' business at each annual meeting of the Company and shall perform such other duties as the Board of Directors may assign him.
Subsection 4. Treasurer. The Treasurer under the direction of the Board of Directors shall have charge of all the funds of the Company, deposit same in the name of the Company in depositories designated by the Board of Directors. He shall pay all vouchers or orders properly attested by the President and Secretary and shall make a complete and accurate report of the finances of the Company at each annual meeting thereof or at any other time upon the request of the Board of Directors.
Subsection 5. Bonds. The Secretary and Treasurer before entering upon their respective duties shall each give bonds in such sum and in such form as the Board of Directors may require. Other officers and employes may be required to give bond at the discretion of the Board of Directors.
SECTION II. Insurance in Relation to Value:
Subsection 1. General Limits. Except as provided in Subsection 2 of this Section, the management of this Company shall exercise due care to prevent the insurance of any building, for more than three-fourths (3/4) of its cash value. Each building shall be insured for a stipulated amount and no blanket insurance shall be permitted except on the personal property within a specified group or class as designated in the policy; provided this Subsection shall not be construed to cover risks other than farm property.
Subsection 2. Special Limits on Livestock. Registered animals, and others, if desired, may be insured individually in such amount as may be approved by the management of the Company. Livestock not thus insured individually may be insured as groups or classes of animals. In the latter case a stipulated amount of insurance shall be placed on each group or class as designated in the policy. In case of loss of an animal in an insured group or class, the indemnity shall not exceed the value of the animal at the time of loss; nor shall it exceed the amount per head specified in the policy for the group or class.
SECTION III. Fees and Assessments:
Subsection 1. Policy Fee and Initial Charges. A policy fee and other initial charges to be fixed by the Board of Directors shall be paid by the applicant at the time of making application for insurance.
Subsection 2. Assessments. The Board of Directors shall levy on the policyholders such assessments as, based on the amount insured and the class or property and hazard covered, may be necessary for losses and expenses and may include reasonable additions to the safety or reserve fund.
Subsection 3. Levy and Collection of Assessments. Levy and Collection of assessments may be made annually, or oftener if required. The insured shall be sent a written or printed notice requiring the payment of such assessment.
Subsection 4. Neglect or Failure to Pay. Neglect or failure to pay an assessment within sixty days after written notice to pay same shall without further notice, render the policy void as to the interest of the insured until such payment be made, and in no case shall the Company be liable to the insured for any loss occurring during such suspension. The notice of assessment shall contain a statement to this effect. The acceptance of any delinquent assessment shall not operate to render the Company liable for any loss occurring during such suspension, nor shall such suspension relieve the insured from liability for assessment or other charges during the period of suspension.
Subsection 5. Termination of Liability. The insured shall not be liable to assessment for any losses or expenses incurred subsequent to the termination of this policy nor shall he be liable for any assessment to cover obligations of the Company while his policy was in force unless due notice of such assessment be given to him within two years from the date of termination of his policy or from the date on which such obligations were incurred, whichever date is earlier.
SECTION IV. Notice.
Notice for all purposes under this policy shall consist of written or printed notice delivered to the insured or other person to be notified or deposited in the post office directed to his address as shown on the records of the Company.
SECTION V. Amendments.
These Bylaws may be amended by a two-thirds (2/3) affirmative vote at any meeting of the Board of Directors or by a similar vote of any annual or special meeting of members. Amendments made by membership meetings shall take precedent over amendments made by the Board of Directors.]
[Pa.B. Doc. No. 97-1031. Filed for public inspection June 27, 1997, 9:00 a.m.]
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