Chapter 3901-1 General Provisions

3901-1-01 Public notice by publication.

(A) Purpose

This rule provides for the giving of proper notice by publication as required by the Administrative Procedures Act, Chapter 119, Revised Code of Ohio; various sections of Title 39, the Insurance Code; and such other miscellaneous sections of the Revised Code concerned with promulgation to the public of such insurance matters as are of widespread public interest and which do not set forth with particularity the means, content and frequency of notice. Any and all existing Department of Insurance rules concerning notice by publication are hereby rescinded, including an unnumbered rule effective September 10, 1956.

(B) Public Notice of Department of Insurance Proposed Rules

(1) Public notice of the proposed adoption, amendment or rescission of any rule by the Superintendent of Insurance, in accord with sections 119.01 through 119.13, inclusive, Revised Code of Ohio, shall be given by publication in a newspaper of general circulation of not less than 10,000 in Cuyahoga, Franklin, Hamilton, and Lucas Counties. Such notice shall be published at least once not less than thirty days prior to the date set for a hearing on the proposed rule, and shall be in full conformity with section 119.03, Revised Code.

(2) Notwithstanding subsection (1) immediately preceding, public notice of the proposed adoption, amendment or rescission of any rule relating to statistical plans, the reporting of statistical information or the designation of statistical agents pursuant to sections 3935.10 and 3937.12, Revised Code, shall be given by publication at least once in a newspaper published in Franklin County, and having a circulation of not less than 10,000, not less than thirty days prior to the date set for hearing on such proposal.

Whenever various other sections of Title 39, Insurance, or miscellaneous sections in other chapters of the Revised Code of Ohio require public notice to be given by the Superintendent of Insurance, and where the method and content of notice are not set forth with particularity, such notice shall be made in accord with subsection (B)(1) hereof.

(D) Public Notice by Insurance Industry

(1) Whenever an insurance company or any individual or firm connected therewith, subject to the regulation and jurisdiction of the Department of Insurance, are required to give public notice by any section of the Revised Code of Ohio, in which the method and content of notice are not set forth with particularity, such public notice shall be given in accord with subsection (B)(1) hereof.

(2) Such public notice shall include:

(a) A synopsis or general statement of the subject matter involved.

(b) An indication of the company’s position, or action to be taken, regarding the subject of notice.

(E) Discretion to Vary Publication

Whenever the Superintendent of Insurance determines that the subject matter of public notice is of an unusual nature and appropriate for more widespread publication, he may direct that such notice be also made in newspapers of general circulation of not less than 10,000 in one or more of the following counties: Mahoning, Montgomery, Summit and Athens. Whenever the subject matter of public notice is of a regional nature, the Superintendent of Insurance may direct such special publication as appropriate. In any case, the Superintendent of Insurance may direct that publication be made more than once, as frequently as may be appropriate. In addition to the public notice provided by this rule, the Superintendent of Insurance may give, or order, such other means of notice as he deems necessary or appropriate.

(F) Effective Date

These rules shall take effect the 15th day of August, 1966.

R.C. 119.032 review dates: 08/31/2009 and 08/30/2014

Promulgated Under: 119.03

Statutory Authority: 3901.041

Rule Amplifies: 119.01 through 119.13, Title 39 and other Revised Code sections concerning notice

Prior Effective Dates: (Former IN-1-01), 8/15/1966

3901-1-04 Provider discounts. [Rescinded]

Rescinded eff 11-14-08

3901-1-05 Insider trading -- instructions and forms.

(A) Purpose

This rule is issued by the superintendent of insurance pursuant to division (H) of section 3901.31 of the Revised Code, which empowers the superintendent to adopt, amend, and rescind rules, pursuant to Chapter 119. of the Revised Code, which will enable the superintendent to carry out the duties imposed by section 3901.31 of the Revised Code. Division (A) of section 3901.31 of the Revised Code requires every person who is directly or indirectly the beneficial owner of more than ten per cent of any class of any equity security of a domestic stock insurance company or who is a director or officer of such company to file with the superintendent of insurance on or before January 31, 1966, or within ten days after the person becomes such beneficial owner, director, or officer, a statement in such form as the superintendent of insurance may prescribe of the amount of all equity securities of such company of which the person is the beneficial owner, and within ten days after the close of each calendar month thereafter, if there has been a change in such ownership during such month, to file with the superintendent of insurance a statement, in such form as the superintendent of insurance may prescribe, indicating the person’s ownership at the close of the calendar month and such changes in the person’s ownership as have occurred during such calendar month. The purpose of this rule is to promulgate procedures and forms to be adhered to in filing initial statements of changes in beneficial ownership of any equity security. Effective April 4, 1985, section 3901.31(A) of the Revised Code was amended to exclude from application of this filing requirement domestic stock insurance companies which are wholly owned subsidiaries of an insurance holding company system.

(B) Filing of statements

(1) Initial statements of beneficial ownership of equity securities shall be filed on Form I.S.S., as set forth in paragraph (C)(9) of this rule. Statements of changes in such beneficial ownership shall be filed on Form C.S.S., as set forth in paragraph (D)(11) of this rule. All such statements shall be prepared in accordance with the requirements of the applicable form and filed as required.

(2) Form I.S.S.

(a) A statement on Form I.S.S. shall be filed by every person who is directly or indirectly the beneficial owner of more than ten per cent of any class of equity security of a domestic stock insurance company or who is a director or officer of such company.

(b) When section 3901.31 of the Revised Code became law, persons who held any of the relationships specified in paragraph (B)(2) of this rule were required to file a statement on Form I.S.S. on or before January 31, 1966. Persons who subsequently assume any of the specified relationships are required to file a statement within ten days after assuming such relationship.

(3) Form C.S.S.

(a) A statement on Form C.S.S. shall be filed by every person who is directly or indirectly the beneficial owner of more than ten per cent of any class of equity security of a domestic stock insurance company or who is a director or officer of such company, who has filed a Form I.S.S. with the department, and who has during any month had any change in his beneficial ownership of any class of equity security of such company. Any beneficial owner, director, or officer who is required to file a statement on Form C.S.S. with respect to any change in his beneficial ownership of equity securities which occurs within six months after he became a beneficial owner, director, or officer of such company shall include in the first such statement the information called for by Form C.S.S. with respect to all changes in his beneficial ownership of equity securities of such company which occurred within six months prior to the filing of such statement.

(b) A statement on Form C.S.S. shall be filed by any person who has ceased to be such beneficial owner, director, or officer of a domestic stock insurance company with respect to any change in his beneficial ownership of equity securities of such company which occurs on or after the date on which he ceased to be such beneficial owner, director, or officer if such change occurs within six months after any change in his beneficial ownership of such securities prior to such date.

(c) Statements on Form C.S.S. which are required to be filed shall be filed on or before the tenth day after the end of each month in which any change in beneficial ownership has occurred. A separate statement shall be filed with respect to the securities of each domestic stock insurance company.

(4) Any person who has ceased to be a beneficial owner, director, or officer of a domestic stock insurance company shall give written notice to the superintendent of insurance of the date on which he ceased to be such beneficial owner, director, or officer within thirty days after said date.

(1) Where statements are to be filed

(a) One signed, sworn to copy of each statement shall be filed with the Ohio department of insurance.

(b) A statement is not deemed to have been filed in the office of the superintendent of insurance until it has actually been received by the department.

(2) Relationship of reporting person to company.

Indicate clearly the relationship of the reporting person to the company; for example, “director,” “director and vice president,” “beneficial owner of more than ten per cent of the company’s common stock,” etc.

(3) Dates as of which beneficial ownership is to be given.

The information as to beneficial ownership of securities shall be given as of the date on which the event occurred which requires the filing of a statement on this form; for example, when the person whose ownership is reported became a director or officer of the company or a beneficial owner of more than ten per cent of the company’s equity securities.

(4) Title of security

The statement of the title of a security shall be such as clearly to identify the security even though there may be only one class; for example, “Class A Common,” “5% Debentures Due 1965,” etc.

(5) Nature of ownership.

Under “nature of ownership,” state whether ownership of the securities is “direct” or “indirect.” If the ownership is indirect, i.e., through a partnership, corporation, trust or other entity, indicate in a footnote, or other appropriate manner, the name or identity of the medium through which the securities are indirectly owned. The fact that securities are held in the name of a broker or other nominee does not, of itself constitute indirect ownership. Securities owned indirectly shall be reported on separate lines from those owned directly and also from those owned through a different type of indirect ownership.

(6) Statement of amount owned.

In stating the amount of securities beneficially owned, give the face amount of debt securities or the number of shares or other units of other securities. In the case of securities owned indirectly, the entire amount of securities owned by the partnership, corporation, trust or other entity, shall be stated. The person whose ownership is reported may, if he so desires, also indicate in a footnote, or other appropriate manner, the extent of his interest in the partnership, corporation, trust or other entity.

(7) Inclusion of additional information.

A statement may include any additional information or explanation deemed relevant by the person filing statement.

(8) Signature.

(a) If the statement is filed for a corporation, partnership, trust, etc., the name of the organization shall appear over the signature of the officer or other person authorized to sign the statement. If the statement is filed for an individual, it shall be signed by him or specifically on his behalf by a person authorized to sign for him.

(b) In those cases where the statement is signed by someone other than the person whose ownership is being reported, documentary evidence of the signing authority shall be filed with the statement.

(9) Form I.S.S.

STATE OF IHIO DEPARTMENT OF INSURANCE

Form I.S.S.

INITIAL STATEMENT OF BENEFICIAL OWNERSHIP OF EQUITY SECURITIES

Filed Pursuant to Section 3901.31, Ohio Revised Code

Name of insurer__________________________________________________

Name of person whose Ownership is reported____________________________________________

Business address of such person__________________________________ (Street,City,State,Zip Code)

Relationship of such person to company named above___________________________________________

Date of event which requires the filing of this statement_____________________________________

SECURITIES BENEFICIALLY OWNED

Title of Security Nature of Ownership Amount Owned Beneficially ________________________________________________

Remarks: (For Additional Space – Use Reverse Side)

I affirm under the penalty of perjury that the forging is full, true and correct.

___________________________________ Signature

______________________________ Date of Statement

Subscribed and sworn to before me this___________day of________________, 20_______

____________________________ Notary Public

(D) Instruction – Form C.S.S.: Statement of changes in beneficial ownership of equity securities

(1) Where statements are to be filed.

(a) One signed, sworn to copy of each statement shall be filed with the Ohio department of insurance.

(b) A statement is not deemed to have been filed in the office of the superintendent of insurance until it has actually been received by the department.

(2) Relationship of reporting person to company.

(3) Transactions and holdings to be reported.

Every transaction shall be reported even though purchases and sales during the month are equal or the change involves only the nature of ownership; for example, from direct or indirect ownership. Beneficial ownership at the end of the month of all classes of securities required to be reported shall be shown even though there has been no change during the month in the ownership of securities of one or more classes.

(4) Title of security.

The statement of the title of the security shall be such as to clearly identify the security even though there may be only one class; for example, “Class A Common,” “5% Debentures Due 1965,” etc.

(5) Date of transaction.

The exact date (month, day and year) of each transaction shall be stated opposite the amount involved in the transactions.

(6) Statement of amounts of securities.

In stating the amount of the securities acquired, disposed of, or beneficially owned, give the face stated. The person whose ownership is reported may, if he so desires, also indicate in a footnote, or other appropriate manner, the extent of his interest in the transaction or holdings of the partnership, corporation, trust or other entity.

(7) Nature of ownership.

Under “nature of ownership,” state whether ownership of the securities is “direct” or “indirect.” If the ownership is indirectly, i.e., through a partnership, corporation, trust or other entity, indicate in a footnote, or other appropriate manner, the name or identity of the medium through which the securities are indirectly owned. The fact that securities are held in the name of the broker or other nominee does not, of itself, constitute indirect ownership. Securities owned indirectly shall be reported on separate lines from securities owned directly and from securities owned through a different type of indirect ownership.

(8) Character of transaction.

If the transaction was with the issuer of the securities, so state. If it involved the purchase of securities through the exercise of options, so state and give the exercise price per share. If any other purchase or sale was effected otherwise than in the open market, the fact shall be indicated. If the transaction was not a purchase or sale, indicate its character; for example, gift, stock dividend, etc., as the case may be. The foregoing information may be appropriately set forth in the table or under “remarks” at the end of the table.

(9) Inclusion of additional information.

A statement may include any additional information or explanation deemed relevant by the person filing the statement.

(10) Signature.

(b) In those cases where the statement is signed by someone other than the person whose partnership is being reported, documentary evidence of the signing authority shall be filed with the statement.

(11) Form C.S.S.

State of Ohio

DEPARTMENT OF INSURANCE

Form C.S.S.

STATEMENT OF CHANGES IN BENEFICIAL OWNERSHIP OF EQUITY SECURITIES

Filed Pursuant to Section 3901.31, Ohio Revised Code

Name of insurer_______________________________________________________

Name of person whose Ownership is reported_________________________________________________

Business address of such person_______________________________________ (Street,City,State,Zip Code)

Relationship of such person to company named above________________________________________________

Statement for Calendar Month of ________________, 20_____

Changes During Month and Month-End Ownership

Title of Security Date of Transaction Amount Bought or Otherwise Acquired Amount Sold or Otherwise Disposed of Nature of Ownership Amount Owned Beneficially at end of Month

Remarks: (For Additional Space — Use Reverse Side)

I affirm under the penalty of perjury that the foregoing is full, true, and correct.

______________________________________________ Signature

_______________________________________ Date of Statement

Subscribed and sworn to before me this_____________day of____________________, 20_______

______________________________ Notary Public

(E) Failure to file

Division (B) of section 3901.99 of the Revised Code provides that “Whoever violates any law relating to the superintendent of insurance, or any law of this state, relating to insurance as defined in division (A)(1) of section 3901.04 of the “Revised Code for the violation of which no penalty is otherwise provided in the Revised Code, shall be fined not more than twenty-five thousand dollars, imprisoned not more than six months, or both.”

HISTORY: Eff 3-20-72; 12-20-76; 8-20-94; 3-21-05

Promulgated Under: 119.03

Statutory Authority: 3901.31(H), 3901.041

Rule Amplifies: 3901.31

R.C. 119.032 review dates: 08/31/2009 and 08/30/2014

3901-1-07 Unfair trade practices.

(A) Authority

Section 3901.041 of the Ohio Revised Code provides that the Superintendent of Insurance shall adopt, amend, and rescind rules and make adjudications necessary to discharge his duties and exercise his powers under Title 39 of the Revised Code.

(B) Purpose

Sections 3901.20 and 3901.21 of the Ohio Revised Code respectively prohibit unfair or deceptive practices in the business of insurance and define certain acts or practices as unfair or deceptive. Section 3901.21 also provides that the enumeration of specific unfair or deceptive acts or practices in the business of insurance is not exclusive or restrictive or intended to limit the powers of the Superintendent of Insurance to adopt rules to implement that Section. The purpose of this Rule is to define certain additional unfair trade practices and to set forth required procedures in connection therewith.

It shall be deemed an unfair or deceptive practice to commit or perform with such frequency as to indicate a general business practice any of the following:

(1) knowingly mispresenting to claimants pertinent facts or policy provisions relating to coverage at issue;

(a) misrepresenting a pertinent policy provision by making any payment, settlement, or offer of first party benefits, which, without explanation, does not include all amounts which should be included according to the claim filed by the first party claimant and investigated by the insurer;

(b) denying a claim on the grounds of a specific policy provision, condition, or exclusion without reference to such provision, condition, or exclusion;

(2) failing to acknowledge pertinent communications with respect to claims arising under insurance policies in writing, or by other means so long as an appropriate notation is made in the claim file of the insurer, within fifteen (15) days of receiving notice of a claim in writing or otherwise;

(3) failing to make an appropriate reply within twenty-one days of all other pertinent communications and/or any inquiries of the Department of Insurance respecting a claim;

(4) failing to adopt and implement reasonable procedures to commence an investigation of any claim filed by either a first party or third party claimant, or by such claimant’s authorized representative, within twenty-one days of receipt of notice of claim;

(5) failing to mail or furnish claimant or the claimant’s authorized representative, a notification of all items, statements and forms, if any, which the insurer reasonably believes will be required of such claimant, within fifteen days of receiving notice of claim, unless the insurer, based on the information then in its possession does not yet know all such requirements, then such notification shall be sent, within a reasonable time;

(6) not offering first party or third party claimants, or their authorized representatives who have made claims which are fair and reasonable and in which liability has become reasonably clear, amounts which are fair and reasonable as shown by the insurer’s investigation of the claim, providing the amounts so offered are within policy limits and in accordance with the policy provisions;

(7) compelling insureds to institute suits to recover amounts due under its policies by offering substantially less then the amounts ultimately recovered in suits brought by them when such insureds have made claims for amounts reasonably similar to the amounts ultimately recovered;

(8) making known to insureds or claimants a policy of appealing from arbitration awards in favor of insureds or claimants for the purpose of compelling them to accept settlements or compromises less than the amount awarded in arbitration;

(9) attempting settlement or compromise of claims on the basis of applications which were altered without notice to, or knowledge, or consent of insureds;

(10) attempting to settle or compromise claims for less than the amount which the insureds had been led reasonably to believe they were entitled to, by written or printed advertising material accompanying or made part of an application;

(11) attempting to delay the investigation or payment of claims by requiring an insured and his physician to submit a preliminary claim report and then requiring the subsequent submission of formal proof of loss forms, both of which submissions contain substantially the same information;

(12) failing to advise the first party claimant or the claimant’s authorized representative, in writing or by other means so long as an appropriate notation is made in the claim file of the insurer, of the acceptance or rejection of the claim, within twenty-one days after receipt by the insurer of a properly executed proof of loss;

(a) failing to notify such claimant or the claimant’s authorized representative, within twenty-one days after receipt of such proof of loss, that the insurer needs more time to determine whether the claim should be accepted or rejected;

(b) failing to send a letter to such claimant or, the claimant’s authorized representative, stating the need for further time to investigate the claim, if such claim remains unsettled ninety days from the date of the initial letter setting forth the need for further time to investigate;

(c) failing to send to such claimant or authorized representative every ninety days after the first ninety-day claim investigation period, a letter setting forth the reasons additional time is needed for investigation, unless the delay is caused by factors beyond the insurer’s control;

(13) failing to advise such claimant or claimant’s authorized representative, of the amount offered, if such claim is accepted in whole or in part;

(14) refusing payments of claims solely on the basis of the insured’s request to do so without making an independent evaluation of the insured’s liability based upon all available information;

(15) failing to adopt and implement reasonable standards for the proper handling of written communications, primarily expressing grievances, received by the insurer from insureds or claimants;

(16) failing to pay any amount finally agreed upon in settlement of all or part of any claim or authorized repairs to be made upon final agreement not later than five days from the receipt of such agreement by the insurer at the place from which the payment or authorization is to be made or from the date of the performance by the claimant of any condition set by such agreement, whichever is later.

(17) For purposes of this section, the following definitions shall apply;

(a) “Investigation” shall mean all activities of the company related directly or indirectly to the determining of liabilities under the coverages afforded by the policy. This shall include, but not be limited to, a bona fide effort to contact all insureds and claimants within a reasonable period after notification of loss. Evidence of a bona fide effort must be maintained in the file. The investigation shall be deemed concluded upon the company’s affirmation or denial of liability.

(b) “Notice of Claim” as applied to an insurer shall include notification given to an agent of an insurer.

(c) “Settlement of claims” shall mean all activities of the company related directly or indirectly to the determination of the extent of damages due under coverages afforded by the policy. This shall include, but not be limited to, the requiring or preparing of repair estimates.

(d) “Days” means calendar days. However, when the last day of a time limit stated in this rule falls on a saturday, sunday or holiday, the time limit is extended to the next immediate following day that is not a saturday, sunday or holiday.

(D) Severability

If any section, term, or provision of this Rule be adjudged invalid for any reason, such judgment shall not affect, impair, or invalidate any other section, term, or provision of this Rule, but the remaining sections, terms, and provisions shall be in and continue in full force and effect.

Effective: 04/05/2007

R.C. 119.032 review dates: 12/29/2006 and 12/30/2011

Promulgated Under: 119.03

Statutory Authority: 3901.041

Rule Amplifies: 3901.20, 3901.21

Prior Effective Dates: 04/01/1975

3901-1-08 Unfair and deceptive military sales practices.

(A) Authority. This rule is adopted under the authority of the superintendent of insurance pursuant to section 3901.041 of the Revised Code.

(B) Purpose. Sections 3901.20 and 3901.21 of the Revised Code, respectively, prohibit unfair or deceptive trade practices in the business of insurance and define certain acts or practices as unfair or deceptive. Section 3901.21 of the Revised Code also provides that the enumeration of specific unfair or deceptive acts or practices in the business of insurance is not exclusive or restrictive or intended to limit the powers of the superintendent of insurance to adopt rules to implement that section. The purpose of this rule is to further define unfair trade practices to include dishonest and predatory practices involving the sale of certain life insurance products to active duty members of the United States armed forces and their families and to set acceptable standards for such sales.

(C) No private cause of action. Nothing herein shall be construed to create or imply a private cause of action for a violation of this rule.

(D) Application. This rule applies to the solicitations and sales of life insurance and annuity products by insurers and insurance agents to active duty members of the United States armed forces and their families. This rule applies in addition to other statutes and rules governing the sale and solicitations of life insurance and annuity products.

(E) Exemptions.

(1) This rule shall not apply to solicitations or sales involving:

(a) Credit insurance;

(b) Group life insurance or group annuities where there is no in-person, face-to-face solicitation of individuals by an insurance agent or where the contract or certificate does not include a side fund;

(c) An application to the existing insurer that issued the existing policy or contract when a contractual change or a conversion privilege is being exercised; or, when the existing policy or contract is being replaced by the same insurer pursuant to a program filed with and approved by the superintendent; or, when a term conversion privilege is exercised among corporate affiliates;

(d) Individual stand-alone health policies, including disability income policies;

(e) Contracts offered by “Servicemembers’ Group Life Insurance” (SGLI) or “Veterans’ Group Life Insurance” (VGLI), as authorized by 38 U.S.C. sections 1965 to 1979;

(f) Life insurance contracts offered through or by a non-profit military association, qualifying under section 501(c)(23) of the “Internal Revenue Code” (IRC), and which are not underwritten by an insurer; or

(g) Contracts used to fund:

(i) An employee pension or welfare benefit plan that is covered by the “Employee Retirement and Income Security Act” (ERISA);

(ii) A plan described by section 401(a), 401(k), 403(b), 408(k) or 408(p) of the IRC, as amended, if established or maintained by an employer;

(iii) A government or church plan defined in section 414 of the IRC, a government or church welfare benefit plan, or a deferred compensation plan of a state or local government or tax exempt organization under section 457 of the IRC;

(iv) A nonqualified deferred compensation arrangement established or maintained by an employer or plan sponsor;

(v) Settlements of or assumptions of liabilities associated with personal injury litigation or any dispute or claim resolution process; or

(vi) Prearranged funeral contracts.

(2) Nothing herein shall be construed to abrogate the ability of nonprofit organizations (and/or other organizations) to educate members of the “United States Armed Forces” in accordance with “Department of Defense DoD Instruction 1344.07 – Personal Commercial Solicitation on DoD Installations” or successor directive.

(3) For purposes of this rule, general advertisements, direct mail and internet marketing shall not constitute “solicitation.” Telephone marketing shall not constitute “solicitation” provided the caller explicitly and conspicuously discloses that the product concerned is life insurance and makes no statements that avoid a clear and unequivocal statement that life insurance is the subject matter of the solicitation. However, nothing in this subdivision shall be construed to exempt an insurer or insurance agent from this rule in any in-person, face-to-face meeting established as a result of the “solicitation” exemptions identified in this subdivision.

(F) Definitions.

(1) “Active duty” means full-time duty in the active military service of the United States and includes members of the reserve component (national guard and reserve) while serving under published orders for active duty or full-time training and all service in the uniformed services under the “Uniformed Services Employment and Reemployment Rights Act” (USERRA). The term does not include members of the reserve component who are performing active duty or active duty for training under military calls or orders specifying periods of fewer than thirty-one calendar days.

(2) “Department of Defense (DoD) Personnel” means all active duty service members and all civilian employees, including nonappropriated fund employees and special government employees, of the “Department of Defense.”

(3) “Door to door” means a solicitation or sales method whereby an insurance agent proceeds randomly or selectively from household to household without prior specific appointment.

(4) “General advertisement” means an advertisement having as its sole purpose the promotion of the reader’s or viewer’s interest in the concept of insurance, or the promotion of the insurer or the insurance agent.

(5) “Insurer” means an insurance company required to be licensed under the laws of this state to provide life insurance products, including annuities.

(6) “Insurance agent” means a person required to be licensed under the laws of this state to sell, solicit or negotiate life insurance, including annuities.

(7) “Known” or “Knowingly” means, depending on its use herein, the insurance agent or insurer had actual awareness, or in the exercise of ordinary care should have known, at the time of the act or practice complained of, that the person solicited:

(a) Is a service member; or

(b) Is a service member with a pay grade of E-4 or below.

(8) “Life insurance” means insurance coverage on human lives including benefits of endowment and annuities, and may include benefits in the event of death or dismemberment by accident and benefits for disability income and, unless otherwise specifically excluded, includes individually issued annuities.

(9) “Military installation” means any state or federally owned, leased, or operated base, reservation, post, camp, building, or other facility to which service members are assigned for duty, including barracks, transient housing, and family quarters.

(10) “MyPay” is a “Defense Finance and Accounting Service” (DFAS) web-based system that enables service members to process certain discretionary pay transactions or provide updates to personal information data elements without using paper forms.

(11) “Service in the uniformed services” and “uniformed services” have the same meanings as in the “Uniformed Services Employment and Reemployment Rights Act of 1994,” 108 Stat. 3149, 38 U.S.C. �4303, as amended, June 5, 2001.

(12) “Service member” means any active duty officer (commissioned and warrant) or enlisted member of the United States armed forces.

(13) “Side fund” means a fund or reserve that is part of or otherwise attached to a life insurance policy (excluding individually issued annuities) by rider, endorsement or other mechanism, which accumulates premium or deposits, with interest, or by other means. The term does not include:

(a) Accumulated value or cash value or secondary guarantees provided by a universal life policy;

(b) Cash values provided by a whole life policy which are subject to standard nonforfeiture laws for life insurance; or

(i) Contains only premiums paid in advance that accumulate at interest;

(ii) Imposes no penalty for withdrawal;

(iii) Does not permit funding beyond future required premiums;

(iv) Is not marketed or intended as an investment; and

(v) Does not carry a commission, either paid or calculated.

(14) “Specific appointment” means a prearranged appointment agreed upon by both parties and definite as to place and time.

(15) “United States Armed Forces” means all components of the army, navy, air force, marine corps, and coast guard.

(G) Practices declared false, misleading, deceptive or unfair on a military installation.

(1) The following acts or practices, when committed on a military installation by an insurer or insurance agent with respect to the in-person, face-to-face solicitation of life insurance, are declared to be false, misleading, deceptive or unfair:

(a) Knowingly soliciting the purchase of any life insurance product “door to door” or without first establishing a specific appointment for each meeting with the prospective purchaser.

(b) Soliciting service members in a group or “mass” audience or in a “captive” audience where attendance is not voluntary.

(d) Making appointments with or soliciting service members in barracks, day rooms, unit areas, or transient personnel housing or other areas where the installation commander has prohibited solicitation.

(e) Soliciting the sale of life insurance without first obtaining permission from the installation commander or the commander’s designee.

(f) Posting unauthorized bulletins, notices or advertisements.

(g) Failing to present “DD Form 2885, Personal Commercial Solicitation Evaluation,” to service members solicited or encouraging service members solicited not to complete or submit a “DD Form 2885.”

(h) Knowingly accepting an application for life insurance or issuing a policy of life insurance on the life of an enlisted member of the United States armed forces without first obtaining, for the insurer’s files, a completed copy of any required form which confirms that the applicant has received counseling or fulfilled any other similar requirement for the sale of life insurance established by rules or directives of the “DoD” or the rules or directives of any branch of the armed forces.

(2) The following acts or practices when committed on a military installation by an insurer or insurance agent constitute corrupt practices, improper influences or inducements and are declared to be false, misleading, deceptive or unfair:

(a) Using “DoD” personnel, directly or indirectly, as a representative or agent in any official or business capacity, with or without compensation, with respect to the solicitation or sale of life insurance to service members.

(b) Using an insurance agent to participate in any United States armed forces sponsored education or orientation program.

(H) Practices declared false, misleading, deceptive or unfair regardless of location.

(1) The following acts or practices by an insurer or insurance agent constitute corrupt practices, improper influences or inducements and are declared to be false, misleading, deceptive or unfair:

(a) Submitting, processing or assisting in the submission or processing of any allotment form or similar device used by the United States armed forces to direct a service member’s pay to a third party for the purchase of life insurance. The foregoing includes, but is not limited to, using or assisting in using a service member’s “MyPay” account or other similar internet or electronic medium for such purposes. This paragraph does not prohibit assisting a service member by providing insurer or premium information necessary to complete any allotment form.

(b) Knowingly receiving funds from a service member for the payment of premium from a depository institution with which the service member has no formal banking relationship. For purposes of this rule, a “formal banking relationship” is established when the depository institution:

(i) Provides the service member a deposit agreement and periodic statements and makes the disclosures required by the “Truth in Savings Act,” 12 U.S.C. sectionso 4301 to 4313 (1992) and the rules promulgated thereunder; and

(ii) Permits the service member to make deposits and withdrawals unrelated to the payment or processing of insurance premiums.

(c) Employing any device or method or entering into any agreement whereby funds received from a service member by allotment for the payment of insurance premiums are identified on the service member’s “Leave and Earnings Statement” or equivalent or successor form as “savings” or “checking” and where the service member has no formal banking relationship as defined in paragraph (H)(1)(b) of this rule.

(d) Entering into any agreement with a depository institution for the purpose of receiving funds from a service member whereby the depository institution, with or without compensation, agrees to accept direct deposits from a service member with whom it has no formal banking relationship as defined in paragraph (H)(1)(b) of this rule.

(e) Using “DoD” personnel, directly or indirectly, as a representative or agent in any official or unofficial capacity with or without compensation with respect to the solicitation or sale of life insurance to service members who are junior in rank or grade, or to the family members of such personnel.

(f) Offering or giving anything of value, directly or indirectly, to “DoD” personnel to procure their assistance in encouraging, assisting or facilitating the solicitation or sale of life insurance to another service member.

(g) Knowingly offering or giving anything of value to a service member with a pay grade of E-4 or below for his or her attendance to any event where an application for life insurance is solicited.

(h) Advising a service member with a pay grade of E-4 or below to change his or her income tax withholding or State of legal residence for the sole purpose of increasing disposable income to purchase life insurance.

(2) The following acts or practices by an insurer or insurance agent lead to confusion regarding source, sponsorship, approval or affiliation and are declared to be false, misleading, deceptive or unfair:

(a) Making any representation, or using any device, title, descriptive name or identifier that has the tendency or capacity to confuse or mislead a service member into believing that the insurer, insurance agent or product offered is affiliated, connected or associated with, endorsed, sponsored, sanctioned or recommended by the U.S. government, the “United States Armed Forces,” or any state or federal agency or government entity. Examples of prohibited insurance agent titles include, but are not limited to, “Battalion Insurance Counselor,” “Unit Insurance Advisor,” “Servicemen’s Group Life Insurance Conversion Consultant” or “Veteran’s Benefits Counselor.”

Nothing herein shall be construed to prohibit a person from using a professional designation awarded after the successful completion of a course of instruction in the business of insurance by an accredited institution of higher learning. Such designations include, but are not limited to, “Chartered Life Underwriter” (CLU), “Chartered Financial Consultant” (ChFC), “Certified Financial Planner” (CFP), “Master of Science In Financial Services” (MSFS), or “Masters of Science Financial Planning” (MS).

(b) Soliciting the purchase of any life insurance product through the use of or in conjunction with any third party organization that promotes the welfare of or assists members of the United States armed forces in a manner that has the tendency or capacity to confuse or mislead a service member into believing that either the insurer, insurance agent or insurance product is affiliated, connected or associated with, endorsed, sponsored, sanctioned or recommended by the U.S. government, or the United States armed forces.

(3) The following acts or practices by an insurer or insurance agent lead to confusion regarding premiums, costs or investment returns and are declared to be false, misleading, deceptive or unfair:

(a) Using or describing the credited interest rate on a life insurance policy in a manner that implies that the credited interest rate is a net return on premium paid.

(b) Excluding individually issued annuities, misrepresenting the mortality costs of a life insurance product, including stating or implying that the product “costs nothing” or is “free.”

(4) The following acts or practices by an insurer or insurance agent regarding SGLI or VGLI are declared to be false, misleading, deceptive or unfair:

(a) Making any representation regarding the availability, suitability, amount, cost, exclusions or limitations to coverage provided to a service member or dependents by SGLI or VGLI, which is false, misleading or deceptive.

(b) Making any representation regarding conversion requirements, including the costs of coverage, or exclusions or limitations to coverage of SGLI or VGLI to private insurers, which is false, misleading or deceptive.

(c) Suggesting, recommending or encouraging a service member to cancel or terminate his or her SGLI policy or issuing a life insurance policy which replaces an existing SGLI policy unless the replacement shall take effect upon or after the service member’s separation from the United States armed forces.

(5) The following acts or practices by an insurer and or insurance agent regarding disclosure are declared to be false, misleading, deceptive or unfair:

(a) Deploying, using or contracting for any lead generating materials designed exclusively for use with service members that do not clearly and conspicuously disclose that the recipient will be contacted by an insurance agent, if that is the case, for the purpose of soliciting the purchase of life insurance.

(b) Failing to disclose that a solicitation for the sale of life insurance will be made when establishing a specific appointment for an in-person, face-to-face meeting with a prospective purchaser.

(c) Excluding individually issued annuities, failing to clearly and conspicuously disclose the fact that the product being sold is life insurance.

(d) Failing to make, at the time of sale or offer to an individual known to be a service member, the written disclosures required by Section 10 of the “Military Personnel Financial Services Protection Act,” Pub. L. No. 109-290, p.16 or as amended.

(e) Excluding individually issued annuities, when the sale is conducted in-person face-to-face with an individual known to be a service member, failing to provide the applicant at the time the application is taken:

(i) An explanation of any free look period with instructions on how to cancel if a policy is issued; and

(ii) Either a copy of the application or a written disclosure. The copy of the application or the written disclosure shall clearly and concisely set out the type of life insurance, the death benefit applied for and its expected first year cost. A basic illustration that meets the requirements of rule 3901-4-04 of the Administrative Code shall be deemed sufficient to meet this requirement for a written disclosure.

(6) The following acts or practices by an insurer or insurance agent with respect to the sale of certain life insurance products are declared to be false, misleading, deceptive or unfair:

(a) Excluding individually issued annuities, recommending the purchase of any life insurance product, which includes a side fund, to a service member in pay grades E-4 and below unless the insurer has reasonable grounds for believing that the life insurance death benefit, standing alone, is suitable.

(b) Offering for sale or selling a life insurance product, which includes a side fund, to a service member in pay grades E-4 and below who is currently enrolled in SGLI, is presumed unsuitable unless, after the completion of a needs assessment, the insurer demonstrates that the applicant’s SGLI death benefit, together with any other military survivor benefits, savings and investments, survivor income, and other life insurance, are insufficient to meet the applicant’s insurable needs for life insurance.

(i) “Insurable needs” are the risks associated with premature death taking into consideration the financial obligations and immediate and future cash needs of the applicant’s estate and/or survivors or dependents.

(ii) “Other military survivor benefits” include, but are not limited to: the “Death Gratuity,” “Funeral Reimbursement,” “Transition Assistance,” “Survivor and Dependents’ Educational Assistance,” “Dependency and Indemnity Compensation,” TRICARE healthcare benefits, “Survivor Housing Benefits and Allowances,” “Federal Income Tax Forgiveness,” and “Social Security Survivor Benefits.”

(c) Excluding individually issued annuities, offering for sale or selling any life insurance contract which includes a side fund:

(i) Unless interest credited accrues from the date of deposit to the date of withdrawal and permits withdrawals without limit or penalty;

(ii) Unless the applicant has been provided with a schedule of effective rates of return based upon cash flows of the combined product. For this disclosure, the effective rate of return will consider all premiums and cash contributions made by the policyholder and all cash accumulations and cash surrender values available to the policyholder in addition to life insurance coverage. This schedule will be provided for at least each policy year from one to ten and for every fifth policy year thereafter, ending at age one hundred, policy maturity or final expiration; and

(iii) Which, by default, diverts or transfers funds accumulated in the side fund to pay, reduce or offset any premiums due.

(d) Excluding individually issued annuities, offering for sale or selling any life insurance contract which, after considering all policy benefits, including but not limited to endowment, return of premium or persistency, does not comply with standard nonforfeiture law for life insurance.

(e) Selling any life insurance product to an individual known to be a service member that excludes coverage if the insured’s death is related to war, declared or undeclared, or any act related to military service except for an accidental death coverage, e.g., double indemnity, which may be excluded.

(I) Severability.

If any provision of these sections or the application thereof to any person or circumstance is held invalid for any reason, the invalidity shall not affect the other provisions or any other application of these sections which can be given effect without the invalid provisions or application. To this end all provisions of this rule are declared to be severable.

Effective: 09/01/2007

R.C. 119.032 review dates: 12/31/2011

Promulgated Under: 119.03

Statutory Authority: 3901.041

Rule Amplifies: 3901.20 and 3901.21

3901-1-10 Appointment of insurance agents.

(A) Purpose

This rule clarifies certain administrative policies and procedures pertaining to agent appointment processes.

(B) Appointment of corporations, limited liability companies and partnerships.

(1) When a corporation or limited liability company is appointed with an insurance company other than life, every natural person active as an agent in such agency shall be appointed with such company; provided however, that the superintendent of insurance may waive this requirement if he is satisfied that the kind of insurance being written by such company is so specialized that only a certain agent or agents in such agency need be so appointed, but any such request for waiver and any approval thereof shall be in writing. When a corporation or limited liability company is appointed with a life insurance company, at least one natural person active as an agent in such agency shall be appointed with such company.

(2) Every natural person active as an agent in an agency that is a partnership and is appointed with an insurance company other than life shall be appointed with such company; provided however, that the superintendent of insurance may waive this requirement if he is satisfied that the kind of insurance being written by such company is so specialized that only a certain agent or agents in such agency need be so appointed, but any such request for waiver and any approval thereof shall be in writing.

In light of the various methods and frequent complexity of insurance bookkeeping practices and sales compensation agreements, which vary considerably among insurance companies, and in recognition of certain accounting irregularities occurring in the collection of so-called “industrial” accounts, indebtedness by a person to an insurance company or agency, or otherwise, shall not be material to such person’s suitability to act as an agent or solicitor unless there is evidence that such indebtedness arises from or is closely related to the alleged commission of larceny, embezzlement, fraud, misrepresentation, conversion, or other culpable misappropriation or wrongful conduct.

(D) Suspension, revocation, or refusal to renew

The superintendent of insurance may suspend, revoke, or refuse to renew the certificate of authority of any insurance company or the license of any insurance agent or solicitor found to be in violation of the provisions set forth in this rule pursuant to the Administrative Procedure Act. Such suspension, revocation, or refusal to renew shall be in addition to such other penalties as may be contained in the Revised Code or in the other department of insurance rules.

(E) Severability

Each paragraph of this rule and every part of each paragraph is an independent paragraph and part of a paragraph, and the holding of any paragraph or a part thereof to be unconstitutional, void, or ineffective for any cause does not affect the validity or constitutionality of any other paragraph or part thereof.

R.C. 119.032 review dates: 12/29/2006 and 12/29/2011

Promulgated Under: 119.03

Statutory Authority: 3901.041, 3905.20(C)

Rule Amplifies: 3905.02, 3905.20

Prior Effective Dates: 1/3/03

3901-1-11 Lead fees and computer services. [Rescinded]

Rescinded eff 4-5-07

3901-1-13 Mortgage guaranty insurance.

(A) Purpose

This rule is issued pursuant to section 3901.041 of the Revised Code. Its purpose is to implement division (A)(24) of section 3929.01 of the Revised Code, as it pertains to the writing and servicing of that kind of insurance known as mortgage guaranty insurance as hereinafter defined.

(B) Definitions

The definitions set forth below shall govern the construction of the terms used in this rule:

(1) “Mortgage guaranty insurance” is:

(a) Insurance against financial loss by reason of nonpayment of principal, interest or other sums agreed to be paid under the terms of any note or bond or other evidence of indebtedness secured by a mortgage, deed of trust, or other instrument constituting a lien or charge on real estate, provided the improvement on such real estate is a residential building or a condominium unit or buildings designed for occupancy by not more than four families; or

(b) Insurance against financial loss by reason of nonpayment of principal, interest or other sums agreed to be paid under the terms of any note or bond or other evidence of indebtedness secured by a mortgage, deed of trust or other instrument constituting a lien or charge on real estate, providing the improvement on such real estate is a building or buildings designed for occupancy by five or more families or designed to be occupied for industrial or commercial purposes; or

(c) Insurance against financial loss by reason of nonpayment of rent or other sums agreed to be paid under the terms of a written lease for the possession, use or occupancy of real estate, provided the improvement on such real estate is a building or buildings designed to be occupied for industrial or commercial purposes.

(2) “Authorized real estate security” for the purpose of this rule means a note, bond or other evidence of indebtedness, not exceeding one-hundred and three per cent of the lower of the fair value as fixed by appraisal or purchase price of the real estate, secured by a mortgage, deed of trust, or other instrument which constitutes, or is equivalent to, a first lien or charge on real estate, provided:

(a) Any percentage in excess of one-hundred per cent is used only for closing costs.

(b) The real estate loan secured in such manner is one of a type which:

(i) A bank;

(ii) A building and loan association, federal savings and loan, or a service corporation of either, or

(iii) An insurance company, which is supervised and regulated by a department of the state of Ohio or an agency of the federal government, is authorized to make, or would be authorized to make, disregarding any requirement applicable to such an institution that the amount of the loan not to exceed a certain percentage of the value of the real estate.

(c) The improvement on such real estate is a building or buildings designed for occupancy as specified by paragraphs (B)(1)(a) and (B)(1)(b) of this rule.

(d) The lien on such real estate may be subject to and subordinate to the following:

(i) The lien on any public bond, assessment or tax, when no installment, call or payment of or under such bond, assessment or tax is delinquent.

(ii) Outstanding mineral, oil, water or timber rights, rights-of-way, easements or rights-of-way of support, sewer rights, building restrictions or other restrictions or covenants, conditions or regulations of use, or outstanding leases upon such real property under which rents or profits are reserved to the owner thereof.

(3) “Contingency reserve” means an additional premium reserve established to protect policyholders against the effect of adverse economic cycles.

A mortgage guaranty insurance company shall not transact the business of mortgage guaranty insurance in the state of Ohio unless: if a stock insurance company, it has capital and surplus in the aggregate amount of not less than two million five hundred thousand dollars, which aggregate shall include paid-in capital of not less than one million and contributed surplus of not less than one million or if a mutual insurance company, a minimum surplus of two million five hundred thousand dollars.

(D) Limitations and restrictions on transacting business

(1) Mortgage guaranty insurance may be transacted in this state by insurers fulfilling the requirements of paragraph (D)(6) of this rule and holding a certificate of authority for the transaction of such insurance pursuant to Title XXXIX of the Revised Code and shall be written only to insure loans secured by authorized real estate securities as defined in paragraph (B)(2) of this rule.

(2) Geographic concentration

(a) A mortgage guaranty insurance company shall not insure loans secured by a single risk in excess of ten per cent of the company’s aggregate capital, surplus and contingency reserve.

(b) No mortgage guaranty insurance company shall have more than twenty per cent of its total insurance in force in any one standard metropolitan statistical areas (“SMSA”) as defined by the United States department of commerce.

(3) Advertising

No mortgage guaranty insurance company or any agent or representative of a mortgage guaranty insurance company shall prepare or distribute or assist in preparing or distributing any brochure, pamphlet, report or any form of advertising to the effect that the real estate investments of any financial institution are “insured investments,” unless the brochure, pamphlet, report or advertising clearly states that the loans are insured by mortgage guaranty insurance companies authorized to transact the business of mortgage guaranty insurance in the state of Ohio or are insured by an agency of the federal government, as the case may be.

(4) Investment limitation

A mortgage guaranty insurance company shall not invest in notes or other evidences of indebtedness secured by a mortgage or other lien upon real property. This section shall not apply to obligations secured by real property or contracts for the sale of real property, which obligations or contracts of sale are acquired in the course of the good faith settlement of claims under policies of insurance issued by the mortgage guaranty insurance company, or in the good faith disposition of real property so acquired.

(5) Coverage limitation

A mortgage guaranty insurance company shall limit its coverage, with respect to any one authorized real estate security, net of reinsurance, ceded to a reinsurer unaffiliated with the company or an affiliated reinsurer which does not own, and is not owned by, in whole or in part, the ceding mortgage guaranty insurer, to a maximum of twenty-five per cent of the entire indebtedness to the insured under that authorized real estate security. In lieu thereof, a mortgage guaranty insurance company may elect to pay the entire indebtedness to the insured and acquire title to the authorized real estate security.

(6) Mortgage guaranty insurance as monoline

(a) A mortgage guaranty insurance company which anywhere transacts any class of insurance other than mortgage guaranty insurance is not eligible to transact mortgage guaranty insurance in the state of Ohio.

(b) A mortgage guaranty insurance company which anywhere transacts the classes of insurance defined in paragraph (B)(1)(b) or (B)(1)(c) may not transact in the state of Ohio the class of mortgage guaranty insurance defined in paragraph (B)(1)(a), provided, however, a mortgage guaranty insurance company which transacts a class of insurance defined in paragraph (B)(1)(a) may write up to five per cent of its insurance in force on residential property designed for occupancy by five or more families.

(7) Underwriting discrimination

(a) Nothing in this rule shall be construed as limiting the right of any mortgage guaranty insurance company to impose reasonable requirements upon the lender with regard to the terms of any note or bond or other evidence of indebtedness secured by a mortgage or deed of trust, such as requiring a stipulated down payment by the borrower.

(b) No mortgage guaranty insurance company may discriminate in the issuance or extension of mortgage guaranty insurance on the basis of sex, marital status, race, color, creed, national origin, physical handicap or mental handicap.

(c) No policy of mortgage guaranty insurance, excluding policies of reinsurance, shall be written unless and until the insurer itself or the lender, in compliance with underwriting directives from the insurer and subject to periodic underwriting audits by the insurer, shall have conducted a reasonable and thorough examination of the evidence supporting credit worthiness of the borrower and the appraisal report reflecting market evaluation of the property and shall have determined that prudent underwriting standards have been met.

(8) Policy forms and premium rates filed

(a) All policy forms and endorsements, and rates to be charged and the premium including all modifications of rates and premiums to be paid by the policyholder shall be filed with and subject to the provisions of sections 3937.01 to 3937.18 of the Revised Code. With respect to owner-occupied, single-family dwellings or owner-occupied two family dwellings, the mortgage guaranty insurance policy shall provide that the borrower shall not be liable to the insurance company for any deficiency arising from a foreclosure sale.

(b) Every mortgage guaranty insurance company shall adopt, print and make available a schedule of premium charges for mortgage guaranty insurance policies. Premium charges made in conformity with the provisions of this rule shall not be deemed to be of interest or other charges under any other provision of law limiting interest or other charges in connection with mortgage loans. The schedule shall show the entire amount of premium charge for each type of mortgage guaranty insurance policy issued by the insurance company.

(9) Outstanding total liability

A mortgage guaranty insurance company shall not at any time have outstanding a total liability, net or reinsurance, under its aggregate mortgage guaranty insurance policies exceeding twenty-five times its capital, surplus and contingency reserve. In the event that any mortgage guaranty insurance company has outstanding total liability exceeding twenty-five times its capital, surplus and contingency reserve, it shall cease transacting new mortgage guaranty business until such time as its total liability no longer exceeds twenty-five times its capital, surplus and contingency reserve.

(10) High risk underwriting

Any mortgage guaranty insurance company which receives five per cent or more of its net annual premium from policies written to insure loans secured by authorized real estate securities having a greater than ninety-five per cent loan-to-value ratio shall notify the superintendent within thirty days. The superintendent may, if he finds that further underwriting of loans having a greater than ninety-five per cent loan-to-value ratio would have an adverse impact on the solvency of the company, prohibit the company from further underwriting such loans.

(E) Rebates, commissions, charges and conflict of interest

(1) Rebates, commissions and charges

(a) A mortgage guaranty insurance company shall not pay or cause to be paid either directly or indirectly, to any owner, purchaser, lessor, lessee, mortgagee or prospective mortgagee of the real property which secures the authorized real estate security or which is the fee of an insured lease, or any interest therein, or any person who is acting as an agent, representative, attorney or employee of such owner, purchaser or mortgagee, any commission, or any part of its premium charges or any other consideration as an inducement for or as compensation on any mortgage guaranty insurance business.

(b) In connection with the placement of any mortgage guaranty insurance, a mortgage guaranty insurance company shall not cause or permit any commission, fee, remuneration, or other compensation to be paid to, or received by, any insured lender or lessor; any subsidiary or affiliate of any insured; any officer, director or employee of any insured or any member of their immediate family; any corporation, partnership, trust, trade association in which any insured or any such officer, director, or employee or member of their immediate family has a financial interest; or any designee, trust, nominee, or other agent or representative of any of the foregoing.

(c) No mortgage guaranty insurance company shall make any rebate of any portion of the premium charge shown by the schedule required by paragraph (D)(8)(b) of this rule. No mortgage guaranty insurance company shall quote any rate or premium charge to any person which is different than that currently available to others for the same type of coverage. The amount by which any premium charge is less than that called for by the current schedule of premium charges is an unlawful rebate.

(2) Conflict of interest

(a) If a member of a holding company system, a mortgage guaranty insurance company licensed to transact business in this state shall not knowingly underwrite mortgage guaranty insurance on mortgages originated by the holding company system or an affiliate or on mortgages originated by any mortgage lender to which credit is extended, directly or indirectly, by the holding company system or any affiliate unless such insurance is underwritten on the same basis, for the same consideration and subject to the same insurability requirements as insurance provided to nonaffiliated lenders.

(i) Any mortgage guaranty insurance company which receives, in the aggregate, twenty percent of more of its net annual premium from policies written to insure mortgages originated by affiliates in the holding company system shall, concurrent with the filing of its annual statement, notify the superintendent of that fact.

(ii) The superintendent may, if he finds that further underwriting of policies issued on said loans would have an adverse impact on the solvency of the company, prohibit the mortgage guaranty insurance company for further underwriting such loans.

(b) A mortgage guaranty insurance company, the holding company system of which it is a part or any affiliate shall not pay any commission, remuneration, rebates or engage in activities proscribed in paragraph (E)(1) of this rule.

(F) Reserves

(1) Unearned premium reserves

A mortgage guaranty insurance company shall compute and maintain an unearned premium reserve as required by the superintendent of insurance.

(2) Loss reserve

A mortgage guaranty insurance company shall compute and maintain adequate case basis and other loss reserves which accurately reflect loss frequency and loss severity and shall include components for claims reported and unpaid, and for claims incurred but not reported, including estimated losses on:

(a) Insured loans which have resulted in the conveyance of property which remains unsold;

(b) Insured loans in the process of foreclosure;

(c) Insured loans in default for four months or for any lesser period which is defined as default for such purposes in the policy provisions; and

(d) Insured leases in default for four months or for any lesser period which is defined as default for such purposes in policy provisions.

(3) Contingency reserve

Each mortgage guaranty insurance company shall establish a contingency reserve out of net premiums remaining (gross premiums less premiums returned to policyholders net of reinsurance) after establishment of the unearned premium reserve. The mortgage guaranty insurance company shall contribute to the contingency reserve an amount equal to fifty per cent of such remaining earned premiums. Contributions to the contingency reserve made during each calendar year shall be maintained for a period of one hundred twenty months, except that withdrawals may be made by the company in any year in which the actual incurred losses exceed thirty-five per cent of the corresponding earned premiums, and no such releases shall be made without prior approval by the superintendent of the insurance company’s state of domicile. If the coverage provided in this rule exceeds the limitations set forth herein, the superintendent of insurance shall establish a rate formula factor that will produce a contingency reserve adequate for the added risk assumed. The face amount of an insured mortgage shall be computed before any reduction by the mortgage guaranty insurance company’s election to limit its coverage to a portion of the entire indebtedness.

(G) Reinsurance

Whenever a mortgage guaranty insurance company obtains reinsurance from an insurance company which is properly licensed to provide such reinsurance or from an appropriate governmental agency, the mortgage guaranty insurer and the reinsurer shall establish and maintain the reserves required in this rule in appropriate proportions in relation to the risk retained by the original insurer and ceded to the assuming reinsurer so that the total reserves established shall not be less than the reserves required by this rule.

(H) Miscellaneous

(1) Whenever the laws of any other jurisdiction in which a mortgage guaranty insurance company subject to the requirement of this rule is also licensed to transact mortgage guaranty insurance require a larger unearned premium reserve or contingency reserve in the aggregate than that set forth herein, the establishment of such larger unearned premium reserve or contingency reserve in the aggregate shall be deemed to be in compliance with this rule.

(2) Unearned premium reserves and contingency reserves shall be computed and maintained on risks insured after the effective date of this rule as required by paragraphs (F)(1) and (F)(3) of this rule. Unearned premium reserves and contingency reserves on risks insured before the effective date of this rule may be computed and maintained as required previously.

(I) Severability

If any provision of this rule or the application thereof to any person or situation is held invalid, such invalidity shall not affect any other provision or application of the rule which can be given effect without the invalid provision or application and to this end the provisions of this rule are declared to be severable.

R.C. 119.032 review dates: 12/27/2007 and 12/27/2012

Promulgated Under: 119.03

Statutory Authority: 3901.041

Rule Amplifies: 3929.01

Prior Effective Dates: 6/6/1978, 8/11/1994, 6/1/2001

3901-1-14 Credit life and credit accident health insurance.

(A) Applicability

This rule is issued pursuant to Chapter 3918. of the Revised Code regulating credit life insurance and credit accident and health insurance and is applicable to all policies, riders, applications for insurance, notices of proposed insurance, certificates of insurance and endorsements providing credit life insurance and credit accident and health insurance issued or renewed on or after November 1, 1983 in the state of Ohio.

Certificates, notices of proposed insurance and premium rates applicable in connection with existing group policies of credit insurance shall be conformed to the requirements of this rule not later than the anniversary date of the group policy next following the effective date of this rule.

No existing group credit life or group credit accident and health policy presently in force in Ohio will be rewritten or redated so as to delay or avoid the effect of this rule.

Any policy issued to replace an existing policy of credit insurance or any amendment to any existing policy of credit insurance shall be ignored for the purpose of determining the anniversary if such change is made after July 1, 1983.

(B) Filing and approval, disclosure

Section 3918.07 of the Revised Code provides that all policies, certificates of insurance, notices of proposed insurance, applications for insurance, endorsements and riders providing coverage on residents of Ohio shall be filed with the superintendent of insurance and that he may disapprove any such form.

(1) No individual or group policy of credit life insurance or credit accident and health insurance shall be issued for delivery in this state, and no application, binder, endorsement, rider, certificate of group insurance, notice of proposed insurance, or other form pertaining to credit life insurance or credit accident and health insurance under such policy shall be issued for delivery or used in this state, on or after the effective date of this rule unless such forms and the premium rates and refund formulas therefor have been filed with the superintendent of insurance and approved prior to such issuance or use and have not been subsequently disapproved in accordance with division (B) of section 3918.07 of the Revised Code.

(2) If a group policy of credit life insurance or credit accident and health insurance:

(a) Has been delivered in this state before the effective date of this rule, or

(b) Delivered in another state before or after the effective date of this rule-

The insurer shall be required to file only the group certificate and notice of proposed insurance as specified in divisions (B) and (D) of section 3918.06 of the Revised Code and such forms shall be approved by the superintendent if they conform with the requirements of Chapter 3918. of the Revised Code and this rule, and if the schedules of premium rates applicable to the insurance evidenced by such certificate or notice are not in excess of the standards set forth in this rule. Provided, however, the premium rate in effect on existing group policies may be continued until the first policy anniversary date following the effective date of this rule.

(3) Division (D) of section 3918.06 of the Revised Code provides that the copy of the application for, or notice of, proposed insurance shall be separate and apart from the credit instrument unless the information required “is prominently set forth therein.” The copy of the application for, or notice of, proposed insurance shall be deemed to be prominently set forth in the credit instrument if set forth in a separate provision on the face or reverse in type at least equal in size and prominence to the type used for the other provisions; provided that if the same is set forth on the reverse of the credit instrument, reference shall be made on the face of the instrument and provided further that the name of the debtor proposed for insurance, any figures relating to the amount and term of coverage, and the rate of amount of payment for insurance by the debtor need not be contained in a separate provision of the instrument, but may be set forth elsewhere in the instrument.

(4)

(a) The disclosure required by paragraph (B)(3) of this rule shall be made to the debtor at the time of the debtor’s application for credit life or credit accident and health insurance (excluding non-contributory insurance) in connection with a credit transaction, and before the debtor becomes obligated to purchase such insurance.

(b) The form(s) containing the disclosure shall be filed with the superintendent of insurance and the disclosure language shall be subject to disapproval pursuant to section 3918.07 of the Revised Code.

(5) If a creditor makes available to the debtors, more than one plan of credit life insurance or more than one plan of credit accident and health insurance, all debtors must be informed of all such plans applicable to the type of loan.

Where rate filings are made in accordance with the premium rate standards, outlined in this paragraph of this rule, the filed rates shall prima facie be deemed, not to be excessive in relation to the benefits provided.

(1) Standards for premium rates for credit life insurance

(a) Monthly premium rate:

It is presumed that the premium rate for credit life insurance, for which premiums are paid monthly on outstanding balances, is not excessive in relation to the benefits provided if the monthly premium rate for such coverage does not exceed 0.846 dollars per one thousand dollars of outstanding balance of insured indebtedness.

(b) Prima facie single premium rate for decreasing term credit life insurance:

It is presumed that the single premium rate for decreasing term credit life insurance for which premiums are paid in one sum for the entire duration of indebtedness, is not excessive in relation to the benefits provided if the single premium rate for such insurance does not exceed a rate of fifty-five cents per one hundred dollars repayable in twelve substantially equal monthly installments and, for other repayment periods, the equivalent single premium rates calculated according to the formula SPn = (n + 1)/20 times the monthly outstanding balance premium rate standard from paragraph (C)(1)(a) of this rule, where “n” is equal to the number of monthly payments, and “SPn” is the single premium rate per one hundred dollars repayable in “n” monthly installments.

(c) As an alternative to the standards set forth above, an insurer may, where age data applicable to the insured persons are available, determine premium rates based on such age data and computed in a manner consistent herewith, subject to approval pursuant to section 3918.07 of the Revised Code.

(d) Standards for premium rates for indebtedness repayable in installments other than as indicated in paragraph (C)(1) of this rule shall be the equivalent of these standards.

(e) Other additional benefits to policyholders and their debtors, (i.e. dismemberment, partial disability, total and permanent disability, and suicide) may be provided by the insurance carriers if they so desire, but in no event may the charge for such coverage be passed on to the debtor so as to increase the total rate to exceed the rate established by this rule. If a suicide exclusion is utilized, such exclusion cannot be effective for more than six months following the effective date of coverage for that insured person.

(f) The foregoing rate standards may be used for credit life insurance with or without age limitations. If an age limitation is provided, it may not be more restrictive than to exclude from coverage any debtor who has attained age sixty-five at incurral of indebtedness, or who will have attained age sixty-six at maturity of the indebtedness.

(g) A policy provision that restricts coverage based on age in accordance with paragraph (C)(1)(c) or (C)(1)(f) of this rule shall, in the absence of misstatement, be valid only for the first sixty days of coverage. During the first sixty days of coverage the insurer shall have the right to cancel or restructure coverage that would otherwise provide benefits in excess of policy age restrictions.

(h) These standards are applicable to the type of decreasing term credit life insurance contract customarily offered for sale protecting credit obligations repayable in substantially equal installments. Standards for premium rates in the case of forms which vary in any material respect from this standard type of credit insurance contract may reflect such variations to the extent that there is a measurable difference in the claims cost of the coverage provided and must receive approval pursuant to section 3918.07 of the Revised Code on a case basis.

(i) Premium rates for joint credit life insurance shall not exceed one and three-quarters times the applicable single credit life rate.

(j) Amount of credit life insurance:

(i) In connection with loans or other credit transactions of sixty months or less, the amount of credit life insurance shall not exceed the scheduled or actual amount of indebtedness, whichever is greater.

(ii) For loans or other credit transactions exceeding sixty months the amount of credit life insurance shall not exceed the net indebtedness, exclusive of unearned finance charges.

(k) The foregoing standards for premium rates are those to become effective November 1, 1983. Effective May 1, 1985, the monthly outstanding balance premium rate shall not exceed eighty cents per one thousand dollars outstanding balance of insured indebtedness and the single premium rate for decreasing term credit life insurance for which premiums are paid in one sum for the entire duration of indebtedness shall not exceed fifty-two cents per one hundred dollars repayable in twelve substantially equal monthly installments. The superintendent shall use experience data reported on the national association of insurance commissioners (NAIC) annual statement credit insurance experience exhibit to adjust the prima facie rates for credit life insurance on an industry-wide basis as necessary to establish and maintain fifty per cent loss ratio. Prima facie rates shall first be adjusted in like manner effective November 1, 1986, based on the data reported the previous year, and shall be adjusted in like manner effective November first of every year after 1986.

(2) Standards for premium rates for credit accident and health insurance

(a) If premiums are paid in one sum for the entire duration of the indebtedness the following rates per one hundred dollars of initial indebtedness repayable in the indicated number of equal monthly installments are applicable:

See Table at http://www.registerofohio.state.oh.us/pdfs/3901/0/1/3901-1-14_PH_FF_A_RU_20081104_1545.pdf

Effective May 1, 1985, the one sum premium per one hundred dollars of initial indebtedness shall be one hundred three per cent of the rates listed in this paragraph of this rule. The superintendent shall use experience data reported on the national association of insurance commissioners (NAIC) annual statement credit insurance experience exhibit to adjust the prima facie rates for credit accident and health insurance on an industry-wide basis as necessary to establish and maintain a sixty per cent loss ratio. Prima facie rates shall first be adjusted in like manner effective November 1, 1986, based on data reported the previous year, and shall be adjusted in like manner effective November first, of every year after 1986.

The above shows rates only for credit transactions repayable in a total number of installments which is a multiple of six. For transactions repayable in numbers of installments not set forth above; either the actuarial equivalent or straight line interpolation may be utilized. The rate standards set forth above shall be applicable for such contracts which contain a provision excluding or denying claim for disability resulting from pre-existing illness, disease or physical condition (whether or not by name or specific description) which totally disabled the debtor at any time during the six-month period immediately preceding the effective date of the debtor’s coverage, or provisions which exclude coverage for pre-existing conditions for which the insured debtor received medical advice, diagnosis, or treatment within six months preceding the effective date of the debtor’s coverage, and which caused loss within the six months following the effective date of coverage, but contain no other provision which excludes or restricts liability in the event of disability. The rate standards set forth herein may be increased ten per cent for such contracts that do not contain a provision excluding or denying a claim for disability resulting from pre-existing conditions.

Any contract to which the above rates apply may contain provisions excluding or restricting coverage in the event of pregnancy, intentionally self-inflicted injuries, foreign travel or residence, or flight in non-scheduled aircraft, war or military service.

Any contract may also provide an age limitation, which limitation may not be more restrictive than to exclude from coverage any debtor who has attained age sixty-five at incurral of indebtedness, or who will have attained age sixty-six at maturity of the indebtedness.

No contract shall provide for an actively-at-work test that requires the debtor to be employed more than thirty hours per week.

(b) Standards for premium rates for indebtedness repayable in installments other than as indicated in paragraph (C)(2)(a) of this rule shall be the equivalent of the standards.

(c) If premium rates are payable other than in one sum, an insurer may determine such rates on a basis consistent with the rates set forth in paragraph (C)(2)(a) of this rule.

(d) The standard for premium rates set forth in paragraph (C)(2)(a) of this rule is applicable to the form of credit accident and health insurance described which is illustrative of the kind of coverage that may be issued. This rule, however, shall not preclude an insurer from filing other forms of credit accident and health insurance for consideration by the superintendent.

(e) Standards for premium rates for contracts providing benefits on a basis different from those illustrated above shall be the equivalent of the standard.

(f) A policy provision that restricts coverage based on age in accordance with paragraph (C)(2)(a) of this rule shall, in the absence of misstatement, be valid only for the first sixty days of coverage. During the first sixty days of coverage the insurer shall have the right to cancel or restructure coverage that would otherwise provide benefits in excess of policy restrictions.

(3) Combination coverage

Standards for premium rates for contracts combining credit life and credit accident and health coverage in one policy shall be consistent with the standards set forth in paragraphs (C)(1) and (C)(2) of this rule, however, such contracts must provide for a refund of the unearned credit accident and health premium, in the event of the debtor’s death. Refunds shall be computed from the date of death. These refunds must also be provided when the insured debtor is covered by separate contracts providing credit life and credit accident and health coverage.

(4) Loss ratio adjustments

Notwithstanding any other provision or paragraph of this rule to the contrary, the superintendent of insurance may, after November 1, 1986, establish minimum loss ratio percentage requirements, based upon claim experience and expense factors, that differ from the fifty per cent standard for credit life and sixty per cent standard for credit accident and health coverage set forth in paragraphs (C)(1), (C)(2), and (C)(8) of this rule.

After November 1, 1986, any insurer desiring to show cause why its premium rates for a case or class of business should not be reduced, as set forth in paragraphs (C)(1) and (C)(8) of this rule, must agree to an examination and audit of it’s claim experience and expense factors. The examination and audit will be performed by qualified actuaries and accountants selected by the superintendent of insurance. The expense of the examination and audit will be paid for by the insurer and the insurer must agree to accept the findings of the superintendent of insurance which will be based upon the results of the examination and audit.

(5) Definitions

As used in connection with credit life or accident and health insurance, the following terms shall mean:

(a) “Claims” means benefits payable on death or disability and does not include loss adjustment expense, claim settlement expense or any other expense, charge, cost or payment.

(b) “Claims incurred” means claims actually paid during the year, plus any estimated reserves at the end of the year for reported claims in the process of settlement, and reserves for unreported claims, and less any estimated reserves at the end of the preceding year for reported claims in the process of settlement and for unreported claims.

Where premiums are payable monthly based on the outstanding balance of insured indebtedness, “premiums earned” shall mean the total premiums paid the insurer during the reporting year plus premiums due the insurer but unpaid at the end of the preceding year, less the premiums due the insurer but unpaid at the end of the current year.

Where premiums are payable in one sum for the entire duration of indebtedness, “premiums earned” shall mean the one-sum premiums which become due the insurer during the reporting year, plus the reserve at the beginning of the reporting year minus the reserve at the end of the reporting year.

The premiums as defined under either system of premium payments shall be without reduction of any kind except for premiums refunded or adjusted on account of termination of coverage.

(d) “Class of business” means a grouping of businesses under the following categories, each category being referred to as a class of business:

(i) Credit unions;

(ii) Commercial banks, societies for savings, and savings and loan associations;

(iii) Finance companies (including second mortgage lenders);

(iv) Motor vehicle dealers under retail installment sale contracts;

(v) All other sales finance companies (including dealers under retail installment sale contracts);

(vi) Production credit associations;

(vii) All others.

(6) Life premium rate deviations

Credit life insurance premium rates exceeding the standards in paragraph (C)(1) of this rule may be approved, as not being excessive in relation to the benefits provided, for the insurance covering the debtors of a creditor or a class of business hereinafter called the “case,” if the credible loss ratio for the case is more than sixty per cent. For such cases, the permissible premium rate shall be computed as follows, unless otherwise determined by the superintendent.

(a) Determine the credible monthly claim cost by multiplying the monthly outstanding balance prima facie premium rate of 0.846 dollars per one thousand dollars by the case credible loss ratio obtained in paragraph (C)(6)(e)(iii) of this rule.

(b) The permissible deviated outstanding balance rate is equal to the credible monthly claim cost plus 0.338 dollars per one thousand dollars.

(c) If the case is on the single premium basis, the permissible schedule of single premium rates is obtained using the formula SPn = (n + 1)/20 times the deviated monthly outstanding balance rate from paragraph (C)(6)(b) of this rule, where:

“n” = the number of equal monthly payments.

“SPn” = the single premium rate per one hundred dollars for “n” monthly payments.

(d) The monthly outstanding balance prima facie premium rate of 0.846 dollars per one thousand dollars indicated in paragraph (C)(6)(a) of this rule, will reduce to eighty cents per one thousand dollars on May 1, 1985. The 0.338 dollars per one thousand dollars loading factor indicated in paragraph (C)(6)(b) of this rule, will reduce to thirty-two cents on May 1, 1985. On November 1, 1986 the monthly outstanding balance prima facie premium rate in paragraph (C)(6)(a) of this rule will be the rate required by paragraph (C)(1)(k) of this rule and the loading factor in paragraph (C)(6)(b) of this rule will be forty per cent of the outstanding balance rate.

(e) The credible loss ratio is computed as follows:

(i) Case size and credibility

Credibility of experience depends upon the case size. Case size is measured according to three premium size brackets to reflect the greater credibility of experience resulting from greater size. The premiums in the brackets are the premiums based on the prima facie premium rate standard. The size brackets are:

Case size Earned premium

1 $ 50,000 – 200,000

2 200,000 – 500,000

3 500,000 – and over

(ii) Credible experience period

The credible experience period is three years if the case aggregate earned premium based on the prima facie rate, developed during the most recent three-year period is less than five hundred thousand dollars. If the case aggregate earned premium during the most recent three-year period based on the prima facie rate is equal to or greater than five hundred thousand dollars, then the credible experience period is the most recent number of years needed to accumulate five hundred thousand dollars of premium on the prima facie rate. For example, if a case were of sufficient size to generate at least five hundred thousand dollars in one year, the credible experience period would be one year.

The experience used in determining the permissible rate is the experience during the credible experience period, as follows:

(iii) Credible loss ratio

The credible loss ratio is based on the experience of the credible experience period. It is a composite of the case’s actual loss ratio (ALR) during the credible experience period and the basic loss ratio (BLR) contemplated by the prima facie rate standards which is fifty per cent for credit life insurance.

The actual loss ratio is the ratio of the incurred claims of the credible experience period divided by the earned premium based on the prima facie rate during the credible experience period.

The compositing of the actual and basic loss ratios takes account of fluctuations about expected experience, and dampens the effect of non-credible fluctuations. The factors used in compositing the loss ratios depend upon case size in accordance with the three size brackets in paragraph (C)(6)(e)(i) of this rule, as follows:

Case size Credible loss ratio

1 50% of ALR plus 50% of BLR

2 75% of ALR plus 25% of BLR

3 100% of ALR plus 0% of BLR

(7) Accident and health premium rate deviations

Credit accident and health insurance premium rates exceeding the standards in paragraph (C)(2) of this rule may be approved, as not being excessive in relation to the benefits provided, for the insurance covering the debtors of a creditor or a class of business hereinafter called the “case,” if the credible loss ratio for the case is more than sixty per cent. For such cases, the permissible premium rate shall be computed as follows, unless otherwise determined by the superintendent.

(a) Determine the credible claim cost by multiplying the prima facie premium rate, by the case credible loss ratio, obtained in paragraph (C)(7)(c)(iii) of this rule.

(b) The permissible deviated outstanding balance rate is equal to the credible monthly claim cost plus the loading factor. The loading factor is computed as a percentage of the prima facie rate as adjusted in accordance with the following table:

(i) Effective November 1, 1983 – thirty-five per cent times the prima facie rate set forth in paragraph (C)(2)(a) of this rule;

(ii) Effective May 1, 1985 – thirty-seven per cent times the prima facie rate set forth in paragraph (C)(2)(a) of this rule;

(iii) Effective November 1, 1986 – forty per cent times the prima facie rate set forth in paragraph (C)(2)(a) of this rule.

(i) Case size and credibility

Case size Earned premium

1 $ 50,000 – 200,000

2 200,000 – 500,000

3 500,000 – and over

(ii) Credible experience period

The credible experience period is three years if the case aggregate earned premium based on the prima facie rate, developed during the most recent three-year period is less than five hundred thousand dollars. If the case aggregate earned premium during the most recent three-year period based on the prima facie rate is equal to or greater than five hundred thousand dollars then the credible experience period is the most recent number of years needed to accumulate five hundred thousand dollars of premium on the prima facie rate. For example, if a case were of sufficient size to generate at least five hundred thousand dollars in one year, the credible experience period would be one year.

(iii) Credible loss ratio

The actual loss ratio is the ratio of the incurred claims of the credible experience period divided by the earned premium based on the prima facie rate during the credible experience period.

Case size Credible loss ratio

1 50% of ALR plus 50% of BLR

2 75% of ALR plus 25% of BLR

3 100% of ALR plus 0% of BLR

(8) Required downward rate deviations

After November 1, 1986, any insurer which produces, for a case or class of business, as determined by the insurer, a credible loss ratio of less than fifty per cent for life and sixty per cent for accident and health, shall be required to make appropriate rate reductions or show cause why its premium rates for such case or class of business should not be reduced. When the rate for any case is required to be reduced, such reduction shall continue whether the case remains with the insurer or is transferred to another insurer, until the loss experience demonstrates that the reduction is no longer appropriate.

(9) Cases with no identifiable charge

Where no debtor of a case is paying directly or indirectly any part of the premium, the case rates shall be such reasonable rates as are approved by the superintendent.

(10) Approved rates

No insurer shall, commencing with the policy anniversary date on or after the effective date of this rule, charge a premium rate for credit life or credit health and accident insurance insuring a debtor under an existing group policy of credit life or accident and health insurance at a rate greater than that approved for the insurer under this rule, or a premium rate under a group policy of credit life or credit accident and health insurance for any renewal year greater than the rate approved pursuant to this rule.

(11) Time limit on deviations

Premium rate deviations as outlined in paragraph (C)(6) of this rule may be utilized for a period of time not to exceed the credible experience period or two years, whichever is less.

All rates in excess of those outlined in this rule are withdrawn as of the effective date of this rule except that any rate provided under a policy of group credit life insurance or group credit accident and health insurance heretofore approved by the department of insurance in excess of those prescribed herein may be continued until the first anniversary date of such group policy after the effective date of this rule. Such rate may be thereafter continued only if an application for increase in premium rates is approved with respect thereto.

(12) Charges for credit insurance

It will be considered that the debtor is charged a specific amount for insurance if, among other things:

(a) An identifiable amount for insurance is disclosed in the credit or other instrument furnished the debtor which sets out the financial elements of the credit transaction, or

(b) There is a differential in finance, interest, service or other similar charge rates charged to debtors who, except for their insurance status (insured vs. non-insured), are in like circumstances.

(D) Termination of coverage and refunds

(1) If a debtor is covered by a group credit insurance policy providing for the payment of single premiums to the insurer, then provision shall be made by the insurer that in the event of termination of the master policy for any reason, insurance coverage with respect to any debtor insured under such master policy shall be continued for the entire period for which the single premium has been paid, subject to the debtor’s right to cancel the insurance at any time by express action.

(2) If a debtor is covered by a group credit insurance policy providing for payment of premiums to the insurer on a monthly outstanding balance basis, then the group policy shall provide that, in the event of termination of the policy for whatever reason, the insured debtor shall be notified that coverage will continue for thirty days from the date of notice, except where replacement of the coverage by the same or another insurer in the same or greater amount takes place without lapse of coverage. The notice required in this paragraph shall be given by the insurer or, at the option of the insurer by the creditor.

(3) Refunds.

(a) Section 3918.08 of the Revised Code requires refund formulas to be filed and approved by the superintendent. This requirement will be considered satisfied if the refund formula to be applied by the insurer is set forth in either the policy if the coverage is written on an individual policy basis, or the certificate if the coverage is written on a group basis pursuant to a master policy; provided further that such forms of policies and certificates have not been disapproved by the superintendent. In the event that the refund formula to be used is the “sum of digits” also commonly known as the “rule of 78” it will be sufficient to state either descriptive name without further explanation in the provisions of the policy or certificate.

(b) The refund of premiums in case of reducing term credit life insurance or credit health and accident insurance on which premiums are payable other than by a single premium and of level-term credit life insurance shall be equal to the pro rata unearned gross premium, and in the case of reducing term credit life insurance paid by a single premium and of credit accident and health insurance shall be equal to the amount computed by the “sum of digits” formula commonly known as the “rule of 78.”

(c) The refund of the amount charged to or collected from the debtor for insurance in the case of reducing term credit life insurance or credit accident and health insurance where said amount, if payable other than in a single sum and of level-term credit life insurance, shall be equal to the pro rata unearned gross amount to be collected, and in the case of reducing term credit life insurance where the whole amount thereof is charged to or collected from the debtor in a single sum and of credit accident and health insurance shall be equal to the amount computed by the “sum of digits” formula commonly known as the “rule of 78.”

(d) Notwithstanding paragraph (D)(3)(a), (D)(3)(b) or (D)(3)(c) of this rule, the refund of premiums for credit accident and health insurance where the premiums are payable in a single sum, and for credit life insurance where the premiums are payable in a single sum and the amount of life insurance does not exceed the net indebtedness, shall be equal to the single premium that would be charged for the remaining term of the debt for the balance outstanding at the date of refund. This formula is commonly known as the “rule of anticipation.”

(e) No refund or credit need be made if the amount is less than one dollar.

(f) In the event of termination, no charge for coverage may be made for the first fifteen days of a loan month, and a full month may be charged for sixteen days or more of a loan month.

(E) Maintenance of statistics

(1) Each insurer writing credit life insurance and credit accident and health insurance shall maintain statistics, on a policy-year basis for group policies, and on a calendar-year basis for individual policies with respect to each plan or type of coverage showing, on an accrual basis, separately for credit life insurance and separately for direct business and reinsurance assumed with respect to the following:

(a) Gross premiums received.

(b) Refunds of premiums on terminated insurance.

(d) Earned premiums.

(e) Claims paid.

(f) Increase in claim reserve.

(g) Claims incurred.

(h) Reserve increases other than set forth in paragraphs (E)(1)(c) and (E)(1)(f) of this rule.

(i) Commissions.

(j) Fees and other allowances.

(k) Dividends and experience rating refunds.

(l) Mean amount of life insurance in force.

(m) Mean number of individual policies and certificates in force during the calendar year.

(2) With respect to credit accident and health insurance, each insurer shall keep a record for each plan or type of coverage which, in addition to the above statistics, shall show the nature of the benefits payable, the applicable waiting period, and the rate at which premiums are charged therefor.

(3) Credit insurance data and statistics shall be submitted from time to time as requested by the superintendent of insurance.

(F) Responsibility of insurers with respect to creditors

(1) Each insurer transacting credit insurance shall be responsible to conduct a thorough review of each creditor with respect to the first year of business with such creditor. The insurer thereafter shall conduct such reviews as reasonably may be necessary to assure compliance with applicable statutes and rules.

(2) Such reviews shall include, but not by way of limitation, verification that:

(a) Premiums and charges to debtors are properly calculated and transmitted to the insurer, based on rates permitted under statutes and the superintendent’s rules and on the amounts of indebtedness actually insured; and

(b) Claims are refunds are properly calculated and paid;

(3) An insurer’s responsibilities are not discharged or avoided by the delegation of premium collection or refund calculation or check or draft drawing, and the actions of such delegatee will be considered as the acts of the insurer.

The insurer shall maintain records of such reviews for three years, and such records will be subject to call and review by the superintendent at his discretion.

(G) Reserve basis

(1) Life

(a) For credit insurance written prior to January 1, 2009, in the state of Ohio, all insurers will be required to maintain reserves not less than 1958 “CET Table of Mortality” at four and one-half per cent interest.

(b) For credit insurance written on or after January 1, 2009, in the state of Ohio, all insurers will be required to maintain reserves not less than “2001 Male Composite Ultimate CSO Mortality” at the maximum valuation interest rate for life insurance as defined in section 3903.721 of the Revised Code.

(c) When the credit life insurance policy or certificate insures two lives, the minimum standard shall be twice the mortality in the “2001 CSO Male Composite Ultimate Mortality” table based on the age of the older insured.

(d) In addition to the mortality reserve, the extra liability for refunds shall be established and maintained as part of the total reserve. Any reserve basis which in the aggregate equals or produces a greater reserve not less than this basis will be acceptable to the superintendent. Also, proper rate credit and similar reserves approved by the superintendent shall be carried by the companies on such risks.

(2) Accident and health

(a) For credit insurance written prior to January 1, 2009, the reserve must not be less than a reserve based on the 1964 “Commissioner’s disability table” at three per cent annual interest. However, should an insurer, after establishing a credit disability reserve on the 1964 “Commissioner’s disability table”, develop a disability reserve for such disability policies that is less than the premium that would have been charged for the remaining benefits for the balance of the term, then an additional reserve must be established so that such aggregate total shall not be less than the premium that would have been charged for the remaining benefits for the balance of the term, for such disability policies. The mean of the gross unearned premiums calculated on a “rule of 78” and a pro rata basis shall be deemed to meet the requirements of this provision.

(b) For credit insurance written on or after January 1, 2009, the reserve must not be less than a reserve based on the morbidity assumption as described in paragraph (G)(2)(c) of this rule at the maximum valuation interest rate for ordinary life insurance as defined in section 3903.721 of the Revised Code. However, should an insurer, after establishing a credit disability reserve on the 1985 “CIDA Table”, develop a disability reserve for such disability policies that is less than the premium that would have been charged for the remaining benefits for the balance of the term, then an additional reserve must be established so that such aggregate total shall not be less than the premium that would have been charged for the remaining benefits for the balance of the term, for such disability policies. The mean of the gross unearned premiums calculated on the “rule of 78” and a pro rata basis shall be deemed to meet the requirements of this provision.

(c) The morbidity assumption for use in determining the minimum standard for valuation of single premium credit disability insurance contract reserves are:

(i) For plans having fewer than a fifteen day elimination period, the “1985 Commissioners Individual Disability Table A” (85CIDA) with claim incidence rates increased by twelve per cent; or

(ii) For plans having greater than a fourteen day elimination period, the 85CIDA for a fourteen-day elimination period with claim incidence rates increased by twelve per cent.

(H) Severability

Each paragraph of this rule and every part of each paragraph is an independent section and part of a section, and the holding of any section or a part thereof to be unconstitutional, void, or ineffective for any cause does not affect the validity or constitutionality of any other section or part thereof.

APPENDIX I – DISCLOSURE FORM

OPTIONAL CREDIT INSURANCE

Credit life or credit accident and health insurance is protection for both the buyer and seller.

You are entitled to a copy of the policy or certificate of insurance within thirty days after credit is extended.

You ARE NOT required to buy credit life insurance or credit accident and health insurance from any particular company or agent. You may use existing policies if insurance is required as additional security.

If you buy credit life insurance, the proceeds will be used to reduce or pay off your unpaid loan or indebtedness when you die. Any insurance proceeds in excess of the amount required to pay off the loan will be paid to your beneficiary or estate.

READ your policy or certificate CAREFULLY for what the policy DOES NOT cover. For example: Some policies do not pay disability benefits unless you are disabled for 14 or 30 days or if you have a pre-existing condition. Some policies will not provide coverage if you are over age 65. See the policy for details on these.

You may not be eligible for credit accident and health insurance unless you now work at least thirty hours per week.

The customer, debtor or lessee, shall use this mandated disclosure form and shall initial the appropriate boxes below.

By initialing below, the customer, debtor or lessee acknowledges that he has accepted or declined credit life or credit accident and health insurance

[ ] ACCEPTS CREDIT LIFE INSURANCE

[ ] DECLINES CREDIT LIFE INSURANCE

[ ] ACCEPTS CREDIT ACCIDENT AND HEALTH INSURANCE

[ ] DECLINES CREDIT ACCIDENT AND HEALTH INSURANCE

IT IS THE INTENT OF THIS FORM THAT THE DISCLOSUERS ARE EASILY SEEN.

THERE SHALL BE NOTHING ELSE ON THIS PAGE.

Effective: 11/14/2008

R.C. 119.032 review dates: 08/29/2008 and 08/29/2013

Promulgated Under: 119.03

Statutory Authority: 3901.041

Rule Amplifies: Chapter 3918

Prior Effective Dates: 4/1/73, 6/1/73, 9/26/83

3901-1-16 Advertisement of sickness and accident insurance. [Rescinded]

Rescinded eff 10-1-09

3901-1-18 Ohio fair plan - plan of operation.

(A) Purpose.

The “Ohio Fair Plan Underwriting Association” 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. 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.

(B) 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. Pursuant to the designation made by the superintendent on September 30, 1985, under authority of division (A) of section 3929.42 of the Revised Code, the association is authorized to provide insurance against the perils of burglary, robbery, and theft for properties which are currently covered or eligible for coverage under the federal crime insurance program under FEMA forms 81-11 (April 1986) and 81-13 (April 1986) as administered by the federal insurance administrator prior to July 1, 1987. 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 and includes any person designated by the applicant to be the applicant’s representative at an inspection.

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.

(D) 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.

(E) 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.

(F) 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 by an inspection bureau assigned by the association and approved by the superintendent. 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. Such an inspection request may be made by the owner, his representative, the current insurer, or a licensed agent.

(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 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 construction 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 construction, maintenance, and occupancy shall be sent within ten days to the association. Included with the report shall be information sufficient for rating in accordance with rating plans filed with the superintendent.

(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 and confirmed by reinspection; or

(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. In no case will the association provide coverage unless the necessary corrections are to commence within thirty days following the date of the application. 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.

(G) 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. In no case will the association provide coverage unless the necessary repairs are to commence within thirty days following the date of the application. 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 licensed agent, or if none, to the applicant, 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.

(5) The association, upon receipt of the annual 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.

(H) Binders.

(1) Each application shall clearly indicate the availability of a binder to an applicant.

(2) If an inspection has not been made and a quote furnished to an applicant within fifteen calendar days from the date a completed application was received by the association through no fault of the applicant, a binder shall be issued to the applicant upon payment to the association of the estimated premium. The estimated premium shall be computed from rates filed with and approved by the superintendent of insurance pursuant to Chapter 3935. of the Revised Code. A binder shall be effective at one minute after twelve a.m. the day following receipt of the estimated premium by the association but no earlier than one minute after twelve a.m. on the sixteenth day following receipt of the application.

(3) If inspection is impossible through no fault of the inspection bureau, or the association, the fifteen-day period referred to in paragraph (H)(2) of this rule shall not start until such time as the property becomes available for inspection.

(4) The superintendent may alter the fifteen-day time requirement as expressed in paragraph (H)(2) of this rule, under conditions as he finds appropriate. When such time alteration is requested, the association shall present the facts to the superintendent or his designee for a decision. 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. 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.

(I) 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.

(J) 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.”

(K) Fidelity bonds.

The association shall obtain fidelity bonds in the amount as prescribed by the superintendent. These bonds shall 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.

(L) 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.

(M) Standing committees.

The board may appoint committees as it deems necessary to carry out the purpose and operations of the association.

(N) 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 mail, 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 mail 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.

(O) 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.

(P) 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.

(Q) Reinsurance.

No reinsurance plan or proposal of the association shall be implemented prior to being filed with the superintendent.

(R) 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.

(S) 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.

(T) 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.

(U) 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.

(V) Examination of books and records.

The superintendent or any person designated by him 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.

(W) Investments.

The association shall invest its funds in accordance with section 3925.08 of the Revised Code.

(X) 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 he deems necessary.

(Y) Severability.

If any provision of this rule or the application thereof to any person or situation is held invalid, such invalidity shall not affect any other provision or application of the rule which can be given effect without the invalid provision or application, and to this end the provisions of this rule are declared to be severable.

R.C. 119.032 review dates: 12/27/2007 and 12/27/2012

Promulgated Under: 119.03

Statutory Authority: 3901.041

Rule Amplifies: 3929.43

Prior Effective Dates: 1/1/1977, 1/16/1981, 1/13/1987, 1/11/1995

3901-1-19 Joint underwriting association. [Rescinded]

Rescinded eff 3-20-08

3901-1-20 Independent filings.

(A) Enabling Rule

Independent filings by insurance companies often contain a so-called “Enabling Rule” providing substantially that “The rules, rates, forms and rating plans filed by or on behalf of the company for each coverage shall govern in all cases not specifically provided for herein.” The purpose of an “Enabling Rule” is to permit the use, with an independently filed rating plan, of any fire or casualty form which has been filed by or on behalf of a company, whenever such form is not specifically provided for in the plan.

(B) All-Inclusiveness

Independently filed rating plans must be all-inclusive by containing every rule and rating plan to be used in connection with the plan, except as provided for in Sections (C) and (D) immediately hereafter.

Reference in independent filings to the use of other independent filings by the same company may be made, but when so used the entire filing referred to shall apply.

(D) Reference to Bureau Filings

Reference in independent filings to the use of bureau filings on behalf of the company may be made, but when so used the entire filing referred to shall apply.

(E) Use of Other Filings

No filings other than as provided in Sections (B), (C), and (D) shall be used in connection with independent filing.

(F) Effective Date

This Rule shall take effect on the 20th day of January, 1967.

R.C. 119.032 review dates: 12/27/2007 and 12/27/2012

Promulgated Under: 119.03

Statutory Authority: 3901.041

Rule Amplifies: 3905.04, 3937.03

Prior Effective Dates: 1/20/1967

3901-1-21 Catastrophe coverage.

(A) Purpose

This rule provides for the writing of catastrophe policies with a minimum retention by the insured of $100,000 for loss or damage to property by fire and allied lines. The customary rating methods currently used by fire insurers do not apply to the rating of risks of this nature, inasmuch as the rating factors for catastrophe coverage vary considerably according to the unique circumstances attendant each risk.

(B) The Existing Bulletin Superseded

This rule supersedes existing Department of Insurance Bulletin 48, dated December 1, 1965.

(1) Pursuant to authority contained in Section 3935.04(F) Ohio Revised Code, it is hereby ruled that filing requirements are suspended in respect to rates for catastrophes or losses in excess of a minimum retention of $100,000 by the insured.

(2) The retention as to each loss occurrence must, in each case, be a minimum of $100,000.

(3) The insured must warrant that this retention shall not be covered by any other policy of insurance.

(D) The Copy of Policy

A copy of any policy and a brief analysis of the risk written under this suspension shall be filed with the Superintendent within 10 days after the policy has been issued.

(E) Statistics

Insurers writing such coverage shall maintain separate statistics on this class of business and shall report such figures to the Superintendent of Insurance upon request.

(F) Effective Date

These rules shall take effect on the 20th day of January, 1967.

R.C. 119.032 review dates: 12/27/2007 and 12/27/2012

Promulgated Under: 119.03

Statutory Authority: 3901.041

Rule Amplifies: 3935.04

Prior Effective Dates: 1/20/1967

3901-1-22 Risk and expense modification plans.

(A) Purpose

Risk and expense modification proposals for individual risks in the multiple peril policies, fire and allied lines, inland marine, and fidelity, are of recent origin. Some fundamental differences are present in the treatment of property as distinguished from casualty lines of insurance. As one example, frequency of loss is generally much greater in casualty than in property lines, but the severity of loss is generally much greater in property insurance. This fundamental factor is a major reason for applying different minimum premium criteria in filings for lines other than the accepted and proven casualty insurance filings.

(B) Existing Rule Superseded

This rule supersedes existing Department of Insurance Rule IN-35-01, effective May 25, 1967.

Every filing for individual risk premium modification must contain satisfactory specifications of factors or elements to be applied to risk modification and expense modification. They shall not duplicate any factor or element already reflected in the basic premium or rates.

(D) Minimum Premium Criteria

The following minimum criteria will hereafter be applied in the approval or disapproval of individual risk premium modification filings, and rules for applying them:

(1) Fidelity and Surety

(a) Minimum premium criteria for fidelity and surety insurance not written as part of a multi-peril package policy, automobile liability, automobile physical damage, general liability, burglary, glass and boiler and machinery rating plans shall remain as presently filed.

(b) Minimum premium criteria for fidelity and surety insurance written as part of a multi-peril package policy shall be $500 for three years for risk modification and for expense modification shall be $500 for three years.

(2) Fire and Allied Lines

Minimum premium criteria for fire and allied lines insurance shall be $500 for three years for risk modification and for expense modification shall be $500 for three years.

(3) Inland Marine

Minimum premium criteria for inland marine insurance shall be $500 for three years for risk modification and for expense modification shall be $500 for three years.

(4) Multi-Peril

Minimum premium criteria for multi-peril insurance coverage shall be $500 for three years for risk modification and for expense modification shall be $500 for three years (automobile coverage shall not be included in multi-peril coverage for the purpose of calculating minimum premium).

(E) Maximum Debit and Credit

For the purpose of calculating risk modification, a limit of 25% maximum debit and credit shall be applied to the rate.

(F) Risk Modification

“Risk Modification” (commonly known as schedule rating in casualty insurance), means the application of controlled debits and credits to the risk rate or premium which has been developed through use of a base rate or class rate and modified by experience rating plans, multiple location rating plans, package discounts where applicable, and other similar approved rating plans. No risks or expense modification shall apply to any multi-peril policy unless the minimum premium criteria are met.

(G) Account Minimums

The minimums used herein refer to the account. If more than one company writes a policy for a part interest, the minimum shall apply to the total interest, not each separate policy.

(H) Total Premium Modified

When an account is eligible for risk and expense modification, the total premium of the account shall be modified, not just the amount in excess of the minimum. However, the application of credits under the plan shall not reduce the premium as modified, below the minimum requirements.

(I) Duplication of Credits

Risk modification shall not be used on any factor or element already considered in the application of a specific rating procedure or which is fully reflected in the basic premium or rates.

(J) Applicable to All Risks

Individual risk premium modification plans must be applied to all risks which are eligible.

(K) Inspection Required

No risk shall be modified except after inspection of the property by a company or bureau representative and the debits or credits applicable shall be determined only by a company or bureau representative.

(L) Supporting Data

The bureau or company shall retain adequate supporting data, including copies of inspection reports which shall be made available for examination upon notice from the Department of Insurance.

(M) Statistics

As a condition to continuance of individual risk premium modification plans, each filer shall maintain complete statistics so that the Department of Insurance may determine from the filer’s experience whether or not minimum premium criteria shall be adjusted upward or downward in the future; such experience statistics shall be supplied to the Department of Insurance upon its request.

(N) Suspension or Revocation

The Superintendent of Insurance may suspend, revoke, or refuse to renew the license of any insurance company found to be in violation of the provisions set forth in this rule. Such suspension, revocation, or refusal to renew shall be in addition to, not substitution for, other penalties provided in the Insurance Code of Ohio.

(O) Effective Date

This rule shall take effect on the 10thday of July, 1973.

R.C. 119.032 review dates: 12/27/2007 and 12/27/2012

Promulgated Under: 119.03

Statutory Authority: 3901.041

Rule Amplifies: 3935.04, 3937.03

Prior Effective Dates: 7/10/1973

3901-1-23 Inland marine risks.

(A) Existing bulletins superseded

This rule supersedes “Bulletin 9”, dated April 1, 1955, and “Bulletin 10”, dated March 18, 1957.

(B) Inland marine risks

(1) Inland marine risks shall be established by the nation-wide marine definition, approved and recommended by the “National Association of Insurance Commissioners” on December 9, 1976, amendments thereto, and interpretations thereof by the N.A.I.C. committee on interpretation of the nation-wide marine definition.

(2) Any company wishing to deviate from the nation-wide marine definition shall make a formal filing and obtain approval of the superintendent of insurance before using such deviation.

This rule shall take effect on the first day of December, 1978.

R.C. 119.032 review dates: 12/27/2007 and 12/27/2012

Promulgated Under: 119.03

Statutory Authority: 3901.041

Rule Amplifies: 3905.04

Prior Effective Dates: 1/20/1967, 12/1/1978

3901-1-24 Public insurance adjusters.

(A) Purpose

This rule is adopted pursuant to Chapter 3951 and Section 3901.041 of the Revised Code, and its purpose is to safeguard the interest of the public by regulating the conduct of public insurance adjusters.

(B) Prohibited Activities

No public insurance adjuster or public insurance agent shall:

(1) engage in any manner or degree, for compensation of any kind, in the business of repairing, remodeling, or replacing damaged or destroyed property, real or personal, which damage or destruction is covered by a policy of insurance; nor have any direct or indirect interst in, nor receive compensation of any kind from any person, firm, association, partnership, or corporation which is engaged in such business;

(2) attempt in any manner to solicit a loss during the progress of a fire or while the fire department or any of its representatives are in any manner engaged at the damaged premises; nor in any way interfere with the performance of the duties of an investigator of the State Fire Marshal’s Office, an investigator of any fire department, or a law enforcement official of this State or of any political subdivision thereof;

(3) give or offer to give to an insured or his representative any portion of the adjuster’s fee or anticipated settlement of the claim for loss or damage as an inducement to secure a contract for the adjustment of a loss;

(4) represent himself to be an adjuster for or a representative of any insurance company, a fire investigator, or a person connected with any fire department or law enforcement agency;

(5) compensate any person to act on his behalf in the solicitation, negotiation, or settlement of a claim unless such person is licensed as a public insurance adjuster or a public insurance adjuster agent;

(6) make an inventory or estimate of loss or damage other than that which is fair and honest;

(7) own or acquire any direct or indirect financial interest in any property, real or personal, which is the subject of a loss adjusted by him; nor have any direct or indirect financial interest in the sale of any salvage of any property which is the subject of a loss adjusted by him.

Every public insurance adjuster shall keep a full record of his transaction as an adjuster for the previous three years and such records shall be open at all times to the inspection of the Superintendent of Insurance or his representative. Such records shall show for each loss adjusted by him:

(1) the name of the insured;

(2) the date, location, and the public insurance adjuster’s estimate of the amount of loss;

(3) the name of the insurer or insurers which issued any policy covering the loss which was the subject of the adjustment;

(4) the amount of coverage, the expiration date, and the number of each policy of insurance covering such loss;

(5) an itemized statement of all recoveries by the insured from all sources with regard to such loss;

(6) the names and addresses of any person or persons soliciting the adjustment on behalf of the public insurance adjuster and the date and time when solicited;

(7) the total compensation received by the public insurance adjuster for the adjustment of the loss;

(8) copies of any agreements between the public insurance adjuster and the insured;

(9) names and addresses of all contractors who performed or contracted to perform work of any kind on the damaged or destroyed property prior to settlement of the claim.

(D) Contract Requirements

(1) No public insurance adjuster shall use in his business as a public insurance adjuster a contract whereby an insured engages or employs the public insurance adjuster to perform the functions specified in 3951.01(A) until thirty days after the form of such contract has been filed with the Superintendent of Insurance, unless within such time the Superintendent gives the public insurance adjuster written approval for the use of such form. If the Superintendent finds within such thirty-day period that the form filed contains any language which is prohibited by any law of this State, including any rule of the Superintendent, or that it is inconsistent, ambiguous, misleading, deceptive, or likely to mislead an insured, the Superintendent will give written notice of such finding to the public insurance adjuster who filed the form, and the public insurance adjuster shall thereafter not use such form.

(2) Every such contract must conspicuously set out the fee of the public insurance adjuster for the adjustment services to be rendered the insured pursuant to the contract.

(E) Restriction on Insurers

(1) No insurer authorized to issue the types of insurance policies set forth in Section 3951.01(A) of the Revised Code shall:

(a) recognize a public insurance adjuster as a party interested in the proceeds of any insurance settlements arising from such policies or negotiate an insurance settlement with a public insurance adjuster representing an insured unless such public insurance adjuster has been duly licensed as a public insurance adjuster by the Department of Insurance.

(b) negotiate an insurance settlement with a representative of an insured, other than a licensed public insurance adjuster, unless such representative has been duly appointed as such by a court of law or is one of those persons enumerated in Section 3951.01(D) of the Revised Code.

(2) Each insurance company referred to in subparagraph (1) above shall keep a record of each insurance loss and/or settlement wherein the insured was represented by a public insurance adjuster. Such record shall include a copy of the public insurance adjuster’s certificate of authority.

(F) Separability

Each section of this rule and every part of each section is an independent section and part of a section, and the holding of any section or a part thereof to be unconstitutional, void, or ineffective for any cause does not affect the validity or constitutionality of any other section or part thereof.

(G) Suspension or Revocation

The Superintendent of Insurance may suspend, revoke, or refuse to renew the license of a public insurance adjuster or public insurance adjuster agent found to be in violation of this rule. Such suspension, revocation, or refusal to renew shall be in addition to, not a substitution for the penalties provided in Section 3951.99 of the Revised Code.

(H) Effective Date

This rule shall take effect on the 1st day of August, 1972.

R.C. 119.032 review dates: 12/29/2006 and 12/29/2011

Promulgated Under: 119.03

Statutory Authority: RC Ch. 3951, RC 3901.041

Rule Amplifies: RC Ch. 3951

Prior Effective Dates: 11/6/1959, 8/1/1972

3901-1-25 Ohio insurance guaranty association.

(A) Name and status. The name of this organization is the Ohio insurance guaranty association, herein referred to as “association.” It is a nonprofit unincorporated association organized pursuant to section 3955.06 of the Revised Code and implementing sections 3955.01 to 3955.20 of the Revised Code concerning the association and its plan of operation.

(B) Purpose. The association is organized to pursue the following purpose:

To do all things which the association is required or empowered to do by the Ohio Insurance Guaranty Association Act, sections 3955.01 to 3955.20 of the Revised Code.

(1) Members

Every insurer licensed to transact insurance in this state and writing one or more kinds of insurance included within section 3955.05 of the Revised Code shall be a member of the association.

(2) Annual meeting

The annual meeting of member insurers shall be held at ten-thirty a.m. on the second Wednesday of October of each year at the offices of the association unless the board shall designate a different time, date or place in Ohio for the holding of such meeting.

(3) Special meeting

Special meetings of member insurers may be held at such time and place within Ohio as shall be designated by the board.

(4) Notice of meetings

Written notice of any meeting of member insurers stating the time, place, and purpose or purposes thereof shall be mailed to each member insurer at the address shown in the books of the association not more than forty nor less than twenty days prior to the meeting.

(5) Quorum

Member insurers represented at any duly called meeting of member insurers shall constitute a quorum for the transaction of business and the actions of a majority of the member insurers present at the meeting shall be the actions of the association, but any action required by law or this plan of operation to be authorized or taken by a designated portion of member insurers, may not be authorized or taken by a lesser portion thereof.

(6) Representation and voting

Each member insurer represented at any meeting of member insurers is entitled to cast one vote for each matter properly submitted to member insurers for their vote, consent, waiver, release, or other action. Each member insurer may be represented at any meeting of member insurers by any officer of such member insurer, or any other person the member insurer may designate in writing signed by an officer. Any officer of a member insurer shall conclusively be deemed to have authority to cast the vote of such member insurer, to appoint proxies, and to execute consents, waivers, and releases on behalf of such member insurer, unless, before a vote is taken or a consent, waiver, or release is acted upon, it appears by a certified copy of its regulations, bylaws, or by resolution of its board or executive committee that such authority does not exist or is vested in some other officer or person. Member insurers may consider and act upon any subject they deem advisable at any annual or special meeting, as long as notice of such meeting given to member insurers describes the subject to be considered and acted upon.

(D) Board of directors.

(1) Membership and duties

(a) The association shall be governed by a board of directors (herein referred to as “board”) which shall, in the name of the association, exercise all of the powers and carry out all of the duties of the association, except as otherwise provided herein. At a meeting of members at which directors are to elected, only members nominated as candidates shall be eligible for election as directors. Nomination for election as a director is limited to: (i) nomination by the board of directors, or (ii) nomination by a member insurer and the seconding of that nomination by a minimum of three member insurers. In the event that nominations are made by member insurers pursuant to paragraph (D)(1)(a)(ii) of this rule, said member insurer(s) shall notify the chairman of the board of said nomination no later than sixty days prior to the annual meeting date. At all elections of directors, the candidates receiving the greatest number of votes shall be elected, subject to the approval of the superintendent of insurance. A majority of member insurers of the board shall be domestic insurers. Not more than one member insurer in a group under the same management or ownership shall serve on the board at the same time.

(b) The board shall consist of not less than five nor more than nine member insurers, the number of board members to be determined by the member insurers at any meeting at which directors are to be elected. The directors shall serve for staggered terms of three years each, except that in the first election following the term of the initial board, three member insurers shall be elected for a three-year term, two member insurers for a two-year term, and two member insurers for a one-year term, all of whom shall serve until their successors are elected. If the number of board members is changed, reductions or increases shall be made from or to the three classes of directors so that an equal number, or as nearly equal a number as possible, of directors is elected each year. Upon the election of member insurers to the board, the association shall notify the superintendent of insurance and request his written approval of the selection. After such approval, each member insurer elected to the board shall designate its authorized representative to serve as director on the board.

(c) The designated representatives of member insurers elected to the board shall elect a chairman and such other officers from among themselves as they deem necessary, each of whom shall serve until his successor is elected.

(d) The chairman, or a board member appointed by him, shall preside at all meetings of the board and of the association. The chairman shall have the authority to sign all documents on behalf of the association except as may be otherwise provided by the board. The board, from time to time and upon such terms as it specifies, may appoint committees whose membership shall be composed of member insurers. The board may adopt regulations and bylaws. Board members shall serve without pay but may be reimbursed for necessary expenses incurred as members of the board.

(2) Board meetings

The board shall meet at least annually immediately following the annual meeting of the association. The board may at any time adopt, change, or discontinue a schedule of regular meetings. In addition, the chairman may, on his own motion, and shall, at the request of two or more board members, convene special meetings of the board at the place and time set forth in the notice of said meeting. A majority of the board shall constitute a quorum for all purposes. A majority of such quorum shall decide any question that may come before the meeting, except that a two-thirds vote is required to request the superintendent of insurance to examine a member insurer, to delegate powers and duties pursuant to paragraph (E)(3) of this rule, to contract with a service facility, or to borrow money. The board may take up and act upon any subject it deems advisable at any meeting. A telephonic conference call of a quorum of the board shall be deemed a “meeting” within the provisions of this paragraph, subject to the notice provisions of paragraph (D)(3) of this rule.

(3) Notice

Written notice of board meetings shall be given to all board members at least five days prior to each meeting. Notice of any meeting may be waived by written consent of any or all members of the board. Any action which may be taken by the vote of the board at a meeting may also be taken without a meeting if authorized in writing or writings signed by all members of the board.

(4) Offices

The principal office of the association shall be located where the board, from time to time, may designate.

(E) The association.

(1) Assessments

(a) After notification of the existence of an insolvent insurer in accordance with division (A)(2) of section 3955.10 of the Revised Code, or by notification received directly from an out-of-state liquidator, the board shall notify all members of the amount of each of their respective assessments therefor not less than thirty days before payment is due.

(b) The association, pursuant to division (A)(3) of section 3955.08 of the Revised Code, may exempt or defer, in whole or part, the assessment of any member insurer if it would cause such insurer’s financial statement to reflect amounts of capital or surplus less than the minimum amounts required for a certificate of authority by any jurisdiction in which such insurer is authorized to transact insurance. In the event the association has deferred an assessment and subsequent determination by the board reveals that such deferment is no longer necessary, the deferment granted such insurer shall be revoked and such deferred assessment shall immediately become due and payable.

(c) Each member insurer may set off, against any assessment, payments authorized in writing by the board made on covered claims and expenses incurred in the payment of such claims if they are chargeable to the account for which the assessment is made.

(d) Periodic assessments may be made for administrative purposes in amounts determined to be adequate to cover foreseeable administrative expenses. If any member insurer’s assessment for administrative purposes is less than ten dollars, its assessment shall be ten dollars.

(e) The association may refund to member insurers, in proportion to the contributions of each member insurer to that insolvency account, that amount by which the assets of the particular insolvency account exceed the liabilities if, at the end of any calendar year, the board finds that the assets of the association in any insolvency account exceed the liabilities of that account as estimated by the board for the coming year.

(f) The association shall waive any refund or assessment of less than ten dollars, except an assessment for administrative purposes.

(g) The “net direct written premiums” used for the calculation of assessments pursuant to division (A)(3) of section 3955.08 of the Revised Code shall be the reported net direct written premiums from the most currently available page fourteen exhibit of premiums and losses to the annual statements filed with the superintendent pursuant to sections 3927.08 and 3929.30 of the Revised Code.

(2) Depositories and assets

The board may open one or more bank accounts for use in association business. The treasurer shall invest any assets not immediately necessary for payment of claims and expenses. The treasurer shall report to the board periodically on said investments, and the board shall review such reports and may direct the treasurer to alter the investments of the association.

(3) Delegation of powers

Any or all powers and duties of the association, except those powers not delegable under the Ohio Insurance Guaranty Association Act, may be delegated to a corporation, association, or other organization which performs or will perform functions similar to those of the association, or its equivalent, in two or more states, pursuant to division (D) of section 3955.09 of the Revised Code.

(4) Service facility

(a) The board may contract with a service facility as provided in the Ohio Insurance Guaranty Association Act subject to the approval of the superintendent of insurance. The terms of such contract may include but are not limited to:

(i) Terms of payment for the performance of the servicing facility.

(ii) Extent of authority delegated to the servicing facility.

(iii) Procedures for giving the receiver, liquidator, or statutory successor timely notice, sufficient to protect the association’s right of subrogation against the receiver, liquidator, or statutory successor, of each and every covered claim not otherwise reported to the receiver, liquidator, or statutory successor.

(iv) Procedures for the handling of covered claims. These procedures may include the right to request from or offer to any person the option to arbitrate his covered claim.

(v) Procedures for the printing or preparation of forms necessary for the proper handling of covered claims.

(vi) Requirement of bond for faithful performance.

(vii) Any other provisions deemed necessary and desirable by the board.

(b) Any service facility shall be reimbursed by the association for all reasonable expenses it incurs and for all payments it makes on behalf of the association.

(5) Claims

The board shall determine the method and place where claims may be filed, hearing and appeals had, and payments made. The board may review claims as it may determine, and may establish and modify monetary limits of claims settlement authority for various employees of the association or any service facility. Any claimant who is dissatisfied with a final decision on his or her claim by an association employee or service facility may appeal that decision to the board. Such appeal shall be in writing, addressed to the board, and shall specify the final decision appealed from and the reason(s) why the claimant disagrees with the final decision. The board may prescribe forms for proof of claim and such other forms as it may deem desirable. Notice of claims to the receiver, liquidator, or statutory successor appointed in this state shall be deemed notice to the association or its agent, such as a service facility or such other organization as defined in paragraph (E)(4) of this rule. Any notice of claim filed with a receiver, liquidator, or statutory successor appointed in another state, if such receiver, liquidator, or statutory successor forwards a certified copy thereof to the association or to an ancillary receiver in this state within such time as is designated for filing claims with the association, shall be deemed notice to the association. The association may appear in, defend, and appeal any action on a claim brought against the association.

(6) Subrogation

The association shall be subrogated pursuant to division (A) of section 3955.12 of the Revised Code to the rights of any person recovering under the Ohio Insurance Guaranty Association Act, to the extent of such person’s recovery from the association.

(7) Prevention and detection of insolvencies

The board shall establish procedures and practices as it deems necessary and desirable to comply with section 3955.14 of the Revised Code.

(8) Other powers

The association may perform such other acts as are necessary or proper to effectuate the purposes of the Ohio Insurance Guaranty Association Act.

(F) Reports and records.

(1) Record

A written record of the proceedings of each meeting of member insurers and of the board shall be made. The original of this record shall be retained by the association with copies being furnished to each board member and, upon written request, to any member insurer.

(2) Annual reports

The board shall make an annual report to member insurers. Such report shall include a review of the association’s activities and an accounting of its income and disbursements for the past year. The board shall make a financial report of the preceding year to the superintendent of insurance not later than the thirtieth day of March of each year.

(3) Other reports

The board may periodically report other activities, procedures, recommendations, and actions for the information of the members.

(4) Audit

The board shall, once every year prior to March thirtieth of each year, request and obtain an audit of the books and records of the association by a certified public accounting firm. In the event there are no insolvencies under the jurisdiction of the association, the board may waive the audit and in lieu thereof, provide a financial statement to member insurers.

(5) Method of account

The association shall maintain its accounts and financial records to comply with this plan of operation and the Ohio Insurance Guaranty Association Act.

(G) Appeal. Any member insurer aggrieved by an action of the association shall appeal to the board before appealing to the superintendent of insurance. If such member insurer is aggrieved by the final action or decision of the board or if the board fails to act within thirty days of such appeal, such member insurer may appeal within thirty days thereafter to the superintendent of insurance. Any final action or order of the superintendent of insurance shall be subject to division (C) of section 3955.10 of the Revised Code.

(H) Amendment. This plan of operation may be amended from time to time to assure the fair, reasonable, and equitable administration of the association. Amendments may be adopted at the annual or special meetings of member insurers provided a copy of such amendments is submitted to each member insurer with the mailed notice of the meeting. Amendments may also be adopted if the board submits such amendments by mailed ballot to each member insurer provided such amendments are approved in writing by a majority of member insurers within thirty days from the date of mailing. All amendments so adopted shall be submitted to the superintendent of insurance and shall become effective upon his adoption pursuant to Chapter 119. of the Revised Code.

(I) Indemnification.

(1) Indemnification

The association shall indemnify any officer, director or employee of the association who was or is a party or is threatened to be made a party to any threatened, pending or completed action, suit or proceeding, whether civil, criminal, administrative, or investigative (including, without limitation, any action threatened or instituted by or in the right of the association) by reason of the fact that he is or was a director, officer, employee, or agent of the association, is or was serving at the request of a member company of the association as a director, or is serving at the request of the association as a trustee, officer, employee or agent of another association, corporation, partnership, joint venture, trust, or other enterprise, against expenses (including, without limitation, attorneys’ fees, filing fees, court reporters’ fees and transcript costs), judgements, fines and amounts paid in settlement actually and reasonably incurred by him in connection with such action, suit or proceeding if he acted in good faith and in a manner he reasonably believed to be in or not opposed to the best interests of the association, and with respect to any criminal action or proceeding, had no reasonable cause to believe his conduct was unlawful. A person claiming indemnifaction under this paragraph shall be presumed, in respect of any act or omission giving rise to such claim for indemnification, to have acted in good faith and in a manner he reasonably believed to be in or not opposed to the best interests of the association, and with respect to any criminal matter, to have had no reasonable cause to believe his conduct was unlawful, and the termination of any action, suit, or proceeding by judgment, order, settlement, or conviction, or upon a plea of nolo contendere or its equivalent, shall not, of itself, rebut such presumption.

(2) Court-approved indemnification

Anything contained in this rule to the contrary notwithstanding: (a) the association shall not indemnify any officer or director of the association who was a party to any completed action or suit instituted by or in the right of the association to procure a judgment in its favor by reason of the fact that he is or was a director, officer, employee or agent of the association, or is or was serving at the request of the association as a director, trustee, officer, employee or agent of another association, corporation, partnership, joint venture, trust, or other enterprise, in respect of any claim, issue or matter asserted in such action or suit as to which he shall have been adjudged to be liable for gross negligence or misconduct (other than negligence) in the performance of his duty to the association unless and only to the extent that the court of common pleas of Franklin county, Ohio or the court in which such action or suit was brought shall determine upon application that, despite such adjudication of liability, and in view of all the circumstances of the case, he is fairly and reasonably entitled to such indemnity as such court of common pleas or such other court shall deem proper; and (b) the association shall promptly make any such unpaid indemnification as is determined by a court to be proper as contemplated in this paragraph.

(3) Indemnification for expenses

Anything contained in this rule to the contrary notwithstanding, to the extent that a director, officer, or employee of the association has been successful on the merits or otherwise in defense of any action, suit or proceeding referred to in paragraph (I)(1) of this rule, or in defense of any claim, issue, or matter therein, he shall be indemnified against expenses (including, without limitation, attorneys’ fees, filing fees, court reporters’ fees and transcript costs) actually and reasonably incurred by him in connection therewith.

(4) Determination required

Any indemnification under paragraph (I)(1) of this rule and not precluded under paragraph (I)(2) of this rule shall be made by the association only upon a determination that the indemnification of the director, officer, or employee is proper in the circumstances because he has met the applicable standard of conduct set forth in paragraph (I)(1) of this rule. Such determination shall be made only: (a) by the board of directors by a majority vote of a quorum consisting of directors who were not and are not parties to, or threatened with, any such action, suit or proceeding, or (b) if such a quorum is not obtainable or if a majority of a quorum of disinterested directors so directs, in a written opinion by independent legal counsel other than an attorney, or a firm having associated with it an attorney who has been retained by or who has performed services for the association, or any person to be indemnified, within the past five years, or (c) by the member insurers, or (d) by the court of common pleas of Franklin county, Ohio or (if the association is a party thereto) the court in which such action, suit or proceeding was brought, if any. Any determination made by the disinterested directors or by independent legal counsel under this paragraph to provide indemnity in respect of any claim, issue or matter asserted in an action or suit threatened or brought by or in the right of the association shall be promptly communicated to the person who threatened or brought the action or suit, and such person shall have the right, within ten days after receipt of such notification, to petition the court of common pleas of Franklin county, Ohio or the court in which action or suit was brought to review the reasonableness of such determination.

(5) Advances for expenses

Expenses (including, without limitation, attorneys’ fees, filing fees, court reporters’ fees and transcript costs) incurred in defending any action, suit or proceeding referred to in paragraph (I)(1) of this rule shall be paid by the association in advance of the final disposition of such action, suit or proceeding to or on behalf of the officer, director or employee promptly as such expenses are incurred by him, but only if such officer, director or employee shall first agree, in writing, to repay all amounts so paid in respect of any claim, issue or other matter asserted in such action, suit or proceeding in defense of which he shall not have been successful on the merits or otherwise: (a) unless it shall ultimately be determined as provided in paragraph (I)(4) of this rule that he is entitled to be indemnified by the association as provided under paragraph (I)(1) of this rule; or (b) if, in respect of any claim, issue or other matter asserted by or in the right of the association in such action or suit, he shall have been adjudged to be liable for gross negligence or misconduct (other than negligence) in the performance of his duty to the association, unless and only to the extent that the court of common pleas of Franklin county, Ohio or the court in which such action or suit was brought shall determine upon application that, despite such adjudication of liability, and in view of all the circumstances, he is fairly and reasonably entitled to all or part of such indemnification.

(6) Paragraph (I) of this rule not exclusive

The indemnification provided by paragraph (I) of this rule shall not be deemed exclusive of any rights to which those seeking indemnification may be entitled under Ohio law, this plan of operation, another association, corporation, or other organization, any agreement, vote of member insurers or disinterested directors, or otherwise, both as to action in his official capacity and as to action in another capacity while holding such office, and shall continue as to a person who has ceased to be a director, officer or employee of the association and shall inure to the benefit of the heirs, executors, and administrators of such a person.

(7) Insurance

The association may purchase and maintain insurance on behalf of any person who is or was a director, officer, employee or agent of the association, or is or was serving at the request of the association as a director, trustee, officer, employee, or agent of another association, corporation, partnership, joint venture, trust, or other enterprise, against any liability asserted against him and incurred by him in any such capacity, or arising out of his status as such, whether or not the association would have the power to indemnify him against such liability under the provisions of paragraph (I) of this rule.

(8) Expenses

The expenses of any indemnification shall be an administrative expense of the association.

(9) Certain definitions

For purposes of paragraph (I) of this rule, and as an example and not by way of limitation: A person claiming indemnification under paragraph (I) of this rule shall be deemed to have been successful on the merits or otherwise in defense of any action, suit or proceeding referred to in paragraph (I)(1) of this rule, or in defense of any claim, issue or other matter therein, if such action, suit or proceeding shall be terminated as to such person, with or without prejudice, without the entry of a judgment or order against him, without a conviction of him, without the imposition of a fine upon him and without his payment or agreement to pay any amount in settlement thereof (whether or not such termination is based upon a judicial or other determination of the lack of merit of the claims made against him or otherwise results in a vindication of him).

(10) Venue

Any action, suit or proceeding to determine a claim for indemnification under paragraph (I) of this rule may be maintained by the person claiming such indemnification, or by the association, in the court of common pleas of Franklin county, Ohio. The association and (by claiming such indemnification) each such person shall consent to the exercise of jurisdiction over its or his person by the court of common pleas of Franklin county, Ohio in any such action, suit or proceeding.

(J) Severability. If any provision of this rule or the application thereof to any person or situation is held invalid, such invalidity shall not affect any other provision or application of this rule which can be given effect without the invalid provision or application, and to this end the provisions of this rule are declared to be severable.

(K) Effective date, compliance, and construction. All member insurers shall comply with this plan of operation. The Ohio Insurance Guaranty Association Act as written, and as it may hereafter be amended, is incorporated as part of this plan of operation. This plan of operation shall be liberally construed to effect the purposes set forth in paragraph (B) of this rule.

R.C. 119.032 review dates: 12/27/2007 and 12/27/2012

Promulgated Under: 119.03

Statutory Authority: 3901.041

Rule Amplifies: Chapter 3955

Prior Effective Dates: 1/1/1977, 10/17/1988

3901-1-29 Designation for alternative or optional retirement programs.

(A) Authority

This rule is promulgated pursuant to section 3901.041 of the Revised Code, providing that the superintendent of insurance shall adopt, amend and rescind rules and make adjudications necessary to discharge the superintendent’s duties and exercise the superintendent’s powers under Title 39 of the Revised Code, subject to Chapter 119. of the Revised Code; and section Chapter 3305. of the Revised Code, which establishes an alternative or optional retirement program for eligible employees of public institutions of higher education. Pursuant to section 3305.03 of the Revised Code, the department of insurance shall designate three or more entities to provide investment options and periodically review each designated provider or vendor to ensure the requirements of Chapter 3305. of the Revised Code are met.

Sections 3901.19 to 3901.26 of the Revised Code prohibit unfair and deceptive acts or practices by any person in the business of insurance, which for the purposes of Chapter 3305. of the Revised Code, includes any person designated as a provider or vendor pursuant to section 3305.3 of the Revised Code. In addition, Section 3901.21 of the Revised Code also provides that the enumeration of specific unfair or deceptive acts or practices in the business of insurance is not exclusive or restrictive or intended to limit the power of the superintendent to adopt rules to implement that section.

(B) Purpose

The purpose of this rule is to establish procedures and set objective standards for the designation and for the periodic review of providers or vendors and the investment options offered to institutions of higher education to assure that the qualifications, standards and requirements in effect at the time of initial designation of the vendors or providers and the investment option or options remain in compliance with the requirements and purposes of Chapter 3305. of the Revised Code, and this rule.

Unless otherwise defined in this paragraph, terms used in this rule have the same meaning as defined in Chapter 3305. of the Revised Code and section 1.59 of the Revised Code:

(1) “Alternative or optional retirement plan or program” means a defined contribution plan sponsored by an institution of higher education and qualified under section 401(a) of the Internal Revenue Code that provides retirement and death benefits through one or more investment options. “Death benefits” may include accumulated investment account balance at death.

(2) “Applicant” means an entity that has applied to the department of insurance to be a designated provider or vendor of one or more investment options for an alternative or optional retirement plan or program sponsored by an institution of higher education.

(3) “Institution of higher education” means a public institution of higher learning as defined under division (A) of section 3505.01 of the Revised Code.

(4) “Investment options” may include life insurance, annuities, variable annuities, regulated investment trusts or companies, pooled investment funds, or other forms of investment, at the option of each electing employee.

(D) Procedure for designation by the department of insurance:

(1) Each applicant applying for designation as a provider or vendor of investment options shall provide the following documentation to the department of insurance evidencing that the applicant meets the standards, qualifications and requirements for designation:

(a) The applicant is authorized to conduct business in this state with regard to the investment options to be offered under an alternative or optional requirement plan or program sponsored by an institution of higher education.

(b) The applicant provides the same or similar investment options to public employees in at least ten other states; and

(2) The applicant provides the following in a form approved by the department of insurance:

(a) The applicant has experience and is capable of providing investment options for employees of institutions of higher education in this state. To qualify under this standard, the applicant must submit a detailed narrative describing its experience and capabilities. The narrative must include, at minimum, the following:

(i) The applicant’s experience in providing investment options under alternative or optional plans or programs sponsored by institutions of higher education in other states;

(ii) The applicant’s potential effectiveness in recruiting institutions of higher education or eligible employees as appropriate to enter into contracts and in retaining those contracts;

(iii) The nature and extent of the rights and benefits to be provided under the investment options;

(iv) The relationship between the rights and benefits under the investment options and the amount of the contributions made under those options;

(v) The suitability of the rights and benefits under the investment options to the needs and interests of eligible employees;

(vi) The capability of the applicant to provide the rights and benefits under the investment options; and

(vii) A certification by an authorized officer of the applicant that, if designated a provider or vendor, the company will abide by the contracts entered into by and between the provider or vendor and the institution of higher education without limitation, any summary plan descriptions or other materials or plan documents and the laws of this state and all applicable federal statutes and regulations.

(b) Documentation that the applicant meets the following minimum objective standards:

(i) A minimum of three billion dollars in IRS-qualified retirement plans for public employees.

(ii) If the applicant is an insurance company authorized to conduct the business of insurance in this state, it must offer only one or more insurance products filed and approved in this state as an alternative or optional retirement program.

(iii) If the applicant is other than an insurance company, it must be registered with the securities and exchange commission under the Investment Company Act of 1940; registered to conduct business in this state and in good standing with the department of commerce; and must be ranked among the top five investment companies by assets under management.

(iv) In applying the standards contained in this paragraph (D)(2)(b), the department may take into account the financial affairs of a holding, parent, affiliated or subsidiary company of the applicant if there is a legally enforceable contract between the applicant and the holding, parent, subsidiary or affiliated company guarantying the applicant’s performance under the alternative or optional retirement system program.

(c) A copy of the materials related to the investment options that will be provided to the institutions of higher education.

(d) A minimum of three letters of recommendation from officers of institutions of higher education who must be among the principal officers for the institution’s alternative or optional retirement plan or program, attesting to the potential effectiveness of the applicant and its investment option in the recruitment and retention of academic or administrative employees and the suitability of the rights and benefits under the investment option to the needs and interests of academic or administrative employees. The letters must be sent directly to the department of insurance by the institution’s officer.

(e) An analysis of the present and future federal tax consequences to employees of institutions of higher education enrolling in the investment options.

(f) If the investment options are offered by an insurance company, an analysis of the extent of coverage for the plan with the Ohio life and health guaranty association.

(g) Other matters relevant to the department’s review, including the following:

(i) The originals and one copy of all submissions comprising the application for designation must be provided in three-ring notebooks divided into sections in the order set forth in this rule, and with dividers clearly labeling the content of each section.

(ii) Unless the applicant is advised that the department requires additional time, the applicant will be notified, in writing, of the department’s decision within thirty days of the applicant’s submission of a complete application containing all of the documentation and submissions required by this rule.

(iii) Failure by the applicant to complete the application process, including without limitation, submitting the information required by the department in a timely manner, shall be deemed an incomplete application and the applicant will be asked to withdraw the application. If the applicant wishes to reapply at a later date, the applicant must comply with paragraph (D) of this rule as though no previous application had been filed.

(E) Review of provider or vendor designation and continuing qualification

(1) A designated provider or vendor shall have an affirmative duty to advise the department and the institution of higher education, in writing, of any change in the design of the investment options, its capability to provide the rights and benefits under the investment options, changes in the federal tax law affecting the rights and benefits under the investment options or any material change in the documentation, standards, qualifications or requirements submitted at the time of its application for designation.

(2) The department shall periodically review each designated provider or vendor and the investment options being offered to ensure that the requirements and purposes of Chapter 3305. of the Revised Code are being met. If the department finds that the provider or vendor is not in compliance with any requirement of Chapter 3305. of the Revised Code or the provider or vendor is not satisfactorily meeting the purposes of Chapter 3305. of the Revised Code by complying with the requirements and maintaining the qualifications and standards set forth in this rule, the department may rescind the provider or vendor’s designation.

(3) Pursuant to section 3305.03 of the Revised Code, the department may engage a person with expertise in the relevant investment options to assist the department in its review of an applicant or a designated provider or vendor, without competitive bidding. All fees and administrative costs for the performance of services rendered by the person providing assistance shall be paid by the applicant, or the designated provider or vendor, as the case may be, through invoice from the department.

(4) Companies approved by the department as designated providers or vendors on or before December 31, 2008, shall be permitted to retain their status as designated providers or vendors, provided they continue to meet the qualifications and standards under which they were originally approved by the department and remain in compliance with the requirements of Chapter 3305. of the Revised Code and paragraph (E) of this rule.

(F) Penalties

An applicant or designated provider or vendor providing false or misleading information to the department of insurance, or its designee, or to an institution of higher education or failing to comply with any requirements of paragraph (E) of this rule shall have committed an unfair and deceptive practice under sections 3901.19 to 3901.26 of the Revised Code, which may result in administrative fines or rescission of designation as a provider or vendor or both. Nothing in this rule shall be construed to limit a private cause of action by an institution of higher education or a plan participant.

(G) Severability

If any provision of this rule or the application thereof to any person or circumstance is for any reason held to be invalid, the remainder of the rule and the application of such provision to other persons or circumstances shall not be affected thereby.

Effective: 02/19/2009

R.C. 119.032 review dates: 10/14/2008 and 08/29/2013

Promulgated Under: 119.03

Statutory Authority: 3901.041

Rule Amplifies: 3305.03

Prior Effective Dates: 2/21/1998

3901-1-31 Group insurance regulations.

(A) Purpose

This rule is issued pursuant to section 3901.041 of the Revised Code. Its purpose is to provide for the writing of policies of group insurance, on a limited basis as hereinafter outlined, by an insurance company having a certificate of authority pursuant to the second paragraph of section 3941.02 of the Revised Code and to ensure that residents of Ohio are not precluded from having group insurance where advantageous tax attributes may be applicable.

(B) Prohibitions

No insurance company shall issue any group policy with respect to any kind of insurance subject to either Chapter 3935. or 3937. of the Revised Code unless:

(1) It is a kind of insurance which, if issued to an employer, would permit the employer’s contributions, if any, to be deductible by the employer and to be excluded from the gross income of the employees, their spouses, and dependents under the applicable provisions of the Internal Revenue Code of 1954; and

(2) It is a kind of insurance which the insurance company is authorized to transact pursuant to its certificate of authority.

Any kind of insurance which meets the requirements of paragraph (B) of this rule may be written by issuing a group policy to:

(1) Any employer; or

(2) Any association, including a labor union, which has a constitution and by-laws and which has been organized and is maintained in good faith for purposes other than that of obtaining insurance; or

(3) Any other substantially similar group which, in the discretion of the superintendent of insurance, may be subject to the issuance of a group policy.

Such group policy shall be for the benefit of the employees or members of the insured group, including their dependents or members of their immediate families if they are included in the coverage.

(D) Filings

Any filing made by an insurance company pertaining to a group policy authorized by this rule shall comply with and be subject to the provisions of either Chapter 3935. or 3937. of the Revised Code, whichever is applicable to the kind of insurance being written, and shall include an individual certificate, to be delivered to each employee or member of the insured group, setting forth in summary form a statement of the essential features of the insurance coverage of such employees or members, the insurance coverage of their dependents or members of their immediate families if they are included in the coverage, and to whom benefits thereunder are payable. Rates shall not be deemed to be unfairly discriminatory because different premiums result from differences in either or both loss exposures and expense factors, so long as the rates reflect the differences with reasonable accuracy.

(E) Producers

No person shall act as an insurance agent in the solicitation or issuance of a group policy authorized by this rule unless such person is duly licensed as an agent for that kind of insurance under the applicable sections of the Revised Code.

(F) Inland marine risks

This rule shall not be applicable to the writing of inland marine insurance.

(G) Severability

(H) Effective date

This rule shall take effect on the 27th day of May, 1978.

R.C. 119.032 review dates: 12/27/2007 and 12/27/2012

Promulgated Under: 119.03

Statutory Authority: 3901.041

Rule Amplifies: 3901.041, Chapter 3935, Chapter 3937, 3941.02

Prior Effective Dates: 5/27/1978

3901-1-34 Notice of public hearing on rates for individual sickness and accident insurance.

(A) Purpose

Whenever the superintendent of insurance schedules a public hearing pursuant to section 3923.021 of the Revised Code, the insurer seeking to adjust its premium rates shall furnish its policyholders, who are residents of the state of Ohio and will be affected by the rate adjustment, with notice of the public hearing. The purpose of this rule is to provide specific requirements for the dissemination of information concerning such a public hearing.

(B) Definitions

(1) “Notice” means a statement which sets forth at least the following:

(a) The name and address of the insurer;

(b) The date, time and place of the scheduled hearing;

(d) A statement that identifies the policies, endorsements, and/or riders affected by the filing and hearing;

(e) A statement that members of the public are entitled to testify at the public hearing.

(2) “State-wide publication” means publication in a newspaper of general circulation in Cuyahoga, Franklin, Hamilton, Lucas, and Athens counties.

(3) “Regional publication” means publication in a newspaper of general circulation in each geographical area of the state which has a sufficient number of affected resident policyholders to warrant publication in that area, as agreed to by the insurer and the department of insurance.

(4) “Legal advertisement” means an advertisement in a form prescribed by the superintendent of insurance published in a newspaper of general circulation.

(5) “Display advertisement” means an advertisement of at least nine square inches published in a newspaper of general circulation.

When an insurer receives notice from the department of insurance that a public hearing will be held, pursuant to section 3923.021 of the Revised Code to consider an adjustment of the premium rates for a policy, endorsement and/or rider which is subject to this rule, the insurer shall give notice of such public hearing to its policyholders, then shown by its records to be residents of Ohio and who, on the date that the insurer receives notice of the hearing, would be affected by the proposed rate adjustment. Notice need not be given if fewer than one hundred Ohio policyholders would be affected by the proposed adjustment. The department of insurance will reschedule a public hearing upon the request of the insurer if there would be insufficient time before the original hearing date for the insurer to provide notice to its policyholders by the method of providing notice selected by the insurer.

(D) Method of furnishing notice

The insurer shall provide notice to its Ohio policyholders in the following manner:

(1) The insurer shall mail notice of the public hearing to the last known address of each policyholder affected by the hearing. Such notice may either be included with other materials sent by the insurer to the policyholder, such as a premium notice, or by a separate mailing. Such notice shall be mailed not less than five days prior to the scheduled hearing date.

(2) As an alternative to providing direct mail notice to each affected policyholder, the insurer may elect to furnish notice of the hearing by the following method:

(a) The insurer shall create and maintain a mailing list of policyholders, who have indicated a desire to receive notice of a public hearing. The insurer shall notify each of its Ohio policyholders at least once each year of their right to have their name and address placed on such a mailing list. When a hearing is scheduled which will affect the premium rates of a policyholder who has had his name placed on the mailing list, the insurer shall furnish that policyholder with notice of the public hearing in the same manner that notice is provided in paragraph (D)(1).

(b) In addition to providing notice to those policyholders on its mailing list each insurer shall provide notice of the hearing to its other affected policyholders through publication of appropriate legal advertisements where the total number of such affected policyholders is less than fifteen thousand. If the hearing will affect policyholders throughout the state of Ohio, the insurer shall make statewide publication of the legal advertisements. If the hearing will only affect policyholders residing in some limited geographical area within the state, the insurer shall make regional publication of the legal advertisement instead of statewide publication. The legal advertisement shall be published at least twice prior to the scheduled hearing date. The second such publication must be made no more than five days prior to the scheduled hearing date.

(c) As an alternative to providing notice by publication of legal advertisements, the insurer may provide notice to affected policyholders by publication of appropriate display advertisements. Such display advertisement must be used instead of a legal advertisement if more than fifteen thousand of the insurer’s policyholders will be affected by the public hearing. If the hearing will affect policyholders throughout the state of Ohio, the insurer shall make state-wide publication of the display advertisements. If the hearing will only affect policyholders residing in some limited geographical area within the state, the insurer shall make regional publication of the display advertisements instead of state-wide publication. The display advertisements shall be published at least twice prior to the scheduled hearing date. The second such publication must be made no more than five days prior to the scheduled hearing date.

(E) Severability

If any provision of this rule or the application thereof to any person or situation is held invalid, such invalidity shall not affect any other provision or application of the rule which can be given effect without the invalid provision or application and to this end, the provisions of this rule are declared to be severable.

(F) Effective date

This rule shall take effect on the 30th day of December, 1979.

HISTORY: Eff 12-30-79; 3-21-05

Promulgated Under: 119.03

Statutory Authority: 3901.041, 3923.021

Rule Amplifies: 3923.021

119.032 Review Date: 12/22/2004 and 12/22/2009

3901-1-35 Solicitation and sale of medicare supplemental accident and health policies.

(A) Authority

This rule is promulgated pursuant to section 3901.041 of the Revised Code, providing that the superintendent of insurance shall adopt, amend and rescind rules and make adjudications necessary to discharge his duties and exercise his powers under Title 39 of the Revised Code; and section 3901.21 of the Revised Code, providing that the enumeration in sections 3901.19 to 3901.26 of the Revised Code, of specific unfair or deceptive acts or practices in the business of insurance is not exclusive or restrictive or intended to limit the powers of the superintendent of insurance to adopt rules to implement said section, or to take action under other sections of the Revised Code.

(B) Purpose

The purpose of this rule is to safeguard the interests of medicare-eligible persons in the solicitation and sale of any type of individual medicare supplemental accident and health insurance policies by providing for the regulation of the solicitation and sale of individual medicare supplemental accident and health insurance policies; and to assure that medicare-eligible persons are not subjected to unfair or deceptive acts or practices in the solicitation and sale of individual medicare supplemental accident and health insurance policies by defining additional unfair or deceptive acts or practices in this rule. This rule shall not apply to the solicitation of group, blanket, or franchise accident and health insurance.

(1) “Medicare-eligible person” means any person eligible for either medicare part A or medicare part B, pursuant to Title XVIII, U.S. Code.

(2) “Medicare program” refers to the benefits available to medicare-eligible persons, pursuant to Title XVIII of the Social Security Act, codified in 42 U.S.C. 1395 ff.

(D) Unfair or deceptive acts or practices defined

It shall be deemed an unfair or deceptive act or practice to commit or perform any of the following:

(1) Any implication, either verbal or written, which conveys the impression that any medicare supplemental insurance program being offered by a company, agent or broker is affiliated with the federal government, the social security administration, the centers for medicare and medicaid services, or the department of health and human services.

(2) Any implication, either verbal or written, which conveys the impression that any medicare supplemental insurance program being offered by a company, agent, solicitor, or broker, is sponsored by the federal government, the social security administration, the centers for medicare and medicaid services, or the department of health and human services.

(3) Any representation by an agent or broker to the effect that such person is a “counselor”, “advisor” or similar designation, for any association or group of medicare-eligible persons, which obscures the actual role of such agent or broker with respect to the solicitation or sale of such insurance.

(4) Any act for the purpose of inducing an applicant or prospective applicant to sign any form, application or document in blank.

(5) Failure by the agent or broker to state affirmatively, verbally and in writing, the following:

(a) That the person making the solicitation or sale is, in fact, an insurance agent or broker;

(b) That the agent or broker is making the solicitation or sale on behalf of an insurance company or insurance companies, which company or companies must be identified to the senior citizens;

(c) That the medicare-eligible person may verify the information required to be stated in paragraph (D)(5)(a) and paragraph (D)(5)(b) by contacting the Ohio department of insurance;

(d) That the medicare-eligible person may contact the agent or broker making the solicitation or sale at both an address and telephone number provided by the agent or broker;

(e) That the medicare-eligible person may contact the insurance company or insurance companies on behalf of which the solicitation or sale was made at an address and telephone number provided by the agent or broker;

(f) That the agent or broker, and the insurance company, have no connection or affiliation with, and are not in any way sponsored by, the federal or state government, the social security administration, the centers for medicare and medicaid services, or the department of health and human services.

(g) That the medicare-eligible person has the option, if he or she purchases a medicare supplemental insurance policy, of paying his or her premium(s) directly to the insurance company.

(6) Any inaccurate or misleading description of the benefits provided by either the medicare program or the medicare supplemental policy being offered for sale.

(7) Any attempt by an insurance company, agent or broker to arrange a solicitation or sales interview with an applicant or prospective applicant by implying or conveying in any way the impression that such insurance company, agent or broker has been authorized by the federal government, the medicare program or the social security administration to contact said applicant or prospective applicant for the purpose of reviewing, modifying or discussing his or her existing insurance program. Such prohibition is also extended to any statement or act which implies or conveys in any way the impression that such insurance company, agent or broker has access to official records of the federal government, medicare program or social security administration, pertaining to the applicant’s or prospective applicant’s insurance program.

(8) Use of any title or initials by the agent or broker which implies or conveys the impression that such agent or broker is affiliated with or sponsored by the federal government, medicare program or social security administration. Such prohibition also applies to the use of trade names by individual agents or brokers.

(9) The making of any misrepresentation or incomplete comparison by the insurance company, agent or broker, by commission or omission, for the purpose of inducing or tending to induce a medicare-eligible person to purchase, amend, lapse, forfeit, change or surrender insurance.

(E) Severability

If any section, term or provision of this rule or the application thereof to any person or situation be adjudged invalid for any reason such invalidity shall not affect, impair or invalidate any other section, term or provision of this rule or the application thereof which can be given effect without the invalid provision or application and to this end the provisions of this rule are declared to be severable.

Effective: 04/05/2007

R.C. 119.032 review dates: 12/29/2006 and 12/30/2011

Promulgated Under: 119.03

Statutory Authority: 3901.041; 3901.21

Rule Amplifies: 3901.19 to 3901.26

Prior Effective Dates: 05/14/1979

3901-1-37 Stabilization reserve fund. [Rescinded]

Rescinded eff 3-20-08

3901-1-38 Termination of insurance activities of "Joint Underwriting Association". [Rescinded]

Rescinded eff 3-20-08

3901-1-40 Misconduct by insurance license applicants and licensees.

(A) Purpose

Section 3901.041 of the Revised Code provides that the superintendent of insurance shall adopt, amend, and rescind rules and make adjudications necessary to discharge his or her duties and exercise his or her powers under Chapter 3901 of the Revised Code. Sections 3905.01, et seq., including 3905.14 of the Revised Code authorize the superintendent of insurance to suspend, revoke or refuse to issue or renew the license of any person whom he or she determines to be unsuitable to act as an insurance agent or solicitor. Section 3901.21 of the Revised Code empowers the superintendent of insurance to adopt rules which implement unfair and deceptive practice statutes, and take action under other sections of the Revised Code. The purpose of this rule is to implement statutes setting forth standards of conduct and responsibility applicable to insurance license applicants, licensees, and/or companies licensed or authorized to transact the business of insurance by the superintendent of insurance.

(B) Conduct by individuals warranting suspension, revocation, or refusal to issue or renew an insurance license, assessment of a civil penalty, or imposition of any other sanctions authorized under Title 39 of the Revised Code.

Whenever it is shown, in accordance with the Revised Code, that an individual:

(1) Has knowingly or negligently failed to make a refund to an insured or potential insured, after receipt of a written demand for such refund and upon the insured’s or potential insured’s compliance with the policy, or

(2) Has committed an unfair or deceptive act as defined by any section of the Revised Code or any rule or regulation of the Ohio department of insurance; or

(3) Has been convicted of a crime involving moral turpitude. For purposes of this rule, moral turpitude means having been convicted of a misdemeanor and as a result of that conviction has been required to register as a sex offender.

(4) Has solicited, procured, or placed additional or replacement health or sickness and accident insurance coverage where he or she knew or should have known that the insured or potential insured:

(a) Was and would continue to be covered by substantially duplicative insurance coverage, where the additional coverage will either not pay additional benefits to those offered by the existing coverage or will provide minimal benefits in relation to the cost to that individual of maintaining such coverage;

(b) Would not be entitled to the benefits of that coverage, because of existing health conditions, where the agent or solicitor had caused that individual to believe that he or she would be entitled to such benefits;

(c) Intended to replace existing insurance coverage but would not be entitled to receive benefits from the replacing insurance coverage until he or she had completed some waiting period, which the agent or solicitor had not disclosed to the insured or potential insured.

An insurance company and/or agent may be found to have engaged in an unfair or deceptive practice, whenever it is shown that:

(1) The insurance company or the managing or principal agent of an insurance agency knew or should have known of the misconduct of its licensed agent, sub-agent, solicitor, or solicitor of its licensed agent, as set forth in paragraph (B) of this rule, and has adopted a practice whereby it has:

(a) Expressly ratified, encouraged, or tolerated such misconduct;

(b) Failed to notify the Ohio department of insurance on those occasions where it has reasonable cause to believe that there has been a violation or is a continuing violation of this rule, and the details thereof which are known by the company or agent. Such information shall be treated as confidential by the department of insurance;

(c) Failed, upon the request of the department of insurance, to make a reasonable investigation to determine if such misconduct has occurred.

(2) An insurance company has adopted a practice of refusing to refund an insured’s or potential insured’s premium payment or to issue insurance coverage to that person, at that person’s election, where the company’s agent, or its agent’s licensed solicitor has violated paragraph (B)(2) of this rule.

An agent shall be deemed to be the agent of the company and the solicitor a representative of the agent for purposes of paragraph (C)(2) of this rule whenever it is shown that:

(a) The agent is appointed by the company, or the solicitor is appointed by a licensed agent of the company, and has solicited and sold insurance coverage to the insured or potential insured on behalf of the company;

(b) The agent, or agent’s appointed solicitor, is not licensed by the company, or has been terminated as an agent of the company, but has been given or permitted to retain copies of the company’s applications, receipts, rate books, or other supplies and has solicited and sold insurance coverage to the insured or potential insured who has justifiably relied on the agent’s or solicitor’s apparent authority to act on behalf of the company

The company shall not be deemed to be responsible for such agent’s or solicitor’s conduct, for the purposes of this rule, if it has made a good faith effort to recover its applications, receipts, rate books or other supplies. If the company is unable to recover such supplies, it will not be deemed to be responsible for such an agent’s or solicitor’s conduct if it notifies insureds or potential insureds by publication in a newspaper of general circulation in the county of the agent’s or solicitor’s principal place of business, that the agent or solicitor is not authorized to represent the company.

(D) Severability

Effective: 04/05/2007

R.C. 119.032 review dates: 12/29/2006 and 12/30/2011

Promulgated Under: 119.03

Statutory Authority: 3901.041

Rule Amplifies: 3901.041, 3905.14, 3905.85 (D)

Prior Effective Dates: 11/30/81

3901-1-41 Medicare supplement.[Rescinded]

Rescinded eff 7-1-09

3901-1-44 Smoker/nonsmoker mortality tables. [Rescinded]

Rescinded eff 11-14-08

3901-1-46 Gender blended mortality tables. [Rescinded]

Rescinded eff 11-14-08

3901-1-47 Annuity solicitation.

(A) Authority

This rule is issued pursuant to section 3901.041 of the Revised Code.

(B) Purpose

The purpose of this rule is to amplify section 3901.21 of the Revised Code as it relates to the solicitation of annuities and to require the use of a disclosure statement in conjunction with the sale of single premium deferred annuities.

No annuity shall be advertised or solicited using any language in advertisements or solicitation material of any kind that refers to the annuity as being “risk free,” or “guaranteed safe,” or using any language with a similar connotation.

At the time an application is taken for a single premium deferred annuity, a disclosure form must be executed by the applicant and the selling agent and attached to the application.

The disclosure language shall be in the exact form as set forth in appendix I of this rule.

(D) Severability

Each paragraph of this rule and every part of each paragraph is an independent section and part of a section, and the holding of any section or a part thereof to be unconstitutional, void, or ineffective for any clause does not affect the validity or constitutionality of any other section or part thereof.

(E) Effective Date

The effective date of this rule is December 14, 1985.

Appendix I Single Premium Deferred Annuity Disclosure Form

IMPORTANT: Read this form carefully before buying this annuity.

1. A single premium deferred annuity (SPDA) is an insurance product (with certain investment features) which, under current federal tax laws, allows the buyer to accrue interest for a period of years without having to pay tax on the interest until he cashes the annuity or arranges to receive regular payments.

2. This annuity is NOT “risk free” or “guaranteed safe.” It is only as sound as the issuing insurance company.

3. From the beginning of this annuity contract the insurance company guarantees an interest rate of _____% for a period of _____ month(s) or _____ year(s).

(Selling agent must fill in all blanks if applicable; if not applicable, write “n/a”).

Subsequent interest guarantees are as follows:

4. Early cash surrender of this annuity MAY result in your being charged a penalty.

5. The selling agent earns a commission on the sale of this annuity which he may have to pay back to the company if you cash in your annuity early.

6. This form MUST BE COMPLETED at the time the application for the SPDA is taken and MUST BE ATTACHED to the application.

Buyer’s signature ________________________________________DATE__________

Seller’s signature ________________________________________DATE__________

[No other language shall be printed or written on this page.]

R.C. 119.032 review dates: 10/14/2008 and 08/29/2013

Promulgated Under: 119.03

Statutory Authority: 3901.041

Rule Amplifies: 3901.21

Prior Effective Dates: 12/14/1985

3901-1-48 "Ohio mine subsidence insurance underwriting association" and "mine subsidence insurance fund" plan of operation.

(A) Authority

This rule is issued pursuant to section 3901.041 of the Revised Code.

(B) Purpose

The purpose of this rule is to implement sections 3929.50 to 3929.53 and 3929.55 to 3929.56 and 3929.58 to 3929.61 of the Revised Code which: (1) establishes the “Ohio Mine Subsidence Underwriting Association,” (2) provides for the transfer of risk from member insurers to the association, and (3) creates the “Mine Subsidence Insurance Fund.”

(1) “Basic property insurance” means insurance against direct loss to property as defined and limited in dwelling fire, homeowners, and farm policies and extended coverage endorsements thereon, and insurance for such types, classes and locations of property against the perils of vandalism, malicious mischief, burglary or theft, as the superintendent of insurance shall designate.

(2) “Board” means the four-member board of governors, empowered by division (C) of section 3929.51 of the Revised Code to govern the “Ohio Mine Subsidence Insurance Underwriting Association” and the “Ohio Mine Subsidence Insurance Fund.”

(3) “Homeowners insurance” means insurance on owner-occupied dwellings providing personal multi-peril property and liability coverages, commonly known as “homeowners insurance.”

(4) “Farm insurance” means insurance providing property coverage on farm dwelling buildings.

(5) “Dwelling fire insurance” means a policy providing property coverage on residential buildings for the perils of fire and lightning and additional coverages.

(6) “Member” means all insurers authorized to write engaged in writing within the state, on a direct basis, basic property insurance or any component thereof in multi-peril and policies.

(7) “Mine subsidence” means loss caused by the collapse or lateral or vertical movement of structures resulting from the caving in of underground mines, including coal mines, clay mines, limestone mines, and salt mines. Mine subsidence does not include loss caused by earthquakes, landslide, volcanic eruption, or collapse of strip mines, storm and sewer drains or rapid transit tunnels.

(8) “Mine subsidence coverage” means the limits and type of coverage as defined by the mine subsidence insurance governing board in the coverage form and approved by the superintendent.

(9) “Mine Subsidence Insurance Underwriting Association,” hereinafter referred to as “association” means the association of members formed pursuant to section 3929.51 of the Revised Code.

(10) “Mine Subsidence Insurance Fund,” hereinafter referred to as “fund,” means the fund formed pursuant to section 3929.52 of the Revised Code which is administered by the board for the purpose of making available insurance coverage against mine subsidence. The state treasurer is the custodian of the fund.

(11) “Plan of operation,” hereinafter referred to as “plan,” means the plan of operation approved by the superintendent for the economical, fair and nondiscriminatory administration of the requirements identified in sections 3929.50 to 3929.53 and 3929.55 to 3929.56 and 3929.58 to 3929.61 of the Revised Code.

(12) “Strip mines” means any surface mine.

(13) “Structure” means any one to four-family dwelling as defined and limited in dwelling fire, homeowners, and farm policies and other structures as described, defined, or limited in the mine subsidence insurance form.

(14) “Superintendent” means the superintendent of insurance of the state of Ohio.

(15) “Treasurer” means the treasurer of the state of Ohio.

(16) “Auditor” means the auditor of the state of Ohio.

(D) Board of governors

(1) The association and fund shall be administered by the board consisting of the director of natural resources or the director’s designee, as chairperson, the treasurer of the state or the treasurer of state’s designee, the superintendent of insurance or the superintendent’s designee, and one representative from member companies. The representative from the member companies shall be an Ohio-domiciled member of the association.

(2) The board shall approve all actions of the association, have the responsibility of administering the association and fund.

(3) The board shall meet as often as is required to perform the duties of administration, and shall meet upon the request of any single member of the board. In no event shall the board meet less than two times per year.

(E) Meeting of members

(1) Members shall elect their authorized representative every three years. The member company representative elected to the board shall be an Ohio-domiciled company.

(2) The members may hold meetings as needed and during any such meeting, a quorum shall consist of a simple majority of members present.

(3) Each member shall be entitled to one vote. Members in the same group of insurers shall be entitled to one vote only.

(F) Liability

Every policy of mine subsidence insurance written hereunder shall provide that such policy does not create any liability on the part of the member issuing such policy, the association, or any organization with which it may contract for administrative or claims services, beyond the net premium on such policies paid into the fund. Such policies shall create no liability beyond the amounts in the fund, on the part of the state of Ohio, the “Ohio Insurance Guaranty Association” and its member companies or any other person or organization.

(G) Notice of availability of mine subsidence insurance

(1) Every insurer that offers basic property and homeowners insurance insuring on a direct basis a structure located in the counties of Athens, Belmont, Carroll, Columbiana, Coshocton, Gallia, Guernsey, Harrison, Hocking, Holmes, Jackson, Jefferson, Lawrence, Mahoning, Meigs, Monroe, Morgan, Muskingum, Noble, Perry, Scioto, Stark, Trumbull, Tuscarawas, Vinton and Washington shall include mine subsidence coverage provided by the Ohio mine subsidence insurance underwriting association in each policy of basic property and homeowners insurance that is delivered, issued for delivery or renewed in any of such counties.

(2) The mine subsidence insurance governing board herein designates Delaware, Erie, Geauga, Lake, Licking, Medina, Ottawa, Portage, Preble, Summit and Wayne counties as counties in which mine subsidence coverage must be offered, on an optional basis, by an insurer.

(a) Every insurer that offers basic property and homeowners insurance insuring on a direct basis to a structure located in any county designated in paragraph (G)(2) of this rule shall offer to include, on an optional basis, mine subsidence coverage provided by the association in each policy of basic property insurance that is delivered, issued for delivery, or renewed in any such designated county.

(b) This offer shall contain language and be in a form approved by the superintendent which includes a description of mine subsidence coverage, a statement that the purchase of the coverage is optional, and the premium charged for the coverage.

(H) Application for coverage

A member insurer who receives a request from a named insured or applicant for mine subsidence shall forward to that named insured or applicant an application for mine subsidence coverage. Such application may be included, at the insurer’s option, with the offer described in paragraph (G)(2)(a) of this rule. The form of the application shall be approved by the superintendent.

(I) Administration and claims processing

The board may retain a contractor to provide administrative and claims processing. When a contractor is retained, the board may from time to time review: (1) the performance of the contractor; (2) the procedures and standards used by the contractor for administration and claims processing; and (3) the application of those procedures and standards to applicants for insurance and to claims of insureds.

(J) Underwriting

(1) Mine subsidence coverage will be available on eligible property. Eligible property must be:

(a) A structure as defined in this rule;

(b) Covered by a valid basic property or homeowners insurance policy.

(2) The member may refuse to provide mine subsidence coverage on an otherwise eligible property where:

(a) The structure evidences unrepaired subsidence damage; or

(b) The structure evidences any mine subsidence damage in progress.

(3) The limit of liability for direct loss caused by mine subsidence under this plan of operation shall not exceed an amount equal to the coverage on the dwelling provided by a basic property or homeowners policy, or three hundred thousand dollars, whichever is less, and shall not exceed the amount expressed in the mine subsidence coverage form as approved by the mine subsidence insurance governing board and approved by the superintendent of insurance.

(4) All coverage provided pursuant to this plan of operation is subject to a deductible of as expressed in the mine subsidence coverage form as approved by the mine subsidence insurance governing board and approved by the superintendent of insurance , but at no time shall the deductible be less than two hundred fifty dollars, or more than five hundred dollars.

(K) Rates and forms

(1) Rates. The board shall periodically review the premium level and experience data and recommend to the superintendent a rate or schedule of rates sufficient to satisfy: (a) all foreseeable claims; (b) normal cost of operation; and (c) a reserve for unexpected contingencies. However, the premium level for mine subsidence coverage in a county designated for optional coverage shall not exceed an annual rate that is greater than twenty dollars. The premium level for mine subsidence coverage in a county as designated in paragraph (G)(1) of this rule shall not exceed an annual rate that is greater than five dollars.

(2) Forms. The policy forms and language shall be approved by the superintendent.

(L) Audits

The auditor shall audit the affairs of the fund in accordance with section 3929.55 of the Revised Code at least once each year. The auditor shall ascertain the expenses incurred in making any such audit and shall certify the amount to the board for payment from the fund.

(M) Reporting and statistics

(1) Claim reports. Members shall, upon receipt of notice of claims from policyholder(s), confirm coverage and provide formal notice of claim to the association.

(2) Financial reports:

(a) The fiscal period shall be the calendar year.

(b) Members reports are required quarterly and shall be due on the forty-fifth day following the close of the quarter.

(i) Gross written premium on a per county basis.

(ii) Premium cancelled/returned on a per county basis.

(iii) Ceding commission withheld (for optional counties only).

(d) Members reports shall be accompanied by the appropriate remittance which shall be full premium collected for mine subsidence coverage in the counties denoted in paragraph (G)(1) of this rule and the net premium (gross premium written, less ceding commission) in the counties denoted in paragraph (G)(2) of this rule less any cancellation/returns. In the event a balance is due to the insurer, that balance shall be carried forward as a credit against future written premiums. An insurer may apply for a refund only if it ceases to issue basic property or homeowner insurance coverage.

(e) Members shall report and pay premium taxes as required.

(f) The association shall review, verify and reconcile members’ reports and research, and rectify any inconsistencies.

(g) The association shall remit receipts to the fund, said remittance to be supported by a summary report of premium written, cancelled/nonrenewed, net premium written and commission taken.

(3) Statistical reports. Members shall compile and file, on a quarterly basis with the financial reports, a summary report of statistics in a form approved by the board. Such reports shall, at minimum, contain:

(a) Quarter and year-to-date policy count by county and in total;

(b) Quarter and year-to-date premium written by county.

(N) “Mine Subsidence Insurance Fund”

The fund shall receive all revenues, appropriations and investment earnings pursuant to this plan of operation. Premiums collected will be considered program income in accordance with the uniform administrative requirements for grants to state and local governments and be used:

(1) To enable the fund to be self-sustaining, with the fund invested by the treasurer of state under guidelines established by the board;

(2) To provide a reserve for payment of claims for verified claims from all types of mine subsidence, including noncoal mining, post-1977 underground mines and active underground mines;

(O) Investment of custodial funds

With the approval of the board, the treasurer of state may invest any monies in the fund that are in excess of the amounts required to meet the immediate cash needs and operating expenses of the fund. The board shall not provide guidelines for the investment of excess funds that are broader or more liberal than the investment provisions for property casualty insurance companies set forth in Chapter 3925. of the Revised Code.

(P) Reinsurance agreement

(1) Every insurer authorized and engaged in writing on a direct basis any property coverages in the state of Ohio shall execute a reinsurance agreement with the association. The form of the reinsurance agreement shall be in a form approved by the board.

(2) An insurer may request exemption from the requirements of paragraph (P) of this rule by filing the exemption form with the superintendent. The exemption shall be effective after review and approved by the superintendent of insurance.

(3) Any insurer who has received an exemption shall notify the association of any change in any circumstances that would be reason to revoke the exemption.

(Q) Effective date of the plan

This plan of operation shall be effective upon the effective date of this rule.

(R) Amendments

Amendments to the plan may be requested by the board or superintendent of insurance in accordance with the provisions of section 3929.53 of the Revised Code.

(S) Severability

Each paragraph of this rule and every part of each paragraph is an independent section and part of a section, and the holding of any section or a part thereof to be unconstitutional, void, or ineffective for any clause does not affect that validity or constitutionally of any other paragraph or part thereof.

Effective: 07/18/2005

R.C. 119.032 review dates: 08/31/2009 and 08/30/2014

Promulgated Under: 119.03

Statutory Authority: 3901.041

Rule Amplifies: 3929.50-3929.53, 3929.55-3929.56, 3929.58-3929.61

Prior Effective Dates: 7/23/87, 1/1/93, 12/28/95

3901-1-49 AIDS Model, consent form.[Rescinded]

Rescinded eff 11-14-08

3901-1-50 Annual financial reports.

(A) Purpose and scope.

(1) This rule is issued by the superintendent pursuant to section 3901.041 of the Revised Code which requires the superintendent to adopt, amend, and rescind rules and make adjudications necessary to discharge his duties and exercise his powers under Title XXXIX of the Revised Code, subject to sections 119.01 to 119.13 of the Revised Code. This rule is issued to implement sections 3901.04, 3901.07 and 3901.77 of the Revised Code.

(2) The purpose of this rule is to facilitate the department’s surveillance of the financial condition of insurers by requiring (a) an annual audit of financial statements reporting the financial position and results of operation of insurers by independent certified public accountants. (b) communication of internal control related matters noted in an audit, and (c) management’s report of internal control over financial reporting. This rule shall apply to all insurers, except those insurers having direct premiums written of less than one million dollars and having less than one thousand policyholders nationwide at the end of any year are exempt from this rule for such year, unless the superintendent makes a specific finding that compliance by the insurer is necessary for the superintendent to carry out its statutory responsibilities. Insurers filing audited financial reports in another state, pursuant to such other state’s requirement of audited financial reports, which are found by the superintendent to be substantially similar to the requirements herein, are exempt from this rule if:

(a) A copy of the audited financial report, communication of internal control related matters noted in audit, and the accountant’s letter of qualifications, which are filed with such other states are filed with the superintendent in accordance with the filing dates specified in paragraphs (C) (J), and (K) of this rule. (Canadian insurers may submit accountants’ reports as filed with the office of the superintendent of financial institutions, Canada); and

(b) A copy of any notification or report of adverse financial condition filed with such other state is filed with the superintendent within the time specified in paragraph (I) of this rule. Foreign or alien insurers required to file management’s report of internal control over financial reporting in another state are exempt from filing the report in this state provided the other state has substantially similar reporting requirements and the report is filed with the superintendent of the other state within the time specified.

(3) This rule shall not prohibit, preclude or in any way limit the superintendent from ordering, conducting and performing examinations of insurers under the rules and regulations and the practice and procedures of the department.

(B) Definitions.

(1) “Audited Financial Report” means the annual report defined in the items specified in paragraph (D) of this rule.

(2) “Accountant” and “Independent Certified Public Accountant” mean an independent certified public accountant or accounting firm, as defined by the general standards of the “American Institute of Certified Public Accountants,” in good standing with the “American Institute of Certified Public Accountants” and in all states in which it is licensed to practice; for Canadian and British companies, it means a Canadian-chartered or British-chartered accountant.

(3) An “affiliate” of, or person “affiliated” with, a specific person, is a person that directly, or indirectly through one or more intermediaries, controls, or is controlled by, or is under common control with, the person specified.

(4) “Audit committee” means a committee (or equivalent body) established by the board of directors of an entity for the purpose of overseeing the accounting and financial reporting process of an insurer or group of insurers, and audits of financial statements of the insurer or group of insurers. The audit committee of any entity that controls a group of insurers may be deemed to be the audit committee for one or more of these controlled insurers solely for the purposes of this rule at the election of the controlling person. Refer to paragraph (M) of this rule for exercising this election. If an audit committee is not designated by the insurer, the insurer’s entire board of directors shall constitute the audit committee.

(5) “Department” means the department of insurance.

(6) “Indemnification” means an agreement of indemnity or a release from liability where the intent or effect is to shift or limit in any manner the potential liability of the person or firm for failure to adhere to applicable auditing or professional standards, whether or not resulting in part from knowing of other misrepresentations made by the insurer or its representatives.

(7) “Independent board member” has the same meaning as described in paragraph (M) of this rule.

(8) “Internal control over financial reporting” means a process effected by an entity’s board of directors, management and other personnel designed to provide reasonable assurance regarding the reliability of the financial statements, i.e., those items specified in paragraphs (D)(2) to (D)(7) of this rule, and includes those policies and procedures that:

(a) Pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of assets;

(b) Provide reasonable assurance that transactions are recorded as necessary to permit preparation of the financial statements, i.e., these items specified in paragraphs (D)(2) to (D)(7) of this rule, and that receipts and expenditures are being made only in accordance with authorizations of management and directors; and

(c) Provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of assets that could have a material effect on the financial statements, i.e., these items specified in paragraphs (D)(2) to (D)(7) of this rule.

(9) “SEC” means the United States securities and exchange commission.

(10) “Section 404” means section 404 of the Sarbanes-Oxley Act of 2002 and the SEC’s rules and regulations promulgated thereunder.

(11) “Section 404 Report” means management’s report on “internal control over financial reporting” as defined by the SEC and the related attestation report of the independent certified public accountant as described in paragraph (B)(2) of this rule.

(12) “SOX Compliant Entity” means an entity that either is required to be compliant with, all of the following provisions of the Sarbanes-Oxley Act of 2002: (i) the preapproval requirements of section 201 (section 10A(i) of the Securities Exchange Act of 1934); (ii) the audit committee independence requirements of section 301 (section 10A(m)(3) of the Securities Exchange Act of 1934); and (iii) the internal control over financial reporting requirements of section 404 (item 308 of SEC regulation S-K0).

(13) “Insurer” means a licensed insurer as defined in Chapter 1738., 1751., 3907., 3909., 3911., 3925., 3929. or 3953. of the Revised Code.

(14) “Group of Insurer’s” means those licensed insurers included in the reporting requirements of sections 3901.32 to 3901.37 of the Revised Code, or a set of insurers as identified by management, for the purpose of assessing the effectiveness of internal controls over financial reporting.

(15) “Statutory accounting practices” has the meaning defined in the current editions of “Annual Statement Instructions” and the “Accounting Practices and Procedures Manual” published by the “National Association of Insurance Commissioners,” or as otherwise prescribed by the insurance department of the insurer’s state of domicile.

(16) “Superintendent” means the superintendent of insurance of the state of Ohio.

(17) “Workpapers” means the records kept by an independent certified public accountant of the procedures followed, the tests performed, the information obtained, and the conclusions reached pertinent to his or her audit of the financial statements of an insurer. Workpapers may include audit planning documentation, work programs, analyses, memoranda, letters of confirmation and representation, abstracts of company documents and schedules of commentaries prepared or obtained by the independent certified public accountant in the course of his or her audit of the financial statements of an insurer and, which support his or her opinion thereof.

(C) General requirements related to filing and extensions for filing of audited financial reports and audit committee appointment.

All insurers shall have an annual audit by an independent certified public accountant and shall file an audited financial report as a supplement to the annual statement with the superintendent on or before June first for the immediately preceding year ended December thirty-first. Extensions of the June first filing date may be granted in writing by the superintendent for thirty day periods upon showing by the insurer and its independent certified public accountant the reasons for requesting such extension and determination by the superintendent of good cause for an extension. The request for an extension must be submitted in writing not less than ten days prior to the due date in sufficient detail to permit the superintendent to make an informed decision with respect to the requested extension.

If an extension is granted, a similar extension of thirty days is granted to the filing of management’s report of internal control over financial reporting.

Every insurer required to file an annual audited financial report pursuant to this rule shall designate a group of individuals as constituting its audit committee, as defined in paragraph (B)(4) of this rule. The audit committee of any entity that controls an insurer may be deemed to be the insurer’s audit committee for purposes of this rule at the election of the controlling person.

The superintendent may require an insurer to file an audited financial report earlier than June first with ninety days advance notice to the insurer.

(D) Contents of audited financial report.

The audited financial report shall report the financial condition of the insurer as of the end of the most recent calendar year and the results of its operations, cash flows, and changes in capital and surplus for the year then ended in conformity with statutory accounting practices. The audited financial report shall include the following items:

(1) Report of independent certified public accountant;

(2) Balance sheet reporting admitted assets, liabilities, capital and surplus;

(3) Statement of gain or loss from operations;

(4) Statement of cash flows;

(5) Statement of changes in capital and surplus;

(6) Notes to financial statements. These notes shall be those appropriate to a CPA audited financial report, based on applicability, materiality and significance, taking into account the subjects covered in the instructions to and illustrations of how to report information in the notes to financial statements section of the naic annual statement instructions and any other notes required by generally accepted accounting principles and shall include:

(a) A reconciliation of differences, if any, between the audited statutory financial statements and the annual financial statement filed with the superintendent including a written description of the nature of these differences; and

(b) A narrative explanation of all significant intercompany transactions and balances; and

(7) The financial statements included in the audited financial report shall be prepared in a form and using language and groupings substantially the same as the relevant sections of the annual financial statement of the insurer filed with the superintendent and:

(a) The financial statements shall be comparative, presenting the amounts as of December thirty-first of the current year and amounts as of the immediately preceding year ending December thirty-first. (However, in the first year in which an insurer is required to file an audited financial report, the comparative data may be omitted); and

(b) Amounts may be rounded to the nearest thousand dollars.

(E) Designation of independent certified public accountant.

(1) Each insurer required by this rule to file an audited financial report must, within sixty days after becoming subject to such requirement, register with the superintendent, in writing, the name and address of the independent certified public accountant retained to conduct the annual audit required in this rule. Insurers not previously retaining an independent certified public accountant shall register the name and address of their retained independent certified public accountant not less than six months before the date when the first audited financial report is to be filed.

(2) The insurer shall obtain a letter from such accountant, and file a copy of such letter with the superintendent, stating that the accountant is aware of the provisions of the insurance code and the rules and regulations of the insurance department of its state of domicile that relate to accounting and financial matters and affirming that he or she will express his or her opinion on the financial statements of the insurer in the terms of their conformity to the statutory accounting practices prescribed or otherwise permitted by such insurance department, specifying such exceptions as he or she may believe appropriate. If an accountant, who was not the accountant for the insurer’s most recently filed audited financial report, is engaged to audit the insurer’s financial statements, the insurer shall, within thirty days of the date the accountant is engaged, notify the department of this event.

(3) If an accountant who was the accountant for the immediately preceding filed audited financial report is dismissed or resigns, the insurer shall within five business days notify the department of insurance of this event. The insurer shall also furnish the superintendent with a separate letter within ten business days of the above notification stating whether in the twenty four months preceding such engagement there were any disagreements with the former accountant on any matter of accounting principles or practices, financial statement disclosure, or auditing scope or procedure, which disagreements, if not resolved to the satisfaction of the former accountant, would have caused him or her to make reference to the subject matter of the disagreement in connection with his or her opinion. Disagreements contemplated by this paragraph are those that occur at the decision-making level, i.e., between personnel of the insurer responsible for presentation of its financial statements and personnel of the accounting firm responsible for rendering its report. The insurer shall also request, in writing, such former accountant to furnish a letter, addressed to the insurer, stating whether the accountant agrees with the statements contained in the insurer’s letter and, if not, stating the reasons for which he or she does not agree; and the insurer shall furnish such responsive letter from the former accountant to the superintendent, together with its own letter.

(F) Qualifications of independent certified public accountant.

An insurer may not use any person or firm as an independent certified public accountant if such person or firm: (1) is not in good standing with the “American Institute of Certified Public Accountants” in all states in which the person or firm is licensed to practice or, for a Canadian or British company, that is not a chartered accountant; (2) has either directly or indirectly entered into an agreement of indemnity or release from liability (collectively referred to as “indemnification”) with respect to the audit of the insurer. Except as otherwise provided herein, an insurer may use a certified public accountant as its independent certified public accountant only if and for as long as such accountant conforms to the standards of his or her profession, as contained in the “Code of Professional Conduct” of the “American Institute of Certified Public Accountants” and “Rules of Professional Conduct” of the “Accountancy Board of Ohio,” or similar code.

The lead (or coordinating) audit partner (having primary responsibility for the audit) may not act in that capacity for more than five consecutive years. The person shall be disqualified from acting in that or a similar capacity for the same company or its insurance subsidiaries or affiliates for a period of five consecutive years. An insurer may make application to the superintendent of insurance for relief from the above rotation requirement on the basis of unusual circumstances. This application should be made at least thirty days before the end of the calendar year. The superintendent may consider the following factors in determining if the relief should be granted: (a) number of partners, expertise of the partners or the number of insurance clients in the currently registered firm; (b) premium volume of the insurer; or (c) number of jurisdictions in which the insurer transacts business. The insurers shall file, with its annual statement filing, the proof of relief from the five years limitation with the states that it is licensed in or doing business in and with the “National Association of Insurance Commissioners.” If the nondomestic state accepts electronic files with the NAIC, the insurer shall file the approval in an electronic format acceptable to the “National Association of Insurance Commissioners.”

The superintendent shall not recognize as a qualified independent certified public accountant, nor accept any annual audited financial report, prepared in whole or in part by, any natural person who (1) has been convicted of fraud, bribery, a violation of the Racketeer Influenced and Corrupt Organizations Act, 18 U.S.C. sections 1961-1968, or any dishonest conduct or practices under federal or state law; (2) has been found to have violated the insurance laws of this state with respect to any previous reports submitted under this rule; or (3) has demonstrated a pattern or practice of failing to detect or disclose material information in previous reports filed under the provisions of this requirement.

The superintendent may hold a hearing to determine whether a certified public accountant is qualified and, considering the evidence presented, may rule that the accountant is not qualified for purposes of expressing his or her opinion on the financial statements in the annual audited financial report made pursuant to this requirement and require the insurer to replace the accountant with another whose relationship with the insurer is qualified within the meaning of this requirement.

(1) The superintendent shall not recognize as a qualified independent certified public accountant, nor accept an annual audited financial report, prepared in whole or in part by an accountant who provides to an insurer, contemporaneously with the audit, the following non-audit services:

(a) Bookkeeping or other services related to the accounting records or financial statements of the insurer;

(b) Financial information systems design and implementation;

(d) Actuarial- oriented advisory services involving the determination of amounts recorded in the financial statements. The accountant may assist an insurer in understanding the methods, assumptions and inputs used in the determination of amounts recorded in the financial statement only if it is reasonable to conclude that the services provided will not be subject to audit procedures during an audit of the insurer’s financial statements. An accountant’s actuary may also issue an actuarial opinion or certification (“opinion”) on an insurer’s reserves if the following conditions have been met:

(i) Neither the accountant nor the accountant’s actuary has performed any management functions or made any management decisions:

(ii) The insurer has competent personnel (or engages a third party actuary) to estimate the reserves for which management takes responsibility:

(iii) The accountant’s actuary tests the reasonableness of the reserves after the insurer’s management has determined the amount of the reserves:

(e) Internal audit outsourcing services:

(f) Management functions or human resources:

(g) Broker or dealer, investment advisor, or investment banking services:

(h) Legal services or expert services unrelated to the audit: or

(i) Any other services that the superintendent determines, by rule, are impermissable.

(2) In general, the principles of independence with respect to services provided by the qualified independent certified public accountant are largely predicted on three basic principles, violations of which would impair the accountant’s independence. The principles are that the accountant cannot function in the role of management, cannot audit his or her own work, and cannot serve in an advocacy role for the insurer.

Insurers having direct written and assumed premiums of less than one hundred million dollars in any calendar year may request an exemption from this paragraph. The insurer shall file with the superintendent a written statement discussing the reasons why the insurer should be exempt from these provisions. If the superintendent finds, upon review of this statement, that compliance with this rule would constitute a financial or organizational hardship upon the insurer, an exemption may be granted.

(3) A qualified independent certified public accountant who performs the audit may engage in other non-audit services for an insurer, including tax services, that are not described in paragraphs (F)(1)(a) to (F)(1)(i) or that do not conflict with paragraph (F)(2) of this rule, only if the activity is approved in advance by the audit committee for the insurer, in accordance with paragraph (J) of this rule.

(4) All auditing services and non-audit services provided to an insurer by the qualified independent certified public accountant of the insurer shall be preapproved by the audit committee of the insurer. The preapproval requirement is waived with respect to non-audit services if the insurer is a “SOX” compliant entity or a direct or indirect wholly-owned subsidiary of a “SOX” compliant entity or;

(a) The aggregate amount of all such non-audit services provided to the insurer constitutes not more than five per cent of the total amount of fees paid by the insurer to its qualified independent certified public account during the fiscal year in which the non-audit services are provided:

(b) The services were not recognized by the insurer at the time of the engagement to be non-audit services; and

(c) The services are promptly brought to the attention of the audit committee and approved prior to the completion of the audit by the audit committee or by one or more members of the audit committee who are members of the board of directors to whom authority to grant such approvals has been delegated by the audit committee.

(5) The audit committee of an insurer may delegate to one or more designated members of the audit committee the authority to grant the preapprovals required by paragraph (F)(4) of this rule. The decisions of any member to whom this authority is delegated shall be presented to the full audit committee at each of its scheduled meetings.

(6) The superintendent shall not recognize an independent certified public accountant as qualified for particular insurer if a member of the board, president, chief executive officer, controller, chief financial officer, chief accounting officer, or any person serving in an equivalent position for that insurer, was employed by the independent certified public accountant and participated in the audit of that insurer during the one year period preceding the date that the most current statutory opinion is due. This section shall only apply to partners and senior unusual circumstances.

(7) The insurer shall file, with its annual statement filing, the approval for relief from paragraph (F)(6) of this rule with the states that it is licensed in or doing business in and the NAIC. If the nondomestic state accepts electronic filing with the NAIC, the insurer shall file the approval in an electronic format acceptable to the NAIC.

(G) Consolidated or combined audits.

An insurer may make an annual written application to the superintendent for approval to file audited consolidated or combined financial statements in lieu of separate annual audited financial statements if the insurer is part of a group of insurance companies which utilizes a pooling or one hundred percent reinsurance agreement that affects the solvency and integrity of the insurer’s reserves and such insurer cedes all of its direct and assumed business to the pool. In such cases, a columnar consolidating or combining worksheet shall be filed with the report, as follows:

(1) Amounts shown on the consolidated or combined audited financial report shall be shown on the worksheet;

(2) Amounts for each insurer subject to this rule shall be stated separately;

(3) Non-insurance operations may be shown on the worksheet on a combined or individual basis;

(4) Explanations of consolidating and eliminating entries shall be included; and

(5) A reconciliation shall be included of any differences between the amounts shown in the individual insurer columns of the worksheet and comparable amounts shown on the financial statements of the insurers.

(H) Scope of audit and report of independent certified public accountant.

Financial statements furnished pursuant to paragraph (D) of this rule shall be examined by an independent certified public accountant. The audit of the insurer’s financial statements shall be conducted in accordance with generally accepted auditing standards. In accordance with AU Section 319 of the professional standards of the accountants “AICPA”, consideration of internal control in a financial statement audit, the independent certified public accountant should obtain an understanding of internal control sufficient to plan the audit. To the extent required by AU 319, for those insurers required to file a management’s report of internal control over financial reporting pursuant to paragraph (O) of this rule, the independent certified public accountant should consider (as that term is defined in Statement on Auditing Standards (SAS) No. 102, defining professional requirements in statements on auditing standards or its replacement) the most recently available report in planning and performing the audit of the statutory financial statements. Consideration should be given to such other standards illustrated in the “Financial Condition Examiner’s Handbook” promulgated by the “National Association of Insurance Commissioners” as the independent certified public accountant deems necessary.

(I) Notification of adverse financial condition.

(1) The insurer required to furnish the annual audited financial report shall require the independent certified public accountant to report in writing within five business days to the board of directors or its audit committee any determination by the independent certified public accountant that the insurer has materially misstated its financial condition as reported to the superintendent as of the balance sheet date currently under audit or that the insurer does not meet the minimum capital and surplus requirement of the Revised Code as of that date. An insurer who has received a report pursuant to this paragraph shall forward a copy of the report to the superintendent within five business days of receipt of such report and shall provide the independent certified public accountant making the report with evidence of the report being furnished to the superintendent. If the independent certified public accountant fails to receive such evidence within the required five business day period, the independent certified public accountant shall furnish to the superintendent a copy of its report within the next five business days.

(2) No independent certified public accountant shall be liable in any manner to any person for any statement made in connection with the above paragraph if such statement is made in good faith in compliance with the above paragraph.

(3) If the accountant, subsequent to the date of the audited financial report filed pursuant to this rule, becomes aware of facts which might have affected his or her report, the department shall note the obligation of the accountant to take such action as prescribed in volume one, section AU five hundred sixty one of the “Professional Standards of the American Institute of Certified Public Accountants,” as amended.

(J) Communication of internal control related matters noted in an audit.

In addition to the annual audited financial report, each insurer shall furnish the superintendent with a written communication as to any unremediated material weakness in its internal controls over financial reporting noted during the audit. Such communication shall be prepared by the accountant within sixty days after the filing of the annual audited financial report, and shall contain:

(1) A description of any unremediated material weakness (as the term material weakness is defined by statement on auditing standard 60, communication of internal control related matters noted in an audit, or its replacement) as of December thirty-first immediately preceding (so as to coincide with the audited financial report discussed in paragraph (C) of this rule in the insurer’s internal control over financial reporting noted by the accountant during the course of their audit of the financial statements. If no unremediated material weaknesses are noted, the communication should so state.

(2) The insurer is required to provide a description of remedial action taken or proposed to correct unremediated material weaknesses, if the actions are not described in the accountant’s communications.

(K) Accountant’s letter of qualifications.

The accountant shall furnish the insurer in connection with, and for inclusion in, the filing of the annual audited financial report, a letter stating:

(1) That he or she is independent with respect to the insurer and conforms to the standards of his or her profession as contained in the “Code of Professional Ethics” and pronouncements of the “American Institute of Certified Public Accountants” and the “Rules of Professional Conduct” of the “Accountancy Board of Ohio” or other state board of public accountancy that performs the same licensing function.

(2) The background and experience in general, and the experience in audits of insurers of the staff assigned to the engagement and whether each is an independent certified public accountant. Nothing within this requirement shall be construed as prohibiting the accountant from utilizing such staff as he or she deems appropriate where such use is consistent with the standards prescribed by generally accepted auditing standards.

(3) That the accountant understands the annual audited financial report and his or her opinion thereon will be filed in compliance with this requirement and that the superintendent will be relying on this information in the monitoring and regulation of the financial position of insurers.

(4) That the accountant consents to the requirements of paragraph (L) of this rule and that the accountant consents and agrees to make available for review by the superintendent his designee or his appointed agent, the workpapers, as defined in paragraph (B)(7) of this rule.

(5) A representation that the accountant is properly licensed by the “Accountancy Board of Ohio” and that he or she is a member in good standing in the “American Institute of Certified Public Accountants.”

(6) A representation that the accountant is in compliance with the requirements of paragraph (F) of this rule.

(L) Definition, availability and maintenance of independent certified public accountant workpapers.

Every insurer required to file an audited financial report pursuant to this rule shall require the accountant to make available for review by department examiners the workpapers prepared in the conduct of his or her examination and any communications related to the audit between the accountant and the insurer, at the offices of the insurer, at the department, or at any other reasonable place designated by the superintendent. The insurer shall require that the accountant retain the workpapers and communications until the domiciliary department has filed a report on examination covering the period of the audit, but for no longer than seven years from the date of the audit report.

In the conduct of the aforementioned periodic review by the domiciliary department examiners, it shall be agreed that photocopies of pertinent audit workpapers may be made and retained by the domiciliary department. Such reviews by the domiciliary department examiners shall be considered investigations and all workpapers and communications obtained during the course of such investigations shall be afforded the same confidentiality as other examination workpapers generated by the domiciliary department.

(M) Requirements for audit committees

This section shall not apply to foreign or alien insurers licensed in this state or an insurer that is a “SOX” compliant entity or a direct or indirect wholly-owned subsidiary of a “SOX” compliant entity.

The audit committee shall be directly responsible for the appointment, compensation and oversight of the work of any accountant (including resolution of disagreements between management and the accountant regarding financial reporting) for the purpose of preparing or issuing audited financial report or related work pursuant to this regulation. Each accountant shall report directly to the audit committee.

Each member of the audit committee shall be a member of the board of directors of the insurer or a member of the board of directors of an entity elected pursuant to this paragraph and paragraph (B)(4) of this rule.

In order to be considered independent for purposes of this rule, a member of the audit committee may not, other than in his or her capacity as a member of the audit committee, the board of directors, or nay other board committee, accept any consulting, advisory or other compensatory fee from the entity or be an affiliated person of the entity or any subsidiary thereof. However, if law requires the board participation by otherwise non-independent members, that law shall prevail and such members may participate in the audit committee and be designated as independent for audit committee purposes, unless they are an officer or employee of the insurer or one of its affiliates.

If a member of the audit committee ceases to be independent for reasons outside the member’s reasonable control, that person, with notice by the responsible entity to the domiciliary state, may remain an audit committee member of the responsible entity until the earlier of the next annual meeting of the responsible entity or one year from the occurrence of the event that caused the member to be no longer independent.

To exercise the election of the controlling person to designate the audit committee for purposes of this rule, the ultimate controlling person shall provide written notice to the domiciliary commissioners of the affected insurers. Notification shall be made timely prior to the issuance of the statutory audit report and include a description of the basis for the election. The election can be changed through notice to the domiciliary commissioner by the insurer, which shall include a description of the basis for the change. The election shall remain in effect for perpetuity, until rescinded.

The audit committee shall require the accountant that performs for an insurer any audit required by this regulation to timely report to the audit committee in accordance with the requirements of “SAS” 61, “Communication with Audit Committees,” or its replacement, including: All significant accounting policies and material permitted practices; All material alternative treatments of financial information within statutory accounting principles that have been discussed with management officials of the insurer, ramifications of the use of the alternative disclosures and treatments, and the treatment preferred by the accountant; and other material written communications between the accountant and the management of the insurer, such as any management letter or schedule of unadjusted differences.

If an insurer is a member of an insurance holding company system, the reports required above may be provided to the audit committee on an aggregate basis for insurers in the holding company system, provided that any substantial differences among insurers in the system are identified to the audit committee.

The portion of independent audit committee members shall meet or exceed the following criteria:

See Chart at http://www.registerofohio.state.oh.us/pdfs/3901/0/1/3901-1-50_PH_FF_A_RU_20081217_1624.pdf

Note A: The superintendent has authority afforded by state law to require the entity’s board to enact improvements to the independence of the audit committee membership if the insurer is in a “RBC” action level event, meets one or more of the standards of an insurer deemed to be in hazardous financial condition, or otherwise exhibits qualities of a troubled insurer.

Note B: All insurers with less than five hundred million dollars in prior year direct written and assumed premiums are encouraged to structure their audit committees with at least a supermajority of independent audit committee members.

Note C: Prior calendar year direct written and assumed premiums shall be the combined total of direct premiums and assumed premiums from non-affiliates for the reporting entities.

An insurer with direct written and assumed premium, excluding premiums reinsured with the federal crop insurance corporation and federal flood program, less than five hundred million dollars may make application to the superintendent for a waiver from these requirements based upon hardship. The insurer shall file, with its annual statement filing, the approval for relief from Section 14 with the states that it is licensed in or doing business in and the NAIC. If the non-domestic state accepts electronic filing with the NAIC, the insurer shall file the approval in an electronic format acceptable to the NAIC.

(N) Conduct of insurer in connection with the preparation of required reports and documents

No director or officer of an insurer shall, directly or indirectly:

(1) Make or cause to be made a materially false or misleading statement to an accountant in connection with any audit, review or communication required under this rule; or

(2) Omit to state, or cause another person to omit to state, any material fact necessary in order to make statements made, in light of the circumstances under which the statements were made, not misleading to an accountant in connection with any audit, review or communication required under this rule.

No officer or director of an insurer, or any other person acting under the direction thereof, shall directly or indirectly take any action to coerce, manipulate, mislead or fraudulently influence any accountant engaged in the performance of an audit pursuant to this rule if that person knew or should have known that the action, if successful, could result in rendering the insurer’s financial statements materially misleading.

Actions that, “if successful, could result in rendering the insurer’s financial statements materially misleading” include, but are not limited to, actions taken at any time with respect to the professional engagement period to coerce, manipulate, mislead or fraudulently influence an accountant:

(a) To issue or reissue a report on an insurer’s financial statements that is not warranted in the circumstances (due to material violations of statutory accounting principles prescribed by the commissioner, generally accepted auditing standards, or other professional or regulatory standards):

(b) Not to perform audit, review or other procedures required by generally accepted auditing standards or other professional standards;

(d) Not to communicate matters to an insurer’s audit committee.

(O) Management’s report of internal control over financial reporting

Every insurer required to file an audited financial report pursuant to this rule that has annual direct written and assumed premiums, excluding premiums reinsured with the federal crop insurance corporation and federal flood program, of five hundred million dollars or more shall prepare a report of the insurer’s or group of insurer’s internal control over financial reporting as these terms are defined in paragraph (B) of this rule. The report shall be filed with the superintendent along with the communication of internal related matters noted in an audit described in paragraph (J) of this rule. Management’s report of internal control over financial reporting shall be as of December thirty-first immediately preceding.

Notwithstanding the premium threshold, as stated above, the superintendent may require an insurer to file management’s report of internal control over financial reporting if the insurer is in any “RBC” level event, or meets any one or more of the standards of an insurer deemed to be in hazardous financial condition as defined in (include reference to corrective action statute).

An insurer or a group of insurers that is:

(1) Directly subject to “Section 404”;

(2) Part of a holding company system whose parent is directly subject to “Section 404”;

(3) Not directly subject to “Section 404” but is a “SOX” compliant entity; or

(4) A member of a holding company system whose parent is not directly subject to “Section 404” but is a “SOX” compliant entity.

may file its or its parents “Section 404” report on internal control and an addendum in satisfaction of this paragraph’s requirement provided that those internal controls of the insurer or group of insurers having a material impact on the preparation of the insurer or group of insurers’ its audited statutory financial statements were included in the scope of the “Section 404” reports. The addendum shall be a positive statement by management that there are no material processes with respect to the preparation of the insurer’s or group of insurers’ audited statutory financial statements excluded from the “Section 404” report. If there are internal controls of the insurer or group of insurers that have a material impact on the preparation of the insurer’s or group of insurers’ audited statutory financial statements and those internal controls were not included in the scope of the “Section 404” report, the insurer or group of insurers may either file (a) a section 16 report, or (b) the “Section 404” report and a section 16 report for those internal controls that have a material impact on the insurer’s or group of insurers’ audited statutory financial statements not covered by the “Section 404” report.

Management’s report of internal control over financial reporting shall include:

(a) A statement that management is responsible for establishing and maintaining adequate control over financial reporting;

(b) A statement that management has established internal control over financial reporting and an assertion to the best of management’s knowledge and belief, after diligent inquiry, as to whether its internal control over financial reporting is effective to provide reasonable assurance regarding the reliability of financial statements in accordance with statutory accounting principles;

(c) A statement that briefly describes the approach or process by which management evaluated the effectiveness of its internal control over financial reporting;

(d) A statement that briefly describes the scope of work that is included and whether any internal controls were excluded;

(e) Disclosure of any unremediated material weaknesses in internal control over financial reporting identified by management as of December thirty-first immediately preceding. Management is not permitted to conclude that the internal control over financial reporting is effective to provide reasonable assurance regarding the reliability of financial statements in accordance with statutory accounting principles if there is one or more unremediated material weakness in its internal controls over financial reporting;

(f) A statement regarding the inherent limitations of internal control systems; and

(g) Signatures of the chief executive officer and the chief financial officer (or equivalent position/title).

Management shall document and make available upon financial condition examination the basis upon which its assertions, required in above, are made. Management may base its assertions, in part, upon its review, monitoring and testing of internal controls undertaken in the normal course of its activities.

(i) Management shall have discretion as to the nature of the internal control framework used, and the nature and extent of documentation, in order to make its assertion in a cost effective manner, as such, may include assembly of or reference to existing documentation.

(ii) Management’s report on internal control over financial reporting, required above, and any documentation provided in support thereof during the course of a financial condition examination, shall be kept confidential by the superintendent.

(P) Exemptions and effective dates.

(1) Upon written application of any insurer, the superintendent may grant an exemption from compliance with any and all provisions this rule if the superintendent finds, upon review of the application, that compliance with this rule would constitute a financial or organizational hardship upon the insurer. An exemption may be granted at any time and from time to time for any specified period. Domestic insurers retaining an independent certified public accountant on the effective date of this rule shall comply with this rule for the year ending December 31, 2008, and each year thereafter unless the superintendent permits otherwise. Domestic insurers not retaining an independent certified public accountant on the effective date of this rule shall meet the following schedule for compliance, unless the superintendent gives his or her written permission otherwise.

(a) For the year ending December 31, 2008, file with the superintendent an audited financial report:

(b) For the year ending December 31, 2009, and each year thereafter, such insurers shall file with the superintendent all reports and communications required by this rule.

(2) Foreign insurers shall comply with this rule for the year ending December 31, 2009, and each year thereafter, unless the superintendent gives his or her written permission otherwise.

(3) The requirements of paragraph (F) of this rule shall be in effect for audits of the year beginning January 1, 2010 and thereafter.

(4) The requirements of paragraph (M) of this rule are to be in effect January 1, 2010. An insurer or group of insurers that is not required to have independent audit committee members or only a majority of independent audit committee members (as opposed to a supermajority) because the total written and assumed premium is below the threshold and subsequently becomes subject to one of the independence requirements due to changes in premium shall have one year following the year threshold is exceeded (but not earlier than January 1, 2010) to comply with the independence requirements. Likewise, an insurer that becomes subject to one of the independence requirements as a result of a business combination shall have one calendar year following the date of acquisition or combination to comply with the independence requirements.

(5) The requirements of paragraph (O) of this rule and other modified sections (identify modified sections), except for paragraph (M) of this rule covered above, are effective beginning with the reporting period December 31, 2010 and each year thereafter. An insurer or group of insurers that is not required to file a report because the total written premium is below the threshold and subsequently becomes subject to the reporting requirements shall have two years following the year the threshold is exceeded (but not earlier than December 31, 2010) to file a report. Likewise, an insurer acquired in a business combination shall have two calendar years following the date of acquisition or combination to comply with the reporting requirements.

(Q) Canadian and British companies.

In the case of Canadian and British insurers, the audited financial report shall be defined as the annual statement of total business on the form filed by such companies with their domiciliary supervision authority duly audited by an independent chartered accountant. For such insurers, the letter required in paragraph (E)(2) of this rule shall state that the accountant is aware of the requirements relating to the audited financial report filed with the superintendent pursuant to paragraph (O) of this rule and shall affirm that the opinion expressed is in conformity with such requirements.

(R) Severability provision.

If any paragraph or portion of a paragraph of this rule or the applicability thereof to any person or circumstance is held invalid by a court, the remainder of the rule or the applicability of such provision to other persons or circumstances shall not be affected thereby.

Effective: 12/27/2008

R.C. 119.032 review dates: 10/09/2008 and 12/15/2013

Promulgated Under: 119.03

Statutory Authority: 3901.04

Rule Amplifies: 3901.04, 3901.07, 3905.29

Prior Effective Dates: 4/5/90, 10/31/92, 4/13/2006

3901-1-51 Regulation of third party administrators. [Rescinded]

Rescinded eff 11-14-08

3901-1-52 Life and health insurance guaranty association disclaimer and not covered form.

(A) Purpose. The purpose of this rule is to establish the form and content of the disclaimer to the summary document describing the general purposes and current limitations of the Ohio life and health insurance guaranty association and the notice that the policy or contract, or portion thereof, may not be covered by the association.

(B) Authority. This rule is issued pursuant to the authority vested in the superintendent under section 3956.18 of the Revised Code.

(C) Applicability. This rule applies to all insurers and agents providing, soliciting or negotiating coverage for direct, non-group life, health, annuity, and supplemental policies or contracts, for certificates under direct group policies and contracts, and for unallocated annuity contracts issued by member insurers.

(D) Delivery of summary document. Division (B)(2) of section 3956.18 of the Revised Code provides that no insurer shall deliver a policy or contract described in division (B)(1) of section 3956.04 of the Revised Code unless the document is delivered to the policy or contract holder prior to or at the time of delivery of the policy or contract, except if division (D) of section 3956.18 of the Revised Code applies. The document also shall be available upon request by a policy or contract holder.

In providing the summary document described in division (B)(2) of section 3956.18 of the Revised Code, the insurer must use the exact form of the disclaimer set forth in appendix I to this rule.

(E) Policy or contract not covered by association. Division (D) of section 3956.18 of the Revised Code provides that no insurer or agent may deliver a policy or contract described in division (B)(1) of section 3956.04 of the Revised Code, all or a portion of which is excluded under division (B)(2)(a) of section 3956.04 of the Revised Code from coverage under Chapter 3956. of the Revised Code unless the insurer or agent, prior to or at the time of delivery gives the policy or contract holder a separate written notice that clearly and conspicuously discloses that the policy or contract, or a portion of the policy or contract, is not covered by the association.

In providing the document described in division (D) of section 3956.18 of the Revised Code, the insurer or agent must use the exact form set forth in appendix I to this rule.

(F) Severability. If any section, term or provision of this rule is adjudged invalid for any reason, such judgment shall not affect, impair or invalidate any other section, term or provision of this rule, but the remaining sections, terms and provisions shall be and continue in full force and effect.

Appendix I

The Ohio Life and Health Guaranty Association may not provide coverage for this policy. If coverage is provided, it may be subject to substantial limitations or exclusions, and require continued residency in Ohio. You should not rely on coverage by the Ohio Life and Health Insurance Guaranty Association in selecting an insurance company or in selecting an insurance policy. Coverage is NOT provided for your policy or any portion of it that is not guaranteed by the insurer or for which you have assumed the risk, such as a variable contract sold by prospectus. You should check with your insurance company representative to determine if you are only covered in part or not covered at all. Insurance companies or their agents are required by law to give or send you this notice. However, insurance companies and their agents are prohibited by law from using the existence of the guaranty association to induce you to purchase any kind of insurance policy.

Ohio Life and Health Insurance

Guaranty Association

1840 Mackenzie Drive

Columbus, Ohio 43220

Ohio Department of Insurance

50 W. Town Street

Third Floor, Suite 300

Columbus, Ohio 43215

Effective: 11/14/2008

R.C. 119.032 review dates: 08/29/2008 and 08/29/2013

Promulgated Under: 119.03

Statutory Authority: 3901.041, 3956.18

Rule Amplifies: 3956.18

Prior Effective Dates: 10/21/90, 3/28/04

3901-1-54 Unfair property/casualty claims settlement practices.

(A) Authority

This rule is issued pursuant to the authority vested in the superintendent under sections 3901.19 to 3901.26 of the Revised Code.

(B) Purpose

The purpose of this rule is to set forth uniform minimum standards for the investigation and disposition of property and casualty claims arising under insurance contracts or certificates issued to residents of ohio. It is not intended to cover claims involving workers’ compensation, or fidelity, suretyship, and boiler and machinery insurance. The provisions of this rule are intended to define procedures and practices which constitute unfair claims practices. Nothing in this rule shall be construed to create or imply a private cause of action for violation of this rule.

(1) “Agent” means any individual, corporation, association, partnership or other legal entity authorized to represent an insurer with respect to a claim;

(2) “Claim file” means any retrievable electronic file, paper file, combination of both, or any other media;

(3) “Claimant” means a first party claimant, a third party claimant.

(4) “Contract” means any insurance policy or document containing the terms of the agreement wherein one party, the insurer, assumes certain obligations including financial obligations that arise as a result of a loss sustained by another party, the insured, or to any other party that has rights under the agreement.

(5) “Days” means calendar days. However, when the last day of a time limit stated in this rule falls on a Saturday, Sunday, or holiday, the time limit is extended to the next immediate following day that is not a Saturday, Sunday, or holiday.

(6) “Department” means the ohio department of insurance

(7) “Documentation” includes, but is not limited to, all communications, transactions, notes, work papers, claim forms, bills and explanation of benefits forms pertaining to the claim;

(8) “First party claimant” means any individual, corporation, association, partnership or other legal entity asserting a right to payment under an insurance policy or insurance contract arising out of the occurrence of the contingency or loss covered by the policy or contract;

(9) “Insurer” shall be defined as set forth in division (D) of section 3901.32 of the Revised Code;

(10) “Investigation” means all activities of an insurer directly or indirectly related to the determination of liability under an insurance contract which is in effect or alleged to be in effect;

(11) “Like kind and quality part” means a salvage motor vehicle part equal to or better than the replaced part that is acquired from a licensed salvage motor dealer.

(12) “Notification of claim” means any notification, under the terms of an insurance contract, to an insurer or its agent, by a claimant, which reasonably apprises the insurer of the facts pertinent to a claim;

(13) “Person” shall be defined as set forth in section 3901.19 of the Revised Code;

(14) “Practice” means a type of activity or conduct engaged in by an insurer with such frequency as to constitute a customary procedure or policy routinely followed in the settlement of insurance claims. A single act is not a business practice. However, an act that is malicious, deliberate, conscious and knowing may be the basis for corrective action ordered only by the superintendent without a showing that the conduct is a practice.

(15) “Replacement crash part” means sheet metal or any plastic parts which generally constitute the exterior of a motor vehicle, including inner and outer panels;

(16) “Superintendent” means the superintendent of insurance;

(17) “Third party claimant” means any individual, corporation, association, partnership or other legal entity asserting a claim against any other individual, corporation, association, partnership or legal entity;

(18) “Written communications” includes any correspondence, regardless of source or type, that is materially related to a claim;

(19) “Proof of loss” means a document from the claimant that provides sufficient information from which the insurer can determine the existence and the amount of the claim.

(D) File and record documentation

An insurer’s claim files are subject to examination by the superintendent of insurance or by the superintendent’s duly appointed designees. To aid in such examination:

(1) An insurer shall maintain claim data that is accessible and retrievable for examination. Such data shall include number, line of coverage, date of loss and date of payment or date of denial or date when claim is closed without payment. The data for closed claims shall be kept for no less than three years or until the completion of the next financial examination conducted by the state of domicile, whichever is greater. Data for claims where the claims payment is less than $1000, or for towing, labor, glass or rental reimbursement may be kept in summary form.

(2) An insurer must be able to reconstruct its activities in regard to any claim, by documentation appropriate for the type and size of the claim. If the claim is closed, the time period for retention is set forth in subsection (1) above.

(3) If an insurer does not maintain hard copy files, claim files shall be accessible and be capable of duplication to hard copy.

(E) Misrepresentation of policy provisions

(1) An insurer shall fully disclose to first party claimants all pertinent benefits, coverages or other provisions of an insurance contract under which a claim is presented.

(2) No agent shall willfully conceal from first party claimants benefits, coverages or other provisions of any insurance contract when such benefits, coverages or other provisions are pertinent to a claim.

(3) No insurer shall deny a claim based on the first party claimant’s failure to make available for inspection the property which is the subject of the claim unless there is documentation of breach of the policy provisions in the claim file.

(4) No insurer shall deny a claim based upon the failure of a first party claimant to give written notice of loss within a specified time limit unless the notice is required by a policy condition, or a first party claimant’s failure to give written notice after being requested to do so by the insurer is so unreasonable as to constitute a breach of the claimant’s duty to cooperate with the insurer.

(5) No insurer shall indicate to a first party claimant on a payment draft, check or in any accompanying letter that the payment is final or a release of any claim unless the policy limit has been paid or the first party claimant and the insurer have agreed to a compromise settlement regarding coverage and the amount payable under the insurance contract.

(6) No insurer shall issue checks or drafts in partial settlement of a loss or claim under a specific coverage that contains language purporting to release the insurer or its insured from total liability.

(F) Response to acknowledge receipt of pertinent communications

(1) Notification of a claim given to an agent of an insurer shall be notification to the insurer.

(2) An insurer shall acknowledge the receipt of a claim within fifteen days of receiving such notification. An insurer may satisfy this requirement by making payment within this ten day period. An insurer may also satisfy this requirement by providing necessary claim forms and complete instructions to the claimant.

(3) An insurer shall respond within fifteen days to any communication from a claimant, when that communication suggests a response is appropriate. In the event that a complaint has been filed by a claimant in any court, an insurer is not obligated to respond within this time period and any communication between the claimant and the insurer will be subject to the appropriate rule of procedure for the court in which the lawsuit was filed.

(4) An insurer shall, within twenty-one days of receipt of an inquiry from the department regarding a claim, furnish the department with a reasonable response to the inquiry.

(G) General standards for settlement of claims

(1) An insurer shall within twenty-one days of the receipt of properly executed proof(s) of loss decide whether to accept or deny such claim(s). If more time is needed to investigate the claim than the twenty-one days allow, the insurer shall notify the claimant within the twenty-one day period, and provide an explanation of the need for more time. If an extension of time is needed, the insurer has a continuing obligation to notify the claimant in writing, at least every forty-five days of the status of the investigation and the continued time for the investigation.

If the form and execution of a proof of loss is material to an insurer, the insurer shall immediately provide the claimant with the specific documents and specific instructions so the claimant can submit the claim. An insurer shall not otherwise deny a claim solely on the basis the proof of loss is not on the insurer’s usual form.

If an insurer reasonably believes, based upon information obtained and documented within the claim file, that a claimant has fraudulently caused or contributed to the loss as represented by a properly executed and documented proof of loss, such information shall be presented to the fraud division of the department within sixty days of receipt of the proof of loss. Any person making such report shall be afforded such immunity and the information submitted will be confidential as provided by sections 3901.44 and 3999.31 of the Revised Code.

(2) No insurer shall deny a claim on the grounds of a specific policy provision, condition or exclusion unless reference to such provision, condition, or exclusion is included in the denial. The claim file of the insurer shall contain documentation of the denial in accordance with section (D) of this rule.

(3) Except as otherwise provided by policy provisions, an insurer shall settle first party claims upon request by the insured with no consideration given to whether the responsibility for payment should be assumed by others.

(4) No insurer shall require an insured to submit to a polygraph examination unless authorized under the applicable insurance contract.

(5) Notice shall be given to claimants at least sixty days, before the expiration of any statute of limitation or contractual limit, where the insurer has not been advised that the claimant is represented by legal counsel.

(6) An insurer shall tender payment to a first party claimant no later than ten days after acceptance of a claim if the amount of the claim is determined and is not in dispute, unless the settlement involves a structured settlement, action by a probate court, or other extraordinary circumstances as documented in the claim file.

(7) If a claim involves a non-negligent party’s property loss and multiple liability insurers, the multiple liability insurers shall adjust the property loss within a reasonable time and pay the non-negligent party’s loss in equal shares. After payment, the multiple liability insurers may then pursue available remedies to resolve the question of responsibility for the non-negligent party’s loss.

(8) If a claim involves multiple coverages under any policy, no insurer shall withhold payment under any such coverage when the payment is known, the payment is not in dispute, and the payment would extinguish the insurer’s liability under that coverage. No insurer shall withhold such payment for the purpose of forcing settlement on all other coverage to effect a single payment.

(9) An insurer must document the application of comparative negligence to any claim settlement. Such information shall be fully disclosed to the claimant upon the claimant’s written request. An insurer shall not use pattern settlements as set forth in division (P) of section 3901.21 of the Revised Code.

(10) An insurer shall not use settlement practices that result in compelling first party claimants to litigate by offering substantially less than the amounts claimed compared to the amount ultimately recovered in actions brought by such claimants.

(H) Standards for prompt, fair and equitable settlements of automobile insurance claims

(1) When partial losses will be settled on the basis of a written estimate prepared by or for an insurer, the insurer shall supply the claimant a copy of the estimate upon which the proposed settlement is based. If the claimant subsequently claims that necessary repairs will exceed the written estimate, the insurer shall pay the difference between the written estimate and a higher estimate obtained by the claimant or promptly provide the claimant with the name of at least one repair shop that will make the repairs for the amount of the written estimate. If the insurer provides the name of only one repair shop, it shall ensure that the repairs are performed in a workmanlike manner. The insurer shall maintain documentation of all communications with the claimant pursuant to this subdivision.

(2) If an insurer reduces a claim amount because of betterment, depreciation or comparative negligence, it shall maintain all information pertaining to the reduction in the claim file. Such deductions shall be itemized and specified on the written estimate as to dollar amount and shall be appropriate for the amount of deductions.

(3) An insurer may reduce a claim amount because of betterment deductions only if the deductions reflect a measurable decrease in market value due to the poorer condition of, or prior damage to, the vehicle; or reflects the general overall condition of the vehicle, considering its age; or the wear and tear or rust, and/or; missing parts, limited to no more of a deduction than the replacement costs of part or parts.

(4) When partial losses will be settled on the basis of a written estimate prepared by or for an insurer, the estimate must clearly indicate the use of the parts in compliance with section 1345.81 of the Ohio Revised Code. When “like kind and quality” parts are expected to be used in the repair, the estimate shall clearly indicate the location of the licensed salvage dealer where the “like kind and quality” parts are to be obtained.

(5) An insurer which elects to repair and designates a specific repair shop for automobile repairs shall cause the damaged automobile to be restored to its condition prior to the loss. The insurer shall assess no additional cost against the claimant other than as stated in the policy, and the repairs should be effected within a reasonable period of time.

(6) In settlement of claimants’ automobile total losses on the basis of actual cash value or replacement of the automobile with another vehicle of like kind and quality, an insurer which elects to offer a replacement automobile shall:

(a) Provide an automobile by the same manufacturer, of the same or newer year, of similar body style, with similar options and mileage as the claimant’s vehicle and in as good or better overall condition than the first party automobile prior to loss;

(b) Ensure that the automobile is available for inspection within a reasonable distance of the claimant’s residence;

(c) Pay all applicable taxes, license fees, and other fees incident to transfer of evidence of ownership of the automobile at no cost to claimant other than any deductible provided in the policy; and

(d) Document the offer of the replacement automobile and any rejection of the offer in the claim file.

(7) In settlement of claimants’ automobile total losses on the basis of actual cash value or replacement of the automobile with another of like kind and quality, an insurer which elects to offer a cash settlement to claimant, shall base the offer upon the actual cost to purchase a comparable automobile less any applicable deductible amount contained in the policy, and/or deduction for betterment as contained in paragraph (H)(2) of this rule. The settlement value may be derived from:

(a) The average cost of two or more comparable automobiles in the local market area if comparable automobiles are or were available to consumers within the last ninety days; or

(b) The average cost of two or more comparable automobiles in areas proximate to the local market area, including the closest in-state or out-of-state major metropolitan areas. If comparable automobiles are or were available to consumers within the last ninety days when comparable automobiles are not available pursuant to subsection (a) of this rule; or

(c) The average of two or more quotations obtained by the insurer from two or more licensed dealers located within the local market area if comparable automobiles are not available pursuant to subsections (a) and (b) of this rule; or

(d) The cost as determined from a generally recognized used motor vehicle industry source such as:

(i) An electronic database if the pertinent portions of the valuation documents generated by the database are provided by the insurer to the claimant upon request; or

(ii) A guidebook that is generally available to the general public if the insurer identifies the guidebook used as the basis for the cost to the claimant upon request; and

(iii) [sic] to which appropriate adjustments for condition, mileage and major options are made and documented in the claim file.

(e) Any method or source chosen as specified in subsection (d) above shall be used consistently over a period of time by the insurer.

(f) If within thirty days of receipt by the claimant of a cash settlement for the total loss of an automobile, the claimant purchases a replacement automobile, the insurer shall reimburse the claimant for the applicable sales taxes incurred on account of the claimant’s purchase of the automobile, but not to exceed the amount that would have been payable by the claimant for sales taxes on the purchase of an automobile with a market value equal to the amount of the cash settlement. If the claimant purchase an automobile with a market value less than the amount of the cash settlement, the insurer shall reimburse only the actual amount of the applicable sales taxes on the purchased automobile. If the claimant cannot substantiate such purchase and the payment of such sales taxes by submission to the insurer of appropriate documentation within thirty-three days after receipt of the cash settlement, the insurer shall not be required to reimburse the claimant for such sales taxes. In lieu of reimbursement, the insurer may pay directly the applicable sales taxes to the claimant at the time of the cash settlement.

An insurer that settles a total loss on a cash settlement basis must maintain in the claim file the documentation used to determine the loss. Such information shall be provided to the first party claimant upon request. An insurer shall notify the first party claimant of any rights to renegotiate the settlement if a comparable vehicle is not available for purchase within thirty-five days of receipt of the settlement.

When an insurer elects to offer a replacement vehicle available to the claimant, the insurer shall provide all the details where such vehicle is available including the vehicle identification number.

(g) An insurer that settles a total loss claim shall provide written notice to the claimant of the right to reimbursement of applicable sales tax as specified in(H)(7)(f) of this rule. The notice shall be issued to the claimant simultaneously with the conveyance of the settlement check to the claimant. If an insurer elects to pay the applicable sales taxes directly to the claimant at the time of the cash settlement in lieu of reimbursement as provided in (H)(7)(f) of this rule, the insurer is not required to provide written notice of the claimant’s right to sales tax reimbursement.

(8) An insurer shall not require a claimant to travel an unreasonable distance to inspect a replacement automobile, to obtain a repair estimate, nor to have the automobile repaired at a specific repair shop.

(9) An insurer shall provide notice to a claimant prior to termination of payment for automobile storage charges. The insurer shall document all actions taken pursuant to this subdivision in accordance with paragraph (D) of this rule.

(10) An insurer shall include the first party claimant’s deductible, if any, in subrogation demands. The insurer shall share any subrogations recovery received on a proportionate basis with the first party claimant, unless the first party claimant’s deductible has been paid in advance or recovered. The insurer shall not deduct expenses from this amount except that an outside attorney or collection agency retained to collect such recovery may be paid a pro rata share of his expenses for collecting this amount.

(I) Standards for prompt, fair and equitable settlement of claims under fire and extended coverage insurance policies

(1) If a fire and extended coverage insurance policy provides for the adjustment and settlement of first party losses based on replacement cost, the following shall apply:

(a) When a loss requires replacement of an item or part, any consequential physical damages incurred in making such repair or replacement not otherwise excluded by the policy, shall be included in the loss.

(b) When an interior or exterior loss requires replacement of an item and the replaced item does not match the quality, color or size of the item suffering the loss, the insurer shall replace as much of the item as to result in a reasonably comparable appearance.

(c) When an insurer settles a loss that results in the insured paying a portion of the repair or replacement as betterment, the insurer shall maintain documentation of the basis for computing the betterment charge, and the insured’s agreement to such charge prior to incurring the expense of the repair or replacement.

(2) If a fire and extended coverage insurance policy provides for the adjustment and settlement of losses on an actual cash value basis the following shall apply:

(a) The insurer shall determine actual cash value by determining the replacement cost of property at the time of loss, including sales tax, less any depreciation. Upon the insured’s request, the insurer shall provide documentation detailing all depreciation deductions.

(b) If the insured’s interest is limited because his property has nominal or no economic value, or a value disproportionate to replacement cost less depreciation, the insurer is not required to comply with subsection (2)(a) of this rule regarding the determination of actual cash value. However, the insurer shall provide upon the insured’s request, a written explanation of the basis for limiting the amount of recovery along with the amount payable under the policy.

(J) Severability

If any provision of this rule or the application of this rule is held invalid, such invalidity shall not affect any other provision or application of the rule which can be given effect without the invalid provision or application and to this end, the provisions of this rule are declared to be severable.

(K) Applicability of rule 3901-1-07 of the Administrative Code

If any provisions of any section of this rule conflicts with any of the provisions contained in rule 3901-1-07 of the ohio regulations of the department of insurance, the provisions of this rule will apply.

(L) Imposition of fine

Pursuant to 3901.22 of the Revised Code and a consent agreement with the insurer, the superintendent may recover the cost of an investigation under this rule and/or a penalty from the insurer.

Effective: 04/05/2007

R.C. 119.032 review dates: 12/29/2006 and 12/30/2011

Promulgated Under: 119.03

Statutory Authority: 3901.041

Rule Amplifies: 3901.20, 3901.21

Prior Effective Dates: 04/05/1990, 09/01/1993, 11/12/2004

3901-1-55 Use of Credit history and credit scores.

(A) Authority

This rule is issued pursuant to section 3901.041 of the Revised Code which provides that the superintendent of insurance shall adopt, amend, and rescind rules and make adjudications, necessary to discharge the superintendent’s duties and exercise the superintendent’s powers, including, but not limited to, the superintendent’s duties and powers under Chapters 1751. and 1753. and Title XXXIX of the Revised Code, subject to Chapter 119. of the Revised Code.

Sections 3901.20 and 3901.21 of the Revised Code prohibit unfair or deceptive practices in the business of insurance and define certain acts or practices as unfair or deceptive. Section 3901.21 also provides that the enumeration of specific unfair or deceptive acts or practices in the business of insurance is not exclusive or restrictive, or intended to limit the powers of the superintendent of insurance to adopt rules to implement section 3901.21 or to take action under other sections of the Revised Code.

(B) Purpose

The purpose of this rule is to clearly define certain unfair practices and to set forth standards with respect to insurers’ and agents’ use of credit history and credit scores in connection with underwriting and rating personal lines coverage.

This rule applies only to personal lines coverage as defined in paragraph (D)(6) of this rule.

(D) Definitions

As used in this rule:

(1) “Adverse action” has the same meaning as defined in the Fair Credit Reporting Act, 15 U.S.C. 1681 et seq. (1998), and includes a denial or cancellation of, an increase in any charge for, or a reduction or other adverse or unfavorable change in the terms of coverage or amount of, any insurance, existing or applied for, in connection with the underwriting or rating of insurance. Issuance of a policy at a rate higher than that which the consumer would have received if the consumer’s credit history had not been taken into account is an adverse action.

(2) “Consumer” means any insured or applicant for personal lines coverage.

(3) “Credit history” means any written, oral, or other communication of any information bearing on a consumer’s creditworthiness, credit standing, or credit capacity that is used or expected to be used, or collected in whole or in part, for the purpose of serving as a factor in determining rates, placement within a tier or with an affiliated company, or eligibility for coverage.

(4) “Credit score” means a number or rating that is derived from an algorithm, computer application, model or other process that is based in whole or in part on credit history.

(5) “Insurance score” and “credit based insurance score” have the same meaning: a number or rating that is derived from an algorithm, computer application, a model or other process that is based in whole or in part on a credit score or credit history, for the purpose of predicting the future insurance loss exposure of a consumer (that is, any insured or applicant).

(6) “Personal lines” means a policy of property and casualty insurance issued to a natural person primarily for personal or family protection for personal automobile, homeowner’s, tenant’s, mobile-homeowner’s, non-commercial dwelling fire or personal umbrella coverage.

(7) “Consumer reporting agency” means any person which, for monetary fees, dues, or on a cooperative nonprofit basis, regularly engages in whole or in part in the practice of assembling or evaluating consumer credit information or other information on consumers for purposes of furnishing such information to third parties.

(E) Credit cannot be the sole underwriting or rating factor

Credit history or a credit score or any aspect thereof, either individually or collectively, may not be used without consideration of any other applicable underwriting or rating factor as the sole basis for:

(1) Any underwriting decision;

(2) Any total premium determination; or

(3) Any adverse action.

This paragraph does not prohibit an insurer from raising a premium rate at renewal based on a change in credit history, in a credit score, or in the actuarial indications for a particular credit history or credit score if other non-credit related factors are also considered in the total premium determination.

(F) Prohibited underwriting, rating and credit scoring factors

No insurer underwriting or rating a policy of personal lines insurance shall use any of the following as a negative factor in any credit scoring methodology or in reviewing the credit history of any consumer:

(1) Credit inquiries not initiated by the consumer;

(2) Credit inquiries relating to insurance coverage;

(3) Disputed information that is currently under investigation by the consumer reporting agency, if so identified on the records of such agency;

(4) Collection accounts with a medical industry code, if so identified on the records of the consumer reporting agency;

(5) Multiple lender inquiries, if coded by the consumer reporting agency on the consumer’s credit report as being from the home mortgage industry and made within thirty days of one another, unless only one inquiry is considered; or

(6) Multiple lender inquiries, if coded by the consumer reporting agency on the consumer’s credit report as being from the automobile lending industry and made within thirty days of one another, unless only one inquiry is considered.

(G) Disclosure requirements

(1) The consumer must be provided notice either prior to or at the time the insurance application is taken that credit history or a credit score may be obtained and used in connection with underwriting or rating a policy. Such notice shall either be written or provided to the consumer in the same medium as the application for insurance. The insurer need not provide such notice to any insured on a renewal policy, if such notice has previously been provided.

(2) If an adverse action is taken as a result of credit history or a credit score the following disclosures must be made to the consumer in writing within thirty days of the date the adverse action is taken:

(a) The insurer must identify and describe the nature of the adverse action;

(b) The insurer must describe the significant factors of the credit history or credit score that resulted in the adverse action, which may include the descriptive credit explanations provided by credit scoring vendors; and

(c) The insurer must provide the consumer with all disclosures required by the Fair Credit Reporting Act, 15, U.S.C. 1681 et seq. (1998). Such disclosures shall include:

(i) The name, address, and telephone number of the consumer reporting agency (including a toll-free telephone number established by the agency if the agency compiles and maintains files on consumers on a nationwide basis) that furnished the consumer information;

(ii) A statement that the consumer reporting agency did not make the decision to take the adverse action and is unable to provide the consumer with the specific reasons why the adverse action was taken;

(iii) Notice to the consumer of the consumer’s right to obtain a free copy of the consumer’s credit report from the consumer reporting agency; and

(iv) Notice to the consumer of the consumer’s right to dispute with the consumer reporting agency the accuracy or completeness of any information in a credit report furnished by the agency.

(H) Updating credit history and credit scores

(1) If credit history or a credit score, or any aspect thereof, is considered in underwriting or rating a consumer and a consumer reporting agency determines that the credit information is inaccurate or incomplete and the insurer receives notice of this determination from a consumer or a consumer reporting agency, the insurer shall, within thirty days after receiving the notice:

(a) Re-underwrite the consumer;

(b) Re-rate the consumer; and

(2) If it is determined by the re-underwriting or re-rating in accordance with paragraph (H)(1) of this rule that the consumer has overpaid the premium, the insurer shall refund to the consumer the amount of the overpayment of premium. Such payment shall be calculated back to the shorter of:

(a) The last twelve months of coverage; or

(b) The current policy term.

(3) After any policy of insurance has been issued and in the absence of a determination of the consumer reporting agency that the consumer’s information is inaccurate or incomplete as described in paragraph (H)(1) of this rule, the insurer must recheck the insured’s credit history or credit score at the written request of the insured, but no more than once every twelve months. The insurer may wait to recheck the credit information until the next renewal. The insurer shall adjust the premium or coverage of any insured whose credit history or credit score was rechecked under this section that reflects any change in the insured’s credit history or credit score. Any such premium or coverage adjustment shall be applied prospectively to the next policy term.

(I) Compliance with rule

(1) Section 3901.20 of the Revised Code prohibits insurers from engaging in unfair or deceptive acts. Section 3901.21 of the Revised Code defines as an unfair and deceptive act the following unfair discriminatory conduct:

Making or permitting any unfair discrimination between individuals of the same class and of essentially the same hazard in the amount of premium, policy fees, or rates charged for any policy or contract of insurance, other than life insurance, or in the benefits payable thereunder, or in underwriting standards and practices or eligibility requirements, or in any of the terms or conditions of such contract, or in any other manner whatever.

(2) Division (A) of section 3937.02 and division (C) of section 3935.03 of the Revised Code set forth the factors an insurer or rating organization may consider in establishing rates for property and casualty insurance. Division (C) of section 3937.02 of the Revised Code provides that risks may be grouped by classification for the establishment of rates and minimum premiums, and states:

Classification rates may be modified to produce rates for individual risks in accordance with rating plans which establish standards for measuring variations in hazards or expense provisions, or both. Such standards may measure any differences among risks that can be demonstrated to have a probable effect upon losses or expenses.

(3) Division (D) of section 3937.02 of the Revised Code further provides: “Rates shall not be excessive, inadequate, or unfairly discriminatory.”

In order to comply with the foregoing paragraphs, insurers shall abide by the following guidelines:

(a) Insurers shall establish that credit history and credit scores used in underwriting or rating determinations are valid risk characteristics and are used in accordance with actuarial principles and standards of practice.

(b) If a consumer has no available credit history (known as a “no hit”), has insufficient credit history to develop a credit score (known as “no score”), or the available credit history is not used for rating, the consumer must be underwritten and rated in accordance with actuarial principles and standards of practice.

(c) Insurers shall not use credit history or credit scores for arbitrary, capricious or unfairly discriminatory purposes. Credit history and credit scores shall not be based on race, color, religion, national origin, sex, marital status, handicap, or age.

(d) Insurers must maintain, implement and make available standards concerning how credit history and credit scores affect underwriting and rating decisions. Insurers shall file with the superintendent all risk classification criteria and rating manuals that relate to credit history and credit scores.

(e) If a credit scoring model is modified or if its use in determining rates or rating plans is modified, the insurer shall re-file risk classification criteria and rating manuals with the superintendent, and shall re-establish that the credit scores are valid risk characteristics and are used in accordance with actuarial principles and standards of practice.

(J) Severability

If any provision of this rule or the application thereof to any person or circumstance is for any reason held to be invalid, the remainder of the rule and the application of the remaining provisions to such persons or circumstances shall not be affected thereby.

Effective: 03/20/2008

R.C. 119.032 review dates: 12/27/2007 and 12/27/2012

Promulgated Under: 119.03

Statutory Authority: 3901.041

Rule Amplifies: 3901.20, 3901.21

Prior Effective Dates: 6/12/2003

3901-1-56 Coordination of benefits. [Rescinded]

Rescinded eff 11-14-08

3901-1-57 Transaction fees.

(A) Purpose – The purpose of this rule is to establish fees and charges for certain transactions or services required to be performed by the department of insurance.

(B) Authority – This rule is issued pursuant to authority vested in the superintendent under sections 3901.041 and 3901.043 of the Revised Code.

(C) The following schedule of fees is established for transactions and services performed under the following sections of the Revised Code:

(1) Transactions pursuant to section 3901.321:

(a) Filing of the statement (Form A) relating to the change of control or takeover of a domestic insurance company. $2500.00

(b) Filing for an exemption from the requirements of section 3901.321. $1000.00

(2) Transactions pursuant to section 3901.341:

(a) Filing of any transaction (Form D) required by this section. $250.00

(3) Transactions pursuant to Chapter 3905:

(a) Filing of a notice of cancellation of an agent or solicitor, including the nonrenewal of an agent or solicitor at the time of annual renewal. $5.00/per license

(b) Filing for authority to conduct business as a surplus lines insurer. $1000.00/annually

(4) Transactions pursuant to sections 3907.09 to 3907.12:

(a) Filing of a petition of merger or consolidation of a life, accident or health insurance company. $1500.00

(b) Filing for approval of a plan of reinsurance that exceeds the limits set forth in section 3907.12, or a plan of assumption reinsurance on policies issued by a domestic insurance company. $1500.00

(5) Transactions pursuant to section 3911.011:

(a) Filing of any policy, certificate, endorsement, application or form for the purpose of determining compliance. Multiple forms relating to a single policy may be filed together for one fee, otherwise, each policy, certificate, endorsement, application, or form is considered as a separate filing. $50.00

(6) Transactions pursuant to sections 3913.01 to 3913.38:

(a) Filing of a plan of conversion of a domestic stock life insurance corporation into a mutual insurance corporation. $2500.00

(b) Filing of a plan of conversion of a domestic mutual life insurance company to a stock life insurance company. $2500.00

(c) Filing of a plan of conversion of a non-life mutual insurance company to a stock non-life insurance company. $2500.00

(d) Filing of a plan of reorganization or merger of a mutual insurance company or mutual insurance holding company. $2500.00

(7) Transactions pursuant to section 3913.40:

(a) Filing of a plan to transfer the domicile of an insurance company either to or from the state of Ohio. $2500.00

(8) Transactions pursuant to section 3915.14:

(9) Transactions pursuant to section 3917.06:

(10) Transactions pursuant to section 3918.07:

(a) Filing of any policy, certificate endorsement, application or form for the purpose of determining compliance. Multiple forms relating to a single policy may be filed together for one fee, otherwise, each policy, certificate, endorsement, application or form is considered as a separate filing. $50.00

(11) Transactions pursuant to section 3923.02:

(a) Filing of any policy, certificate, endorsement, application or form for the purpose of determining compliance. Multiple forms relating to a single policy may be filed together for one fee, otherwise, each policy, certificate, endorsement, application or form is considered as a separate filing. $50.00

(12) Transactions pursuant to section 3935.04:

(a) Any filing per insurer, required to be submitted to the superintendent. Multiple forms relating to a single policy may be filed together for one fee, otherwise, each form or policy is considered a separate filing. $50.00/filing

(b) Any excess rate filing required to be submitted to the superintendent pursuant to division (G) of section 3935.04 of the Revised Code is exempt from the filing fee.

(13) Transactions pursuant to section 3937.03:

(b) Any special filing pursuant to division (E) of section 3937.03 and any excess rate filing pursuant to division (G) of section 3937.03 that are required to be submitted to the superintendent are exempt from the filing fee.

(D) Whenever another state or jurisdiction charges a greater fee for a transaction listed in this rule to an insurer domiciled in Ohio, then the superintendent may charge that higher fee to the insurer not domiciled in Ohio, who seeks to have the transaction completed in this state.

(E) (1) The department will invoice the insurer for the fee charged for the transactions listed in paragraphs (C)(2), (C)(3)(a), (C)(5), (C)(8)[,] (C)(9), (C)(10), (C)(11), (C)(12) and (C)(13) of this rule, otherwise, the fee is to be submitted with the first documents sent to the department.

(2) All fees collected pursuant to this rule shall be deposited to the credit of the department of insurance operating fund created pursuant to section 3901.021 of the Revised Code.

(F) Severability If any section, term or provision of this rule is adjudged invalid for any reason, such judgment shall not affect, impair or invalidate any other section, term or provision of this rule, but the remaining sections, terms and provisions shall be and continue in full force and effect.

HISTORY: Eff 4-21-94; 10-8-04; 3-21-05

Promulgated Under: 119.03

Statutory Authority: 3901.041, 3901.043

Rule Amplifies: 3901.321, 3901.341, 3905, 3907.08-3907.12, 3911.011, 3913.01-3913.23, 3913.40, 3915.14, 3917.06, 3918.07, 3923.02, 3935.04, 3937.03

R.C. 119.032 review dates: 08/31/2009 and 08/30/2014

3901-1-58 Standard credentialing form for physician and non-physician providers.

(A) Purpose

The purpose of this rule is to prescribe the standard credentialing form to be used when credentialing or recredentialing providers. For purposes of this rule, the term “providers” shall have the same meaning as in division (P) of section 3963.01 of the Revised Code.

(B) Authority

This rule is issued pursuant to the authority vested in the superintendent under sections 3901.041, 3901.21, and 3963.08 of the Revised Code.

All credentialing and recredentialing of physicians and non-physician individual providers identified in division (P) of section 3963.01 of the Revised Code shall be performed using the credentialing form available from the council for affordable quality healthcare (CAQH) in electronic or paper format. The CAQH credentialing form shall be referred to as the department of insurance part A credentialing form. Copies of this form may be obtained electronically from CAQH or from the department of insurance. The department of insurance part B credentialing form shall be used to credential hearing aid dealers, home health agencies, hospice care providers and all other providers, with the exception of hospitals, that are not individuals. Copies of this form may be obtained from the department of insurance. The credentialing forms prescribed by this rule may be reproduced as needed and may be amended from time to time.

(D) Severability

Effective: 05/30/2009

R.C. 119.032 review dates: 11/14/2008 and 08/29/2013

Promulgated Under: 119.03

Statutory Authority: 3901.041, 3901.21, 1753.09

Rule Amplifies: 3901.20, 3901.21, 1753.03, 1753.04

Prior Effective Dates: 1/14/1999, 1/14/2002

3901-1-59 Standardized health claim form rule.

(A) Authority

Section 3901.041 of the Revised Code provides that the superintendent shall adopt, amend, and rescind rules and make adjudications necessary to discharge his duties and exercise his powers under Title XXXIX of the Revised Code. This rule is promulgated under authority of section 3902.22 of the Revised Code to provide for a standard claim form to be used by all third-party payers for reimbursement of health care services and supplies. Sections 3901.20 and 3901.21 of the Revised Code respectively prohibit unfair or deceptive practices in the business of insurance and define certain acts or practices as unfair or deceptive. Section 3901.21 also provides that the enumeration of specific unfair or deceptive acts or practices in the business of insurance is not exclusive or restrictive or intended to limit the power of the superintendent to adopt rules to implement that section.

(B) Purpose

The purpose of this rule is to standardize the forms used in the billing and reimbursement of health care, reduce the number of forms utilized, increase efficiency in the reimbursement of health care through standardization and encourage the use of electronic data interchange of health care expenses and reimbursement.

As used in this rule

(1) “CDT codes” means the most current dental terminology and codes prescribed by the American dental association.

(2) “Claim” means any request submitted to a third-party payer for benefits or proceeds under a benefit plan or contract on a standardized health claim form as described in paragraph (E)(2) of this rule.

(3) “CPT codes” means the most current procedural terminology and codes as published by the American medical association.

(4) “CMS” means the centers for medicare and medicaid services of the U.S. department of health and human services formerly known as the federal health care financing administration of the U.S. department of health and human services (HCFA).

(5) “CMS Form 1450” means the health insurance claim form published by CMS for use by institutional care practitioners. For purposes of this rule, the CMS form 1450 includes the UB-82 or UB-92 forms and their successors.

(6) “CMS Form 1500” means the health insurance claim form published by CMS for use by health care practitioners. For purposes of this rule, the CMS Form 1500 will include successor forms as approved by CMS.

(7) “HCPCS” means CMS’s common procedure coding system which is based upon the AMA’s most current CPT publication.

(a) “HCPCS Level 1 codes” means the AMA’s CPT codes with the exception of anesthesiology services;

(b) “HCPCS Level 2 codes” means the codes for physician and non-physician services which are not the most current CPT publication;

(c) “HCPCS Level 3 codes” means the codes for services needed by individual contractors or state agencies to process claims. They are used for items and services not having the frequency of use, geographic distribution, or general applicability needed to justify a code assignment at a higher level.

(8) “Health care practitioner” means:

(a) A chiropractor licensed under Chapter 4734. of the Revised Code;

(b) A corporation or partnership of health care practitioners defined in this section;

(d) A dietitian licensed under Chapter 4759. of the Revised Code;

(e) A nurse licensed under Chapter 4723. of the Revised Code;

(f) An optometrist licensed under Chapter 4725. of the Revised Code;

(g) A physician as defined under section 4730.01 of the Revised Code;

(h) A podiatrist licensed under Chapter 4731. of the Revised Code;

(i) A psychologist licensed under Chapter 4732. of the Revised Code;

(j) A therapist, including speech, physical, respiratory and occupational therapists licensed under Chapter 4753., 4755. or 4761. of the Revised Code.

(9) “ICD-9-CM codes” means the disease codes in the most current international classification of diseases, clinical modifications published by the U.S. department of health and human services.

(10) “Institutional care practitioner” means:

(a) A hospice licensed under Chapter 3712. of the Revised Code;

(b) A hospital as defined under section 3727.01 of the Revised Code;

(c) A skilled nursing facility, extended care facility, intermediate care facility, convalescent nursing home, or adult care facility licensed under Chapters 3721. and 3722. of the Revised Code.

(11) “J515 form” means the uniform dental claim form approved by the American dental association for use by dentists. For purposes of this rule, the J515 form shall include its successors.

(12) “Medicare” means Title XVIII of the federal Social Security Act (42 U.S.C. 1395 et seq.).

(13) “NCPDP universal claim form”” means the form adopted for use by the national council for prescription drug programs, including numbers DAH 3-97 and DAH 2PT and its successors.

(14) “Other provider” means a supplier of health care services or supplies not meeting the definition of health care practitioner or institutional care practitioner, including but not limited to a pharmacist, physician assistant, nurse aide, or supplier of durable medical equipment.

(15) “Third-party payer” is as defined in R.C. 3901.38.

(D) Applicability and scope

Except as otherwise specifically provided, the requirements of this rule apply to all issuers of policies or contracts of insurance, administrators of self-funded employee benefit plans, and other forms of coverage involved in the reimbursement of health care expenses, and all health care and institutional care practitioners licensed by this state. It is not to cover claims involving medicare, parts A or B; medicaid, the tricare program or workers’ compensation insurance. Nothing herein shall be construed to create or imply a private cause of action for violation of this rule.

(E) General provisions

(1) A health care practitioner, institutional care practitioner, or other provider shall file a claim on the CMS 1500, UB-82/UB-92/CMS-1450, NCPDP universal claim form or the J515 claim forms (and their successor forms) which, for the purpose of this rule, are deemed approved for use in this state.

(2) Third-party payers transacting business in this state shall accept claims submitted on the CMS 1500, UB-82/UB-92/CMS-1450, NCPDP universal claim form or the J515 claim forms (and their successor forms) which, for the purpose of this rule, are deemed approved for use in this state.

(3) Nothing in this regulation shall prohibit a third-party payer and an institutional care practitioner, health care practitioner or other provider from entering into a mutual agreement regarding the submission of claims to the third-party payer.

(4) All health care practitioners and institutional care practitioners shall:

(a) Use the most current editions of the CMS Form 1500, CMS form 1450 or J515 and most current instructions for these forms in filing claims with third-party payers.

(b) Modify their billing practices to encompass the coding changes for all billing and claim filing by the effective date of the changes set forth by the developers of the forms, codes and procedures required under this rule;

(5) Nothing in this regulation shall prevent a third-party payer from requesting supporting documentation as described in R.C. Section 3901.381.

(F) Requirements for use of CMS form 1500

(1) Health care practitioners, other than dentists, shall use the CMS form 1500 and instructions provided by CMS for use of the CMS form 1500 when filing claims with third-party payers for professional services.

(2) A third-party payer may not require a health care practitioner to use any coding system for the filing of claims for health care services other than the following:

(a) HCPCS Codes (and their successors);

(b) ICD-9-CM Codes (and their successors);

(3) For anesthesia services use HCPCS level 1 codes for anesthesia.

(4) Third party payers may accept the American society of anesthesiologists relative value guide codes for anesthesia services if mutually agreed to with the provider.

(5) A third-party payer may not require a health care practitioner to use any other descriptor with a code or to furnish additional information with the initial submission of a CMS form 1500 except under the following circumstances:

(a) When the procedure code used describes a treatment or service which is not otherwise classified; or

(b) When the procedure code is followed by the CPT modifier 22, 52 or 99. A health care practitioner may use item 19 of the CMS form 1500 to explain the multiple modifiers.

(6) A health care practitioner may use box 19 of the CMS form 1500 to indicate the form is an amended version of a form previously submitted to the third-party payer by inserting the word “amended” in the space provided.

(7) A health care practitioner billing for services based on the amount of time involved shall indicate the number of units in item 24 g of the CMS form 1500 if it is not used to specify the number of days of treatment.

(8) Third-party payers shall provide reimbursement to health care practitioners and other providers using the first that applies:

(a) Medicare physician identification number (UPIN);

(b) Federal tax identification number;

(G) Requirements for use of CMS form 1450/UB82/UB92

(1) Institutional care practitioners shall use the CMS form 1450 and instructions provided by CMS for use of the CMS form 1450 when filing claims with third-party payers for professional services.

(2) A third-party payer may not require an institutional care practitioner to use any coding system for the filing of claims for health care services other than the following:

(a) ICD-9-CM codes (and their successors);

(b) HCPCS level 1 codes (and their successors);

(d) HCPCS level 3 codes (and their successors); and

(e) Other codes as accepted by the national uniform billing committee;

(f) If charges include direct service of a health care practitioner, the information outlined in paragraph (E) of this rule.

(3) Institutional care practitioners shall specify the license number of physical therapists and other health care professionals rendering services designated as physical therapy in block 83 of CMS form 1450.

(H) Requirements for use of J515 form:

(1) A dentist shall use the J515 form and instructions provided by the American dental association for billing patients or their representatives directly and filing claims with third-party payers for professional services;

(2) A third-party payer may not require a dentist to use any code other than the CDT codes, or their successors, for the filing of claims for dental care services.

(I) Requirements for use of NCPDP universal claim form

A pharmacist shall use the NCPDP universal claim form, or its successors, to submit claims with third party payers.

(J) Penalties

Failure to comply with any requirements of paragraphs (E) to (I) of this rule is an unfair and deceptive practice within the meaning of section 3901.21 of the Revised Code.

(K) Severability

Effective: 04/05/2007

R.C. 119.032 review dates: 12/29/2006 and 12/30/2011

Promulgated Under: 119.03

Statutory Authority: 3901.041, 3901.20, 3901.21, 3902.22

Rule Amplifies: 3902.21 to 3902.23, 3901.38 to 3901.3813

Prior Effective Dates: 01/08/1994, 01/01/1996, 10/28/2002

3901-1-60 Unfair health claim practices.

(A) Authority

Section 3901.041 of the Revised Code provides that the superintendent of insurance shall adopt, amend, and rescind rules and make adjudications, necessary to discharge his duties and exercise his powers under Title XXXIX of the Revised Code.

Sections 3901.20 and 3901.21 of the Revised Code respectively prohibit unfair or deceptive practices in the business of insurance and define certain acts or practices as unfair or deceptive. Section 3901.21 also provides that the enumeration of specific unfair or deceptive acts or practices in the business of insurance is not exclusive or restrictive or intended to limit the powers of the superintendent of insurance to adopt rules to implement that section.

Section 3901.3813 permits the superintendent to adopt rules as the superintendent considers necessary to carry out the purposes of section 3901.38 and sections 3901.381 [3901.38.1] to 3901.3812 [3901.38.12] of the Revised Code.

(B) Purpose

The purpose of this rule is to define certain additional unfair trade practices and to set forth minimum standards in connection with the investigation and disposition of health claims arising under policies, certificates or contracts issued pursuant to Ohio’s insurance statutes, rules and regulations under Titles XVII and XXXIX of the Revised Code. It is not to cover claims involving medicare, parts A or B; medicaid, the tricare program or workers’ compensation insurance. Nothing herein shall be construed to create or imply a private cause of action for violation of this rule.

(1) “Claim” means any request submitted to a third-party payer for benefits or proceeds under a benefit plan or contract on a standardized health claim form as described in Ohio Administrative Code rule 3901-1-59.

(2) “Coordinated Care” means the management of health care services by a third-party payer for a beneficiary. Examples include, but are not limited to, provider selection or referral, preadmission certification, length of stay determination and second surgical opinions.

(3) “Day” means calendar day. However, when the last day of a time limit stated in this rule falls on a Saturday, Sunday or state or federal holiday, the time limit is extended to the next immediate following day that is not a Saturday, Sunday or holiday.

(4) “Deny or Denial” means a refusal to pay any portion of a claim. The application of contractual co-pays and deductibles are not considered a denial of a claim.

(5) “Documentation” includes, but is not limited to, all supporting documentation as defined in ORC 3901.381(B)(2) and any records of communications or activities, notes, work papers, claim forms, bills and explanation of benefit forms relative to a claim, including the electronic transmission of the data contained in such items.

(D) General claim practices

(1) A third-party payer shall notify the beneficiary and the provider of the denial of any claim. The notification shall include the specific reasons for the denial and the contract provision, condition, limitation or exclusion of the benefit plan or contract that is the basis for the denial of payment for the claim. The information must be provided in such a way that a reasonable person would understand the reasons and basis for the denial.

(2) No third-party payer shall indicate to a beneficiary or provider on an electronic payment or transmittal, payment draft, check, or in any communication that the payment is “final” or a “release of claim” unless the third-party payer has paid the benefit plan or contract’s limit or the provider or beneficiary has agreed to a compromise settlement.

(3) When a third-party payer administers more than one benefit plan under which a beneficiary may make a claim for benefits and has been notified by the beneficiary or provider that more than one claim may be filed for benefits, the third-party payer shall establish procedures to eliminate duplicate processing procedures and to encourage concurrent processing of the claims.

(4) The third-party payer shall inform the beneficiary or provider with specificity what supporting documentation is required to determine whether additional benefits would be payable.

(E) Coordinated care practices

(1) Every third-party payer with coordinated care provisions in a benefit plan or contract shall:

(a) Fully explain in the policy and certificate the procedures required for compliance with coordinated care provisions, including all penalties for failure to comply with those procedures.

(b) Process claims for any services or procedures which the third-party payer has authorized pursuant to the beneficiary’s or provider’s compliance with coordinated care procedures subject to non-coordinated care provisions.

(c) Provide the beneficiary or provider with timely written notification of the confirmation or denial of coverage pursuant to coordinated care requirements of the beneficiary’s benefit plan or contract. Unless the third-party payer has determined that all claims will be paid in full or denied, the notification shall include the following statement at the top of the notice, in twelve point bold face type, before any other textual information:

This is not an approval for claim payment

Confirmation of (particular coordinated care provision) only

We have not yet reviewed the patient’s health care plan. Depending on the limitations of the health care plan, we may pay all, part, or none of the claims.

(F) Reporting insurance fraud

If a third-party payer reasonably believes, based upon information obtained and documented, that a beneficiary or provider has fraudulently caused or contributed to the claim as represented by a properly executed and documented claim form or billing, such information shall be presented to the fraud division of the Ohio department of insurance within sixty days of when the fraud becomes evident. Any person making such report shall be afforded such immunity and the information submitted shall be confidential as provided by sections 3901.44 and 3999.31 of the Revised Code.

(G) File and record documentation

Each third-party payer shall maintain complete documentation of every claim for a period of three years. The documentation shall be sufficient to permit complete reconstruction of the third-party payer’s activities and communications with respect to each claim. Documentation shall include the date of each activity or communication. All documentation shall be reproducible to paper.

(H) Complaint procedure

Every third-party payer shall:

(1) Establish and maintain a procedure for the expeditious resolution of electronic, written, and oral complaints initiated by beneficiaries and providers.

(2) Include the third party payer’s complaint procedure in every benefit plan, contract or certificate.

(3) Keep records of written complaints from and responses to beneficiaries and providers for three years.

(4) Include the following statement or a substantially similar statement on all notification of claim denials:

“If you wish to dispute the company’s decision on this claim, you may register a complaint by (insert third-party payer’s procedure): (insert address of office). In reviewing your complaint, the company will follow the complaint procedure described in your benefits plan.”

(5) Include the following statement on the written notice to beneficiary of the company’s final adjudication of a complaint:

“If all appeal rights have been exhausted and you disagree with the company’s decision, you have the right to file a complaint with the “Ohio Department of Insurance.” For consumers: “Ohio Department of Insurance, Consumer Services Division, 2100 Stella Court, Columbus, Ohio 43215-1067, (614)-644-2673, toll free in Ohio 1-800-686-1526.” For providers: “Ohio Department of Insurance, Market Regulation Division, Provider Complaint Unit, 2100 Stella Court, Columbus, Ohio 43215-1067, (614) 644-6428.”

(I) Penalties

The superintendent may impose sanctions according to Revised Code section 3901.3812 for violations of paragraph (D)(1) or (D)(4) of this rule. All other violations of this rule are unfair and deceptive practices within the meaning of Revised Code section 3901.21 and are subject to the penalties set forth in section 3901.22 of the Revised Code. Any agreement consented to pursuant to division (G) of section 3901.22 of the Revised Code may include the recovery of the costs of the investigation in addition to the penalty so agreed.

(J) Severability

If any section, term or provision of this rule be adjudged invalid for any reason, such judgment shall not affect, impair, or invalidate any other section, term, or provision of this rule, but the remaining sections, terms, and provisions shall be and continue in full force and effect.

Effective: 04/05/2007

R.C. 119.032 review dates: 12/29/2006 and 12/30/2011

Promulgated Under: 119.03

Statutory Authority: 3901.041, 3901.20, 3901.21, 3901.38 to 3901.3813

Rule Amplifies: 3901.20, 3901.21, 3901.22, 3901.38 to 3901.3813

Prior Effective Dates: 10/1/94; 10/28/02

3901-1-62 External review. [Rescinded]

Rescinded eff 11-14-08

3901-1-63 Viatical settlement regulations.

(A) Authority and purpose

Authority. Section 3901.041 of the Revised Code provides that the superintendent of insurance shall adopt, amend, and rescind rules and make adjudications, necessary to discharge his duties and exercise his powers under Chapters 1751. and 1753. and Title XXXIX of the Ohio Revised Code. This rule is promulgated under authority to provide for the regulation of viatical settlement brokers and providers authorized by sections 3916.01 to 3916.21 and 3916.99 of the Revised Code.

Purpose. Section 3916.01 to 3916.21 and 3916.99 of the Revised Code establish regulatory standards for viatical settlement brokers and providers. The purpose of this rule is to define the additional standards and procedures the superintendent of insurance has adopted.

(B) Definitions. As used in this rule:

(1)

(a) “Financing entity” means an underwriter, placement agent, lender, purchaser of securities, purchaser of a policy or certificate from a viatical settlement provider, credit enhancer, or any other person that has a direct ownership interest in a policy or certificate that is the subject of a viatical settlement contract and to which both of the following apply:

(i) Its principal activity related to the transaction is providing funds to effect the viatical settlement or the purchase of one or more viaticated policies.

(ii) It has an agreement in writing with one or more licensed viatical settlement providers to finance the acquisition of viatical settlement contracts.

(b) “Financing entity” does not include a non-accredited investor or viatical settlement purchaser.

(2) Notwithstanding section 1.59 of the Revised Code, “person” means a natural person or a legal entity, including, but not limited to, an individual, partnership, limited liability company, association, trust, or corporation.

(3) “Policy” means an individual or a group policy, group certificate, contract, or arrangement of insurance affecting the rights of a resident of this state or bearing a reasonable relation to this state, regardless of whether delivered or issued for delivery in this state.

(4) “Related provider trust” means a titling trust or any other trust established by a licensed viatical settlement provider or a financing entity for the sole purpose of holding ownership or beneficial interest in purchased policies in connection with a financing transaction, provided that the trust has a written agreement with the licensed viatical settlement provider under which the licensed viatical settlement provider is responsible for ensuring compliance with all statutory and regulatory requirements and under which the trust agrees to make all records and files related to viatical settlement transactions available to the superintendent as if those records and files were maintained directly by the licensed viatical settlement provider.

(5) “Special purpose entity” means a corporation, partnership, trust, limited liability company or other similar entity formed solely to provide access, either directly or indirectly, to institutional capital markets for a financing entity or licensed viatical settlement provider.

(6)

(a) “Viatical settlement broker” means a person that, on behalf of a viator and for a fee, commission, or other valuable consideration, offers or attempts to negotiate viatical settlements between a viator and one or more viatical settlement providers.

(b) “Viatical settlement broker” does not include an attorney, a certified public accountant, or a financial planner accredited by a nationally recognized accreditation agency, who is retained to represent the viator and whose compensation is not paid directly or indirectly by the viatical settlement provider or purchaser.

(7) “Viatical settlement contract” means any of the following:

(a) A written agreement establishing the terms under which compensation or any thing of value, that is less than the expected death benefit of the insurance policy or certificate will be paid in return for the viator’s assignment, transfer, sale, devise, or bequest of the death benefit or ownership of any portion of the insurance policy or certificate of insurance;

(b) A contract for a loan or any other financing transaction secured primarily by an individual or group life insurance policy or certificate, other than a loan by a life insurance company pursuant to the terms of the life insurance contract or a loan secured by the cash value of a policy or certificate.

(c) An agreement to transfer ownership or change the beneficiary designation of the policy or certificate at a later date, regardless of the date that compensation is paid to the viator.

(8)

(a) “Viatical settlement provider” means a person, other than a viator, that enters into or effectuates a viatical settlement contract.

(b) “Viatical settlement provider” does not include any of the following:

(i) A bank, savings bank, savings and loan association, credit union, or other financial institution that takes an assignment of a life insurance policy or certificate as collateral for a loan;

(ii) The issuer of a life insurance policy or certificate providing accelerated benefits as defined in section 3915.21 of the Revised Code and pursuant to the contract;

(iii) An individual who enters into or effectuates not more than one agreement in any calendar year for the transfer of life insurance policies or certificates for any value less than the expected death benefit;

(iv) An authorized or eligible insurer that provides stop loss coverage to a viatical settlement provider, purchaser, financing entity, special purchase entity, or related provider trust;

(v) A financing entity;

(vi) Special purchase entity;

(vii) A related provider trust;

(viii) A viatical settlement purchaser.

(9) “Viaticated policy” means a life insurance policy or certificate that has been acquired by a viatical settlement provider pursuant to a viatical settlement contract.

(10)

(a) “Viator” means the owner of a life insurance policy or certificate holder under a group policy who, in return for compensation or any thing of value that is less than the expected death benefit of the policy or certificate, assigns, transfers, sells, devises, or bequests the death benefit or ownership of any portion of the insurance policy or certificate of insurance. For the purposes of this chapter, a “viator” is not limited to an owner of a life insurance policy or a certificate holder under a group policy insuring the life of an individual with a terminal or chronic illness or condition except where specifically addressed.

(b) “Viator” does not include any of the following:

(i) A licensee under this chapter;

(ii) An accredited investor or qualified institutional buyer as defined respectively in regulation D, Rule 501 or Rule 144A of the Securities Act of 1933, as amended;

(iii) A financing entity;

(iv) A special purpose entity;

(v) A related provider trust.

(11)

(a) “Viatical settlement purchaser” means a person who gives a sum of money as consideration for a life insurance policy or an interest in the death benefits of a life insurance policy, or a person who owns, acquires, or is entitled to a beneficial interest in a trust that owns a viatical settlement contract or is the beneficiary of a life insurance policy that has been or will be the subject of a viatical settlement contract, for the purpose of deriving an economic benefit.

(b) “Viatical settlement purchaser” does not include any of the following:

(i) A licensee under this chapter;

(ii) An accredited investor or qualified institutional buyer as defined respectively in regulation D, Rule 144A of the Securities Act of 1933, as amended;

(iii) A financing entity;

(iv) A special purpose entity;

(v) A related provider trust;

An application for a viatical settlement broker or viatical settlement provider license shall be accompanied by all of the following:

(1) A nonrefundable filing fee in the amount of:

(a) If applying for a viatical settlement broker license: $200.00;

(b) If applying for a viatical settlement provider license: $1,000.00.

(2) A criminal records check conducted by the superintendent of the bureau of criminal identification and investigation in accordance with section 109.572 of the Revised Code. The applicant shall direct that the bureau’s written response to that request by transmitted to the superintendent of insurance, or to the superintendent’s designee, as specified on the form prescribed pursuant to that section. The superintendent of insurance, in the superintendent’s discretion may designate other governmental agencies or other sources to conduct the criminal records check. If other than an individual applicant, a criminal records check shall be submitted by each partner, officer, member, or designated employee of the person authorized to act as a viatical settlement broker or viatical settlement provider. The applicant shall pay any fee required for conducting the criminal records check.

(3) If applying for a viatical settlement provider license, a copy of the most recent audited financial statement, or, if an audited financial statement is not available, the superintendent may accept a financial statement certified as true and accurate by the chief financial officer of the applicant. These financial statements must demonstrate suitable fiscal soundness and capacity for the viatical settlement provider to operate and meet its obligations under Chapter 3916 of the Revised Code.

(4) If applicable, a copy of the articles of incorporation or organization, partnership agreement, trust agreement, or other such organizational documents of the applicant certified by the proper domiciliary official, and proof of registration with the Ohio secretary of state’s office.

(5) If a nonresident applicant, and required to be licensed in the applicant’s domicile state, a certificate of good standing from the applicant’s domicile state.

(6) A detailed plan of operation which addresses the following items:

(a) A description of the corporation organizational structure of the applicant, its parent company and all affiliates.

(b) A description of the procedures used by the applicant to ensure that viatical settlement proceeds will be sent to the viator within three business days as provided in section 3916.09 of the Revised Code.

(c) A description of the procedures used by the applicant to ensure that an insured’s identity, individual identification data, financial, and medical information are kept confidential as provided in section 3916.13 of the Revised Code.

(d) A description of the anti-fraud program.

(7) Copies of all contract, application, and disclosure forms intended for use in Ohio.

(8) Such other information as the superintendent may request.

(D) License renewal

In support of the application for license renewal, a viatical settlement broker or viatical settlement provider shall submit:

(1) A nonrefundable fee in the amount of:

(a) If a viatical settlement broker: $100.00;

(b) If a viatical settlement provider: $500.00.

Effective: 04/13/2006

R.C. 119.032 review dates: 12/21/2005 and 12/21/2010

Promulgated Under: 119.03

Statutory Authority: 3901.041, 3916.20, 3916.03

Rule Amplifies: 3916.01 to 3916.21 and 3916.99

Prior Effective Dates: 10/11/2001

3901-1-64 Medical liability data collection.

(A) Purpose

The purpose of this rule is to establish procedures and requirements for the reporting of specific medical, dental, optometric and chiropractic claims data to the Ohio Department of Insurance.

(B) Authority

This rule is promulgated pursuant to the authority vested in the superintendent under sections 3901.041 and 3929.302 of the Revised Code.

(1) “Medical, dental, optometric and chiropractic claims” include those claims asserted against a risk located in this state that either:

(a) meet the definition of “medical claim,” “dental claim,” “optometric claim,” or “chiropractic claim” in section 2305.113 of the Revised Code, or

(b) have not been asserted in any civil action, but that otherwise meet the definition of “medical claim,” “dental claim,” “optometric claim,” or “chiropractic claim” in section 2305.113 of the Revised Code.

(2) “Risk retention group” has the same meaning as in section 3960.02 of the Revised Code.

(3) “Surplus lines insurer” means an insurer that is not licensed to do business in this state, but is nonetheless approved by the department to offer insurance because coverage is not available through licensed insurers.

(4) “Self-insurer” means any person or persons who set aside funds to cover liability for future medical, dental, optometric or chiropractic claims or that otherwise assume their own risk or potential loss for such claims. “Self-insurer” includes captives.

(D) Each authorized insurer, surplus lines insurer, risk retention group, self-insurer, the medical liability underwriting association if created under section 3929.63 of the Revised Code, or any other entity that offers medical malpractice insurance to, or that otherwise assumes liability to pay medical, dental, optometric or chiropractic claims for, risks located in this state, shall report at least annually to the superintendent of insurance, or to the superintendent’s designee, information regarding any medical, dental, optometric, or chiropractic claim asserted against a risk located in this state, if the claim resulted in:

(1) A final judgment in any amount,

(2) A settlement in any amount, or

(3) A final disposition of the claim resulting in no indemnity payment on behalf of the covered person or persons.

(E) The report required by division (D) shall include for each claim:

(1) The name, address and specialty coverage of each covered person;

(2) The insured’s policy number, if applicable;

(3) The date of the occurrence that created the claim;

(4) The name and address of the injured person;

(5) The date the claim was reported and the claim number;

(6) The injured person’s age and sex;

(7) If the medical, dental, optometric, or chiropractic claim was filed with the court, the case number and the name and location of the court;

(8) In the case of a judgment, the date and amount of the judgment and, if the judgment is subject to the itemization requirements in section 2323.43(B) of the Revised Code, a description of the portion of the judgment that represents economic loss, non-economic loss and punitive damages, if any;

(9) In the case of a settlement, the date and amount of the settlement and, if known, the injured person’s incurred medical expense, wage loss, and other expenses;

(10) Any loss adjustment expenses allocated to the claim or, if known, the amount allocated to each covered person;

(11) The loss adjustment expense, broken down between fees and expenses, paid to defense counsel;

(12) The date and reason for final disposition, if no judgment or settlement, and the type of disposition;

(13) Unless disclosure is otherwise prohibited by state or federal law, a summary of the occurrence which created the claim which shall include:

(a) The name of the institution, if any, and the location at which the injury occurred;

(b) The operation, diagnosis, treatment, procedure or other medical event or incident giving rise to the alleged injury;

(F) Frequency

The report(s) required by this rule shall be filed with the superintendent, or the superintendent’s designee, on or before May 1 of each year, and shall contain information for the previous calendar year.

(G) Noncompliance

Any person listed in division (D) that fails to timely submit the report required under this section shall be subject to a fine not to exceed $500.00.

(H) Confidentiality

Information reported to the superintendent or the superintendent’s designee pursuant to this rule shall be confidential and privileged and is not a public record as defined in section 149.43 of the Revised Code. The information provided under this section is not subject to discovery or subpoena and shall not be made public by the superintendent or any other person, including any rating organizations or other agencies designated by the superintendent to gather and/or compile the information.

(I) The requirements of this rule do not apply to reinsurers, reinsurance contracts, reinsurance agreements, or reinsurance claims transactions.

HISTORY: Eff 1-2-05

R.C. 119.032 review dates: 08/31/2009 and 08/30/2014

Promulgated Under: 119.03

Statutory Authority: 3901.041, 3929.302

Rule Amplifies: 3929.302

3901-1-65 Medical Malpractice Annual Filing Requirements.

(A) Purpose

The purpose of this rule is to safeguard the interest of the public by allowing reasonable inspection and analysis of insurers’ rating plans on an annual basis for the regulation and monitoring of medical malpractice premium rates.

(B) Authority

This rule is adopted pursuant to the authority vested in the superintendent under sections 3901.041, 3937.04 and 3937.12 of the Revised Code.

(1) Every insurer issued a certificate of authority to write medical malpractice insurance in this state and that issues such insurance in this state, shall at a minimum, file annually with the superintendent of insurance, appropriate information and exhibits, in support of the insurer’s existing rating plan. If at any time the superintendent of insurance finds that a rate no longer complies with section 3937.01 to 3937.17 of the Revised Code, the superintendent may, in accordance with section 3937.04 of the Revised Code, state that the rate shall no longer be effective.

(2) In lieu of the filing required in division (C)(1) a carrier may annually file for a rate adjustment in accordance with section 3937.03 of the Revised Code.

(3) Included with a filing required in divisions (C)(1) or (C)(2), every insurer that issues medical malpractice insurance in this state, shall file the average, minimum, and maximum deviation from manual rates due to individual risk premium modifications, also known as schedule rating credits and debits, or discretionary credits and debits, applied by the insurer during a twelve month period which ends no more than six months before the date of the filing. If at any time the superintendent of insurance finds that the credits and debits exceed the maximum allowed or may result in inadequate rates or be destructive of competition or detrimental to solvency of insurers, the superintendent may in accordance with section 3937.04 of the Revised Code state that the rate shall no longer be effective.

(4) The first filing under (C)(1) or (C)(2) is due within twelve months of the effective date of this rule.

(D) Superintendent’s Discretionary Authority

Extensions of time for the filing required under division (C) may be granted by the superintendent upon a showing by the insurer the reasons for requesting such extension and a determination by the superintendent of good cause for the extension. The request for an extension must be submitted in writing not less than ten days prior to the due date of the required filing.

(E) Severability

Each paragraph of this rule and every part of each paragraph is an independent paragraph and part of a paragraph, and the determination that any paragraph or subpart of this rule or the application thereof to any person or circumstance is for any reason held invalid, such invalidity shall not affect any other paragraph or subpart or application of the rule that can be given effect without the invalid provision or application.

Effective: 03/26/2006

R.C. 119.032 review dates: 08/31/2009 and 08/30/2014

Promulgated Under: 119.03

Statutory Authority: 3901.041

Rule Amplifies: 3937.12

3901-1-66 Surety bail bond agent conduct.

(A) Purpose. The purpose of this rule is to establish criteria for surety bail bond agent conduct.

(B) Authority. This rule is promulgated pursuant to the authority vested in the superintendent under sections 3901.041 and 3905.95 of the Revised Code.

(1) “Cash bond” means the full amount of the bail required to be paid in cash to release a defendant from jail.

(2) “Power of attorney” means a legal instrument that is used by a authorized surety company to delegate authority to a licensed general agent or surety bail bond agent for the posting of surety bail bonds with a court of law up to a specified monetary amount.

(3) “Surety bail bond” means a court accepted bond instrument from a licensed insurance company issued for or on behalf of an incarcerated person held under criminal charges in any Ohio mayor, municipal, county, or federal court.

(4) “Immigration bond” means a federally accepted bond instrument from a surety company approved by the United States department of treasury issued for and on behalf of alien detainees held by United States immigration and customs enforcement, within the department of homeland security pending a hearing or court appearance; or to guarantee that an alien will be financially independent during a lawful visit or prolonged stay to the United States.

(D) Stacking bonds prohibited.

A surety bail bond agent shall not submit more than one power of attorney for any single bond, charge or charges, as is assigned a number by a court of proper jurisdiction.

(E) Submitting powers and bonds

(1) All surety bail bonds submitted to the court or the custodian of an arrested person must be accompanied by a current, non-expired, legal power of attorney.

(2) Only one power of attorney shall be submitted per bond. The face value of the power shall be equal to or greater than the amount of the bond set by the court in the single charge or charges for which the bond and power are being submitted.

(3) No power of attorney that has been altered or erased shall be submitted to a court or insurance company.

(4) No expired power of attorney shall be submitted to a court or insurance company.

(5) No power of attorney shall be used or submitted to a court or insurance company more than once.

(F) Immigration bonds

Immigration bonds may be solicited, sold, or negotiated only by:

(1) A person holding an Ohio insurance license with a casualty line of authority conferred pursuant to Title 39 of the Revised Code.

(2) A person holding an Ohio surety bail bond line of authority conferred pursuant to Title 39 of the Revised Code, who has been given a bond power that expressly allows for the writing of an immigration bond.

(G) Bond money from loan companies

No surety bail bond agent shall be employed by, contracted with, or act as an agent for, or own an ownership interest in any person or business entity that loans money for, or takes collateral for the loan of money for, the purpose of posting a cash bond or surety bail bond on behalf of a defendant.

(H) Real property as collateral

When accepting real property as collateral for a bond,

(1) A surety bail bond agent shall not require the transfer of title of any real property as a condition of issuing the bail bond.

(2) A surety bail bond agent may require a defendant, or anyone agreeing to provide real property as collateral on a defendants behalf, to establish title and unencumbered value, at the defendants expense, together with mortgage security or other documents necessary to establish the surety bail bond agent’s lien interest in the real property by the bail agent.

(3) A surety bail bond agent shall not provide title, notary, or lien filing services directly or indirectly to the client or defendant for a fee. A surety bail bond agent shall not receive any valuable consideration for referring a person for title, notary, or lien filing services.

(4) Return of security document collateral:

(a) If the security document has not been filed with the state or a division of the state to perfect the lien, and the bond has not been called or otherwise needed or used, the original mortgage or other security document must be stamped cancelled and returned to the client or defendant within twenty-one days from the end of the bond.

(b) If the security document has been filed with the state or a division of the state to perfect the lien, and the bond has not been called or otherwise needed or used, a release of the mortgage or release of the other security document must be completed within twenty-one days after the end of the bond. A copy of the release containing an official date/time stamp must be provided to the client within twenty-six days after the end of the bond.

(I) Solicitation

(1) The following activities shall constitute prohibited solicitation by a surety bail bond agent on the grounds of a courthouse or detention facility:

(a) Approaching a person not currently a client and in any way initiating communication concerning bail bond services.

(b) Writing bonds for an individual without their direct knowledge and consent.

(c) Communicating as, or holding oneself out to be, a court appointed surety bail bond agent or suggesting in any manner that one has been appointed by a court or other public agency to write a bond for a particular defendant, or on a particular case.

(d) Wearing clothing that indicates a person is in the bail bond industry unless otherwise directed by the court or detention facility, except the wearing of the issued department of insurance ID card.

(e) Conducting business in a loud and conspicuous manner.

(f) Distributing a business card, pen, or any other item, that identifies an individual or business entity as providing surety bail bond services.

(g) Physically impeding, blocking, or hindering the public from viewing or obtaining the docket or other information needed to ascertain the status or procedure of any court process including all court bonding processes.

(h) Engaging or hiring any person, directly or indirectly, to perform any acts listed in paragraphs (I)(1)(a) to (I)(1)(g) of this rule.

(i) Any other activity that may be construed as the sale or solicitation of surety bail bonds.

(2) The following activities shall not constitute prohibited solicitation by a surety bail bond agent on the grounds of a courthouse or detention facility subject to the limitations of paragraph (I)(1) of this rule:

(a) Having personal business matters before a court or detention facility;

(b) Attending a scheduled hearing or meeting with any person(s) regarding surety bail bonds as long as the meeting is arranged with the person(s) prior to the arrival at the courthouse or detention facility;

(d) Gathering court and docket information for business purposes;

(e) Writing a bond and posting a bond with the court;

(f) Returning a fugitive from justice pursuant to section 2927.27 of the Revised Code;

(g) Notifying a court, or detention facility of professional activities being conducted by the surety bail bond agent, other than solicitation; or

(h) Filing required paperwork with the court or detention facility regarding bonds, prisoners, bail bond license status, or fugitives.

(J) Severability

If any section, term or provision of this rule is adjudged invalid for any reason, such judgment shall not affect, impair or invalidate any other section, term or provision of this rule, but the remaining sections, terms and provisions shall be and continue in full force and effect.

Effective: 12/14/2008

R.C. 119.032 review dates: 11/30/2012

Promulgated Under: 119.03

Statutory Authority: 3901.041, 3905.95

Rule Amplifies: 3901.83 to 3901.99