AN ACT TO AMEND TITLE 18, CHAPTER 65, DELAWARE CODE, RELATING TO INSURANCE BY PROVIDING FOR INSURANCE FOR THE PROTECTION OF THE STATE OF DELAWARE.
Be it enacted by the General Assembly of the State of Delaware:
Section 1. That Chapter 65 of Title 18, Delaware Code, be repealed.
Section 2. That Chapter 65 of Title 18, Delaware Code, shall henceforth read as follows:
CHAPTER 65. INSURANCE FOR THE PROTECTION OF
THE STATE OF DELAWARE
SUBCHAPTER I. GENERAL PROVISIONS
§ 6501. Definitions
As used in this Chapter:
(1) "The Committee" means the Insurance Coverage Determination Committee, hereinafter established by § 6502 (1 );
(2) "Coverage Office" means the State Insurance Coverage Office, hereinafter established by § 6503;
(3) "Director" means the Director of Insurance Coverage, hereinafter established by § 6503;
(4) "The Fund" means the State Self-Insurance Fund as provided for by Subchapter III of this Chapter.
§ 6502. Insurance for the protection of the State and the Public
(1) Determination of coverage. There is hereby established the Insurance Coverage Determination Committee, which shall be composed of the Governor, the State Auditor and the Insurance Commissioner, during their respective terms of office, which Committee shall from time to time determine the method of insuring, the amount of insurance, and the class of coverage covering any type of risk to which the State may be exposed, including, but not limited to: Life Insurance, as same is defined in § 902, of this Title; Health Insurance, as same is defined in § 903, of this Title; Property Insurance, as same is defined in § 904, of this Title; Surety Insurance, as same is defined in § 905 (a) (1), of this Title; Casualty Insurance, as same is defined in § 906, of this Title; Marine and Transportation and "wet marine" insurance, as same is defined in §907, of this Title; Title Insurance, as same is defined in § 908, of this Title; to be effected and carried by the State or any subdivision thereof, including all school districts, but excluding however municipal corporations, counties, and the authorities relating to the crossings of the Delaware River and the Delaware Bay.
(2) Forms of Coverage. The Committee shall:
(a) Protect the State from loss to State owned property;
(b) Protect the public from wrongful actions of State officials and employees and failure or malfunction of State owned property;
(c) Secure for the State the maximum economic advantage feasible in the operation of its insurance coverage program, including, when deemed appropriate to such end, the utilization of blanket policies, deductible or excess loss insurance, and self-insurance;
(d) Determine such insurance protection as shall be required by the needs of the State and as shall be most economically advantageous to the State by providing for, as they shall deem appropriate, no insurance on small losses, coverage by commercial insurance, coverage by self-insurance, or a combination of such methods.
(3) Regulations and Administration. The Insurance Commissioner shall promulgate such rules and regulations as shall be necessary to carry out the policy determinations of the Committee in administering the State insurance coverage program, so as to effectively provide coverage for the State whether same be procured from commercial insurers or by self-insurance or a combination of both.
§ 6503. Establishment of State Insurance Coverage Office
There is hereby established under the direction and supervision of the Insurance Commissioner the State Insurance Coverage Office, hereinafter in this Chapter referred to as the Coverage Office, the executive head of which shall be the Director of Insurance Coverage, hereinafter referred to in this Chapter as the Director who shall be appointed by and serve at the pleasure of the Insurance Commissioner.
§ 6504. Qualifications of Director of Insurance Coverage
The Director shall be qualified for his office by virtue of his education and experience, and during his tenure of office he shall not be associated directly or indirectly with any insurance agency, firm, or corporation, and before entering upon the duties of his office he shall file with the Secretary of State a bond in the penal sum of Fifty Thousand Dollars ($50,000.00) with corporate surety approved by the Insurance Commissioner. The Director shall be charged with and responsible for the administration of the Coverage Office as herein provided.
§ 6505. Salary of the Director of Insurance Coverage
The salary of the Director shall be not less than Ten Thousand ($10,000.00) Dollars per year. The Director shall be in the classified service of the State by virtue of said employment.
§ 6506. Duties of the State Insurance Coverage Office
The Coverage Office shall provide:
(a) The placement of all insurance with commercial insurers that the Committee has deemed appropriate to place with such insurers;
(b) The operation of The Fund when and if same shall be established by the Committee for the operation of a self-insurance program;
(c) Centralized responsibility for the operation of the State insurance coverage program vested in a single agency with an adequate staff of legal, actuarial and administrative personnel;
(d) The establishment and operation of an Open Bid procedure to be maintained for purchasing new insurance coverage from commercial insurers and renewing existing contracts with such commercial insurers which will permit the free forces of market competition to operate to the benefit of the State insurance coverage program;
(e) The keeping of all policies with commercial insurers and all records necessary and pertinent thereto in some safe and secure place;
(f) The keeping in some safe and secure place of all records, accounts, claims files, statistical studies and other such records and documents necessary and proper in the administration of the self-insurance program when and if the Committee deems it proper to utilize same;
(g) The periodic preparation of reports as to the commercially procured insurance coverage part of the program which shall present the basic statistical-actuarial data pertaining to the experience of that part of the program and its component parts, which, reports shall be public documents;
(h) Provide to the commercial insurance industry such information about bidding procedures as is required by the statutes of the State of Delaware, so that any qualified commercial insurer may have an opportunity to offer its service to the State in the areas where the Committee has deemed it desirable to procure commercial coverage;
() Periodic comprehensive insurance surveys of program needs, and a continuing review of existing commercially procured insurance contracts, as well as analysis of commercial rates in terms of changing economic conditions, and periodic studies of commercial market conditions and developments;
(a) Such special investigations and reports as may be requested by the Insurance Commissioner.
§ 6507. Insurance by other Agencies of the State
No other agency of the State, for which coverage is herein provided, shall be authorized to place any insurance, any provisions of the law to the contrary notwithstanding, and all insurance for such agencies shall be placed by and through the Coverage Office.
§ 6508. Existing insurance contracts
Existing insurance contracts and any renewals thereof may continue in full force and effect unless and until otherwise provided by the Director.
§ 6509. Defense of sovereignity prohibited
The defense of sovereignity is waived and cannot and will not be asserted as to any risk or loss covered by the State insurance coverage program, whether same be covered by commercially procured insurance or by self-insurance, and every commercially procured insurance contract shall contain a provision to this effect, where appropriate.
SUBCHAPTER II. COMMERCIAL INSURANCE
§ 6520. Placement of commercial insurance
When the Committee shall determine and declare it to be advisable to insure against a certain risk or risks with commercially procured insurance, then as to such risk or risks, the Coverage Office shall provide for the placement of such insurance as shall be necessary with duly accredited and qualified commercial insurers. The purchase of all new policies of commercial insurance, and the renewal of all existing commercial policies, shall be by Open Bid procedure under rules and regulations promulgated by the Insurance Commissioner calculated to permit the free forces of market competition to operate to the economic benefit of the State insurance coverage program.
§ 6521. Payment of premiums on commercial insurance
The Coverage Office shall demand and receive all bills for premiums to be paid, and shall present same to Insurance Commissioner for his approval and the approval of the other members of the Committee. After the Committee has approved said bills, the Commissioner shall present same for payment to the State Treasurer, who shall pay the same.
§ 6522. Administration and records
The administration of the commercially insured part of the State insurance coverage program shall be the responsibility of the Coverage Office which shall keep in some safe and secure place all policies of insurance and all records pertaining thereto and such other records, reports, studies, analysis and correspondence as is necessary to effectuate the efficient and economic administration of the program.
SUBCHAPTER III. SELF-INSURANCE
§ 6530. Placement of self-insurance
When the Committee shall determine and declare it to be advisable to insure against a certain risk or risks through a self-insurance program, no such program being in existence as of the date of the enactment of this statute, then as to such risk or risks there shall be established a State Self-Insurance Fund, hereinafter in this Chapter referred to as The Fund, which Fund shall be established pursuant to the hereinafter provided for schedule and through which Fund said risk or risks shall be insured for each year thereafter until the contrary is determined and declared to be advisable by the Committee or by subsequent Legislation.
§ 6531. Capitalization of the State Self-Insurance Fund
(1) The Fund shall be capitalized according to the following schedule:
(a) Transfer from Fire and Storm Damage Contingency Fund of money theretofore allocated for payment of deductibles.
Such amount of money as is at the time of the establishment of The Fund then on the books of the Budget Commission as the Fire and Storm Damage Contingency Fund shall thereupon be transferred to The Fund.
() Premiums to be allocated as to Property Insurance risks to be covered by The Fund.
As to all real and personal property loss risks to be insured by The Fund, an annual premium shall be paid to The Fund for each fiscal year in such amount as the Committee shall determine and declare to be appropriate, but not to exceed .0008 of the replacement value of such property in any one year or the then existing commercially approved rates for such coverage in any particular year, whichever shall be greater;
(c) Premiums to be allocated as to Workmen's Compensation risks to be covered by The Fund.
As to all workmen's compensation loss risks to be insured by The Fund, an annual premium shall be paid to The Fund for each fiscal year in such amount as the Committee shall determine and declare to be appropriate, but not to exceed .002 of the gross annual payroll of the employees so covered or the then existing commercially approved rates for such coverage in any particular year, whichever shall be the greater;
(d) Premiums to be allocated as to Fidelity Bonds for State officials or employees to be covered by The Fund.
As to all Fidelity Bonds for State officials to be covered by The Fund, an annual premium shall be paid to The Fund for each fiscal year in such amount as the Committee shall determine and declare to be appropriate, but not to exceed .005 of the face value of the Bonds thus covered or the then existing commercially approved rates for such coverage in any particular year, whichever shall be the greater;
() Premiums to be Allocated as to all other risks covered by The Fund, not specifically referred to in subsections (a) through (d) above.
As to all other insurable risks to be covered by The Fund, not specifically referred to in subsections (a) through (d) above, an annual premium shall be paid to The Fund for each fiscal year in such amount as the Committee shall determine and declare to be appropriate, but not to exceed the then existing commercially approved rates for such coverage in any particular year.
(2) Payment of Premium Allocations
The gross premium allocation, provided for in subsection (1) above, shall be determined by the Committee for each fiscal year and made a part of the budget request of the Insurance Department as submitted by the Insurance Commissioner for the fiscal year, and upon approval by the General Assembly in the Annual Budget, shall be paid to The Fund by the State Treasurer. However, in starting the self-insurance program as to any particular risk, the Committee may direct that the funds theretofor allocated for the payment of commercial insurance premiums for commercial policies covering such risk or risks shall be paid into The Fund as the initial premium for such self-insurance coverage, and upon such direction, as communicated to the State Treasurer by the Insurance Commissioner, the State Treasurer shall so reallocate such specified sum to The Fund.
(3) Maximum Level of Effective Capitalization and Termination of Premium Payments upon Reaching Same.
The aforesaid premium allocations to The Fund shall continue to be allocated and paid to The Fund until such time as the effective uncommitted gross capitalization of The Fund, when invested as hereinafter provided for, shall produce in each year sufficient income to pay the average annual claims made upon The Fund for the risks therein insured as computed upon the record of such claims over the preceding five years, at which point no further premiums will be allocated or paid; but at such time as the effective uncommitted gross capitalization of The Fund shall fall below such desired level and shall no longer produce sufficient income, because of increased claims or increased coverage or both, to pay the average annuals claims computed as aforesaid, then in that event and at that time the said premium allocations to The Fund shall once again be allocated and paid to The Fund until the aforesaid desired level of capitalization is once again obtained, and such allocations and payments of premiums shall be effected from time to time as the demands upon The Fund shall require.
(4) Emergency Back-Up Fund
In the event that the Committee determines and declares its intention to embark upon a self-insurance program, as herein provided for, within two years of the passage of this act, then and in that event there shall be set aside in the Capital Investment Fund the sum of One Million ($1,000,000.00) Dollars, which sum shall remain in the Capital Investment Fund and subject to the administration and control of the Budget Director unless and until it shall be necessary to draw upon same to pay any claim or claims upon the aforesaid State Self-Insurance Fund which exceed the gross effective uncommitted capitalization of said Fund, at which time such funds as shall be necessary to pay such excess claim or claims up to, but not exceeding, One Million ($1,000,000.00) Dollars, shall be paid from the Capital Investment Fund to the State Self-Insurance Fund upon direction of the Committee. However, as the gross effective uncommitted capitalization of the State Self-Insurance Fund shall have reached the level of One Million ($1,000,000.00) Dollars, then at that time Five Hundred Thousand ($500,000.00) Dollars of the aforesaid committed One Million $1,000,000.00) Dollars of Capital Investment Fund shall be released from this commitment, and at the time that the gross effective uncommitted capitalization of the State Self-Insurance Fund shall have reached the level of Two Million ($2,000,000.00) Dollars, then at that time the remaining Five Hundred Thousand ($500,000.00) Dollars of the aforesaid committed One Million ($1,000,000.00) Dollars of the Capital Investment Fund shall be released from this commitment, unless same shall have been previously expended, as aforesaid, to pay excess claims upon the State Self-Insurance Fund, in which case same shall be repaid to the said Capital Investment Fund according to such schedule as the Committee shall deem appropriate and feasible and not injurious to the operation of the Self-Insurance program.
§ 6532. Administration and custody of the State Self-Insurance Fund.
The Director, subject to the supervision and control of the Insurance Commissioner, shall be the custodian of and administrator of The Fund.
§ 6533. Investment of moneys in the fund
The Director may invest and reinvest such portion of The Fund as is not required to meet regular anticipated expenses in:
(1) Obligations of the United States;
(2) Obligations of the State of Delaware or its subdivisions;
(3) Time deposit accounts of the Farmers Bank of the State of Delaware;
(4) Such other investments as are approved by the Insurance Commissioner for investment by Domestic Life Insurance Companies pursuant to the provisions of Chapter 13 of this Title.
All income from such investments shall be continued in The Fund to pay the obligations of The Fund and provide for its growth.
§ 6534. Provisions for deductible limits
The Committee, from time to time, may declare and enforce such deductible limits on any insured risk covering loss to State owned property, both real, personal and mixed, as it shall deem appropriate.
§ 6535. Provisions for reinsurance
The Committee, from time to time, may determine the advisability of purchasing commercial reinsurance contracts as to any risk or risks covered by The Fund and direct the Coverage Office to place such insurance, in such amount as the Committee shall have determined to be most feasible, in the manner herein provided for the placement of other commercial insurance coverage.
§ 6536. Adjusting claims and paying losses
The Coverage Office shall have the responsibility of adjusting all claims and paying all losses in risks covered by The Fund, and shall carry out its duties in conformity with appropriate regulations promulgated for that purpose by the Insurance Commissioner, which regulations shall be in general conformity with the accepted practice in the commercial insurance industry in such matters, and shall be calculated to provide for prompt, efficient and equitable settlement procedures. The Coverage Office shall keep such records and files as shall be necessary and proper in its fulfillment of this obligation.
§ 6537. Arbitration of disputes and litigation of claims
(1) Any dispute between the Coverage Office and a State Agency claimant, which cannot be amicably resolved, shall be referred to arbitration before an arbitrator selected by the Secretary of State. The expense of such arbitration will be borne by the disputants equally. The decision of the arbitrator will be final and binding upon the disputants.
(2) Any dispute between the Coverage Office and a claimant under the Workmen's Compensation coverage, should same be covered by The Fund, which cannot be amicably resolved, shall be handled in the manner of a claim against a commercial insurer before the Industrial Accident Board with all normal rights of appeal.
(3) Any dispute between the Coverage Office and a claimant not otherwise covered in subsections (1) and (2) above, which cannot be amicably resolved, may be made the subject of litigation in any Court of competent jurisdiction in the State of Delaware.
§ 6538. Inspections of insured property
The Coverage Office shall have available to it the services of the State Fire Marshal and his deputies for the purpose of inspecting self-insured real and personal property of the State and may call upon the Fire Marshal and his deputies to conduct such inspections of such property as are reasonable and necessary to determine the risk involved in insuring same and to provide the basis for requests, or suggestions as to how undesirable hazards may be corrected; and the Fire Marshal and his deputies shall cooperate with the Coverage Office in this regard, conducting such investigations as are requested and reporting the results thereof to the Coverage Office together with such recommendations as the investigator shall deem to be appropriate.
All State agencies, officials and employees will render full cooperation to the Fire Marshal and the Coverage Office in these matters and shall promptly correct such hazards as are found to exist, and failure to do so shall be referred to the Governor by the Coverage Office for such remedial executive action as he shall deem appropriate.
§ 6539. Independent contractors
The Director shall first employ all resources available to him in the Coverage Office, the Insurance Department, the Office of the State Fire Marshal, the Justice Department, and the Auditor's Office, before retaining independent contractors, but in the event that special expertise is required for the performance of his duties not otherwise available to him, or not readily available to him when required, then he is authorized and directed to contract for the services of such independent contractors as shall be best equipped to render such services, including, but not limited to, accountants, actuaries, claims adjusters and investigators, attorneys and engineers, which contracts shall be on an ad hoc or per case basis, and for which he is authorized to make payment by drafts upon The Fund, subject to the approval of the Insurance Commissioner, as an administrative expense of The Fund.
§ 6540. Fidelity bonds
In the event that the Committee determines and declares it advisable to self-insure the statutory required Fidelity Bonds of the officials and/or employees of the State or its herein covered subdivisions, and establishes a self-insurance program in that regard, then those provisions of the several statutes of the State of Delaware requiring that such bonds be with corporate surety are superseded as to such bonds as are covered by such self-insurance program to the extent that said statutes required corporate surety.
Approved June 30, 1969.