TITLE 18

Insurance Code

Insurance

CHAPTER 68. HEALTH CARE MEDICAL NEGLIGENCE INSURANCE AND LITIGATION

Subchapter V. Joint Underwriting Association


(a) A temporary Joint Underwriting Association is hereby provided for which shall consist of 2 categories of membership whose members shall be designated as category A members and category B members. The requirements for membership in, and the liabilities and obligations of membership in, either such category of the Association shall be as set forth in subsections (b) and (c) of this section.

(b) Category A of the Association shall consist of all insurers authorized to write and engaged in writing, within this State on a direct basis, casualty insurance, including insurers covering such peril package policies as defined in subsection (a) of § 906 of this title. The liabilities and obligations of membership within this category of the Association shall be as set forth for members in this subchapter.

(c) Category B of the Association shall consist of: (1) All insurers authorized to write and engaged in writing, within this State on a direct basis, health insurance as defined in § 903 of this title; and (2) all health service corporations incorporated and offering insurance and/or health service contracts pursuant to Chapter 63 of this title. The liabilities and obligations of membership within this category of the Association shall also be as set forth for members in this subchapter; provided, however, that the members of category B shall have no liabilities or obligations to the Association whatsoever pursuant to this subchapter until such time as the Association's aggregate losses, before any attempts have been made by category A members to recoup such losses and after crediting against such aggregate losses all funds available for payment of such losses in the stabilization reserve fund, exceed 5 percent of the net direct premiums paid to all category A members for insurance written within this State on a direct basis during the most recent year of the Association's existence. In the event that the members of category B of the Association are required to so share in the losses of the Association, then all members in both categories A and B shall participate on the same basis thereafter in all such additional losses of the Association above the 5 percent losses paid by the members of category A.

(d) Every such insurer shall be a member of the Association and shall remain a member as a condition of its authority to continue to transact such kind of insurance within this State.

(e) The purpose of the Association shall be to provide, for a period not exceeding 2 years from the date it commences underwriting operations, a market for health care medical negligence insurance on a self-supporting basis without subsidy from its members.

(f) The Association shall commence underwriting operations only by separate category of health care provider and only after the making by the Commissioner, upon due hearing and investigation, of the finding that such underwriting operations are necessary and 1 or more of the following findings:

(1) That health care medical negligence insurance is not reasonably available for physicians in the voluntary market. Upon such determination the Association shall be authorized to issue policies of health care medical negligence insurance to physicians and need not be the exclusive agency through which health care medical negligence insurance may be written in this State on a primary basis for physicians;

(2) That general liability insurance or health care medical negligence insurance, or both, are not reasonably available for hospitals in the voluntary market. Upon such determination the Association shall be authorized to issue policies of general liability and health care medical negligence insurance to hospitals but need not be the exclusive agency through which such insurance may be written on a primary basis in this State; or

(3) That health care medical negligence insurance is not reasonably available for another specific type or types of licensed health care provider in the voluntary market. Upon such determination the Association shall be authorized to issue policies of health care medical negligence insurance and need not be the exclusive agency through which health care medical negligence insurance may be written in this State on a primary basis for such specific type of health care provider.

(g) If the Commissioner determines at any time that health care medical negligence insurance can be made reasonably available in the voluntary market for either: (1) Physicians, (2) hospitals or (3) any specific type of other licensed health care provider, the Association shall thereby cease its underwriting operations for any such general liability and health care medical negligence insurance it is then writing in respect to which the Commissioner has made such determination.

(h) The Association shall, pursuant to this chapter and the plan of operation with respect to health care medical negligence insurance, have the power on behalf of its members:

(1) To issue, or to cause to be issued, policies of insurance to applicants, including incidental coverages and subject to limits as specified in the plan of operation but not to exceed $1,000,000 for each claimant under 1 policy and $3,000,000 for all claimants under 1 policy in any 1 year;

(2) To underwrite such insurance and to adjust and pay losses with respect thereto, or to appoint a servicing company or companies to perform those functions;

(3) To assume reinsurance from its members; and

(4) To cede reinsurance.

(i) The Association and its members shall cooperate with the Commissioner, to the extent the Commissioner permits and with the Association's actual or prospective policyholders, on all matters pertaining to the Commissioner's duties and the insurance issued or to be issued by the Association.

60 Del. Laws, c. 373, § 1; 71 Del. Laws, c. 373, § 3.;

(a) Within 45 days following the creation of the Association, the directors of the Association shall submit to the Commissioner for the Commissioner's review a proposed plan of operation, consistent with this chapter.

(b) The plan of operation shall provide for economic, fair and nondiscriminatory administration and for the prompt and efficient provision of insurance, and shall contain other provisions including, but not limited to, preliminary assessment of all members for initial expenses necessary to commence operations, establishment of necessary facilities, management of the Association, assessment of members to defray losses and expenses, Commission arrangements, reasonable and objective underwriting standards, acceptance and cession of reinsurance, appointment of servicing carriers or other servicing arrangements and procedures for determining amounts of insurance to be provided by the Association.

(c) The plan of operation shall be subject to approval by the Commissioner after consultation with the directors of the Association, representatives of the public and other affected individuals and organizations. If the Commissioner disapproves all or any part of the proposed plan of operation, the directors shall within 15 days submit for review an appropriate revised plan of operation or part thereof. If the directors fail to do so, the Commissioner shall promulgate a plan of operation or part thereof, as the case may be. The plan of operation approved or promulgated by the Commissioner shall become effective and operational upon order of the Commissioner.

(d) Amendments to the plan of operation may be made by the directors of the Association, subject to the approval of the Commissioner, or shall be made at the direction of the Commissioner.

60 Del. Laws, c. 373, § 1.;

(a) All policies issued by the Association shall provide for a continuous period of coverage beginning with their respective effective dates and terminating automatically at 12:01 a.m. 2 years from the date the Association began underwriting operations with respect to their category of coverage, unless sooner terminated in accordance with this chapter. All such policies shall be issued subject to the group retrospective rating plan and the Stabilization Reserve Fund authorized by this chapter. All such policies shall be written so as to apply only to injury or breach of contract: (1) Which results from acts or omissions during the policy period; and (2) which is discovered and for which written claim is made against the insured not later than 1 year after the end of the policy period. No policy form shall be used by the Association unless it has been filed with the Commissioner and either: (1) The Commissioner has approved it; or (2) 30 days have elapsed and the Commissioner has not disapproved it as misleading or violative of public policy. All such policies shall be written so as to apply to injury or breach of contract which results from acts or omissions during the policy period, commonly designated as occurrence-type policies.

(b) Cancellation of the Association's policies shall be governed by procedures as determined by the Commissioner, except that the Association may also cancel any of its policies in the event of nonpayment of any Stabilization Reserve Fund charge by mailing or delivering to the insured at the address shown on the policy written notice stating when not less than 10 days thereafter cancellation shall be effective. Notification of any such cancellation shall be given to the appropriate agency for licensure or professional registration to the extent possible.

(c) The rates, rating plans, rating rules, rating classifications and territories applicable to the insurance written by the Association and statistics relating thereto shall be subject to Chapter 25 of this title, giving due consideration to the past and prospective loss and expense experience for health care medical negligence insurance written and to be written in this State, trends in the frequency and severity of losses, the investment income of the Association and such other information as the Commissioner may require. All rates shall be on an actuarially sound basis, giving due consideration to the group retrospective rating plan and the Stabilization Reserve Fund, and shall be calculated to be self-supporting. The Commissioner shall take all appropriate steps to make available to the Association the loss and expense experience of insurers previously writing health care medical negligence insurance in this State.

(d) All policies issued by the Association shall be subject to a nonprofit group retrospective rating plan to be approved by the Commissioner under which the final premium for all policyholders of the Association, as a group, will be equal to the administrative expenses, loss and loss adjustment expenses and taxes, plus a reasonable allowance for contingencies and servicing. Policyholders shall be given full credit for all investment income, net of expenses and a reasonable management fee, on policyholder supplied funds. The standard premium (before retrospective adjustment) for each policy issued by the Association shall be established for portions of the policy period coinciding with the Association's fiscal year on the basis of the Association's rates, rating plans, rating rules, rating classifications and territories then in effect. The maximum final premium for all policyholders of the Association, as a group, shall be limited as provided in this chapter. Subject to the nonprofit group retrospective rating plan required by this subsection, there shall be a strong presumption that the rates filed and premiums for the business of the Association are not unreasonable or excessive.

(e) The Commissioner shall examine the business of the Association as often as the Commissioner deems appropriate to make certain that the group retrospective rating plan is being operated in a manner consistent with this section. If the Commissioner finds that it is not being so operated, the Commissioner shall issue an order to the Association, specifying in what respects its operation is deficient and stating what corrective action shall be taken.

(f) The Association shall certify to the Commissioner the estimated amount of any deficit remaining after the Stabilization Reserve Fund has been exhausted in payment of the maximum final premium for all policyholders of the Association. Within 60 days after such certification the Commissioner shall authorize the members of the Association to commence recoupment of their respective shares of the deficit by 1 of the following procedures: (1) Applying a surcharge to be determined by the Association at a rate not to exceed 2 percent of the annual premiums on future policies affording those kinds of insurance which form the basis for their participation in the Association under procedures established by the Association; or (2) deducting their share of the deficit from past or future premium taxes due the State. If the Commissioner fails within 60 days to authorize 1 of the above procedures, each member of the Association may commence recoupment of its deficit by the second procedure described above. The Association shall amend the amount of its certification of deficit to the Commissioner as the values of its incurred losses become finalized and the members of the Association shall amend their recoupment procedure accordingly.

(g) In the event that sufficient funds are not available for the sound financial operation of the Association, pending recoupment as provided in subsection (f) of this section, all members shall, on a temporary basis, contribute to the financial requirements of the Association in the manner established by this chapter. Any such contribution shall be reimbursed to the members by recoupment as provided in subsection (f) of this section.

60 Del. Laws, c. 373, § 1; 71 Del. Laws, c. 373, § 3.;

(a) There is hereby created a Stabilization Reserve Fund. The Fund shall be administered by 3 directors, 1 of whom shall be the Commissioner or the Commissioner's deputy. The remaining 2 directors shall be appointed by the Commissioner. One shall be a representative of the Association; the other a representative of its policyholders.

(b) The directors shall act by majority vote with 2 directors constituting a quorum for the transaction of any business or the exercise of any power of the Fund. The directors shall serve without salary, but each director shall be reimbursed for actual and necessary expenses incurred in the performance of his or her official duties as a director of the Fund. In the absence of fraud or wilful misconduct, the directors shall not be subject to any personal liability or accountability with respect to the administration of the Fund.

(c) Each policyholder shall pay to the Association a Stabilization Reserve Fund charge equal to one third of each premium payment due for insurance through the Association. Such charge shall be separately stated in the policy. The Association shall cancel the policy of any policyholder who fails to pay the Stabilization Reserve Fund charge.

(d) The Association shall promptly pay to the trustee of the Fund all Stabilization Reserve Fund charges which it collects from its policyholders and any retrospective premium refunds payable under the group retrospective rating plan authorized by this subchapter.

(e) All moneys received by the Fund shall be held in trust by a corporate trustee selected by the directors. The corporate trustee must be authorized to act as a corporate trustee in the State. The corporate trustee may invest the moneys held in trust, subject to the approval of the directors. All investment income shall be credited to the Fund. All expenses of administration of the Fund shall be charged against the Fund. The moneys held in trust shall be used solely for the purpose of discharging, when due, any retrospective premium charges payable by policyholders of the Association under the group retrospective rating plan authorized by this chapter. Payment of retrospective premium charges shall be made by the directors upon certification to them by the Association of the amount due. If all moneys accruing to the Fund are finally exhausted in payment of retrospective premium charges, all liability and obligations of the Association's policyholders with respect to the payment of retrospective premium charges shall thereupon terminate and shall be conclusively presumed to have been discharged. Any moneys remaining in the Fund after all such retrospective premium charges have been paid shall be returned to policyholders in proportion to their policy premiums under procedures authorized by the directors.

60 Del. Laws, c. 373, § 1; 70 Del. Laws, c. 186, § 1.;

(a) Any licensed physician, hospital or other licensed health care provider shall, on or after the effective date of the plan of operation, be entitled to apply to the Association for such coverage.

(b) If the Association determines that the applicant meets the underwriting standards of the Association as prescribed in the plan of operation and there is no unpaid, uncontested premium due from the applicant for prior insurance (as shown by the insured having failed to make written objection to the premium charges within 30 days after billing), then the Association, upon receipt of the premium, or such portion thereof as is prescribed in the plan of operation, shall cause to be issued a policy of health care medical negligence insurance.

60 Del. Laws, c. 373, § 1; 71 Del. Laws, c. 373, § 3.;

All insurers which are members of the Association shall participate in its writings, expenses, servicing allowance, management fees and losses in the proportion that the net direct premiums of each such member (excluding that portion of premiums attributable to the operation of the Association) written during the preceding calendar year bears to the aggregate net premiums written in this State by all members of the Association. Each insurer's participation in the Association shall be determined annually on the basis of such net direct premiums written during the preceding calendar year, as reported in the annual statements and other reports filed by the insurer with the Commissioner.

60 Del. Laws, c. 373, § 1.;

The Association shall be governed by a board of 11 directors, to be elected annually. Eight directors shall be elected by cumulative voting by the members of the Association whose votes in such election shall be weighted in accordance with each member's net direct premiums written in the areas of insurance determining membership in the Association during the preceding calendar year. Three directors shall be appointed by the Commissioner as representatives of health care providers. The 8 member companies serving on the first board shall be elected at a meeting of the members held at a time and place designated by the Commissioner. The Commissioner shall appoint the other 3 directors serving on the first board on or before the date of such meeting from lists of names tendered to the Commissioner by all interested health care provider groups.

60 Del. Laws, c. 373, § 1.;

(a) Any applicant to the Association, any person insured pursuant to this subchapter, or their representatives, or any affected insurer, may appeal to the Commissioner within 30 days after any ruling, action or decision by or on behalf of the Association with respect to those items the plan of operation defines as appealable matters.

(b) All orders of the Commissioner made pursuant to this chapter shall be subject to judicial review as provided in § 328 of this title.

60 Del. Laws, c. 373, § 1.;

The Association shall file in the office of the Commissioner, annually on or before the 1st day of March, a statement which shall contain information with respect to transactions, condition, operations and affairs during the preceding year. Such statement shall contain such matters and information as are prescribed and shall be in such form as is approved by the Commissioner. The Commissioner may, at any time, require the Association to furnish additional information with respect to its transactions, condition or any matter connected therewith considered to be material and of assistance in evaluating the scope, operation and experience of the Association.

60 Del. Laws, c. 373, § 1.;

The Commissioner shall make an examination into the affairs of the Association at least annually. Such examination shall be conducted and the report thereon filed in the manner prescribed in Chapter 3 of this title. The expenses of every such examination shall be borne and paid by the Association in the manner prescribed by § 326 of this title.

60 Del. Laws, c. 373, § 1.;

There shall be no liability on the part of, and no cause of action of any nature shall arise against the Association, the Commissioner, or authorized representatives or any other person or organization, for any statements made in good faith by them during any proceeding or concerning any matters within the scope of this chapter.

60 Del. Laws, c. 373, § 1; 70 Del. Laws, c. 186, § 1.;

No member of the board of directors of the Stabilization Reserve Fund who is otherwise a public officer or employee shall suffer a forfeiture of his or her office or employment or any loss or diminution in the rights and privileges appertaining thereto, by reason of membership on the board of directors of the Stabilization Reserve Fund.

60 Del. Laws, c. 373, § 1.;