The Vermont Statutes Online

Title 8: Banking and Insurance

Chapter 137: Vermont Joint Underwriting Associations

• § 4981. Definitions

  As used in this chapter, unless the context otherwise requires:

  (1) “Association” means a joint underwriting association established pursuant to this chapter.

  (2) “Commissioner” means the Commissioner of Financial Regulation or a designee.

  (3) “Property and casualty insurance” means all insurance covered under chapter 128 of this title relating to property and casualty rate regulation.

  (4) “Member” means an insurer that is a member of an association.

  (5) “Plan” means the plan of operation of the association approved or proposed by the Commissioner pursuant to this chapter. (Added 1985, No. 265 (Adj. Sess.), § 4, eff. June 4, 1986; amended 1989, No. 225 (Adj. Sess.), § 25(b); 1995, No. 180 (Adj. Sess.), § 38(a); 2011, No. 78 (Adj. Sess.), § 2, eff. April 2, 2012; 2021, No. 105 (Adj. Sess.), § 236, eff. July 1, 2022.)

• § 4982. Creation of Vermont joint underwriting associations

  (a) The Commissioner is hereby authorized, under the terms of this chapter, to establish one or more Vermont joint underwriting associations. The purpose of any such association shall be to provide insurance on a self-supporting basis without subsidy from its members. No such association formed pursuant to this chapter shall be formed for the purpose of providing coverage for pollution exposures.

  (b) Each insurer authorized to write, and engaged in writing within this State, property and casualty insurance shall be a member of an association established under this chapter by the Commissioner and shall remain a member as a condition of its authority to write such insurance within this State, except that the Commissioner may exclude classes of insurers for administrative convenience or because it is not practicable to require them to participate.

  (c) An association shall be a temporary, nonexclusive, nonprofit unincorporated association constituting a legal entity separate and distinct from its members. All funds and reserves of an association shall be separately held and invested.

  (d) An association shall not commence or resume after suspension any of its underwriting operations until the Commissioner, after due hearing and investigation, determines, and the emergency board approves such determination, that a voluntary market of insurance does not exist and that a voluntary market assistance plan has failed to restore availability of the needed insurance coverages. Upon such determination, an association shall be authorized to engage in the underwriting of any specific line of insurance determined to be unavailable in the voluntary market. If, after an association commences its operation, the Commissioner determines that insurance can be made available in the voluntary market, he or she shall suspend the operation of the association. The Commissioner may re-establish the association’s operations if he or she finds after due hearing and investigation that the insurance industry has failed to provide a voluntary market for the specific line of insurance underwritten through the association.

  (e) An association shall, subject to the terms and conditions of this chapter, have power on behalf of its members to:

  (1) Issue, or to cause to be issued, policies of insurance to qualified applicants, including incidental coverages and subject to limits as specified in the plan of operation. Coverages under such policies may be made available as primary or excess protection.

  (2) Underwrite and otherwise service such policies of insurance and adjust and pay losses with respect thereto, or appoint service companies or associations to perform those functions.

  (3) Assume or cede 100 percent reinsurance or a lesser percentage on any policy underwritten by the association. (Added 1985, No. 265 (Adj. Sess.), § 4, eff. June 4, 1986.)

• § 4983. Board of directors

  Each association established under this chapter shall operate subject to the supervision of a board of directors consisting of representatives of four of the members, who shall be elected by the members; an insurance agent licensed and writing insurance in this State, who shall be named by the Commissioner; and two representatives of the group of buyers of the line of insurance provided, to be named by the association of such group, if any exists, or by the Commissioner. A chair and such other officers as may be provided for in the plan shall be elected by the board. The directors shall serve without compensation but shall be reimbursed by the association for their actual and necessary expenses incurred in the performance of their duties. (Added 1985, No. 265 (Adj. Sess.), § 4, eff. June 4, 1986.)

• § 4984. Plan of operation

  (a) Within 45 days following the creation of an association pursuant to section 4982 of this title, or such additional time as may be prescribed by the Commissioner, the board of directors of the association shall submit to the Commissioner for review and approval a proposed plan of operation consistent with the provisions of this chapter. If the Commissioner approves the proposed plan, the Commissioner shall certify such approval to the board and the plan shall take effect 10 days after such certification. If the Commissioner disapproves of all or any part of the proposed plan, the Commissioner shall return the plan to the board with a statement in writing of the reasons for the disapproval and any recommendations the Commissioner may make. The board may accept the Commissioner’s recommendations and submit the amended plan to the Commissioner or submit a new plan within 30 days after the return of the disapproved plan to the board. Within 10 days after receipt of the second plan, the Commissioner shall propose a plan and certify it to the board. A plan proposed by the Commissioner shall take effect 10 days after certification to the board.

  (b) The plan of operation shall provide for economic, fair, and nondiscriminatory administration, and for the prompt and efficient provision of insurance on a self-supporting basis. The plan shall contain other provisions including preliminary assessment of all members for initial expenses necessary to commence operations, establishment of necessary facilities, management of the association, administrative expenses, reasonable commission arrangements, reasonable and objective underwriting standards, procedures for acceptance and cession of reinsurance, appointment of servicing carriers or other servicing arrangements or the direct issuance of syndicate policies, procedures for determining amounts of insurance to be provided by the association, provisions for assessment of deficits under section 4986 of this title, and an equitable apportionment among the members in the association’s writings, expenses, servicing allowance, management fees, and losses.

  (c) Amendments to the plan may be made by the board of directors of the association, subject to the approval of the Commissioner. The Commissioner may also make amendments to the plan subject to the approval of the board. An amendment to the plan shall take effect not less than 10 days after adoption. (Added 1985, No. 265 (Adj. Sess.), § 4, eff. June 4, 1986; amended 2021, No. 105 (Adj. Sess.), § 237, eff. July 1, 2022.)

• § 4985. Policy forms and rates

  (a) The Commissioner shall specify whether policy forms and the rate structure shall be on a claims-made, occurrence, or other basis and coverage shall be provided by an association only on the basis specified by the Commissioner. The Commissioner may specify a claims-made basis only if the contract makes provisions for residual “occurrence” coverage or extended reporting coverage upon the discontinuance of the insured activity in this State of the insured or the termination of the insurance policy by the insured for so long as there is a reasonable probability of a claim for injury for which the insured may be held liable. Provision may be made for a premium charge allocable to any such residual “occurrence” coverage and such premium charges for such residual coverage shall be segregated and separately maintained and calculated to be self-supporting for such purpose, which may include the reinsurance of all or a part of that portion of the risk. All policy forms shall be approved by the Commissioner.

  (b) The rates, rating plans, rating rules, and rating classifications applicable to the insurance written by the association shall be approved by the Commissioner after hearing and shall be on an actuarially sound basis calculated to be self-supporting without insured assessments, giving due consideration to the past and prospective loss and expense experience within and without this State for that line of 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.

  (c) Policies issued by an association may provide for deductibles and for coinsurance, premium discounts, surcharges, separate classifications that reflect income, and other features not necessarily in current use. (Added 1985, No. 265 (Adj. Sess.), § 4, eff. June 4, 1986.)

• § 4986. Deficits

  (a) In the event an association suffers an underwriting deficit for any year, the board of directors shall so certify to the Commissioner. Such certification shall be subject to the review and approval of the Commissioner. As provided in the plan of operation, but in a term not to exceed one year, each policyholder shall pay to the association a premium contingency assessment that bears the same ratio to the amount of such deficit as his or her premium for such year for insurance written or reinsured by the association bore to the total premiums paid to the association for such year. The association may cancel any policy of any policyholder who fails to pay the premium contingency assessment and need not pay any future claims against that policyholder. Any deficit premium contingency assessment uncollectible against any policyholder shall not be assessed against any other policyholder or policyholders.

  (b) In no event shall a deficit incurred by an association be charged directly or indirectly to any insured other than a policyholder insured through an association.

  (c) An 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 upon approval by the Commissioner amend their recoupment procedure accordingly. The board of directors of an association may require all members to contribute on a temporary basis to the financial requirements of the association prior to recoupment of any deficit in such proportion as shall be specified in the plan. (Added 1985, No. 265 (Adj. Sess.), § 4, eff. June 4, 1986.)

• § 4987. Annual statements

  Each association shall adopt a fiscal year beginning on October 1 and shall file in the office of the Commissioner on or before the 15th day of November each year, or such other month specified in the plan, a statement as prescribed by the Commissioner. The statement shall contain matters and information required by the Commissioner including information with respect to its transactions, condition, operations, and affairs during the preceding year, and shall be in a form approved by the Commissioner. The Commissioner may, at any time, require an association to furnish additional information with respect to matters considered to be material to the scope, operation, and experience of the association. (Added 1985, No. 265 (Adj. Sess.), § 4, eff. June 4, 1986.)

• § 4988. Examination

  The Commissioner shall make an examination into the affairs of each association annually or as often as he or she deems necessary. The Commissioner shall make an order indicating the scope of the examination and may appoint as examiners one or more competent persons not employed by any insurer or interested in any insurer except as a policyholder. The expenses of every such examination shall be borne and paid for by the association involved. (Added 1985, No. 265 (Adj. Sess.), § 4, eff. June 4, 1986.)

• § 4989. Immunity

  Any association, the Commissioner, or any other person or organization shall be immune from civil liability for any actions taken or statements made in good faith by any of them in any report, communication, or actions concerning risks insured or to be insured by the association or during any proceedings in connection therewith. Any reports and communications in connection therewith are not subject to public inspection. (Added 1985, No. 265 (Adj. Sess.), § 4, eff. June 4, 1986.)

• § 4990. Rules; enforcement

  The Commissioner may adopt reasonable rules to carry out the purposes of this chapter and may suspend or revoke, after reasonable notice and a hearing, the certificate of authority or license to transact the business of insurance in this State of any member or other person that fails to comply with the provisions of this chapter, rules adopted hereunder, or any plan. (Added 1985, No. 265 (Adj. Sess.), § 4, eff. June 4, 1986; amended 2015, No. 23, § 84.)

• § 4991. Appeal

  Any member or other person aggrieved by any action or decision of an association, or of any member as a result of its participation therein, may appeal to the board of directors. The decision of the board of directors may be appealed to the Commissioner within 30 days from the date of its decision. The Commissioner shall, after hearing held upon notice, issue an order approving or disapproving the board of directors’ decision. All final orders and decisions of the Commissioner are subject to judicial review as provided in 3 V.S.A. § 815. (Added 1985, No. 265 (Adj. Sess.), § 4, eff. June 4, 1986.)

• § 4992. Termination

  The authority granted to the Commissioner to establish a joint underwriting association under this chapter shall continue indefinitely unless the authority is terminated by act of the General Assembly. In the event authority is so terminated, any association established prior to the termination date may continue to exist for a period of one year from the date it commences underwriting activities. All obligations incurred by the association or by policyholders during this period shall be honored and binding until discharged, and any association shall remain in effect for the purpose of discharging any obligations incurred. The plan of operation shall provide for the orderly dissolution of the association at its termination. Upon termination of the association and the discharge of all its liabilities and at any such other time as may be specified in the plan, any excess funds of the association shall be distributed to the policyholders of the association in an equitable manner as set forth in the plan of operation. (Added 1985, No. 265 (Adj. Sess.), § 4, eff. June 4, 1986; amended 1987, No. 20; 1987, No. 185 (Adj. Sess.), § 7, eff. May 5, 1988; 1989, No. 113, § 3.)