Bill Text: MI HB5272 | 2009-2010 | 95th Legislature | Introduced
Bill Title: Insurance; property and casualty; environmental contamination insurance; require for industrial property and provide for escrow of proceeds. Amends 1994 PA 451 (MCL 324.101 - 324.90106) by adding pt. 204.
Spectrum: Partisan Bill (Democrat 12-0)
Status: (Introduced - Dead) 2009-08-26 - Printed Bill Filed 08/20/2009 [HB5272 Detail]
Download: Michigan-2009-HB5272-Introduced.html
HOUSE BILL No. 5272
August 19, 2009, Introduced by Reps. Tlaib, Liss, Robert Jones, Bledsoe, Lisa Brown, Smith, Johnson, Durhal, Haugh, Kennedy, Nathan and Jackson and referred to the Committee on Great Lakes and Environment.
A bill to amend 1994 PA 451, entitled
"Natural resources and environmental protection act,"
(MCL 324.101 to 324.90106) by adding part 204.
THE PEOPLE OF THE STATE OF MICHIGAN ENACT:
PART 204.
ENVIRONMENTAL CONTAMINATION INSURANCE
Sec. 20401. As used in this part:
(a) "Commissioner" means that term as defined in section 102
of the insurance code of 1956, 1956 PA 218, MCL 500.102.
(b) "Department" means the director of the department of
environmental quality or his or her designee to whom the director
delegates a power or duty by written instrument.
(c) "Environment" means that term as defined in section 20101.
(d) "Environmental contamination" means the release of a
substance, or the potential release of a discarded substance, in a
quantity that is or may become injurious to the environment or to
the public health, safety, or welfare.
(e) "Final settlement" means a determination of the amount due
and owing to the insured for a loss to insured property, made by
any of the following means:
(i) Acceptance of a proof of loss by the insurer.
(ii) Execution of a release by the insured.
(iii) Acceptance of an arbitration award by both the insured and
the insurer.
(iv) Judgment of a court of competent jurisdiction.
(f) "Industrial property" means real property on which an
industry is operating or operated after the effective date of this
section.
(g) "Insured property" means industrial property for which
there is environmental contamination insurance coverage, under
section 20403 or otherwise.
(h) "Interim response activity" means the cleanup or removal
of a released substance or the taking of other actions, before the
implementation of a remedial action, as may be necessary to
prevent, minimize, or mitigate injury to the public health, safety,
or welfare, or to the environment. Interim response activity also
includes, but is not limited to, measures to limit access,
replacement of water supplies, and temporary relocation of
individuals as determined to be necessary by the department. In
addition, interim response activity means the taking of other
actions as may be necessary to prevent, minimize, or mitigate a
threatened release.
(i) "Municipality" means and "municipal" refers to a city,
village, or township.
(j) "Owner" means a person who owns an industrial property.
Owner does not include a person who holds indicia of ownership
primarily to protect the person's security interest in the
property, including, but not limited to, a vendor's interest under
a recorded land contract.
(k) "Release" includes, but is not limited to, any spilling,
leaking, pumping, pouring, emitting, emptying, discharging,
injecting, escaping, leaching, dumping, or disposing of a substance
into the environment, or the abandonment or discarding of barrels,
containers, and other closed receptacles containing a substance.
Release does not include any of the following:
(i) An activity authorized under this act.
(ii) A release that results in exposure to individuals solely
within a workplace, with respect to a claim that these individuals
may assert against their employers.
(iii) Emissions from the engine exhaust of a motor vehicle,
rolling stock, aircraft, or vessel.
(iv) A release of source material, by-product material, or
special nuclear material from a nuclear incident, as those terms
are defined in 42 USC 2014, if the release is subject to
requirements with respect to financial protection established by
the nuclear regulatory commission under 42 USC 2210, or any release
of source material, by-product material, or special nuclear
material from any processing site designated under 42 USC 7912 or
7942.
(v) If applied according to label directions and according to
generally accepted agricultural and management practices developed
pursuant to the Michigan right to farm act, 1981 PA 93, MCL 286.471
to 286.474, the application of a fertilizer, soil conditioner,
agronomically applied manure, or pesticide; fruit, vegetable, or
field crop residuals or processing by-products; aquatic plants; or
a combination of these substances. As used in this subparagraph,
"fertilizer", "soil conditioner", and "pesticide" mean those terms
as defined in sections 8501, 8501a, and 8305.
(vi) Fruits, vegetables, field crop processing by-products, or
aquatic plants, that are applied to the land for an agricultural
use or for use as an animal feed, if the use is consistent with
generally accepted agricultural and management practices developed
pursuant to the Michigan right to farm act, 1981 PA 93, MCL 286.471
to 286.474.
(l) "Remedial action" includes, but is not limited to, cleanup,
removal, containment, isolation, destruction, or treatment of a
substance released or threatened to be released into the
environment and monitoring, maintenance, or the taking of other
actions that may be necessary to prevent, minimize, or mitigate
injury to the public health, safety, or welfare or to the
environment.
(m) "Representative of the municipality" or "representative"
means an individual designated by the governing body of the
municipality as the municipality's agent for the purposes of this
part.
(n) "Response activity" means evaluation, interim response
activity, remedial action, demolition, or the taking of other
actions necessary to protect the public health, safety, or welfare,
the environment, or the natural resources. Response activity also
includes health assessments or health effect studies carried out
under the supervision, or with the approval of, the department of
public health and enforcement actions related to any response
activity.
(o) "Threatened release" or "threat of release" means any
circumstance that may reasonably be anticipated to cause a release.
Sec. 20403. (1) The owner of industrial property shall
maintain environmental contamination insurance that will cover
claims arising from occurrences during that person's period of
ownership. The insurance shall be provided by an insurer who has a
certificate of authority from the commissioner to sell
environmental contamination insurance.
(2) Not later than 120 days after the department promulgates
rules under section 20417 to implement this part, or 120 days after
a person becomes the owner of industrial property, whichever is
later, the owner of industrial property shall submit both of the
following to the department as evidence of the required coverage
under subsection (1):
(a) A certificate of insurance that uses wording approved by
the department.
(b) A certified true and complete copy of the insurance
policy.
(3) An insurance policy under subsection (1) shall require the
insurer to notify the department and the owner at least 120 days
before the expiration date of the policy or upon cancellation of
the policy. If the owner does not extend the effective date of the
insurance policy or obtain a new insurance policy that satisfies
the requirements of this part within 90 days after the department
receives the notice, the department shall notify the municipality,
which may draw on the policy as provided in section 20407.
Sec. 20405. The amount of the insurance required under section
20403 shall be determined pursuant to rules promulgated under
section 20417.
Sec. 20407. (1) If a claim is filed for a loss due to
environmental contamination from an insured industrial property and
a final settlement of the claim is reached or a judgment is entered
in an action that involves the loss, the insurer for the insured
industrial property shall withhold the final settlement or judgment
amount from payment. When the settlement or judgment amount is
withheld, the insurer shall give notice of the withholding to the
treasurer of the municipality in which the insured industrial
property is located, to the insured, and to any mortgagee that has
a lien against the insured industrial property, if the mortgagee is
named on the policy. If a judgment was entered, notice shall also
be provided to the court in which the judgment was entered. The
notice shall include all of the following:
(a) The identity and address of the insurer.
(b) The name and address or forwarding address of each
policyholder, including any mortgagee named on the policy.
(c) The location of the insured industrial property.
(d) The date of loss, policy number, and claim number.
(e) The amount of money withheld.
(f) A statement that the withheld amount will be paid to the
municipality for deposit into a trust or escrow account established
for the purposes of this part if within 15 days after the notice is
sent by the insurer the municipality notifies the insurer that the
money should be paid to the municipality for the purposes of this
part.
(g) A statement that, if the municipality does not notify the
insurer as provided in subdivision (f), the withheld amount will be
paid to the insured.
(h) An explanation of this part.
(2) The insurer shall not pay the withheld amount to the
municipality unless all of the following requirements are met:
(a) Within 15 days after the insurer sends notice under
subsection (1), a representative of the municipality requests, for
cause as described in this subdivision, that the insurer pay the
withheld amount to the municipality for deposit in a trust or
escrow account maintained by the municipal treasurer for the
purposes of this part. Either or both of the following are prima
facie evidence of environmental contamination from the insured
industrial property and constitute cause for the escrowing of the
withheld amount as surety for response activity:
(i) A final settlement or judgment that equals or exceeds 50%
of the amount of environmental contamination insurance on the
insured industrial property.
(ii) A certificate from the department that there is a
reasonable basis to believe that response activities whose cost
equals or exceeds 50% of the amount of environmental contamination
insurance on the insured industrial property will be required
because of a release from industry operating on the real property
during the period of the owner's ownership.
(b) If there is a settlement, the request under subdivision
(a) is sent to the insurer with a copy to the insured and any
mortgagees named on the insurance policy. The copy to the insured
shall contain the notice required under subdivision (d). Upon
receipt of the request, the insurer shall forward the withheld
amount to the municipal treasurer and shall provide notice of the
forwarding to the insured and any mortgagees named on the insurance
policy.
(c) If there is a judgment, the request under subdivision (a)
is sent to the insurer with a copy to the insured, any mortgagees
named on the insurance policy, and the court in which judgment was
entered. The copy to the insured shall contain the notice required
under subdivision (d). Upon the motion of the municipality, the
court shall order the insurer to transmit the withheld amount to
the municipal treasurer.
(d) The municipality notifies the insured of the insured's
right to object to the municipality's retention of the withheld
amount under subsection (3). The notice shall identify the
representative of the municipality to whom the insured should
address his or her objections.
(3) Within 10 days from the date of mailing of notice to the
insured under subsection (2), the insured may object to the
municipality's retention of the withheld amount and do either of
the following:
(a) Seek resolution with the representative of the
municipality designated to receive and resolve objections under
this section. If the insured seeks resolution under this
subdivision, the municipality shall make a final determination and
shall notify the insured of that determination not later than 30
days after receipt of notice that the insured wishes to seek
resolution under this subdivision. This final determination shall
include notice to the insured that if the insured objects to the
municipality's determination, the insured may seek relief in
circuit court.
(b) Seek relief in the circuit court.
(4) Upon receipt of money and information from an insurer as
prescribed in subsections (1) and (2), the municipal treasurer
shall record the information and the date of receipt of the money
and shall immediately deposit the money in a trust or escrow
account established for the purposes of this part. The account may
earn interest. If a mortgage on the insured industrial property is
in default, the municipal treasurer, not more than 10 days after
receipt of a written request from a first mortgagee, shall release
to the mortgagee policy proceeds received by the municipality with
respect to that property to the extent necessary to satisfy any
outstanding lien of the mortgagee.
(5) Except as provided in section 20409(3), money deposited in
a trust or escrow account pursuant to subsection (4) shall not be
commingled with municipal funds. Any interest earned on the money
shall be retained by the municipality to defray expenses incurred
under this part.
Sec. 20409. (1) The representative of the municipality shall
immediately forward the policy proceeds deposited under section
20407(4) to the insured if the representative receives or is shown
reasonable proof that any necessary response activity is under way
or has been completed, except to the extent that the amount
withheld under section 20407 is needed to complete response
activity. The representative shall immediately forward the policy
proceeds to a contractor performing response activities relative to
a release at the insured property when the representative receives
or is shown reasonable proof that the insured has entered into a
contract with the contractor for the performance of response
activities relative to a release at the insured property and that
the insured consents to payment of funds directly to the contractor
performing the response activities upon completion.
(2) Reasonable proof required under subsection (1) includes
any of the following:
(a) Originals or copies of pertinent contracts, invoices,
receipts, and other similar papers evidencing both the work
performed or to be performed and the materials used or to be used
by all contractors performing response activity relative to a
release at the insured property, other than a contractor subject to
subdivision (b).
(b) An affidavit executed by the contractor that has performed
the greatest amount of response activity relative to a release at
the insured property. The contractor shall attach to the affidavit
all pertinent contracts, invoices, and receipts and shall swear
that these attached papers correctly indicate the nature and extent
of the work performed to date by the contractor and the materials
used.
(c) An inspection of the insured real property that verifies
that response activity has been completed in accordance with
subsection (1).
(3) If reasonable proof required under subsection (1) is not
received by or shown to the authorized representative of the
municipality within 120 days after the withheld policy proceeds
were received by the municipal treasurer, the municipality shall
use the withheld proceeds to perform response activities relative
to the release at the insured property. Any unused portion of the
withheld proceeds shall be returned to the insured. The
municipality may extend the 120-day time period under this
subsection.
(4) An insurer or an agent or employee of an insurer is not
liable for withholding or transferring money in the course of
complying or attempting to comply with this part. If there is a
dispute with a lienholder concerning the distribution of an amount
withheld from payment under this section, the insurer may file an
action in circuit court to identify all parties that may have a
financial interest in the withheld amount and to determine how the
withheld amount should be distributed.
Sec. 20411. (1) This part does not apply to industrial
property located in a municipality unless the municipality by
resolution by its governing body notifies the commissioner in
writing that the municipality has established a trust or escrow
account to be used as prescribed in this part and intends to
uniformly apply this section with respect to all industrial
property located within the municipality. The commissioner shall
prepare and distribute to all insurance companies that provide
environmental contamination insurance in this state a list of all
municipalities that have elected to apply this part.
(2) If the commissioner receives a notification under
subsection (1) after the list under subsection (1) has first been
distributed, the commissioner shall prepare and distribute an
amended list indicating the addition. The addition is effective on
the date specified by the commissioner in the amendment. The
commissioner shall notify the municipality added to the list, and
insurance companies that provide environmental contamination
insurance in this state, of the effective date of the addition,
which shall be at least 30 days after receipt of notice by the
insurance company. A municipality added to the list shall not apply
this part to any loss that occurred before the effective date of
the addition.
(3) A municipality may request to be deleted from the list
under subsection (1) or may cease to apply this part for a period
of not less than 6 months upon not less than 30 days' written
notice to the commissioner. After receipt of a municipality's
request to be deleted from the list, the commissioner shall prepare
and distribute an amendment to the list indicating the deletion.
The deletion is effective on the date specified by the commissioner
in the amendment. The commissioner shall notify the municipality
deleted from the list, and insurance companies that provide
environmental contamination insurance in this state, of the
effective date of the deletion, which shall be not less than 30
days after receipt of the notice by the insurance company. A
municipality deleted from the list shall continue to apply this
section to any loss that occurred before the effective date of the
deletion, notwithstanding the deletion.
Sec. 20413. (1) The withholding requirements of section 20407
do not apply if all of the following occur:
(a) Within 15 days after agreement on a final settlement
between the insured and the insurer, the insured has filed with the
insurer evidence of a contract for the performance of response
activities as described in section 20409(1) and (2).
(b) The insured consents to the payment of money directly to
the contractor performing the response activity. Money released
under this subdivision may be forwarded only to a contractor
performing the response activity on the insured property.
(2) Upon receipt under subsection (1) of the contract to
perform response activity, the insurer shall give notice to the
municipality in which the property is situated that there will not
be a withholding under this section because of the contract.
Sec. 20415. If an insurer withholds payment under an
environmental contamination insurance policy in good faith because
of a suspected intentional release, fraud, or another question
concerning coverage, this part does not apply until the issue is
resolved and final settlement is made.
Sec. 20417. The department shall promulgate rules to implement
this part. The department shall submit proposed rules for public
hearing pursuant to the administrative procedures act of 1969, 1969
PA 306, MCL 24.201 to 24.328, within 1 year after the effective
date of this part.
Sec. 20419. (1) An owner of industrial property who violates
this part may be ordered to pay a civil fine of not more than
$10,000.00. A violation of this part may be prosecuted by the
prosecutor of the county in which the violation occurred or by the
attorney general.
(2) If an insurer violates this part, the commissioner, after
providing the insurer notice and an opportunity for a hearing, may
temporarily revoke the insurer's authority to transact business in
this state.
