Bill Text: WV HB2923 | 2020 | Regular Session | Introduced


Bill Title: Reforming the practice of securing state insurance

Spectrum: Partisan Bill (Republican 7-0)

Status: (Introduced) 2020-01-08 - To House Banking and Insurance [HB2923 Detail]

Download: West_Virginia-2020-HB2923-Introduced.html

FISCAL NOTEWEST virginia legislature

2019 regular session

Introduced

House Bill 2923

By Delegates Jennings, Kessinger, Cooper,  Hanna, Mandt, Cadle and Hardy

[Introduced February 8, 2019; Referred
to the Committee on Banking and Insurance then the Judiciary.]

A BILL to amend and reenact §29-12-2, §29-12-3, §29-12-4, and §29-12-5 of the Code of West Virginia, 1931, as amended; and to amend said code by adding thereto a new section, designated §29-12-5d, all relating to reforming the practice of securing state insurance; reasserting the sovereign immunity of the State of West Virginia and the qualified immunity of its officers and employees as to any damages in excess of state insurance; providing for the process by which settlement of claims be approved; limiting attorney fees in instances of settlement of claims against state insurance or entry of final judgment for a claimant; establishing the extent of the amount of the state’s insurance coverage; establishing term limits for members of the state board of risk and insurance management; providing that the Insurance Commissioner submits the report of the board’s activities and providing for certain information to be contained in the report; providing that appointed members of the board of risk and insurance management serve at the pleasure of the Governor; clarifying that the director of the Board of Insurance and Risk Management shall hold no other employment; requiring any person who files a claim against the state which is subject to state insurance to reimburse the state for its costs of defense in the event a verdict is entered for the state; and limiting attorney fees in settlement of claims.

Be it enacted by the Legislature of West Virginia:


ARTICLE 12. STATE INSURANCE.


§29-12-2. Definitions.

As used in this article, unless the context otherwise clearly requires:

(a) “Board” means the state Board of Risk and Insurance Management;

“Board of Public Works” means the corporation established in §5-4-1 of this code;

(b) “Company” means and includes corporations, associations, partnerships and individuals;

(c) “Insurance” means all forms of insurance and bonding services available for protection and indemnification of the state and its officials, employees, properties, activities and responsibilities against loss or damage or liability, including fire, marine, casualty, and surety insurance;

(d) “Insurance company” means all insurers or insurance carriers, including, but not limited to, stock insurance companies, mutual insurance companies, reciprocal and interinsurance exchanges, and all other types of insurers and insurance carriers, including life, accident, health, fidelity, indemnity, casualty, hospitalization and other types and kinds of insurance companies, organizations and associations, but excepting and excluding workers' compensation coverage;

(e) “State property activities” and “state responsibilities” means and includes all operations, boards, commissions, works, projects and functions of the state, its properties, officials, agents and employees which, within the scope and in the course of governmental employment, may be subject to liability, loss, damage, risks and hazards recognized to be and normally included within insurance and bond coverages; and

(f) “State property” means all property belonging to the State of West Virginia and any boards or commissions thereof wherever situated and which is the subject of risk or reasonably considered to be subject to loss or damage or liability by any single occurrence of any event insured against.


§29-12-3. State Board of Risk and Insurance Management; creation, composition, qualifications, and compensation.

(a)(1) The “state board of insurance of West Virginia” is hereby reestablished, reconstituted and continued as the state Board of Risk and Insurance Management. The board shall be composed of five members. One member shall be the vice chancellor of health sciences of the West Virginia Higher Education Policy Commission. The remaining four members shall be appointed by the Governor with the advice and consent of the Senate and shall serve at the pleasure of the Governor. One member shall be appointed by the Governor from a list of three eligible persons submitted to the Governor by the President of the Senate, and one member shall be appointed by the Governor from a list of three eligible persons submitted to the Governor by the Speaker of the House of Delegates. Each member shall be a resident of West Virginia and shall have experience in one or more of the following areas: law, accounting, business, insurance or actuarial science.

(2) Initial appointment of the members other than the vice chancellor for health sciences shall be for the following terms:

One member shall be appointed for a term ending June 30, 2003;

One member shall be appointed for a term ending June 30, 2004;

One member shall be appointed for a term ending June 30, 2005; and

One member shall be appointed for a term ending June 30, 2006.

(3) Except for appointments to fill vacancies, each subsequent appointment shall be for a term ending June 30 of the fourth year following the year the preceding term expired. In the event a vacancy occurs it shall be filled by appointment for the unexpired term. A member whose term has expired shall continue in office until a successor has been duly appointed and qualified: Provided: That no member, other than the vice chancellor of health sciences of the West Virginia Higher Education Policy Commission and the Insurance Commissioner of West Virginia, shall serve for a cumulative period of time greater than four years. No member of the board may be removed from office by the Governor except for official misconduct, incompetency, neglect of duty, or gross immorality

(4) Members of the board appointed prior to the reenactment of this article during the sixth extraordinary session of the 2001 Legislature, shall serve until December 15, 2001.

(b) The Insurance Commissioner of West Virginia shall serve as secretary of the board without vote and shall make available to the board the information, facilities, and services of the office of the state Insurance Commissioner.

(c) The members of the board shall receive from the executive director of the board the same compensation authorized by law for members of the Legislature for the interim duties for each day, or portion thereof, the member is engaged in the discharge of official duties. All board members shall be reimbursed for their actual and necessary expenses incurred in the discharge of official duties, except that mileage shall be reimbursed at the same rate as that authorized for members of the Legislature.

(d) Notwithstanding any provision of this section to the contrary, the board is subject to the provisions of §29-12-12 of this code.


§29-12-4. Organization, meetings, records and reports of board.

The board shall select one of its members as chairman and shall meet in the office of the Insurance Commissioner upon call of the chairman. The board shall keep records of all of its proceedings which shall be public and open to inspection, shall adopt a seal and shall exercise and perform the duties prescribed by this article.

The board In his or her capacity as the secretary of the board, the Insurance Commissioner shall prepare and submit a report in writing to the Governor, Legislative Auditor, and budget director on or before August 31 of each year. Such report shall contain a summary of the board's proceedings during the preceding fiscal year including a detailed and itemized statement and summary of all state insurance procured by the board during such fiscal year. The report shall also contain, at a minimum:

(1) A list of claims filed against the state during the period of time covered by each report, containing at a minimum, the names of each claimant, the nature of the claim, whether the claimant was or is represented by an attorney, and if so, the name of the attorney or attorneys and law firm representing the claimant, and the sum of damages initially sought for each claim;

(2) The disposition or status of each claim as of the date of the report, whether paid, tried, settled, pending, or otherwise disposed and for those claims settled the votes of the board members, whether to accept or reject a settlement of the claim;

(3) The costs to the state or its insurer for the defense, if any, of each claim as of the date of the report, including the name and law firm of any attorney representing the state in defending the claim;

(4) For those claims which result in a payment by the state or its insurer, the amount finally paid to each claimant at the close of the claim;

(5) Whether the state agency or officer against whom each claim is made has contested the factual basis for the claim;

(6) The funds received by the board during the most recently concluded fiscal year and the prior four fiscal years, including state agency premiums, mine subsidence premiums, and political subdivision premiums, interest income, and investment returns;

(7) The amounts paid by the board in claims, vendor fees, reinsurance premiums, or any other expenses itemized by type, during the most recently concluded fiscal year and the prior four fiscal years; and

(8) All funds held in accounts on behalf of the board.


§29-12-5. Powers and duties of board.

(a)(1) The board has, without limitation and in its discretion as it seems necessary for the benefit of the insurance program, general supervision and control over the insurance of state property, activities, and responsibilities, including:

(A) The acquisition and cancellation of state insurance: Provided, That the State of West Virginia does hereby ratify, reassert, and affirm its sovereign immunity, and the qualified immunity of its officers or employees, under the Constitution of the United States and the Constitution of the State of West Virginia;

(B) Determination of the kind or kinds of coverage;

(C) Determination of the amount or limits for each kind of coverage: Provided, That no policy of insurance issued pursuant to this article shall cover more than $500,000 in losses, per occurrence, inclusive of any payments made to an attorney or other party representing a claimant;

(D) Determination of the conditions, limitations, exclusions, endorsements, amendments, and deductible forms of insurance coverage: Provided, That no policy of state insurance shall permit the settlement of claims in contravention of the settlement provisions contained in this article;

(E) Inspections or examinations relating to insurance coverage of state property, activities, and responsibilities;

(F) Reinsurance; and

(G) Any and all matters, factors and considerations entering into negotiations for advantageous rates on and coverage of such state property, activities, and responsibilities.

(2) The board shall endeavor to secure reasonably broad protection against loss, damage, or liability to state property and on account of state activities and responsibilities by proper, adequate, available, and affordable insurance coverage and through the introduction and employment of sound and accepted principles of insurance, methods of protection, and principles of loss control and risk.

(3) The board is not required to provide insurance for every state property, activity, or responsibility.

(4) Any policy of insurance purchased or contracted for by the board shall provide that the insurer shall be barred and estopped from relying upon the constitutional immunity of the State of West Virginia against claims or suits: Provided, That nothing herein shall bar a state agency or state instrumentality from relying on the constitutional immunity granted the State of West Virginia against claims or suits arising from or out of any state property, activity, or responsibility not covered by a policy or policies of insurance: Provided, however, That nothing herein shall bar the insurer of political subdivisions from relying upon any statutory immunity granted such political subdivisions against claims or suits.

(5) The board shall make a complete survey of all presently owned and subsequently acquired state property subject to insurance coverage by any form of insurance, which survey shall include and reflect inspections, appraisals, exposures, fire hazards, construction, and any other objectives or factors affecting or which might affect the insurance protection and coverage required.

(6) The board shall keep itself currently informed on new and continuing state activities and responsibilities within the insurance coverage herein contemplated. The board shall work closely in cooperation with the state Fire Marshal’s office in applying the rules of that office insofar as the appropriations and other factors peculiar to state property will permit.

(7) The board may negotiate and effect, subject to the provisions of subsection (b) of this section, settlement of any and all insurance claims arising on or incident to losses of and damages to covered state properties, activities and responsibilities hereunder and shall have authority to execute and deliver proper releases of all such claims when settled. The board may adopt rules and procedures for handling, negotiating, and settlement of settling all such claims. Any discussion or consideration of the financial or personal information of an insured may be held by the board in executive session closed to the public, notwithstanding the provisions of §6-9A-1 et seq. of this code.

(8) The board may employ an executive director and such other employees, including legal counsel, as may be necessary to carry out its duties. The executive director shall receive an annual salary as provided in §6-7-2a of this code. The executive director shall devote full time to his or her duties to the exclusion of any other employment. The legal counsel may represent the board before any judicial or administrative tribunal and perform such other duties as may be requested by the board.

(9) The board may enter into any contracts necessary to the execution of the powers granted to it by this article or to further the intent of this article.

(10) The board may make rules propose rules for legislative approval governing its functions and operations and the procurement of state insurance. Except where otherwise provided by statute, rules of the board are subject to the provisions of §29A-3-1 et seq. of this code.

(11) The funds received by the board, including, but not limited to, state agency premiums, mine subsidence premiums, and political subdivision premiums, shall be deposited with the West Virginia Investment Management Board with the interest income and returns on investment a proper credit to such property insurance trust fund or liability insurance trust fund as applicable.

(12) Should the board recommend that an insurance claim against the state be settled, such settlement shall be subject to the provisions of subsection (b) of this section. No policy of insurance entered into by the board may provide that the state loses its insurance coverage in the event it declines to settle an insurance claim against the advice of the board or of any vendor of state insurance.

(b) Settlement of Claims Against State Agencies or Offices. – (1) Should the board recommend that an insurance claim against a state agency or office be settled, the board shall make such recommendation in writing to the state’s constitutional officer (whether the Governor, Attorney General, Auditor, Commissioner of Agriculture, Secretary of State, Superintendent of Free Schools, or Treasurer) under whose authority or supervision the state agency or employee, against which the claim is alleged, lies. The constitutional officer shall accept or reject the recommendation of the board, in writing delivered to the board within five business days of receipt of the board’s written recommendation. In the event that the constitutional officer rejects the board’s written recommendation to settle the claim, the board may by unanimous vote of all members appeal the constitutional officer’s rejection to the Board of Public Works. The Board of Public Works shall consider the appeal at its next regular meeting, or may call an emergency meeting for the purposes of considering the appeal, and may accept or reject the board’s recommendation to settle a claim by majority vote. The constitutional officer who rejected the board’s recommendation may fully participate and vote on the question as a member of the Board of Public Works.

(2) Should a claim against state insurance be settled, any fees payable to an attorney representing the claimant shall not exceed 15 percent of the settlement amount. Should a claim against state insurance not be settled and a final order of judgment be entered for the claimant, any fees payable to an attorney representing the claimant shall not exceed 20 percent of the amount awarded to the claimant. The settlement amount or damage award paid to a claimant, together with any attorney fees, shall not exceed in the aggregate $500,000 per occurrence.

(b) (c) (1) Definitions. -- The following words and phrases when used in this subsection, for the purposes of this subsection, have the meanings respectively ascribed to them in this subsection;

(A) “Political subdivision” has the same meaning as in §29-12A-3 of this code;

(B) “Charitable” or “public service organization” means any hospital in this state which has been certified as a critical access hospital by the federal Centers for Medicare and Medicaid upon the designation of the state Office of Rural Health Policy, the Office of Community and Rural Health Services, the Bureau for Public Health or the Department of Health and Human Resources and any bona fide, not-for-profit, tax-exempt, benevolent, educational, philanthropic, humane, patriotic, civic, religious, eleemosynary, incorporated or unincorporated association or organization, or a rescue unit or other similar volunteer community service organization or association, but does not include any nonprofit association or organization, whether incorporated or not, which is organized primarily for the purposes of influencing legislation or supporting or promoting the campaign of any candidate for public office; and

(C) “Emergency medical service agency” has the same meaning as in §16-4C-3 of this code.

(2) If requested by a political subdivision, a charitable or public service organization, or an emergency medical services agency, the board may, but is not required to, provide property and liability insurance to insure the property, activities, and responsibilities of the political subdivision, charitable or public service organization or emergency medical services agency. The board may enter into any contract necessary to the execution of the powers granted by this article or to further the intent of this article.

(A) Property insurance provided by the board pursuant to this subsection may also include insurance on property leased to or loaned to the political subdivision, a charitable or public service organization, or an emergency medical services agency, which is required to be insured under a written agreement.

(B) The cost of insurance, as determined by the board, shall be paid by the political subdivision, the charitable or public service organization, or the emergency medical services agency and may include administrative expenses. For purposes of this section, if an emergency medical services agency is a for-profit entity, its claims history may not adversely affect other participants’ rates in the same class.

(c) (d) (1) The board has general supervision and control over the optional medical liability insurance programs providing coverage to health care providers as authorized by the provisions of §29-12B-1 et seq. of this code. The board is hereby granted and may exercise all powers necessary or appropriate to carry out and effectuate the purposes of this article.

(2) The board shall:

(A) Administer the preferred medical liability program and the high risk medical liability program and exercise and perform other powers, duties, and functions specified in this article;

(B) Obtain and implement, at least annually, from an independent outside source, such as a medical liability actuary or a rating organization experienced with the medical liability line of insurance, written rating plans for the preferred medical liability program and high risk medical liability program on which premiums shall be based;

(C) Prepare and annually review written underwriting criteria for the preferred medical liability program and the high risk medical liability program. The board may utilize review panels, including, but not limited to, the same specialty review panels to assist in establishing criteria;

(D) Prepare and publish, before each regular session of the Legislature, separate summaries for the preferred medical liability program and high risk medical liability program activity during the preceding fiscal year, each summary to be included in the Board of Risk and Insurance Management audited financial statements as “other financial information” and which shall include a balance sheet, income statement and cash flow statement, an actuarial opinion addressing adequacy of reserves, the highest and lowest premiums assessed, the number of claims filed with the program by provider type, the number of judgments and amounts paid from the program, the number of settlements and amounts paid from the program, and the number of dismissals without payment;

(E) Determine and annually review the claims history debit or surcharge for the high risk medical liability program;

(F) Determine and annually review the criteria for transfer from the preferred medical liability program to the high risk medical liability program;

(G) Determine and annually review the role of independent agents, the amount of commission, if any, to be paid therefor and agent appointment criteria;

(H) Study and annually evaluate the operation of the preferred medical liability program and the high risk medical liability program and make recommendations to the Legislature, as may be appropriate, to ensure their viability, including, but not limited to, recommendations for civil justice reform with an associated cost-benefit analysis, recommendations on the feasibility and desirability of a plan which would require all health care providers in the state to participate with an associated cost-benefit analysis, recommendations on additional funding of other state-run insurance plans with an associated cost-benefit analysis and recommendations on the desirability of ceasing to offer a state plan with an associated analysis of a potential transfer to the private sector with a cost-benefit analysis, including impact on premiums;

(I) Establish a five-year financial plan to ensure an adequate premium base to cover the long-tail nature of the claims-made coverage provided by the preferred medical liability program and the high risk medical liability program. The plan shall be designed to meet the program's estimated total financial requirements, taking into account all revenues projected to be made available to the program and apportioning necessary costs equitably among participating classes of health care providers. For these purposes, the board shall:

(i) Retain the services of an impartial, professional actuary, with demonstrated experience in analysis of large group malpractice plans, to estimate the total financial requirements of the program for each fiscal year and to review and render written professional opinions as to financial plans proposed by the board. The actuary shall also assist in the development of alternative financing options and perform any other services requested by the board or the executive director. All reasonable fees and expenses for actuarial services shall be paid by the board. Any financial plan or modifications to a financial plan approved or proposed by the board pursuant to this section shall be submitted to and reviewed by the actuary and may not be finally approved and submitted to the Governor and to the Legislature without the actuary’s written professional opinion that the plan may be reasonably expected to generate sufficient revenues to meet all estimated program and administrative costs, including incurred but not reported claims, for the fiscal year for which the plan is proposed. The actuary’s opinion for any fiscal year shall include a requirement for establishment of a reserve fund;

(ii) Submit its final, approved five-year financial plan, after obtaining the necessary actuary’s opinion, to the Governor and to the Legislature no later than January 1, preceding the fiscal year. The financial plan for a fiscal year becomes effective and shall be implemented by the executive director on July 1, of the fiscal year. In addition to each final, approved financial plan required under this section, the board shall also simultaneously submit an audited financial statement based on generally accepted accounting practices (GAAP) and which shall include allowances for incurred but not reported claims: Provided, That the financial statement and the accrual-based financial plan restatement shall not affect the approved financial plan. The provisions of Chapter 29A of this code shall not apply to the preparation, approval and implementation of the financial plans required by this section;

(iii) Submit to the Governor and the Legislature a prospective five-year financial plan beginning on January 1, 2003, and every year thereafter, for the programs established by the provisions of §29-12B-1 et seq. of this code. Factors that the board shall consider include, but shall not be limited to, the trends for the program and the industry; claims history, number and category of participants in each program; settlements and claims payments; and judicial results;

(iv) Obtain annually certification from participants that they have made a diligent search for comparable coverage in the voluntary insurance market and have been unable to obtain the same;

(J) Meet on at least a quarterly basis to review implementation of its current financial plan in light of the actual experience of the medical liability programs established in §29-12B-1 et seq. of this code. The board shall review actual costs incurred, any revised cost estimates provided by the actuary, expenditures and any other factors affecting the fiscal stability of the plan and may make any additional modifications to the plan necessary to ensure that the total financial requirements of these programs for the current fiscal year are met;

(K) To analyze the benefit of and necessity for excess verdict liability coverage;

(L) Consider purchasing reinsurance, in the amounts as it may, from time to time, determine is appropriate, and the cost thereof shall be considered to be an operating expense of the board;

(M) Make available to participants optional extended reporting coverage or tail coverage: Provided, That, at least five working days prior to offering such coverage to a participant or participants, the board shall notify the President of the Senate and the Speaker of the House of Delegates in writing of its intention to do so and such notice shall include the terms and conditions of the coverage proposed;

(N) Review and approve, reject or modify rules that are proposed by the executive director to implement, clarify or explain administration of the preferred medical liability program and the high risk medical liability program. Notwithstanding any provisions in this code to the contrary, rules promulgated pursuant to this paragraph are not subject to the provisions of §29A-3-9 through §29A-3-16, inclusive, of this code. The board shall comply with the remaining provisions of article three and shall hold hearings or receive public comments before promulgating any proposed rule filed with the Secretary of State: Provided, That the initial rules proposed by the executive director and promulgated by the board shall become effective upon approval by the board notwithstanding any provision of this code;

(O) Enter into settlements and structured settlement agreements whenever appropriate. The policy may not require as a condition precedent to settlement or compromise of any claim the consent or acquiescence of the policyholder. The board may own or assign any annuity purchased by the board to a company licensed to do business in the state;

(P) Refuse to provide insurance coverage for individual physicians whose prior loss experience or current professional training and capability are such that the physician represents an unacceptable risk of loss if coverage is provided;

(Q) Terminate coverage for nonpayment of premiums upon written notice of the termination forwarded to the health care provider not less than 30 days prior to termination of coverage;

(R) Assign coverage or transfer insurance obligations and/or risks of existing or in-force contracts of insurance to a third-party medical professional liability insurance carrier with the comparable coverage conditions as determined by the board. Any transfer of obligation or risk shall effect a novation of the transferred contract of insurance and if the terms of the assumption reinsurance agreement extinguish all liability of the board and the State of West Virginia, such extinguishment shall be absolute as to any and all parties; and

(S) Meet and consult with and consider recommendations from the Medical Malpractice Advisory Panel established by the provisions of §29-12B-1 et seq. of this code.

(d) (e) If, after September 1, 2002, the board has assigned coverages or transferred all insurance obligations and/or risks of existing or in-force contracts of insurance to a third-party medical professional liability insurance carrier, and the board otherwise has no covered participants, then the board shall not thereafter offer or provide professional liability insurance to any health care provider pursuant to the provisions of subsection (c) (d) of this section or the provisions of §29-12B-1 et seq. of this code unless the Legislature adopts a concurrent resolution authorizing the board to reestablish medical liability insurance programs.

§29-12-5d. Reimbursement of state costs to defend meritless insurance claims.


The state shall be entitled to reimbursement for its usual and customary fees, costs, and expenses to defend an insurance claim if: (1) The person making the claim against the state’s insurance is represented by an attorney; (2) the claimant or the state have elected to try the matter before a court of competent jurisdiction; and (3) the court returns a judgment in favor of the state.

 

NOTE: The purpose of this bill is to reform certain practices concerning state insurance. The bill clarifies and reasserts the state’s sovereign immunity, under the Eleventh Amendment to the United States Constitution and the Constitution of the State of West Virginia, as to any amounts in excess of any policy of insurance and limits the insurance coverage of the state for any type of insurance to $500,000 per occurrence. The bill requires the state Insurance Commissioner to report the activities of Board of Risk and Insurance Management, and disclose certain information and statistics relative to claims and payouts as part of its annual report. The bill requires that insurance remain in force should the state elect to not settle a claim, and vests in the state’s constitutional officers, and ultimately the Board of Public Works, the final determination as to whether a claim should be settled. The bill establishes term limits for the members of the Board of Risk and Insurance Management, clarifies that the board’s executive director shall serve full time and hold no other employment, and establishes the state’s right to reimbursement of its defense costs in the event a claim is tried civilly and a verdict is returned for the state. Finally, the bill caps the amount of any settlement which may be payable to an attorney representing a claimant, or the amount of any damages awarded to a claimant payable to any attorney representing a claimant.

Strike-throughs indicate language that would be stricken from a heading or the present law and underscoring indicates new language that would be added.

feedback