S T A T E O F N E W Y O R K
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1920
2015-2016 Regular Sessions
I N S E N A T E
January 15, 2015
___________
Introduced by Sen. LIBOUS -- read twice and ordered printed, and when
printed to be committed to the Committee on Insurance
AN ACT to amend the insurance law, in relation to reciprocal insurance
companies, and medical malpractice premium rates and surcharges; and
to amend chapter 266 of the laws of 1986, amending the civil practice
law and rules and other laws relating to malpractice and professional
medical conduct, in relation to medical malpractice premium rates and
surcharges
THE PEOPLE OF THE STATE OF NEW YORK, REPRESENTED IN SENATE AND ASSEM-
BLY, DO ENACT AS FOLLOWS:
Section 1. Section 7308 of the insurance law is amended to read as
follows:
S 7308. Conversion of domestic reciprocal insurers into stock
property/casualty insurance companies. (a) AS USED IN THIS ARTICLE:
(1) "DOMESTIC RECIPROCAL MEDICAL MALPRACTICE INSURER" MEANS ANY DOMES-
TIC RECIPROCAL INSURER ORGANIZED PURSUANT TO ARTICLE SIXTY-ONE OF THIS
CHAPTER FOR WHICH, IN THE YEAR ENDING DECEMBER THIRTY-FIRST PRIOR TO
CONVERTING TO A STOCK PROPERTY/CASUALTY INSURANCE COMPANY, AT LEAST
NINETY PERCENT OF ITS PREMIUM WRITINGS WERE DERIVED FROM INSURING PHYSI-
CIANS OR DENTISTS WHO HAD AN ACADEMIC APPOINTMENT AT ANY STATE UNIVERSI-
TY OF NEW YORK MEDICAL SCHOOL OR FACILITY, OR WHO HAD AN ACADEMIC
APPOINTMENT AT NEW YORK MEDICAL COLLEGE;
(2) "CLINICAL PRACTICE PLAN" MEANS (A) A CLINICAL PRACTICE PLAN AS
DEFINED IN SUBPARAGRAPH (III) OF PARAGRAPH (B) OF SUBDIVISION FOURTEEN
OF SECTION TWO HUNDRED SIX OF THE PUBLIC HEALTH LAW AND WHICH PLAN IS
SUBJECT TO REGULATION BY THE BOARD OF REGENTS, AND (B) WESTCHESTER
MEDICAL CENTER.
(B) Any domestic reciprocal insurer doing business under the
provisions of this article may, EITHER (1) by the affirmative vote of
its subscribers holding two-thirds of its operating reserve accumu-
lations at the date of the meeting at which the proposal to convert is
EXPLANATION--Matter in ITALICS (underscored) is new; matter in brackets
[ ] is old law to be omitted.
LBD07218-01-5
S. 1920 2
voted upon, OR (2) IN THE CASE OF A DOMESTIC RECIPROCAL MEDICAL MALPRAC-
TICE INSURER, BY THE UNANIMOUS AFFIRMATIVE VOTE OF ITS ADVISORY COMMIT-
TEE, be converted into and licensed as a stock property/casualty insur-
ance company, in the manner prescribed by this section and subject to
any other requirements of law. The advisory committee of any such recip-
rocal insurer proposing so to convert shall cause the attorney-in-fact
of such reciprocal insurer to give to [each subscriber of record at the
close of business on the last day of the quarter year next preceding the
issue of such notice] THE SUPERINTENDENT not less than thirty days
notice by mail of [the meeting at which the] SUCH proposed conversion
[is to be voted upon and of a hearing of the subscribers before the
superintendent]. [At such hearing or any adjournment thereof, the] THE
superintendent shall pass upon the fairness of the terms and conditions
of the proposed conversion and of the issuance of shares of the corpo-
ration and he OR SHE shall approve [or disapprove] the same IN THE
ABSENCE OF CLEAR EVIDENCE THAT SUCH CONVERSION WOULD BE DETRIMENTAL TO
THE INTERESTS OF THE PEOPLE OF THE STATE. The provisions of this chap-
ter relative to a similar domestic insurance company organized to do the
same kinds of insurance business shall apply to the organization and
licensing of such corporation.
[(b)] (C) If converted into a stock insurance corporation,
subscriptions to the capital shares may be made, in whole or in part, by
the subscribers of the reciprocal insurer, and their subscriptions may
be paid in to the extent of their operating reserve accumulations by a
transfer thereof or any portion thereof to such corporation. The contin-
gent surplus of the reciprocal insurer accumulated pursuant to
subsection (a) of section six thousand one hundred five of this chapter
shall be included in the capital and surplus of the corporation and
shares representing the same shall be issued to existing subscribers, at
the rate determined as provided in the next sentence for each dollar of
par value of the shares of such new corporation, in proportion to their
shares in the aggregate operating reserves at the time when the proposal
to convert is adopted. The rate of payment for each dollar of par value
of the stock of such new corporation shall be determined by agreement
between the advisory committee of the reciprocal insurer and the board
of directors of the stock insurance company. Every such subscriber
shall be entitled in the subscription to the capital shares of such
corporation to a priority in subscribing thereto for thirty days after
the opening of the books of subscription in proportion to his interest
in such reciprocal insurer at such date but at the rate of payment fixed
by the board of directors. At the expiration of such thirty days the
board of directors may sell and dispose of the capital shares which have
not been taken or subscribed, as aforesaid, but at not less than the
same rate of payment. [(c)] THIS SUBSECTION SHALL NOT APPLY TO DOMESTIC
RECIPROCAL MEDICAL MALPRACTICE INSURERS.
(D) IN THE CASE OF A DOMESTIC RECIPROCAL MEDICAL MALPRACTICE INSURER,
IF CONVERTED INTO A STOCK INSURANCE CORPORATION, SUBSCRIPTIONS TO THE
CAPITAL SHARES MAY BE MADE, IN WHOLE OR IN PART, ONLY BY THE CLINICAL
PRACTICE PLANS REPRESENTED ON ITS ADVISORY COMMITTEE, AND THEIR
SUBSCRIPTIONS MAY BE PAID IN TO THE EXTENT OF THEIR RESPECTIVE SUBSCRIB-
ERS' OPERATING RESERVE ACCUMULATIONS BY A TRANSFER THEREOF OR ANY
PORTION THEREOF TO SUCH CORPORATION. THE CONTINGENT SURPLUS OF THE
RECIPROCAL INSURER ACCUMULATED PURSUANT TO SUBSECTION (A) OF SECTION SIX
THOUSAND ONE HUNDRED FIVE OF THIS CHAPTER SHALL BE INCLUDED IN THE CAPI-
TAL AND SURPLUS OF THE CORPORATION AND SHARES REPRESENTING THE SAME
SHALL BE ISSUED TO SUCH CLINICAL PRACTICE PLANS AT THE RATE DETERMINED
S. 1920 3
AS PROVIDED IN THE NEXT SENTENCE FOR EACH DOLLAR OF PAR VALUE OF THE
SHARES OF SUCH NEW CORPORATION, IN PROPORTION TO THEIR RESPECTIVE
SUBSCRIBERS' SHARE IN THE AGGREGATE OPERATING RESERVES AT THE TIME WHEN
THE PROPOSAL TO CONVERT IS ADOPTED. THE RATE OF PAYMENT FOR EACH DOLLAR
OF PAR VALUE OF THE STOCK OF SUCH NEW CORPORATION SHALL BE DETERMINED BY
AGREEMENT BETWEEN THE ADVISORY COMMITTEE OF THE RECIPROCAL INSURER AND
THE BOARD OF DIRECTORS OF THE STOCK INSURANCE COMPANY. EVERY SUCH CLIN-
ICAL PRACTICE PLAN SHALL BE ENTITLED IN THE SUBSCRIPTION TO THE CAPITAL
SHARES OF SUCH CORPORATION TO A PRIORITY IN SUBSCRIBING THERETO FOR
THIRTY DAYS AFTER THE OPENING OF THE BOOKS OF SUBSCRIPTION IN PROPORTION
TO ITS INTEREST IN SUCH RECIPROCAL INSURER AT SUCH DATE BUT AT THE RATE
OF PAYMENT FIXED BY THE BOARD OF DIRECTORS. AT THE EXPIRATION OF SUCH
THIRTY DAYS THE BOARD OF DIRECTORS MAY SELL AND DISPOSE OF THE CAPITAL
SHARES WHICH HAVE NOT BEEN TAKEN OR SUBSCRIBED, AS AFORESAID, BUT AT NOT
LESS THAN THE SAME RATE OF PAYMENT.
(E) If after examination, the superintendent finds that the
proceedings for the conversion to a corporation of any such insurer have
been regularly taken in conformity with law, and that the corporation
meets with the requirements of this chapter, he may issue a license to
such insurer to do business under the provisions of this chapter. There-
upon, the remaining assets shall be forthwith transferred to it, and the
predecessor reciprocal insurer or insurers shall cease to have authority
to do business as such and shall be deemed extinguished. Every such new
corporation formed by conversion shall assume and succeed to all of the
obligations and liabilities of the converting reciprocal insurer and be
held liable to pay and discharge all such debts and liabilities in the
same manner as if they had been incurred or contracted by the corpo-
ration, but, EXCEPT IN THE CASE OF A DOMESTIC RECIPROCAL MEDICAL MALP-
RACTICE INSURER, the subscribers of the reciprocal insurer shall contin-
ue subject to all the liabilities, claims and demands which shall then
exist, or which may thereafter accrue against them, or any of them, by
reason of any obligations incurred by them or in their behalf as such
subscribers before the date of conversion.
(F) Upon the conversion of any reciprocal insurer, OTHER THAN A DOMES-
TIC RECIPROCAL MEDICAL INSURER, dissenting subscribers, meaning thereby
subscribers who shall not within thirty days after the opening of the
books of subscription have subscribed to shares of the corporation and
applied their accumulated operating reserves to payment therefor as
provided in subsection [(b) hereof] (C) OF THIS SECTION, shall be enti-
tled to the conditional withdrawal of their accumulated operating
reserves on deposit with the reciprocal insurer as of the date of
conversion but a sufficient amount thereof shall be retained by the
corporation as a deposit until all of the obligations incurred on its
behalf have been extinguished. When all of such obligations have been
paid, discharged or terminated, and the superintendent after an examina-
tion shall have so certified, the said subscribers' deposits or the
balances thereof remaining to their credit shall be returned and
released, whereupon the powers of the attorney-in-fact relating thereto
shall cease and terminate.
(G) UPON THE CONVERSION OF ANY DOMESTIC RECIPROCAL MEDICAL MALPRACTICE
INSURER, ALL SUBSCRIBERS SHALL BE ENTITLED TO THE CONDITIONAL WITHDRAWAL
OF THEIR ACCUMULATED OPERATING RESERVES ON DEPOSIT WITH THE RECIPROCAL
INSURER AS OF THE DATE OF CONVERSION BUT A SUFFICIENT AMOUNT THEREOF
SHALL BE RETAINED BY THE CORPORATION AS A DEPOSIT UNTIL ALL OF THE OBLI-
GATIONS INCURRED ON ITS BEHALF HAVE BEEN EXTINGUISHED. WHEN ALL OF SUCH
OBLIGATIONS HAVE BEEN PAID, DISCHARGED OR TERMINATED, AND THE SUPER-
S. 1920 4
INTENDENT AFTER AN EXAMINATION SHALL HAVE SO CERTIFIED, SUCH SUBSCRIB-
ERS' DEPOSITS OR THE BALANCES THEREOF REMAINING TO THEIR CREDIT SHALL BE
RETURNED AND RELEASED, WHEREUPON THE POWERS OF THE ATTORNEY-IN-FACT
RELATING THERETO SHALL CEASE AND TERMINATE.
S 2. Paragraph 2 of subsection (c) of section 5502 of the insurance
law is amended by adding a new subparagraph (E) to read as follows:
(E) THE SURCHARGES ON PREMIUMS IMPOSED PURSUANT TO SECTION FORTY, AS
AMENDED, OF CHAPTER TWO HUNDRED SIXTY-SIX OF THE LAWS OF NINETEEN
HUNDRED EIGHTY-SIX SHALL APPLY TO ANY PLAN OR POOL ESTABLISHED IN
ACCORDANCE WITH SUBPARAGRAPH (D) OF THIS PARAGRAPH TO SATISFY ANY ACTU-
ARIALLY PROJECTED DEFICIENCY THAT IS ATTRIBUTABLE TO THE PREMIUM LEVELS
FOR POLICIES PROVIDING COVERAGE FOR PHYSICIANS AND SURGEONS MEDICAL
MALPRACTICE FOR THE PERIODS COMMENCING JULY FIRST, NINETEEN HUNDRED
EIGHTY-FIVE AND ENDING JUNE THIRTIETH, TWO THOUSAND SEVENTEEN. NO MEMBER
OF SUCH PLAN OR POOL SHALL BE REQUIRED TO SATISFY ANY PORTION OF SUCH
DEFICIENCY FROM ITS OWN ASSETS UNLESS THE SUPERINTENDENT OF FINANCIAL
SERVICES IMPOSES SUCH A SURCHARGE, AND THE AMOUNT OF SUCH DEFICIENCY IS
NOT SATISFIED WITHIN TWENTY-FOUR MONTHS OF THE DATE THE SURCHARGE IS
IMPOSED, AND IN THAT EVENT SUCH MEMBERS SHALL ONLY BE LIABLE FOR THEIR
PROPORTIONATE SHARE OF ANY DEFICIENCY REMAINING AFTER SUCH PLAN OR POOL
HAS BEEN LIQUIDATED IN ACCORDANCE WITH ARTICLE SEVENTY-FOUR OF THIS
CHAPTER, AND THEN ONLY TO THE EXTENT CLAIMS AGAINST INSUREDS COVERED BY
SUCH PLAN OR POOL ARE NOT COVERED BY THE PROPERTY AND LIABILITY INSUR-
ANCE SECURITY FUND ESTABLISHED BY ARTICLE SEVENTY-SIX OF THIS CHAPTER.
S 3. Section 40 of chapter 266 of the laws of 1986, amending the civil
practice law and rules and other laws relating to malpractice and
professional medical conduct, as amended by section 21 of part B of
chapter 60 of the laws of 2014, is amended to read as follows:
S 40. The superintendent of [insurance] FINANCIAL SERVICES shall
establish rates for policies providing coverage for physicians and
surgeons medical malpractice for the periods commencing July 1, 1985 and
ending June 30, 2015; provided, however, that ANY INSURER FOR WHICH AT
LEAST NINETY PERCENT OF ITS PREMIUM WRITINGS IN THE YEAR ENDING DECEMBER
31 PRIOR TO MAKING A FILING WERE DERIVED FROM INSURING PHYSICIANS OR
DENTISTS WHO HAD AN ACADEMIC APPOINTMENT AT ANY STATE UNIVERSITY OF NEW
YORK MEDICAL SCHOOL OR FACILITY, OR WHO HAD AN ACADEMIC APPOINTMENT AT
NEW YORK MEDICAL COLLEGE, MAY FILE ITS MEDICAL MALPRACTICE PREMIUM RATES
WITH THE DEPARTMENT OF FINANCIAL SERVICES. SUCH RATES SHALL BECOME
EFFECTIVE WITHOUT PRIOR APPROVAL PROVIDED THAT THE OVERALL EFFECT OF THE
FILING DOES INCREASE OR DECREASE SUCH INSURER'S AGGREGATE PREMIUM RATES
BY MORE THAN FIVE PERCENT OVER THE PREMIUM RATES ESTABLISHED BY THE
SUPERINTENDENT OF FINANCIAL SERVICES FOR SUCH INSURER AS OF JULY 1 OF
SUCH PRECEDING YEAR. PROVIDED, FURTHER, THAT notwithstanding any other
provision of law, the superintendent shall not establish or approve any
increase in rates for the period commencing July 1, 2009 and ending June
30, 2010. The superintendent shall direct insurers to establish segre-
gated accounts for premiums, payments, reserves and investment income
attributable to such premium periods and shall require periodic reports
by the insurers regarding claims and expenses attributable to such peri-
ods to monitor whether such accounts will be sufficient to meet incurred
claims and expenses. On or after July 1, 1989, the superintendent shall
impose a surcharge on premiums to satisfy a projected deficiency that is
attributable to the premium levels established pursuant to this section
for such periods; provided, however, that such annual surcharge shall
not exceed eight percent of the established rate until July 1, 2015, at
which time and thereafter such surcharge shall not exceed twenty-five
S. 1920 5
percent of the approved adequate rate, and that such annual surcharges
shall continue for such period of time as shall be sufficient to satisfy
such deficiency. The superintendent shall not impose such surcharge
during the period commencing July 1, 2009 and ending June 30, 2010. On
and after July 1, 1989, the surcharge prescribed by this section shall
be retained by insurers to the extent that they insured physicians and
surgeons during the July 1, 1985 through June 30, 2015 policy periods;
in the event and to the extent physicians and surgeons were insured by
another insurer during such periods, all or a pro rata share of the
surcharge, as the case may be, shall be remitted to such other insurer
in accordance with rules and regulations to be promulgated by the super-
intendent. Surcharges collected from physicians and surgeons who were
not insured during such policy periods shall be apportioned among all
insurers in proportion to the premium written by each insurer during
such policy periods; if a physician or surgeon was insured by an insurer
subject to rates established by the superintendent during such policy
periods, and at any time thereafter a hospital, health maintenance
organization, employer or institution is responsible for responding in
damages for liability arising out of such physician's or surgeon's prac-
tice of medicine, such responsible entity shall also remit to such prior
insurer the equivalent amount that would then be collected as a
surcharge if the physician or surgeon had continued to remain insured by
such prior insurer. In the event any insurer that provided coverage
during such policy periods is in liquidation, the property/casualty
insurance security fund shall receive the portion of surcharges to which
the insurer in liquidation would have been entitled. The surcharges
authorized herein shall be deemed to be income earned for the purposes
of section 2303 of the insurance law. The superintendent, in establish-
ing adequate rates and in determining any projected deficiency pursuant
to the requirements of this section and the insurance law, shall give
substantial weight, determined in his discretion and judgment, to the
prospective anticipated effect of any regulations promulgated and laws
enacted and the public benefit of stabilizing malpractice rates and
minimizing rate level fluctuation during the period of time necessary
for the development of more reliable statistical experience as to the
efficacy of such laws and regulations affecting medical, dental or
podiatric malpractice enacted or promulgated in 1985, 1986, by this act
and at any other time. Notwithstanding any provision of the insurance
law, rates already established and to be established by the superinten-
dent pursuant to this section are deemed adequate if such rates would be
adequate when taken together with the maximum authorized annual
surcharges to be imposed for a reasonable period of time whether or not
any such annual surcharge has been actually imposed as of the establish-
ment of such rates.
S 4. This act shall take effect immediately.