(Approved August 23, 1997)

Transcription

1 (S.B. 466) (No. 99) (Approved August 23, 1997) AN ACT To amend clauses (1), (2), (3), (8), (11), (13) and (14) of Article of Act No. 77 of June 19, 1977, as amended, known as the "Insurance Code of Puerto Rico," in order to grant powers to the Insurers Syndicate for the joint underwriting of medical-hospital professional malpractice insurance, the underwriting, at its discretion, of insurance with limits in excess of one hundred thousand dollars ($100,000) per incident and three hundred thousand dollars ($300,000) in aggregate and public liability insurance for those qualified applicants for whom it has underwritten the professional malpractice insurance; and to reduce the number of directors of the Board of Directors of the Syndicate. STATEMENT OF MOTIVES The approval of Act No. 4 of December 30, 1986, enabled the Legislature to establish the means to face the critical situation related to the availability of medicalhospital professional malpractice insurance for health services professionals and health care institutions. The creation of the Insurers Syndicate for the joint underwriting of medicalhospital professional liability insurance, allowed for the establishment of an insurer conceived to compete actively in said insurance market and guarantee its availability for health service professionals and health care institutions that are unable to obtain professional malpractice insurance from insurers that compete in the open market. Thus these professionals and institutions are provided with the opportunity to comply

2 with the obligation of meeting certain financial responsibility requirements as a condition to practice their professions or operate medical-hospital institutions. A decade after its creation, the Insurers Syndicate for the joint underwriting of medical-hospital professional malpractice insurance, is fulfilling the purpose for which it was created. At present, the Syndicate underwrites the greatest percentage of medical-hospital professional malpractice insurance policies in Puerto Rico. Furthermore, the number of insurers that participate in the open market has increased, in marked contrast with the situation of ten years ago. The Syndicate guarantees that the health services professionals and health care institutions may depend on said Syndicate as a reliable and accessible alternative to furnish their insurance needs. The Legislature of Puerto Rico, aware of the development of the Syndicate and of the changes which the medical-hospital professional malpractice insurance market has undergone, has, on past occasions, amended Act No. 4, supra, so as to reconcile said Act to the demands required by the development of the Syndicate and the growth of the open market. The legislation at hand seeks to amend Chapter 41 of the Insurance Code of Puerto Rico in order to grant the power to said Syndicate to underwrite, in the free exercise of its discretion, and without restrictions as to the coverage limits, medical-hospital professional malpractice insurance in excess of one hundred thousand dollar ($100,000) limit per incident and an aggregate of three hundred thousand dollars ($300,000), thus enabling that the economic situation of the Syndicate is not thereby affected adversely. This amendment shall allow the Syndicate to compete on an equal footing with those insurers that participate in the open market, by offering insurance with limits which meet the insurance needs of health services professionals and health care institutions and be attractive to them. Likewise, this legislation shall allow the Syndicate to underwrite, exercising its

3 discretion, public liability insurance policies to those health care professionals and institutions for whom it has also underwritten the professional malpractice insurance policies. This will reduce the possibility of having unnecessary controversies arise due to the occasional difficulty in determining whether a claim corresponds to the professional malpractice insurance or to the public liability insurance. We may take as an example the falls of patients in hospital areas where the conditions in the hallways and other pedestrian walkways are inadequate. Having only one insurer underwrite both the professional malpractice insurance and the public liability insurance reduces the risk of lack of precision with regard to the scope of the coverages. Furthermore, with this amendment the Syndicate is able to expand its source of premiums, which contributes to greater stability in the rates. While the Syndicate, in its function of providing insurance for residual risks which cannot be obtained through the open market, is not empowered to select the risks it insures under professional malpractice insurance, its profile of insured parties holds a greater proportion of subnormal risks, or those risks which are prone to cause losses with greater frequency or severity, than the proportion of those risks which are generally held by those insurers that participate in the open market and have the power to select the risks they insure. Expanding the base of the insured parties that would produce premiums will better allow for the distribution of losses generated by the residual risks, and at the same time allow the Syndicate to maintain a competitive rate level against that of the insurers that participate in the open market. Finally, this amendment would eliminate the advantage the insurers that participate in the open market have over the Syndicate, since it would allow the Syndicate to adopt the generalized market practice of having a single insurer underwrite the professional malpractice insurance as well as the public liability insurance. Finally, this Legislature granted the Commissioner of Insurance through Act No.

4 253 of December 27, 1995, known as the "Compulsory Motor Vehicle Liability Insurance Act," the power to consolidate the administration and operations of the Joint Compulsory Liability Insurance Underwriting Association with the syndicates created in Chapters 37 and 41 of the Insurance Code of Puerto Rico. This legislation establishes the basis for achieving the consolidation and attaining the expeditious and cost-effective administration of said insurers. To such effects, the number of directors of the Insurers Syndicate for the joint underwriting of medical-hospital professional malpractice insurance, shall be reduced from nine (9) to seven (7), and its Board of Directors, as a body, and its directors shall be treated in a manner similar to that of the members of the Board of Directors of the Joint Underwriting Association, as to the limited immunity they enjoy in the discharge of their duties and functions as well as the fiduciary duty which also binds them in their performance. BE IT ENACTED BY THE LEGISLATURE OF PUERTO RICO: Section 1.- Clauses (1), (2), (3), (8), (11), (13) and (14) of Article of Act No. 77 of June 19, 1977, as amended, are hereby amended to read as follows: "Article Syndicate; plan of operations... (1) The purpose of the Syndicate is to provide medical-hospital professional malpractice insurance to qualified applicants. The Syndicate shall be obliged to provide the limits established in Article of this Code. The Syndicate may opt to underwrite limits in excess of those established in Article of this Code for the rate classifications, provided this does not affect the financial situation of the Syndicate. (2) The Syndicate shall have the power to issue, with regard to the medicalhospital professional malpractice insurance, insurance policies to qualified applicants and to cede and assume reinsurance. Likewise, the Syndicate shall be empowered to,

5 issue at its discretion, public liability insurance policies to those qualified applicants to whom it has issued professional malpractice insurance policies. The Syndicate shall not be subject to the provisions of Article of this Code and shall not be bound to transact its insurance through agents or brokers. Neither shall qualified applicants be bound to use agents or brokers to place their insurance with the Syndicate. With the consent of the Commissioner, the Syndicate may delegate on one or more of its members who wish to do so and who do not participate in the open market, or in any other entity, to service its policies and claims on its behalf. The member or entity to be chosen shall be selected through a process of competitive biddings without the cost of the bid necessarily being a determining factor in said selection. In evaluating said selection, the Commissioner shall have the proper authority to ensure that the entity is chosen which proves it has the greatest capability to penetrate the market and provide its services to all geographic areas of the country, safeguard the competitive side of the Syndicate and ensure the most efficient operation thereof. 3) The Syndicate shall operate under the direction of a Board of Directors constituted by four (4) insurers elected by the insurers who are members of the Syndicate or their authorized representatives, which in the case of a domestic insurer shall be the respective chairpersons, and in the case of a foreign insurer, shall be its principal officials in Puerto Rico; the official in charge of the administration and operation of the Syndicate, and two (2) private citizens representing the public interest who shall not have any substantial economic interest in purveyors of health services or insurance. The Directors shall be elected for three (3)-year terms, the official in charge of the administration and operation of the Syndicate shall be director while holding said position and the two (2) private citizens representing the public interest, shall be appointed by the Governor of Puerto Rico for a three (3)-year term each and shall hold office until their successors are appointed and take office.

6 ... (8) The Syndicate shall adopt an operating plan within sixty (60) days of being constituted, subject to the approval of the Commissioner, which shall be effective ten (10) days after having been approved by the latter. Should the Commissioner fail to approve the plan in whole or in part, the Board of Directors of the Syndicate shall submit the duly-amended and revised plan within fifteen (15) working days after notice of said disapproval and should the Board fail to submit said new plan or should it not be acceptable, the Commissioner shall promulgate his/her own plan or the corresponding part thereof, as the case may be. The plan shall provide for an efficient, economical, fair and nondiscriminatory administration and for the prompt and efficient marketing of the medical-hospital professional malpractice insurance which will strengthen the competitiveness of the Syndicate in the insurance market and guarantees access to the service to potential insurers. The Board of Directors may, on its own initiative, or at the request of the Commissioner, amend the operating plan, subject to the approval of the Commissioner. Without it being construed as a limitation, said plan shall contain the following: a)... (11) Any profits obtained from the operation of the Syndicate, as well as any profit that reverts to the participants, shall be exempted from the payment of income taxes. Likewise, the Syndicate shall be exempted from the payment of personal property taxes related to the investments in securities. (12)... (13) Neither the Board of Directors of the Syndicate nor its directors, shall incur financial liability for any action taken in the performance of their duties and powers under this Chapter, in their personal or individual capacity, which in the case

7 of insurer members shall mean both the insurer and its representative before the Board of Directors, nor the Syndicate officials, provided they do not act in violation of their fiduciary duties to the Syndicate, or incur any action which directly or indirectly impairs the competitive position, the financial interests or the participation of the Syndicate in the market, or act intentionally to cause damages or are knowingly aware that they may cause any damage. (14) Any members of the Board of Directors who individually or jointly among themselves or in conjunction with other members of the Syndicate, and acting in violation of their fiduciary duties regarding the Syndicate, incur any action which, directly or indirectly impairs the competitive position, the financial interests or the participation of the Syndicate in the market; use or disclose inside information of the Syndicate which is not equally accessible to other insurer members, or allow the disclosure of inside information with the purpose of harming or benefiting insurers that participate in the free market, shall be individually or collectively liable, as the case may be, to the Syndicate, or to the damaged insurer member, for an amount equal to three (3) times the financial losses that said actions may have caused the latter". Section 2.- Effectiveness This Act shall take effect immediately after its approval. However, the amendment to clause (3) of Article of Act No. 77 of June 19, 1957, as amended, shall take effect, regarding the inclusion of the official in charge of the administration and operation of the Syndicate as a member of the Board of Directors, when the first vacancy occurs in the latter, and regarding the number of insurer-members of the Syndicate which shall be part of the Board of Directors, said vacancies shall not be filled until the number of directors reaches four (4).

8 December 18, 1998 José A. Figueroa-Lugo, Director of the Office of Legislative Services of the Legislature of Puerto Rico, hereby certifies to the Secretary of State that he has duly compared the English and Spanish texts of Act No.99 (S.B. 466) of the 1st Session of the 13th Legislature of Puerto Rico, entitled: AN ACT to amend clauses (1), (2), (3), (8), (11), (13) and (14) of Article of Act No. 77 of June 19, 1977, as amended, known as the "Insurance Code of Puerto Rico," in order to grant powers to the Insurers Syndicate for the joint underwriting of medicalhospital professional malpractice insurance, the underwriting, at its discretion, of insurance with limits in excess of one hundred thousand dollars ($100,000) per incident and three hundred thousand dollars ($300,000) in aggregate and public liability insurance for those qualified applicants for whom it has underwritten the professional malpractice insurance; and to reduce the number of directors of the Board of Directors of the Syndicate, and finds the same are complete, true and correct versions of each other. José A. Figueroa-Lugo