REPRESENTATIVES Flowers, Martin, Seitz, Setzer, Allen, G. Smith, Daniels, Driehaus, Faber, Fessler, Gibbs, Hughes, Koziura, T. Patton, Seaver, Sferra, White, Wolpert, Woodard

To amend sections 3903.28 and 3903.32 and to enact

1

sections 3929.62, 3929.63, 3929.631, 3929.632,

2

3929.64, 3929.65, 3929.66, 3929.661, 3929.67,

3

3929.68, 3929.681, 3929.682, 3929.69, and 3929.70

4

of the Revised Code to lengthen the time period

5

during which the liquidator of an insolvent

6

insurance company may void certain preferential

7

transfers, to provide for the establishment of a

8

Medical Liability Underwriting Association for

9

medical liability insurance, and to make an

10

appropriation.

11

BE IT ENACTED BY THE GENERAL ASSEMBLY OF THE STATE OF OHIO:

Section 1. That sections 3903.28 and 3903.32 be amended and	12
sections 3929.62, 3929.63, 3829.631, 3929.632, 3929.64, 3929.65,	13
3929.66, 3929.661, 3929.67, 3929.68, 3929.681, 3929.682, 3929.69,	14
and 3929.70 of the Revised Code be enacted to read as follows:	15

Sec. 3903.28.  (A)(1) A preference is a transfer of any of	16
the property of an insurer or of an interest in the property of an	17
insurer to or for the benefit of a creditor, for or on account of	18
an antecedent debt, made or suffered by the insurer within one	19
yeartwo years before the filing of a successful complaint for	20
liquidation under sections 3903.01 to 3903.59 of the Revised Code,	21
the effect of which transfer may be to enable the creditor to	22
obtain a greater percentage of his debt than another creditor of	23
the same class would receive. If a liquidation order is entered	24
while the insurer is already subject to a rehabilitation order,	25
then such transfer shall be deemed preferences if made or suffered	26
within one year before the filing of the successful complaint for	27
rehabilitation, or within two years before the filing of the	28
successful complaint for liquidation, whichever time is shorter	29
date that enables the creditor to receive more than the creditor	30
would receive if the insurer was liquidated under this chapter,	31
the transfer had not been made, and the creditor received payment	32
of the debt to the extent provided by the provisions of this	33
chapter.	34

(2) Any preference may be avoided by the liquidator if any of	35
the following apply:	36

(a) The insurer was insolvent at the time of the transfer;

37

(b) The transfer was made within four monthsone hundred	38
twenty days before the filing of the complaint date;	39

(c) The creditor receiving it or to be benefited thereby or	40
histhe creditor's agent acting with reference thereto had, at the	41
time when the transfer was made, reasonable cause to believe that	42
the insurer was insolvent or was about to become insolvent;	43

(d) The creditor receiving it was an officer, or any of the	44
following:	45

(i) An officer or director of the insurer;

46

(ii) A person, including but not limited to an employee or	47
attorney or other person, who was in fact in a position of	48
comparable influence into effect a level of control over the	49
actions of the insurer comparable to that of an officer or	50
director whether or not hethe person held such position, or any	51
but excluding employees of the department of insurance and any	52
person retained or appointed by the department to assist in the	53
examination, supervision, or other regulation or monitoring of the	54
insurer;	55

(iii) A shareholder holding directly or indirectly more than	56
five per cent of any class of any equity security issued by the	57
insurer, or any;	58

(iv) Any other person, firm, corporation, association, or	59
aggregation of persons with whom the insurer did not deal at arm's	60
length.	61

(3) Where the preference is voidable, the liquidator may	62
recover the property or the value of the property from the initial	63
transferee, and if itthe property has been transferred or	64
converted, itsthe liquidator may recover the property or the	65
value of the property from any person who has received or	66
converted the property, except that a subsequent bona fide	67
purchaser or lienor who has given consideration of less than fair	68
equivalent value has a lien upon the property to the extent of the	69
consideration actually given. Where a preference by way of lien or	70
security title is voidable, the court may on due notice order the	71
such lien or title to beis preserved for the benefit of the	72
estate, in which event the lien or title shall pass to the	73
liquidator.	74

(4) The liquidator may not avoid a transfer under this	75
section as provided by the following:	76

(a) To the extent that the transfer was intended, by both the	77
insurer and the creditor to or for whose benefit the transfer was	78
made, to be a contemporaneous exchange for new value given to the	79
insurer and was in fact a substantially contemporaneous exchange;	80

(b) To the extent that the transfer was in payment of a debt	81
incurred by the insurer in the ordinary course of business or	82
financial affairs of the insurer and the transferee and the	83
transfer both was made in the ordinary course of business or	84
financial affairs of the insurer and the transferee and was made	85
according to ordinary business terms;	86

(c) If the transfer was made to or for the benefit of a	87
creditor, to the extent that after the transfer the creditor gave	88
new value to or for the benefit of the insurer not secured by an	89
otherwise unavoidable security interest, on account of which new	90
value the insurer did not make an otherwise unavoidable transfer	91
to or for the benefit of such creditor.	92

(B)(1) A transfer of property other than real property is	93
deemed to be made or suffered when it becomes so far perfected	94
that no subsequent lien obtainable by legal or equitable	95
proceedings on a simple contract can become superior to the rights	96
of the transferee.	97

(2) A transfer of real property is deemed to be made or	98
suffered when it becomes so far perfected that no subsequent bona	99
fide purchaser from the insurer can obtain rights superior to the	100
rights of the transferee.	101

(3) A transfer which creates an equitable lien is not deemed	102
to be perfected if there are available means by which a legal lien	103
can be created.	104

(4) A transfer not perfected prior to the filing of a	105
complaint for liquidationdate is deemed to be made immediately	106
before the filing of the successful complaint date.	107

(5) The provisions of division (B) of this section apply	108
whether or not there are or were creditors who might have obtained	109
liens or persons who might have become bona fide purchasers.	110

(C)(1) A lien obtainable by legal or equitable proceedings	111
upon a simple contract is one arising in the ordinary course of	112
such proceedings upon the entry or docketing of a judgment or	113
decree, or upon attachment, garnishment, execution, or like	114
process, whether before, upon, or after judgment or decree and	115
whether before or upon levy. It does not include liens which under	116
applicable law are given a special priority over other liens which	117
are prior in time.	118

(2) A lien obtainable by legal or equitable proceedings is	119
superior to the rights of a transferee, or a purchaser may obtain	120
rights superior to the rights of a transferee within the meaning	121
of division (B) of this section, if such consequences follow only	122
from the lien or purchase itself, or from the lien or purchase	123
followed by any step wholly within the control of the respective	124
lienholder or purchaser, with or without the aid of ministerial	125
action by public officials. Such a lien is not, however, superior	126
and such a purchase does not create superior rights for the	127
purpose of division (B) of this section through any acts	128
subsequent to the obtaining of such a lien or subsequent to such a	129
purchase which require the agreement or concurrence of any third	130
party or which require any further judicial action or ruling.	131

(D) A transfer of property for or on account of a new and	132
contemporaneous consideration that is deemed under division (B) of	133
this section to be made or suffered after the transfer because of	134
delay in perfecting it does not thereby become a transfer for or	135
on account of an antecedent debt if any acts required by the	136
applicable law to be performed in order to perfect the transfer as	137
against liens or bona fide purchasers' rights are performed within	138
twenty-one days or any period expressly allowed by the law,	139
whichever is less. A transfer to secure a future loan, if such a	140
loan is actually made, or a transfer which becomes security for a	141
future loan, has the same effect as a transfer for or on account	142
of a new and contemporaneous consideration.	143

(E) If any lien deemed voidable under division (A)(2) of this	144
section has been dissolved by the furnishing of a bond or other	145
obligation, the surety on which has been indemnified directly or	146
indirectly by the transfer of or the creation of a lien upon any	147
property of an insurer before the filing of a complaint under	148
sections 3903.01 to 3903.59 of the Revised Code which results in a	149
liquidation orderdate, the indemnifying transfer or lien is also	150
deemed voidable.	151

(F) The property affected by any lien deemed voidable under	152
divisions (A) and (E) of this section is discharged from such	153
lien, and that property and any of the indemnifying property	154
transferred to or for the benefit of a surety passes to the	155
liquidator, except that the court may on due notice order any such	156
lien to be preserved for the benefit of the estate and the court	157
may direct that such conveyance be executed as may be proper or	158
adequate to evidence the title of the liquidator.	159

(G) The Franklin county court of common pleas has exclusive	160
jurisdiction of any proceeding by the liquidator to hear and	161
determine the rights of any parties under this section. Reasonable	162
notice of any hearing in the proceeding shall be given to all	163
parties in interest, including the obligee of a releasing bond or	164
other like obligation. Where an order is entered for the recovery	165
of indemnifying property in kind or for the avoidance of an	166
indemnifying lien, the court, upon motion of any party in	167
interest, shallmay in the same proceeding ascertain the value of	168
the property or lien, and if the value is less than the amount for	169
which the property is indemnity or than the amount of the lien,	170
the transferee or lienholder may elect to retain the property or	171
lien upon payment of its value, as ascertained by the court, to	172
the liquidator, within such reasonable times as the court shall	173
fix.	174

(H) The liability of a surety under a releasing bond or other	175
like obligation shall be discharged to the extent of the value of	176
the indemnifying property recovered or the indemnifying lien	177
nullified and avoided by the liquidator, or where the property is	178
retained under division (G) of this section to the extent of the	179
amount paid to the liquidator.	180

(I) If a creditor has been preferred, and afterward in good	181
faith gives the insurer further credit without security of any	182
kind, for property which becomes a part of the insurer's estate,	183
the amount of the new credit remaining unpaid at the time of the	184
complaint may be set off against the preference which would	185
otherwise be recoverable from him.	186

(J) If an insurer shall, directly or indirectly, within four	187
monthsone hundred twenty days before the filing of a successful	188
complaint for liquidation under sections 3903.01 to 3903.59 of the	189
Revised Codedate, or at any time in contemplation of a proceeding	190
to liquidate it, pay money or transfer property to an	191
attorney-at-law for services rendered or to be rendered, the	192
transaction may be examined by the court on its own motion or	193
shall be examined by the court on motion of the liquidator and	194
shall be held valid only to the extent of a reasonable amount to	195
be determined by the court, and the excess may be recovered by the	196
liquidator for the benefit of the estate provided that where the	197
attorney is in a position of influence in the insurer or an	198
affiliate thereof, payment of any money or the transfer of any	199
property to the attorney-at-law for services rendered or to be	200
rendered shall be governed by the provisions of division (A)(2) of	201
this section.	202

(K)(1) Every officer, manager, employee, shareholder, member,	203
subscriber, attorney, or any other person acting on behalf of the	204
insurer who knowingly participates in giving any preference when	205
he has reasonable cause to believe the insurer is or is about to	206
become insolvent at the time of the preference shall be personally	207
liable to the liquidator for the amount of the preference. It	208
shall be presumed that there is reasonable cause to so believe if	209
the transfer was made within four months before the date of filing	210
of the successful complaint for liquidation.	211

(2)(J) As to every transfer subject to avoidance under this	212
section:	213

(1) Every person receiving any property from the insurer or	214
the benefit thereof as a preference voidable under division (A) of	215
this section shall be personally liable for the property and shall	216
be bound to account to the liquidator.	217

(3)(2) The liquidator has the burden of proving that a	218
transfer under division (A)(2) of this section is voidable, and	219
the person against which recovery or voidability is sought has the	220
burden of proving that a transfer under division (A)(4) of this	221
section is not voidable.	222

(3) The fact that the insurer was under examination,	223
supervision, or other regulatory oversight by the department of	224
insurance, or that the department may have acquiesced in or	225
approved any payments made by the insurer, does not effect or	226
otherwise create a defense to avoidance of a transfer voidable	227
under this section.	228

(K) Nothing in this division shall be construed to prejudice	229
any other claim by the liquidator against any person.	230

(L) As used in this section:

231

(1) "Complaint date" means the date on which a complaint is	232
filed by the superintendent of insurance seeking the liquidation	233
of an insurer, if the complaint results in an order of	234
liquidation. If the insurer is placed in rehabilitation, which	235
rehabilitation is later converted to liquidation, the "complaint	236
date" is the date on which the original complaint seeking	237
rehabilitation was filed.	238

(2) "New value" means money or money's worth in goods,	239
services, new credit, or the release by a transferee of property	240
previously transferred to the transferee in a transaction that is	241
neither void nor voidable by the liquidator under any applicable	242
law, including the proceeds of the transferred property, but does	243
not include an obligation substituted for an existing obligation.	244

Sec. 3903.32.  The amount recoverable by the liquidator from	245
reinsurers shall not be reduced as a result of delinquency	246
proceedings, regardless of any provision in the reinsurance	247
contract or other agreement. Payment made by a reinsurer directly	248
to an insured or other creditor does not diminish the reinsurer's	249
obligation to the insurer's estate except when the reinsurance	250
contract or other written agreement either provides for direct	251
payment of the reinsurance to the insured or beneficiary of the	252
insurance policy in the event of the insolvency of the ceding	253
insurer or provides for payment to a third party and has received	254
the prior written approval of the superintendent of insurance.	255

Sec. 3929.62. As used in sections 3929.62 to 3929.70 of the	256
Revised Code and any rules adopted pursuant to those sections:	257

(A) "Applicant" means any licensed physician or hospital as	258
those terms are defined in section 2305.113 of the Revised Code.	259

(B) "Medical liability underwriting association" means a	260
nonprofit unincorporated underwriting association for medical	261
liability insurance established under section 3929.63 of the	262
Revised Code.	263

(C) "Medical liability insurance" means insurance coverage	264
against the legal liability of the insured and against loss,	265
damage, or expense incident to a claim arising out of the death,	266
disease, or injury of any person as the result of negligence or	267
malpractice in rendering professional service by any licensed	268
physician or hospital, as those terms are defined in section	269
2305.113 of the Revised Code, or any employee or agent acting	270
within the scope of their duties for a physician or hospital,	271
which coverage may include coverage relating to the accreditation	272
of medical professionals.	273

Sec. 3929.63. (A) A medical liability underwriting	274
association for medical liability insurance may be created for one	275
or more classes of insurance by rule of the superintendent of	276
insurance pursuant to Chapter 119. of the Revised Code upon a	277
finding by the superintendent that both of the following	278
circumstances exist:	279

(1) A substantial number of applicants for such class or	280
classes of medical liability insurance have not been placed with	281
insurers authorized to write medical liability insurance in this	282
state, and are insurable risks. For purposes of this section,	283
"insurable risk" means that the physician or hospital is licensed,	284
certified, or accredited as required by law.	285

(2) The lack of such class or classes of medical liability	286
insurance threatens the availability of health care for any group	287
of individuals in this state.	288

(B) The medical liability underwriting association may:

289

(1) Issue or cause to be issued policies of insurance to	290
applicants, including incidental coverages, subject to terms,	291
conditions, exclusions, and limits, established by the medical	292
liability underwriting association's board of governors subject to	293
the superintendent's approval. Coverages under such policies may	294
be made available as primary or excess protection, provided limits	295
of primary protection under one policy shall not exceed one	296
million dollars for each claim and three million dollars in any	297
year unless otherwise provided for in the plan of operation.	298

(2) Underwrite the insurance and adjust and pay losses with	299
respect thereto, or appoint service companies or associations to	300
perform those functions;	301

(3) Assume reinsurance;

302

(4) Cede reinsurance.

303

Sec. 3929.631. (A) In the event the superintendent of	304
insurance creates the medical liability underwriting association	305
under section 3929.63 of the Revised Code or reactivates the	306
medical liability underwriting association under section 3929.632	307
of the Revised Code, the superintendent also shall create a	308
stabilization reserve fund for the medical liability underwriting	309
association under Chapter 119. of the Revised Code. The	310
stabilization reserve fund shall be administered by thirteen	311
directors, one of whom shall be the superintendent of insurance or	312
the superintendent's deputy. The remaining twelve directors shall	313
be appointed by the superintendent. Of these twelve directors,	314
five shall be doctors of medicine and surgery, two shall be	315
doctors of osteopathic medicine and surgery, one shall be a doctor	316
of podiatric medicine, and four shall be representatives of	317
hospitals.	318

(B) The directors shall act by majority vote with seven	319
directors constituting a quorum for the transaction of any	320
business or the exercise of any power of the stabilization reserve	321
fund. The directors shall serve without salary, but each director	322
shall be reimbursed for actual and necessary expenses incurred in	323
the performance of official duties as a director of the	324
stabilization reserve fund. The directors are not subject to any	325
personal liability with respect to administration of the fund.	326

(C) Each policyholder of the medical liability underwriting	327
association shall pay to the medical liability underwriting	328
association annually a stabilization reserve fund charge. The	329
charge shall be determined by the directors with the agreement of	330
the board of governors of the medical liability underwriting	331
association, subject to the approval of the superintendent. In the	332
event that there is no agreement among the directors, the board of	333
governors, and the superintendent as to the charge, the	334
superintendent shall determine the charge. The amount of the	335
charge may differentiate between types of coverage, but shall be	336
sufficient to ensure that the medical liability underwriting	337
association is actuarially sound, adequately reserved, financially	338
stable, and efficiently managed so as to satisfy the purposes of	339
sections 3929.62 to 3929.70 of the Revised Code. The medical	340
liability underwriting association shall cancel the policy of any	341
policyholder who fails to pay the stabilization reserve fund	342
charge.	343

(D) The medical liability underwriting association promptly	344
shall pay to the trustee of the stabilization reserve fund all	345
stabilization reserve fund charges that it collects from its	346
policyholders.	347

(E) All money received by the stabilization reserve fund	348
shall be held in trust by a corporate trustee selected by the	349
directors. The corporate trustee may invest the money held in	350
trust, subject to the approval of the directors. All investment	351
income shall be credited to the stabilization reserve fund. All	352
expenses of administration of the stabilization reserve fund shall	353
be charged against the stabilization reserve fund. The money held	354
in trust shall be used for the purpose of reimbursing the medical	355
liability underwriting association for any deficit that arises out	356
of the operations of the medical liability underwriting	357
association and for any other purpose that is approved by the	358
board of directors, if the purpose is reasonably consistent with	359
the purposes of the association. Such payment to the medical	360
liability underwriting association shall be made by the directors	361
upon the medical liability underwriting association's	362
certification to the directors of the amount due.	363

(F) If the board of governors determines that the moneys	364
contained in the stabilization reserve fund at the end of a fiscal	365
year, exclusive of dollars allocated for pending claims and after	366
payment of all claims and expenses, are in excess of amounts that	367
are necessary to ensure that the medical liability underwriting	368
association is actuarially sound, adequately reserved, financially	369
stable, and efficiently managed as to satisfy the purposes of	370
sections 3929.62 to 3929.70 of the Revised Code, and the	371
superintendent concurs, the superintendent shall cause the return	372
of the excess fund moneys to applicants that have contributed to	373
the fund and that are not medical liability underwriting	374
association policyholders at the end of the fiscal year. In	375
effectuating the return of fund moneys, the superintendent shall	376
ascertain the total amount contributed to the fund by each	377
applicant during the entire period of the fund's existence. Within	378
a reasonable time period not to exceed one year, the	379
superintendent shall remit to each eligible applicant an amount	380
that bears the same ratio to the total amount of excess fund	381
moneys as the total amount contributed to the fund by each	382
applicant bears to the total amount contributed to the fund by all	383
applicants. Notwithstanding the return of moneys under this	384
division, policyholders shall continue to be subject to the	385
charges of the stabilization reserve fund under this section. The	386
total amount to be returned under this division shall reflect any	387
interest actually earned by the fund less fund operating expenses.	388

Sec. 3929.632. (A) The medical liability underwriting	389
association created under section 3929.63 of the Revised Code may	390
be dissolved, or its operations may be suspended, by rule of the	391
superintendent of insurance adopted pursuant to Chapter 119. of	392
the Revised Code, upon a finding by the superintendent that the	393
circumstances described in division (A) of section 3929.63 of the	394
Revised Code no longer exist.	395

(B) In the case of any dissolution or suspension under	396
division (A) of this section, the superintendent shall adopt rules	397
pursuant to Chapter 119. of the Revised Code that establish	398
standards and procedures for the fair and equitable cessation or	399
suspension of operations, including rules that ensure the payment	400
of all claims on policies issued and expenses incurred by the	401
medical liability underwriting association. Rules adopted under	402
this section may include rules relating to reinsurance. The	403
remaining funds of the medical liability underwriting association	404
shall be used for funding the medical liability underwriting	405
association or for funding another medical malpractice initiative	406
with the approval of the general assembly.	407

(C) If operations of the medical liability underwriting	408
association are suspended, the superintendent may subsequently	409
reactivate its operations by rule adopted in accordance with	410
Chapter 119. of the Revised Code.	411

(D) The following persons shall not incur or suffer any	412
liability to any person, by reason of actions taken in order to	413
comply with this section:	414

(1) The medical liability underwriting association;

415

(2) The board of governors of the medical liability	416
underwriting association or any member of the board;	417

(3) The agents or employees of the medical liability	418
underwriting association;	419

(4) The superintendent;

420

(5) Any other state officer responsible for the care and	421
custody of the funds of the medical liability underwriting	422
association.	423

Sec. 3929.64. (A)(1) A board of governors consisting of nine	424
members shall govern the medical liability underwriting	425
association, seven of whom shall be appointed by the	426
superintendent of insurance. Of the seven members appointed by the	427
superintendent, five shall be selected from insurers licensed to	428
write and writing liability insurance in this state, at least two	429
of which insurers must write medical liability insurance in this	430
state. In addition to representatives from the five insurers, the	431
superintendent also shall appoint one member who is a licensed	432
physician and one member from a hospital operating in this state.	433
The governor shall appoint two members. Of the two members	434
appointed by the governor, one shall be an insurance agent	435
licensed and writing medical liability insurance in this state.	436
The other member appointed by the governor shall represent the	437
interests of consumers and shall neither be a member of, or	438
associated with, a health care provider or profession nor	439
associated with a health insuring corporation holding a	440
certificate of authority under Chapter 1751. of the Revised Code	441
or an insurance company. The members of the board of governors	442
shall serve without compensation but shall be reimbursed for their	443
actual and necessary expenses incurred in the discharge of their	444
official duties. The directors of the stabilization reserve fund	445
shall serve as ex officio members of the medical liability	446
underwriting association's board of governors.	447

(2) Of the initial member appointments made under division	448
(A)(1) of this section, three shall be for terms of one year,	449
three shall be for terms of two years, and three shall be for	450
terms of three years, with the members' terms determined from the	451
date the medical liability underwriting association is created	452
under section 3929.63 of the Revised Code. Thereafter, terms of	453
office for appointed members shall be for three years, each term	454
ending on the same day of the same month of the year as did the	455
term it succeeds. A vacancy shall be filled in the same manner as	456
the original appointment. Members may be reappointed to the board	457
of governors.	458

(B) The board of governors may employ, compensate, and	459
prescribe the duties and powers of as many employees and	460
consultants as are necessary to carry out the purposes of sections	461
3929.62 to 3929.70 of the Revised Code.	462

Sec. 3929.65. (A)(1) Within forty-five days after the	463
creation or a reactivation of the medical liability underwriting	464
association, the board of governors of the medical liability	465
underwriting association shall submit to the superintendent of	466
insurance, for the superintendent's review, a proposed plan of	467
operation consistent with sections 3929.62 to 3929.70 of the	468
Revised Code. The superintendent may adopt this plan by rule	469
promulgated in accordance with Chapter 119. of the Revised Code.	470
If the superintendent does not adopt the plan within thirty days	471
of its submission, the superintendent shall formulate a plan of	472
operation consistent with sections 3929.62 to 3929.70 of the	473
Revised Code. Subsequent to the termination of the thirty-day	474
period, the superintendent shall establish the plan by rule in the	475
minimum time permitted by Chapter 119. of the Revised Code.	476

(2) At any time after the adoption of a plan of operation	477
under division (A)(1) of this section, the board of governors may	478
submit proposals for amendments to the plan of operation to the	479
superintendent for the superintendent's approval. The	480
superintendent also may propose amendments to the plan of	481
operation. All amendments to the plan of operation shall be	482
consistent with sections 3929.62 to 3929.70 of the Revised Code	483
and shall be adopted as rules in accordance with Chapter 119. of	484
the Revised Code.	485

(B) The plan of operation shall provide for economic, fair,	486
and nondiscriminatory administration and for the prompt and	487
efficient provision of medical liability insurance, and shall	488
contain other provisions, including, but not limited to,	489
provisions relating to all of the following:	490

(1) Establishment of necessary facilities;

491

(2) Management of the medical liability underwriting	492
association;	493

(3) Reasonable and objective underwriting standards;

494

(4) Acceptance and cession of reinsurance;

495

(5) The appointment of servicing carriers or the direct	496
issuance of syndicate policies;	497

(6) The issuance of a binder providing coverage for which an	498
applicant tenders an amount equal to the annual premium as	499
estimated by the medical liability underwriting association.	500

(C) The medical liability underwriting association shall	501
separately code all policies written so that appropriate records	502
may be compiled for purposes of calculating the adequate premium	503
levels for each classification of risk. The plan of operation	504
shall set forth the manner in which policies are coded.	505

Sec. 3929.66. (A) Any applicant practicing or operating in	506
this state seeking to purchase medical liability insurance being	507
offered by the medical liability underwriting association, on or	508
after the effective date of the medical liability underwriting	509
association's plan of operation, may apply to the medical	510
liability underwriting association for medical liability	511
insurance. The application may be made on behalf of an applicant	512
by a broker or agent authorized by the applicant, or may be made	513
on behalf of a number of eligible applicants who are members of a	514
medical society.	515

(B) The board of governors of the medical liability	516
underwriting association, in formulating the plan of operation	517
under section 3929.641 of the Revised Code, shall include minimum	518
eligibility and underwriting standards for applicants. If the	519
medical liability underwriting association determines that an	520
applicant meets the eligibility and underwriting standards of the	521
medical liability underwriting association as prescribed in the	522
plan of operation and there is no unpaid, uncontested premium due	523
to the medical liability underwriting association from the	524
applicant for prior medical liability insurance, the medical	525
liability underwriting association, upon receipt of the premium,	526
or such portion thereof as is prescribed in the plan of operation,	527
shall issue a policy of medical liability insurance for a term of	528
one year.	529

(C) The medical liability underwriting association is under	530
no obligation to issue any policy of insurance to any applicant	531
who fails to meet the medical liability underwriting association's	532
eligibility and underwriting standards.	533

(D) The rates, rating plans, rating rules, rating	534
classifications, territories, and policy forms applicable to the	535
insurance written by the medical liability underwriting	536
association and related statistics are subject to Chapter 3937. of	537
the Revised Code and shall be established by the board of	538
governors subject to the approval of the superintendent of	539
insurance, giving due consideration to the past and prospective	540
loss and expense experience for medical liability insurance sold	541
by insurers in this state, trends in the frequency and severity of	542
losses, and such other information as the superintendent may	543
require. All rates shall be on an actuarially sound basis, and	544
shall be calculated to be self-supporting exclusive of any amounts	545
held by the stabilization reserve fund. There shall be a	546
presumption that the rates filed and premiums for the business of	547
the medical liability underwriting association are not	548
unreasonable or excessive. The superintendent shall take all	549
appropriate steps to make available to the medical liability	550
underwriting association the profit, loss, and expense experience	551
of insurers currently or previously writing medical liability	552
insurance in this state.	553

(E) All policies issued by or on behalf of the medical	554
liability underwriting association shall be written so as to apply	555
only to death, disease, or injury which results from acts or	556
omissions covered by the policy and reported during the policy	557
period and for which written claim is made against the insured,	558
unless otherwise provided for in the plan of operation.	559

(F) All policies issued by or on behalf of the medical	560
liability underwriting association shall contain a provision that	561
upon termination of the policy through cancellation on grounds	562
other than nonpayment of premiums, or through retirement or death	563
of the insured, the insured or the insured's estate has the right	564
on payment of appropriate additional premiums to extend coverage	565
to include claims covered by the policy and discovered and	566
reported after the policy period and for which written claim is	567
made against the insured.	568

Sec. 3929.661. The medical liability underwriting association	569
may offer policyholders the option of being liable as a co-insurer	570
on sums paid out by way of settlement or judgment against the	571
policyholder on any claim made under the policy. The medical	572
liability underwriting association has sole authority to settle	573
any claim subject to the co-insurance option without the consent	574
of the insured. The plan of operation shall set forth the terms	575
and conditions of the optional co-insurance coverage.	576

Sec. 3929.67. (A) A medical liability insurance policy that	577
insures a physician, written by or on behalf of the medical	578
liability underwriting association pursuant to sections 3929.62 to	579
3929.70 of the Revised Code, may only be cancelled during the term	580
of the policy for one of the following reasons:	581

(1) Nonpayment of premiums;

582

(2) The license of the insured to practice medicine and	583
surgery or osteopathic medicine and surgery has been suspended or	584
revoked;	585

(3) The insured's failure to meet minimum underwriting	586
standards;	587

(4) The occurrence of a change in the individual risk that	588
substantially increases any hazard insured against after the	589
coverage has been issued or renewed, except to the extent that the	590
insurer reasonably should have foreseen the change or contemplated	591
the risk in writing the policy.	592

(B) A medical liability insurance policy that insures a	593
hospital, written by or on behalf of the medical liability	594
underwriting association pursuant to sections 3929.62 to 3929.70	595
of the Revised Code, may only be cancelled during the term of the	596
policy for one of the following reasons:	597

(1) Nonpayment of premiums;

598

(2) The hospital is not certified or accredited in accordance	599
with Chapter 3727. of the Revised Code;	600

(3) An injunction against the hospital has been granted under	601
section 3727.05 of the Revised Code;	602

(4) The occurrence of a change in the individual risk that	603
substantially increases any hazard insured against after the	604
coverage has been issued or renewed, except to the extent that the	605
insurer reasonably should have foreseen the change or contemplated	606
the risk in writing the policy.	607

Sec. 3929.68. There shall be no liability imposed on the part	608
of, and no cause of action of any nature arises against, the	609
medical liability underwriting association or the stabilization	610
reserve fund, its board of governors, directors, agents, or	611
employees, an insurer or its employees, any licensed agent or	612
broker, or the superintendent of insurance or the superintendent's	613
authorized representatives and employees, for any action taken by	614
them in the performance of their powers and duties under sections	615
3929.62 to 3929.70 of the Revised Code. Any reports and	616
communications made in connection with those actions are not	617
public records.	618

Sec. 3929.681. Any insurer or other person aggrieved by any	619
action or decision of the medical liability underwriting	620
association may appeal to the board of governors. The decision of	621
the board of governors may be appealed to the superintendent of	622
insurance within thirty days from the date of the action or the	623
decision. The superintendent shall, after a hearing held upon	624
proper notice, issue an order approving or disapproving the action	625
or decision, with respect to the matter that is the subject of	626
appeal. All final orders and decisions of the superintendent are	627
subject to judicial review as provided in Chapter 119. of the	628
Revised Code.	629

Sec. 3929.682. (A) A medical liability fund is hereby created	630
in the state treasury. The medical liability fund shall consist of	631
the remaining funds of the joint underwriting association, the	632
association created under section 3929.72 of the Revised Code and	633
dissolved under section 3929.721 of the Revised Code, and shall be	634
used for the purposes of funding the medical liability	635
underwriting association that is created in accordance with	636
sections 3929.62 to 3929.70 of the Revised Code or for funding	637
another medical malpractice initiative with the approval of the	638
general assembly.	639

(B) As used in this section, "remaining funds of the joint	640
underwriting association" means funds paid to the treasurer of	641
state in accordance with section 3929.721 of the Revised Code and	642
any plan of dissolution or trust agreement adopted under section	643
3929.721 of the Revised Code.	644

Sec. 3929.69. (A) Annually on or before the first day of	645
March, the medical liability underwriting association shall file	646
in the office of the superintendent of insurance a statement	647
containing information with respect to its transactions,	648
condition, operations, and affairs during the preceding year. The	649
statement shall contain such matters and information as are	650
prescribed and shall be in a form approved by the superintendent.	651

(B) The superintendent or any person designated by the	652
superintendent, at any time, may visit and examine the operation	653
and experience of the medical liability underwriting association.	654
The association shall give the superintendent or the	655
superintendent's designee free access to all the books, records,	656
files, papers, and documents that relate to the operation of the	657
medical liability underwriting association, and may summon,	658
qualify, and allow the examination as witnesses of all persons	659
having knowledge of the medical liability underwriting	660
association's operations, including officers, agents, and	661
employees of the medical liability underwriting association.	662

(C) The medical liability underwriting association also is	663
subject to examination by the superintendent in accordance with	664
section 3901.07 of the Revised Code.	665

Sec. 3929.70. The medical liability underwriting association	666
is exempt from all license fees, and income, franchise, premium,	667
and privilege taxes levied or assessed by this state or any of its	668
political subdivisions.	669

Section 2. That existing sections 3903.28 and 3903.32 of the	670
Revised Code are hereby repealed.	671

Section 3. Section 3903.28 of the Revised Code, as amended by	672
this act, shall apply only to liquidations for which an order of	673
liquidation has been entered by the court on or after the	674
effective date of this act.	675

Section 4. (A) As used in this section:

676

(1) "Joint Underwriting Association" means the Joint	677
Underwriting Association created under section 3929.72 of the	678
Revised Code and dissolved under section 3929.721 of the Revised	679
Code.	680

(2) "Remaining funds of the Joint Underwriting Association"	681
means funds paid to the Treasurer of State in accordance with	682
section 3929.721 of the Revised Code and any plan of dissolution	683
or trust agreement adopted under section 3929.721 of the Revised	684
Code.	685

(B) The Superintendent of Insurance shall certify to the	686
Director of Budget and Management the amount of cash deposited	687
from the remaining funds of the Joint Underwriting Association to	688
the General Revenue Fund. Notwithstanding section 3929.721 of the	689
Revised Code, the Director of Budget and Management shall transfer	690
an amount equal to the certified amount from the General Revenue	691
Fund to the Medical Liability Fund created in section 3929.682 of	692
the Revised Code. The amount transferred is hereby appropriated in	693
fiscal year 2004. Any unencumbered and unallocated balances are	694
hereby reappropriated in fiscal year 2005.	695

This section is not subject to the referendum. Therefore,	696
under Ohio Constitution, Article II, Section 1d and section 1.471	697
of the Revised Code, this section goes into immediate effect when	698
this act becomes law.	699