REPRESENTATIVES Flowers, Martin, Seitz, Setzer, Allen, G. Smith, Daniels, Driehaus, Faber, Fessler, Gibbs, Hughes, Koziura, T. Patton, Seaver, Sferra, White, Wolpert, Woodard, Barrett, Book, Brown, Calvert, Carano, Cirelli, Clancy, Collier, DeBose, Distel, Domenick, C. Evans, D. Evans, Gilb, Hagan, Hartnett, Harwood, Hollister, Hoops, Jerse, Key, Mason, Miller, Niehaus, Oelslager, Olman, Reidelbach, Schaffer, Schlichter, Schmidt, S. Smith, D. Stewart, J. Stewart, Strahorn, Taylor, Widener, Willamowski, Wilson, Yates

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, to make an

10

appropriation, and to declare an emergency.

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, 3929.631, 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 initiated by the liquidator filed	161
in the state to hear and determine the rights of any parties under	162
this section. Reasonable notice of any hearing in the proceeding	163
shall be given to all parties in interest, including the obligee	164
of a releasing bond or other like obligation. Where an order is	165
entered for the recovery of indemnifying property in kind or for	166
the avoidance of an indemnifying lien, the court, upon motion of	167
any party in interest, shallmay in the same proceeding ascertain	168
the value of the property or lien, and if the value is less than	169
the amount for which the property is indemnity or than the amount	170
of the lien, the transferee or lienholder may elect to retain the	171
property or lien upon payment of its value, as ascertained by the	172
court, to the liquidator, within such reasonable times as the	173
court shall 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 is voidable under division (A)(2) of this section, and	219
the person against which recovery or voidability is sought has the	220
burden of proving that a transfer is not voidable under division	221
(A)(4) of this section.	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, podiatrist, or	258
hospital as those terms are defined in section 2305.113 of the	259
Revised Code.	260

(B) "Medical liability underwriting association" means a	261
nonprofit unincorporated underwriting association for medical	262
liability insurance established under section 3929.63 of the	263
Revised Code.	264

(C) "Medical liability insurance" means insurance coverage	265
against the legal liability of the insured and against loss,	266
damage, or expense incident to a claim arising out of the death,	267
disease, or injury of any person as the result of negligence or	268
malpractice in rendering professional service or related to the	269
credentialing or accreditation of any medical professional or	270
hospital by any licensed physician, podiatrist, or hospital, as	271
those terms are defined in section 2305.113 of the Revised Code,	272
or any employee or agent acting within the scope of their duties	273
for a physician, podiatrist, or hospital.	274

Sec. 3929.63. (A) A medical liability underwriting	275
association for medical liability insurance may be created for one	276
or more classes of insurance by rule of the superintendent of	277
insurance pursuant to Chapter 119. of the Revised Code upon a	278
finding by the superintendent that both of the following	279
circumstances exist:	280

(1) A substantial number of applicants for such class or	281
classes of medical liability insurance have not been placed with	282
insurers authorized to write medical liability insurance in this	283
state, and are insurable risks. For purposes of this section,	284
"insurable risk" means that the physician, podiatrist, or hospital	285
is licensed, certified, or accredited as required by law.	286

(2) The lack of such class or classes of medical liability	287
insurance threatens the availability of health care for any group	288
of individuals in this state.	289

(B) The medical liability underwriting association may:

290

(1) Issue or cause to be issued policies of insurance to	291
applicants, including incidental coverages, subject to terms,	292
conditions, exclusions, and limits, established by the medical	293
liability underwriting association's board of governors subject to	294
the superintendent's approval. Coverages under such policies may	295
be made available as primary or excess protection, provided limits	296
of primary protection under one policy shall not exceed one	297
million dollars for each claim and three million dollars in any	298
year unless otherwise provided for in the plan of operation.	299

(2) Underwrite the insurance and adjust and pay losses with	300
respect thereto, or appoint service companies or associations to	301
perform those functions;	302

(3) Assume reinsurance;

303

(4) Cede reinsurance.

304

Sec. 3929.631. (A) In the event the superintendent of	305
insurance creates the medical liability underwriting association	306
under section 3929.63 of the Revised Code or reactivates the	307
medical liability underwriting association under section 3929.632	308
of the Revised Code, the superintendent also shall create a	309
stabilization reserve fund for the medical liability underwriting	310
association under Chapter 119. of the Revised Code. The	311
stabilization reserve fund shall be administered by thirteen	312
directors, one of whom shall be the superintendent of insurance or	313
the superintendent's deputy. The remaining twelve directors shall	314
be appointed by the superintendent. Of these twelve directors,	315
five shall be doctors of medicine and surgery, two shall be	316
doctors of osteopathic medicine and surgery, one shall be a doctor	317
of podiatric medicine, and four shall be representatives of	318
hospitals.	319

(B) The directors shall act by majority vote with seven	320
directors constituting a quorum for the transaction of any	321
business or the exercise of any power of the stabilization reserve	322
fund. The directors shall serve without salary, but each director	323
shall be reimbursed for actual and necessary expenses incurred in	324
the performance of official duties as a director of the	325
stabilization reserve fund. The directors are not subject to any	326
personal liability with respect to administration of the fund.	327

(C) Each policyholder of the medical liability underwriting	328
association shall pay to the medical liability underwriting	329
association annually a stabilization reserve fund charge. The	330
charge shall be determined by the directors with the agreement of	331
the board of governors of the medical liability underwriting	332
association, subject to the approval of the superintendent. In the	333
event that there is no agreement among the directors, the board of	334
governors, and the superintendent as to the charge, the	335
superintendent shall determine the charge. The amount of the	336
charge may differentiate between types of coverage, but shall be	337
sufficient to ensure that the medical liability underwriting	338
association is actuarially sound, adequately reserved, financially	339
stable, and efficiently managed so as to satisfy the purposes of	340
sections 3929.62 to 3929.70 of the Revised Code. The medical	341
liability underwriting association shall cancel the policy of any	342
policyholder who fails to pay the stabilization reserve fund	343
charge.	344

(D) The medical liability underwriting association promptly	345
shall pay to the trustee of the stabilization reserve fund all	346
stabilization reserve fund charges that it collects from its	347
policyholders.	348

(E) All money received by the stabilization reserve fund	349
shall be held in trust by a corporate trustee selected by the	350
directors. The corporate trustee may invest the money held in	351
trust, subject to the approval of the directors. All investment	352
income shall be credited to the stabilization reserve fund. All	353
expenses of administration of the stabilization reserve fund shall	354
be charged against the stabilization reserve fund. The money held	355
in trust shall be used for the purpose of reimbursing the medical	356
liability underwriting association for any deficit that arises out	357
of the operations of the medical liability underwriting	358
association and for any other purpose that is approved by the	359
board of directors, if the purpose is reasonably consistent with	360
the purposes of the association. Such payment to the medical	361
liability underwriting association shall be made by the directors	362
upon the medical liability underwriting association's	363
certification to the directors of the amount due.	364

(F) If the board of governors determines that the moneys	365
contained in the stabilization reserve fund at the end of a fiscal	366
year, exclusive of dollars allocated for pending claims and after	367
payment of all claims and expenses, are in excess of amounts that	368
are necessary to ensure that the medical liability underwriting	369
association is actuarially sound, adequately reserved, financially	370
stable, and efficiently managed as to satisfy the purposes of	371
sections 3929.62 to 3929.70 of the Revised Code, and the	372
superintendent concurs, the superintendent shall cause the return	373
of the excess fund moneys to applicants that have contributed to	374
the fund and that are not medical liability underwriting	375
association policyholders at the end of the fiscal year. In	376
effectuating the return of fund moneys, the superintendent shall	377
ascertain the total amount contributed to the fund by each	378
applicant during the entire period of the fund's existence. Within	379
a reasonable time period not to exceed one year, the	380
superintendent shall remit to each eligible applicant an amount	381
that bears the same ratio to the total amount of excess fund	382
moneys as the total amount contributed to the fund by each	383
applicant bears to the total amount contributed to the fund by all	384
applicants. Notwithstanding the return of moneys under this	385
division, policyholders shall continue to be subject to the	386
charges of the stabilization reserve fund under this section. The	387
total amount to be returned under this division shall reflect any	388
interest actually earned by the fund less fund operating expenses.	389

Sec. 3929.632. (A) The medical liability underwriting	390
association created under section 3929.63 of the Revised Code may	391
be dissolved, or its operations may be suspended, by rule of the	392
superintendent of insurance adopted pursuant to Chapter 119. of	393
the Revised Code, upon a finding by the superintendent that the	394
circumstances described in division (A) of section 3929.63 of the	395
Revised Code no longer exist, or if the superintendent finds that	396
the continued operation of the medical liability underwriting	397
association undermines its statutory purpose or threatens its	398
ability to meet its contractual obligations.	399

(B) In the case of any dissolution or suspension under	400
division (A) of this section, the superintendent shall adopt rules	401
pursuant to Chapter 119. of the Revised Code that establish	402
standards and procedures for the fair and equitable cessation or	403
suspension of operations, including rules that ensure the payment	404
of all claims on policies issued and expenses incurred by the	405
medical liability underwriting association. Rules adopted under	406
this section may include rules relating to reinsurance. The	407
remaining funds of the medical liability underwriting association	408
shall be used for funding the medical liability underwriting	409
association or for funding another medical malpractice initiative	410
with the approval of the general assembly.	411

(C) If operations of the medical liability underwriting	412
association are suspended, the superintendent may subsequently	413
reactivate its operations by rule adopted in accordance with	414
Chapter 119. of the Revised Code.	415

(D) The following persons shall not incur or suffer any	416
liability to any person, by reason of actions taken in order to	417
comply with this section:	418

(1) The medical liability underwriting association;

419

(2) The board of governors of the medical liability	420
underwriting association or any member of the board;	421

(3) The agents or employees of the medical liability	422
underwriting association;	423

(4) The superintendent;

424

(5) Any other state officer responsible for the care and	425
custody of the funds of the medical liability underwriting	426
association.	427

Sec. 3929.64. (A)(1) A board of governors consisting of nine	428
members shall govern the medical liability underwriting	429
association. The members shall be appointed by the governor with	430
the advice of the superintendent of insurance. Five shall be	431
selected from insurers licensed to write and writing liability	432
insurance in this state, at least two of which insurers must write	433
medical liability insurance in this state. One shall be a licensed	434
physician and one shall be from a hospital operating in this	435
state. One shall be an insurance agent licensed and writing	436
medical liability insurance in this state. One shall represent the	437
interests of consumers and shall neither be a member of, or	438
associated with, a health insuring corporation holding a	439
certificate of authority under Chapter 1751. of the Revised Code	440
or an insurance company. The members of the board of governors	441
shall serve without compensation but shall be reimbursed for their	442
actual and necessary expenses incurred in the discharge of their	443
official duties. The directors of the stabilization reserve fund	444
shall serve as ex officio members of the medical liability	445
underwriting association's board of governors.	446

(2) Of the initial member appointments made under division	447
(A)(1) of this section, three shall be for terms of one year,	448
three shall be for terms of two years, and three shall be for	449
terms of three years, with the members' terms determined from the	450
date the medical liability underwriting association is created	451
under section 3929.63 of the Revised Code. Thereafter, terms of	452
office for appointed members shall be for three years, each term	453
ending on the same day of the same month of the year as did the	454
term it succeeds. A vacancy shall be filled in the same manner as	455
the original appointment. Members may be reappointed to the board	456
of governors.	457

(B) The board of governors may employ, compensate, and	458
prescribe the duties and powers of as many employees and	459
consultants as are necessary to carry out the purposes of sections	460
3929.62 to 3929.70 of the Revised Code.	461

Sec. 3929.65. (A)(1) Within forty-five days after the	462
creation or a reactivation of the medical liability underwriting	463
association, the board of governors of the medical liability	464
underwriting association shall submit to the superintendent of	465
insurance, for the superintendent's review, a proposed plan of	466
operation consistent with sections 3929.62 to 3929.70 of the	467
Revised Code. The superintendent may adopt this plan by rule	468
promulgated in accordance with Chapter 119. of the Revised Code.	469
If the superintendent does not adopt the plan within thirty days	470
of its submission, the superintendent shall formulate a plan of	471
operation consistent with sections 3929.62 to 3929.70 of the	472
Revised Code. Subsequent to the termination of the thirty-day	473
period, the superintendent shall establish the plan by rule in the	474
minimum time permitted by Chapter 119. of the Revised Code.	475

(2) At any time after the adoption of a plan of operation	476
under division (A)(1) of this section, the board of governors may	477
submit proposals for amendments to the plan of operation to the	478
superintendent for the superintendent's approval. The	479
superintendent also may propose amendments to the plan of	480
operation. All amendments to the plan of operation shall be	481
consistent with sections 3929.62 to 3929.70 of the Revised Code	482
and shall be adopted as rules in accordance with Chapter 119. of	483
the Revised Code.	484

(B) The plan of operation shall provide for economic, fair,	485
and nondiscriminatory administration and for the prompt and	486
efficient provision of medical liability insurance, and shall	487
contain other provisions, including, but not limited to,	488
provisions relating to all of the following:	489

(1) Establishment of necessary facilities;

490

(2) Management of the medical liability underwriting	491
association;	492

(3) Reasonable and objective eligibility and underwriting	493
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 3929.65 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)(1) The medical liability underwriting association is	530
under no obligation to issue any policy of insurance to any	531
applicant who fails to meet the medical liability underwriting	532
association's eligibility and underwriting standards.	533

(2) As an eligibility standard, the medical liability	534
underwriting association, as a condition for issuing or renewing	535
insurance, shall require that the applicant has been declined for	536
medical liability insurance by two insurers authorized to write	537
medical liability insurance in this state.	538

(D) The rates, rating plans, rating rules, rating	539
classifications, territories, and policy forms applicable to the	540
insurance written by the medical liability underwriting	541
association and related statistics are subject to Chapter 3937. of	542
the Revised Code and shall be established by the board of	543
governors subject to the approval of the superintendent of	544
insurance, giving due consideration to the past and prospective	545
loss and expense experience for medical liability insurance sold	546
by insurers in this state, trends in the frequency and severity of	547
losses, and such other information as the superintendent may	548
require. All rates shall be on an actuarially sound basis, and	549
shall be calculated to be self-supporting exclusive of any amounts	550
held by the stabilization reserve fund. There shall be a	551
presumption that the rates filed and premiums for the business of	552
the medical liability underwriting association are not	553
unreasonable or excessive. The superintendent shall take all	554
appropriate steps to make available to the medical liability	555
underwriting association the profit, loss, and expense experience	556
of insurers currently or previously writing medical liability	557
insurance in this state.	558

(E) All policies issued by or on behalf of the medical	559
liability underwriting association shall be written so as to apply	560
only to death, disease, or injury which results from acts or	561
omissions covered by the policy and reported during the policy	562
period and for which written claim is made against the insured,	563
unless otherwise provided for in the plan of operation.	564

(F) All policies issued by or on behalf of the medical	565
liability underwriting association shall contain a provision that	566
upon termination of the policy through cancellation on grounds	567
other than nonpayment of premiums, or through retirement or death	568
of the insured, the insured or the insured's estate has the right	569
on payment of appropriate additional premiums to extend coverage	570
to include claims covered by the policy and discovered and	571
reported after the policy period and for which written claim is	572
made against the insured.	573

Sec. 3929.661. The medical liability underwriting association	574
may offer policyholders the option of being liable as a co-insurer	575
on sums paid out by way of settlement or judgment against the	576
policyholder on any claim made under the policy. The medical	577
liability underwriting association has sole authority to settle	578
any claim subject to the co-insurance option without the consent	579
of the insured. The plan of operation shall set forth the terms	580
and conditions of the optional co-insurance coverage.	581

Sec. 3929.67. (A) A medical liability insurance policy that	582
insures a physician or podiatrist, written by or on behalf of the	583
medical liability underwriting association pursuant to sections	584
3929.62 to 3929.70 of the Revised Code, may only be cancelled	585
during the term of the policy for one of the following reasons:	586

(1) Nonpayment of premiums;

587

(2) The license of the insured to practice medicine and	588
surgery, osteopathic medicine and surgery, or podiatric medicine	589
and surgery has been suspended or revoked;	590

(3) The insured's failure to meet minimum eligibility and	591
underwriting standards;	592

(4) The occurrence of a change in the individual risk that	593
substantially increases any hazard insured against after the	594
coverage has been issued or renewed, except to the extent that the	595
medical liability underwriting association reasonably should have	596
foreseen the change or contemplated the risk in writing the	597
policy;	598

(5) Discovery of fraud or material misrepresentation in the	599
procurement of insurance or with respect to any claim submitted	600
thereunder.	601

(B) A medical liability insurance policy that insures a	602
hospital, written by or on behalf of the medical liability	603
underwriting association pursuant to sections 3929.62 to 3929.70	604
of the Revised Code, may only be cancelled during the term of the	605
policy for one of the following reasons:	606

(1) Nonpayment of premiums;

607

(2) The hospital is not certified or accredited in accordance	608
with Chapter 3727. of the Revised Code;	609

(3) An injunction against the hospital has been granted under	610
section 3727.05 of the Revised Code;	611

(4) The insured's failure to meet minimum eligibility and	612
underwriting standards;	613

(5) The occurrence of a change in the individual risk that	614
substantially increases any hazard insured against after the	615
coverage has been issued or renewed, except to the extent that the	616
medical liability underwriting association reasonably should have	617
foreseen the change or contemplated the risk in writing the	618
policy;	619

(6) Discovery of fraud or material misrepresentation in the	620
procurement of insurance or with respect to any claim submitted	621
thereunder.	622

Sec. 3929.68. (A) There shall be no liability imposed on the	623
part of, and no cause of action of any nature arises against, the	624
medical liability underwriting association or the stabilization	625
reserve fund, its board of governors, directors, agents, or	626
employees, an insurer or its employees, any licensed agent or	627
broker, or the superintendent of insurance or the superintendent's	628
authorized representatives and employees, for any action taken by	629
them in the performance of their powers and duties under sections	630
3929.62 to 3929.70 of the Revised Code. Any reports and	631
communications made in connection with those actions are not	632
public records.	633

(B) With respect to any policy of insurance issued by the	634
medical liability underwriting association, any contract executed	635
by the medical liability underwriting association or the	636
stabilization reserve fund, or any action taken under or related	637
to sections 3929.62 to 3929.70 of the Revised Code, there shall be	638
no liability on the part of the state beyond amounts paid into or	639
earned by the medical liability underwriting association and	640
stabilization reserve fund.	641

Sec. 3929.681. Any insurer or other person aggrieved by any	642
action or decision of the medical liability underwriting	643
association may appeal to the board of governors. The decision of	644
the board of governors may be appealed to the superintendent of	645
insurance within thirty days from the date of the action or the	646
decision. The superintendent shall, after a hearing held upon	647
proper notice, issue an order approving or disapproving the action	648
or decision, with respect to the matter that is the subject of	649
appeal. All final orders and decisions of the superintendent are	650
subject to judicial review as provided in Chapter 119. of the	651
Revised Code.	652

Sec. 3929.682. (A) A medical liability fund is hereby created	653
in the state treasury. The medical liability fund shall consist of	654
the remaining funds of the joint underwriting association, the	655
association created under section 3929.72 of the Revised Code and	656
dissolved under section 3929.721 of the Revised Code, and shall be	657
used for the purposes of funding the medical liability	658
underwriting association that is created in accordance with	659
sections 3929.62 to 3929.70 of the Revised Code or for funding	660
another medical malpractice initiative with the approval of the	661
general assembly.	662

(B) As used in this section, "remaining funds of the joint	663
underwriting association" means funds paid to the treasurer of	664
state in accordance with section 3929.721 of the Revised Code and	665
any plan of dissolution or trust agreement adopted under section	666
3929.721 of the Revised Code.	667

Sec. 3929.69. (A) Annually on or before the first day of	668
March, the medical liability underwriting association and the	669
stabilization reserve fund shall file in the office of the	670
superintendent of insurance a statement or statements containing	671
information with respect to their transactions, condition,	672
operations, and affairs during the preceding year. The statement	673
or statements shall contain such matters and information as are	674
prescribed and shall be in a form approved by the superintendent.	675

(B) The superintendent or any person designated by the	676
superintendent, at any time, may visit and examine the operation	677
and experience of the medical liability underwriting association	678
and stabilization reserve fund. The association and stabilization	679
reserve fund shall give the superintendent or the superintendent's	680
designee free access to all the books, records, files, papers, and	681
documents that relate to the operation of the medical liability	682
underwriting association and stabilization reserve fund, and may	683
summon, qualify, and allow the examination as witnesses of all	684
persons having knowledge of the operations of the medical	685
liability underwriting association and the stabilization reserve	686
fund, including officers, agents, and employees of the medical	687
liability underwriting association and the stabilization reserve	688
fund.	689

(C) The medical liability underwriting association and	690
stabilization reserve fund also are subject to examination by the	691
superintendent in accordance with section 3901.07 of the Revised	692
Code.	693

Sec. 3929.70. The medical liability underwriting association	694
and the stabilization reserve fund are exempt from all license	695
fees, and income, franchise, premium, and privilege taxes levied	696
or assessed by this state or any of its political subdivisions.	697

Section 2. That existing sections 3903.28 and 3903.32 of the	698
Revised Code are hereby repealed.	699

Section 3. The amendment by this act of section 3903.28 of	700
the Revised Code shall apply only to liquidations for which an	701
order of liquidation has been entered by the court on or after	702
ninety days after the effective date of this section.	703

Section 4. The amendment by this act of section 3903.32 of	704
the Revised Code first applies ninety days after the effective	705
date of this section.	706

Section 5. (A) As used in this section:

707

(1) "Joint Underwriting Association" means the Joint	708
Underwriting Association created under section 3929.72 of the	709
Revised Code and dissolved under section 3929.721 of the Revised	710
Code.	711

(2) "Remaining funds of the Joint Underwriting Association"	712
means funds paid to the Treasurer of State in accordance with	713
section 3929.721 of the Revised Code and any plan of dissolution	714
or trust agreement adopted under section 3929.721 of the Revised	715
Code.	716

(B) The Superintendent of Insurance shall certify to the	717
Director of Budget and Management the amount of cash deposited	718
from the remaining funds of the Joint Underwriting Association to	719
the General Revenue Fund. Notwithstanding section 3929.721 of the	720
Revised Code, the Director of Budget and Management shall transfer	721
an amount equal to the certified amount from the General Revenue	722
Fund to the Medical Liability Fund created in section 3929.682 of	723
the Revised Code. The amount transferred is hereby appropriated in	724
fiscal year 2004. Any unencumbered and unallocated balances are	725
hereby reappropriated in fiscal year 2005.	726

This section is not subject to the referendum. Therefore,	727
under Ohio Constitution, Article II, Section 1d and section 1.471	728
of the Revised Code, this section goes into immediate effect when	729
this act becomes law.	730

Section 6. This act is hereby declared to be an emergency	731
measure necessary for the immediate preservation of the public	732
peace, health, and safety. The reason for this necessity is the	733
need to maintain ready access to medical liability insurance for	734
Ohio's physicians, podiatrists, and hospitals as the availability	735
of this insurance in the market declines; access to medical	736
liability insurance needed if Ohio's physicians, podiatrists, and	737
hospitals are to maintain their practices and operations in this	738
state, providing Ohio's residents with ready, quality medical	739
care. Therefore, this act shall go into immediate effect.	740