GENERAL ASSEMBLY OF NORTH CAROLINA

SESSION 1997

H	2 

HOUSE BILL 452
Committee Substitute Favorable 4/22/97

Short Title:  Beach Plan Amendments/AB.	(Public)

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Sponsors:

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Referred to:  

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March 10, 1997

A BILL TO BE ENTITLED
AN ACT TO AMEND THE BEACH PLAN PARTICIPATION FORMULA AND REVISE OTHER STATUTES RELATED TO THE BEACH PLAN.
The General Assembly of North Carolina enacts:
Section 1.  G.S. 58-45-5 reads as rewritten:
"§ 58-45-5.  Definition of terms.
In this Article, unless the context otherwise requires,
(1)	‘Association' means the North Carolina Insurance Underwriting Association established under this Article;
(2)	‘Beach area' means all of that area of the State of North Carolina south and east of the inland waterway from the South Carolina line to Fort Macon (Beaufort Inlet); thence south and east of Core, Pamlico, Roanoke and Currituck sounds to the Virginia line, being those portions of land generally known as the Outer Banks;
(3)	Repealed by Session Laws 1991, c. 720, s. 6.
(3a)	‘Crime insurance' means insurance against losses resulting from robbery, burglary, larceny, and similar crimes, as more specifically defined and limited in the various crime insurance policies, or their successor forms of coverage, approved by the Commissioner and issued by the Association.  Such policies shall not be more restrictive than those issued under the Federal Crime Insurance Program authorized by Public Law 91-609.
(3b)	‘Directors' means the Board of Directors of the Association.
(4)	‘Essential property insurance' means insurance against direct loss to property as defined in the standard statutory fire policy and extended coverage, vandalism and malicious mischief endorsements thereon, or their successor forms of coverage, as approved by the Commissioner;
(5)	‘Insurable property' means real property at fixed locations in the Beach area, including travel trailers when tied down at a fixed location, or the tangible personal property located therein, but shall not include insurance on motor vehicles or farm risks; which property is determined by the Association, after inspection and under the criteria specified in the plan of operation, to be in an insurable condition.  However, any one and two family dwellings built in substantial accordance with the Federal Manufactured Home Construction and Safety Standards, any predecessor or successor federal or State construction or safety standards, and any further construction or safety standards promulgated by the association and approved by the Commissioner, or the North Carolina Uniform Residential Building Code and any structure or building built in substantial compliance with the North Carolina Building Code, including the design-wind requirements, which is not otherwise rendered uninsurable by reason of use or occupancy, shall be an insurable risk within the meaning of this Article.  However, none of the following factors shall be considered in determining insurable condition: neighborhood, area, location, environmental hazards beyond the control of the applicant or owner of the property.  Also, any structure begun on or after January 1, 1970, not built in substantial compliance with the Federal Manufactured Home Construction and Safety Standards, any predecessor or successor federal or State construction or safety standards, and any further construction or safety standards promulgated by the association and approved by the Commissioner, or the North Carolina Uniform Residential Building Code or the North Carolina Building Code, including the design-wind requirements therein, shall not be an insurable risk.  The owner or applicant shall furnish with the application proof in the form of a certificate from a local building inspector, contractor, engineer or architect that the structure is built in substantial accordance with the Federal Manufactured Home Construction and Safety Standards, any predecessor or successor federal or State construction or safety standards, and any further construction or safety standards promulgated by the association and approved by the Commissioner, or the North Carolina Uniform Residential Building Code or the North Carolina Building Code; however, an individual certificate shall not be necessary where the structure is located within a political subdivision which has certified to the Association on an annual basis that it is enforcing the North Carolina Uniform Residential Building Code or the North Carolina Building Code and has no plans to discontinue enforcing these codes during that year.
(6)	Repealed by Session Laws 1995 (Regular Session, 1996), c. 592, s. 2.
(6a)	‘Net direct premiums' means gross direct premiums (excluding reinsurance assumed and ceded) written on property in this State for essential property insurance, homeowners, and the property portion of commercial multiple peril policies as computed by the Commissioner, less:
a.	Return premiums on uncancelled contracts;
b.	Dividends paid or credited to policyholders; and
c.	The unused or unabsorbed portion of premium deposits.
	‘Net direct premiums' shall not include premiums on farm properties and manufacturing risks.
(7)	‘Plan of operation' or ‘plan' means the plan of operation of the Association approved or promulgated by the Commissioner, under this Article."
Section 2.  G.S. 58-45-25 reads as rewritten:
"§ 58-45-25.  Each member of Association to participate in its expenses, profits, and losses.
(a)	Each member of the Association shall participate in the expenses, profits, and losses of the Association in the proportion that its net direct premium written in this State during the preceding calendar year for residential and commercial properties outside of the Beach area bears to the aggregate net direct premiums written in this State during the preceding calendar year for residential and commercial properties outside of the Beach area by all members of the Association, as certified to the Association by the Commissioner.  The Commissioner shall certify each member's participation after review of annual statements and any other reports and data necessary to determine participation and may obtain any necessary information or data from any member of the Association for this purpose.  Any insurer that is authorized to write and that is engaged in writing any insurance, the writing of which requires the insurer to be a member of the Association under G.S. 58-45-10, shall become a member of the Association on the first day of January after authorization.  The determination of the insurer's participation in the Association shall be made as of the date of membership of the insurer in the same manner as for all other members of the Association.
(b)	All member companies shall receive credit each year for essential property insurance, homeowners insurance, and the property portion of commercial multiple peril policies voluntarily written in the Beach area in accordance with guidelines and procedures to be submitted by the Directors to the Commissioner for approval.  The participation of each member company in the expenses, profits, and losses of the Association shall be reduced accordingly; provided, no credit shall be given where coverage for the peril of wind has been excluded.  The guidelines and procedures for granting credit shall encourage and assist each member company to voluntarily write these coverages in the Beach area for commercial and residential properties."
Section 3.  G.S. 58-45-30(a) reads as rewritten:
"(a)	The Directors shall submit to the Commissioner for his review and approval, a proposed plan of operation. The plan shall set forth the number, qualifications, terms of office, and manner of election of the members of the board of directors, and shall grant proper credit annually to each member of the Association for essential property insurance, homeowners insurance, and the property portion of commercial multiple peril policies voluntarily written in the Beach area and shall provide for the efficient, economical, fair and nondiscriminatory administration of the Association and for the prompt and efficient provision of essential property insurance in the Beach area in order to promote orderly community development in the Beach area and to provide means for the adequate maintenance and improvement of the property in the Beach area. The plan may include the establishment of necessary facilities; management of the Association; the assessment of members to defray losses and expenses; underwriting standards; procedures for the acceptance and cession of reinsurance; procedures for determining the amounts of insurance to be provided to specific risks; time limits and procedures for processing applications for insurance; and for such other provisions that are considered necessary by the Commissioner to carry out the purposes of this Article."
Section 4.  G.S. 58-33-100 reads as rewritten:
"§ 58-33-100.  Payment of premium to agent valid; obtaining by fraud a crime.
(a)	Any agent, broker or limited representative who acts for a person other than himself negotiating a contract of insurance is, for the purpose of receiving the premium therefor, the company's agent, whatever conditions or stipulations may be contained in the policy or contract.  This subsection does not apply to the Insurance Underwriting Association established under Article 45 of this Chapter or the Joint Underwriting Association established under Article 46 of this Chapter.
(b)	Any agent, broker or limited representative knowingly procuring by fraudulent representations payment, or the obligation for the payment, of a premium of insurance, shall be guilty of a Class 1 misdemeanor."
Section 5.  G.S. 58-45-35(b) reads as rewritten:
"(b)	If the Association determines that the property is insurable and that there is no unpaid premium due from the applicant for prior insurance on the property, the Association, upon receipt of the premium, or part of the premium, as is prescribed in the plan of operation, shall cause to be issued a policy of essential property insurance and shall offer additional extended coverage, optional perils endorsements, business income coverage, crime insurance, separate policies of windstorm and hail insurance, or their successor forms of coverage, for a term of one year or three years.  Short term policies may also be issued.  Any policy issued under this section shall be renewed, upon application, as long as the property is insurable property."
Section 6.  If any section or provision of this act is declared unconstitutional or invalid by the courts, it does not affect the validity of the act as a whole or any part other than the part so declared to be unconstitutional or invalid.
Section 7.  Sections 1, 3, 4, 5, and this section of this act are effective when this act becomes law.   Section 2 of this act becomes effective January 1, 1998, and applies to policies issued or renewed on or after that date.