A BILL TO BE ENTITLED
AN ACT relating to professional liability of state employees and agencies.
Whereas, it is in the public policy of this State for State departments, agencies, educational institutions, and hospitals to purchase professional liability insurance; and
Whereas, the rates charged for professional liability insurance should be regulated to the end that the rates shall not be excessive, inadequate, or unfairly discriminatory; and
Whereas, the public interest requires that existing legislation should be amended to clarify and make certain the intent of existing legislation and to clarify, strengthen, and provide adequate remedies to the State to ensure that rates being charged and collected from State agencies, educational institutions, and hospitals for professional liability insurance pursuant to filings of rates and forms under Chapter 58 of the General Statutes are not excessive in violation of the standards in effect at the time the rates were charged; and
Whereas, the public interest requires that State departments, agencies, educational institutions, and hospitals should have the opportunity for a hearing on the reasonableness of rates charged for professional liability insurance to prevent the collection of rates that are found to be excessive and to clarify that a refund shall be provided for any rate found to be excessive which has been charged or collected; Now, therefore,
The General Assembly of North Carolina enacts:
SECTION 1.  Article 40 of Chapter 58 of the General Statutes is amended by adding a new section to read:
"§ 58‑40‑145.  Professional liability insurance for State departments, agencies, and institutions and State employees and officers.
(a)	Any rate, form, or filing actually used by an insurer to calculate a premium to be charged or collected as the final premium in a retrospective rating plan for professional liability insurance for State hospitals, agencies, universities, colleges, institutions, and State employees and officers which would result in the payment of premiums or charges by an insured which exceed the insurer's actual paid and incurred loss and loss expense for the policy period, plus a reasonable allowance for unallocated expenses and a reasonable margin for an underwriting profit of the insurer for the policy period, shall be presumed to be excessive within the meaning of G.S. 58‑40‑20. In the event of the receipt by the Commissioner and the insurer of a written demand from the Attorney General on behalf of the insured for a hearing thereon, the insurer shall not collect or attempt to collect the premium, rate, or charge without the express written approval of the Commissioner following a hearing at which the parties to the policy may be heard and present evidence.
(b)	On the Commissioner's own motion, the Commissioner may hold a hearing and, at the request of the Attorney General on behalf of the insured, the Commissioner shall hold a hearing to determine if a rate filed pursuant to this Article and Article 41 of this Chapter for professional liability insurance for State hospitals, agencies, universities, colleges, institutions, and their employees and officers complies with the requirements of G.S. 58‑40‑20. If, after a hearing, the Commissioner disapproves a rate, the Commissioner must issue an order specifying in what respects the rate fails to meet the requirements of G.S. 58‑40‑20. If the Commissioner finds a rate to be excessive, the Commissioner shall order the excess premium, plus interest at a rate determined in the same manner as in G.S. 58‑36‑25(b) as of the dates the rates were effective for policyholders, to be returned to those policyholders who have paid the excess premium. If the Commissioner finds a rate to be unfairly discriminatory, the Commissioner shall order an appropriate adjustment for policyholders who have paid the unfairly discriminatory premium. The order must be issued within 30 business days after the close of the hearing.
(c)	An insurer is prohibited from charging or collecting, or attempting to charge or collect, any premium or any additional fee or charge for professional liability insurance for State hospitals, agencies, universities, colleges, institutions, and State employees and officers except in accordance with filings made with the Commissioner under this section and Article 41 of this Chapter. This section may be enforced by the Commissioner and by the Attorney General against any insurer charging, collecting, or attempting to charge or collect the premium.
(d)	An insurer providing professional liability insurance for State hospitals, agencies, universities, colleges, institutions, and State employees and officers which was developed and used in individual form or rate as the result of the uniqueness of a particular risk, may file and use such rates and forms in accordance with rules adopted by the Commissioner pursuant to G.S. 58‑41‑50(g). Provided, however, that those rules shall not be interpreted to eliminate the requirement for the filing of any rate or form which affects the premium or charge collected or attempted to be collected from an insured. With respect to any rate charged or attempted to be collected by an insurer pursuant to the filings, if there has been no prior hearing on the rates and filings before the Commissioner, each insurer which issues or has issued policies pursuant to G.S. 58‑41‑50(g) which are subject to this section shall, upon demand by the Attorney General on behalf of the insureds under the policies, refund, or otherwise credit to those purchasing the policies any excessive profit, as determined by the Commissioner after a hearing pursuant to the standards set policies, including retrospective premiums, during any period of consecutive, continuous coverage pursuant to a multiyear agreement."
SECTION 2.  G.S. 58‑32‑15 is amended by adding a new subsection to read:
"(e)	A committee is hereby established to adopt criteria for the selection of insurance carriers from which the Commission may acquire professional liability insurance for State employees and officers under this section. The committee shall consist of three members, including the Administrator of the Commission, a designee of the Attorney General, and a designee of the Governor who is also an employee of a State agency that utilizes professional liability insurance. All members of the committee shall be elected for their knowledge of professional liability insurance. In adopting criteria for the selection of insurance carriers from which the Commission may acquire professional liability insurance for State officers and employees, due consideration shall be given by the committee to the following factors:
(1)	The size and financial strength of the insurance carrier.
(2)	The experience and expertise of the insurance carrier in the particular line of professional liability insurance for which coverage is to be placed.
(3)	The past experience of State officers and employees with the insurance carrier with respect to the reasonableness of premiums charged, policy service, loss prevention programs, and the sharing of information with risk managers of State departments, institutions, agencies, universities, and community colleges.
(4)	The past experience of the insurance carrier with consumer complaints.
(5)	A willful failure to perform in accordance with one or more insurance contracts of professional liability insurance for State officers and employees or agencies.
(6)	A history of failure to perform, or unsatisfactory performance of, one or more contracts of professional liability insurance entered into for the coverage of State officers and employees or agencies.
(7)	The past experience of the insurance carrier with respect to lawsuits or disputes with State officials or agencies concerning rates charged or coverage provided to State officers and employees or agencies.
(8)	Any other factor that a person reasonably knowledgeable about professional liability insurance would consider in determining whether to place insurance with an insurance carrier.
The committee shall apply these criteria in the evaluation of prospective insurance carriers for professional liability insurance for State employees, officers, and agencies and shall prepare and maintain a list of approved insurance carriers. The Commission shall not acquire professional liability insurance under this Article except from an insurance carrier which currently appears on the list adopted by the committee pursuant to this section.
The committee shall meet at least once each calendar quarter, on the first business day after January 15, April 15, July 15, and October 15, and upon the call of the Administrator of the Commission. The Administrator of the Commission shall be responsible for issuing notices of meetings of the committee and maintaining the books and records of the proceedings of the committee. Members of the committee shall be reimbursed for travel and subsistence expenses at rates set out in G.S. 138‑6 from funds made available to the Commission for the reimbursement of the committee members. There is no liability of, and no cause of action of any nature arises against, the members of the committee or of the Commission for the performance of their powers and duties under this section."
SECTION 3.  G.S. 58‑31‑25 reads as rewritten:
"§ 58‑31‑25.  Professional liability insurance for officials and employees of the State.
The Commissioner may acquire professional liability insurance covering the officers and employees of any State department, institution or agency upon the request of such State department, institution or agency in accordance with G.S. 58-32-15. Premiums for such insurance coverage shall be paid by the requesting department, institution or agency at rates fixed by the Commissioner in accordance with G.S. 58‑40‑145 and from funds made available to it for the purpose. The Commissioner, in placing a contract for such insurance is authorized to place such insurance through the Public Officers and Employees' Liability Insurance Commission, and shall exercise all efforts to place such insurance through the said commission prior to attempting to procure such insurance through any other source.
The Commissioner, pursuant to this section, may acquire professional liability insurance covering the officers and employees of a department, institution or agency of State government only if the coverage to be provided by such policy is coverage of claims in excess of the protection provided by Articles 31 and 31A of Chapter 143 of the General Statutes.
The purchase, by any State department, institution or agency of professional liability insurance covering the law‑enforcement officers, officers or employees of such department, institution or agency shall not be construed as a waiver of any defense of sovereign immunity by such department, institution or agency. The purchase of such insurance shall not be deemed a waiver by any employee of the defense of sovereign immunity to the extent that such defense may be available to him.
The payment, by any State department, institution or agency of funds as premiums for professional liability insurance through the plan provided herein, covering the law‑enforcement officers or officials or employees of such department, institution or agency is hereby declared to be for a public purpose."
SECTION 4.  This act is effective when it becomes law and applies to pending litigation and arbitration proceedings.