SENATE BILL NO. 151 January 27, 1999, Introduced by Senators SIKKEMA, GOUGEON, BULLARD, GOSCHKA, BENNETT, MC COTTER, HAMMERSTROM, MC MANUS, STEIL, NORTH and SHUGARS and referred to the Committee on Health Policy. A bill to amend 1951 PA 35, entitled "An act to authorize intergovernmental contracts between munici- pal corporations; to authorize any municipal corporation to con- tract with any person or any municipal corporation to furnish any lawful municipal service to property outside the corporate limits of the first municipal corporation for a consideration; to pre- scribe certain penalties; to authorize contracts between munici- pal corporations and with certain nonprofit public transportation corporations to form group self-insurance pools; and to prescribe conditions for the performance of those contracts," by amending sections 5, 7, and 7a (MCL 124.5, 124.7, and 124.7a), sections 5 and 7 as amended and section 7a as added by 1988 PA 36. THE PEOPLE OF THE STATE OF MICHIGAN ENACT: 1 Sec. 5. (1) Notwithstanding any other provision of law to 2 the contrary, any 2 or more municipal corporations, by intergov- 3 ernmental contract, may form a group self-insurance pool to 4 provide for joint or cooperative action relative to their 5 financial and administrative resources for the purpose of 00098'99 FDD 2 1 providing to the participating municipal corporations risk 2 management and coverage for pool members and employees of pool 3 members, for acts or omissions arising out of the scope of their 4 employment, including any or all of the following: 5 (a) Casualty insurance, including general and professional 6 liability coverage. 7 (b) Property insurance, including marine insurance and 8 inland navigation and transportation insurance coverage. 9 (c) Automobile insurance, including motor vehicle liability 10 insurance coverage and security for motor vehicles owned or oper- 11 ated, as required by section 3101 of the insurance code of 1956, 12Act No. 218 of the Public Acts of 1956, as amended, being sec-13tion 500.3101 of the Michigan Compiled Laws1956 PA 218, MCL 14 500.3101, and protection against other liability and loss associ- 15 ated with the ownership of motor vehicles. 16 (d) Surety and fidelity insurance coverage. 17 (e) Umbrella and excess insurance coverages. 18 (F) HOSPITAL, MEDICAL, SURGICAL, OR DENTAL COVERAGE. 19(2) A group self-insurance pool may not provide for hospi-20tal, medical, surgical, or dental benefits to the employees of21the member municipalities in the pool except when such benefits22arise from the obligations and responsibilities of the pool in23providing automobile insurance coverage, including motor vehicle24liability insurance coverage and security for motor vehicles25owned or operated, as required by section 3101 of the insurance26code of 1956, Act No. 218 of the Public Acts of 1956, as amended,00098'99 3 1and protection against other liability and loss associated with2the ownership of motor vehicles.3 (2)(3)A group self-insurance pool may assume, cede, and 4 sell risk for coverages set forth in subsection (1). If a group 5 self-insurance pool obtains reinsurance, the reinsurance contract 6 shall be made available to the commissioner upon request. If the 7 reinsurance contract is not available to the group self-insurance 8 pool, the group self-insurance pool shall providetothe com- 9 missionersuchWITH written documentation of coverage as is 10 requested by the commissioner. 11 (3)(4)A group self-insurance pool, for the purposes of 12 carrying on the business of the group self-insurance pool whether 13 or not a body corporate, shall have the power to sue and be sued; 14 to make contracts; to hold and dispose of real and personal prop- 15 erty; and to borrow money, contract debts, and pledge assets in 16 the name of the group self-insurance pool. 17 (4)(5)In addition to any other powers granted by this 18 act, the power to enter into intergovernmental contracts under 19 this section specifically includes the power to establish the 20 pool as a separate legal or administrative entity for purposes of 21 effectuating group self-insurance pool agreements. 22 (5)(6)The legislature hereby finds and determines that 23 insurance protection is essential to the proper functioning of 24 municipal corporations; that the resources of municipal corpora- 25 tions are burdened by the securing ofsuchINSURANCE protection 26 through standards carriers; that proper risk management requires 27thespreadingofriskso asto minimize fluctuation in 00098'99 4 1 insurance needs; and that, therefore, all contributions of 2 financial and administrative resources made by a municipal corpo- 3 ration pursuant to an intergovernmental contractasauthorized 4 under this act are made for a public and governmental purpose, 5 and thatsuchTHOSE contributions benefit each contributing 6 municipal corporation. 7 (6)(7)Two or more municipal corporations shall not form 8 a group self-insurance pool to provide the coverages described in 9 subsection (1) other than pursuant to sections 5 to 12b. 10 Sec. 7. Any intergovernmental contract entered into under 11 section 5 for the purpose of establishing a group self-insurance 12 pool shall provide ALL OF THE FOLLOWING: 13 (a) A financial plan setting forth, in general terms, ALL OF 14 THE FOLLOWING: 15 (i) The insurance coverages to be offered by the group 16 self-insurance pool, applicable deductible levels, and the maxi- 17 mum level of claimswhichTHAT the pool will self-insure. 18 (ii) Subject to section 7a, the amount of cash reserves to 19 be set aside for the payment of claims. 20 (iii) The amount of insurance to be purchased by the pool to 21 provide coverage over and above the claimswhichTHAT are not 22 to be satisfied directly from the pool's resources. 23 (iv) Subject to section 7a, the amount of aggregate excess 24 insurance coverage to be maintained or the amount of the deposit 25 of unimpaired surplus to be maintained with the state treasurer, 26 which aggregate excess insurance or deposit shall be used in the 27 event that the group self-insurance pool's resources are 00098'99 5 1 exhausted in a given fiscal period.TheEXCEPT AS OTHERWISE 2 PROVIDED IN SUBPARAGRAPH (v), THE aggregate excess insurance 3 COVERAGE or deposit OF UNIMPAIRED SURPLUS, or combination of 4 aggregate excess insurance COVERAGE and deposit OF UNIMPAIRED 5 SURPLUS shall be, at a minimum, in the amount ofNOT LESS THAN 6 $5,000,000.00 unless the commissioner determines a lesser amount 7 of aggregate excess insurance COVERAGE would be adequate. 8 HOWEVER, A GROUP SELF-INSURANCE POOL PROVIDING COVERAGE UNDER 9 SECTION 5(1)(F) SHALL HAVE AGGREGATE EXCESS INSURANCE COVERAGE OR 10 A DEPOSIT OF UNIMPAIRED SURPLUS WITH THE STATE TREASURER, OR A 11 COMBINATION OF AGGREGATE EXCESS INSURANCE COVERAGE AND DEPOSIT OF 12 UNIMPAIRED SURPLUS WITH THE STATE TREASURER, OF NOT LESS THAN 13 $7,500,000.00. 14 (b) Aplan ofmanagementwhichPLAN THAT provides for 15 all of the following: 16 (i) The means of establishing the governing authority of the 17 pool. 18 (ii) The responsibility of the governing authority with 19 regard to fixing contributions to the pool, maintaining reserves, 20 levying and collecting assessments for deficiencies, disposing of 21 surpluses, and administering the pool in the event of termination 22 or insolvency. 23 (iii) The basis upon which new members may be admitted to, 24 and existing members may leave, the pool. 25 (iv) The identification of funds and reserves by exposure 26 areas. 00098'99 6 1 (v) Other provisions necessary or desirable for the 2 operation of the pool. 3 (c) For election by pool members of a governing authority, 4 which shall be a board of directors for the pool, a majority of 5 whom shall be elected or appointed officers of pool members. 6 Sec. 7a. (1)WhenIF 2 or more municipal corporations 7 have formed a group self-insurance pool by an intergovernmental 8 contract pursuant to section 5, the group self-insurance pool 9 shall immediately submit a copy of the intergovernmental contract 10 to the commissioner of insurance. The commissioner of insurance 11 shall review it for compliance with this act. 12 (2) A copy of each coverage document form issued by the pool 13 shall be filed with the commissioner of insurance. 14 (3) Each group self-insurance pool shall maintain aggregate 15 excess insurance COVERAGE or a deposit OF UNIMPAIRED SURPLUS with 16 the state treasurer,of unimpaired surpluswhich aggregate 17 excess insurance COVERAGE or deposit OF UNIMPAIRED SURPLUS shall 18 be used in the event that the pool's resources are exhausted in a 19 given fiscal period.TheEXCEPT AS PROVIDED IN SUBSECTION (4), 20 THE aggregate excess insurance COVERAGE or deposit OF UNIMPAIRED 21 SURPLUS, or combination of aggregate excess insurance and deposit 22 OF UNIMPAIRED SURPLUS shall be, at a minimum, in the amount of23 NOT LESS THAN $5,000,000.00 unless the commissioner determines a 24 lesser amount of aggregate excess insurance would be adequate. A 25 copy of the aggregate excess insurance contract obtained by a 26 group self-insurance pool pursuant to this section shall be filed 00098'99 7 1 with the commissioner of insurance who shall review it for 2 compliance with this act. 3 (4) A GROUP SELF-INSURANCE POOL PROVIDING COVERAGE UNDER 4 SECTION 5(1)(F) SHALL HAVE AGGREGATE EXCESS INSURANCE COVERAGE OR 5 A DEPOSIT OF UNIMPAIRED SURPLUS WITH THE STATE TREASURER, OR A 6 COMBINATION OF AGGREGATE EXCESS INSURANCE COVERAGE AND DEPOSIT OF 7 UNIMPAIRED SURPLUS WITH THE STATE TREASURER, OF NOT LESS THAN 8 $7,500,000.00. 9 (5)(4)A group self-insurance pool shall set aside cash 10 reserves that are adequate for the payment of claims. 00098'99 Final page. FDD