Session of 1998
By Senator Steffes
            9             AN ACT concerning insurance; allowing the merger or consolidation of
10             mutual insurance companies providing liability insurance for health
11             care providers with certain insurance companies; amending K.S.A.
12             1997 Supp. 40-12a02, 40-12a04, 40-12a06 and 40-12a07 and repealing
13             the existing sections; also repealing K.S.A. 1997 Supp. 40-12a08.
15       Be it enacted by the Legislature of the State of Kansas:
16           Section 1. K.S.A. 1997 Supp. 40-12a02 is hereby amended to read
17       as follows: 40-12a02. (a) Except as otherwise provided in this act, the
18       provisions of article 12 of chapter 40 of the Kansas Statutes Annotated
19       shall control the formation and operation of companies organized under
20       this act.
21           (b) Any association of health care providers domiciled within the state
22       of Kansas which has been in existence for three years or more, may, as
23       provided in this act, form an insurance company for the purpose of issuing
24       contracts of insurance ;'oviding liability insurance for health care provid-
25       ers which are members of the association, the member's employees, di-
26       rectors, professional associations and affiliates.
27           (c) Any two or more such associations of health care providers, may
28       form an insurance company for the purpose of issuing contracts of insur-
29       ance providing liability insurance for such association's respective mem-
30       bers, the member's employees, directors, professional associations and
31       affiliates upon the assessment plan.
32           Sec. 2. K.S.A. 1997 Supp. 40-12a04 is hereby amended to read as
33       follows: 40-12a04. The persons proposing to form any such company shall
34       subscribe, acknowledge and file with the commissioner articles of incor-
35       poration specifying:
36           (a) The name, which shall contain the word ``mutual,'' the names of
37       persons initially associated, the ;>=thod by which other persons may be
38       admitted to the company as members organizational form of the com-
39       pany, whether stock or mutual, the purposes for which the company is
40       organized and the location of such company's principal or home office,
41       which shall be within this state. The articles of incorporation shall provide
42       for bylaws and for the amendment of the articles of incorporation and
43       the bylaws.

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  1           (b) The names and addresses of those persons composing the board.
  2           (c) The names and addresses of the incorporators.
  3           Sec. 3. K.S.A. 1997 Supp. 40-12a06 is hereby amended to read as
  4       follows: 40-12a06. (a) Any company organized under the provisions of this
  5       act shall be empowered to make contracts of insurance as provided herein
  6       and to cede to any insurer or accept from any insurer reinsurance on any
  7       portion of any such risk for the following kinds of insurance:
  8           (1) Against loss or liability arising out of the performance of profes-
  9       sional services rendered or which should have been rendered by an in-
10       sured.
11           (2) Against loss or liability to persons or property for which the in-
12       sured may be liable or have assumed liability, including but not limited
13       to liability of any person who is a director or officer of a health care
14       provider arising out of acts performed or which should have been per-
15       formed by such director or officer.
16           (3) Against loss or liability to persons or property resulting from the
17       ownership, maintenance or use of any ambulance, aircraft or other vehicle
18       used by an insured in connection with rendering professional services in
19       K.S.A. 40-901 et seq., and amendments thereto and K.S.A. 40-1101 et
20       seq., and amendments thereto.
21           (b) Any company organized under the provisions of this act shall be
22       empowered to contract with the governing board of any plan created
23       pursuant to K.S.A. 40-3413 and amendments thereto to issue policies to
24       any applicant for liability insurance under the provisions of any such plan,
25       to service and manage such policies and in all respects to administer and
26       carry out the functions of any plan as the same may be authorized by the
27       contract. Policies may be issued to persons and corporations under the
28       provisions of such contract even though the insured is not a member of
29       the association of health care providers forming the insurance company.
30       No provision of this act or of article 12 of chapter 40 of the Kansas Statutes
31       Annotated regarding the voting rights of members or the payment of
32       dividends shall apply to policies issued under this subsection.
33           (c) Any company organized under the provisions of this act may
34       unite, merge or consolidate with any insurance company organized pur-
35       suant to K.S.A. 40-301 et seq., and amendments thereto, and authorized
36       by K.S.A. 40-901 et seq., and amendments thereto, or K.S.A. 40-1101 et
37       seq., and amendments thereto, or any organization composed of health
38       care providers in accordance with K.S.A. 40-4001 et seq., and amend-
39       ments thereto, provided that the resulting company shall be governed by
40       the provisions of this act. The resulting company may be a mutual or a
41       stock company.
42           Sec. 4. K.S.A. 1997 Supp. 40-12a07 is hereby amended to read as
43       follows: 40-12a07. The commissioner shall issue a certificate of authority

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  1       when any company, organized under this act, has fully complied with the
  2       following conditions:
  3           (a) The company holds bona fide applications for insurance upon
  4       which it shall issue at least 20 policies to at least 20 ;>--bers insureds.
  5       If the company is in compliance with all other provisions of this act, the
  6       commissioner shall not revoke or refuse to renew the certificate of au-
  7       thority because ;>--bership the number of insureds has declined to less
  8       than 20 ;>--bers.
  9           (b) No insurance company organized pursuant to this act shall expose
10       itself to loss on any one risk or hazard to an amount exceeding 20% of its
11       surplus unless the excess is reinsured.
12           (c) It shall have collected, in accordance with the method provided
13       in the articles of incorporation or the bylaws, the full consideration ac-
14       cording to its filed rate on each contract for which application has been
15       made. The total of such consideration shall be held in cash or securities
16       in which such insurance companies are authorized to invest, or one or
17       more clean and irrevocable letters of credit, and it shall possess and there-
18       after maintain a surplus of lawful assets or letters of credit over and above
19       liabilities in an amount not less than the capital and surplus required of
20       a domestic stock insurance company transacting the same kinds of insur-
21       ance. Pursuant to K.S.A. 1997 Supp. 40-229a, and amendments thereto,
22       the company shall deposit with the commissioner securities in which such
23       insurance companies are authorized to invest, or one or more clean and
24       irrevocable letters of credit, for the benefit of the commissioner, in an
25       amount not less than the minimum capital stock required of a domestic
26       stock insurance company. For the purpose of this act, letters of credit
27       shall be in the form allowed by K.S.A. 40-221a(b)(2), and amendments
28       thereto, drawn on the account of a health care provider for the benefit
29       of the company, or for the benefit of the commissioner if the letter of
30       credit is on deposit in accordance with this section.
31           Sec. 5. K.S.A. 1997 Supp. 40-12a02, 40-12a04, 40-12a06, 40-12a07
32       and 40-12a08 are hereby repealed.
33           Sec. 6. This act shall take effect and be in force from and after its
34       publication in the Kansas register.