An Act concerning the Kansas storage tank act; relating to funds; providing for refund of
certain surplus of premiums paid; amending K.S.A. 65-34,126 and K.S.A. 2000 Supp.
65-34,123 and repealing the existing sections.

Be it enacted by the Legislature of the State of Kansas:

      Section  1. K.S.A. 2000 Supp. 65-34,123 is hereby amended to read
as follows: 65-34,123. Except as provided in K.S.A. 74-7246, and amend-
ments thereto, The underground fund and the aboveground fund shall
be and are hereby abolished on July 1, 2004 2014.

      Sec.  2. K.S.A. 65-34,126 is hereby amended to read as follows: 65-
34,126. (a) The commissioner of insurance shall adopt and implement a
plan for applicants for insurance who are in good faith entitled to insur-
ance necessary to achieve compliance with the financial responsibility
requirements for third-party liability imposed by 40 CFR part 280, sub-
part H, and part 281 adopted by the federal environmental protection
agency. Insurers undertaking to transact the kinds of insurance specified
in subsection (b) or (c) of K.S.A. 40-1102 and amendments thereto and
rating organizations which file rates for such insurance shall cooperate in
the preparation and submission to the commissioner of insurance of a
plan or plans for the insurance specified in this section. Such plan shall

      (1) Insurance necessary to achieve compliance with the financial re-
sponsibility requirements for third-party liability imposed by 40 CFR part
280, subpart H, and part 281;

      (2) for the appointment by the plan of a servicing carrier which shall
be: (A) An insurance company authorized to transact business in this state;
(B) an insurance company which is listed with the commissioner pursuant
to K.S.A. 40-246e and amendments thereto; or (C) a risk retention group,
as defined by K.S.A. 40-4101 and amendments thereto, which meets the
requirements established under the federal liability risk retention act of
1986 (15 U.S.C. 3901 et seq.) and has registered with the commissioner
pursuant to K.S.A. 40-4103 and amendments thereto;

      (3) reasonable rules governing the plan, including provisions requir-
ing, at the request of the applicant, an immediate assumption of the risk
by an insurer or insurers upon completion of an application, payment of
the specified premium and deposit of the application and the premium
in the United States mail, postage prepaid and addressed to the plan's

      (4) rates and rate modifications applicable to such risks, which rates
shall be established as provided by subsection (b);

      (5) the limits of liability which the insurer shall be required to assume;

      (6) coverage for only underground storage tanks located within this

      (7) coverage for at least 12 months from the date of the original ap-
plication with respect to any underground storage tank which has been
installed for less than 10 years, and may provide such coverage with re-
spect to any such tank which has been installed 10 or more years, without
requiring tank integrity tests, soil tests or other tests for insurability if,
within six months immediately preceding application for insurance, the
tank has been made to comply with all provisions of federal and state law,
and all applicable rules and regulations adopted pursuant thereto, but the
plan may provide for renewal or continuation of such coverage to be
contingent upon satisfactory evidence that the tank or tanks to be insured
continue to be in compliance with such laws and rules and regulations;

      (8) exclusion from coverage of any damages for noneconomic loss and
any damages resulting from intentional acts of the insured or agents of
the insured;

      (9) to the extent allowed by law, subrogation of the insurer to all rights
of recovery from other sources for damages covered by the plan or plans;

      (10) an optional deductible of the first $2,500, $5,000 or $10,000 of
liability per occurrence at any one location for compensation of third
parties for bodily injury and property damage caused by either gradual
or sudden and accidental releases from underground petroleum storage
tanks, but no such deductible shall apply to reasonable and necessary
attorney fees and other reasonable and necessary expenses incurred in
defending a claim for such compensation;

      (11) coverage only of claims for occurrences that commenced during
the term of the policy and that are discovered and reported to the insurer
during the policy period or within six months after the effective date of
the cancellation or termination of the policy;

      (12) a method whereby applicants for insurance, insureds and insur-
ers may have a hearing on grievances and the right of appeal to the com-

      (13) a method whereby adequate reserves are established for open
claims and claims incurred but not reported based on advice from an
independent actuary retained by the plan at least annually, the cost of
which shall be borne by the plan;

      (14) a method whereby the plan shall compare the premiums earned
to the losses and expenses sustained by the plan for the preceding fiscal
year and if, for that year: (A) There is any excess of losses and expenses
over premiums earned, plus amounts transferred pursuant to subsection
(a)(15), an amount equal to such excess losses and expenses shall be trans-
ferred from the underground fund established by K.S.A. 65-34,114 and
amendments thereto to the plan; or (B) there is any surplus of premiums
earned, plus amounts transferred pursuant to subsection (a)(15), over
losses, including loss reserves, and expenses sustained, an amount equal
to 1/2 of such surplus shall be transferred to such fund from the plan and
the remaining 1/2 of such surplus shall be transferred to such fund from
the plan refunded from the plan to the insureds in proportion to the
amount each paid into the plan during the preceding fiscal year; and

      (15) a method whereby, during any fiscal year, whenever the losses
and expenses sustained by the plan exceed premiums earned, an amount
equal to the excess of losses and expenses shall be transferred from the
underground fund established by K.S.A. 65-34,114 and amendments
thereto to the plan upon receipt by the secretary of health and environ-
ment of evidence, satisfactory to the secretary, of the amount of the excess
losses and expenses.

      (b) The commissioner of insurance shall establish rates, effective Jan-
uary 1 of each year, for coverage provided under the plan adopted pur-
suant to this section. Such rates shall be reasonable, adequate and not
unfairly discriminatory. Such rates shall be based on loss and expense
experience developed by risks insured by the plan and shall be in an
amount deemed sufficient by the commissioner to fund anticipated claims
based upon reasonably prudent actuarial principles, except that:

      (1) Due consideration shall be given to the loss and expense experi-
ence developed by similar plans operating or trust funds offering third
party liability coverage in other states and the voluntary market; and

      (2) before January 1, 1992, the annual rate shall be not more than
$500 for each tank for which coverage is provided under the plan with
selection of a $10,000 deductible.

      In establishing rates pursuant to this subsection, the commissioner shall
establish, as appropriate, lower rates for tanks complying with all federal
standards, including design, construction, installation, operation and re-
lease detection standards, with which such tanks are or will be required
to comply by 40 C.F.R part 280 as in effect on the effective date of this

      (c) The commissioner of insurance shall appoint a governing board
for the plan. The governing board shall meet at least annually to review
and prescribe operating rules of the plan. Such board shall consist of five
members appointed as follows: One representing domestic or foreign
insurance companies, one representing independent insurance agents,
one representing underground storage tank owners and operators and
two representing the general public. No member representing the gen-
eral public shall be, or be affiliated with, an insurance company, inde-
pendent insurance agent or underground storage tank operator. Members
shall be appointed for terms of three years, except that the initial appoint-
ment shall include two members appointed for two-year terms and one
member appointed for a one-year term, as designated by the commis-

      (d) Before adoption of a plan pursuant to this section, the commis-
sioner of insurance shall hold a hearing thereon.

      (e) An insurer participating in the plan adopted by the commissioner
of insurance pursuant to this section may pay a commission with respect
to insurance assigned under the plan to an agent licensed for any other
insurer participating in the plan or to any insurer participating in the plan.

      (f) The commissioner of insurance may adopt such rules and regu-
lations as necessary to administer the provisions of this section.

      (g) The department of health and environment and the plan shall
provide to each other such information as necessary to implement and
administer the provisions of this section. Any such information which is
confidential while in the possession of the department or plan shall re-
main confidential after being provided to the other pursuant to this sub-

      (h) This section shall be part of and supplemental to the Kansas stor-
age tank act.

 Sec.  3. K.S.A. 65-34,126 and K.S.A. 2000 Supp. 65-34,123 are
hereby repealed.
 Sec.  4. This act shall take effect and be in force from and after its
publication in the statute book.

Approved April 19, 2001.