Ohio Administrative Code
Title 3901 - Department of Insurance
Chapter 3901-1 - General Provisions
Section 3901-1-18 - Ohio fair plan - plan of operation
Universal Citation: OH Admin Code 3901-1-18
Current through all regulations passed and filed through September 16, 2024
(A) Purpose
The purpose of this rule is for adoption by the superintendent of a plan of operation submitted by the board of governors of the "Ohio Fair Plan Underwriting Association". The plan of operation has been formulated for the purpose of making basic property and homeowners' insurance coverage, as identified in section 3929.42 of the Revised Code, available for qualified property owned by persons who have been unable to secure such insurance in the normal insurance market.
(B) Authority
This rule is promulgated pursuant to the authority vested in the superintendent under section 3901.041 of the Revised Code. This plan of operation is adopted pursuant to section 3929.43 of the Revised Code and implements sections 3929.41 to 3929.49 of the Revised Code.
(C) Definitions
(1) "Association" means the "Ohio
Fair Plan Underwriting Association" created under section
3929.43
of the Revised Code.
(2) "Basic
property insurance" means insurance against direct loss to property as defined
and limited in standard fire policies and extended coverage endorsements
thereon, as approved by the superintendent, and insurance for such types,
classes and locations of property against the perils of vandalism, malicious
mischief, burglary, theft or liability, as the superintendent shall designate.
The association is also authorized to provide insurance against the perils of
burglary, robbery, and theft for properties. Such coverage is to be provided by
separate policies. Basic property insurance does not include automobile
insurance or insurance on manufacturing risks.
(3) "Environmental hazard" means any
hazardous condition that might give rise to loss under an insurance contract,
but which is beyond the control of the property owner.
(4) "Insurable risks" means property that
meets the reasonable underwriting standards of the association.
(5) "Underwriting standards" means the
underwriting standards for basic property insurance and homeowners' insurance
which have been filed with the superintendent.
(6) "Homeowners' insurance" means insurance
on owner-occupied dwellings providing personal multi-peril property and
liability coverages, commonly known as homeowners' insurance, subject to
underwriting standards, exclusions, deductibles, rates and conditions as are
customarily used by member insurers for similar coverages.
(7) "Location" means real and personal
property consisting of and contained in a single building or in contiguous
buildings under one ownership.
(8)
"Urban area" means the state of Ohio having been so designated by the
superintendent.
(9)
"Superintendent" means the superintendent of insurance of the state of
Ohio.
(10) "Member insurer" means
an insurer required to be a member of the association by section
3929.43
of the Revised Code.
(11) "Licensed
agent" means any person licensed by the superintendent pursuant to section
3905.01
of the Revised Code.
(12) "Board"
means the board of governors of the association authorized pursuant to section
3929.43
of the Revised Code.
(13)
"Applicant" means any person applying for insurance from the
association.
(D) Notice of cancellation by members
Member insurers shall provide written notice of cancellation or nonrenewal for any risk eligible for insurance through the association, (except for non-payment of premium, evidence of incendiarism, or misrepresentation) not less than thirty days prior to cancellation or nonrenewal. The notice shall explain to the insured the procedures for making application to the association. This thirty-day notice shall not apply to binders of thirty days duration or less.
(E) Insurance agents
(1) Upon request, a licensed
agent shall assist any owner of property in completing an application for
insurance with the association.
(2)
No licensed agent, although licensed to represent one or more member insurers
of the association, shall hold himself out as an agent of the association or
have any authority to bind any risk for the association.
(F) Maximum liability, limitations and special coverage
(1) The maximum limits of
liability for basic property insurance and homeowners' insurance per location
through the association is one million five hundred thousand dollars. The
maximum limit of liability for residential crime insurance is ten thousand
dollars. The maximum limit of liability for commercial crime insurance is
fifteen thousand dollars.
(2) The
association may require that vandalism and malicious mischief coverage be
written in conjunction with extended coverage.
(3) The association is authorized to issue
mine subsidence insurance coverage to its policyholders pursuant to sections
3929.50
to
3929.61
of the Revised Code and as provided for in the plan of operations of the "Mine
Subsidence Insurance Underwriting Association."
(4) The association is not authorized to
provide insurance coverage for automobiles or manufacturing risks.
(G) Inspections
(1) Any person having an insurable interest
in real or tangible personal property, or both, at a fixed location in Ohio,
who has been unable to obtain basic property insurance or homeowners'
insurance, shall be granted upon application to the association, an inspection
of the property. The inspection shall be made only of property requiring an
inspection to determine eligibility for fair plan coverage. The inspection
shall be free of charge to the applicant.
(2) All inspection reports shall be in
writing and shall contain the information necessary to determine eligibility
for coverage pursuant to the association's underwriting guide as filed with the
superintendent.
(3) If an interior
inspection is necessary to determine eligibility of property described in an
application submitted to the association:
(a)
The inspector or inspection company shall contact the new applicant and arrange
for the applicant or the person designated by the applicant to be present
during the inspection. The inspector shall not recommend correction of physical
deficiencies or advise the applicant whether the association will provide
coverage. The inspection report shall provide any information necessary for
underwriting but shall not refer to environmental hazards. Physical
deficiencies shall be reported on the inspection report. Vacancy or unoccupancy
shall be reported on the inspection report.
(b) The inspection report shall contain
information describing the occupancy and other observations of the
risk.
(4) Subsequent to
the inspection of a property, the association shall indicate to the new
applicant any condition charges which have been applied by the
association.
(5) After the
inspection report has been completed, a copy of the completed inspection
report, and any photograph, indicating the pertinent features of the building,
maintenance, and occupancy shall be sent within ten days to the
association.
(6) The association
shall, within ten business days after receipt of the inspection report, advise
the applicant and his licensed agent that:
(a)
The risk is acceptable, and if condition charges have been imposed, the
improvements necessary to remove the condition charges; or
(b) The risk will be acceptable if the
improvements noted in the report are made by the applicant; or
(c) The risk is not acceptable for the
reasons stated in the report.
(7) The association shall not refuse to
insure any risk because of an environmental hazard.
(8) The association may, for cause upon
information or well-founded belief without notice to the insured at any time
during the policy term, cause a property insured by it to be inspected for the
purpose of determining whether the property meets the association's
underwriting standards. Reinspections may also be made upon the request of the
insured, for statistical purposes, upon change in type of occupancy, or upon a
reasonable periodic schedule. The association may, upon the basis of the report
of reinspection, refuse to renew or may cancel a policy in accordance with its
terms and this plan of operation. Any person aggrieved by such decision may
appeal, in accordance with paragraph (J) of this rule. The association need not
afford an insured the opportunity to be present during a reinspection nor
furnish the insured with a copy of a reinspection report. If an insured
requests a copy of a reinspection report, the association shall provide a copy
to the insured.
(9) If an
inspection report shows that a property is in violation of any building,
housing, air pollution, sanitation, health, fire or safety code, ordinance or
rule, or if an applicant otherwise has received written notice of any violation
of such a code, ordinance of rule, the applicant shall also submit to the
association a detailed plan that indicates the manner and estimated period of
time in which violation will be corrected.
If the association is satisfied that the violations are subject to correction
within a reasonable period of time and that the applicant otherwise meets the
requirements of section
3929.44
of the Revised Code, it may issue a policy or binder to the applicant on the
condition that the plan be implemented and completed on schedule and that the
property be reinspected.
(H) Application and issuance of policy
(1) Every policy written by the association
shall include an additional policy condition representing that:
(a) At least two insurance companies
authorized to do business in Ohio have declined to grant the coverage requested
in the application; and
(b) There
are no outstanding taxes, assessments, penalties or charges with respect to the
property to be insured; and
(c) The
applicant has not received written notice from an authorized public entity
stating that his property is in violation of any building, housing, air
pollution, sanitation, health, fire or safety code, ordinance or
rule.
(2) If the
property is in violation of any such code, ordinance or rule, and if the
applicant has received such written notice of any such violation, the applicant
shall submit to the association a detailed plan that indicates the manner and
estimated period of time in which such violations will be corrected.
If the association is satisfied that the
violations are subject to correction within a reasonable period of time and
that the applicant otherwise meets the requirements of section
3929.44
of the Revised Code, it may cause a policy or binder of basic property
insurance to be issued to the applicant on the condition that the plan be
implemented on schedule and that the property be reinspected.
(3) The association is under no obligation to
issue basic property insurance or homeowners insurance to any person, unless
that person and his or her property would be insurable in the normal insurance
market, and such property, except for its location, would constitute an
insurable risk in accordance with reasonable underwriting standards. The
association, in determining whether the property is insurable, shall give no
consideration to the condition of surrounding property or properties, where
such condition is not within the control of the applicant.
(4) If a risk is accepted by the association,
it shall deliver a policy or binder to the applicant and if applicable, the
licensed insurance agent, upon payment of the premium to the association. The
association shall pay the authorized commission to the licensed agent as
designated by the applicant. The association shall not pay commission to a
nonresident agent. The association may pay commission to a licensed nonresident
business entity agent for assistance provided by an individual resident agent
affiliated with that nonresident business entity agent.
(5) The association, upon receipt of the
applicable premium from the applicant, shall issue the policy to be effective
the day following receipt of the premium. The policy shall be issued in the
name of the association as provided in section
3929.481
of the Revised Code.
(6) The policy
shall be issued for a term of one year.
(7) If the property is found to be an
insurable risk but the inspection reveals that there are one or more
unsatisfactory conditions, charges will be imposed in conformity with the
rating plans on file with the superintendent. If the unsatisfactory conditions
are corrected, and such corrections are verified, the charges shall be
revised.
(8) If the association
determines that the property is not an acceptable risk, the association shall,
within ten days, send the applicant a written statement setting forth in
reasonable detail the features of the property or conditions which prevent it
from constituting an acceptable risk and the corrections to be made in order to
make the property an acceptable risk.
(9) Upon completion of the required
corrections by the applicant, the association, when notified, shall promptly
reinspect the property, if such reinspection is necessary to determine
eligibility.
(I) Binders
(1) Each application shall clearly indicate
the availability of a binder to an applicant.
(2) A binder shall be issued to the applicant
upon payment to the association of the minimum binder deposit premium and
provided the application indicates that the risk preliminarily meets the
association's underwriting standards. The earliest a binder shall be effective
is at one minute after twelve a.m. the day following receipt of the premium and
completed application by the association.
(3) If inspection is impossible through no
fault of the inspection company, the association may decline to offer coverage
until such time as the property becomes available for inspection.
(4) The binder shall remain in effect until
the risk is accepted by the association or until cancelled and the reasons for
cancellation given to the applicant.
(5) Binders shall be issued for a definite
period, not to exceed one year.
(6)
(a) If an insurance policy is to be issued,
the policy shall commence on the effective date of the binder. Policies so
issued are not subject to flat cancellation.
(b) If an insurance policy will not be
issued, the full earned premium must be charged subject to the rules governing
cancellation of policies.
(c) A
binder shall be void upon the acceptance of a risk by the association and the
payment of any additional premium indicated by an inspection; or upon the
cancellation of a risk and notice of reasons for the cancellation given to the
applicant.
(7)
(a) The association shall not cancel a policy
or binder issued by it, except:
(i) For cause,
which would have been grounds for nonacceptance of the risk had such cause been
known to the association at the time of acceptance; or
(ii) For nonpayment; or
(iii) At the request of an insured.
(b) Notice of cancellation,
together with the reasons therefore, shall be sent to the insured.
(c) Any cancellation notice to an insured
shall be accompanied by a statement that the insured has a right to appeal as
provided in paragraph (J) of this rule.
(8) If a property meets all underwriting
requirements, the association shall compute the actual annual premium from
rates approved by the superintendent of insurance pursuant to Chapter 3935. of
the Revised Code. A return premium will be forwarded to the applicant if the
provisional binder premium exceeds the actual annual premium. The association
shall request additional premium if the actual annual premium exceeds the
estimated provisional binder premium.
(9) If a property does not meet all
underwriting requirements, the association shall cancel the binder on a pro
rata basis. If an applicant requests cancellation of a binder, the association
shall cancel in accordance with cancellation provisions of the coverage forms
approved by the superintendent.
(J) Right to appeal
(1) Any applicant or insured shall have the
right to appeal any action or decision of the association to the board of the
association. Such appeal to the board must be made in writing within thirty
days after receipt of notice of the action or decision of the association.
Within forty-five days from receipt of an appeal, the board, upon no less than
ten days notice to the insured, shall hold a hearing on the appeal. For good
cause shown, by the insured or the association, the hearing may be continued
for not more than sixty days. The board shall render its decision on the appeal
and notify the applicant or insured of its decision no later than ten days
after the hearing. Each denial of insurance to an applicant shall be
accompanied by a statement to the applicant and the licensed agent that the
applicant has the right to appeal.
(2) Any applicant, insured, or member insurer
shall have the right to appeal to the superintendent any action or decision of
the board. An appeal shall be made within thirty days of the board's action or
decision. The decision of the superintendent of an appeal is a final order and
is subject to judicial review as provided in Chapter 119. of the Revised
Code.
(K) Indemnification
Each member of any association committee, each association officer, employee, or member insurer, and each member of the board shall be indemnified against liability incurred in connection with the affairs of the association. The conditions and limits of such indemnification are provided in "Article IX of the Constitution," "Articles of Agreement" and "Bylaws of the Association."
(L) Fidelity coverage
The association shall obtain fidelity coverage to reimburse the association for any pecuniary loss it may sustain by any act or acts of fraud or dishonesty on the part of members of the board, association officers or employees in the discharge of their duties.
(M) Board of governors
(1) The association shall be governed by a
board.
(2) The board shall meet as
often as may be required to perform the general duties of administration of the
association or on the call of the superintendent. Seven members of the board
shall constitute a quorum.
(3) The
board shall appoint a general manager as administrator who shall serve at the
pleasure of the board and perform such duties as the board
designates.
(4) The board may
promulgate guidelines consistent with state law and the plan of operation to
govern such internal operations as investments, personnel, underwriting
standards and claims practices. The guidelines shall be in writing and filed
with the superintendent.
(5) The
board shall undertake a public education program to assure that the services of
the association receive adequate public attention. In accordance with division
(I) of section
3929.43
of the Revised Code, the board shall adopt a written program for decreasing the
overall utilization of the association as a source of insurance.
(N) Standing committees
The board may appoint committees as it deems necessary to carry out the purpose and operations of the association.
(O) Relationship with member insurers
(1) The association shall operate as a joint
underwriting association insuring one hundred per cent of the risk on behalf of
its member insurers. It may cede or purchase reinsurance in the name of the
association or on behalf of member insurers on eligible risks written through
the association.
(2) Each member
insurer shall participate in the writings, expenses, assessments, profits and
losses of the association in the same proportion as a member insurer's premiums
written bear to the aggregate premiums written by all member insurers as
determined by the board.
(3) There
shall be an annual meeting of the association and its member insurers at a time
and place fixed by the superintendent. Representatives of member insurers on
the board shall serve for a period of one year or until successors are elected
or designated.
(4) A special
meeting may be called at such time and place designated by the superintendent
or upon the written request to the superintendent.
(5) Twenty days notice of an annual or
special meeting shall be given in writing by the board to member insurers. A
majority of member insurers present at a meeting shall constitute a quorum.
Voting by proxy shall be permitted. Notice of any meeting shall be accompanied
by an agenda for the meeting.
(6)
Any matter may be proposed and voted upon by regular mail, email or other
electronic means provided such procedure is unanimously authorized by the
members of the board present and voting at any meeting of the board. If so
approved by the board, notice of any proposal shall be mailed to member
insurers not less than twenty days prior to the final date fixed by the board
for voting thereon.
(7) At any
regular or special meeting at which the vote of member insurers is or may be
required on any proposal, or any vote of member insurers which may be taken by
regular mail, email or other electronic means on any proposal, votes shall be
cast and counted on a weighted basis in accordance with each member insurer's
respective habitational or commercial premiums written, as the case may
be.
(P) Member insolvency
(1) In the event any member insurer
fails to pay the assessment for its proportionate part of any loss or expense
because the member insurer is insolvent, and the board determines that the
assessment cannot be collected within a reasonable period of time, the unpaid
assessment shall be paid by the remaining member insurers, each contributing in
the manner provided by division (E) of section
3929.43
of the Revised Code, but without regard to the premium writings of the
insolvent member insurer. The insolvent member insurer shall remain liable to
the association for the full amount of the assessment and any collection made
by the association against the assessment shall be credited and paid back to
the other member insurers in the same proportions as shall have been utilized
in calculating each member insurer's contribution toward the unpaid
assessment.
(2) No refund which
would otherwise be paid under the plan of operation shall be paid to a member
when its membership has been terminated, or to the liquidator, receiver,
conservator, or statutory successor of a member insurer until the assessment of
the member insurer has been paid. A refund shall be applied as a set-off
against an assessment. Any balance remaining shall be paid to the member
insurer or to the liquidator, receiver, conservator, or statutory successor of
the member insurer.
(Q) Advance assessments and recoupments
(1) At
such times as may be determined by the board and approved by the
superintendent, the board shall establish an annual rate of assessment needed
to cover any deficit arising out of the operation of the association. The rate
of assessment shall be based upon a reasonable estimate of a deficit expected
to occur. The association may levy advance assessments at that rate against
member insurers, payable in periodic installments, subject to approval by the
superintendent.
(2) The board may
at any time levy an assessment against member insurers to provide necessary
operating funds.
(3) Each member
insurer may recoup assessments levied against it by adjusting its premiums for
basic property insurance and homeowner's insurance by the addition of a rating
factor computed from time to time by the board and approved by the
superintendent. The board shall notify all member insurers of the amount of the
rating factor and any changes to it.
(4) Any member insurer implementing a change
in rates pursuant to division (D)(2) of section
3929.43
of the Revised Code, shall file the change with the superintendent. The change
shall not increase rates more than the amount authorized by the association and
approved by the superintendent pursuant to the plan.
(R) Reinsurance
No reinsurance plan or proposal of the association shall be implemented prior to being filed with the superintendent.
(S) Statistics
(1) Every insurance policy issued by the
association shall be separately coded for statistical purposes.
(2) The association shall comply with any
reporting requirements of the superintendent in respect of its underwriting
operations and experience. The reports shall be made at least annually in such
form and detail as may be required by the superintendent under section
3935.03 of the
Revised Code.
(3) The association
shall report its loss and expense experience to a statistical organization
approved by the superintendent. Its loss and expense experience shall be
reported in a form and according to a plan filed by the statistical
organization with the superintendent.
(4) The association shall submit to the
superintendent periodic reports concerning the number of risks inspected, the
number of risks accepted, the number of risks conditionally accepted, the
number of reinspections made and the number of risks declined.
(T) Distribution of associated funds
Ten days prior to the distribution to its member insurers of any funds held by the association, notification shall be given to the superintendent.
(U) Filing of policies and other documents
All policies, endorsements, forms, manual rates or rating plans, minimum class rates, rating schedules, rating rules, and every modification of the same shall be those filed with the superintendent. The association may file special notice endorsements for review by the superintendent. In the event that the superintendent approves a rating factor under paragraph (Q)(3) of this rule, such increment shall be applicable to all policies issued by the association.
(V) Annual and quarterly financial statements
The association shall file annual and quarterly financial statements with the superintendent in the form prescribed by the superintendent. Annual financial statements shall be prepared and furnished to the superintendent on or before March first of the following year.
(W) Examination of books and records
The superintendent or any person designated by the superintendent may examine the operation of the association in accordance with section 3929.45 of the Revised Code. The expenses of the examination shall be paid by the association.
(X) Investments
The association shall invest its funds in accordance with section 3925.08 of the Revised Code.
(Y) General powers of superintendent
(1) The plan
of operation and any amendment thereto shall be subject to the approval of the
superintendent and adopted pursuant to Chapter 119. of the Revised
Code.
(2) The plan of operation
shall be administered under the supervision of the superintendent.
(3) The association shall submit to the
superintendent periodic reports as the superintendent deems
necessary.
(Z) Severability
If any paragraph, term or provision of this rule is adjudged invalid for any reason, the judgment shall not affect, impair or invalidate any other paragraph, term or provision of this rule, but the remaining paragraphs, terms and provisions shall be and continue in full force and effect.
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