An Act To Authorize the Superintendent of Insurance To Establish a Fair Access to Insurance Requirements Plan (AFfER DEADLINE)
Maine Legislature, Session 121, LD 1601
Committee: Insurance and Financial Services
Sponsors: MA YO, O'NEIL, DAGGETT, DA VIS, MARTIN, TREAT, TURNER, WOODCOCK, COLWELL

Legislative Document 
No. 1601 
S.P.554 
In Senate, May 5, 2003 
An Act To Authorize the Superintendent of Insurance To Establish 
a Fair Access to Insurance Requirements Plan 
(AFfER DEADLINE) 
Approved for introduction by a majority of the Legislative Council pursuant to Joint Rule 
205. 
Reference to the Committee on Insurance and Financial Services suggested and ordered 
printed. 
Presented by Senator MA YO of Sagadahoc. 
Cosponsored by Representative O'NEIL of Saco and 
JOY J. O'BRIEN 
Secretary of the Senate 
Senators: President DAGGETT of Kennebec, DA VIS of Piscataquis, LaFOUNTAIN of York, 
MARTIN of Aroostook, TREAT of Kennebec, TURNER of Cumberland, WOODCOCK of 
Franklin, Representative: Speaker COLWELL of Gardiner. 
Printed on recycled paper 
Be it enacted by the People of the State of Maine as follows: 
Sec. I. 24-A MRS A §3043 is enacted to read: 
53043. 
Fair access to insurance requirements plan 
1. 
Definitions. 
As 
used 
in this 
section, 
unless 
the 
context 
otherwise 
indicates, 
the 
following 
terms 
have 
the 
following meanings. 
A. 
"FAIR Access to Insurance Re'iluirements Plan" or "FAIR 
Plan" means the plan that the superintendent may establish 
pursuant to subsection 2. 
So 
"FAIR 
Plan 
Association" 
or 
"association" 
means 
a 
nonprofit association established pursuant to this section 
to develop and administer a program to provide residential 
property insurance in designated underserved areas in this 
State. 
C. 
"Insurer" means any licensed insurer writing property 
and casualty insurance in this State, including: 
(1) 
A Lloyd's plan company: and 
(2) 
A reciprocal or interinsurance exchange. 
D. 
"Residential 
property 
insurance" 
means 
the 
coverage 
against loss to real or tangible personal property at a 
fixed location provided in a homeowner's policy, residential 
fire and allied lines policy or farm owner's policy. 
Eo 
"Inspection 
bureau" 
means 
the 
organization 
or 
organizations designated by the FAIR Plan Association with 
the approval of the superintendent to make inspections to 
determine 
the 
condition 
of 
the 
properties 
for 
which 
residential property insurance is sought and to perform such 
other 
duties 
as 
may 
be 
authorized 
by 
the 
FAIR 
Plan 
Association or the superintendent. 
The manner and scope of 
the 
inspection 
and 
evaluation 
report 
for 
residential 
property must be prescribed by the association pursuant to 
the plan of operation. 
F. 
"Net 
direct 
premiums" 
means 
gross 
direct 
written 
premiums 
less 
return 
premiums 
upon 
canceled 
contracts, 
irrespective of reinsurance assumed or ceded, written on 
residential property pursuant to this section. 
G. 
"Underserved 
area" 
means 
an 
area 
designated 
as 
underserved by the superintendent. 
Page l-LR2026(1) 
2. 
Authority. 
If the superintendent determines, after a 
public hearing, that in all or any part of the State residential 
property insurance is not reasonably available in the voluntary 
market to a substantial number of insurable risks and that at 
least 50% of the applicants to the residential property market 
assistance program pursuant to subsection 4 who are qualified 
under the plan of operation, after the superintendent has made 
insurer participation mandatory 
under 
the plan of 
operation 
pursuant to subsection 3, have not been placed with an insurer in 
the previous 12 month period, the superintendent may establish 
the Fair Access to Insurance Requirements Plan, or FAIR Plan, to 
deliver residential property insurance to citizens of this State 
in underserved areas that must be determined and designated by 
the superintendent by rule. 
Each insurer, as a condition of its 
authority to transact residential property insurance in this 
State, 
shall 
participate 
in 
the 
FAIR 
Plan 
Association 
in 
accordance with this section. 
3. 
Governing cOlIDittee; plan of qperation. 
The FAIR Plan 
is administered as fOllows. 
A. 
The FAIR Plan must be administered by the governing 
committee 
of 
the 
association, 
appointed 
according 
to 
paragraph B, pursuant to a plan of operation. 
Subject to 
the approval of the superintendent. the governing committee 
~~all develop a plan of operation and propose amendments to 
the plan of operation. 
The 
plan of operation and 
any 
amendments to the plan of operation must be adopted by the 
superintendent by rule. 
The governing committee may on its 
own initiative or at the request of the superintendent amend 
the plan of operation. 
B. 
The governing committee of the association is composed 
of 11 members appointed by the superintendent as follows: 
(1) 
Five 
members 
who 
represent 
the 
interests 
of 
insurers; 
(2) 
Four PUblic members; and 
(3) 
Two members who are licensed producers. 
The 
superintendent 
or 
the 
superintendent I s 
designated 
representative 
from 
within 
the 
bureau serves 
as 
an 
ex 
Officio, nonvoting member. 
To be eligible to serve on the governing committee as a 
representative of insurers, 
a person must be a full-time 
employee of an authorized insurer. 
C, 
The plan of operation must provide: 
(1) 
For the issuing of residential property insurance 
pursuant to this section and the distribution of the 
losses 
and 
the 
expenses 
in 
the 
writing 
of 
such 
insurance in this State: 
(2) 
That all insurers writing residential property 
insurance shall participate in the writings. expenses. 
profits 
and 
losses 
of 
the 
association. 
in 
the 
proportion 
that 
the 
net 
direct 
premiums 
of 
each 
participating insurer written in this State during the 
preceding calendar year bear 
to 
the 
aggregate net 
direct 
premium 
written 
in 
this 
State 
by 
all 
participating 
insurers, 
This 
information 
must 
be 
determined in accordance with a residential property 
statistical plan adopted by the superintendent: 
(3) 
That 
a 
participating 
insurer 
is entitled to 
receive 
credit 
for 
similar 
insurance 
VOluntarily 
written 
in 
a 
designated 
underserved 
area 
and 
its 
participation in the writings in the association must 
be reduced in accordance with the provisions of the 
plan of operation: 
(4) 
For the immediate binding of eligible risks: for 
the use of premium installment payment plans. adeguate 
marketing 
and 
service 
facilities: 
and 
for 
the 
establishment of reasonable service standards; 
(5) 
Procedures for efficient, economical, 
fair 
and 
nondiscriminatory 
administration 
of 
the 
FAIR 
Plan 
Association; 
(6) 
Procedures 
for 
determining 
the 
net 
level 
of 
participation reguired for each insurer in the FAIR 
Plan Association; 
(7) 
For the use of deductibles and other underwriting 
devices 
and 
for 
assessment 
of 
all 
participating 
insurers 
in 
amounts 
sufficient 
to 
operate 
the 
association: 
the establishment of maximum limits of 
liability to be placed through the association; 
and 
commissions 
to 
be 
paid 
to 
the 
licensed 
agents 
submitting applications; 
( 8) 
That the association issue policies in its own 
(9) 
Reasonable underwriting standards for determining 
insurability of the risk; 
(10) 
Procedures 
for 
the 
assumption 
and 
ceding of 
reinsurance by the association; and 
(11) 
Any 
other 
procedures 
or 
operational 
matters 
considered necessary by the governing committee or the 
superintendent. 
4. 
FAIR Plan Association. 
Pursuant 
to 
procedures 
and 
reguirements set forth in the plan of operation under subsection 
3, 
paragraph C, 
the 
FAIR 
Plan Association shall develop and 
administer a program for participation by all insurers writing 
residential property insurance in this State. 
The association 
shall make residential property insurance available to applicants 
in underserved areas whose property is insurable in accordance 
with reasonable underwriting standards but who, after diligent 
efforts, 
are 
unable 
to 
procure 
such 
insurance 
through 
the 
voluntary market as evidenced by 2 declinations from insurers 
actually writing residential property insurance in the State. 
5. 
Powers 
of 
association: 
centralized 
operations 
authorized. 
The 
following 
are 
the 
powers 
and 
centralized 
operations of the association. 
A. 
The association is authorized, for FAIR Plan purposes 
only, to issue policies of insurance and endorsements to 
policies of insurance in its own name or a trade name duly 
adopted 
for that purpose 
and 
to act on behalf of all 
participating insurers in connection with these policies and 
otherwise in any manner necessary to accomplish the purposes 
of this section, including, but not limited to, issuance of 
policies, collection of premiums, issuance of cancellations 
and payment of commissions, losses, judgments and expenses. 
B. 
The participating insurers are liable to the association 
as provided in this section and the plan of operation for 
the expenses and liabilities so incurred by the association, 
and 
the 
association shall 
make 
assessments 
against 
the 
participating insurers as required to meet such expenses and 
liabilities. 
In connection with any policy issued by the 
association: 
(1) 
Service 
of 
any 
notice, 
proof 
of 
loss, 
legal 
process or other communication with respect to the 
policy must be made upon the association; and 
(2) 
Any action by the insured constituting a 
claim 
under 
the 
policy 
may 
be 
brought only against 
the 
association. and the association is the proper party 
for all purposes in any action brought under or in 
connection with any such policy. 
The requirements in subparagraph (1) and subparagraph (2) 
must be set forth in any policy issued by the association 
and the form and content of any such policy are subject to 
the approval of the superintendent. 
C. 
The 
association is 
authorized 
to 
assume 
and 
cede 
reinsurance in conformity with the plan of operation. 
D. 
Each insurer must participate in the writings, expenses, 
profits and losses of the association in the proportion that 
its net direct premiums written bear to the aggregate net 
direct premiums written by all insurers. 
6. 
PrQPerty inspection: FAIR Plan procedure. 
The following 
provisions govern property inspection and FAIR Plan procedure. 
A. 
Any person having an insurable interest in real or 
tangible 
personal 
property 
at 
a 
fixed 
location 
in 
an 
underserved area who. after diligent effort, has been unable 
to obtain residential property insurance. as evidenced by 2 
current 
declinations 
from 
insurers 
actually 
writing 
residential property insurance in the State, is entitled 
upon application to the association to an inspection and 
evaluation 
of 
the 
property 
by 
representatives 
of 
the 
inspection bureau. 
B. 
An application may be made on behalf of the applicant by 
a 
licensed 
producer 
and 
must 
be 
submitted 
on 
a 
form 
prescribed by the association. 
C. 
Promptly after the reg:uest 
an inspection must be made and 
with the association and made 
upon reg:uest. 
for inspection is received, 
an inspection report filed 
available to the applicant 
D. 
If the inspection bureau finds that the residential 
property 
meets 
the 
reasonable 
underwriting 
standards 
established in the plan of operation, the applicant must be 
so informed in writing and a policy or binder must be issued 
by the association. 
If the residential property does not 
meet 
the criteria, 
the 
applicant must 
be 
informed, 
in 
writing, of the reasons for the failure of the residential 
property to meet the criteria. 
E. 
If, at any time, the applicant makes improvements in the 
residential property or its condition that the applicant 
believes are sufficient to make the residential property 
meet the criteria, a representative of the inspection bureau 
shall reinspect the residential property upon request. In 
any case, the applicant for residential property insurance 
is eligible for one reinspection any time within 60 days 
after 
the 
initial 
FAIR 
Plan 
inspection. 
If 
upon 
reinspection the residential property meets the reasonable 
underwriting standards established in the plan of operation, 
the applicant must be so informed in writing and a policy or 
binder must be issued by the association. 
1. 
Approval of rates. 
The association shall file with the 
superintendent for approval the proposed rates and supplemental 
rate information to be used in connection with the issuance of 
policies 
or 
endorsements. 
Rates 
must 
be 
set in 
an 
amount 
sufficient to carryall claims to maturity and to meet the 
expenses incurred in the writing and servicing of the business. 
Within 
days 
of 
the 
filing 
of 
the 
proposed 
rates, 
the 
superintendent 
shall 
enter 
an 
order 
either 
approving 
or 
disapproving, 
in whole or in part, 
the proposed rates. 
The 
superintendent may, 
upon notice to the association, extend the 
period for entering an order under this section an additional 30 
days. 
Such a policy or endorsement may not be issued until such 
time as the superintendent approves the rates to be applied to 
the policy or endorsement. 
An order disapproving a rate must 
state the grounds for the disapproval and the findings in support 
of the disapproval. 
8. 
Appeals: 
judicial 
review. 
The 
following provisions 
govern appeals and judicial review. 
A. 
Any applicant or affected insurer has 
the right of 
appeal to the superintendent. 
A decision of the association 
may be appealed to the superintendent within 30 days after 
such decision. 
B. 
All orders or decisions of the 
superintendent made 
pursuant to this section constitute final agency action and 
are subject to judicial review in accordance with the Maine 
Administrative Procedure Act. 
9. 
Immunity from liability. 
There is no liability on the 
part of and no cause of action against insurers, the inspection 
bureau, the association, the governing committee or their agents 
or 
employees 
or 
the 
superintendent 
or 
the 
superintendent's 
authorized 
representatives 
with 
respect 
to 
any 
inspection 
required to be undertaken by this section or for any acts or 
omissions 
in connection with 
such 
an inspection or 
for 
any 
statements made in any report and communication concerning the 
insurability of the property, in the findings required by the 
provisions 
of this section or at the hearings 
conducted in 
connection with such an inspection. 
10. 
Insolvency. 
In the event any participating insurer 
fails, 
by 
reason of 
insolvency, 
to pay 
any assessment, 
the 
association 
shall 
cause 
the 
reimbursement 
ratios 
to 
be 
immediately recalculated, excluding from this recalculation the 
amount of the insolvent insurer's assessment determined by the 
super intendent to be uncollectible, so that such uncollectible 
amount 
is, 
in effect, 
assumed 
and 
redistributed 
among 
the 
remaining participating insurers. 
11. 
AsseSsments 
and 
premium 
surcharges. 
If 
a 
deficit 
occurs 
in 
the 
association, 
the 
association 
shall 
assess 
participating insurers in accordance with this subsection and 
each insurer may charge a premium surcharge on every property 
insurance policy issued by it insuring property in this State, 
the effective date of which policy is within the 3-year period 
commencing 
days 
after 
the 
date 
of 
assessment 
by 
the 
association. 
The amount of the surcharge must be calculated on 
the basis of a uniform percentage of the premium on such policies 
equal 
to 
1/3 
of 
the 
ratio 
of 
the 
amount 
of 
an 
insurer's 
assessment 
to 
the 
amount 
of its direct 
earned 
premiums 
as 
reported 
in its financial 
statement 
to 
the 
bureau 
for 
the 
calendar 
year 
immediately 
preceding 
the 
year 
in 
which 
the 
assessment is made, 
such that over the period of 3 years the 
aggregate of all such surcharges by an insurer equals the amount 
of the assessment of such insurer. 
The minimum surcharge on a 
policy is $1. 
A surcharge may be rounded to the nearest dollar. 
12. 
Sanctions. 
If the association, inspection bureau or a 
participating insurer is found 
to be 
in violation of or in 
failure to comply with this section, such entity is subject to 
the penalties authorized in section 12-A. 
The superintendent may 
also utilize any other disciplinary procedures authorized by this 
Title, including the cease and desist procedures authorized by 
section 12-A. 
13. 
Annual 
report. 
The 
association 
shall 
compile 
a 
calendar year annual operating report and submit this annual 
report to the superintendent and the joint standing committee of 
the Legislature having jurisdiction over insurance and financial 
services matters 
on 
or 
before 
March 
31st of 
the 
following 
calendar year. 
The annual report is a public record as defined 
in Title 1, section 402, subsection 3. 
14. 
Powers of superintendent. 
In addition to any powers 
conferred upon the superintendent by this section or any other 
law, the superintendent shall supervise the association and the 
inspection bureau. In addition, the superintendent may: 
A, 
Examine 
the 
operation 
of 
the 
association 
and 
the 
inspection bureau through free access to all the books, 
records, 
files, 
papers 
and 
documents 
relating to their 
operation and may summon, gualify and examine as witnesses 
all persons having knowledge of such operations, including 
the governing committee or officers or employees of the 
association; 
B. 
Do all things necessary to enable the State and the 
association to fully participate in any federal program of 
reinsurance that may be enacted for purposes similar to the 
purposes of this section; 
C. 
Reguire such reports 
from the association concerning 
risks insured by the association pursuant to this section as 
may be considered necessary; 
D. 
Adopt policy forms, endorsements, rates and rating and 
rule manuals for use by the association; and 
E. 
Establish 
a 
consumer 
education 
program 
designed 
to 
increase the ability of consumers to differentiate among 
different 
products 
and 
providers 
in 
the 
property 
and 
casualty market. 
15. 
Rules. 
The superintendent may adopt rules to implement 
this section. 
Rule 
adopted pursuant to this subsection are 
routine technical rules as defined in Title 5, 
chapter 
375, 
subchapter 2-A. 
SUMMARY 
This bill provides that the Superintendent of Insurance may 
establish a Fair Access to Insurance Requirements Plan, or FAIR 
Plan, 
under 
certain 
circumstances, 
if 
the 
superintendent 
determines, after a public hearing, that in all or any part of 
the 
State 
residential 
property 
insurance 
is 
not 
reasonably 
available in the voluntary market to a substantial number of 
insurable 
risks. 
The 
FAIR 
Plan 
would 
be 
developed 
and 
administered 
by 
the 
FAIR 
Plan 
Association, 
a 
nonprofit 
association appointed by the superintendent that includes members 
from 
the 
~nsurance industry and 
the public. 
The 
FAIR 
Plan 
Association 
would 
develop 
and 
administer 
a 
program 
for 
participation 
by 
all 
licensed 
insurers 
writing 
residential 
property insurance in this State that would make residential 
property insurance available to applicants in underserved areas 
whose 
property 
is 
insurable 
in 
accordance 
with 
reasonable 
underwriting 
standards 
but 
who, 
after diligent efforts, 
are 
unable to procure such insurance through the voluntary market, as 
evidenced 
by 
declinations 
from 
insurers 
actually writing 
residential property insurance in this State.