2023 Laws of Puerto Rico › TITLE TWENTY-SIX - Insurance (§§ 101 — 10377) › Subtitle 1 - Insurance Generally (§§ 101 — 4513) › Chapter 41 - Medical-Hospital Professional Liability Insurance (§§ 4101 — 4111) › § 4104 - Insurers—Syndicate; operating plan

A Medical/Hospital Malpractice Insurance Joint Underwriters Syndicate is hereby created to provide such insurance to qualified applicants. The Syndicate shall be composed of all insurers in Puerto Rico authorized to contract any type of insurance as defined in §§ 404–409 of this title. Said insurers shall be members of the Syndicate and their participation in it shall be an indispensable condition for them to be able to continue underwriting insurance in the Commonwealth of Puerto Rico.
(1) The purpose of the Syndicate is to provide medical-hospital professional malpractice insurance to qualified applicants. The Syndicate shall be obliged to provide the limits established in § 4105 of this title. The Syndicate may opt to underwrite limits in excess of those established in § 4105 of this title, for the rate classifications, provided this does not affect the financial situation of the Syndicate.
(2) The Syndicate shall have the power to issue, with regard to the medical-hospital professional malpractice insurance, insurance policies to qualified applicants and to cede and assume reinsurance. Likewise, the Syndicate shall be empowered to issue, at its discretion, public liability insurance policies to those qualified applicants to whom it has issued professional malpractice insurance policies. The Syndicate shall not be subject to the provisions of § 329 of this title, and shall not be bound to transact its insurance through agents or brokers. Neither shall qualified applicants be bound to use agents or brokers to place their insurance with the Syndicate. With the consent of the Commissioner, the Syndicate may delegate on one or more of its members who wish to do so and who do not participate in the open market, or in any other entity, to service its policies and claims on its behalf. The member or entity to be chosen shall be selected through a process of competitive biddings without the cost of the bid necessarily being a determining factor in said selection. In evaluating said selection, the Commissioner shall have the proper authority to ensure that the entity is chosen which proves it has the greatest capability to penetrate the market and provide its services to all geographic areas of the country, safeguard the competitive side of the Syndicate and ensure the most efficient operation thereof.
(3) The Syndicate shall operate under the direction of a Board of Directors composed of nine (9) members. It shall consist of five (5) insurers elected by the insurers who are members of the Syndicate or their authorized representatives, which in the case of a local insurer shall be the respective presidents, and in the case of a foreign insurer shall be its principal officers in Puerto Rico; one (1) private citizen representing the public interest, who may not have any substantial financial interest in health services or insurance providers; one (1) representative of the Department of Health of Puerto Rico, who shall be its Secretary, one (1) representative of the Board of Medical Examiners and one (1) representative of the Puerto Rico Surgeons Association. The directors shall be elected for staggered terms as follows: three (3) directors that represent insurers who are members of the Syndicate shall be appointed for three (3) years and the remaining directors shall hold office for two (2) years. The remaining directors shall be appointed by the Governor of Puerto Rico for a term of three (3) years each and shall hold office until their successors are appointed and take office.
In the case of the representatives of the Board of Medical Examiners and the Puerto Rico Surgeons Association, the Governor shall appoint their representatives with the recommendation of said private entities.
The full Board shall elect the administrator of the Syndicate, who shall not be a director.
(4) The Commissioner of Insurance shall convoke all of the members of the Syndicate annually for the election of the new members of the Board of Directors through a notice to such effects issued at least fifteen (15) days prior to the date the meeting is to be held, and such notice shall specify the date, hour and place said meeting shall take place. The members’ votes in said election shall be weighed in the proportion that the net direct premiums underwritten by each member in the types of insurance mentioned in this section during the former calendar year have to the total direct net premiums underwritten in Puerto Rico for said lines of insurance by all Syndicate members in said year. The members of the Board of Directors shall elect the Chairman and other officers from among themselves according to the standards established by regulations. The Board shall be empowered to designate the Syndicate’s executives and officers.
(5) The insurers that participate in the open market shall have all the rights that the other Syndicate members have, including access to all information that, in the Board of Directors’ judgment, does not place them in a privileged competitive position nor injure the Syndicate’s opportunities to compete with regard to said insurers.
(6) The insurers who operate on the open market as well as the Syndicate shall provide all qualified applicants with medico-hospital professional liability insurance coverage in a uniform insurance policy form for all health service professionals and health care institutions. Said uniform policy form shall meet the requirements established in §§ 1101–1137 of this title, and shall include a clause guaranteeing the right of the insured to be issued line coverage for an undefined term in case his/her coverage for withdrawal or voluntary or involuntary separation from the profession lapses, or in case of the liquidation or closing down of the operations of a health care institution. Said form shall also establish the premium rates that apply to the policy. Likewise, said policy shall contain a clause that provides that in the case of sudden death or total disability of the insured who has not purchased the line coverage, his heirs or tutor, as the case may be, shall be issued line coverage, provided the insured has paid the corresponding premium for the right to exercise this option.
The premium for line coverage shall not exceed double the premium that the insured has paid for the last medico-hospital professional liability coverage, prior to the line coverage, unless in public hearings here required, it is shown beyond reasonable doubt that a greater increase is imposed than that indicated for the premium to be adequate.
The Commissioner shall not approve an increase establishing the rates of premium applicable to the policy without previously holding public hearings where the affected insured, as well as the Syndicate, the insurers who participate in the free market, and any other interested person have an opportunity to express their points of view and to present the reports, documents or actuarial studies deemed pertinent to sustain their position. The Commissioner shall notify the affected parties on the holding of public hearings for the increase in the types of premium, through the publication of a notice, on two occasions within a period of thirty (30) days in a newspaper of general circulation. Such notice shall be made sixty (60) days before holding public hearings. Any decision made by the Commissioner shall be subject to judicial review according to § 226 of this title.
The Commissioner shall review the policy premiums for medical malpractice insurance every two (2) years, according to regulations implemented by the Commissioner for this purpose. However, the Commissioner may hold public hearings for this purpose within the period of two (2) years if conditions and circumstances of the industry or of the medical class so require it.
(7) The Syndicate shall have the general corporate powers established in § 2905 of this title and may sue and be sued and negotiate such contracts that are proper to carry out its purposes.
(8) The Syndicate shall adopt an operating plan within sixty (60) days of being constituted, subject to the approval of the Commissioner, which shall be effective ten (10) days after having been approved by the latter. Should the Commissioner fail to approve the plan in whole or in part, the Board of Directors of the Syndicate shall submit the duly amended and revised plan within fifteen (15) working days after notice of said disapproval and should the Board fail to submit said new plan or should it not be acceptable, the Commissioner shall promulgate his/her own plan or the corresponding part thereof, as the case may be.
The plan shall provide for an efficient, economical, fair and nondiscriminatory administration and for the prompt and efficient marketing of the medical-hospital professional malpractice insurance which will strengthen the competitiveness of the Syndicate in the insurance market and guarantees access to the service to potential insurers. The Board of Directors may, on its own initiative, or at the request of the Commissioner, amend the operating plan, subject to the approval of the Commissioner.
Without it being construed as a limitation, said plan shall contain the following:
(a) The standards, organization and procedures for the administration of the Syndicate, including the designation of the officials that the Board of Directors deems necessary.
(b) The rates, rating plans and rating rules that apply to health service professionals and health care institutions as well as the statistics related to the experience for those two (2) categories of insured; all subject to the provisions of §§ 1201–1240 of this title.
Recognizing the importance of the responsibility of this Syndicate, the Commissioner shall ascertain that the rates are not excessive, inadequate or unfairly unequal.
(c) The rating rules and plans registered with regard to the Plan shall provide standards for the application of surcharges for risks with adverse experience. Such rating rules and plans shall provide for the prompt elimination of said surcharges once the experience returns to normal. Standards may also be provided for risk classification that reflects the experience of losses and expenditures in the different specialties of the practice of the health service professionals or health care institutions, and to recognize the cost of specialist’s reinsurance in the case of risks which merit it because of their nature or the limits of the coverage.
(9) The Commissioner shall be responsible for safeguarding the Syndicate’s right to compete on the open market. To such effects he shall see to it that:
(a) The Syndicate retains the reserves required by law;
(b) the insurers who participate in said market do not use their membership in the Syndicate to limit or weaken the Syndicate’s competitive status, and
(c) the Syndicate’s Board of Directors shall always keep the health service professionals and the health care institutions well informed of the fact that [the] Syndicate is a competitive insurer, and of the services it offers, its rates and its financial responsibility based on the financial backing of the insurance industry. The Commissioner shall require the Syndicate to divulge said information broadly and that, among other measures, it sends [to] each and every one of the health professionals and health care institutions, annually, a written communication containing said information.
(10)
(a) All insurers who are members of the Syndicate shall share in its profits and losses in the proportion that the direct net premiums for the types of insurance specified in § 4103 of this title, underwritten in Puerto Rico by each of said members during the year preceding the year in which the profits or losses are declared, represent to the total of the direct net premiums underwritten in Puerto Rico by all of said members during the preceding year, for said types of insurance.
(b) To these purposes, the Commissioner shall certify to the Syndicate the direct net premiums underwritten during said previous year and the proportions corresponding to the various members of the Syndicate, pursuant to the formulas established in clause (a) of this subsection.
(c) At their option, and subject to the standards established to such effects by the Syndicate, the insurers who are members thereof may participate therein in a higher percentage than that indicated above.
(d) The criteria to participate in the Syndicate may apply to the underwriting of the types of insurance specified in § 4103 of this title, separately, if it is thus provided in the plan.
(e) If an insurer who is a member of the Syndicate becomes insolvent, the obligations contracted by said insurer with the Syndicate shall be distributed among all the other members of the Syndicate in the corresponding proportions as provided in this section. Said insurers shall, in turn, be entitled to claim said sums from the Insurance Guaranty Association created in §§ 3801–3819 of this title.
In those cases in which an insurer retires from the market he shall be obliged to continue his responsibility with the Syndicate until his obligations are extinguished, in the same proportion he had at the date of his retirement.
(11) Any profits obtained from the operation of the Syndicate, as well as any profit that reverts to the participants, shall be exempted from the payment of income taxes. Likewise, the Syndicate shall be exempted from the payment of personal property taxes related to the investments in securities.
(12) The Commissioner shall be empowered to regulate the Syndicate’s operations pursuant to the provisions of this title and in those areas it deems pertinent, especially to ensure its competitive nature and with regard to the use of agents and brokers and the payment of commissions.
(13) Neither the Board of Directors of the Syndicate nor its directors, shall incur financial liability for any action taken in the performance of their duties and powers under this chapter, in their personal or individual capacity, which in the case of insurer members shall mean both the insurer and its representative before the Board of Directors, nor the Syndicate officials, provided they do not act in violation of their fiduciary duties to the Syndicate, or incur any action which directly or indirectly impairs the competitive position, the financial interests or the participation of the Syndicate in the market, or act intentionally to cause damages or are knowingly aware that they may cause any damage.
(14) Any members of the Board of Directors who individually or jointly among themselves or in conjunction with other members of the Syndicate, and acting in violation of their fiduciary duties regarding the Syndicate, incur any action which, directly or indirectly impairs the competitive position, the financial interests or the participation of the Syndicate in the market; use or disclose inside information of the Syndicate which is not equally accessible to other insurer members, or allow the disclosure of inside information with the purpose of harming or benefiting insurers that participate in the free market, shall be individually or collectively liable, as the case may be, to the Syndicate, or to the damaged insurer member, for an amount equal to three (3) times the financial losses that said actions may have caused the latter.
History —Ins. Code, added as § 41.040 on Dec. 30, 1986, No. 4, p. 869, § 1; Aug. 5, 1993, No. 55, § 1; Aug. 23, 1997, No. 99, § 1; Aug. 29, 2002, No. 223, § 1; Dec. 19, 2002, No. 284, § 6; May 21, 2004, No. 119, § 1; Sept. 17, 2004, No. 378, § 1.