3901-1-18 Ohio fair plan - plan of operation.| (A) | Purpose | | The purpose of this rule is for adoption by the superintendent of a plan of operation submitted by theboard of governors of the "Ohio Fair Plan Underwriting Association". The plan of operation has beenformulated for the purpose of making basic property and homeowners' insurance coverage, as identifiedin section3929.42of the Revised Code, available for qualified property owned by persons who have beenunable to secure such insurance in the normal insurance market. | | (B) | Authority | | This rule is promulgated pursuant to the authority vested in the superintendent undersection 3901.041 of the Revised Code. This plan of operation is adopted pursuant to section3929.43of the Revised Code, and implements sections3929.41 to3929.49of the Revised Code. | | (C) | Definitions | | | (1) | "Association" means the "Ohio Fair Plan Underwriting Association" created undersection 3929.43of the Revised Code. | | (2) | "Basic property insurance" means insurance against direct loss to property asdefined and limited in standard fire policies and extended coverage endorsem*ntsthereon, as approved by the superintendent, and insurance for such types, classesand 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 againstthe perils of burglary, robbery, and theft for properties. Such coverage is to be provided byseparate policies. Basic property insurance does not include automobile insuranceor insurance on manufacturing risks. | | (3) | “Environmental hazard” means any hazardous condition that might give rise toloss under an insurance contract, but which is beyond the control of the propertyowner. | | (4) | “Insurable risks” means property that meets the reasonable underwriting standardsof the association. | | (5) | “Underwriting standards” means the underwriting standards for basic propertyinsurance and homeowners’ insurance which have been filed with the superintendent. | | (6) | “Homeowners’ insurance” means insurance on owner-occupied dwellings providingpersonal multi-peril property and liability coverages, commonly known ashomeowners’ insurance, subject to underwriting standards, exclusions,deductibles, rates and conditions as are customarily used by member insurersfor similar coverages. | | (7) | “Location” means real and personal property consisting of and contained in asingle 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 bysection 3929.43of the Revised Code. | | (11) | “Licensed agent” means any person licensed by the superintendent pursuant tosection 3905.01 of the Revised Code. | | (12) | “Board” means the board of governors of the association authorized pursuantto section 3929.43of 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 riskeligible for insurance through the association, (except for non-payment of premium,evidence of incendiarism, or misrepresentation) not less than thirty days prior tocancellation or nonrenewal. The notice shall explain to the insured the procedures formaking application to the association. This thirty-day notice shall not apply to bindersof thirty days duration or less. | | (E) | Insurance agents. | | | (1) | Upon request, a licensed agent shall assist any owner of property incompleting an application for insurance with the association. | | (2) | No licensed agent, although licensed to represent one or more memberinsurers of the association, shall hold himself out as an agent of theassociation 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 hundredthousand dollars. The maximum limit of liability for residential crimeinsurance is ten thousand dollars. The maximum limit of liability forcommercial crime insurance is fifteen thousand dollars. | | (2) | The association may require that vandalism and malicious mischief coveragebe written in conjunction with extended coverage. | | (3) | The association is authorized to issue mine subsidence insurance coverageto its policyholders pursuant to sections 3929.50 to 3929.61 of the RevisedCode and as provided for in the plan of operations of the “Mine SubsidenceInsurance Underwriting Association.” | | (4) | The association is not authorized to provide insurance coverage forautomobiles or manufacturing risks. |
| | (G) | Inspections. | | | (1) | Any person having an insurable interest in real or tangible personalproperty, or both, at a fixed location in Ohio, who has been unable toobtain basic property insurance or homeowners’ insurance, shall begranted upon application to the association, an inspection of theproperty. The inspection shall be made only ofproperty requiring an inspection to determine eligibility for fairplan coverage. The inspection shall be free of charge to the applicant. | | (2) | All inspection reports shall be in writing and shall contain theinformation necessary to determine eligibility for coverage pursuantto the association’s underwriting guide as filed with the superintendent. | | (3) | If an interior inspection is necessary to determine eligibility of propertydescribed in an application submitted to the association: | | | (a) | The inspector or inspection company shall contact the newapplicant and arrange for the applicant or the person designatedby the applicant to be present duringthe inspection. The inspector shall not recommend correctionof physical deficiencies or advise the applicant whether theassociation will provide coverage. The inspection report shallprovide any information necessary for underwriting but shallnot refer to environmental hazards. Physical deficienciesshall be reported on the inspection report. Vacancy orunoccupancy shall be reported on the inspection report. | | (b) | The inspection report shall contain information describing theoccupancy and other observations of the risk. |
| | (4) | Subsequent to the inspection of a property, the association shall indicateto the new applicant any condition charges which have been applied by theassociation. | | (5) | After the inspection report has been completed, a copy of the completedinspection report, and any photograph, indicating the pertinent features ofthe building, maintenance, and occupancy shall be sent withinten days to the association. | | (6) | The association shall, within ten business days after receipt of theinspection report, advise the applicant and his licensed agent that: | | | (a) | The risk is acceptable, and if condition charges have beenimposed, the improvements necessary to remove the conditioncharges; or | | (b) | The risk will be acceptable if the improvements noted in thereport 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 environmentalhazard. | | (8) | The association may, for cause upon information or well-founded belief withoutnotice to the insured at any time during the policy term, cause a propertyinsured by it to be inspected for the purpose of determining whether theproperty meets the association’s underwriting standards. Reinspections mayalso be made upon the request of the insured, for statistical purposes, uponchange in type of occupancy, or upon a reasonable periodic schedule. Theassociation may, upon the basis of the report of reinspection, refuse to renewor 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(I) of this rule. The association need not afford an insured the opportunity tobe present during a reinspection nor furnish the insured with a copy of areinspection report. If an insured requests a copy of a reinspection report, theassociation 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 orrule, or if an applicant otherwise has received written notice of any violationof such a code, ordinance of rule, the applicant shall also submit to theassociation a detailed plan that indicates the manner and estimated period oftime in which violation will be corrected. If the association is satisfied thatthe violations are subject to correction within a reasonable period of time andthat the applicant otherwise meets the requirements of section3929.44of the Revised Code, it may issue a policy or binder to the applicant on thecondition that the plan be implemented and completed on schedule and that theproperty be reinspected. |
| | (H) | Application and issuance of policy. | | | (1) | Every policy written by the association shall include an additional policycondition representing that: | | | (a) | At least two insurance companies authorized to do business inOhio have declined to grant the coverage requested in theapplication; and | | (b) | There are no outstanding taxes, assessments, penalties orcharges with respect to the property to be insured; and | | (c) | The applicant has not received written notice from an authorizedpublic entity stating that his property is in violation of anybuilding, housing, air pollution, sanitation, health, fire orsafety code, ordinance or rule. |
| | (2) | If the property is in violation of any such code, ordinance or rule, and ifthe applicant has received such written notice of any such violation, theapplicant shall submit to the association a detailed plan that indicates themanner and estimated period of time in which such violations will be corrected.If the association is satisfied that the violations are subject to correctionwithin a reasonable period of time and that the applicant otherwise meets therequirements of section 3929.44 of the Revised Code, it may cause a policy orbinder of basic property insurance to be issued to the applicant on thecondition that the plan be implemented on schedule and that the property bereinspected. | | (3) | The association is under no obligation to issue basic property insurance orhomeowners insurance to any person, unless that person and his property wouldbe insurable in the normal insurance market, and such property, except for itslocation, would constitute an insurable risk in accordance with reasonableunderwriting standards. The association, in determining whether the property isinsurable, shall give no consideration to the condition of surrounding propertyor 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 tothe applicant and if applicable, the licensed insurance agent, upon payment of the premium tothe association. The association shall pay the authorized commission to thelicensed agent as designated by the applicant. The association shall not paycommission to a nonresident agent. The association may pay commission to alicensed nonresident business entity agent for assistance provided by an individualresident agent affiliated with that nonresident business entity agent. | | (5) | The association, upon receipt of the applicable premium from the applicant, shallissue the policy to be effective the day following receipt of the premium. Thepolicy shall be issued in the name of the association as provided in section3929.481of 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 revealsthat there are one or more unsatisfactory conditions, charges will be imposedin conformity with the rating plans on file with the superintendent. If theunsatisfactory 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, theassociation shall, within ten days, send the applicant a written statement settingforth in reasonable detail the features of the property or conditions which preventit from constituting an acceptable risk and the corrections to be made in order tomake the property an acceptable risk. | | (9) | Upon completion of the required corrections by the applicant, the association, whennotified, shall promptly reinspect the property, if such reinspection is necessaryto determine eligibility. |
| | (I) | Binders. | | | (1) | Each application shall clearly indicate the availability of a binder to anapplicant. | | (2) | A binder shall be issued to the applicant upon payment to the association of theminimum binder deposit premium and provided the application indicates that therisk preliminarily meets the association's underwriting standards. The earliest abinder shall be effective is at one minute after twelve a.m. the day followingreceipt 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 becomesavailable for inspection. | | (4) | The binder shall remain in effect until the risk is accepted by the association oruntil 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 shallcommence on the effective date of the binder. Policies soissued are not subject to flat cancellation. | | (b) | If an insurance policy will not be issued, the full earnedpremium must be charged subject to the rules governingcancellation of policies. | | (c) | A binder shall be void upon the acceptance of a risk by theassociation and the payment of any additional premiumindicated by an inspection; or upon the cancellation of arisk and notice of reasons for the cancellation given to theapplicant. |
| | (7) | | (a) | The association shall not cancel a policy or binder issued byit, except: | | | (i) | For cause, which would have been grounds fornonacceptance of the risk had such cause beenknown 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 bya statement that the insured has a right to appeal as providedin paragraph (I) of this rule. |
| | (8) | If a property meets all underwriting requirements, the association shallcompute the actual annual premium from rates approved by the superintendentof insurance pursuant to Chapter 3935. of the Revised Code. A return premium will beforwarded to the applicant if the provisional binder premium exceeds the actualannual premium. The association shall request additional premium if the actualannual premium exceeds the estimated provisional binder premium. | | (9) | If a property does not meet all underwriting requirements, the associationshall cancel the binder on a pro rata basis. If an applicant requestscancellation of a binder, the association shall cancel in accordance withcancellation 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 ordecision of the association to the board of the association. Such appealto the board must be made in writing within thirty days after receipt ofnotice of the action or decision of the association. Within forty-five daysfrom receipt of an appeal, the board, upon no less than ten days notice tothe insured, shall hold a hearing on the appeal. For good cause shown, bythe insured or the association, the hearing may be continued for not morethan sixty days. The board shall render its decision on the appeal andnotify the applicant or insured of its decision no later than ten daysafter the hearing. Each denial of insurance to an applicant shall beaccompanied by a statement to the applicant and the licensed agent thatthe applicant has the right to appeal. | | (2) | Any applicant, insured, or member insurer shall have the right to appealto the superintendent any action or decision of the board. An appeal shallbe made within thirty days of the board’s action or decision. The decisionof the superintendent of an appeal is a final order and is subject to judicialreview as provided in Chapter 119. of the Revised Code. |
| | (K) | Indemnification. | | Each member of any association committee, each association officer, employee, or memberinsurer, and each member of the board shall be indemnified against liability incurred inconnection with the affairs of the association. The conditions and limits of suchindemnification are provided in “Article IX of the Constitution,” “Articles ofa*greement” and “Bylaws of the Association.” | | (L) | Fidelity coverage. | | The association shall obtain fidelity coverage to reimburse the association for any pecuniary lossit may sustain by any act or acts of fraud or dishonesty on the part of members ofthe 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 generalduties of administration of the association or on the call of thesuperintendent. Seven members of the board shall constitute a quorum. | | (3) | The board shall appoint a general manager as administrator who shallserve at the pleasure of the board and perform such duties as the boarddesignates. | | (4) | The board may promulgate guidelines consistent with state law and theplan of operation to govern such internal operations as investments,personnel, underwriting standards and claims practices. The guidelinesshall be in writing and filed with the superintendent. | | (5) | The board shall undertake a public education program to assure that theservices of the association receive adequate public attention. Inaccordance with division (I) of section3929.43of the Revised Code, the board shall adopt a written program for decreasingthe 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 andoperations of the association. | | (O) | Relationship with member insurers. | | | (1) | The association shall operate as a joint underwriting association insuringone hundred percent of the risk on behalf of its member insurers. It maycede or purchase reinsurance in the name of the association or on behalf ofmember 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 memberinsurer’s premiums written bear to the aggregate premiums written by allmember insurers as determined by the board. | | (3) | There shall be an annual meeting of the association and its member insurersat a time and place fixed by the superintendent. Representatives of memberinsurers on the board shall serve for a period of one year or untilsuccessors are elected or designated. | | (4) | A special meeting may be called at such time and place designated by thesuperintendent or upon the written request to the superintendent. | | (5) | Twenty days notice of an annual or special meeting shall be given in writingby the board to member insurers. A majority of member insurers present at ameeting 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 otherelectronic means provided such procedureis unanimously authorized by the members of the board present and votingat any meeting of the board. If so approved by the board, notice of anyproposal shall be mailed to member insurers not less than twenty days priorto the final date fixed by the board for voting thereon. | | (7) | At any regular or special meeting at which the vote of member insurers isor may be required on any proposal, or any vote of member insurers whichmay 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 eachmember insurer’s respective habitational or commercial premiums written, asthe case may be. |
| | (P) | Member insolvency. | | | (1) | In the event any member insurer fails to pay the assessment for itsproportionate part of any loss or expense because the member insureris insolvent, and the board determines that the assessment cannot becollected within a reasonable period of time, the unpaid assessmentshall be paid by the remaining member insurers, each contributing inthe manner provided by division (E) of section3929.43of the Revised Code, but without regard to the premium writings ofthe insolvent member insurer. The insolvent member insurer shallremain liable to the association for the full amount of the assessmentand any collection made by the association against the assessment shallbe credited and paid back to the other member insurers in the sameproportions as shall have been utilized in calculating each memberinsurer’s contribution toward the unpaid assessment. | | (2) | No refund which would otherwise be paid under the plan of operationshall be paid to a member when its membership has been terminated, orto the liquidator, receiver, conservator, or statutory successor of amember insurer until the assessment of the member insurer has been paid.A refund shall be applied as a set-off against an assessment. Anybalance remaining shall be paid to the member insurer or to theliquidator, receiver, conservator, or statutory successor of themember insurer. |
| | (Q) | Advance assessments and recoupments. | | | (1) | At such times as may be determined by the board and approved by thesuperintendent, the board shall establish an annual rate of assessmentneeded to cover any deficit arising out of the operation of the association.The rate of assessment shall be based upon a reasonable estimate of adeficit expected to occur. The association may levy advance assessments atthat rate against member insurers, payable in periodic installments, subjectto approval by the superintendent. | | (2) | The board may at any time levy an assessment against member insurers toprovide necessary operating funds. | | (3) | Each member insurer may recoup assessments levied against it by adjustingits premiums for basic property insurance and homeowner’s insurance by theaddition of a rating factor computed from time to time by the board andapproved by the superintendent. The board shall notify all member insurersof 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 section3929.43of the Revised Code, shall file the change with the superintendent. Thechange shall not increase rates more than the amount authorized by theassociation and approved by the superintendent pursuant to the plan. |
| | (R) | Reinsurance. | | No reinsurance plan or proposal of the association shall be implemented prior tobeing filed with the superintendent. | | (S) | Statistics. | | | (1) | Every insurance policy issued by the association shall be separately codedfor statistical purposes. | | (2) | The association shall comply with any reporting requirements of thesuperintendent in respect of its underwriting operations and experience.The reports shall be made at least annually in such form and detail asmay be required by the superintendent under section 3935.03 of theRevised Code. | | (3) | The association shall report its loss and expense experience to astatistical organization approved by the superintendent. Its loss andexpense experience shall be reported in a form and according to a planfiled by the statistical organization with the superintendent. | | (4) | The association shall submit to the superintendent periodic reportsconcerning the number of risks inspected, the number of risks accepted,the number of risks conditionally accepted, the number of reinspectionsmade 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 theassociation, notification shall be given to the superintendent. | | (U) | Filing of policies and other documents. | | All policies, endorsem*nts, forms, manual rates or rating plans, minimum class rates,rating schedules, rating rules, and every modification of the same shall be those filedwith the superintendent. The association may file special notice endorsem*nts for reviewby the superintendent. In the event that the superintendent approves a rating factor underparagraph (P)(3) of this rule, such increment shall be applicable to all policies issuedby the association. | | (V) | Annual and quarterly financial statements. | | The association shall file annual and quarterly financial statements with thesuperintendent in the form prescribed by the superintendent. Annual financial statementsshall be prepared and furnished to the superintendent on or before March first of thefollowing year. | | (W) | Examination of books and records. | | The superintendent or any person designated by the superintendent may examine the operation of theassociation in accordance with section3929.45of 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 theRevised Code. | | (Y) | General powers of superintendent. | | | (1) | The plan of operation and any amendment thereto shall be subject to theapproval of the superintendent and adopted pursuant to Chapter 119 of theRevised Code. | | (2) | The plan of operation shall be administered under the supervision of thesuperintendent. | | (3) | The association shall submit to the superintendent periodic reports asthe superintendent deems necessary. |
| | (Z) | Severability. | | If any paragraph, term or provision of this rule is adjudged invalid for any reason,the judgement shall not affect, impair or invalidate any other paragraph, term orprovision of this rule, but the remaining paragraphs, terms and provisions shall beand continue in full force and effect. |
Effective: 11/17/2022
Five Year Review (FYR) Dates: 08/31/2022
Promulgated Under: 119.03
Statutory Authority: 3901.041, 3929.43
Rule Amplifies: 3935.03, 3935.04, 3937.02, 3937.03
Prior Effective Dates: 1/1/1977, 1/20/1978, 2/19/1981, 6/13/1987, 1/11/1995, 4/14/2016, 11/16/2017
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