COAL AND CLAY
MINE SUBSIDENCE INSURANCE BOARD[25 PA. CODE CH. 401] Mine Subsidence Fund [38 Pa.B. 6931]
[Saturday, December 20, 2008]The Coal and Clay Mine Subsidence Insurance Board (Board) proposes to amend Chapter 401 (relating to mine subsidence fund), regarding the administration of the Mine Subsidence Insurance Fund (Fund), to read as set forth in Annex A. The proposed amendments will clarify the regulations concerning issuance of Mine Subsidence Insurance (MSI) policies. It will also propose new regulations codifying the insurance producer program, as well as, explicitly authorizing the issuance of grants and loans to assist in developing new technologies or services.
This proposal was adopted by the Board at its meeting of September 4, 2008.
A. Effective Date
These amendments will go into effect upon publication in the Pennsylvania Bulletin as final-form rulemaking.
B. Contact Persons
For further information contact Lawrence Ruane, Administrator, Mine Subsidence Program, P. O. Box 8462, Rachel Carson State Office Building, Harrisburg, PA 17105-8462, (717) 783-9590; or Marc A. Roda, Assistant Counsel, Bureau of Regulatory Counsel, P. O. Box 8464, Rachel Carson State Office Building, Harrisburg, PA 17105-8464, (717) 787-7060. Information regarding submitting comments on this proposal appears in Section J of this preamble. Persons with a disability may use the AT&T Relay Service by calling (800) 654-5984 (TDD users) or (800) 654-5988 (voice users). This proposal is available electronically through the DEP web site www.depweb.state.pa.us.
C. Statutory Authority
This proposed rulemaking is being made under the authority of section 19 of the act of August 23, 1961 (P. L. 1068, No. 484) (52 P. S. § 3219) (act) which provides, inter alia, that the Board shall have the power to make rules and regulations.
D. Purpose and Background
The Fund was created in 1961 to provide a reliable source of compensation for damage to structures caused by underground coal and clay mine subsidence, a risk excluded from standard property and casualty insurance policies. This insurance pool of moneys for compensating owners of structures damaged by underground coal or clay mine subsidence is vital to the economic well being of this Commonwealth's coal mining regions.
The Fund is administered by a Board consisting of the Secretary of the Department of Environmental Protection (Department) as Chairperson, the State Treasurer and the Insurance Commissioner. See, section 3 of the act (52 P. S. § 3203). A listing of Board members is available upon request from Lawrence Ruane, whose name, address and phone number appears in Section B of this preamble. The Board's responsibilities include, inter alia approving: insurance premiums, the terms of insurance, the amount of commission to be paid to insurance producers, approving funds for administering the MSI Program and the adoption of implementing regulations. See sections 3, 10 and 19 of the act (52 P. S. §§ 3203, 3210 and 3219). The Department is responsible for the day-to-day administration of the MSI Program. See sections 4, 10 and 22 of the act (52 P. S. §§ 3204, 3210 and 3222).
The amendments will clarify the regulations concerning issuance of MSI policies by: (1) revising some of the definitions to ensure consistency with the MSI insuring agreement; (2) codifying standards for issuing MSI policies for structures owned either as a condominium, cooperative or conventionally but having multiple units; (3) simplifying and expanding the criteria for covering multiple purpose structures at the residential rate; and (4) codifying the Board's recently adopted policy for issuing MSI policies for damaged structures. The standard for waiving the loss deductible is amended to be consistent with current practice. Finally, this proposal will establish new regulations: (1) codifying the submission of MSI applications by insurance producers; and (2) explicitly authorizing the issuance of grants and loans to foster the development of new technologies or services which can assist the Board and Department in administering the Fund.
E. Summary of Regulatory Requirements
There are no companion Federal laws or regulations that govern the provisions of mine subsidence insurance. The proposed regulatory changes are as follows.
§ 401.1. Definitions.
There will be new definitions for ''association,'' ''common elements,'' ''commissions,'' ''condominium,'' ''cooperative,'' ''insurance producers'' and ''units.'' The terms ''commission'' and ''insurance producers'' are used in proposed §§ 401.41--401.45 (relating to insurance producers). The terms ''association,'' ''common elements,'' ''condominium,'' ''cooperative'' and ''units'' are used in the amendment to § 401.11 (relating to eligibility for insurance) clarifying the issuance of MSI policies covering structures owned either as a condominium, cooperative or conventionally but having multiple units.
The definitions for ''mine subsidence'' and ''structure'' are amended to ensure consistency with the MSI insuring agreement. In particular, the definition for ''structure'' will include appurtenances as defined in the insurance policy. At its December 2006 meeting, the Board expanded the MSI policy's coverage by amending the insuring agreement's definition of ''structures'' to include some of the appurtenances associated with the building to be covered. By referencing appurtenances as defined in the MSI insuring agreement, the Board is left the flexibility to modify the scope of this coverage as experience indicates.
§ 401.11. Eligibility for insurance.
Many of the amendments to this section are for the purpose of simplicity and clarity of language. However, the following amendments establish substantive changes. The amendment to subsection (b) adds new standards specifying how MSI policies are to be issued for structures owned as a condominium or cooperative. The different ownership rights associated with structures owned as a condominium or cooperative have been the source of confusion concerning to whom the policy is to be issued, that is, the condominium association, cooperative or the individual unit owner, and what part of the structure the policy can cover. These amendments are based on 68 Pa.C.S. §§ 3101--3414 and 4101--4113 and will eliminate that confusion. It is anticipated that eliminating this confusion will facilitate the sale of MSI policies, especially by the submission of MSI applications through insurance producers.
Subsection (c) is simplified to focus on insurance rates for structures partially used for residential purposes. The requirement that there cannot be more than four units is being dropped, leaving the requirement that at least half the structure must be used for residential purposes. In the Board's experience, the key issue in determining whether such a mixed use structure is to be insured as a residential structure is the percentage of the structure used for residential purposes.
The requirement in subsection (d) that a double home is insured as one structure is deleted. This issue is now covered by the new subsection (f). Subsection (e) becomes subsection (d) and is amended to codify the Board's recently developed policy for issuing MSI policies to damaged structures. This codification provides insurance producers with clear standards for accepting MSI applications for damaged structures, and implements the Board's commitment to maximizing the availability of MSI policies.
The new subsection (e) clarifies that the Board can refuse to issue an MSI policy covering a structure that is being damaged. Until the damage event is completed it is impossible to either repair the damage or meet the requirements for issuing a policy to a damaged structure.
The new subsection (f) specifies how a conventionally owned structure comprised of multiple units can be covered. These standards will ensure a consistent approach for insuring these structures.
§ 401.13. Coverage limits and insurance premiums.
The amendment to subsection (a) deletes the requirement that the Board set rates for MSI policies covering individual structures. This can be read as a limitation on the Board's authority to set policy rates, which is inappropriate.
The amendment to subsection (b) deletes the requirement that the premium check must be submitted within 80 days of the filing of the MSI application. This restriction was added to ensure that the MSI policy is purchased before a structure is damaged. In the Board's experience, this restriction is unnecessary.
§ 401.22. Loss deductible amount.
The last sentence is rewritten to accurately state the Board's long-standing practice of waiving the loss deductible when the amount of the loss suffered exceeds the coverage limit.
§ 401.41. Submission of applications.
This section codifies the current practice of requiring insurance producers to submit MSI applications by means of the MSI web site.
§ 401.42. Commission rates.
This section restates the Board's statutory authority for annually setting the insurance producer's commission rates.
§ 401.43. Payment of commission.
The insurance producer will retain its commission from the MSI policy premium to be paid. This is a change from current practice, which calls for the Board to separately pay the insurance producer its commission. It takes 3 months for the Department to pay the commission. Having the insurance producer retain its commissions from premium payments is consistent with industry practice, reduces the Department's operating costs and facilitates the insurance producer's cash flow.
§ 401.44. Repayment of commission.
This section addresses repayment of commissions that have become unearned due to either the MSI policy application being rejected or the MSI policy being canceled. Failure to repay an unearned commission may result in the insurance producer's exclusion from submitting MSI applications. The Board's exclusion of an insurance producer from submitting applications is an action of the Department appealable to the Environmental Hearing Board.
§ 401.45. Confidentiality of policyholder information.
Insurance producers are required to adhere to the Board's policy of maintaining the confidentiality of all applicant and policyholder information. Failure to maintain this confidentiality may result in the insurance producer's exclusion from submitting MSI applications. The Board's exclusion of an insurance producer from submitting MSI applications is an action of the Department appealable to the Environmental Hearing Board.
§ 401.51. Loans and grants.
This section gives the Board the explicit authority to make loans and grants to entities to encourage the development of technologies or services that will benefit the fund. These are technologies and services such as robotic sensing devices or geographic information systems that provide value to the MSI program's policy, application and claim investigation processes. A grant or loan, rather than a service purchase contract, is the appropriate vehicle for providing financial assistance to encourage the development of these technologies and services. The limitation on the amount of excess moneys that can be used to finance loans or grants ensures the Fund's financial integrity.
F. Benefits, Costs and Compliance
Benefits--The amendment to § 401.11(c) makes the residential rate, about 1/3 of the commercial rate, available to more structures used for both residential and commercial purposes. Section 401.43 (relating to payment of commission) benefits insurance producers because the commission is retained from the premium payment, that is, immediately paid, rather than waiting 3 months to receive a payment from the Board. Learning institutions and other entities developing technologies and services potentially valuable to the Board will benefit from the availability of grants or loans to foster those developments.
Compliance Costs
There are no costs associated with this proposed rulemaking.
Compliance Assistance Plan
The Department will notify policyholders at the time of policy renewal of the broader application of residential rates to mixed-use structures. Insurance producers registered to submit MSI applications will also be notified of changes in procedures and their obligations due to this proposed rulemaking. Finally, a link to the Pennsylvania Bulletin Notice of Proposed Rulemaking will be placed on the MSI web site.
Paperwork Requirements
This proposed rulemaking will not impose any additional paperwork requirements on MSI policyholders or insurance producers.
G. Pollution Prevention
The regulations affected by this proposed rulemaking address the administration of the Commonwealth's Mine Subsidence Insurance Program. They do not address pollution prevention.
H. Sunset Review
These regulations will be reviewed in accordance with the sunset review schedule published by the Department to determine whether the regulations effectively fulfill the goals for which they were intended.
I. Regulatory Review
In accordance with section 5(a) and (f) of the Regulatory Review Act (71 P. S. §§ 745.5a and (f)), the Department submitted a copy of the proposed amendments on December 10, 2008, to the Legislative Reference Bureau for publication of notice of proposed rulemaking in the Pennsylvania Bulletin, and to the Independent Regulatory Review Commission (IRRC). In accordance with section 5(f) of the act, the Department will submit the proposed amendments and the required material to the Chairpersons of the House Environmental Resources and Energy Committee and the Senate Environmental Resources and Energy Committee (Committees) no later than the second Monday after the date by which both Committees designations have been published in the Pennsylvania Bulletin. In addition to submitting the proposed amendments, the Department has provided IRRC and will provide the Committees with a copy of detailed Regulatory Analysis Form. A copy of this material is available to the public upon request.
Under section 5(g) of the Regulatory Review Act, IRRC may convey any comments, recommendations or objections to the proposed rulemaking within 30 days of the close of the public comment period. The comments, recommendations or objections must specify the regulatory review criteria which have not been met. The Regulatory Review Act specifies detailed procedures for review, prior to final publication of the rulemaking, by the Department, the General Assembly and the Governor of comments, recommendation or objects raised.
J. Public Comments
Written Comments--Interested persons are invited to submit comments, suggestions or objections regarding the proposed rulemaking to the Coal and Clay Mine Subsidence Insurance Board, P. O. Box 8462, Harrisburg, PA 17105-8462 (express mail: Rachel Carson State Office Building, 5th Floor, 400 Market Street, Harrisburg, PA 17101-2301). Comments submitted by facsimile will not be accepted. Comments, suggestions or objections must be received by the Board by January 20, 2009. Interested persons may also submit a summary of their comments to the Board. The summary may not exceed one page in length and must also be received by the Board by January 20, 2009. The one-page summary will be provided to each member of the Board in the agenda packet distributed prior to the meeting at which the final regulation will be considered.
Electronic Comments--Comments may be submitted electronically to the Board at RegComments@state.pa.us and must also be received by the Board by January 20, 2009. A subject heading of the proposal and a return name and address must be included in each transmission. If an acknowledgment of electronic comments is not received by the sender within 2 working days, the comments should be retransmitted to ensure receipt.
JOHN HANGER,
Acting ChairpersonFiscal Note: 7-424. No fiscal impact; (8) recommends adoption.
Annex A TITLE 25. ENVIRONMENTAL PROTECTION PART III. COAL AND CLAY MINE SUBSIDENCE INSURANCE BOARD CHAPTER 401. MINE SUBSIDENCE FUND GENERAL PROVISIONS § 401.1. Definitions.
The following words and terms, when used in this chapter, have the following meanings, unless the context clearly indicates otherwise:
* * * * * Association--One of the following:
(i) The unit owners' association organized under 68 Pa.C.S. § 3301 (relating to organization of unit owners' association) for condominiums.
(ii) The proprietary lessees' association organized under 68 Pa.C.S. § 4301 (relating to organization of association) for cooperatives.
* * * * * Commissions--Fees paid to insurance producers as compensation for the applications they submit to the Board.
Common elements--All portions of a condominium or cooperative other than the units.
Condominium--Real estate, portions of which are designated for separate ownership and the remainder of which is designated for common ownership solely by the owners of those portions. Real estate is not a condominium unless the undivided interests in the common elements are vested in the unit owners. Ownership of the real estate is in accordance with 68 Pa.C.S. Subpart B (relating to Uniform Condominium Act).
Cooperative--Real estate owned by an association, each of whose members is entitled, by virtue of his ownership interest in the association, to exclusive possession of a unit. Ownership of the real estate is in accordance with 68 Pa.C.S. Subpart C (relating to Real Estate Cooperative Act).
* * * * * Insurance producer--A person that sells, solicits or negotiates contracts of insurance.
* * * * * Mine subsidence--The movement of the ground's surface as a result of the [partial or complete cave-in or the] collapse of underground coal or clay mine workings.
* * * * * Structure--A complete building, [that] which contains a roof, walls and a foundation [which] that firmly attaches the structure to the earth, and its appurtenances as defined in the insurance policy.
Units--
(i) Specific areas of a building that are separate and distinct from other areas of the building, having an individual entrance accessing either a common entry or the building's exterior.
(ii) For the purposes of the definition of ''common elements'' and § 401.11(b)(2) (relating to eligibility for insurance), the following apply:
(A) Units in a condominium are portions of the condominium designated for separate ownership, the boundaries of which are described in the condominium declaration.
(B) Units in a cooperative are physical portions of the cooperative designated for separate occupancy under a proprietary lease.
INSURANCE POLICIES § 401.11. Eligibility for insurance.
(a) [To be eligible for a mine subsidence insurance policy, the insured shall be the owner of a structure within the anthracite or bituminous coal or clay mine regions, the territorial extent of which will be designated by the Board. The Board may add to, subtract from or change the territorial classifications] Structures located within the coal and clay regions of this Commonwealth are eligible for coverage.
(b) Only [a title] an owner of a structure may be named as the [insured in an insurance policy and an insurance policy will not be issued to another person] policyholder.
(1) If there [are several owners of one structure, they] is more than one owner of a structure, the owners shall designate one owner whose name shall appear on the insurance policy. The other [owners] policyholders shall be listed in the application for insurance.
(2) If the structure is owned as a condominium or cooperative:
(i) The association is the policyholder if the policy covers all common elements and units.
(ii) The unit owner shall be the policyholder if the policy only covers the unit and there is a separate policy covering the common elements.
(iii) A unit owner may purchase coverage for the unit and common elements if the association will not purchase insurance. However, the unit association shall be the named policyholder with the unit owner being listed in the application. Renewals will be sent to the unit owner.
(c) [An individual, corporation or group of individuals holding title to more than one structure within the anthracite or bituminous coal or clay mine regions may insure these structures.] Structures which are at least 50% residential [and have at most four residential units] are eligible for residential rates. [Other structures shall be insured at commercial rates.]
(d) [A double home shall be considered one structure if both sides of the home are owned by the same person.
(e) The Board, or its agents, may refuse to issue an insurance policy for] If a structure [previously] is damaged by mine subsidence or by another cause, [if this] and the Board determines that the damage could not be separated or apportioned from subsequent damage, [until the previous damage has been repaired to the satisfaction of the Board, or its agents.] the Board will issue a policy if the applicant either:
(1) First repairs the damages to the Board's satisfaction.
(2) Submits to the Board an estimate, prepared by a reputable expert, of the cost to repair the damages to the Board's satisfaction. The cost to repair, adjusted for inflation, would be excluded from any damage claim settlement. However, a policy would not be issued if the cost to repair exceeded the replacement cost of the structure or the policy limit, which ever is less, because the policy would have no value.
(e) The Board may refuse to issue a policy while the structure to be covered is being damaged by mine subsidence or by another cause, until the Fund determines that the cause of damage has ceased.
(f) Multiple unit structures are insured as follows:
(1) Structures comprised of vertically stacked units are only insurable under a single policy.
(2) Other unit configurations are insurable under a single or multiple policy at the owner's discretion.
§ 401.13. Coverage limits and premiums for insurance.
(a) The maximum amount of insurance [for a single covered structure], the term or duration of the policy, and the premium rate shall be determined by the Board.
(b) An insurance policy is effective upon the date a complete application and its premium is received by the Board or its agent [provided the premium associated with that application is received by the Board or its agent within the next 80 days] and provided that the applicant and structure meet the eligibility requirements in the act and in § 401.11 (relating to eligibility for insurance).
INSURANCE COVERAGE § 401.22. Loss deductible amount.
Every insurance policy [shall] must include a loss deductible amount for which the Fund is not liable. The amount will be determined by the Board and may be changed as experience may warrant, and will be included in the schedule of premium rates adopted by the Board. [The Fund will be liable for only a specified percentage of a loss in excess of the deductible amount as will be adopted in the schedule of premium rates.] The loss deductible will be waived if the cost to repair the damage exceeds the amount of coverage under the policy.
INSURANCE PRODUCERS (Editor's Note: The following text is new and has been printed in regular print to enhance readability.)
§ 401.41. Submission of applications.
Insurance producers may only submit applications for mine subsidence insurance to the Board electronically from the Board's web site.
§ 401.42. Commission rates.
The Board will annually establish commission rates.
§ 401.43. Payment of commissions.
The insurance producer shall retain the commission from the premium collected. The Board may authorize other forms of payment.
§ 401.44. Repayment of commissions.
Commissions in excess of $5 that are unearned due to the Board's rejection of a mine subsidence insurance application or the cancellation of a policy shall be repaid to the Board upon its demand. Failure by an insurance producer to promptly repay commissions as directed by the Board may result in exclusion from participation with the Fund.
§ 401.45. Confidentiality of policyholder information.
Insurance producers are responsible to safeguard all applicant and policyholder information and are responsible for the misuse of information that is under their control. Failure by an insurance producer to safeguard applicant and policyholder information may result in exclusion from participation with the Fund.
LOANS AND GRANTS § 401.51. Loans and grants.
Each year the Board may authorize up to 1% of the Fund's Unreserved Fund Balance, as declared by the Board under section 10(c) of the act (52 P. S. § 3210(c)), to be used to provide loans and grants to entities that develop technologies, perform services or engage in other activities that benefit the Fund by improving its ability to provide mine subsidence insurance coverage or to improve the efficiency, economy and effectiveness of the Fund's operations.
[Pa.B. Doc. No. 08-2292. Filed for public inspection December 19, 2008, 9:00 a.m.]
